June 8, 2020

Income Strategy Update for Week Ended 6/5/20

Chemours Jumps on Signs of Recovery While Debt of GTT Communications Falls on Lower-than-Expected Infrastructure Sale Bids

Last week, the Income Strategy advanced 11.30%, outperforming both the Merrill Lynch U.S. High Yield Master II Index’s 3.31% gain and the S&P 500’s 4.96% rise. (Exhibit 1). The strategy ended the week down -19.28% YTD, or 1,670 basis points behind the high yield index and 1,902 basis points behind the S&P 500.

Exhibit 1: Preliminary Performance of Income Strategy Versus High Yield, Equity Indices, Through 6/5/201

Time Period Income Strategy ML HY II S&P 500
Last Week (5/29 – 6/5) 11.30% 3.31% 4.96%
MTD 11.30% 3.31% 4.96%
QTD 31.05% 12.14% 24.05%
YTD -19.28% -2.58% -0.26%
Inception (annualized since 4/2/2009) 11.16% 10.36% 15.60%

Source: Bloomberg, Miller Value Partners

Three equities and two bonds comprised last week’s top five contributors. Debt of Bed Bath & Beyond (BBBY) and Diebold Nixdorf (DBD) continued their advance last week as investor appetite for high yield remained robust while Apollo Global (APO) rose in conjunction with the broad equity market. Additionally, Bed Bath & Beyond announced Chairman Patrick Gaston has stepped down as Chairman of the Board and will be replaced by Harriet Edelman effective immediately. Previously, Edelman spent more than 25 years at Avon Products, including as Chief Information Officer and Senior VP of global supply chain. Chemours (CC) rose above its 200-day moving average and in sympathy with signs of recovery in auto end-markets with China posting its second consecutive month of sales growth. Goldman Sachs maintained their positive view on Cedar Fair (FUN) following management meetings, noting the long-term strategy remains in-tact with the potential for significant pent-up demand following local re-openings.

Exhibit 2: Significant Contributors to Performance, 5/29/20 – 6/5/20

Name Type Return
Bed Bath & Beyond 5.165% 8/44 Bond 19.2%
Diebold Nixdorf 8.5% 4/24 Bond 11.5%
Apollo Global Management Equity 11.6%
The Chemours Co Equity 26.0%
Cedar Fair Equity 16.4%

Source: Miller Value Partners

Two bonds and an equity comprised last week’s only detractors. Debt of GTT Communications (GTT) fell on reports that first round bids for the company’s infrastructure business came in at $1.5Bn, below prior Bloomberg reports the assets could fetch $2.0Bn. There was no price-changing news on the debt of Chaparral Energy (CHAP).

Exhibit 3: Significant Detractors from Performance, 5/29/20 – 6/5/20

Name Type Return
Chaparral Energy 8.75% 7/23 Bond -25.9%
GTT Communications 7.875% 12/24 Bond -4.7%

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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