June 3, 2019

Income Strategy Update for Week Ended 5/31/19

CenturyLink Advances on Continued Insider Buying While Alternative Asset Managers Fall with the Broad Equity Market

Last week, the Income Strategy declined -2.96%, underperforming both the Merrill Lynch U.S. High Yield Master II Index’s -0.56% fall and the S&P 500’s -2.58% loss. (Exhibit 1). The strategy ended the week up 6.91% YTD, or 61 basis points behind the high yield index and 383 basis points behind the S&P 500.

Exhibit 1: Preliminary Performance of Income Strategy Versus High Yield, Equity Indices, Through 5/31/191

Time Period Income Strategy ML HY II S&P 500
Last Week (5/24 – 5/31) -2.96% -0.56% -2.58%
MTD -6.23% -1.27% -6.35%
QTD -3.34% 0.11% -2.56%
YTD 6.91% 7.52% 10.74%
Inception (annualized since 4/2/2009) 13.01% 11.06% 15.35%

Source: Bloomberg, Miller Value Partners

Equities comprised last week’s top five contributors (Exhibit 2). CenturyLink (CTL) advanced on continued insider buying activity as Lead Director of the Board, Bruce W Hanks, purchased 10,000 shares at $10.63, totaling $106,300. Further, the company announced successful early tender results that exceeded the offer of up to $525M of longer-dated debt securities. NGL Energy Partners (NGL) reported EBITDA of $132.2M, slightly missing estimates of $134.5M, while distributable cash flow of $84.6M provided 1.8x coverage on the $0.39/share distribution (10.6% annualized yield). Management initiated 2020 EBITDA guidance of $600M at the midpoint, nicely above analyst estimates of $555M. New Media Investment Corp (NEWM) rose on reports of merger discussions with Gannett (GCI), a deal that would combine the country’s two largest newspaper publications. There was no price-changing news on Just Energy Group (JE CN) or Seaspan (SSW).

Exhibit 2: Significant Contributors to Performance, 5/24/19 – 5/31/19

Name Type Return
Just Energy Group Inc Equity 2.1%
CenturyLink Inc Equity 5.8%
NGL Energy Partners LP Equity 1.6%
Seaspan Corp Equity 1.9%
New Media Investment Corp Equity 2.6%

Source: Miller Value Partners

Equities comprised last week’s top five detractors (Exhibit 3). Alternative asset managers Apollo Global (APO), Blackstone Group (BX), and Carlyle Group (CG) fell with the broad equity market. Apollo and Carlyle both fell below their 50-day moving averages. British American Tobacco (BATS LN) fell as tobacco stocks dropped on weak Nielsen data showing an 11.2% decline in cigarette volumes for the trailing four-week period. There was no price-changing news on National CineMedia (NCMI).

Exhibit 3: Significant Detractors from Performance, 5/24/19 – 5/31/19

Name Type Return
Apollo Global Management LLC Equity -7.5%
Blackstone Group LP Equity -6.9%
British American Tobacco PLC Equity -8.1%
National CineMedia Equity -5.2%
Carlyle Group LP Equity -2.9%

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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