The first quarter was a weak one across markets, as both equities and bonds pulled back – the S&P 500 fell -4.35%, US investment grade bonds were off -0.05% and high yield declined -0.50%. The market texture was reminiscent of the first quarter of 2022, when Russia invaded Ukraine, sending oil prices to nearly $130/barrel before returning to more normal levels by the end of that year. The market, however, did not quickly bounce back after that quarter’s decline – rather, it kept going down, putting in a -24% decline from the start of the year to its closing low in October. Investors are naturally wondering whether the current turmoil is likely to result in a similar decline.
Indeed, economists and markets alike noted that growth is likely to slow in conjunction with the tighter oil availability and higher gas prices. The Federal Reserve Bank of Atlanta reduced its first quarter estimate for real economic growth from 3.2% to 1.3% over the span of one month due largely to reduced contributions from personal consumption and residential investment. Bond investors caught a whiff of trouble starting in February, causing the two-to-ten-year yield spread, which investors watch for a forward-looking read on the economy, to flatten to 51 basis points from 73, which was a four-year high; the flattening also reversed all of the curve’s steepening progress on the heels of the Fed’s decision to start expanding its balance sheet again (see “The World’s Biggest Buyer Is Back, and People Don’t Get It”).
While the economy is likely to slow and the bottom may not be in, the rest of the machine appears to be in a more stable position today than it was in 2022. Everything was bouncing back from COVID then, as surging demand collided with pared back supply chains, pushing headline inflation to 7% prior to the oil price shock versus inflation of just 2.7% entering 2026. At around 300 basis points, high-yield spreads were remarkably similar entering each year. While spreads blew out to 578 in 2022, high-yield creditors have so far remained more optimistic this time around, despite all the worry about private credit.
One particular dynamic that we have flagged repeatedly is that big growth continues to appear more vulnerable than smaller cap value, which manifested in a big way in the 2022 pullback and so far this year too. The Russell 2000 Value index advanced 5% in the first quarter, outperforming the Russell 1000 Growth index by nearly 1500 basis points. The S&P 500 information technology sector, which compounded at an impressive 20% annualized between 2009 through 2025, declined -9.1% in the first quarter, among the worst-performing industry groups. People that care about valuation might still find the group unattractive, as it trades at nearly an 8-turn premium to the market on an EV/EBITDA basis, putting it in the 83rd percentile on EV/EBITDA premium over the past thirty years.1 High relative and absolute valuation along with rising capital intensity and a slowing growth backdrop is generally not a great starting point for sustained future outperformance.
Conversely, low expectations in capital-intensive industries appear attractive now that capital has a cost again. Between 2010 and 2020, bond yields barely exceeded the rate of inflation, providing very little opportunity cost for investing in long-duration assets. Now, industries that generate excess capital and return it to shareholders are more compelling. Many energy stocks after the rally appear to appropriately discount $70-$80 oil but are still failing to appreciate that years of underinvestment and improved capital discipline could imply sustained high returns in a world where AI is hungry for power. Financials, which had a rough first quarter, appear poised to do well in a structurally higher rate regime, with a clear path to earnings growth and compelling valuations. The dividend yield on the market is coming off a five-decade low, which we think is a good dynamic to fade, and financials offer juicy yields too.
As always, we remain the largest investors in our strategies and appreciate your partnership. We are optimistic about the future and welcome any questions or comments.
Bill Miller IV, CFA CMT
April 12, 2026
Jump to Fund Updates:
Miller Income Fund
Miller Value Partners Appreciation ETF (MVPA)
Miller Value Partners Leverage ETF (MVPL)
Miller Income Fund
The Miller Income Fund (LMCLX) gained 4.08% during the quarter, outperforming the ICE BofA High Yield Index’s -0.53% decline. View current month-end performance here. The fund initiated four new positions during the quarter. Arbor Realty Trust (ABR) is an internally-managed mortgage REIT trading at a ~35% discount to book value, with a ~16% dividend yield, despite the resumption of accretive share buybacks, and a differentiated, capital-light business model, with stable loan demand from government-sponsored enterprises. Bloomin’ Brands 5.125% senior unsecured bonds due 2029 yielded more than 9% as of quarter-end, which seems compelling relative to the company’s year-end lease-adjusted net leverage ratio of 3.9x, as management expects their ongoing transformation initiatives to revitalize its renowned Outback Steakhouse banner and drive a positive inflection in Fiscal Year 2026 (FY26) same-restaurant comparable growth. Conduent 6% senior secured notes due 2029 yielded more than 18% as of quarter-end, which compares favorably to net leverage ratio of 2.8x as of year-end, as the new CEO sharpens the company’s strategic focus and capital allocation framework to position the company for top-line growth and sustainable free cash flow generation in the future. Crescent Energy (CRGY) is a compelling E&P company, trading at just 2x trailing twelve-month (TTM) cash flow, despite a strong balance sheet (1.5x net leverage), attractive shareholder returns, and an opportunistic management team with a history of strong capital efficiency and consolidating peers at attractive multiples to deliver more durable cash flow generation throughout cycles. The fund eliminated its positions in Public Policy Holding Company (PPHC) and Stellantis NV (STLA) during the quarter, as PPHC approached our internal estimate of fair value, while STLA opted not to pay a dividend this year, as a new CEO attempts a strategic pivot in a very challenging operating environment. View current month-end holdings
Miller Value Partners Appreciation ETF
Miller Value Partners Appreciation Fund (MVPA) fell -5.36% (market price) during the quarter, underperforming the S&P 500’s -4.33% decline. View current month-end performance here. Despite the fund’s overweight position in small-cap value, relative to the benchmark, financial and housing-related holdings detracted from performance as rates rebounded from intra-quarter lows amid rising geopolitical tensions and growth concerns. The fund initiated four new positions during the quarter. As mentioned in the above Income Fund commentary, Crescent Energy (CRGY) trades at a depressed valuation multiple, despite a strong track record of accretive M&A and capital efficiency, which should drive a resilient cash flow profile across commodity cycles. Similarly, Bloomin’ Brands (BLMN) looks attractive, trading at less than 5x TTM free cash flow (FCF) as management reinvests behind strong casual-dining assets (Outback + Carrabba’s) in an effort to reignite comparable restaurant growth and deliver margin expansion off near historical lows. Build-a-Bear Workshop (BBW), also a holding in the Income Fund, trades at just ~5.1x TTM EBITDA, despite a pristine balance sheet, robust returns on capital, and a burgeoning asset-light wholesale business that’s tapping into immense international whitespace, which should provide a long runway for growth and margin expansion. Portillo’s (PTLO), a Chicago-based restaurant chain, trades at ~5.1x TTM operating cash flow, despite top-tier average unit volumes (AUVs) and a revamped site development strategy that plans to capitalize on the chain’s significant domestic whitespace, while also slashing growth capex requirements, potentially driving a positive inflection in free cash flow in the near future. The fund exited two positions during the quarter. Expensify (EXFY) fell in sympathy with a broader sell-off in software providers, as the potential for widespread AI disruption created too much uncertainty about the company’s long-term earnings power. PayPal (PYPL) replaced their CEO after the payment processor’s market share losses accelerated into year-end, casting doubt over the company’s ability to stabilize its competitive position and reaccelerate growth. View current holdings
Miller Value Partners Leverage ETF
Miller Value Partners Leverage (MVPL) fund fell -6.77% (market price) during the quarter, underperforming the S&P 500’s -4.33% decline. View current month-end performance here. After entering the quarter in a leverage-on position, the fund flipped to a leverage-off position two separate times during the quarter, before exiting the quarter in a leverage-off position. Heightened market volatility detracted from performance in the quarter relative to the benchmark. Despite the underperformance in the quarter, the fund has outperformed its benchmark by 1,067bps on a market price basis over the last twelve months, and we remain confident in its long-term prospects. View current holdings
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The performance data quoted represents past performance and is no guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. For the most recent month-end performance, please call 888.593.5110 or visit the Fund’s website at millervaluefunds.com