Stellantis Gains Technical Momentum After GM Earnings Beat, While Western Alliance Falls in Sympathy with Regional Banks on NYCB Concerns

Last week, the Income Strategy’s representative account ended flat (net of fees), underperforming the ICE BofA Merrill Lynch High Yield Master II Index’s 0.05% gain and underperforming the S&P 500’s 1.41% gain. (Exhibit 1). The strategy ended the week down -1.97% YTD, or 199 basis points behind the high yield index and 603 basis points behind the S&P 500.

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

Time Period Income Strategy Representative Account ICE BofA Master High Yield II Index S&P 500 Index
Last Week (1/26 – 2/2) 0.00% 0.05% 1.41%
MTD 0.14% 0.00% 2.34%
QTD -1.97% 0.02% 4.06%
YTD -1.97% 0.02% 4.06%
1 Year 0.58% 7.49% 20.59%
5 Year 3.85% 4.28% 14.80%
Inception (annualized since 2/28/2014) 3.54% 4.28% 12.47%
Source: Bloomberg, Miller Value Partners.

Five equities comprised last week’s top 5 contributors. Shares of Stellantis NV (STLA) advanced above the stock’s 50-day moving average last week after rival automaker General Motors (GM) reported above-consensus 4Q23 results and guided for FY24 Adjusted EPS of $9.00, well ahead of consensus of $7.70. JP Morgan upgraded AT&T (T) to Overweight with a price target of $21, or ~17.8% upside from Friday’s closing price. The analysts expect the telecom giant to generate FCF of $17.4B in 2024, or a FCF yield of 13.6%, and point out AT&T’s ~12.0% relative valuation discount to Verizon on a forward P/E basis. There was no price-changing news for Buckle (BKE), Encore Wire (WIRE), or Boise Cascade (BCC) last week.

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

Name Type
Stellantis NV Equity
AT&T Inc. Equity
The Buckle Inc. Equity
Encore Wire Corp. Equity
Boise Cascade Co. Equity
Source: Miller Value Partners.

Five equities comprised last week’s top 5 detractors. Western Alliance Bancorp (WAL) fell in sympathy with other regional banks last week after New York Community Bancorp (NYCB) slashed its quarterly dividend by approximately 71% and reported a 4Q23 provision for credit losses of $552MM, significantly higher than the consensus estimate of $45MM, which reignited fears about the stability of the banking industry. Shares of Jackson Financial (JXN) declined below the stock’s 50-day moving average last week. Quad Graphics (QUAD) announced that it repurchased 492.4K shares of its common stock in 4Q23, bringing total FY23 share repurchases to 2.85MM shares for $12.6MM, or ~4.4% of the company’s market cap. There was no price-changing news for OneMain Holdings (OMF) or CTO Realty Growth (CTO) last week.

Name Type
Western Alliance Bancorp Equity
Jackson Financial Inc. Equity
OneMain Holdings Inc. Equity
CTO Realty Growth Equity
Quad Graphics Equity
Source: Miller Value Partners.