December 2, 2019

Income Strategy Update for Week Ended 11/29/19

Alternative Asset Managers Rise While NGL Energy Partners Falls on Credit Suisse Price Cut

Last week, the Income Strategy advanced 2.08%, outperforming both the Merrill Lynch U.S. High Yield Master II Index’s 0.43% gain and the S&P 500’s 1.04% rise. (Exhibit 1). The strategy ended the week up 16.16% YTD, or 411 basis points ahead of the high yield index and 1,147 basis points behind the S&P 500.

Exhibit 1: Preliminary Performance of Income Strategy Versus High Yield, Equity Indices, Through 11/29/191

Time Period Income Strategy ML HY II S&P 500
Last Week (11/22 – 11/29) 2.08% 0.43% 1.04%
MTD 3.01% 0.26% 3.63%
QTD 1.68% 0.49% 5.87%
YTD 16.16% 12.05% 27.63%
Inception (annualized since 4/2/2009) 13.24% 10.94% 16.11%

Source: Bloomberg, Miller Value Partners

Equities comprised last week’s top five contributors (Exhibit 2). Alternative asset managers Carlyle Group (CG), Apollo Global (APO), and Sculptor Capital (SCU) rose with the broad equity market. Further, Citi reaffirmed their Buy rating and $45 price target on Sculptor Capital, 130% implied upside and keeping the stock on their 90-day positive catalyst watchlist. Chico’s (CHS) jumped after reporting a narrower-than-expected EPS loss of $(0.04), topping consensus of $(0.07) on same-store sales of -2.2% (vs -4.7% estimate), driven by double-digit growth at Soma and sequential improvement at Chico’s and WHBM. Management provided Q4 guidance, where they see negative low-single-digit comp sales and -100bps to -150bps of gross margin decline, primarily due to tariff costs. Chico’s maintained FY19 comp guidance in the negative mid-single digits and lowered capex to $40M-$45M (from $45M-$50M). Quad Graphics (QUAD) rose as COO Thomas Frankowski purchased $47,300 worth of stock at $4.30.

Exhibit 2: Significant Contributors to Performance, 11/22/19 – 11/29/19

Name Type Return
Chico’s FAS Equity 26.6%
Quad Graphics Equity 15.4%
Carlyle Group LP Equity 4.2%
Apollo Global Management Inc Equity 3.2%
Sculptor Capital Management Equity 10.3%

Source: Miller Value Partners

Three equities and two bonds comprised last week’s top five detractors (Exhibit 3). Credit Suisse lowered their price target on NGL Energy Partners (NGL) to $12 (from $14), 20% implied upside excluding the 15.6% dividend yield, reflecting a reduced outlook for the water segment following Q3 earnings. Sberbank (SBER LI) fell below its 50-day moving average. There was no price changing news on the debt of Diebold-Nixdorf (DBD) or Chemours (CC).

Exhibit 3: Significant Detractors from Performance, 11/22/19 – 11/29/19

Name Type Return
NGL Energy Partners LP Equity -5.0%
Sberbank Equity -2.0%
Diebold Nixdorf 8.5% 4/24 Bond -0.8%
The Chemours Co Equity -1.7%
***RECENTLY ADDED SECURITY*** Bond -1.0%

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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