Peters MacGregor Global Equity Update November 2015 THINK INDEPENDENTLY. INVEST ACTIVELY

Transcription

1 Peters MacGregor Global Equity Update November 2015 THINK INDEPENDENTLY. INVEST ACTIVELY

2 DISCLAIMER THIS PRESENTATION IS PREPARED BY PETERS MACGREGOR CAPITAL MANAGEMENT ( PMCM ) ABN AFSL THE PRESENTATION IS FOR GENERAL INFORMATION PURPOSES ONLY AND DOES NOT TAKE INTO ACCOUNT ANY PARTICULAR PERSON S INVESTMENT OBJECTIVES, FINANCIAL SITUATION OR NEEDS. IT IS NOT THE INTENTION OF PMCM THAT THIS REPORT BE USED AS THE PRIMARY SOURCE OF READERS INFORMATION BUT AS AN ADJUNCT TO THEIR OWN RESOURCES AND TRAINING. THE INFORMATION USED IN PREPARING THIS PRESENTATION WAS DERIVED FROM SOURCES CONSIDERED TO BE RELIABLE AND ACCURATE. PMCM, ITS EMPLOYEES, CONSULTANTS, ADVISERS AND AGENTS ARE NOT LIABLE FOR ANY OPINION EXPRESSED OR FOR ANY ERROR OR OMISSION THAT MAY HAVE OCCURRED TO THE EXTENT THAT LAW ALLOWS ANY SUCH RESPONSIBILITY TO BE EXCLUDED. NO REPRESENTATION IS GIVEN, WARRANTY MADE OR RESPONSIBILITY TAKEN AS TO THE ACCURACY OF THIS REPORT. TO THE EXTENT LAW IMPLIES SUCH MATTERS, THEY ARE EXCLUDED TO THE EXTENT LAW PERMITS. ANY FORWARD LOOKING STATEMENTS ARE BASED ON REASONABLE GROUNDS BUT DUE TO OUR INABILITY TO PREDICT FUTURE EVENTS THEY CANNOT BE GUARANTEED. PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE. NO RESPONSIBILITY IS ACCEPTED BY PMCM AND ITS RELATED PARTNERS FOR ANY LOSS ARISING IN ANY WAY (INCLUDING DUE TO NEGLIGENCE) FROM ANYONE ACTING OR REFRAINING FROM ACTING AS A RESULT OF INFORMATION OR MATERIAL PRESENTED. PETERS MACGREGOR CAPITAL MANAGEMENT LIMITED

3 People Process Performance attribution Portfolio Positioning Philosophy: Stock Selection Very few companies exhibit all three attributes at the same time patient approach 3

4 People Process Performance attribution Portfolio Positioning Philosophy: Portfolio Management Concentrated Portfolio Holdings Risk Management Economic diversification: industry, geography Interrelationship between holdings Position sizing Strict Sell Discipline Price meets our assessed valuation Impaired thesis causes valuation to decline or conviction level to fall Replace with more attractive opportunity Risk management overlay sector / thematic exposure Cash is a by-product 0-30% 4

5 People Process Performance attribution Portfolio Positioning Our strict criteria makes the investment universe manageable 4,700 stock universe Great Company Proprietary screens 200 stocks fundamentally researched (dynamic) DCF Valuation (>20% discount) Max 30 Stock Portfolio 5

6 People Process Performance attribution Portfolio Positioning Performance summary September 2015* Performance (%) MSCI ACWI IMI NR (AUD) Index (%) Outperformance (%) Std Dev Sharpe Ratio Correlation 1 Month 3 Months 6 Months 1 Year 3 Years (p.a) 5 Years (p.a) 7 Years (p.a) 10 Years (p.a) Since inception (p.a) -2.03% -2.73% 0.70% 2.91% -1.05% 3.96% 1.74% -1.12% 2.86% 23.33% 16.87% 6.46% % 22.20% -2.28% % 14.09% 1.03% % 8.21% 3.26% % 5.72% 2.96% % 6.26% 1.82% * Performance as at 30 September Inception date: 10 September The net returns are net of management fees and before taxes. They do not include franking credits. Past performance should not be taken as an indication of future performance. This information does not take into account your investment objectives, financial situation or particular needs. Before making any investment decision, you should obtain and carefully consider the PDS, having regard to your investment objectives, financial situation and particular needs. The MSCI figures are the MSCI AC World IMI Net Total Return Index (AUD). 6

7 Oct-10 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Corporate Overview People Process Performance attribution Portfolio Positioning Our disciplined approach has shown consistent outperformance over rolling five year periods 5 Year Rolling Active Returns - PMGF vs MSCI ACWI IMI Net Return (AUD) Index 12% 10% 8% 6% 4% 2% 0% -2% As at 30 September

8 People Process Performance attribution Portfolio Positioning Regional Exposure by Revenue Emerging Markets 7.8% Australasia 5.7% Europe 3.7% Cash 22.9% United Kingdom 8.1% Canada 2.1% USA 49.7% As at 30 September

9 People Process Performance attribution Portfolio Positioning Top Holdings Holding Sector Great Company Great Management Great Price (Discount at purchase) AIG Insurance Dominant P&C and life company in the world Profitable underwriting culture Shareholder alignment very strong > 35 Bank of America Financials Dominant banking distribution in US Grassroots operational specialist > 30 Berkshire Hathaway Conglomerate Diversified conglomerate of the best companies in the world Warren Buffett and cadre of exceptional underlying managers > 20 Fairfax Financial Holdings Insurance Largest Canadian P&C insurer Superb underwriting culture & shareholder focus management > 25 Fiat Industrials Great world wide brands (Ferrari, Maserati, JEEP) Well aligned BoD and a CEO with a long term rational focus > 50 Howard Hughes Diversified Real Estate Prime real-estate exposure in the US Board owns large % of Co with significant real estate development experience > 50 Michael Hill Consumer Discretionary Leading jewelry retailer Board owns over 50% of company > 20 Precision Castparts Aerospace and Defense Has pricing power supplying high performance components in jet engines Stock has outperformed Apple over 15 years thanks to CEO Mark Donegan > 20 Rolls-Royce Holdings Aerospace and Defense One half of a duopoly in the widebody civil aircraft market Warren East is the highly successful former CEO of ARM holdings. > 25 Royal Bank of Scotland Financials Dominant UK bank refocusing on traditional lending in its home market Former CBA executive Ross McEwan brings valuable retail banking experience > 25 As at 30 September

10 People Process Performance attribution Portfolio Positioning Liberty Media Case study Key Criteria 1. Great Company 2. Great Management 3. Great Price Evidence Liberty Media's main asset and value is SiriusXM satellite radio. Since the 2008 merger of Sirius and XM, the combined company now holds a legal monopoly in the US for satellite radio. SiriusXM is a wonderful business that s growing quickly due to its strong barriers to entry. Liberty Media is a key holding company of legendary cable investor John Malone. SiriusXM s valuation of 16x cashflow doesn t reflect its high growth due to concerns about 'the connected car' and new entrants like streaming radio apps (Pandora, Spotify) and Apple music. These substitutes have been around for a while and had no impact on Sirius due to its content. 10

11 People Process Performance attribution Portfolio Positioning Purchased $35 34 Apr 15 May 15 Jun 15 Jul 15 Aug 15 Sep 15 11

12 People Process Performance attribution Portfolio Positioning Liberty Media Case study Purchase date Q Idea generation Proprietary research On watch list? Investment Thesis Yes Since the 2008 merger of Sirius and XM, the combined company now holds a legal monopoly in the US for satellite radio. SiriusXM is a wonderful business with extremely favourable economics and strong barriers to entry. The company works off a subscriber model where users pay on average $12 per month to access in-car (and online) 100s of commercial free music channels, sports broadcasts (NFL, NBA, etc), news programs (CNBC, CNN) and original content like Howard Stern. The fixed cost element of the business has lead to extremely strong 37% EBTIDA profit margins. Valuation $60 - purchased ~$36 12

13 People Process Performance attribution Portfolio Positioning Investment Process Case study Key Criteria 1. Great Company Evidence Under the stewardship of Marchionne, Fiat has one of the strongest records of growing operating profits per share of all the major auto companies. Well aligned with large valuable stock options and share ownership. History of successfully completing long term plans and building shareholder value (doubled profits at SGS S.A., returned Fiat to profitability in less than his first two years of management, acquired majority of Chrysler at the peak of the recession) Under the stewardship of Marchionne, Fiat has one of the strongest records of growing operating profits per share of all the major auto companies. 2. Great Management 3. Great Price Well aligned with large valuable stock options and share ownership. History of successfully completing long term plans and building shareholder value (doubled profits at SGS S.A., returned Fiat to profitability in less than his first two years of management, acquired majority of Chrysler at the peak of the recession) Assuming Ferrari spins at 10b this would place the remaining company (Chrysler, Fiat, Jeep & Maserati) at 9b or less than 5x 2016 earnings estimates. Purchased $9, reduced $16. 13

14 People Process Performance attribution Portfolio Positioning 18 Reduced $ Purchased $ Apr Jun Aug Oct Dec-14 9-Feb Apr-15 9-Jun-15 8-Aug-15 14

15 People Process Performance attribution Portfolio Positioning Investment Process Case study Purchase date Q Idea generation After reading 'Overhaul' which covered the North American auto restructuring in the GFC. On watch list? No FCA was seen as a struggling Italian car manufacturer with a weak balance sheet. Fiat was even shorted by notable investor Jim Chanos. Investment Thesis In reality, the value of Chrysler alone outweighed any European uncertainties and was likely close to the entire market value of the company. Fiat was overlooked by North American analysts because it was not then listed on any major US stock exchange and had little research coverage. The US market was also extremely likely to eventually return to normal production levels after years of production cuts and an ageing car fleet. Valuation $20 - purchased $9 15

16 QUESTIONS How do you see values on global markets in a relative sense? E.g do you think the US is expensive at present, and is this making you hold more cash than you otherwise would? 16

17 Peters MacGregor Global Fund For more information please see the Fund Factsheet under handouts or visit our website: Minimum investment: $10,000 Recommended investment timeframe: 5 years+ Management fee: 1.35% p.a (no performance fees) Peters MacGregor Capital Management Suite 1801A Westfield Tower 2, 101 Grafton Street Bondi Junction, Sydney, NSW, 2022 Australia 17