September 30, 2019

Income Strategy Update for Week Ended 9/27/19

Just Energy Advances as Robert Snyder Boosts Stake While Alternative Asset Managers Fall

Last week, the Income Strategy declined -1.52%, underperforming both the Merrill Lynch U.S. High Yield Master II Index’s -0.34% fall and the S&P 500’s -0.98% loss. (Exhibit 1). The strategy ended the week up 14.54% YTD, or 301 basis points ahead of the high yield index and 540 basis points behind the S&P 500.

Exhibit 1: Preliminary Performance of Income Strategy Versus High Yield, Equity Indices, Through 9/27/191

Time Period Income Strategy ML HY II S&P 500
Last Week (9/20 – 9/27) -1.52% -0.34% -0.98%
MTD 4.06% 0.34% 1.35%
QTD 2.97% 1.25% 1.18%
YTD 14.54% 11.53% 19.94%
Inception (annualized since 4/2/2009) 13.33% 11.08% 15.71%

Source: Bloomberg, Miller Value Partners

Equities and a bond comprised last week’s top five contributors (Exhibit 2). Just Energy Group (JE CN) soared as top five holder Robert Snyder, a retail energy veteran, increased his stake from 5.2% to 8.3% and held discussions with management and other top holders about the ongoing strategic review. Canaccord views the transaction as positive for the stock, maintaining their “Speculative Buy” rating and expects the move to encourage management to successfully conclude the strategic review as soon as possible. Debt of CenturyLink (CTL) rose as the company completed a refinancing of Level 3 notes with $1B worth of 4.625% senior notes due 2027. Management of BGC Partners (BGCP) announced they’re confident with the midpoint of Q3 revenue and pre-tax adjusted earnings guidance of $510M and $87.5M, respectively. There was no price changing news on Chico’s (CHS) or Cedar Fair (FUN).

Exhibit 2: Significant Contributors to Performance, 9/20/19 – 9/27/19

Name Type Return
Just Energy Group Inc. Equity 50.1%
Chico’s FAS, Inc. Equity 13.3%
Cedar Fair LP Equity 5.9%
CenturyLink Inc 7.6 9/39 Bond 1.3%
BGC Partners Equity 1.1%

Source: Miller Value Partners

Equities and a bond also comprised last week’s top five detractors (Exhibit 3). Alternative asset managers Sculptor Capital Management (SCU), Carlyle Group (CG), and Apollo Global (APO) fell last week with the broad equity market. Goldman Sachs, however, maintained their constructive stance on the group with expectations for fee-related earnings acceleration driven by robust fundraising, margin expansion, and strong accrued carry balances. Further, Sculptor Capital fell below closely watched technical levels. Chemours (CC) declined as Gordon Haskett flagged the potential for higher PFAS liability costs, citing a recent report from the Environmental Business Journal.

Exhibit 3: Significant Detractors from Performance, 9/20/19 – 9/27/19

Name Type Return
Sculptor Capital Management Equity -16.4%
Carlyle Group LP Equity -3.4%
Apollo Global Management Inc. Equity -2.9%
The Chemours Company Equity -10.0%

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 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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