July 8, 2019
Income Strategy Update for Week Ended 7/5/19
Alternative Asset Managers Rise While Endo Falls After Drawing Revolver
Last week, the Income Strategy advanced 2.09%, outperforming both the Merrill Lynch U.S. High Yield Master II Index’s 0.18% gain and the S&P 500’s 1.69% rise. (Exhibit 1). The strategy ended the week up 13.55% YTD, or 319 basis points ahead of the high yield index and 700 basis points behind the S&P 500.
Exhibit 1: Preliminary Performance of Income Strategy Versus High Yield, Equity Indices, Through 7/5/191
| Time Period | Income Strategy | ML HY II | S&P 500 |
| Last Week (6/28 – 7/5) | 2.09% | 0.18% | 1.69% |
| MTD | 2.09% | 0.18% | 1.69% |
| QTD | 2.09% | 0.18% | 1.69% |
| YTD | 13.55% | 10.36% | 20.55% |
| Inception (annualized since 4/2/2009) | 13.55% | 11.23% | 16.14% |
Source: Bloomberg, Miller Value Partners
Equities comprised last week’s top five contributors (Exhibit 2). Alternative asset managers Carlyle Group (CG), Blackstone Group (BX), and Apollo Global Management (APO) rose in conjunction with the broad equity market and the completion of Blackstone’s transition to a C-corp, which should make it easier for investors to own the stock. Jefferies remains bullish on the group surrounding the C-corp narrative and expects sequential Q2 growth for accrued performance fees. B Riley remains optimistic on National CineMedia (NCMI) despite weak Q2 box office trends and is forecasting an upcoming summer rebound. The analyst maintains a “Buy” rating and $9.75 price target, 41% implied upside excluding the 9.8% dividend yield, stating valuation is now more reflective of a box office trough. British American Tobacco (BATS LN) moved above closely watched technical levels.
Exhibit 2: Significant Contributors to Performance, 6/28/19 – 7/5/19
| Name | Type | Return |
| Carlyle Group LP | Equity | 4.6% |
| Blackstone Group Inc | Equity | 6.2% |
| Apollo Global Management LLC | Equity | 4.3% |
| National CineMedia | Equity | 6.7% |
| British American Tobacco PLC | Equity | 7.0% |
Source: Miller Value Partners
A smattering of asset classes comprised last week’s top five detractors (Exhibit 3). Debt of Endo Pharmaceuticals (ENDP) fell after the company announced it drew $300M from its $1B revolving credit facility for general corporate purposes and additional flexibility. Further, Moody’s downgraded Endo’s corporate family rating from B2 to B3 and revised the company’s outlook from “Negative” to “Stable”. There was no price-changing news on the other top detractors
Exhibit 3: Significant Detractors from Performance, 6/28/19 – 7/5/19
| Name | Type | Return |
| Arlington Asset Investment Corp | Equity | -3.2% |
| Quad Graphics | Equity | -2.3% |
| Just Energy Group Inc | Equity | -1.8% |
| Ascena Retail Group TL B 1L 08/22 | Term Loan | -2.2% |
| Endo International PLC 6.0 7/23 | Bond | -1.9% |
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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