Centre American Select Equity Fund

Transcription

1 Centre American Select Equity Fund Large Capitalization Stock Focused Concentrated Portfolio Focus on Risk Adjusted Returns Actively Managed to Seek Long Term Alpha

2 Fund Profile: Summary Investment Objective: The Fund seeks to generate long-term capital growth Investment Strategy Highlights: Invests in a diversified portfolio of large capitalization American blue chip equity securities High conviction investment ideas What we believe are best 45 to 75 stocks of American companies concentrated in the top 20 names Bottom up fundamental stock selection process driven by Economic Value Added (EVA) investment philosophy Focus on delivering risk adjusted returns and positive upside vs. downside market capture ratio over long-term Stock selection is combined with quantitative portfolio construction and risk management for optimal stock position sizing within sector/industry emphasis and risk parameters The Fund may employ hedges and other capital protective strategies when deemed tactically appropriate a risk managed growth fund 2

3 Fund Profile: Characteristics Style: US Large Growth Sector Allocation Subject to change Market Cap Definitions Giant Large Mid Small Micro > $40 billion $8 billion - $40 billion $1 billion - $8 billion $500 million - $1 billion < $500 million Source: Morningstar as of February 1, 2017 Source: Centre Asset Management, LLC. As of December 31,

4 Fund Profile: Fund Manager James A. Abate, MBA, CPA, CFA, is the Managing Director and Chief Investment Officer of Centre Asset Management and is responsible for the firm s American Select Equity and Real Return strategies. Prior to founding Centre, Mr. Abate was US Investment Director for GAM. Previously, Mr. Abate served as Managing Director and Fund Manager at Credit Suisse Asset Management responsible for the US Select Equity strategy and the firm s global sector funds. Previously, he was a Manager in Price Waterhouse's Valuation/Corporate Finance Group and served as a commissioned officer in the US Army. Mr. Abate is a contributing author to several John Wiley published books: Applied Equity Valuation, Focus on Value, Short Selling, and The Theory and Practice of Investment Management; as well as published research papers in institutional investor journals, some of which were adopted by the CFA Institute candidate study programs. 4

5 Trump s Support is Widespread County-level voting map of the 2016 Presidential Election Source: Wikipedia, Centre Asset Management, LLC. As of January 31,

6 What Fueled Trump s Victory? Growing Sense of Financial Inequality As of January 31,

7 What Fueled Trump s Victory? Growing Sense of Uneven Shared Sacrifice for Failed Intervention Policies Source: Daily Yonder, Centre Asset Management, LLC. As of January 31,

8 What Fueled Trump s Victory? Repudiation of Both Parties Establishment! 8

9 Trump s Action Plan for the United States Issues ( America First Energy Plan America First Foreign Policy Bringing Back Jobs And Growth Making Our Military Strong Again Standing Up For Our Law Enforcement Community Trade Deals Working For All Americans 9

10 America First Energy Plan Issues ( Achieving energy independence from the OPEC cartel and any nations hostile to our interests Take advantage of the estimated $50 trillion in untapped shale, oil, and natural gas reserves, especially those on federal lands that the American people own Macro Implication More Oil & Gas Supply, Lower Risk of Import Disruptions Lower Energy Prices Winners Pipeline & Transportation, Domestic Energy Service Companies, Consumer Discretionary Companies Losers Integrated Multi-National Oil Companies, Thug-ocracies Opinions expressed are those of the author and are subject to change. 10

11 Bringing Back Jobs And Growth & Trade Deals Working For All Americans Issues ( Starts with pro-growth tax reform - lower rates for individuals in every tax bracket, simplify the tax code, and reduce the U.S. corporate tax rate Moratorium on new federal regulations and federal agencies to identify and repeal job-killing regulations Consequences for companies/countries that engage in illegal or unfair trade practices that hurt American workers $1 trillion in infrastructure investment ( American Energy & Infrastructure Act ) Macro Implication Stronger US Dollar Offsetting Benefits/Cost to Importation Driven Businesses Winners Domestically focused business Telecommunications, Utilities, Infrastructure-Related Industrials Losers Big-Box Retailers, Clothing & Footwear, Consumer-driven Technology Companies Opinions expressed are those of the author and are subject to change. 11

12 What May Rain on the Trump Parade 12

13 What May Rain on the Trump Parade Structural Limits to Domestic GDP Growth - Demographics GDP Growth (in %) Time (in years) Labor Productivity Growth (in %) Potential Labor Force (in %) As of January 31, 2017 Source: Economic Cycle Research Institute. As of January 31, 2017 Time (in years) 13

14 What May Rain on the Trump Parade Debt Ceiling and Federal Source of Infrastructure Funding As of January 31,

15 What May Rain on the Trump Parade Stock Market Does Not Always Equal Economy Trajectory S&P 500 Index Price (LHS) and trailing twelve month earnings per share (RHS) S&P 500 Index S&P 500 TTM EPS Source: Centre Asset Management, LLC. As of January 31, 2017 LHS: Left-Hand Side. RHS: Right-Hand Side. TTM: Trailing Twelve Months. EPS: Earnings Per Share. 15

16 What May Rain on the Trump Parade Trump Taking Credit for Stock Market Rally, He ll Also be Blamed for Correction? S&P 500 TTM EPS S&P 500 Index Source: Centre Asset Management, LLC. As of January 31, 2017 T12M EPS:.Trailing 12 Month Earnings Per Share 16

17 What May Rain on the Trump Parade The Known Unknowns Can Flare Up Leading to Test of Temperament As of January 31,

18 Key Observations on Pricing of Risk & Future Growth The transition from an interest rate driven market to an earnings growth one has historically been less than smooth Sources of Stock Market Total Returns Dividend Yield Net Share Repurchases Earnings Growth Re-Rating (Change in P/E Multiple) Sales Growth Efficiency Δ Risk Appetite (Equity Risk Premium) Δ Profit Margin Δ Interest Rates/ Inflation Δ Asset Turnover Source: Centre Asset Management, LLC. As of January 31,

19 U.S. Equity Market Strategy Market Related or Systematic Risk Sector/Industry Related Risk Company Specific or Idiosyncratic Risk Assume return from beta will be much lower due to structural headwinds, increased political/conflict risk, and investor sentiment and valuations at historic highs use hedges and other capital protective strategies (put options) when deemed appropriate Diversification is good, Over-diversification is bad if the return benefit from systematic risk is lower going forward, drive performance through active, concentrated stock selection and understand external influences on sector/stock returns as well as intraindustry price return correlations Number of Fund security positions nearer bottom of typical range (45-75 positions) Source: Centre Asset Management, LLC & James Abate, Focus on Value. * As of 31 January 2017, subject to change. 19

20 Capital Protective Strategies when Deemed Tactically Appropriate What we Expect if Markets Swoon *A protected portfolio means a portfolio whose value is hedged by put options; whereas an unprotected portfolio refers to the opposite. The above illustration is a hypothetical example only and does not imply anything further for the fund. Source: Centre Asset Management, LLC & Chicago Board Options Exchange; * As of 31 January 2017, subject to change. 20

21 Disclosures Disclaimer: The views and opinions expressed in this presentation are those of the author and do not necessarily reflect the official policy or position of Centre Asset Management, LLC. Analysis performed within this presentation are only examples and are based only on very limited and dated open source information. Assumptions made within the analysis are not reflective of the position of Centre Asset Management, LLC. Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus containing this and other most current information regarding the fund, please go to our website or call Read the prospectus carefully before you invest. Important Risk Disclosure: There is no assurance that this investment philosophy will consistently lead to successful investing. An Investment in the Funds involves risk, including loss of principal. The Fund is subject to risks including undervalued securities risk, portfolio turnover risk (which may result in tax consequences), and political/economic risk. Funds focusing on a single sector may experience greater price volatility. Diversification does not eliminate the risk of experiencing investment losses. Centre American Select Equity Fund is distributed by ALPS Distributors, Inc. Centre Asset Management, LLC and ALPS Distributors, Inc. are not affiliated. Centre American Select Equity Fund Top 10 Holdings (as of 12/31/2016 and subject to change): DRX Exp. 02/09/

22 Definitions 1. S&P 500 The S&P 500 Index is the Standard & Poor's composite index of 500 stocks, a widely recognized, unmanaged index of common stock prices. You cannot invest directly into an index. 2. Alpha A measure of performance on a risk-adjusted basis. Alpha takes the volatility (price risk) of a mutual fund and compares its riskadjusted performance to a benchmark index. 3. Beta A measure of systematic risk. An asset s sensitivity to the performance of the broader market. 4. Systematic Risk Also known as market risk or undiversifiable risk. It is the uncertainty inherent to the entire market or entire market segment. 5. Put Option An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time. 6. Profit Margin Net income divided by revenue. 7. Dividend Yield Dividend per share divided by the price per share of a stock. 8. Economic Value Added An estimate of a firm's economic profit - being the value created in excess of the required return of the company's investors (being shareholders and debt holders). Quite simply, EVA is the profit earned by the firm less the cost of financing the firm's capital. The idea is that value is created when the return onthe firm's economic capital employed is greater than the cost of that capital. 9. Earnings Growth An increase in the earnings of a particular security in a given time period. 10. EPS (earnings per share) The portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator of a company's profitability. 11. EPS ForwardTwelve Month Earnings per share forward twelve month is the forecasted earnings per share for the next twelve month. 12. P/E Price to earnings ratio. A valuation measure that indicates how much are investors willing to pay for a dollar in the company s earnings. 13. Price/EPS TTM P/E ratio in the trailing twelve months. 14. Asset Turnover A ratio ofa company s sales orrevenues generated relative to the value of its assets. 15. Macro Environment A macro environment is the condition that exists in the economy as a whole, rather than in a particular sector or region. The Macro environment is closely linked to the general business cycle as opposedto the performance ofan individual business sector. 16. GDP The gross domestic product is one of the primary indicators used to gauge the health of a country s economy. It represents the total dollar value of all goods and services produced over a specific time period. 17. Inflation The rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling. 18. OPEC The Organization of Petroleum Exporting Countries is a group consisting of 12 of the world s major oil-exporting nations. OPEC is a cartel that aims to manage the supply of oil in an effort to set the price of oil on the world market, in order to avoid fluctuations that might affect the economies of both producing and purchasing countries. 22