The CMAW Defined Contribution Pension Plan. Daren Atkinson, CFA Vice President, Portfolio Manager March 31, 2016

Transcription

1 The CMAW Defined Contribution Pension Plan Daren Atkinson, CFA Vice President, Portfolio Manager March 31, 2016

2 Overview of Leith Wheeler Background & Experience Founded in 1982 Funded by a multi-employer, union pension plan (still a client!) We have been managing your Pension Plan since April 2010 Independent & Employee Owned Succession planning in place to ensure continued independence Our livelihood depends on the success of our company if our clients do well we will do well Our Clients Come First We have controlled our growth to ensure we will continue to provide excellent performance results for our clients Disciplined Value Investment Approach Excellent long term performance & preservation of capital Pg 2

3 History Of Our Company 1982 Leith Wheeler Founded 2005 Canadian Equity Fund Closed For New Institutional Mandates 2003 Founding Partner Succession Begins 2009 Jim Gilliland (President & CEO) joins Leith Wheeler 2016 Over $16 Billion In Assets Under Management 2013 Ownership Succession Completed Founded in 1982, we are an independent, employee-owned investment manager, with a value-oriented investment philosophy that focuses on preserving clients' capital. Pg 3

4 Our Clients We are a nationwide organization with over $16 Billion in assets under management We manage funds for 89 different pension plans across Canada We have offices in Vancouver, Calgary and Toronto Pg 4

5 Our Investment Teams PORTFOLIO MANAGERS Years Experience Daren Atkinson 15 Perry Teperson 25 CANADIAN EQUITIES FIXED INCOME U.S. EQUITIES (Barrow Hanley) INTERNATIONAL EQUITIES (Sprucegrove) Years Experience Years Experience Years Experience Years Experience Bill Dye 31 Jim Gilliland 22 Mark Giambrone 23 Shirley Woo 27 David Jiles 31 Eric Lam 23 Michael Nayfa 11 Arjun Kumar 13 Richard Liley 19 Ben Homsy 18 Terry Pelzel 10 Sabu Mehta 28 Nick Szucs 17 Catherine Heath 16 Jane Gilday 47 Alex Limion 14 Patrick Reddy 15 Dhruv Mallick 16 Monroe Helm 39 Christine McLean 11 Bob Lau (Trader) 18 Alexei Konopkine 10 Plus 9 Analysts Plus 6 analysts Ryan Goulding 9 Sean Greenhalgh 9 Pg 5

6 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Performance of the CMAW Defined Contribution Pension Plan $17,000 $16,000 $15,000 Growth of $10,000 Since April 2010 $10,000 would have grown to over $16,000 today $14,000 $13,000 $12,000 $11,000 $10,000 $9,000 Pg 6

7 How Is The Plan Invested? As of March 31, 2016 International Stocks 18.3% Cash & Equivalents 2.1% Bonds 35.1% U.S. Stocks 18.3% Canadian Stocks 26.2% A high quality, diversified portfolio of stocks and fixed income investments Pg 7

8 Characteristics We Look For In The Stocks We Own We are cautious about the price we will pay for a stock Looking to invest in quality businesses selling for sensible prices Think like long-term owners Would we buy the whole company? Management We Trust Do they pass the Wallet test Good Governance is Essential Does the company operate in a responsible manner Pg 8

9 An Example of a Stock We Do Not Own Pg 9

10 Valeant Pharmaceuticals - The Market Darling $350 $300 $250 $200 $150 $100 $50 $0 Mar-16 Jan-16 Nov-15 Sep-15 Jul-15 May-15 Mar-15 Jan-15 Nov-14 Sep-14 Jul-14 May-14 Mar-14 Jan-14 Nov-13 Sep-13 Jul-13 May-13 Mar-13 Pg 10

11 Valeant Pharmaceuticals - The Ugly Duckling! $350 $300 $250 $200 $150 $100 $50 $0 Mar-16 Jan-16 Nov-15 Sep-15 Jul-15 May-15 Mar-15 Jan-15 Nov-14 Sep-14 Jul-14 May-14 Mar-14 Jan-14 Nov-13 Sep-13 Jul-13 May-13 Mar-13 Pg 11

12 What Happened At Valeant? Over the years, we have struggled to wrap our heads around Valeant s business model & have never owned it Valeant employed an aggressive acquisition strategy using a tax advantage it gained from being headquartered in Canada Subsequently it has come to light that they were increasing the price of the drugs they were acquiring by astronomical amounts Hillary Clinton has vowed to go after Valeant for their predatory pricing practices This Company Has Never Passed Our Wallet Test Pg 12

13 Example of Stocks We Do Own Pg 13

14 TD Bank TD is a very well run, diversified Canadian bank that has also built a significant presence in the United States Pg 14

15 Owning Good Businesses Will Pay Off Over Time $0.50 TD Bank s Dividend Growth $0.45 $0.40 $0.35 $0.30 $0.25 $0.20 $0.15 $0.10 $0.05 $ Returning Profit to Shareholders Pg 15

16 Tourmaline Oil Corp. Low Cost Structure Top quartile cost structure total cash costs of $1.47 per mcf which is down 24% year-over-year All-in supply cost of $3 per mcf vs. industry at $3.75 per mcf Industry leading finding and development costs as well as capital efficiencies Strong Management Team and Board Insiders own 30% of the business and have been purchasing shares in the open market Management team sold its former company Duvernay Oil Corp. to Shell in 2008 for $5.6 billion Solid Financial Position Net debt to cash flow in 2016 is approximately 1.8X vs. its peer group at 4.1X Look for Tourmaline to use its balance sheet to take advantage of over-levered competitors over the next 12 months Attractive Valuation Trading at 58% of its intrinsic value of $38 per share using a long-term natural gas price of US$3.50 per mcf Low cost structure allows business to generate growth in cash flow per share and production per share in the current environment Tourmaline is a high quality energy company with a terrific management team, a strong balance sheet and one of the lowest cost structures in the industry Pg 16

17 Tourmaline vs. Suncor Growth Over the Next 3 Years 16.0% 14.0% 12.0% 10.0% Per Annum Production Growth TOU SU 10.0% 8.0% 6.0% 4.0% Per Annum Cash Flow Growth TOU 30.0% 25.0% 20.0% Per Annum Leverage Growth SU 8.0% 6.0% 4.0% 2.0% 0.0% 2.0% 0.0% -2.0% -4.0% -6.0% SU 15.0% 10.0% 5.0% 0.0% TOU Current Valuation (Enterprise Value to Debt Adjusted Cash Flow) TOU 10x SU 15x Tourmaline stacks up well against Suncor and is trading at a much more attractive valuation Pg 17

18 Expected Returns For Some Of Your Larger Holdings As of March 31, 2016 Company 3 Year Target Return Saputo 6.0% Toronto Dominion Bank 9.6% Bank of Nova Scotia 11.6% Toromont 7.8% Open Text 11.9% Canadian Tire 6.1% Tourmaline Oil Corp 14.5% CI Financial 12.0% Brookfield Asset Management 15.6% Stantec 13.9% Our forecasted returns continue to look attractive for the companies you own Pg 18

19 What Can We Expect Going Forward? Pg 19

20 There Will Be Bumps Along The Way TSX Composite Performance Q ,800 Mar.7: Commodity resurgence turns Canadian Stocks from Zero to Hero Bloomberg News 13,400 13,000 Jan.4: China sell-off sparks gloomy 2016 start for TSX, Dow The Globe and Mail Feb.8: Signs of distress in markets gather force as fears over global economy deepen Financial Post Mar.17: The oil price crash is over let the recovery of Alberta s hard-hit economy begin Financial Post 12,600 12,200 Feb.9: Goldman [Sachs] 11,800 Sees Risk of Oil Below Jan.15: More bad news coming: $20. Bloomberg News Canadian corporate earnings will be awful - Financial Post 11,400 January February March Mar.31: TSX finishes flat to cap best month since 2011 The Globe and Mail Pg 20

21 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Markets Will Move Higher Over Time $225 Performance of a Balanced Portfolio Over The Last 15 Years 60% Stocks and 40% Bonds $200 $175 $150 Time to recover Time to recover $125 $100 Time to recover $75 Pg 21

22 A Wise Quote "Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497. Warren Buffet: The New York Times, October 16, 2008 Pg 22

23 Thank you Pg 23