June 11, 2018

Income Strategy Update for Week Ended 6/8/18

Abercrombie & Fitch Bounces Back While Detractors See Light News

Last week, the Income Strategy advanced 1.67%, outperforming both the Merrill Lynch U.S. High Yield Master II Index’s 0.41% rise and the S&P 500’s 1.66% gain (Exhibit 1). The strategy ended the week up 10.00% YTD, or 978 basis points ahead of the high yield index and 515 basis points ahead of the S&P 500.

Exhibit 1: Preliminary Performance of Income Strategy Versus High Yield, Equity Indices, Through 6/8/181

Time Period Income Strategy ML HY II S&P 500
Last Week (6/1- 6/8) 1.67% 0.41% 1.66%
MTD 1.90% 0.49% 2.77%
QTD 11.07% 1.15% 5.65%
YTD 10.00% 0.22% 4.85%
Inception (annualized since 4/2/2009-5/31/18) 15.71% 11.70% 16.68%

Source: Bloomberg, Miller Value Partners

Four equities and a bond comprised last week’s top five contributors (Exhibit 2). Retailers advanced broadly on a strong weekly retail sales report showing same-store sales jumped +4% year over year. Abercrombie & Fitch (ANF) bounced back nicely and moved above closely watched technical levels after last week’s drop, which looks overdone given posting better-than-expected earnings and same-store sales, as well as management’s FY18 guidance raise. The company also traded up in sympathy with peer American Eagle Outfitters (AEO), which received an upgrade at B. Riley with a “Buy” rating on strong Q1 earnings. Mall REIT CBL & Associates (CBL) rose above its 200-day moving average, while peer Washington Prime Group (WPG) formed a golden cross as the stock’s 50-day moving average moved above its 200-day moving average. There was no price-changing news on Endo Pharmaceuticals (ENDP) or New Media Investment Group (NEWM).

Exhibit 2: Significant Contributors to Performance, 6/1/18 – 6/8/18

Name Type Return
Abercrombie & Fitch Co Equity 21.6%
Endo Pharmaceuticals Holdings 6.0% 7/23 Bond 7.4%
CBL & Associates Properties Equity 13.7%
New Media Investment Group Equity 6.9%
Washington Prime Group Equity 5.9%

Source: Miller Value Partners

Five equities comprised last week’s top five detractors (Exhibit 3), though there was no apparent news that drove any of the moves, except Arlington Asset Investment (AI), which closed the week below its 50-day moving average.

Exhibit 3: Significant Detractors from Performance, 6/1/2018 – 6/8/18

Name Type Return
Hi-Crush Partners LP Equity -3.8%
National CineMedia Equity -2.3%
Seaspan Corp Equity -1.3%
Arlington Asset Investment Corp Equity -3.0%

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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