June 18, 2018

Income Strategy Update for Week Ended 6/15/18

Endo Debt Advances on Removal of Litigation Overhang While Detractors See Light News

Last week, the Income Strategy decreased -0.11% underperforming both the Merrill Lynch U.S. High Yield Master II Index’s 0.43% rise and the S&P 500’s 0.07% gain (Exhibit 1). The strategy ended the week up 9.88% YTD, or 922 basis points ahead of the high yield index and 496 basis points ahead of the S&P 500.

Exhibit 1: Preliminary Performance of Income Strategy Versus High Yield, Equity Indices, Through 6/15/181

Time Period Income Strategy ML HY II S&P 500
Last Week (6/8- 6/15) -0.11% 0.43% 0.07%
MTD 1.79% 0.93% 2.84%
QTD 10.95% 1.59% 5.73%
YTD 9.88% 0.66% 4.92%
Inception (annualized since 4/2/2009-5/31/18) 15.71% 11.70% 16.68%

Source: Bloomberg, Miller Value Partners

Three equities and two bonds comprised last week’s top five contributors (Exhibit 2). Media stocks advanced broadly on renewed optimism for M&A after a federal judge approved AT&T’s (T) purchase of Time Warner (TWX). National CineMedia (NCMI) formed a golden cross as the stock’s 50-day moving average rose above the 100-day moving average. Debt of Endo Pharmaceuticals (ENDP) traded higher after the company announced a master settlement agreement resolving all product liability claims against its testosterone replacement therapy, removing a significant litigation overhang. Further, the company will make a one-time payment which will not increase Endo’s product liability reserve which was accrued for in 4Q17. Debt of Frontier Communications (FTR) rose after the company reported an agreement with Granite Telecommunications, LLC to deliver advanced Ethernet services to Granite’s large, multi-location business and government customers. There was no price-changing news on CenturyLink Inc (CTL) or New Media Investment Group (NEWM).

Exhibit 2: Significant Contributors to Performance, 6/8/18 – 6/15/18

Name Type Return
National CineMedia Equity 5.1%
Endo Pharmaceuticals Hldgs Inc 6 7/23 Bond 4.0%
New Media Invt Group Inc Com Equity 4.8%
Frontier Communications Corp 10.5 9/22 Bond 2.1%
CenturyLink Inc Equity 2.2%

Source: Miller Value Partners

Five equities comprised last week’s top five detractors (Exhibit 3). Hi-Crush Partners (HCLP), CBL & Associates (CBL), and Abercrombie & Fitch Co. (ANF) all fell below closely watched technical levels. There was no price-changing news on Maiden Holdings (MHLD) or Energy Transfer Partners LP (ETP).

Exhibit 3: Significant Detractors from Performance, 6/8/2018 – 6/15/18

Name Type Return
Hi-Crush Partners LP Equity -4.8%
Maiden Holdings Ltd Equity -3.4%
CBL & Associates Properties Equity -6.3%
Energy Transfer Partners LP Equity -3.0%
Abercrombie & Fitch Co. Equity -3.5%

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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