LARGE CAP VALUE STRATEGY

Transcription

1 LARGE CAP VALUE STRATEGY P V G A S S E T M A N A G E M E N T March 31 st 2017 L O S S A V E R S E I N V E S T I N G W W W. P V G A S S E T M A N A G E M E N T. C O M

2 Content About PVG 3 Philosophy & Process 6 Statistics 17 Appendix 25 2

3 About PVG 3

4 Overview International Value Contrarian Style Pure large cap value Attractively priced High conviction Sector focused High Dividend Low Volatility Low Portfolio Turnover Consistent Results Gross Performance Since Inception PVG Structured to Serve 100% employee owned $454m AUM as of 3/31/2017 Serving individual and institutional investors since Russell 1000 Value (tr)

5 Dedicated Resources Investment Management Patrick S. Adams Chief Executive Officer CEO, Portfolio Manager Lean and resourceful Clear accountabilities Demonstrated expertise Joseph N. Pecoraro Founder, Portfolio Manager CCO, Portfolio Manager Timothy J. McIntosh Portfolio Manager Portfolio Manager, Security Analyst, Investment Strategist Paul M. MacNamara Portfolio Manager Investment Strategist, Equity Analysis, Wealth Management Collaborative and motivated Investor Relations Rick Garcia Director of Marketing and Sales, Portfolio Manager Management of Sales, Portfolio Manager Business Responsibilities Joseph N. Pecoraro Jana Henderson Annie Gallegos Michelle Segarra Compliance Trading & Operation Trading & Operation Client Service & Marketing 5

6 Philosophy & Process 6

7 We Believe Active style of growth and valuation Superior equity performance results from healthy fundamentals, attractive valuations and a focus on the sectors that have historically delivered the best results Risk management Sector focus Security selection We look to buy great companies at attractive prices with a very patient investment approach. Timothy McIntosh, Portfolio Manager 7

8 Process Discipline Consistent Repeatable Proven Investment Universe Sector Focus Quantitative Analysis Security Selection Portfolio Construction Investment Portfolio US Large Cap Value Companies >$7.5B cap. ~400 Stocks Health Care Technology Energy Financials All Other Quadrant Report Fundamentals Valuation ~100 Stocks Balance Sheet Dividend Yield Use of Free Cash Flow Technicals Management Quality Health Care Technology Energy Financials All Other PVG Large Cap Value Portfolio Stocks Portfolio Monitoring and Sell Discipline 8

9 Sector Focus Persistence A handful of sectors have outperformed the US large cap universe over the last quarter century. PVG: Focuses investor capital in traditionally outperforming sectors Opportunistically invests in non-focus sectors US Large Cap Value Sector and Asset Class Performance % Healthcare 12% 10% Energy Financials Technology SP500 8% 6% 4% 2% 0% Source: Lipper Inc; A Reuters Company., January 1, 1986 through December 31, Annualized Returns. Financials measured by Financial Services Funds, Healthcare by Healthcare/Biotechnology funds, Consumer Staples measured by Fidelity Consumer Staples Fund, Energy by Natural Resources Funds, and Technology by Science and Technology Funds. Returns from January 1, 1999 through December 31, 2010 is measured by SPDR sector ETF funds. 9

10 Dividend Focus Those firms that have paid and increased dividends have significantly outperformed the market in the past thirty years. Dividend Growers and Initiators Sector and Asset Class Performance PVG: Focuses investor capital in those foreign large cap companies that are increasing dividends. 10

11 Finding Growing Companies with Compelling Valuations A Focus on Fundamentals Sector-by-sector screening broad range of metrics Fundamentals A+ Balance sheet High Yield Low Valuation Technicals Low Beta Correlation Relative strength Identifies healthy companies with stocks selling at significant discounts to peers and historical levels Narrows universe to a short list of about 100 stocks P/S relative to peers, history Sector-level analysis Quadrant 1 Discount Priced Quadrant 2 Below Market Average - Quadrant 3 Above Market Average + Quadrant 4 Premium Priced Upside potential Downside protection 11

12 Quadrant Report Illustration - Pharmaceuticals Screening supports key goal: Buy great companies at attractive prices with a very patient investment approach Stock/ Price relative Quadrant to ma Quadrant 1 Discount Priced Stock/ Price relative to market and history AstraZeneca 33% Discount Stock/ Price relative Comments to ma Buy Metrics Relative and historic values P/D, P/E, P/S, P/CF & P/B Quadrant 2 Market Average - Novartis 15% Discount Hold Quadrant 3 Market Average + Teva Pharmaceutical 20% Premium Hold or Sell Quadrant 4 Premium Priced Shire 75% Premium Sell 12

13 Security-level Analysis In selecting stocks for inclusion in the portfolio, PVG analysts seek: Fundamental strengths Low PEG ratio High relative dividend Balance sheet strength Earnings consistency Culture of stability and achievement Quality management Focus on creating shareholder value + Technical strengths Stock price support Relative strength to peers Relative strength to moving averages Stochastic indicators of oversold conditions 13

14 Fundamental Analysis Illustration Pharmaceutical Industry Analysis Valuations are still compressed even with the outperformance of the general sector over the preceding five years. Limited patent exposure High relative dividends Increasingly immune to cyclical economic pressures (e.g. a patient may delay costly new drugs) Growth Companies within the sector have demonstrated the ability to continue single digit earnings and revenues growth with high sustainable dividends. Positives include: Demographics aging populations in developed markets; US, Europe and Japan Good company managements, solid balance sheets, high relative dividend yields, best R&D Emerging markets expansion of revenue from 10% to 25%. Company Industry P/S Ratio Relative Dividend Value* Yield Company Industry P/S Ratio Relative Dividend Value* Yield Abbvie Inc. Drug % AstraZeneca Drug % GlaxoSmithKline ADR Drug % Lilly (Eli) Drug % Merck & Co. Drug % Pfizer, Inc. Drug % Novartis AG ADR Drug % Roche ADR Drug % *relative to market and history Source: Value Line Inc. As of September 30,

15 Portfolio Construction Allocation decisions basis Bottom -up 80%-90% Top-down 10%-20% Allocation rules Quantitative screen Stock-by-stock analysis Inflation Yield Curve Currencies Commodities Monetary policy Healthcare 15%-30% Top Down Positioning Constructive Neutral Macro Indications Positive sloping yield curve Strong GDP growth Solid fwd earnings growth Slightly upward slowing or flat yield curve Moderate GDP growth Mixed earnings growth Typical Allocations + Energy + Financials - Healthcare + Tech + Industrials + Cons. Discretionary - Utilities Quantitative screen Stock-by-stock analysis Financials 15%-30% Energy 10%-25% Technology 5%-15% All other sectors 15%-35% Cash 1%-10% Defensive Flat to inverted yield curve Weak GDP growth Mixed earnings growth - Energy - Financials + Healthcare - Tech - Industrials - Cons. Discretionary + Utilities + Cons. Staples 15

16 A Patient but Disciplined Style Risk Objectives Achieve consistent rates of return with a very low standard deviation Achieve high risk-adjusted rates of return based upon Information ratio Sortino ratio Watch List Higher valuations Slowing growth Weakening fundamentals We will sell a stock if Valuation and price targets reached Relative value moves stock to mostoverpriced quadrant Growth parameters slow Negative news flow occurs Technical analysis indicates weakness An investment with greater potential displaces the position 16

17 Statistics 17

18 Current LCV Portfolio As of March 31, 2017 Characteristic (5 year) PVG Large Cap Value Russell 1000 Value Index EPS Growth -- 5 yr. fwd 5.54% 5.14% P/E P/B Yield 3.23% 2.43% Beta r Allocations Mega Cap $25B % 42.79% Large Cap $10B - $25B 11.97% 33.60% Mid Cap $1B - $10B 0.64% 21.08% Top Holdings - 3/31/2017 Ventas 6.2% Total SA 4.7% GlaxoSmithKline 6.1% T. Rowe Price 4.7% Occidental Petroleum 6.0% Cisco 4.5% Target 5.6% Pepsico 4.4% Pfizer 4.8% Exxon Mobil 4.2% Sector Weights REIT 8.70% 4.61% Utilities 0.00% 6.16% Telecomm Services 1.28% 3.92% Materials 6.09% 3.20% Information Technology 9.59% 10.11% Industrials 2.76% 9.68% Health Care 10.84% 22.72% Financials 18.08% 26.13% Energy 14.30% 12.22% Consumer Staples 5.28% 8.78% Consumer Cyclical 11.20% 4.35% 0.00% 10.00% 20.00% 30.00% PVG Russell 1000 Value TR 18

19 Yearly Returns - Gross As of March 31, % Outperformance of Russell 1000 Value Index since inception, 3/31/05 35% 25% 15% 5% -5% -15% -25% -35% -45% YTD PVG 3.94% 21.69% 0.24% % 23.93% 13.86% 7.16% 11.10% 25.29% 13.73% -1.67% 20.48% 3.66% R1000V 6.95% 22.24% -0.17% % 19.69% 15.50% 0.39% 17.50% 32.52% 13.45% -3.82% 17.34% 3.26% PVG R1000V 19

20 Annualized Returns - Gross As of March 31, 2017 Annualized: 1 Year 3 Years 5 Years 10 Years PVG U.S. LCV Portfolio Russell 1000 Value Index Morningstar Large Cap Value Universe

21 Strong Downside Protection Capital Preservation Preserve capital in declining markets 0-5 Gross Performance From 06/30/08 to 01/31/ SIPCO S&P 500 Russell 1000 Value SIPCO PVG S&P 500 Russell 1000 Value 21

22 Looking Forward U.S. Large Cap Value Portfolio Pure international exposure with the benefits of a contrarian approach An emphasis on capital preservation and risk management A record of long-term risk adjusted outperformance of benchmark and peers A focused organization aligned entirely to clients needs and interests 22

23 Appendix 23

24 Fee Schedule Institutional Accounts Up to $50mm 0.85% $50mm to $100mm 0.70% $100mm+ 0.60% 24

25 Disclosure PVG ASSET MANAGEMENT, LLC. has prepared and presented this report in compliance with the Global Investment Performance Standards(GIPS ). Composite Disclosures & Footnotes: PVG is an independent investment advisory firm headquartered in Centennial, Colorado. PVG manages equity, fixed income, and ETF portfolios for both individual and institutional investors. The firm was founded in PVG and SIPCO merged in October of 2016 U.S. Value Leaders Composite consists of all fully discretionary large cap value equity portfolios with strong relative balance sheets and above average dividend yield value. Inception of the portfolio is 3/31/2005. The portfolio is concentrated in the healthcare, energy, technology, and financial sectors. The portfolio is typically invested in equities chosen primarily from the United States. 15% of the portfolio can be invested in ADR securities from the major developed markets of Europe and Asia. When the portfolio manager believes that the global stock markets are highly valued or that market conditions warrant a more defensive posture, the manager may raise cash or purchase market hedges. The benchmark is the Russell 1000 Value. The Russell 1000 Value Index measures the performance of the large-cap value segment of the U.S. equity universe. The U.S. Dollar is the currency used to express performance of each composite. Returns are presented gross of management fees, and include the reinvestment of all income. Other than levered and inverse ETFs, leverage or derivatives are not used. The use of levered and inverse ETFs is anticipated to be infrequent and may not materially impact returns in any given year. A complete list and description of all of the firm s composites is available upon request. PVG does not have composite minimums. A complete list and description of all of the firm s composites is available upon request. Performance is expressed in U.S. dollars. Period PVG does not have composite minimums. Performance is expressed in U.S. dollars. PVG clearly labels returns as gross of fees or net of fees in the column headings of the composite performance table. As of January 1, 2015, the composite is a carve out. which includes the large cap stock segment plus cash of the PVG Value Long Short Portfolio. Withholding taxes on dividends, interest income and capital gains are custodial based and reclaimed where available through the Advent Axis portfolio accounting system. Exchange rates for foreign securities provided by the external custodians and have no known inconsistencies. Performance presentations conform to local laws and regulations (principally the SEC) that do not differ from the GIPS requirements in any known material manner. All performance presentations periods are GIPS compliant. PVG composites do not contain bundled fee portfolios. Gross of fee returns reflect direct trading expenses. Net of fee returns reflect direct trading expenses and investment management fees. Additional information regarding policies for calculating and reporting returns is available upon request. PVG does not use sub-advisors and has not historically. Total Return (gross of fees) (%) Total Return (net of fees) (%) Benchmark Return* (%) Number of Portfolios at Period End Composite Dispersion (Asset-Wtd Std Dev) (%) Total Composite Assets at Period End ($millions) Percent of Total Firm Assets (%) Total Firm Assets at Period End ($millions) 2005* (0.97) (0.17) (30.53) (31.44) (36.84) (1.67) (2.12) (3.82) Q PVG fees for investment management services are: Account Market Value Annual Fee $1 - $250, % $250,000 - $500, % 500,000 - $1,000, % $1,000,000 and up 1.00% 25

26 Disclosure Composite Disclosures & Footnotes: (Cont.) All significant events that would help a prospective client interpret the firm s performance record are believed to be disclosed within the firm s SEC Form ADV Part II with Schedule F, the composite performance table and related footnotes, the client s Investment Management Agreement, the client s Investment Policy Statement, the firm s web site and various firm brochures. PVG, as a firm, has not been redefined. No composites have been redefined. There have been no composite name changes. Composite creation date is 3/31/2005 Calendar month-end or last business day of the month portfolio valuations are used. Composite dispersion is the asset-weighted standard deviation of the individual portfolios around the composite mean for the current period. Composites with 5 portfolios or less are shown as NM (not meaningful). PVG does not have multiple defined firms within a parent company. There have been no changes in calculation methodology or valuation sources that would result in a material impact on the performance of composite returns. Returns for periods of greater than 1 year are annualized. The three year annualized ex-post standard deviation of the composite and/or benchmark is not presented because 36 monthly returns are not available. SEC Disclosure and Representative : The U.S. Securities and Exchange Commission ( SEC ) allows performance information to be presented gross of management fees in one-on-one presentations if accompanied by disclosures that: (1) the results do not reflect the deduction of investment management fees; (2) the client s return will be reduced by the management fees and any other expenses incurred in the management of the account; and (3) the advisor s investment advisory fees are described in Part II of the advisor s Form ADV. Also accompanying these disclosures must be a representative example that shows the effect an investment advisory fee, compounded over a period of years, could have on the total value of a client s portfolio. 26

27 Personnel Patrick S. Adams CEO & Portfolio Manager Chief executive office and lead portfolio manager. Bachelor of Science Degree in Finance and Accounting from Ohio State University. Master of Business Administration (M.B.A) degree from Xavier University in Cincinnati, OH. Chartered Financial Analyst (CFA) Previous experience includes serving as CIO and portfolio manager for the Berger Mutual Funds, portfolio manager for Kemper and the Dreyfus/Founders mutual funds. Joseph N. Pecoraro Founder, CCO & Portfolio Manager Founder, Chief Compliance Officer and portfolio manager. Bachelor of Arts Degree and Masters Degree in Economics from California State University, Fullerton. Chartered Financial Analyst (CFA) Previous experience includes serving as a security analyst with Security Pacific National Bank and British brokerage firm, Joseph Sebags in Los Angeles and London, top performing manager with the Oppenheimer Funds Group, co-founder of investment advisory firm, Alpine Capital Management. 27

28 Personnel (cont.) Timothy J. McIntosh Portfolio Manager Serves as senior investment officer. Oversees aspects of major client accounts and serves as lead portfolio manager for the firm s US Corporate Flexible Bond and US International ADR portfolios. Bachelor of Science Degree in Economics from Florida State University. Master of Business Administration (M.B.A) degree from University of Sarasota. Master of Public Health Degree (M.P.H) from the University of South Florida. Former finance professor at Eckerd College in St. Petersburg from CFA Level II Candidate, Certified Financial Planner Previous experience includes employment with Blue Cross/Blue Shield of Florida and the United States Army - Military Intelligence Paul M. MacNamara Portfolio Manager Provides client service to high net worth clients and serves on investment committee. Assists in the analysis of equity securities and market valuation. Bachelor of Science Degree in History from Millersville University. Master of International Relations from Troy State University. Founder Atlantic Investment Advisors Inc Certified Financial Planner U.S. Army Special Forces Officer (Retired Colonel) 28

29 Personnel (cont.) Rick Garcia President, Director of Marketing & Sales, Portfolio Manager Serves as the portfolio manager for PVG s technical strategies. Leadership role includes management of the sales and marketing division. Bachelor of Science Degree in Finance from Metropolitan State College of Denver. Previous experience includes serving as a Stock Broker for Charles Schwab & Co., and a Business Development Consultant for Jackson National Life Distributors. U.S. Marine Corps honorable discharged as a Sergeant. Jana Henderson Vice President, Director of Trading & Operations Serves as director of operations, responsible for the execution of trades, coordinate new business, oversee financial controls and manages client reporting. Engineer of Finance and Economics from Thomas Beta University, Zlin, Czech Republic 29

30 Personnel (cont.) Annie Gallegos Vice President, Trading & Operations Advent Axys & Moxy Trading specialist. Firm s senior trader and also provides customer support, daily portfolio reconciliation, performance reporting, and assists in compliance. Maintains control procedures and performs data integrity audits to ensure the accuracy and integrity of data, utilizing Advent software. Bachelor of Science Degree in Economics from Northwestern University. Previous experience includes employment with Chicago based Premier Asset Management and WaMu Investment Company. 30