Presented by Managing Partners: L.D. Porayko, MD D. Wingnean, MD September 2015.
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WILLIAM OSLER CAPITAL 5 TH YEAR PORTFOLIO REVIEW Presented by Managing Partners: L.D. Porayko, MD D. Wingnean, MD September 2015
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Transcript of Presented by Managing Partners: L.D. Porayko, MD D. Wingnean, MD September 2015.
WILLIAM OSLER CAPITAL 5TH YEAR PORTFOLIO REVIEW
Presented by Managing Partners:L.D. Porayko, MDD. Wingnean, MD
September 2015
Important Disclaimer/Legal Stuff
WILLIAM OSLER CAPITAL AND ITS PORTFOLIO MANAGERS MAY HAVE A LONG OR SHORT POSITION IN ANY OF THE SECURITIES PRESENTED
THESE SECURITIES MAY BE SOLD OR BOUGHT WITHOUT GIVEN NOTICE. PLEASE VERIFY DETAILS AND CONSIDER YOUR INDIVIDUAL FINANCIAL
SITUATION BEFORE MAKING YOUR OWN INVESTMENT DECISIONS.
THERE IS NO GUARANTEE OF ACCURACY OR COMPLETENESS OF THE CONTENT IN ANY MEDIA USED IN THIS PRESENTATION.
WILLIAM OSLER CAPITAL AND ITS MANAGING PARTNERS WILL NOT ACCEPT LIABILITY FOR ANY LOSSES OR DAMAGES, MONETARY OR
OTHERWISE THAT MAY RESULT FROM THE CONTENT OF THIS PRESENTATION.
DISCIPLINEFLEXIBILITY
PATIENCE
Time Arbitrage= our most powerful ally
Mispricing
Quantitative
Owner-Operator Orientation
Alignment of interests
Advantages
Durable Moat
Threats/Opportunities
Potential game-
changers
Strength of Conviction & Edge
The source of patience
MOATS METHODOLOGY
Our Mandate
Positive return in both bear
and bull markets
Invest with a margin of
safety
Primum Non
Nocere
Pay little for
optionality
Alignment of partner interests
3 Value Themes
Compounders
Cigar Butts
Special Situations
Sector Exposure
CRE 23%
Energy 21%
Financial 20%
Other 36%
THE PORTFOLIO:
Cash Management
AUM :
2015: $4.8MM CDN
Cash Position ≈ 23%
(20%US$:80% CDN$)
Net Long Equity + Cash CDN$ Exposure:
≈12% short CDN(14% net long CDN 2014)
Total Current Active Positions = 26
• LT Goal: ≈ 15
Ex Cash Top 5 positions = 33% total
• LT Goal: ≈ 50%
Portfolio Concentration
Long-term Performance
Long-term Performance
WOAPICTSXS&PRussell
Short-term Performance
TSX return
Sans Valeant
TSX returnwith fund return superimposed
Sans Valeant
BYD
IDWM
NOVCFW SHOS
Last year…You did well only if you held US$ stocks
Market Valuations…even the US market looks fairly valued at interest rates of 5%
1/2.5% = P/E of 40x
1/5% = P/E of 20x
What the #$#! are we doing owning O&G?
Mean Regression
Energy Sector Cyclical Downturn
“We do believe that the North American rig count has now reached bottom, but that we will only see a
slow increase in drilling and completion activity in the second half of the year, which will not make any
material dent in the massive overcapacity that has been created...” —Schlumberger
Energy Sector Downturn
A Variant Perception
“Core believes that worldwide crude oil supply and demand markets are
well on their way to a balance at year-end, 2015…Core sees the V-
shape recovery, led by higher commodity prices and followed by
worldwide drilling activities, starting to increase in early 2016.” —
Core Labs
?OPPORTUNITY
A little nugget of truth about predicting economic outcomes
Attributed to Josh Brown, of the Reformed Broker Blog
“Roses are red,Violets are blue,We have no idea what’s going to happen,And neither do you.”
What we think…
Portfolio Review
Top Five Positions
The top 5: only 1 left from ‘14
Company Allocation Last year’s rank
IDW Media Holdings 13% 11
US Reg Bank Subport 6.5% 15
Special Opp Fund 6% 12
Nat’l Oilwell Varco 4% 1
Leucadia Nat’l 4% 18
IDW Media
Holdings
At the tilting point?
Allocation: 13% Annualized Return: 62%
Aggregator of Media Assets
Has many features we like to see
Oddball conglomerate
Illiquid & obscure
Spin-offTalented owner-operator mgmt
Long runway
Multi-bagger
Initial Capital Divested
Mispriced? Maybe.
EM 2.8x 2010 14x 2015E
ROIC low 30’sEBIT margin doubled
since 2011
adj 2017 EBIDTA to double again to $22MM
TV/Movies/Merchandising• 2017 EV/EBIDTA of 6x???
We’ll see.
Owner-operator orientation?
•HJ and 2 HF’s own 84%
Howard Jonas: Founder/Chair
•Owns 17% of IDWTed Adams: CEO
•Except…IDT debacleShareholder-friendly track
record
Durable Competitive Advantage?
Patents
Geography
Threats/Opportunities
THREATS OPPORTUNITIES
Minimal tangible assets
3 large competitors
Capital Markets
Rapid Growth phase
Streaming content
M&A
Stock currency
Strength of Conviction
10x upside
Downside
considerable:
valuation and fickle
capital markets
Free call
option on futur
e grow
th
#2 Thrift/Regional Bank Basket
Consolidation trend
Discounts to book; yet overcapitalized & profitable
Activists at work
Thrift ownership/economic distortion
Allocation 6.5%Annualized Return:
43%
Regional Bank Sub-PortfolioName Ticker Market Price
# Shares owned Market Value Allocation Return (-div)
Pathfinder Bancorp PBHC $10.94 2,717 $29,724 0.5% 20.0%Investors Bancorp ISBC $12.21 2,500 $30,525 0.5% 22.0%
Oconee Fed Fin Crp OFED $18.44 1,751 $32,288 0.5% 0.0%
Westfield Financial WFD $7.47 3,000 $22,410 0.4% 3.7%
Sunnyside Bancorp SNNY $10.20 1,000 $10,200 0.2% 3.0%
Riverview Bancorp RVSB $4.45 7,000 $31,150 0.5% 13.0%
First Internet Bancorp INBK $33.11 2,500 $82,775 1.3% 106.0%
Total Value SubPort $239,072 USD
US:CDN Forex 1.31
Total Value SubPort $313,185 CDN
Total Value Port $4,855,082 CDN
Allocation Subport 6.45%
Subport return 44.17%
Not including Dividends or Forex benefit
Subport return 51.80%Including forex
benefit
Threats
Hyper-inflation
Rapid interest rate rise
Market valuation
Geopolitical/macro-economic
Even brisk IR rises can be ok
And even moderate inflation is ok
#3 Special Opportunities Fund
Master
Arbitrager
of CEF in-
efficiencies
Discount to
its own NAV
(13%)
Mid-teens CAGR track
record
Insider
buying
Int’l expan-sion?
Allocation: 4.5% Total Return: -2%
#4 NOV: Baby in the bathwater?
Allocation 3.3%Total Return -38%
Mispriced?
Tailwinds for the outfitters…
…but headwinds for the prospectors
It’s a supply problem; demand is increasing by 1,400,000 BOE/day!
Also…depletion curves….
NOV: OOO?
Exemplary capital
allocation record
Conservative balance
sheet
NOV: Advantages
EOS and Network effect
90% rigs have NOV kit
60% market share
Sticky contracts
NOV: Threats & Opportunities
Acquisitive
business plan
Mis-execution of
M&A
Take-
under
Emerging markets
Up and
coming
competition
NOV: Conviction
Secular multi-decade tailwind
What’s our Edge? Patience
LUK: Complex Conglomerate… in transition
= $32/share—60% above market!
Allocation: 3.5% Total Return: -11%
#5 Leucadia National
Honourable Mentions
#6 BYD-UN #7 PSD #8 BPY-UN #11 RHDGF
Contemplating some mistakes
Charlie Munger said:•“I know I’ll perform better if I rub my nose in my mistakes. This is a wonderful trick to learn.”
Over-estimating economic moats•Particularly competitive threats… business is really, really hard!
Corporate culture really
matters
Opportunities in the unloved
O&G value ‘basket’
Emerging
market
franchises
Asset managers
REITS
Fund Strategy
Who are we & why do we do this?
Lorne Porayko, MD, CIM
David Wingnean, MD, MBA
Who are we & why do we do this?
Perceived need
Innate curiosity
Career Longevity
Temperament
Love it!!!
Why use us vs. others?
Skin in the game
Choice vs. $ imperative
Know our client base
Discipline, high RQ and
life experience
What do we get out of it?
OPM Discipline
✔
Securities Council
Requirement ✔
Positive Impact
✔
Eventual Roll Out of
Professional Fund
$10MM AUM minimum
30-S
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$0.00
$1,000,000.00
$2,000,000.00
$3,000,000.00
$4,000,000.00
$5,000,000.00
AUM $10MM
?2017-2020
Thank You For Your Trust &
Support
