December 9, 2019

Income Strategy Update for Week Ended 12/6/19

Alternative Asset Managers Advance While Chico’s Falls on No News

Last week, the Income Strategy advanced 0.64%, outperforming both the Merrill Lynch U.S. High Yield Master II Index’s 0.41% gain and the S&P 500’s 0.21% rise. (Exhibit 1). The strategy ended the week up 16.90% YTD, or 437 basis points ahead of the high yield index and 1,100 basis points behind the S&P 500.

Exhibit 1: Preliminary Performance of Income Strategy Versus High Yield, Equity Indices, Through 12/6/191

Time Period Income Strategy ML HY II S&P 500
Last Week (11/29 – 12/6) 0.64% 0.41% 0.21%
MTD 0.64% 0.41% 0.21%
QTD 2.33% 0.92% 6.09%
YTD 16.90% 12.53% 27.90%
Inception (annualized since 4/2/2009) 13.28% 10.96% 16.10%

Source: Bloomberg, Miller Value Partners

Equities comprised last week’s top five contributors (Exhibit 2). Alternative asset managers Sculptor Capital Management (SCU) and Apollo Global (APO) rose with the broad equity market. Further, Sculptor reported AUM of $33.6B, an 180bps month-over-month improvement while their master fund returned +2.33% in November, implying YTD performance of +12.67%. Abercrombie & Fitch (ANF) rose above its 50 and 100-day moving averages as RBC remains encouraged by domestic trends and continued improvement in promotional activity leading into the holiday season. Chemours (CC) advanced on reports lawmakers pulled provisions that would tighten the regulation of PFAS in the annual defense authorization bill. There was no price-changing news on Seaspan (SSW).

Exhibit 2: Significant Contributors to Performance, 11/29/19 – 12/6/19

Name Type Return
Seaspan Corp Equity 12.7%
Abercrombie & Fitch Co Equity 7.1%
Sculptor Capital Management Equity 9.8%
The Chemours Co Equity 5.7%
Apollo Global Management Equity 2.0%

Source: Miller Value Partners

Four equities and a bond comprised last week’s top five detractors (Exhibit 3). Chico’s (CHS) fell despite B Riley maintaining their “Buy” rating and $5.50 price target, 31% implied upside excluding the 8.4% dividend yield, noting the stock is poised to benefit from digital and omni tech initiatives. Stifel downgraded William Hill (WMH LN) from “Buy” to “Hold” but left their price target of 190p unchanged, 13% implied upside excluding the 6.2% dividend yield. The analyst stated that while the company is positioned well, regulatory risk in the UK remains elevated. Credit Suisse maintains their “Neutral” rating on Carlyle Group (CG) and raised their price target to $28 (from $27), 5% implied downside partially offset by the 4.2% dividend yield. Energy Transfer (ET) completed its acquisition of SemGroup (SEMG) following final shareholder approval. There was no price-changing news on the debt of Diebold Nixdorf (DBD).

Exhibit 3: Significant Detractors from Performance, 11/29/19 – 12/6/19

Name Type Return
Chico’s FAS Equity -13.7%
Diebold- Nixdorf 8.5% 4/24 Bond -2.3%
William Hill plc Equity -3.3%
Carlyle Group LP Equity -1.0%
Energy Transfer LP Equity -2.6%

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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