May 26, 2020

Income Strategy Update for Week Ended 5/22/20

Alternative Asset Managers Rise Above Closely Watched Technical Levels While Detractors See Light News

Last week, the Income Strategy advanced 6.60%, outperforming both the Merrill Lynch U.S. High Yield Master II Index’s 2.73% gain and the S&P 500’s 3.27% rise. (Exhibit 1). The strategy ended the week down -29.84% YTD, or 2,244 basis points behind the high yield index and 2,207 basis points behind the S&P 500.

Exhibit 1: Preliminary Performance of Income Strategy Versus High Yield, Equity Indices, Through 5/22/201

Time Period Income Strategy ML HY II S&P 500
Last Week (5/15 – 5/22) 6.60% 2.73% 3.27%
MTD 1.62% 2.68% 1.67%
QTD 13.91% 6.59% 14.71%
YTD -29.84% -7.40% -7.77%
Inception (annualized since 4/2/2009) 9.81% 9.90% 14.85%

Source: Bloomberg, Miller Value Partners

Four equities and a bond comprised last week’s top five contributors. Alternative asset managers Apollo Global Management (APO) and Carlyle Group (CG) both rose above closely watched technical levels and in conjunction with the broad equity market. Credit Suisse initiated coverage of Cedar Fair (FUN) with an “Outperform” rating and $37 price target, 6% implied upside from current levels. The analyst believes Cedar Fair can outperform peers in the current environment given the drive-to capability of their parks and robust early season pass sales, as well as solid runway given recent cost savings initiatives and strong liquidity. Debt of Bed Bath & Beyond (BBBY) gained as the company announced the re-opening of 600 additional stores (~50% of the total fleet) by June 13th and the expansion of curbside pick-up services to 1,350 stores (~90% of the total fleet). Management also noted traffic on the company’s website and mobile app is +30% over recent weeks while digital sales have doubled. There was no price-changing news on Chemours (CC).

Exhibit 2: Significant Contributors to Performance, 5/15/20 – 5/22/20

Name Type Return
Cedar Fair LP Equity 28.4%
Apollo Global Management Equity 11.1%
Carlyle Group Equity 14.2%
Bed Bath & Beyond 5.165% 8/44 Bond 13.7%
The Chemours Co Equity 12.3%

Source: Miller Value Partners

Three bonds comprised last week’s only detractors, though no company-specific news drove any of the moves.

Exhibit 3: Significant Detractors from Performance, 5/15/20 – 5/22/20

Name Type Return
Alliance Resource Partners 7.5% 5/25 Bond -1.1%
GTT Communications 7.875% 12/24 Bond -1.4%
Extraction Oil & Gas 7.375% 5/24 Bond -20.0%

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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