September 16, 2019

Income Strategy Update for Week Ended 9/13/19

Retail Advances on Trade War Optimism While Cedar Fair, Apollo Fall Despite Street Optimism

Last week, the Income Strategy advanced 3.99%, outperforming both the Merrill Lynch U.S. High Yield Master II Index’s 0.15% gain and the S&P 500’s 1.02% rise. (Exhibit 1). The strategy ended the week up 17.17% YTD, or 557 basis points ahead of the high yield index and 456 basis points behind the S&P 500.

Exhibit 1: Preliminary Performance of Income Strategy Versus High Yield, Equity Indices, Through 9/13/191

Time Period Income Strategy ML HY II S&P 500
Last Week (9/6 – 9/13) 3.99% 0.15% 1.02%
MTD 6.46% 0.40% 2.87%
QTD 5.35% 1.31% 2.70%
YTD 17.17% 11.60% 21.73%
Inception (annualized since 4/2/2009) 13.63% 11.13% 15.94%

Source: Bloomberg, Miller Value Partners

Equities comprised last week’s top five contributors (Exhibit 2). Last week’s value inflection benefitted the strategy in relation to broadly watched indices. Retailers Abercrombie & Fitch (ANF) and Chico’s (CHS) advanced on continued strength in US same-store sales and optimism on a potential resolution to the US-China trade wars. Further, Abercrombie rose above its 50-day moving average. Alternative asset manager Carlyle Group (CG) rose with the broad equity market, as well as on optimism from Deutsche Bank, who sees the group moving higher on strong fundraising and organic fee-related earnings growth. NGL Energy Partners (NGL) rose above closely watched technical levels. There was no price-changing news on Quad Graphics (QUAD).

Exhibit 2: Significant Contributors to Performance, 9/6/19 – 9/13/19

Name Type Return
Abercrombie & Fitch Co. Equity 20.9%
Chico’s FAS Equity 22.2%
Quad Graphics Equity 14.5%
Carlyle Group Equity 5.1%
NGL Energy Partners LP Equity 10.4%

Source: Miller Value Partners

Four equities and a bond comprised last week’s top five detractors (Exhibit 3). Cedar Fair (FUN) fell despite Wedbush reiterating their “Outperform” rating and $60 price target, 10% implied upside excluding the 6.8% dividend yield. Apollo Global Management (APO) declined despite Wells Fargo maintaining their “Outperform” rating and increasing their price target from $42 to $48, 18% implied upside excluding the 4.9% dividend yield. There was no price-changing news on the debt of Chaparral Energy (CHAP), Macquarie Infrastructure (MIC), or National CineMedia (NCMI).

Exhibit 3: Significant Detractors from Performance, 9/6/19 – 9/13/19

Name Type Return
Chaparral Energy 8.75% 7/23 Bond -9.6%
Cedar Fair LP Equity -5.8%
Apollo Global Management Equity -1.2%
Macquarie Infrastructure Co Equity -1.2%
National CineMedia Equity -0.6%

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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