April 16, 2018

Income Strategy Update for Week Ended 4/13/18

Hi-Crush Partners Advances on Stephens’ Bullish Outlook While Chimera Falls Below Closely Watched Technicals

Last week, the Income Strategy advanced 0.84%, outperforming the Merrill Lynch U.S. High Yield Master II Index’s 0.83% gain, but underperforming the S&P 500’s 2.04% rise (Exhibit 1). The strategy ended the week up 0.72% YTD, or 50 basis points ahead of the high yield index and 82 basis points ahead of the S&P 500.

Exhibit 1: Preliminary Performance of Income Strategy Versus High Yield, Equity Indices, Through 4/13/181

Time Period Income Strategy ML HY II S&P 500
Last Week (4/6 – 4/13) 0.84% 0.83% 2.04%
MTD 1.95% 1.14% 0.66%
QTD 1.95% 1.14% 0.66%
YTD 0.72% 0.22% -0.10%
Inception (annualized since 4/2/2009-3/31/18) 14.92% 11.76% 16.67%

Source: Bloomberg, Miller Value Partners

Four equities and a preferred comprised last week’s top five contributors (Exhibit 2). Stephens initiated coverage of Hi-Crush Partners (HCLP) with an “Overweight” rating and a price target of $16 (6.0x 2018E earnings), 36.8% above where the stock currently trades. The analyst expects rapid top and bottom-line growth on increasing price and growing volumes and believes management’s commitment to increasing distributions supports a higher valuation. Preferred shares of AmTrust Financial (AFSI) closed the week above their 50-day moving average. Investment bank Greenhill (GHL) rose above closely watched technicals as Sandler O’Neill raised their price target on the stock to $20, slightly above where it currently trades. New Media Investment Group (NEWM) advanced as CEO, Michael Reed, purchased 25,000 shares for a total of $411,250, or $16.45/share. Further, the company announced the acquisition of Akron Beacon Journal for $16M and in a separate transaction, the sale of substantially all of the publishing and related assets of GateHouse Media Alaska to Black Press. There was no price-changing news on Abercrombie & Fitch (ANF).

Exhibit 2: Significant Contributors to Performance, 4/6/18 – 4/13/18

Name Type Return
Hi-Crush Partners LP Equity 7.9%
AmTrust Financial Services 6.95% Preferred 7.0%
Abercrombie & Fitch Co Equity 4.2%
Greenhill & Co Equity 6.2%
New Media Investment Group Equity 4.9%

Source: Miller Value Partners

Four equities and a bond comprised last week’s top five detractors (Exhibit 3). Chimera Investment Corp (CIM) fell below closely watched technical levels. Apollo Global Management (APO) announced they are seeking to raise more than $4B for their third natural resources fund. There was no price-changing news on CYS Investments (CYS), Washington Prime Group (WPG), or the debt of Endo Pharmaceutical Holdings (ENDP).

Exhibit 3: Significant Detractors from Performance, 4/6/2018 – 4/13/18

Name Type Return
CYS Investments Equity -2.7%
Chimera Investment Corp Equity -2.5%
Apollo Global Management Equity -1.7%
Washington Prime Group Equity -2.1%
Endo Pharmaceuticals Holdings 6.0% 7/23 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 fee 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.

©2018 Miller Value Partners, LLC

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