March 11, 2019

Income Strategy Update for Week Ended 3/8/19

TriplePoint Venture Growth Rises on Strong Results While Apollo Global Falls With Broad Equity Market

Last week, the Income Strategy declined -2.49%, underperforming both the Merrill Lynch U.S. High Yield Master II Index’s -0.54% fall and the S&P 500’s -2.12% loss. (Exhibit 1). The strategy ended the week up 8.90% YTD, or 307 basis points ahead of the high yield index and 97 basis points behind the S&P 500.

Exhibit 1: Preliminary Performance of Income Strategy Versus High Yield, Equity Indices, Through 3/8/191

Time Period Income Strategy ML HY II S&P 500
Last Week (3/1 – 3/8) -2.49% -0.54% -2.12%
MTD -2.61% -0.50% -1.44%
QTD 8.90% 5.83% 9.87%
YTD 8.90% 5.83% 9.87%
Inception (annualized since 4/2/2009) 13.54% 11.14% 15.63%

Source: Bloomberg, Miller Value Partners

Equities comprised last week’s top five contributors (Exhibit 2). TriplePoint Venture Growth (TPVG) reported Q4 net interest income of $0.41, beating analyst estimates of $0.34 and covering the dividend of $0.36/share (10.7% annualized yield). The company generated an 18% yield on debt investments and posted 23% sequential portfolio growth. Western Asset Mortgage (WMC) reported Q4 EPS of $0.34, topping consensus estimates of $0.32 and the dividend of $0.31/share (11.9% annualized yield). Net interest income of $17.1M grew 7.5% on a quarter-over-quarter basis, while book value fell 3.3% to $10.45 on spread widening. There was no price-changing news on Cedar Fair (FUN) or Chimera Investment Corp (CIM).

Exhibit 2: Significant Contributors to Performance, 3/1/19 – 3/8/19

Name Type Return
TriplePoint Venture Growth BDC Equity 5.8%
Western Asset Mortgage Capital Equity 3.2%
Cedar Fair LP Equity 1.3%
Chimera Investment Corp Equity 0.7%

Source: Miller Value Partners

Equities comprised last week’s top five detractors (Exhibit 3). Alternative Asset Manager Apollo Global Management (APO) fell with the broad equity market. Seaspan (SSW) fell despite posting a solid print, where Q4 core EPS of $0.31 beat consensus estimates of $0.28. Management continues to prioritize growing operating cash flow (+67.9% Y/Y) and de-levered to the tune of $109M over the quarter. The company maintained its $0.125/share dividend (6.4% annualized yield). Norges Bank initiated a 1.2% position in Investment Bank Greenhill (GHL). Further, a note from Goldman Sachs cites globally announced deal volumes and counts continued their declining trend, falling 21% and 28%, respectively year-over-year in February. BGC Partners (BGCP) fell below its 50-day moving average. There was no price-changing news on Tupperware Brands (TUP).

Exhibit 3: Significant Detractors from Performance, 3/1/2019 – 3/8/19

Name Type Return
Apollo Global Management LLC Equity -4.3%
Tupperware Brands Corp Equity -7.5%
Seaspan Corp Equity -9.5%
Greenhill & Co Equity -8.1%
BGC Partners Equity -6.6%

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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