From Manufacturing to Energy: How to Capture Sustainable Growth in US Equity

Transcription

1 From Manufacturing to Energy: How to Capture Sustainable Growth in US Equity Andrew Acheson, Portfolio Manager John Peckham, CFA, Portfolio Manager, Co-Head of Equity Research, US June 2013 Page 1 I For Dublin 2013 Investment Conference Attendees Only and Not to be Distributed to the Public

2 Pioneer Funds U.S. Fundamental Growth Andrew Acheson Portfolio Manager Page 2 I For Dublin 2013 Investment Conference Attendees Only and Not to be Distributed to the Public.

3 Fertile Environment for US Large-Cap Growth Companies Opportunity: Pioneer Funds U.S. Fundamental Growth Implications for Investing: Consider an allocation to: In an environment of slow but steady economic momentum, a position in quality large-capitalisation companies may help pursue growth For growth investors who fear the effects of volatile markets, consider an investment approach that has delivered lower volatility Pioneer Funds Pioneer U.S. Fundamental Funds U.S. Growth Fundamental Great Companies Growth at Good Great Prices Companies at Good Prices Morningstar Rating TM An Attractive Track Record of Risk and Reward Source: Morningstar, 30 April Copyright 2013 Morningstar UK Limited. All Rights Reserved. The information contained herein: (1) may not be copied or distributed; and (2) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Page 3 I For Dublin 2013 Investment Conference Attendees Only and Not to be Distributed to the Public.

4 Pioneer Funds U.S. Fundamental Growth Our Philosophy We believe that a concentrated portfolio of companies with businesses that generate high returns on incremental invested capital, possess a sustainable competitive advantage, and capitalise on secular trends, can provide competitive performance over time. Page 4 I For Dublin 2013 Investment Conference Attendees Only and Not to be Distributed to the Public.

5 Pioneer Funds U.S. Fundamental Growth Great Companies at Good Prices Large-cap growth fund seeking to deliver investment upside at lower than average risk Highly analytical approach looking to identify growth companies with: Fortress franchises: strong and enduring business models Superior sales and cash flow growth Above average returns on capital Self-funded growth: long-term growth through re-investment Justifiable valuations High conviction (approx holdings) Ten largest holdings typically represent 35% 45% of assets Page 5 I For Dublin 2013 Investment Conference Attendees Only and Not to be Distributed to the Public.

6 The Characteristics that Define Our Approach Valuation: Growth at the Right Price A Multi-Factor Approach Traditional Price Multiple Metrics Discounted Cash Flow Cash Flow and ROIC Evaluation Steady State Cash Flow Yield Operating cash flow (excluding growth investments) (a) Enterprise Value (b) Return on Incremental Invested Capital Incremental Operating Cash Flow Incremental Growth Capital Invested (c) (a) Growth investments include incremental Selling, General and Administrative Expenses (SG&A) and Research and Development (R&D). (b) Enterprise value equals total equity market cap plus company debt less cash. (c) Incremental growth capital invested equals incremental SG&A and R&D, capital expenditures above depreciation and working capital. Page 6 I For Dublin 2013 Investment Conference Attendees Only and Not to be Distributed to the Public.

7 1) Strong Track Record vs. Morningstar Peer Average Delivering on Our Investment Philosophy Morningstar Rating TM Overall Rating Percentile Ranking 3 Years Ann Pioneer Funds U.S. Fundamental Growth 7th 4th 23rd 3 rd 51st 3 rd 20% 15% 10% 5% 0% 13.6% 12.4% 12.6% 13.4% 10.2% 9.7% 13.2% 15.3% 13.5% 4.9% 2.6% -3.7% 17.0% 16.7% 13.3% -5% 1 Year 3 Years Ann Pioneer Funds U.S. Fundamental Growth Russell 1000 Growth Index Morningstar US Large-Cap Growth Equity Average Source: Morningstar, 30 April Morningstar overall ratings, rankings and performance are based on Class A USD non-distributing units net of fees. Morningstar quartile rankings are based on a comparison of Pioneer Funds U.S. Fundamental Growth s performance relative to all the other funds in the Morningstar US Large-Cap Growth Equity category. Copyright 2013 Morningstar UK Limited. All Rights Reserved. The information contained herein: (1) may not be copied or distributed; and (2) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Page 7 I For Dublin 2013 Investment Conference Attendees Only and Not to be Distributed to the Public.

8 Return 2) Strong Returns Achieved at Lower Volatility than BMK & Morningstar Peer Average Delivering on Our Investment Philosophy 3-Year Volatility/Return Comparison 16% 14% Return % Std Dev % Pioneer Funds U.S. Fundamental Growth % 10% Russell 1000 Growth Index (TR) Morningstar US Large-Cap Growth Equity Average % 14% 16% 18% Standard Deviation Source: Morningstar, 30 April Copyright 2013 Morningstar UK Limited. All Rights Reserved. The information contained herein: (1) may not be copied or distributed; and (2) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Risk/return figures are based on Class A USD non-distributing units net of fees. Benchmark refers to the Russell Growth 1000 Index. Past performance does not guarantee and is not indicative of future results. Page 8 I For Dublin 2013 Investment Conference Attendees Only and Not to be Distributed to the Public.

9 3) Has Captured Less Downside Compared to Morningstar Peer Average Delivering on Our Investment Philosophy 1-Year Downside Capture Ratio 3-Year Downside Capture Ratio 120% 100% 80% 96% 100% 112% 140% 120% 100% 89% 100% 125% 60% 40% 80% 60% 40% 20% 20% 0% Pioneer Funds - U.S. Fundamental Growth Russell 1000 Growth Index Morningstar US Large Cap Growth Equity Average 0% Pioneer Funds - U.S. Fundamental Growth Russell 1000 Growth Index Morningstar US Large Cap Growth Equity Average Source: Morningstar, 30 April Copyright 2013 Morningstar UK Limited. All Rights Reserved. The information contained herein: (1) may not be copied or distributed; and (2) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Downside capture figures are based on Class A USD non-distributing units net of fees. Page 9 I For Dublin 2013 Investment Conference Attendees Only and Not to be Distributed to the Public.

10 Summary What Makes the Difference? Offers exposure to high-quality franchises with strong and enduring business models and sustainable long-term growth potential The focus is not just on earnings, but on how a company achieves its earnings Companies selected for the Portfolio have been successful in increasing profits with relatively moderate capital needs Maximises return potential through careful stock selection and concentration Consistent and disciplined investment approach Page 10 I For Dublin 2013 Investment Conference Attendees Only and Not to be

11 Pioneer Funds U.S. Research John Peckham, CFA Portfolio Manager, Co-Head of Equity Research, US Page 11 I For Dublin 2013 Investment Conference Attendees Only and Not to be

12 Pioneer Investments US Equity Research Team S&P 500 Sector Breakdown US Equity Analysts Average Experience: 20 Years Paul Cloonan, CFA Semiconductors Pioneer Investments since 1997 Over 19 years in Investment Management J. Clarkson Williams, CFA Technology Hardware Pioneer Investments since 1995 Over 26 years in Investment Management Yves Raymond Software and Services Pioneer Investments since 1999 Over 16 years in Investment Management George Sidgwick Telecommunications, Media and Transportation Pioneer Investments since 2003 Over 16 years in Investment Management Bradley Galko, CFA Capital Goods Pioneer Investments since 2001 Over 22 years in Investment Management David Sobell Biotechnology, Health Care Equipment and Services Pioneer Investments since 2000 Over 21 years in Investment Management Chris Stevo Pharmaceuticals Pioneer Investments since 2012 Over 19 years in Investment Management Carol Lintz Consumer Staples Pioneer Investments since 2006 Over 29 years in Investment Management Robert Petrie Consumer Discretionary ex-media Pioneer Investments since 2012 Over 15 years in Investment Management John Peckham, CFA Materials Pioneer Investments since 2002 Over 11 years in Investment Management John Murray Energy Pioneer Investments since 2012 Over 11 years in Investment Management Terry Shu, CFA Insurance and Utilities Pioneer Investments since 2008 Over 38 years in Investment Management James Moynihan Banks and Real Estate Pioneer Investments since 2007 Over 27 years in Investment Management Brian Popiel Diversified Financials Pioneer Investments since 2011 Over 14 years in Investment Management Page 12 I For Dublin 2013 Investment Conference Attendees Only and Not to be

13 Pioneer Funds U.S. Research Investment Philosophy Bottom-up, research-driven investment philosophy Specialist career Analysts, with in-depth knowledge of companies and sectors Aim to produce stable outperformance over time using insights gained from research Page 13 I For Dublin 2013 Investment Conference Attendees Only and Not to be

14 Pioneer Funds U.S. Research Investment Process Stock Selection Research Insights and Investment Cases Research insight is a fundamentally different understanding of an investment controversy or critical issue that manifests itself in a material price anomaly versus the existing share price An investment case is a clear, concise articulation of an analyst s research insight. An articulation of what an analyst understands regarding investment controversy that is different to what is imputed in the share price Page 14 I For Dublin 2013 Investment Conference Attendees Only and Not to be

15 Pioneer Funds U.S. Research Portfolio Overview Broadly diversified* US equity portfolio, sector neutral versus benchmark (S&P 500 Index) As such, performance is not achieved through sector positions but by selecting the most attractive companies Managed by Pioneer Investments US Research Analysts Best ideas from analysts in each sector Based on proprietary fundamental research Leverage off Research team of experienced and specialised career analysts Total AUM (Mil) $2,609.6 Total Number of Holdings 100 Assets in Top 10 Holdings 24.3% Fund Inception 20 April 1998 First NAV Date (A Class) 27 December 2001 Morningstar Rating Source: Pioneer Investments as at 30 April Morningstar Ratings: Copyright 2013 Morningstar UK Limited. All Rights Reserved. The information contained herein: (1) may not be copied or distributed; and (2) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. *Diversification does not guarantee a profit or protect against a loss. Page 15 I For Dublin 2013 Investment Conference Attendees Only and Not to be

16 Pioneer Funds U.S. Research Performance vs. Morningstar Peers as at 30 April Year 3 Years 5 Years 10 Years % Rank Quartile 70% 3rd 42% 2nd 21% 1st 17% 1st Source: Pioneer Investments as at 30 April Morningstar Ratings: Copyright 2013 Morningstar UK Limited. All Rights Reserved. The information contained herein: (1) may not be copied or distributed; and (2) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Page 16 I For Dublin 2013 Investment Conference Attendees Only and Not to be

17 Shale Gas in the United States Source: Pioneer Investments For Illustrative purpose only. Page 17 I For Dublin 2013 Investment Conference Attendees Only and Not to be

18 Energy Sector How We Invest Investment Universe 43 Energy Companies in the S&P 500 Index 80 Companies that meet Cap requirement Leverage Quant group to Fish from a better pool Understand and exploit longer-term trends E&Ps Service Companies Refiners Page 18 I For Dublin 2013 Investment Conference Attendees Only and Not to be

19 Energy Sector How We Invest (Continued) Understand expectations Conferences, Sell Side and Trade Conferences Company Road Shows Dialogue with Sell Side Define range of outcomes Base Case DCF using marginal prices for Commodities Downside Case (what happens when we are wrong) Page 19 I For Dublin 2013 Investment Conference Attendees Only and Not to be

20 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 Stock Price (rebased to 100) Analyst Idea: Oil and Gas Company Investment Case based on: 200,000 acres in the Marcellus shale is the highest IRR oil or gas resource play in the entire US Potential reserves are at least 10 times that of their proven reserves providing decades of growth Grows production at least two times faster than its peers, while keeping capex within their operating cash flow Will start generating substantial free cash flow potentially as much as $1 - $1.5B over the next two years $200 $180 $160 $140 $120 $100 $80 Oil and Gas Company (Price) The portfolio is actively managed, and information may not be representative of current or future holdings. References to individual stocks should not be taken as investment recommendations to buy or sell any security. Past performance does not guarantee and is not indicative of future results. Source: Pioneer Investments and Bloomberg as at 30 April Page 20 I For Dublin 2013 Investment Conference Attendees Only and Not to be

21 Manufacturing How We Invest Monitor extensive and diverse universe of capital goods companies Hundreds of issuers, most with diverse multi-business portfolios Defense to Healthcare, Energy to Agriculture Leverage Quant Group Multiple screens (capitalisation, macro indicators) Captures intersection of historical fundamental data and stockmarket data Develop and articulate clearly defined investment thesis, while being aware of cyclical undercurrents Leverage analysts deep knowledge of companies diverse business portfolios, developed over more than a decade Stay attuned to various, individual industry cycles Page 21 I For Dublin 2013 Investment Conference Attendees Only and Not to be

22 Manufacturing How We Invest (Continued) Go beyond the merely cyclical in developing investment cases Management changes / Operational improvement Portfolio actions / Capital allocation stories Longer-term ( secular ) global trends EM infrastructure Shifts in global energy / shale revolution Global emissions standards Fiscal austerity or rising threats from rogue regimes Page 22 I For Dublin 2013 Investment Conference Attendees Only and Not to be

23 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 Stock Price (rebased to 100) Analyst Idea: Global Diversified Industrial Company Investment Case based on: Company has strong brands that are market leaders Historically undermanaged, however, company s financials have improved as new management s operational initiatives have taken hold More shareholder-friendly capital redeployment (and strategic portfolio actions) should further augment returns over time $135 $130 $125 $120 $115 $110 $105 $100 $95 $90 Global Diversified Industrial Company (Price) The portfolio is actively managed, and information may not be representative of current or future holdings. References to individual stocks should not be taken as investment recommendations to buy or sell any security. Past performance does not guarantee and is not indicative of future results. Source: Pioneer Investments and Bloomberg as at 30 April Page 23 I For Dublin 2013 Investment Conference Attendees Only and Not to be

24 Important Information Unless otherwise stated all information contained in this document is from Pioneer Investments and is as at 30 April Pioneer Funds U.S. Fundamental Growth and Pioneer Funds U.S. Research are sub-funds (the Sub-Funds ) of Pioneer Funds (the Fund ), a fonds commun de placement with several separate sub-funds established under the laws of the Grand Duchy of Luxembourg. Past performance does not guarantee and is not indicative of future results. Unless otherwise stated, all views expressed are those of Pioneer Investments. These views are subject to change at any time based on market and other conditions and there can be no assurances that countries, markets or sectors will perform as expected. Investments involve certain risks, including political and currency risks. Investment return and principal value may go down as well as up and could result in the loss of all capital invested. More recent returns may be different than those shown. Please contact your local sales representative for more current performance results. In the event this Sub-Fund holds derivatives, portfolio breakdown and allocation slides reflect such derivative exposure only where specifically noted. This material is not a prospectus and does not constitute an offer to buy or a solicitation to sell any units of the Fund or any services, by or to anyone in any jurisdiction in which such offer or solicitation would be unlawful or in which the person making such offer or solicitation is not qualified to do so or to anyone to whom it is unlawful to make such offer or solicitation. For additional information on the Fund, a free prospectus should be requested from Pioneer Global Investments Limited ( PGIL ), 1 George s Quay Plaza, George s Quay, Dublin 2, Ireland. Call Fax This information is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities or services in the United States or in any of its territories or possessions subject to its jurisdiction to or for the benefit of any United States person (being residents and citizens of the United States or partnerships or corporations organized under United States laws). The Fund has not been registered in the United States under the Investment Company Act of 1940 and units of the Fund are not registered in the United States under the Securities Act of This document is not intended for and no reliance can be placed on this document by retail clients, to whom the document should not be provided. The content of this document is approved by PGIL. In the UK, it is directed at professional clients and not at retail clients and it is approved for distribution by Pioneer Global Investments Limited (London Branch), Portland House, Bressenden Place, London, SW1E 5BH, authorised by the Central Bank of Ireland and regulated by the Financial Services Authority for the conduct of UK business. The Fund is an unregulated collective investment scheme under the UK Financial Services and Markets Act 2000 and therefore does not carry the protection provided by the UK regulatory system. Pioneer Funds Distributor, Inc., 60 State Street, Boston, MA ( PFD ), a U.S.-registered broker-dealer, provides marketing services in connection with the distribution of Pioneer Investments products. PFD markets these products to financial intermediaries, both within and outside of the U.S. (in jurisdictions where permitted to do so) for sale to clients who are not United States persons For Dublin 2013 Investment Conference Attendees Only and Not to be Distributed to the Public Pioneer Investments is a trading name of the Pioneer Global Asset Management S.p.A. group of companies. Date of First Use: 6 June 2013 Page 24 I For Dublin 2013 Investment Conference Attendees Only and Not to be