Jefferies & Company Meet the Manager April 29 th, 2010

Transcription

1 Jefferies & Company Meet the Manager April 29 th, 2010

2 Talkot Fund Formed in September year track record Experienced Management Absolute Return Objective Yield Focused Invests across asset classes Large Management Stake Aims to be Tax Efficient -1-

3 Talkot Capital We can t change the wind, we can only adjust our sails -2-

4 Investment Objectives The Talkot Fund's goal is to provide investors with compelling risk-adjusted absolute returns in any market environment Preserving capital is considered as important as maximizing returns The Fund aims to be tax-efficient by investing with a longterm horizon and avoiding short-term gains where possible -3-

5 Investment Methodology Longs: Focus on Cash Flow and Tangible Book Value Future Cash Flow of investments are thoroughly analyzed and modeled Undervalued relative to future cash flows Tangible Book Value and Hard Assets are analyzed Focus on misunderstood and/or underfollowed securities Shorts: Used as hedge and profit generator Companies operating at competitive disadvantage, weak management, weak cash flows, priced to perfection Original Research Detailed review of companies: Management, financials, industry dynamics Direct contact with management, industry sources and competitors Internal Models generated Investment time horizon, entry and exit points are considered before investment is made -4-

6 Portfolio Strategy/Composition Investment Yield Common & Prf d Equity, Debt, Cash Eqvs Value Investments Value/Special- Situations High Risk Privates/ Micro-Cap/ Distressed Portfolio Total Portfolio Weighting 40-60% Long/ 10-20% Short 20-30% Long/ 5-20% Short Target Return Expected Contribution 10-20% 4-12% 20-30% 4-9% <10% 40%+ 2-4% % Long 15-40% Short %

7 Yield: Investment Example Anworth Mortgage Asset Corp. (NYSE: ANH) % % % 10.00% Price BV Yield % % 2Q98 2Q99 2Q00 2Q01 2Q02 2Q03 2Q04 2Q05 2Q06 2Q07 2Q08 2Q09 2Q10-6-

8 8/31/ /31/ /31/2008 2/28/2009 4/30/2009 6/30/2009 8/31/ /31/ /31/2009 2/28/2010 Yield: Investment Example Ashford Hospitality Trust Preferred Stock Dallas-based Lodging REIT Purchased Preferred Stock with a current yield of over 35%; 23 cents on the dollar Preferred Dividends are well covered at over 3X under recession stressed scenario Many financing options before Preferred dividend would be cut Solid underlying assets that are less sensitive to economy Insider buying and corporate buybacks Able to Hedge through shorting Common Stock $24 $20 $16 $12 $8 $4 $- AHT 8.45% Series D -7-

9 Yield: Investment Example Dynex Capital, a mortgage REIT (mreit) has been a core position in the Fund since Tom Akin was elected Chairman of the Board in 2003, and became CEO in The insight gained from Dynex has created a plethora of timed investments in the mreit industry. The mreit yield component, combined with realized gains, has been a cornerstone of the Fund s profitability over the past 9 years. $10 $8 $6 $4 $2 Dynex Capital, Inc. (NYSE: DX) $- -8-

10 Value Investments: What We Like Industry Dynamics Multi-Year Growth Benefits from Technology Benefits from Government Umbrella/Spending International Exposure Company Dynamics Ability to grow earnings without much need for capital Experienced Management who are aligned with shareholders Strong Competitive Position Pricing Power Dividend Paying -9-

11 8/31/ /31/ /31/2007 2/29/2008 4/30/2008 6/30/2008 8/31/ /31/ /31/2008 2/28/2009 4/30/2009 6/30/2009 8/31/ /31/ /31/2009 2/28/2010 Value: Investment Example IESI-BFC Ltd. : 4 th Largest Waste Company in North America Collects solid waste from commercial and residential customers Purchased at substantial discount to cash flow Recession Resistant Satisfaction guaranteed or double your garbage back $30 $25 $20 $15 $10 $5 $- IESI-BFC Ltd. (NYSE: BIN) -10-

12 High Risk: Investment Example State Bank and Trust: Headquartered in Macon, Georgia Acquired failed banks from the FDIC with $2 Billion of assets Entire balance sheet is under the umbrella of FDIC loss sharing agreement Well positioned to gain additional market share through: Organic growth (other GA banks don t have enough capital to lend) Future FDIC-assisted deals (there s a concentration of problem banks in GA) Talkot purchased SBT common stock near tangible book value Currently a private company, plans to IPO later this year. -11-

13 Investment Structure Tom Akin Portfolio Hedging mreits Biotechnology Kyle Akin Commodities T.J. Leverte Value Investing Special Situations Ian McBane Financials Casey Fitz-Gerald Technology Operations -12-

14 Management Bios Tom Akin - Managing General Partner and Founder, CIO Dynex Capital, Chairman and CEO Board Memberships: Dynex (NYSE-DX), CombiMatrix (Nasdaq-CBMX), Centiv Services MBA UCLA, BA UC Santa Cruz T.J. Leverte, CFA- Portfolio Manager, COO Joined Talkot in 2005 Experience: Five Corners Partners, Fortune Brands, PriceWaterhouse Coopers, Prudential Georgetown University School of Business Administration Casey Fitz-Gerald - CCO Joined Talkot in 1999 UC Santa Barbara, BA in Economics w/emphasis in Accounting Ian McBane Analyst ECONorthwest, University of Oregon, Portland State, MS in Economics Kyle Akin Analyst Claremont McKenna College, BA Religious Studies Janice Woerner - Office Manager Joined Talkot in 1999 UC Davis, BA History -13-

15 Summary of Terms Minimum Investment: $1,000,000 High-Water Mark Hurdle Rate of 5% Management/Performance Fee: 1.5%/20% Contact Information: Talkot Capital LLC 2400 Bridgeway, Suite 300 Sausalito, CA