July 22, 2019

Income Strategy Update for Week Ended 7/19/19

British American Tobacco Rises in Sympathy with Strong Peer Earnings While Alternative Asset Managers Fall

Last week, the Income Strategy declined -1.14%, underperforming the Merrill Lynch U.S. High Yield Master II Index’s -0.16% fall but outperforming the S&P 500’s -1.21% loss. (Exhibit 1). The strategy ended the week up 12.82% YTD, or 268 basis points ahead of the high yield index and 724 basis points behind the S&P 500.

Exhibit 1: Preliminary Performance of Income Strategy Versus High Yield, Equity Indices, Through 7/19/191

Time Period Income Strategy ML HY II S&P 500
Last Week (7/12 – 7/19) -1.14% -0.16% -1.21%
MTD 1.43% -0.01% 1.29%
QTD 1.43% -0.01% 1.29%
YTD 12.82% 10.14% 20.06%
Inception (annualized since 4/2/2009) 13.42% 11.16% 16.04%

Source: Bloomberg, Miller Value Partners

Equities comprised last week’s top five contributors (Exhibit 2). British American Tobacco (BATS LN) rose above closely watched technical levels in conjunction with peer Philip Morris (PM) posting solid Q2 results, beating consensus earnings estimates and raising full-year guidance on the backs of strong next-generation product demand. Citi reaffirmed their Buy rating on Abercrombie & Fitch (ANF) with a $35 price target, 92% implied upside excluding the 4.4% dividend yield, citing continued strength in the Hollister brand and attractive valuation relative to peers. New Media (NEWM) advanced on reports the company is in discussions to acquire peer Gannett (GCI) in a cash and stock deal that could yield $200M in annual synergies and would combine the nation’s top two newspaper firms by circulation. Erdemir (EREGL TI) moved above its 50-day moving average. There was no price-changing news on BGC Partners (BGCP).

Exhibit 2: Significant Contributors to Performance, 7/12/19 – 7/19/19

Name Type Return
British American Tobacco Equity 5.9%
BGC Partners Equity 4.5%
Abercrombie & Fitch Equity 2.6%
New Media Investment Group Equity 3.3%
Erdemir Equity 8.2%

Source: Miller Value Partners

Equities also comprised last week’s top five detractors (Exhibit 3). Alternative asset managers Apollo Global (APO) and Carlyle Group (CG) fell despite a strong earnings report from peer Blackstone (BX), as well as continued optimism from Goldman Sachs, who continues to favor alternatives in the capital market space. Chico’s (CHS) named interim-CEO Bonnie Brooks as its full-time President and CEO. The company also announced they are realigning their business segments between retail and intimates, falling under the leadership of Molly Langenstein who joins from Macy’s (M) where she served as General Business Manager of the Ready-to-Wear group. Management reaffirmed full year guidance. National CineMedia (NCMI) fell below its 50-day moving average. There was no price-changing news on Quad Graphics (QUAD).

Exhibit 3: Significant Detractors from Performance, 7/12/19 – 7/19/19

Name Type Return
Apollo Global Management LLC Equity -4.4%
Carlyle Group LP Equity -4.2%
Quad Graphics Equity -7.3%
National CineMedia Equity -3.8%
Chico’s FAS Equity -6.3%

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 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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