Income Strategy Weekly Update for 02/02/2024 – 02/09/2024

MicroStrategy Gains on Earnings Beat and Crypto Rally, While OneMain Drops on Mixed Guidance

Last week, the Income Strategy’s representative account rose 0.86% (net of fees), outperforming the ICE BofA Merrill Lynch High Yield Master II Index’s 0.17% gain and underperforming the S&P 500’s 1.40% gain. (Exhibit 1). The strategy ended the week down -1.13% YTD, or 132 basis points behind the high yield index and 665 basis points behind the S&P 500.

Exhibit 1: Performance of Income Strategy Representative Account Net of Fees Versus High Yield, Equity Indices, Through 2/9/2024¹

Time Period	Income Strategy Representative Account	ICE BofA Master High Yield II Index	S&P 500 Index
Last Week (2/2 – 2/9)	0.86%	0.17%	1.40%
MTD	1.01%	0.17%	3.77%
QTD	-1.13%	0.19%	5.52%
YTD	-1.13%	0.19%	5.52%
1 Year	5.60%	9.34%	25.18%
5 Year	4.31%	4.28%	15.10%
Inception (annualized since 2/28/2014)	3.62%	4.29%	12.60%

Source: Bloomberg, Miller Value Partners.

Four equities and one bond comprised last week’s top 5 contributors. MicroStrategy Inc 0.75% 12/15/2025 rose as the software company benefitted from a Bitcoin price rally last week that resulted in a 10.6% weekly gain for the prominent cryptocurrency, as well as an earnings report coming with the statement that MicroStrategy was committed to developing the Bitcoin network. Stellantis NV (STLA) rose in sympathy with other automakers last week after Ford (F) beat consensus expectations with its 4Q23 earnings report and provided strong FY24 guidance, signaling healthy demand. Shares of Jackson Financial (JXN) advanced above the stock’s 50-day moving average last week. Buckle (BKE) reported that January 2024 comparable same store net sales fell -17.4% Y/Y, while total net sales fell -4.5% Y/Y during the period. There was no price-changing news for Encore Wire (WIRE) last week.

Exhibit 2: Significant Contributors to Income Strategy Representative Account Performance, 01/26/24 – 02/02/24

Name	Type
MicroStrategy Inc 0.75% 12/15/2025	Bond
Stellantis NV	Equity
Jackson Financial Inc.	Equity
The Buckle Inc.	Equity
Encore Wire Corp.	Equity

Source: Miller Value Partners.

Four equities and one bond comprised last week’s top 5 detractors. OneMain Holdings (OMF) reported 4Q23 Adjusted EPS of $1.39, -10.9% Y/Y, ahead of consensus of $1.37, and a net charge-offs ratio of 7.70%, +102bps Q/Q, slightly worse than consensus of 7.61%. New loan originations came in at $3.0B in the quarter, -13% Y/Y, due to the company’s credit box tightening and pricing actions, as the company’s front book, or loan originations after the company’s credit tightening in August 2022, now represent 65% of the company’s portfolio. Management provided FY24 guidance that calls for managed receivables organic growth of 4%, revenue growth of 7%, net charge-offs of 8.0% (vs. 7.5% in FY23), and an operating expense ratio of ~6.7% (vs. 7.0% in FY23), at the respective midpoints. Gray Television Inc 5.375% 11/15/2031 fell in sympathy with other local TV station owners last week after ESPN, Fox, and Warner Bros Discovery announced they were collaborating to create a shared sports-streaming service. Shares of Alliance Resource Partners (ARLP) declined below the stock’s 50-day moving average last week. There was no price-changing news for AT&T (T) or Vonovia SE (VNA GY) last week.

Name	Type
AT&T Inc	Equity
OneMain Holdings Inc.	Equity
Gray Television 5.375% 11/15/2031	Bond
Alliance Resource Partners	Equity
Vonovia SE	Equity

Source: Miller Value Partners.

As of prior week’s market close unless otherwise stated.

¹The performance figures for the representative Income Strategy account reflect the deduction of investment management fees and certain other expenses. Returns greater than 1 year are annualized.

For additional information about Income Strategy performance, please click on the Income Strategy Composite Performance Disclosure. Past performance is no guarantee of future results.

Significant Contributors and Significant Detractors are based on holdings that had the greatest effect on representative account performance for the week. Holdings that have been in the portfolio 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. There is no guarantee that market trends discussed herein will continue. 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. Portfolio composition is shown as of a point in time and is subject to change without notice.