March 16, 2020

Income Strategy Update for Week Ended 3/13/20

Sole Contributor Advances on Light News While Cedar Fair Falls on Travel, Crowd Restrictions

Last week, the Income Strategy declined -15.50%, underperforming both the Merrill Lynch U.S. High Yield Master II Index’s -7.29% fall and the S&P 500’s -8.73% loss. (Exhibit 1). The strategy ended the week down -27.20% YTD, or 1,806 basis points behind 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 3/13/201

Time Period Income Strategy ML HY II S&P 500
Last Week (3/6 – 3/13) -15.50% -7.29% -8.73%
MTD -19.65% -7.71% -8.13%
QTD -27.20% -9.14% -15.73%
YTD -27.20% -9.14% -15.73%
Inception (annualized since 4/2/2009) 10.39% 9.88% 14.18%

Source: Bloomberg, Miller Value Partners

Debt of Ocwen (OCN) was the single contributor to performance last week, though there was no company-specific news driving the move.

Exhibit 2: Significant Contributors to Performance, 3/6/20 – 3/13/20

Name Type Return
Ocwen 8.375% 5/22 Bond 0.2%

Source: Miller Value Partners

Four equities and a bond comprised last week’s top five detractors. Theme park operator Cedar Fair (FUN) fell with travel and leisure stock after President Trump restricted travel to the US and government agencies recommended the restriction of large crowds. Insiders, though, purchased 9,660 shares totaling $275,000. Danske Bank (DANSKE DC) fell below its 200-day moving average and with European banks as investors assessed the credit impact from falling oil prices. Insiders at Diebold Nixdorf (DBD) purchased 37,835 totaling $196,500. Done Brothers, the main retail subsidiary of Betfred, reported a 3.03% position in William Hill (WMH LN). Shares fell, however, as sporting events globally were suspended or cancelled amid the COVID-19 outbreak. NGL Energy Partners (NGL) fell in conjunction with oil prices on weaker demand growth expectations, as well as Saudi Arabia announcing price cuts and increased production.

Exhibit 3: Significant Detractors from Performance, 3/6/20 – 3/13/20

Name Type Return
Cedar Fair Equity -29.3%
Danske Bank A/S Equity -25.1%
Diebold Nixdorf 8.5% 4/24 Bond -11.4%
William Hill Equity -37.2%
NGL Energy Partners Equity -46.1%

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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