January 14, 2019

Income Strategy Update for Week Ended 1/11/19

Carlyle Advances on Citi Optimism While Debt of Frontier Communications Falls on Wells Fargo Concerns

Last week, the Income Strategy advanced 4.52%, outperforming both the Merrill Lynch U.S. High Yield Master II Index’s 1.88% rise and the S&P 500’s 2.58% gain. (Exhibit 1). The strategy ended the week up 9.46% YTD, or 626 basis points ahead of the high yield index and 583 basis points ahead of the S&P 500.

Exhibit 1: Preliminary Performance of Income Strategy Versus High Yield, Equity Indices, Through 1/11/191

Time Period Income Strategy ML HY II S&P 500
Last Week (1/4 – 1/11) 4.52% 1.88% 2.58%
MTD 9.46% 3.20% 3.63%
QTD 9.46% 3.20% 3.63%
YTD 9.46% 3.20% 3.63%
Inception (annualized since 4/2/2009-12/31/18) 12.83% 10.73% 14.84%

Source: Bloomberg, Miller Value Partners

Equities comprised last week’s top five contributors (Exhibit 2). Just Energy Group (JE CN), Tupperware Brands (TUP), Macquarie Infrastructure Corp (MIC), and Greenhill (GHL) all moved above closely watched technical levels. Further on Macquarie, RBC reiterated their “Outperform” rating and $45 price target, 11% implied upside excluding the 9.8% dividend yield. More on Greenhill, Sandler O’Neill raised their price target on the stock to $31, 8% implied upside. The analyst cited strong advisory revenues in 4Q18 driven by the second strongest quarter in history for deal completions and believes the M&A cycle still has room to run. Carlyle Group (CG) advanced on a bullish note from Citi, who believes the company is at a favorable intersection of strong, secular growth and deep value. The analyst expects positive momentum and upside to fee-related earnings guidance led by durable near-term drivers. The analyst has a “Buy” rating on the stock with a $34.50 price target, 101% implied upside excluding the 9.8% dividend yield.

Exhibit 2: Significant Contributors to Performance, 1/4/19 – 1/11/19

Name Type Return
Just Energy Group Inc Equity 7.5%
Tupperware Brands Corp Equity 9.8%
Macquarie Infrastructure Corp Equity 5.5%
Carlyle Group LP Equity 6.0%
Greenhill & Co Equity 10.3%

Source: Miller Value Partners

A smattering of asset types comprised last week’s top five detractors (Exhibit 3). Debt of Frontier Communications (FTR) fell on a Wells Fargo downgrade citing the company has been strategically reviewing upcoming debt maturities. The analyst believes the debt is pricing in a restructuring and remains concerned about the company’s balance sheet obligations. B. Riley reiterated their Neutral rating on Maiden Holdings (MHLD) but lowered their price target to $2.50, 80% implied upside. This comes on the heels of Maiden and AmTrust Financial (AFSI) terminating a bulk of their quota share agreement where Maiden will cede $480M of unearned premiums to AmTrust.

Exhibit 3: Significant Detractors from Performance, 1/4/2019 – 1/11/19

Name Type Return
***RECENTLY ADDED SECURITY*** Bond -2.8%
Frontier Communications 10.5% 9/22 Bond -1.4%
***RECENTLY ADDED SECURITY*** Equity -2.6%
Maiden Holdings Ltd Equity -6.0%
Cash Cash 0.0%

Source: Miller Value Partners


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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. Content may not be reprinted, republished or used in any manner without written consent from Miller Value Partners.

©2018 Miller Value Partners, LLC

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