December 30, 2019

Income Strategy Update for Week Ended 12/27/19

Sberbank Advances on Russian Buyout Reports While Chemours Falls as JP Morgan Cuts Price Target

Last week, the Income Strategy advanced 0.48%, outperforming the Merrill Lynch U.S. High Yield Master II Index’s 0.14% gain but underperforming the S&P 500’s 0.60% rise. (Exhibit 1). The strategy ended the week up 23.99% YTD, or 960 basis points ahead of the high yield index and 785 basis points behind the S&P 500.

Exhibit 1: Preliminary Performance of Income Strategy Versus High Yield, Equity Indices, Through 12/27/191

Time Period Income Strategy ML HY II S&P 500
Last Week (12/20 – 12/27) 0.48% 0.14% 0.60%
MTD 6.74% 2.07% 3.29%
QTD 8.54% 2.58% 9.36%
YTD 23.99% 14.39% 31.84%
Inception (annualized since 4/2/2009) 13.84% 11.07% 16.34%

Source: Bloomberg, Miller Value Partners

Equities comprised last week’s top five contributors (Exhibit 2). Sberbank (SBER LI) rose on reports that Russia is considering using the country’s National Wealth Fund to buy the central bank’s stake in the company. William Hill (WMH LN) rose above its 50-day moving average on news that peer DraftKings is combining with Diamond Eagle, a deal which will IPO in the first half of 2020 and highlights the long-term US sportsbetting opportunity. Abercrombie & Fitch (ANF) moved above its 50-day moving average. There was no price-changing news on NGL Energy Partners (NGL) or Danske Bank (DANSKE DC).

Exhibit 2: Significant Contributors to Performance, 12/20/19 – 12/27/19

Name Type Return
NGL Energy Partners LP Equity 4.5%
Abercrombie & Fitch Co Equity 4.0%
Sberbank Equity 2.8%
William Hill plc Equity 3.5%
Danske Bank Equity 1.9%

Source: Miller Value Partners

Equities and a bond comprised last week’s top five detractors (Exhibit 3). JP Morgan maintained their “Neutral” rating on Chemours (CC) but lowered their price target to $19 (from $21), 7.5% implied upside excluding the 5.7% dividend yield, reflecting estimates of lower-than-expected volumes and higher inventory costs. Chico’s (CHS) fell below its 50-day moving average. There was no price-changing news on alternative asset managers Sculptor Capital (SCU) or Apollo Global (APO), as well as on the debt of Alliance Resource Partners (ARLP).

Exhibit 3: Significant Detractors from Performance, 12/20/19 – 12/27/19

Name Type Return
Chico’s FAS Equity -8.0%
The Chemours Co Equity -2.1%
Alliance Resource Partners 7.5% 5/25 Bond -1.2%
Sculptor Capital Management Equity -1.4%
Apollo Global Management Equity -0.4%

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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