Smead US Value UCITS Fund

Transcription

1 Smead US Value UCITS Fund 1st Quarter 2017 Webcast This material is provided for informational purposes only and should not be construed as investment advice. Forecasts and opinions reflect the personal judgments of the presenter and may not reflect those of Smead Capital Management. Statements and opinions are subject to change Smead Capital Management (SCM), All Rights Reserved. Opinions expressed are those of Smead Capital Management, are subject to change, are not guaranteed, and should not be considered recommendations to buy or sell any security.

2 Today s Agenda Performance, Characteristics and Top 10 Holdings Cole Smead, CFA, Portfolio Manager Featured Stock: Lennar Corporation Tony A. Scherrer, CFA, Portfolio Manager Bill Smead, Lead Portfolio Manager 2

3 Quarter-End Performance Average Annualized Total Returns (%) as of 31/3/2017 Quarter 1 Year 3 Years Since Inception (29/11/2013) Smead US Value UCITS Fund I USD ACC 7.10% 14.11% 7.06% 8.08% Russell 1000 Value Index 3.27% 19.22% 8.67% 9.56% S&P 500 Index 6.07% 17.17% 10.37% 10.71% Gross Expense Ratio 1.15% Investors should carefully read the prospectus, the key investor information document and all other relevant documentation before investing in the Fund. Performance data quoted represents past performance realized within Pareturn Smead US Value Fund (the Absorbed Sub-Fund), whose assets and liabilities have been transferred to the Sub-Fund with effect 22 February 2016; past performance does not guarantee future results. The 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 of the Fund may be lower or higher than the performance quoted. Currency fluctuations may have a negative impact on the value of an investment in the Fund. Net performance results are calculated after management fees and certain operational costs, commissions, fees and other charges that could have a negative impact on performance. The performance figures given are a measure of the change in net asset value of the Fund which are net of all Fund fees and expenses but do not take into account taxes or charges. 3

4 Smead US Value UCITS Fund Key Facts and Characteristics as of 31/3/ Past performance does not guarantee future results.

5 Smead US Value UCITS Fund Top Ten Holdings as of 31/3/2017 Percentage of Fund NVR Inc 6.53% Amgen Inc Berkshire Hathaway Inc B JPMorgan Chase & Co Bank of America Corporation American Express Co ebay Inc Aflac Inc Tegna Inc PayPal Holdings Inc 5.77% 5.55% 5.39% 5.23% 5.12% 5.06% 4.66% 4.49% 4.14% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 5 Fund holdings and sector allocations are subject to change at any time and are not recommendations to buy or sell any security.

6 Portfolio Additions / Deletions First Quarter 2017 > Adds to position weightings: Express Scripts (ESRX) Nordstrom (JWN) Lennar (LEN) Walgreens (WBA) > Trims to position weightings: Bank of America (BAC) JPMorgan & Co. (JPM) Comcast Corporation (CMCSK) Home Depot (HD) NVR Inc. (NVR) TEGNA Inc. (GNA) > Sells: Cabela's (CAB) Gannett Co. Inc. (GCI) 6 Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security.

7 Today s Agenda Performance, Characteristics and Top 10 Holdings Cole Smead, CFA, Portfolio Manager Featured Stock: Lennar Corporation Tony A. Scherrer, CFA, Portfolio Manager Bill Smead, Lead Portfolio Manager 7 CFA is a registered trademark owned by the CFA Institute.

8 1. Meets an economic need 2. Strong competitive advantage (wide moats or barriers to entry) 3. Long history of profitability and strong operating metrics 4. Generates high levels of free cash flow (FCF) 5. Available at a low price in relation to intrinsic value Our Eight Criteria Required over entire holding period Favored, but not required 6. Management s history of shareholder friendliness 7. Strong balance sheet For companies that don t meet one of these, we believe our required criteria will ultimately correct or overwhelm. 8. Strong insider ownership (preferably with recent purchases) May also relate to timing/portfolio weighting 8 Past performance is no guarantee of future results. Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security.

9 Lennar Corporation: meets an economic need 9 Past performance is no guarantee of future results. Source: Lennar slide deck, May 17, 2016, JP Morgan conference. Data for the time period 1/1/ /31/2015. Data from 1/1/ /31/2018 is projected.

10 Lennar Corporation: strong competitive advantage 10 Past performance is no guarantee of future results. Source: Bloomberg. All charts are as of 12/31/2016.

11 Lennar Corporation: long history of profitability & operating metrics 11 Past performance is no guarantee of future results. Source: Bloomberg. For the first chart, data is for the time period 1/1/ /31/2016. For the second chart, data is for the time period 1/1/ /31/2016.

12 Lennar Corporation: high levels of free cash flow 12 Past performance is no guarantee of future results. Source: Bloomberg. Data for the time period 1/1/ /31/2016. Data projected through 12/31/2018.

13 Lennar Corporation: low price in relation to intrinsic value 13 Past performance is no guarantee of future results. Source: ThomsonReuters Baseline. Data is as of 3/30/2017.

14 Lennar Corporation: history of shareholder friendliness 14 Past performance is no guarantee of future results. Source: Bloomberg. Data for the time period 1/31/1990-3/31/2017.

15 Lennar Corporation: strong balance sheet 15 Past performance is no guarantee of future results. Source: Lennar slide deck, May 17, 2016, JP Morgan conference BofA Merrill Lynch report, Feb 12, Data for the time period 1/1/ /31/2015. LTM: Last twelve months.

16 Lennar Corporation: strong balance sheet Strong Balance Sheet Data as of 2/28/2017 Enterprise Value $15.3Bn $1.1 Bn in Cash & Cash-Equiv Debt/Equity ratio: 63% Book Value ps $29.96 $4.6 Bn in Long-Term Debt Debt/Total Cap ratio: 39% Tangible BV ps $29.80 $4.6 Bn in TOTAL Debt Net Cash (Debt) ps: -$15.04 Price / Tgbl BV 1.7x $7.2 Bn in Equity Interest Coverage Ratio of 4.5x ; FCF could wipe out Debt in Yr CDS Spread 78 bp (1-Yr Default Likelihood 0.03%); S&P LT Credit Rating BB; Moody's LT Credit Rating Ba1 16 Past performance is no guarantee of future results. Source: Bloomberg. Data for the time period 1/1/ /30/2016. LT: Long-term, BV: Book Value, PS: position, CDS: CDS Spread, BP: basis point and FY: Fiscal Year.

17 Lennar Corporation: insider ownership LENNAR CORP-A Top Insider Holders % held Value MILLER STUART A 0.57% $59.6 Mil BECKWITT RICHARD 0.55% $56.7 Mil GROSS BRUCE E 0.29% $29.8 Mil JAFFE JONATHAN M 0.23% $24 Mil BESSETTE DIANE J 0.12% $12.2 Mil SUSTANA MARK 0.09% $9.1 Mil LAPIDUS SIDNEY 0.06% $6.4 Mil LENNAR CORP - B SHS Top Insider Holders % held Value MILLER STUART A 68.06% $897.3 Mil GROSS BRUCE E 0.19% $2.6 Mil LAPIDUS SIDNEY 0.13% $1.7 Mil JAFFE JONATHAN M 0.12% $1.6 Mil LANDON R KIRK 0.07% $0.9 Mil BESSETTE DIANE J 0.02% $0.3 Mil HUDSON SHERRILL W 0.02% $0.2 Mil 17 Past performance is no guarantee of future results. Source: Bloomberg, The Washington Service. Data as of 3/31/2017.

18 Today s Agenda Performance, Characteristics and Top 10 Holdings Cole Smead, CFA, Portfolio Manager Featured Stock: Lennar Corporation Tony A. Scherrer, CFA, Portfolio Manager Bill Smead, Lead Portfolio Manager 18

19 Own Meritorious Businesses, Not Stock Markets Presented by: Lead Portfolio Manager Bill Smead Smead Capital Management (SCM), All Rights Reserved. Opinions expressed are those of Smead Capital Management, are subject to change, are not guaranteed, and should not be considered recommendations to buy or sell any security.

20 Today s Agenda The risk in the S&P 500 A Potentially Bright Future for Main Street Sell Joy, Buy Misery Part II 20

21 The risk in the S&P 500 Dow Jones + S&P to Past performance is no guarantee of future results. Bloomberg. Data for the time period 12/31/ /31/1982. Date range was chosen as a comparison time period where investors have favored tech stocks and indexing.

22 The risk in the S&P 500 Growth v. Value in the Market 22 Past performance is no guarantee of future results. Source: Fundstrat Fall 2016 State of the Market, page 72. Data for the time period 1/1/1995 3/31/2017.

23 The risk in the S&P 500 Money has Piled Into Passive 23 Past performance is no guarantee of future results. Source: Data for the time period 1/1/ /31/2016.

24 The risk in the S&P 500 Agnostic and Undifferentiated Capital! 24 Past performance is no guarantee of future results. Source: Merrill Lynch, Jan 2017 The Active-Passive Debate and U.S. Trust; FactSet. Data for the time period 1/1/ /31/2015.

25 The risk in the S&P 500 Expensive stocks extremely expensive 25 Past performance is no guarantee of future results.

26 The risk in the S&P 500 Pioneering euphoria in Glam Tech 26 Past performance is no guarantee of future results. Source: Data for the time period 1/1/1990-3/31/2017.

27 The risk in the S&P 500 Future P/E contraction from higher future interest rates? 27 Past performance is no guarantee of future results. Source: Data for the time period 1/1/ /31/2015.

28 Today s Agenda The risk in the S&P 500 A Potentially Bright Future for Main Street Sell Joy, Buy Misery Part II 28

29 A Potentially Bright Future for Main Street Birth rates exploding 29 Past performance is no guarantee of future results. Source: National Center for Health Statistics. Data for the time period 1/1/ /31/2015.

30 A Potentially Bright Future for Main Street Household formation way up as population soars 30 Past performance is no guarantee of future results. Source: BofA Merrill Lynch Global Research Data for the time period 1/1/ /31/2030. Forecasted data is projected.

31 A Potentially Bright Future for Main Street Has Rent Reached a Pain Point? 31 Past performance is no guarantee of future results. Source: Data as of 2/28/2017.

32 A Potentially Bright Future for Main Street Mortgage demand should soar driving interest rates 32 Past performance is no guarantee of future results. Source: Bloomberg. Data for the time period 9/9/ /31/2016.

33 A Potentially Bright Future for Main Street Is Share of Labor Ready to Broaden? 33 Past performance is no guarantee of future results. Source: Data for the time period 1/1/ /31/2012.

34 Today s Agenda The risk in the S&P 500 A Potentially Bright Future for Main Street Sell Joy, Buy Misery Part II 34

35 Sell Joy, Buy Misery Part II Sell Glam Tech 35 Past performance is no guarantee of future results. Source:

36 Sell Joy, Buy Misery Part II Sell Glam Tech 36 Past performance is no guarantee of future results. Source: The Economist

37 Sell Joy, Buy Misery Part II Sell overpriced energy 37 Past performance is no guarantee of future results. Source: Bloomberg. Data for the time period 1/1/2014-3/31/2017.

38 Sell Joy, Buy Misery Part II Sell Glam Staples 38 Past performance is no guarantee of future results. Source: Bloomberg Data for the time period 1/1/2007-3/31/2017.

39 Sell Joy, Buy Misery Part II Sell Safety / Buy Risk 39 Past performance is no guarantee of future results. Source: NACUBO-Commonfund Study of Endowments, Data for the time period 1/1/ /31/2016.

40 Sell Joy, Buy Misery Part II Buy homebuilding and home formation (LEN, NVR, HD, CMCSK, SNI, DIS) 40 Past performance is no guarantee of future results. Source: Bloomberg. Data for the time period 1/1/ /31/2016. LEN (Lennar), NVR (NVR, Inc.), HD (Home Depot), CMCSK (Comcast), SNI (Scripps Networks Interactive) and DIS (Disney).

41 Sell Joy, Buy Misery Part II Buy homebuilding and home formation (LEN, NVR, HD, CMCSK, SNI, DIS) 41 Past performance is no guarantee of future results. Source: Data for the time period 1/1/ /31/2016. LEN (Lennar), NVR (NVR, Inc.), HD (Home Depot), CMCSK (Comcast), SNI (Scripps Networks Interactive) and DIS (Disney).

42 Sell Joy, Buy Misery Part II Homebuilding s Affect on GDP 42 Past performance is no guarantee of future results. Source: billion-toll-on-u-s-economy-data-show Data for the time period 1/1/ /31/2016. GDP: Gross Domestic Product.

43 Sell Joy, Buy Misery Part II Financials: Net Interest Margin Nowhere Near Peak Levels 43 Past performance is no guarantee of future results. Source: Fundstrat / Bloomberg, Data for the time period 1/1/ /31/2016. Shaded areas represent historical recession time periods. The end of the red arrows mark the start and finish of the recessionary periods.

44 Today s Agenda The risk in the S&P 500 A Potentially Bright Future for Main Street Sell Joy, Buy Misery Part II 44

45 Today s Agenda Performance, Characteristics and Top 10 Holdings Cole Smead, CFA, Portfolio Manager Featured Stock: Lennar Corporation Tony A. Scherrer, CFA, Portfolio Manager Bill Smead, Lead Portfolio Manager 45

46 Definitions Basis point: A basis point is one hundredth of one percent, used chiefly in expressing differences of interest rates. Bond Ratings: All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moody s, Standard & Poor s or Fitch. When a bond is rated by more than one organization, Smead US Value UCITS Fund uses the highest rating available. Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself. Book Value: A company's common stock equity as it appears on a balance sheet, equal to total assets minus liabilities, preferred stock, and intangible assets such as goodwill. Cash Flow: A revenue or expense stream that changes a cash account over a given period. CDS Spread: The buyer of the protection in a credit default swap pays a premium to the seller, and this premium is called the CDS spread. Debt/Equity: A measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity. Debt/Total Capital: A company's debt-to-capital ratio or D/C ratio is the ratio of its total debt to its total capital, its debt and equity combined. Free Cash flow: measures the cash generating capability of a company by adding non-cash charges (e.g. depreciation) and interest expense to pretax income. The Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit. It is calculated using several factors related to borrower eligibility (credit score, loan type, loan-to-value ratio, etc.). These metrics and underwriting criteria for over 95 lenders/investors are combined by MBA using data made available via the AllRegs Market Clarity product and a proprietary formula derived by MBA to calculate the MCAI, a summary measure which indicates the availability of mortgage credit at a point in time. MSCI World ex US Index: A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the world. Intrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business, in terms of both tangible and intangible factors. Leverage: The relationship of debt to equity. Mutual Fund Portfolio Turnover: A measure of the trading activity in the fund's portfolio of investments. In other words, how often securities are bought and sold. Price/Earnings (P/E): the ratio of a firm s closing stock price & its trailing 12 months earnings/share. Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard, or tangible, book value as reported in the company's balance sheet. Russell 1000 Index: The Russell 1000 Index is an index that represents the highest-ranking 1,000 stocks in the Russell 3000 Index, which represents about 90% of the total market capitalization of that index. S&P 500 Index: A market-value weighted index consisting of 500 stocks chosen for market size, liquidity, and industry group representation. 46

47 Disclosures The information contained herein represents the opinion of Smead Capital Management and is not intended to be a forecast of future events, a guarantee of future results, nor investment advice. This does not constitute the solicitation of an offer to purchase or subscribe for any investment, financial instrument or service in any jurisdiction where such a solicitation of an offer is unlawful. The Fund is only available for investment by non-us citizens who are not residents of the US. The Fund is not offered for sale or sold in the US, its territories or possessions. The Fund is not registered for sale to the public in all jurisdictions. The information contained herein has not been reviewed in light of your personal circumstances. Subscriptions will only be received and shares issued on the basis of the current prospectus for the Fund, the most recent financial reports and the simplified prospectus. Smead Capital Management is the investment manager of the Smead US Value UCITS Fund. Smead Funds - Smead US Value UCITS Fund, incorporated on December 4, 2015, is a UCITS organized as an investment company with variable capital, with one Sub-Fund (Société d investissement à capital variable, SICAV ) under the laws of Luxembourg, and is regulated by the Commission de Surveillance du Secteur Financier ( CSSF ) which is the Luxembourg supervisory authority. Further information about the Sub-Fund, including copies of its prospectus, the last annual reports and any subsequent half yearly reports can be obtained free of charge, in English, at the registered office of the Fund, Central Administrator, the Custodian Bank, the Fund distributors or online at These agreements may be amended by mutual agreement of the parties involved. Luxembourg taxation regime may have an impact on the personal tax position of the investors. Depending on your own country of residence, this might have an impact on your investment. For further details you should consult a tax adviser. Duff & Phelps (Luxembourg) Management Company S.à r.l. was appointed as Management Company of the Fund with effect 4 December 2015 and may be held liable solely on the basis of any statement contained in this document that is misleading, inaccurate or inconsistent with the relevant parts of the prospectus for the Fund. Smead Capital Management is the Delegated manager of this Sub-Fund. This Fund is authorized in Luxembourg and regulated by the Commission de Surveillance du Secteur Financier. Duff & Phelps (Luxembourg) Management Company S.àr.l. is authorized in Luxembourg and regulated by the Commission de Surveillance du Secteur Financier. Frank Russell Company is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell is a trademark of Russell Investment Group. The information contained within this document has not been reviewed in light of your personal circumstances. Information provided does not constitute investment advice and no investment decisions should be made based on any information provided. Information reflects the views of Smead Capital Management as of a particular time. Such views are subject to change without notice. Information regarding holdings, allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations. This information is not a recommendation to purchase or sell a security or follow any strategy or allocation. Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts. While Smead Capital Management has used reasonable efforts to obtain information from reliable sources, no representations or warranties are made as to the accuracy, reliability or completeness of third-party information presented in this material. This material is not to be duplicated or recreated without prior written consent of Smead Capital Management. 47

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