Income Strategy Weekly Updates

November 24, 2020

Income Strategy Update for Week Ended 11/20/20

Chico’s Jumps with Strong Peer Results, Positive Vaccine News While OneMain Falls on Slight Up-Tick in October Net Charge-Offs

Last week, the Income Strategy advanced 2.49%, outperforming both the Merrill Lynch U.S. High Yield Master II Index’s 0.62% gain and the S&P 500’s -0.73% decline. (Exhibit 1). The strategy ended the week down -10.18% YTD, or 1,358 basis points behind the high yield index and 2,213 basis points behind the S&P 500.

Exhibit 1: Preliminary Performance of Income Strategy Versus High Yield, Equity Indices, Through 11/20/201

Time Period Income Strategy ML HY II S&P 500
Last Week (11/13 – 11/20) 2.49% 0.62% -0.73%
MTD 12.34% 3.23% 8.94%
QTD 10.39% 3.71% 6.04%
YTD -10.18% 3.40% 11.95%
Inception (annualized since 4/2/2009) 11.67% 10.50% 16.08%

Source: Bloomberg, Miller Value Partners

Three equities and two bonds comprised last week’s top five contributors. Small-cap cyclicals extended gains last week following another positive vaccine development, this time from Moderna. Chico’s (CHS) rose in sympathy with specialty retail peer L Brands (LB), who reported a Q3 beat across the board on stronger than expected revenue and gross margin. Shares moved above the 200-day moving average. Atlas Corp (ATCO) gained as containership time-charter rates rose to a five-year high on continued demand improvement. Debt of Nordstrom (JWN) gained alongside peer Macy’s (M), who posted solid Q3 results that saw EBITDA inflect positive three months earlier than expected. There was no price-changing news on the debt of Diebold-Nixdorf (DBD) or Alrosa (ALRS RX).

Exhibit 2: Significant Contributors to Performance, 11/13/20 – 11/20/20

Name Type Return
Chico’s FAS Equity 24.1%
Diebold Nixdorf 8.5% 4/24 Bond 4.4%
Atlas Corp Equity 6.6%
Alrosa PJSC Equity 10.9%
Nordstrom 5% 1/44 Bond 9.6%

Source: Miller Value Partners

Three equities and two bonds comprised last week’s top five detractors. OneMain Holdings (OMF) fell as October trust data indicates net charge-offs rose 24bps M/M though are down 210bps Y/Y and remain well below pre-pandemic levels. Apollo Global Management (APO) fell below closely watched technical levels. There was no price-changing news on the securities of Pitney Bowes (PBI), Bed Bath & Beyond (BBBY) or NGL Energy Partners (NGL).

Exhibit 3: Significant Detractors from Performance, 11/13/20 – 11/20/20

Name Type Return
OneMain Holdings Equity -4.6%
Apollo Global Management Equity -1.3%
Pitney Bowes Equity -1.4%
Bed Bath & Beyond 5.165% 8/44 Bond -0.2%
NGL Energy Partners 7.5% 4/26 Bond -1.5%

Source: Miller Value Partners

Did you know that we write this piece for Opportunity Equity as well? Check it out.

1The performance figures reflect the results of a representative account net of management fees and certain other expenses. For important additional information about Income Strategy performance, please click on the Income Strategy Composite Performance Disclosure. The performance returns shown in this report are preliminary and are subject to revision. Past performance is no guarantee of future results.

Significant Contributors and Significant Detractors are the Strategy holdings that had the greatest effect on Strategy performance for the week. Holdings that have been in the Strategy since the end of the most recent calendar quarter are identified by name. For information on how Contributor/Detractor data were calculated and a list showing the contribution to the Strategy’s weekly performance of each investment held at such quarter end, contact us.

Any views expressed are subject to change at any time, and Miller Value Partners disclaims any responsibility to update such views. The information presented should not be considered a recommendation to purchase or sell any security and should not be relied upon as investment advice. It should not be assumed that any purchase or sale decisions will be profitable or will equal the performance of any security mentioned. Past performance is no guarantee of future results, and there is no guarantee dividends will be paid or continued. Content may not be reprinted, republished or used in any manner without written consent from Miller Value Partners.

©2019 Miller Value Partners, LLC

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