May 21, 2018

Income Strategy Update for Week Ended 5/18/18

Preferred Shares of AmTrust Advance on Icahn Stake While Maiden Holdings Falls on Downgrade

Last week, the Income Strategy advanced 0.57%, outperforming both the Merrill Lynch U.S. High Yield Master II Index’s -0.21% decline and the S&P 500’s -0.47% fall (Exhibit 1). The strategy ended the week up 7.11% YTD, or 736 basis points ahead of the high yield index and 487 basis points ahead of the S&P 500.

Exhibit 1: Preliminary Performance of Income Strategy Versus High Yield, Equity Indices, Through 5/18/181

Time Period Income Strategy ML HY II S&P 500
Last Week (5/11- 5/18) 0.57% -0.21% -0.47%
MTD 4.71% 0.00% 2.63%
QTD 8.15% 0.67% 3.02%
YTD 7.11% -0.25% 2.24%
Inception (annualized since 4/2/2009-4/30/18) 15.17% 11.81% 16.54%

Source: Bloomberg, Miller Value Partners

Four equities and a preferred comprised last week’s top five contributors (Exhibit 2). AltaCorp Capital initiated coverage of Hi-Crush Partners (HCLP) with an “Outperform” rating and a price-target of $17.20, 23.6% implied upside excluding the dividend. Preferred shares of AmTrust Financial (AFSI) rose as activist investor Carl Icahn disclosed a 9.4% stake in the company and outlined his opposition to the proposed private deal at $13.50/share, claiming it is not equitable to minority shareholders. New Media Investment Group (NEWM) rose above its 50-day moving average as the company finalized the previously announced acquisition of the Akron Beacon Journal for $16M and the subsequent sale of substantially all of the assets of GateHouse Media Alaska Holdings, Inc. Shares of Abercrombie & Fitch (ANF) rose after David Einhorn’s Greenlight Capital disclosed a new stake in the company. There was no price-changing news on Greenhill (GHL).

Exhibit 2: Significant Contributors to Performance, 5/11/18 – 5/18/18

Name Type Return
 Greenhill & Co Inc Equity 9.8%
 Hi-Crush Partners LP Equity 6.3%
 AmTrust Financial Services 6.95% Preferred 6.9%
 New Media Investment Group Equity 4.4%
 Abercrombie & Fitch Co Equity 4.9%

Source: Miller Value Partners

Five equities comprised last week’s top five detractors (Exhibit 3). JMP Securities downgraded Maiden Holdings (MHLD) from “Outperform” to “Market Perform”, citing the current risk/reward trade-off is much more balanced after the recent run-up in share price. Seaspan (SSW) accepted delivery of its third (in a four series total) 10,000 TEU containership, which will commence a three-year, fixed-rate charter with CMA CGM, with an option to extend the contract for an additional three years. There was no price-changing news on Apollo Global Management (APO) or CYS Investments (CYS).

Exhibit 3: Significant Detractors from Performance, 5/11/2018 – 5/18/18

Name Type Return
 Maiden Holdings Ltd Equity -10.7%
 Seaspan Corp Equity -6.3%
 Apollo Global Management LLC Equity -2.1%
 CYS Investment Equity -2.3%

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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