Strategic Investing April 2016 - Amazon Web...
Transcript of Strategic Investing April 2016 - Amazon Web...
1 / 89© 2016 SIA Group – www.s-i-a.ch
Strategic Investing
April 2016
2 / 89© 2016 SIA Group – www.s-i-a.ch
Presentation plan
. Quoted Equity with a Private Equity Approach
. The case for equities
. Our investment approach
. Portfolio construction
. Expected returns
. Some words on copper and oil
. A managed account: owner’s reporting
. Appendix
Key message: if approached as a business owner, equities can be a high return, low risk investment.
3 / 89© 2016 SIA Group – www.s-i-a.ch
Key messages
. Private Equity is probably not so “alternative” to Quoted Equity: the underlying asset for both PE and QE is common equity, with all the residual economic interest
. The key differences can favor PE or QE:
. Opportunities to create value through intervention
. Opportunities to modify financial structure
. Opportunities to construct an efficient portfolio
. Price volatility
. Liquidity
. Investors must keep similar time horizons
4 / 89© 2016 SIA Group – www.s-i-a.ch
Two ways of investing in QE
. Buy “shares that will go up” (trading strategy)
. Buy profitable businesses at a discount
"It might have been supposed that competition between expert professionals, possessing judgment and knowledge beyond that of the average private investor, would correct the vagaries of the ignorant individual left to himself. It happens, however, that the energies and skill of the professional investor and speculator are mainly occupied otherwise. For most of these persons are, in fact, largely concerned, not with making superior long-term forecasts of the probable yield of an investment over its whole life, but with foreseeing changes in the conventional basis of valuation a short time ahead of the general public. They are concerned, not with what an investment is really worth to a man who buys it for "keeps", but with what the market will value it at, under the influence of mass psychology, three months or a year hence."
(JM Keynes, The general theory of employment, interest, and money, 1936)
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Benefits of intervention clearly favor PE
. “Activist” investing is very limited in the world of Quoted Equity:
. Limitations of size
. Limitations of control
. Legal and practical considerations
. On the other hand, active intervention is an essential part of PE investing, and can be the key ingredient in long-term profitability
. Underlying profits
. Multiple expansion
. Leverage
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“Financial Engineering” seems to favor PE, but…
. Not necessarily a long-term source of value
. Generates its own endogenous risk
. In reality, it can be replicated in QE investing
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…diversification clearly favors QE
. Quoted Equity facilitates enormously diversification across sectors, sizes, and geographies. By definition all quoted stocks are available for investment, only limited in practice by investor’s size
. It is in the essence of PE to intervene, which requires specific knowledge, which requires specialization, which requires huge size to diversify.
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The main difference for many investors is volatility
. For years (at least, pre-2008), PE was seen as “less volatile” than QE, and therefore as having a better risk/reward profile
. But volatility is not the same as risk, and QE is actually less risky than PE, often with better long term returns when risk adjusted
. “Making money while the market drops”
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. Bubbles and “black holes”
. Mr. Private and Mr. Public
. Mr. Retail
. Who makes money over the long term?
Volatility actually presents opportunity for QE
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Finally, liquidity favors QE
. Even with long-term investment horizons, liquidity is clearly an advantage, all other things being equal
. Liquidity also facilitates correcting mistakes at an affordable price
. From a “behavioral” point of view, however, liquidity can end up hurting the investor
11 / 89© 2016 SIA Group – www.s-i-a.ch
Summary
. It’s probably correct to see PE and QE as two ways of investing in the same underlying asset class: residual ownership claims on corporations
. Both have advantages and disadvantages: ability to intervene; ease to diversify.
. Financial engineering is not really a source of value; volatility can be a source of value for Quoted Equity investments: for a long-term, unleveraged investor, volatility is a source of opportunity not a source of risk
. High profitability, low volatility, and immediate liquidity are probably not even worth looking for.
. IN ANY CASE, THE IMPORTANT POINT IS TO UNDERSTAND IS THAT QE ARE “REAL ASSETS”
12 / 89© 2016 SIA Group – www.s-i-a.ch
Presentation plan
. Quoted Equity with a Private Equity Approach
. The case for equities
. Our investment approach
. Portfolio construction
. Expected returns
. Some words on copper and oil
. A managed account: owner’s reporting
. Appendix
Key message: if approached as a business owner, equities can be a high return, low risk investment.
13 / 89© 2016 SIA Group – www.s-i-a.ch
A risky investment?
. Starts with a 3% cash dividend
. Will grow the dividend about 5% every year
. Will try to pay (increasing) cash regardless of macroeconomic conditions
. It is very well diversified
. It is very solid financially
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It’s been going on for many years. These are the last 54
Annualized rate of dividend growth: 5.7 % Volatility of dividend growth: 50 bp
39.3034.83
31.1226.35
22.6822.27
28.3628.77
24.6722.16
19.3817.23
16.1215.69
16.3216.63
15.9515.24
14.6213.65
13.1212.5212.40
12.0111.82
11.029.75
8.818.28
7.897.53
7.096.876.63
6.205.65
5.074.67
4.053.683.603.383.153.073.133.163.072.922.872.722.502.282.132.021.95
0 5 10 15 20 25 30 35 40
2014
2011
2008
2005
2002
1999
1996
1993
1990
1987
1984
1981
1978
1975
1972
1969
1966
1963
1960
Dividends S&P 500 in USD
Expon. (Dividends S&P 500 in USD)
Source: Standard & Poors / Bloomberg
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0 5 10 15 20 25 30 35 40
2014
2011
2008
2005
2002
1999
1996
1993
1990
1987
1984
1981
1978
1975
1972
1969
1966
1963
1960Dividends S&P 500 in USDExpon. (Dividends S&P 500 in USD) The Vietnam war starts
Egypt, Jordan, Syria, and Libya invade Israel Soviet tanks invade Czechoslovakia
On Yom Kippur day, several Arab countries invade Israel. Oil embargo is declared. Oil goes from $18 to $42 in two weeks.
Nixon resigns. US GDP decreases more than 4%. The S&P drops more than 25%.
The Iranian revolution starts
Bretton Woods monetary system breaks down. Nixon takes dollar off gold standard
France nationalizes banks, large companies
JFK is assassinated Cuban missile crisis
The Soviet Union invades Afghanistan “Savings and Loan” crisis: 1,600 banks go bankrupt
This investment exists, and it’s highly liquid. It’s called the S&P 500
Total collapse of the financial system
October 19: the stock market plunges 508 points Pro‐democracy demonstrations in Tiananmen Square are violently crushed
Iraqi troops invade Kuwait and threaten Saudi Arabia
Open war in Yugoslavia. The EMS breaks down The “tequila crisis” blows up
The Asian crisis explodes Russia defaults both in its domestic and foreign debt
The Nasdaq bubble pops Terrorists destroy the World Trade Center
Euro collapse?
Source: Stand
ard & Poo
rs / Bloo
mberg
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Of course, the price of the investmenthas been volatile, but not its value
Annualized rate of dividend growth: 5.7 % Volatility of dividend growth: 50 bp
Price annualized return: 6.8 % Volatility of index returns: 16.3 %
Dividend 2014: 700.000 $ Total dividends: 10.500.000 $ Current market value: 34.000.000 $
Source: Standard & Poors / Bloomberg
0
500
1'000
1'500
2'000
0
5
10
15
20
25
30
35
40
1962 1967 1972 1977 1982 1987 1992 1997 2002 2007 2012
Dividends S&P 500 in USD Price S&P 500 Index in USD (r. scale) Expon. (Dividends S&P 500 in USD)
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The contrast with bonds is sharp
Dividend 2014: 700.000 $ Total dividends: 10.500.000 $ Current market value: 34.000.000 $
Coupon 2014: 40’000 $ Total interests: 4’000’000 $ Current market value: 1’000’000 $
$ 4 p.a. (1960 – 1969)
$ 4 p.a. (from 2010)
$ 8 p.a. (1970 – 1979)
$ 12 p.a. (1980 – 1989)
$ 8 p.a. (1990 – 1999)
$ 6 p.a. (2000 – 2009)
Source: Stand
ard & Poo
rs / Bloo
mberg
39.3034.8331.12
26.3522.68
22.2728.3628.77
24.6722.16
19.3817.23
16.1215.69
16.3216.63
15.9515.24
14.6213.65
13.1212.5212.40
12.0111.82
11.029.75
8.818.28
7.897.53
7.096.876.63
6.205.65
5.074.67
4.053.683.603.383.153.073.133.163.072.922.872.722.502.282.13
0 5 10 15 20 25 30 35 40
2014
2011
2008
2005
2002
1999
1996
1993
1990
1987
1984
1981
1978
1975
1972
1969
1966
1963Coupons Bonds in USD
Dividends S&P 500 in USD
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. The essential risk is valuation
. In the end, return is simple: dividend yield (plus net stock repurchase), plus real growth, plus inflation. For an index, these are basically macroeconomic data. For individual stocks, strategic analysis is required.
Risk is low but… overpaying is expensive
Annualized total return (TR) of S&P 500 Index(in %, in USD)
Source: Standard & Poors / Bloomberg
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Coca‐Cola(Earning per Share, quarterly basis, from 31st December 1998 to 30th September 2013, in USD)
The real fundamental risk is to overpay
Source: Bloomberg
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
‐$0.4
‐$0.2
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
COCA‐COLA CO/THE ‐ Earnings per share in USD (r. scale)
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Coca‐Cola(Price return and Earning per Share, quarterly basis, from 31st December 1998 to 30th September 2013, in USD)
The real fundamental risk is to overpay
Source: Bloomberg
‐$0.4
‐$0.2
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
‐50%
‐25%
0%
25%
50%
75%
100%
125%
150%
COCA‐COLA CO/THE ‐ Earnings per share in USD (r. scale)COCA‐COLA CO/THE ‐ Price return in %
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PEPSICO INC ‐ Earnings per share in USD (r. scale)
‐$0.6
‐$0.4
‐$0.2
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
$1.4
$1.6
$1.8
Coca‐Cola & Pepsi Co.(Price return and Earning per Share, quarterly basis, from 31st December 1998 to 30th September 2013, in USD)
The real fundamental risk is to overpay
Source: Bloomberg
‐$0.4
‐$0.2
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
‐50%
‐25%
0%
25%
50%
75%
100%
125%
150%
COCA‐COLA CO/THE ‐ Earnings per share in USD (r. scale)COCA‐COLA CO/THE ‐ Price return in %
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PEPSICO INC ‐ Earnings per share in USD (r. scale)
‐$0.6
‐$0.4
‐$0.2
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
$1.4
$1.6
$1.8
Coca‐Cola vs. Pepsi Co.(Price return and Earning per Share, quarterly basis, from 31st December 1998 to 30th September 2013, in USD)
The real fundamental risk is to overpay
Source: Bloomberg
‐$0.4
‐$0.2
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
‐50%
‐25%
0%
25%
50%
75%
100%
125%
150%COCA‐COLA CO/THE ‐ Earnings per share in USD (r. scale)
COCA‐COLA CO/THE ‐ Price return in %
PEPSICO INC ‐ Price return in %
PE: 50PE: 35
Total Return: 67%Annualized: 3.5%
Total Return: 180%Annualized: 7.2%
23 / 89© 2016 SIA Group – www.s-i-a.ch
Presentation plan
. Quoted Equity with a Private Equity Approach
. The case for equities
. Our investment approach
. Portfolio construction
. Expected returns
. Some words on copper and oil
. A managed account: owner’s reporting
. Appendix
Key message: if approached as a business owner, equities can be a high return, low risk investment.
24 / 89© 2016 SIA Group – www.s-i-a.ch
What is strategic investing
. We want to find good companies at inexpensive prices
. Our key concept is that of “intrinsic return” to an “owner”
. We buy companies, not shares
. We don’t look for “shares that will go up”
. We don’t “play the markets”, look for “catalysts” or in any way put our investors’ money in the hands of future price movements
We never “chase” the markets. We use markets’ prices as opportunities to buy or sell. We never act on a view on what the markets will do: we have no way on what the markets will do (except for the long term).
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. A “good company” for us is one that delivers a return on equity well above its cost of capital,adjusted by risk, over the cycle
. This only happens when companies’ profits are protected by barriers to entry, i.e., when supplyhas structural difficulties to follow demand:
. Economies of scale
. Privileged access to raw materials or clients
. Proprietary products or processes
. Reputation effects
. Long lead times to add capacity
. In the end, companies earn returns above their cost of capital only if they are somehowprotected from full competition
. To determine if that will be the case, a thorough understanding of the competitive dynamics ofthe sector is necessary
. This is essential to avoid value traps: for instance, European banks, utilities, & telecom in thelast few years…
What is a good company
Nestlé’s ROE (10 year) > 16%Peugeot’s ROE (10 year) < 4%
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What is an inexpensive company
. Our target: annual double digit net return to investors
. This requires at least 10‐15% “intrinsic return”: there is growth… and there are fees
. We use a variety of measures (EV/Ebit, PE, P/NAV, IRR, etc.) to determine “intrinsic return”
. Our current portfolio has an expected return above 12%
. Key analytical variables are ROCE, dividend yield, leverage, and the notion of “convergence”.
. Ensuring a company is indeed “inexpensive” implies avoiding “value traps” and finding “hidden gems” through very thorough strategic and financial analysis
27 / 89© 2016 SIA Group – www.s-i-a.ch
Strategic investing and volatility
. Investors seek a “holy grail”: mid‐sized returns with no volatility. This is risky and, long term, not very profitable
. Investors must look first and foremost at fundamental risk: for a long‐term, unleveraged investor, volatility is source of opportunity not a source of risk
. But this requires understanding what one is buying: fundamental analysis, thinking as an owner
. Long‐term investors in a well diversified, well researched equity portfolio bought at a low price run only the long‐term risk that the world will implode. Everything else is pure noise.
. We build our portfolio to mitigate fundamental risk (good companies, low prices) and, to some extent, volatility: fundamental diversification.
28 / 89© 2016 SIA Group – www.s-i-a.ch
Presentation plan
. Quoted Equity with a Private Equity Approach
. The case for equities
. Our investment approach
. Portfolio construction
. Expected returns
. Some words on copper and oil
. A managed account: owner’s reporting
. Appendix
Key message: if approached as a business owner, equities can be a high return, low risk investment.
29 / 89© 2016 SIA Group – www.s-i-a.ch
. Step 1: determine the category of stocks with the least fundamental risk:
. Technological
. Business
. Cycle
. Forex
. Regulation
. Financial
. This stock should have a relatively certain Expected Return
. Step 2: determine the stocks’ Expected Return
. Step 3: Determine the appropriate Return Spreads for the different levels of risk
We start our portfolio construction by determining the “risk‐free” stocks’ Expected Return
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Some “micro” data
Reckitt Benckiser Group, UK, in GBPLong‐term growth of EPS: 7.0%Long‐term growth of DPS: 17.4%Total return: 1’324.4%Annualized total return: 12.8%
McDonald‘s Corp, USA, in USDLong‐term growth of EPS: 9.9%Long‐term growth of DPS: 15.5%Total return: 1’593.0%Annualized total return: 13.7%
0
200
400
600
800
1'000
1'200
1'400
‐0.5
0
0.5
1
1.5
2
2.5
3
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014e
(FY 1990 ‐ 2012)
%GBP
RECKITT BENCKISER GROUP PLC
Earnings per share (GBP) Dividend per share (GBP) Cum.Total return net (r. scale)
02004006008001'0001'2001'4001'6001'8002'000
0
1
2
3
4
5
6
7
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014e
(FY 1990 ‐ 2012)
%USD
MCDONALD'S CORP
Earnings per share (USD) Dividend per share (USD) Cum.Total return net (r. scale)Source: Bloomberg
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Portfolio construction: establishing spreads
After determining the “risk‐free rate of return”, we determine the necessary spreads for all other levels of risk
. Category 1: “risk‐free stock”: 10%
. Category 2: solid, non‐cyclical companies: 12%
. Category 3: solid, cyclical companies: 14%
. Category 4: special situations: 16%
These are entry returns. If the return decreases noticeably, because of share price appreciation or long‐term business deterioration, the stock becomes a candidate for a sale.
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Category 1: Sodexo SA
. Sodexo SA designs, manages and delivers comprehensive on‐site service solutions for its clients. The Company offers food, construction management, reception, technical maintenance and housekeeping services, maintains scanners and laboratory equipment, and operates river and harbor cruises and correctional facilities. Sodexo also designs employee benefit and incentive programs. (Bloomberg Ticker: SW FP)
Source: Bloomberg
30
60
120
Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16
EUR
SODEXO(Price in EUR, 04.01.2008 ‐ 08.04.2016)
log scale
Issue DataLast Price (08.04.2016) 94.28 52wk High (14.03.2016) 96.57 52wk Low (29.09.2015) 70.45P/E (Trailing 12m) 20.64Dividend Yield 2.31Price to Book Ratio 3.90Price to Sales Ratio 0.73EV / Trail 12M EBITDA 11.34Shares Outstanding 157.132Market Cap 14'943.26Enterprise Value 13'019.50
Per Share DataEPS (Trail ing 12m) 4.61Dividend per Share 2.20Book Value / Share 24.36Sales / Share (Trailing 12m) 130.33Cash Flow / Basic Share 6.69Free Cash Flow / Share 4.70
Cash Flow AnalysisPrice / Cash Flow 14.22Price / Free Cash Flow 20.23Cash Flow / Net Income 1.45Dividend Payout Ratio 49.58Cash Generated / Cash Req 1.76Cash Dividend Coverage 2.02Cash‐oper / Sales 5.13Eff Interest Rate 30.68
ProfitabilityEBIT 1'136Operating Margin 5.73Pretax Margin 5.26Return on Assets 4.84Return on Common Equity 20.29Return on Capital 11.82Asset turnover 1.37
StructureCurrent Ratio 1.00Quick Ratio 0.75Total Debt to Total Assets 21.54Total Debt to Com Equity 84.07Acct Receivable Turnover 6.11Inventory Turnover 62.27Gross Margin 15.94EBIT / Total Inter 7.57
Growth PotentialSales 1yr Growth 9.99Asset 1yr Growth ‐0.01Capital 1yr Growth ‐3.80
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Category 2: Drägerwerk AG
. Drägerwerk AG & Company KGAA manufactures medical, safety, and aerospace equipment. The Company produces ventilators, monitoring equipment, transportincubators, anesthesia machines, surgical lights, ward equipment, home care equipment, systems for safe breathing in industry, mining and fire fighting, and airplane crew and passenger oxygen systems.(Bloomberg Ticker: DRW3 GY)
Source: Bloomberg
30
60
120
Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16
EUR
DRAEGERWERK AG ‐ PREF(Price in EUR, 01.01.2010 ‐ 08.04.2016)
log scale
Issue DataLast Price (08.04.2016) 58.81 52wk High (27.04.2015) 123.70 52wk Low (04.02.2016) 51.12P/E (Trailing 12m) 32.84Dividend Yield 0.32Price to Book Ratio 1.12Price to Sales Ratio 0.40EV / Trail 12M EBITDA 7.10Shares Outstanding 7.6Market Cap 993.27Enterprise Value 1'195.70
Per Share DataEPS (Trail ing 12m) 1.82Dividend per Share 0.13Book Value / Share 53.17Sales / Share (Trailing 12m) 147.79Cash Flow / Basic Share 2.24Free Cash Flow / Share ‐3.96
Cash Flow AnalysisPrice / Cash Flow 27.86Price / Free Cash FlowCash Flow / Net Income 1.22Dividend Payout Ratio 7.07Cash Generated / Cash Req 0.28Cash Dividend Coverage 14.15Cash‐oper / Sales 1.53Eff Interest Rate 32.78
ProfitabilityEBIT 73Operating Margin 2.81Pretax Margin 1.90Return on Assets 1.44Return on Common Equity 3.55Return on Capital 3.84Asset turnover 1.15
StructureCurrent Ratio 1.71Quick Ratio 1.13Total Debt to Total Assets 14.78Total Debt to Com Equity 36.18Acct Receivable Turnover 3.81Inventory Turnover 3.64Gross Margin 44.91EBIT / Total Inter 3.27
Growth PotentialSales 1yr Growth 7.16Asset 1yr Growth 3.46Capital 1yr Growth 4.45
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Category 2: Bakkafrost P/F
. Bakkafrost P/F operates a fish farm. The Company offers a wide range of salmon products supplied by its own processing facilities. Bakkafrost provides fresh salmon to the fresh fish market, mokehousesand processors of ready meals, and frozen salmon portions vacuum packed in catering boxes or in retailboxes. (Bloomberg Ticker: BAKKA NO)
Source: Bloomberg
Issue DataLast Price (08.04.2016) 319.30 52wk High (30.03.2016) 334.60 52wk Low (17.04.2015) 171.00P/E (Trailing 12m) 15.20Dividend Yield 3.28Price to Book Ratio 4.75Price to Sales Ratio 4.32EV / Trail 12M EBITDA 11.39Shares Outstanding 48.85807Market Cap 15'429.38Enterprise Value 10'209.75
Per Share DataEPS (Trail ing 12m) 16.62Dividend per Share 8.25Book Value / Share 53.14Sales / Share (Trailing 12m) 58.41Cash Flow / Basic Share 15.82Free Cash Flow / Share 3.30
Cash Flow AnalysisPrice / Cash Flow 16.08Price / Free Cash Flow 77.76Cash Flow / Net Income 0.95Dividend Payout Ratio 49.75Cash Generated / Cash Req 0.85Cash Dividend Coverage 2.01Cash‐oper / Sales 26.94Eff Interest Rate 12.36
ProfitabilityEBIT 1'001Operating Margin 35.10Pretax Margin 32.43Return on Assets 21.95Return on Common Equity 34.89Return on Capital 29.20Asset turnover 0.77
StructureCurrent Ratio 4.74Quick Ratio 0.73Total Debt to Total Assets 11.42Total Debt to Com Equity 17.34Acct Receivable Turnover 15.34Inventory TurnoverGross Margin 57.86EBIT / Total Inter 40.64
Growth PotentialSales 1yr Growth 6.23Asset 1yr Growth 13.21Capital 1yr Growth 13.45
20
40
80
160
320
Mar 10 Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 Mar 16
NOK
BAKKAFROST P/F(Price in NOK, 26.03.2010 ‐ 08.04.2016)
log scale
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Category 3: Marine Harvest
Source: Bloomberg
. Marine Harvest is a Norwegian based fish farming plant, raising mainly Atlantic salmon. The Company operates hatcheries, processes and packages fish, as well as sells and markets the products. Marine Harvest operates in Canada, Norway and Scotland. The Company sells salmon worldwide through its sales companies in Norway, Canada, the United Kingdom and the United States. (Bloomberg Ticker: MHG NO)
Issue DataLast Price (08.04.2016) 134.10 52wk High (08.04.2016) 136.00 52wk Low (12.05.2015) 83.16P/E (Trailing 12m) 39.42Dividend Yield 4.22Price to Book Ratio 3.29Price to Sales Ratio 2.16EV / Trail 12M EBITDA 16.49Shares Outstanding 450.0857Market Cap 59'726.37Enterprise Value 63'283.54
Per Share DataEPS (Trail ing 12m) 3.37Dividend per Share 5.20Book Value / Share 40.39Sales / Share (Trailing 12m) 61.44Cash Flow / Basic Share 3.94Free Cash Flow / Share ‐0.45
Cash Flow AnalysisPrice / Cash Flow 30.77Price / Free Cash Flow 1586.11Cash Flow / Net Income 1.23Dividend Payout Ratio 164.91Cash Generated / Cash Req 0.41Cash Dividend Coverage 0.61Cash‐oper / Sales 6.27Eff Interest Rate 36.63
ProfitabilityEBIT 2'883Operating Margin 10.40Pretax Margin 8.08Return on Assets 3.78Return on Common Equity 8.87Return on Capital 6.37Asset turnover 0.70
StructureCurrent Ratio 3.35Quick Ratio 0.81Total Debt to Total Assets 25.54Total Debt to Com Equity 56.56Acct Receivable Turnover 7.45Inventory Turnover 1.18Gross Margin 42.77EBIT / Total Inter 6.92
Growth PotentialSales 1yr Growth 9.52Asset 1yr Growth 8.89Capital 1yr Growth 12.10
20
40
80
160
Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16
NOK
MARINE HARVEST(Price in NOK, 01.01.2010 ‐ 08.04.2016)
log scale
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Category 3: Leroey Seafood Group ASA
. Leroey Seafood Group ASA is the parent corporation for a group of companies that produce and market ocean and farmed fish and seafood products. The Company also sells a range of processed fish products. Leroey trades with producers, distributers, and importers of fish on a worldwide basis. The Company has subsidiaries in Denmark, France, and Portugal.(Bloomberg Ticker: LSG NO)
Source: Bloomberg
Issue DataLast Price (08.04.2016) 397.00 52wk High (07.04.2016) 411.00 52wk Low (17.04.2015) 232.00P/E (Trailing 12m) 18.22Dividend Yield 3.05Price to Book Ratio 2.71Price to Sales Ratio 1.59EV / Trail 12M EBITDA 13.77Shares Outstanding 54.57737Market Cap 21'503.48Enterprise Value 21'374.72
Per Share DataEPS (Trail ing 12m) 21.62Dividend per Share 12.00Book Value / Share 145.36Sales / Share (Trailing 12m) 247.53Cash Flow / Basic Share 15.03Free Cash Flow / Share 4.60
Cash Flow AnalysisPrice / Cash Flow 26.24Price / Free Cash Flow 85.74Cash Flow / Net Income 0.69Dividend Payout Ratio 55.18Cash Generated / Cash Req 0.65Cash Dividend Coverage 1.81Cash‐oper / Sales 6.06Eff Interest Rate 17.87
ProfitabilityEBIT 1'380Operating Margin 10.26Pretax Margin 11.16Return on Assets 7.65Return on Common Equity 15.58Return on CapitalAsset turnover 0.87
StructureCurrent Ratio 2.54Quick Ratio 0.40Total Debt to Total Assets 24.04Total Debt to Com Equity 48.72Acct Receivable TurnoverInventory Turnover 16.36Gross Margin 34.48EBIT / Total Inter 14.41
Growth PotentialSales 1yr Growth 6.93Asset 1yr Growth 7.57Capital 1yr Growth 11.40
60
120
240
480
Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16
NOK
LEROEY SEAFOOD GROUP ASA(Price in NOK, 01.01.2010 ‐ 08.04.2016)
log scale
37 / 89© 2016 SIA Group – www.s-i-a.ch
Category 3: California Resources
. California Resources Corporation explores for and produces oil and natural gas.(Bloomberg Ticker: CRC US)
Source: Bloomberg
Issue DataLast Price (12.04.2016) 1.46 52wk High (17.04.2015) 9.87 52wk Low (25.02.2016) 0.28P/E (Trailing 12m)Dividend YieldPrice to Book RatioPrice to Sales Ratio 0.24EV / Trail 12M EBITDAShares Outstanding 388.1835Market Cap 595.86Enterprise Value 7'035.46
Per Share DataEPS (Trail ing 12m) ‐0.79Dividend per Share 0.03Book Value / Share ‐2.36Sales / Share (Trailing 12m) 6.27Cash Flow / Basic Share 1.05Free Cash Flow / Share 0.01
Cash Flow AnalysisPrice / Cash Flow 1.46Price / Free Cash Flow 264.30Cash Flow / Net IncomeDividend Payout RatioCash Generated / Cash Req 0.98Cash Dividend CoverageCash‐oper / Sales 16.77Eff Interest Rate
ProfitabilityEBIT ‐5'150Operating Margin ‐214.32Pretax Margin ‐227.88Return on Assets ‐36.36Return on Common EquityReturn on Capital ‐47.08Asset turnover 0.25
StructureCurrent Ratio 0.82Quick Ratio 0.35Total Debt to Total Assets 87.10Total Debt to Com EquityAcct Receivable Turnover 9.46Inventory Turnover 33.10Gross Margin 11.15EBIT / Total Inter ‐15.80
Growth PotentialSales 1yr Growth ‐42.42Asset 1yr Growth ‐43.56Capital 1yr Growth ‐41.73
0
2
4
6
8
10
12
Nov 14 Feb 15 May 15 Aug 15 Nov 15 Feb 16
USD
CALIFORNIA RESOURCES CORP(Price in USD, 13.11.2014 ‐ 12.04.2016)
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Category 4: First Quantum Minerals Ltd.
. First Quantum Minerals Ltd. explores for, mines, and produces copper cathode, copper in concentrate, and gold. The Company also produces sulfuric acid. (Bloomberg Ticker: FM CN)
Source: Bloomberg
Issue DataLast Price (08.04.2016) 6.28 52wk High (01.05.2015) 19.83 52wk Low (20.01.2016) 2.15P/E (Trailing 12m)Dividend Yield 0.28Price to Book Ratio 0.40Price to Sales Ratio 1.35EV / Trail 12M EBITDA 20.15Shares Outstanding 689.3311Market Cap 4'942.50Enterprise Value 8'338.26
Per Share DataEPS (Trail ing 12m) ‐0.53Dividend per Share 0.08Book Value / Share 13.88Sales / Share (Trailing 12m) 4.17Cash Flow / Basic Share 1.84Free Cash Flow / Share ‐0.58
Cash Flow AnalysisPrice / Cash Flow 3.14Price / Free Cash FlowCash Flow / Net IncomeDividend Payout RatioCash Generated / Cash Req 0.74Cash Dividend CoverageCash‐oper / Sales 44.22Eff Interest Rate
ProfitabilityEBIT ‐84Operating Margin ‐3.11Pretax Margin ‐3.41Return on Assets ‐2.72Return on Common Equity ‐5.37Return on Capital ‐1.31Asset turnover 0.15
StructureCurrent Ratio 1.97Quick Ratio 0.61Total Debt to Total Assets 27.18Total Debt to Com Equity 52.90Acct Receivable Turnover 8.34Inventory Turnover 2.02Gross Margin 10.86EBIT / Total Inter ‐0.11
Growth PotentialSales 1yr Growth ‐23.83Asset 1yr Growth 4.45Capital 1yr Growth ‐2.34
2
4
8
16
32
64
Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16
CAD
FIRST QUANTUM MINERALS LTD(Price in CAD, 01.01.2010 ‐ 08.04.2016)
log scale
39 / 89© 2016 SIA Group – www.s-i-a.ch
Presentation plan
. Quoted Equity with a Private Equity Approach
. The case for equities
. Our investment approach
. Portfolio construction
. Expected returns
. Some words on copper and oil
. A managed account: owner’s reporting
. Appendix
Key message: if approached as a business owner, equities can be a high return, low risk investment.
40 / 89© 2016 SIA Group – www.s-i-a.ch
The basic calculation:
Expected Return = Dividend yield + Growth (Real growth + Inflation) * changes in PE
The different markets are discounting very different futures, which may not be realistic (companies adjust over the long term):
Market situation
Source: Bloomberg
IndexPrice/EPS2015
Price/EPS2016e
Dividend Yield2015
Dividend Yield2016e
S&P 500 18.3x 15.6x 2.2 2.5Euro Stoxx 50 22.3x 12.6x 3.6 4.3Topix 16.6x 14.0x 1.8 2.1SMI 18.7x 15.6x 3.3 3.7
41 / 89© 2016 SIA Group – www.s-i-a.ch
We expect double digit returns for the future
Table with category 1, 2, 3, 4, with their expected returns and volatilities, as well as the total of the portfolio of the LTIF Classic (as of 31st March 2016)
Portfolio composition, by industry and region for the LTIF Classic (as of 31st March 2016)
Source: SIA Group / Bloomberg
Category Equity Expected Return Marginal Volatility1 17.5% 9.4% 15.7%2 35.6% 11.9% 18.6%3 42.7% 16.5% 25.8%4 4.1% 17.5% 36.0%
Overall 100.0% 13.7% 21.9%
42 / 89© 2016 SIA Group – www.s-i-a.ch
We expect double digit returns for the future
. These returns are annualized: not every year.
. At a 10% annualized return, assets double in 7 years, almost quadruple in 14 years and multiply by 7 in 20 years.
. The essence of ownership is patience, and letting good companies compound.
. This is one of the best ways to preserve and increase wealth for the next generations:
. Profitability: about the best possible real long‐term returns
. Transparency: all audited data
. Very low transaction fees and running costs
. Liquidity: easy of increasing/decreasing positions
. Diversification: enter partnerships with the best companies worldwide, in many different sectors and countries
43 / 89© 2016 SIA Group – www.s-i-a.ch
SIA is well placed to obtain these returns
. Our investment philosophy has proven itself with many investors over many years
. We possess the requisite analytical skill, both strategic and financial
. We provide a thoroughly transparent, owner‐oriented reporting and information
. Our medium size allows us to both have enough resources and total concentration on a number of clients.
. We can exploit relatively small opportunities.
. We have a track record to back our claims:
Source: SIA Group / Bloomberg
EUR USD EUR USD
Value at 14th January 2002 86.79 82.69 100.00 89.45
Value at 31st March 2016 152.04 184.54 328.27 374.08
Difference (%) 75.2% 123.2% 228.3% 318.2%
Annualized return (%) 4.0% 5.8% 8.7% 10.6%
MSCI AC World Index TR Net LTIF Classic
44 / 89© 2016 SIA Group – www.s-i-a.ch
Presentation plan
. Quoted Equity with a Private Equity Approach
. The case for equities
. Our investment approach
. Portfolio construction
. Expected returns
. Some words on copper and oil
. A managed account: owner’s reporting
. Appendix
Key message: if approached as a business owner, equities can be a high return, low risk investment.
45 / 89© 2016 SIA Group – www.s-i-a.ch
Copper apparent demand
. Copper apparent demand over the past 20 years shows a trend growth of just above 3%, in line with the growth of the global economy.
. There is variability, of course, in any given year.
. Two‐year periods of flattish demand are not uncommon, especially after a year of rapid growth.
. 2014 saw a growth of 8%, followed by a flat 2015, and a return to trend would imply a 1% growth for 2016.
10000000
12000000
14000000
16000000
18000000
20000000
22000000
24000000
26000000
28000000
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Global Refined Copper Demand
3.2% growth line
Source: World Bureau of Metal Statistics, Bloomberg
46 / 89© 2016 SIA Group – www.s-i-a.ch
Copper demand expectations. Some analysts have an expectation of return to trend growth by 2017, although some others see lower growth (down to 2%). This is not what history shows.
. Note that there is no agreement on the definition of demand, as the numbers differ greatly for the historical 2014 and 2015 (depending on adjustments). This is important for later comparing supply expectations.
16000
18000
20000
22000
24000
26000
28000
2008 2009 2010 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E
GS Global refined consumption
RBC Total Global Demand '000 tonnes
MCQ Refined Consumption
BMO Total Demand
ML Global consumption
Berenberg Refined Demand
WMB historical demand and 3.2% trend
47 / 89© 2016 SIA Group – www.s-i-a.ch
Copper supply expectations
. Most analysts assume fairly steady supply growth through 2019 just above expected demand growth, resulting in midly increasing surplus.
. 2020 widely seen as the year when supply growth stalls.
16000
18000
20000
22000
24000
26000
28000
2008 2009 2010 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E
GS Global refined supply
RBC Base Case Supply '000 tonnes
MCQ Refined Production
BMO Total Refined Supply
ML Global production
Berenberg Refined Supply
WMB historical supply and 3.2% trend
48 / 89© 2016 SIA Group – www.s-i-a.ch
Copper price reflects these expectations...
. Historical copper price
. Price curve
49 / 89© 2016 SIA Group – www.s-i-a.ch
... And the marginal costs of the industry
. Capacity additions and lower demand than expected has resulted in marginal cost pricing.
50 / 89© 2016 SIA Group – www.s-i-a.ch
But the cost curve is steep
. Small changes in S/D balance can greatly affect the price.
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Even with relatively high stocks in China
. The Chinese State Reserve Bureau has been taking advantage of low prices to stock up.
. But stocks can go fast if demand picks up.
. And prices might not wait.
52 / 89© 2016 SIA Group – www.s-i-a.ch
Risks to S/D balance
. Demand. Relatively small changes in demand can tip the balance. Restocking cycles
. Supply. Project delays. Production disturbances: strikes, land slides. Unavailable stocks
. The S/D balance can be altered much earlier than expected.
53 / 89© 2016 SIA Group – www.s-i-a.ch
Eventually new capacity will be needed
. To incentivize new capacity prices have to go at least 50% higher
. Even after getting into an incentive pricing regime, projects take years to build
54 / 89© 2016 SIA Group – www.s-i-a.ch
Oil: the world will need 100m barrels a day by 2020
• The world consumed 95m b/d oil in 2015A
• 100m b/d in 2020, with demand growth at 1.0% p.a., in line with historical averages
• Growth only in developing countries. OECD demand is already flat or decreasing
• Depletion is c.3% per year so we need around 18m b/d new production assets to offset it
• Electric Vehicles, CO2 emission regulation will not have a large impact over 2020
55 / 89© 2016 SIA Group – www.s-i-a.ch
Demand in developing countries keeps growing
• Non OECD demand has been steadily growing for the past few years, around 3%+ per year
• While OCDE demand has been flat to slightly down since the late 90s
• We see no reason for a change in the next few years, a least to 2020. China, India, Indonesia… even Brasil in deep crisis should continue to grow car and transport penetration
56 / 89© 2016 SIA Group – www.s-i-a.ch
ICE Transport penetration Rises
• Transport accounts for c. 2/3 of oil products demand and transport is very much related to GDP growth. Very steady growth excluding large crisis
• China, and further down the road India, and most developing countries will continue to increase motor vehicle penetration. CHI now has around 15% penetration in Motor Vehicles per person vs 80%+ in most advanced economies.
• China sells a similar number of new cars than the US and growth has been monitored by the CHI authorities (licenses, pollution, …)
• Cheap oil prices make the ICE (internal combustion engine) competitive
57 / 89© 2016 SIA Group – www.s-i-a.ch
Supply has surprised the world bringing 4m b/d from scratch
• Growth in supply has been almost entirely coming from shale oil (US): +4m b/d in 4 years
• This happened at high oil prices… at current prices shale oil will fall by1m b/d in 2016
• Back to basics for 2016: Demand up 1m b/d (+1%) and supply down 1m b/d (shale). The market is re‐balancing
• Iran can grow 0.5m b/d in 2016, Libya can do the same (unlikely), still 1m b/d deficit
• The world is approaching an undersupply situation
58 / 89© 2016 SIA Group – www.s-i-a.ch
But OPEC is not really growing
• OPEC has grown production by 3.5m b/d since 2010 (Saudi Arabia alone 2m b/d)
• OPEC could grow a bit thanks to Iran and Libya (if geopolitics stabilise) and there are 2m b/d spare capacity
• Consensus points to 1.5m b/d production increase in 5 years, when the world needs 5m b/d, net of depletion
• There still is disruption risk in countries such as Venezuela, Nigeria, Angola, Irak, Libya
59 / 89© 2016 SIA Group – www.s-i-a.ch
US shale production is falling at current prices
• Thanks to shale the US liquids production has grown from c8m b/d to c. 13m b/d 2011‐15
• With high prices of course… at current oil prices, shale production is already falling
• On our estimates shale needs 60$+ to be back to investment mode. Higher prices needed for growth mode
• Should we adjust this number by depletion, it needs rather 80$
• So the response is yes, US shale is needed and prices will incentivise its comeback
60 / 89© 2016 SIA Group – www.s-i-a.ch
And Shale Oil Production is Falling
• Shale Oil Production is expected to fall by 1m b/d in 2016, peak to trough. It is already falling by 0.5m b/d
• Most of productivity improvements are behind us. Main advances have been the number of drilling days and longer laterals
• Cost deflation is also behind us and this industry is cyclical
61 / 89© 2016 SIA Group – www.s-i-a.ch
The clock is ticking… Current spare capacity is all time low
• We estimate 2m b/d spare capacity, mainly in Saudi Arabia
• 2% of global capacity, similar to the levels reached in 2005, before prices shoot up
• 2% spare is below the 4‐5% needed to protect the market from disruptions
• Shale oil will be the swing producer but with a time lag (6 quarters in for a full response)
• There is a risk of oil prices overshooting
62 / 89© 2016 SIA Group – www.s-i-a.ch
The Clock is Ticking… Depletion is Kicking
• Global depletion is around 3‐4% per year and IEA forecasts increased depletion for the next years
• Global depletion is accelerating due to reduced capex globally and tight formations
• Shale oil depletion is much higher
63 / 89© 2016 SIA Group – www.s-i-a.ch
The “MotherFrackers” Depletion
• US shale depletion is 1/3 year 1, 50% year 2 and 2/3 year 3. How do we make numbers when your facilities must be 66% amortised by year 3? Nobody cares
• Global depletion is accelerating due to reduced capex globally and tight formations
• We encourage you to take a look to an excellent presentation made by Mr. David Einhornfrom Greenlight Capital “The Motherfrackers” where you will find accurate calculations on real IRRs on shale. Shale has never made money due to depletion and growth ambitions
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US Shale Plays are Uneconomic at current oil price
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And Oil Capex has collapsed. It must comeback
• Due to low oil prices the sector has massively cut capex
• 50%+ cut in 2015 and 16 will lead to a lack of new projects as from 2018
• Offshore, oil sands take 3‐4+ years to reach first oil from FID… no new projects for the end of the decade
• Shale oil cannot fully replace other all extraction techniques but even if it could it would need 60$ oil+
• Offshore and oil sands need in our view 80$ oil to break even
66 / 89© 2016 SIA Group – www.s-i-a.ch
Supply down, Demand Up, Oil Market has Started to Rebalance
• We believe that the oil market is already re‐balancing
• Oil price must incentivise shale oil first, then off shore, oil sands and most oil extraction techniques
• We think oil prices will surpass the shale incentive level as there is a time lag and the world has not yet felt the impact from lower capex
• Difficult to assess if te rebalancing will complete in 2016 or 2017 but it has already started
67 / 89© 2016 SIA Group – www.s-i-a.ch
Oil Will Move to 60$+ to incentivise spending in shale
68 / 89© 2016 SIA Group – www.s-i-a.ch
Why is the Oil Price at around 40$ ? Is it a Coincidence?
69 / 89© 2016 SIA Group – www.s-i-a.ch
SIA has ~15% of its AuM in oil related stocks
• We started our positions a bit early, in 2014/15 thinking in a 2015/16 re‐balancing and have been slowly during the downturn
• But the Rebalancing is actually happening in 2016/17
• We have built a small portfolio of energy equities to control the risk.
• We have also bought debt of California resources, at 40c on the dollar
E&Ps: Occidental Petroleum, Petrobras, Premier Oil, California Resources, Bankers Petroleum (taken over by Geo Jade)
Oil sands: Cenovus & Suncor Oil Services: Schlumberger, Halliburton, TGS, Baker Hughes (merger with Halliburton
challenged)
Equipment: Cameron (bought by Schlumberger), National Oilwell Engineers: Amec, Fluor
70 / 89© 2016 SIA Group – www.s-i-a.ch
Appendix. Massive Capex Cuts in 2015 & 2016
71 / 89© 2016 SIA Group – www.s-i-a.ch
Appendix. Supply/Demand estimates. IEA, Morningstar
72 / 89© 2016 SIA Group – www.s-i-a.ch
Appendix. Non OPEC Supply Will not Grow at current Oil Prices
73 / 89© 2016 SIA Group – www.s-i-a.ch
Appendix. Capex has halved
74 / 89© 2016 SIA Group – www.s-i-a.ch
Appendix. US oil rig count & US shale production
Source: GS estimates
75 / 89© 2016 SIA Group – www.s-i-a.ch
Appendix. Inventories are only Short term indicators
• Consensus focuses in the short term and thus inventories
• In OECD countries, there are 3bn bblstored, very high vs recent years
• OECD consumes 17bn bbl per year so there are 2 month of inventories… really not look massive
• There is no data on non OECD countries but our guess is that inventories are lower
76 / 89© 2016 SIA Group – www.s-i-a.ch
Appendix. Shale oil & Rig Count
77 / 89© 2016 SIA Group – www.s-i-a.ch
Presentation plan
. Quoted Equity with a Private Equity Approach
. The case for equities
. Our investment approach
. Portfolio construction
. Expected returns
. Some words on copper and oil
. A managed account: owner’s reporting
. Appendix
Key message: if approached as a business owner, equities can be a high return, low risk investment.
78 / 89© 2016 SIA Group – www.s-i-a.ch
Owner’s reporting
Quarterly • Earnings for the quarter, year‐to‐date, year on year• Dividends for the quarter, year‐to‐date, year on year• Book value
Annually Earnings, dividends and book value, plus:
• Portfolio changes• Brief note on each company• Forward estimates
We’ll report on the whole portfolio on what it is: a diversified, holding company of operating businesses:
79 / 89© 2016 SIA Group – www.s-i-a.ch
Source: SIA Group / Bloomberg
Update Typical fundamental reporting sheet
Reporting LTIF Classic as of 31.12.2015 (aggregate data in EUR)
NAV %248.37287.75 15.9%321.19 11.6%331.39 3.2%
Year EPS Growth PE Prof.%MSCI
World PEMSCI WorldProf. %
Year DPS YieldMSCI
World DYYear BPS Growth P/B
MSCIWorld P/B
2012 18.7 13.3 7.5% 15.9 6.3% 2012 6.6 2.7% 2.8% 2012 133.1 1.9 1.82013 19.3 3.2% 14.9 6.7% 19.3 5.2% 2013 6.9 2.4% 2.4% 2013 152.5 14.6% 1.9 2.12014 22.2 14.6% 14.5 6.9% 17.9 5.6% 2014 9.0 2.8% 2.5% 2014 191.9 25.8% 1.7 2.22015e 24.6 11.3% 13.4 7.4% 18.9 5.3% 2015e 10.0 3.0% 2.6% 2015e 229.5 19.6% 1.4 2.12016e 27.1 10.1% 12.2 8.2% 16.0 6.3% 2016e 10.5 3.2% 2.7% 2016e 251.9 9.8% 1.3 2.0
31.12.201431.12.2015
Date31.12.201231.12.2013
16
18
20
22
24
26
28
2012 2013 2014 2015e 2016e
EUR
LTIF Classic EPS
6
7
8
9
10
11
2012 2013 2014 2015e 2016e
EUR
LTIF Classic DPS
100
150
200
250
2012 2013 2014 2015e 2016eEU
R
LTIF Classic BPS
80 / 89© 2016 SIA Group – www.s-i-a.ch
Summary
. Target of double digit returns
. Extremely low fundamental risk: “don’t lose money”
. Owner approach to investing: long‐term, focus on profit growth and not share price movements
. Balanced portfolio across risk levels
. SIA adds value by taking a long‐term approach, applying strategic analysis and discriminating opportunities from value traps.
81 / 89© 2016 SIA Group – www.s-i-a.ch
Presentation plan
. Quoted Equity with a Private Equity Approach
. The case for equities
. Our investment approach
. Portfolio construction
. Expected returns
. Some words on copper and oil
. A managed account: owner’s reporting
. Appendix
Key message: if approached as a business owner, equities can be a high return, low risk investment.
82 / 89© 2016 SIA Group – www.s-i-a.ch
Long‐term performance of the LTIF Classic fund
LTIF Classic, MSCI AC World Index, S&P 500 Index and Eurostoxx 50 Index, incl. annualized returns(indexed, in EUR, 14th January 2002 – 31st March 2016)
Source: SIA Group / Bloomberg25
50
100
200
400
Jan 02 Jan 04 Jan 06 Jan 08 Jan 10 Jan 12 Jan 14 Jan 16
LTIF Classic EUR +228.3% total / +8.7% p.a.S&P 500 Index Total return Net EUR +89.2% total / +4.6% p.a.MSCI World AC Index Total Return Net EUR +75.2% total / +4.0% p.a.EURO STOXX 50 Index Net Return +24.8% total / +1.6% p.a.
log scale
83 / 89© 2016 SIA Group – www.s-i-a.ch
Long Term Investment Fund (SIA) structure
. Daily liquidity, cut‐off time previous day at 4:00 pm CET
. Performance fees are assessed and paid quarterly, subject to High Water Marks or Hurdle Rates
. There are no entry or exit fees. There is a discretionary 1% fee to transfer funds between compartments to prevent excessive market timing, which generates costs for investors
Compartments Classic Series Stability A Cap SeriesInvestment style Long-only Low Volatility
Management fee 1.5% pa 0.9% pa
Performance fee 15% (HWM and Hurdle Rate) 15% (HWM)
Currency EUR CHF USD GBP EUR USD
ISIN number LU0244071956 LU0301246772 LU0301247077 LU0750886714 LU1128810261 LU1132799310
Telekurs valor 2'432'569 3'101'817 3'101'820 18'032'305 25'840'496 25'906'913
Bloomberg ticker LTIFCLA LX LTIFCLC LX LTIFCLU LX LTIFCLS LX LTISTAE LX LTISTAU LX
Compartments Natural ResourcesInvestment style Long-only, centered on natural resources
Management fee 1.5% pa
Performance fee 15% (HWM)
Currency EUR CHF USD GBP
ISIN number LU0244072335 LU0301246939 LU0301247234 LU0457696077
Telekurs valor 2'432'575 3'101'836 3'101'839 10'638'983
Bloomberg ticker LTIFGEV LX LTIFGEC LX LTIFGEU LX LTIFGEG LX
84 / 89© 2016 SIA Group – www.s-i-a.ch
. Market Capitalization of companies in EUR in the LTIF Classic as of 31st March 2016
. Median market capitalization of companies in the LTIF Classic: EUR 16.6 billion
Long Term Investment Fund (SIA) ‐ Classic
Source: SIA Group / Bloomberg
85 / 89© 2016 SIA Group – www.s-i-a.ch
Long Term Investment Fund (SIA) ‐ Classic
The evolution of the market value of the shares (NAV) are net of all fees and expenses. Please find the disclaimer at the end of the presentation.
NET PERFORMANCE (logarithmic chart)
PORTFOLIO COMPOSITION
Source: SIA Group
50
100
200
400
Jan 02 Jan 04 Jan 06 Jan 08 Jan 10 Jan 12 Jan 14 Jan 16
LTIF Classic EURMSCI AC World Index Daily Net TR EUR
+228.3% cum.+8.7% p.a.
+75.2% cum.+4.0% p.a.
FUND'S HISTORYYear NAV % cum. % Year NAV % cum. %2002 20102003 20112004 20122005 20132006 20142007 20152008 20162009
228.3%‐0.9%
264.21212.11248.37
15.9% 187.8%321.19 11.6% 221.2%
28.0%
93.10 134.30 171.84
16.0% 164.2%
148.4%112.1%‐19.7%
17.1%
‐6.9%34.3%71.8%
213.2%313.1%31.9%
‐67.4%
27.6%
68.9%
‐6.9%44.3%
231.4%3.2%
127.7%
331.39
42.8% 145.4%
328.2734.9%
287.75245.44 313.21 413.07 134.86 227.72
NET PERFORMANCEPeriod FundYear‐to‐date1 month rolling3 months rolling1 year rolling3 years rolling5 years rollingSince inceptionAnnualized return
‐0.9%‐11.1%20.9%30.2%
‐0.9%5.5%
228.3%8.7%
KEY DATADividend yield (aggregated Bloomberg estimate) 2.8%Standard deviation (annualized, s.i.) 21.3%Sharpe ratio (risk free, s.i.) 0.4Alpha (vs. index, s.i.) 5.5%Beta (vs. index, s.i.) 1.1Expected return (as estimated by SIA) 13.7%Intrinsic value (as estimated by SIA) € 479Number of equity positions 40
86 / 89© 2016 SIA Group – www.s-i-a.ch
Long Term Investment Fund (SIA) ‐ Stability A Cap
The evolution of the market value of the shares (NAV) are net of all fees and expenses. Please find the disclaimer at the end of the presentation.
NET PERFORMANCE (logarithmic chart)
PORTFOLIO COMPOSITION
Source: SIA Group
60
120
240
Aug 05 Aug 07 Aug 09 Aug 11 Aug 13 Aug 15
LTIF Stability A Cap EURHFRX Equity Hedge Index EUR
+85.3% cum.+6.0% p.a.
+4.7% cum.+0.4% p.a.
*Inception Date of Stability A Cap EUR: 11.06.2015 @ EUR 183.69Performance from 31.08.2005 ‐ 10.06.2015 is a conversion in EUR of our Stability Growth CHF Total return rebased to official inception price
FUND'S HISTORYYear NAV % cum. % Year NAV % cum. %2005 20132006 20142007 20152008 20162009201020112012
85.91 0.3% 0.3% 160.46 12.2% 87.4%96.49 12.3% 12.7% 166.16 3.6% 94.0%118.58 22.9% 38.5%
‐2.3% 85.3%123.92 29.1% 44.7%
162.35 ‐2.3% 89.6%95.96 ‐19.1% 12.1% 158.66
132.35 ‐11.2% 54.5%149.02 20.3% 74.0%
143.02 8.1% 67.0%
NET PERFORMANCEPeriod FundYear‐to‐date1 month rolling3 months rolling1 year rolling3 years rolling5 years rollingSince inceptionAnnualized return
‐2.3%3.2%‐2.3%
2.8%‐15.5%
85.3%13.0%
6.0%
KEY DATADividend yield (aggregated Bloomberg estimate) 2.8%Standard deviation (annualized, s.i.) 10.5%Sharpe ratio (risk free, s.i.) 0.5Alpha (vs. index, s.i.) 6.1%Beta (vs. index, s.i.) 0.4Expected return (as estimated by SIA) 13.7%Number of equity positions 40
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Long Term Investment Fund (SIA) ‐ Natural ResourcesNET PERFORMANCE (logarithmic chart)
PORTFOLIO COMPOSITION
The evolution of the market value of the shares (NAV) are net of all fees and expenses. Please find the disclaimer at the end of the presentation.Source: SIA Group
50
100
200
Feb 05 Feb 07 Feb 09 Feb 11 Feb 13 Feb 15
S&P Global NaturalResources Net TR Index EURLTIF Natural Resources EUR
‐22.8% cum.‐2.3% p.a.
+16.9% cum.+1.4% p.a.
FUND'S HISTORYYear NAV % cum. % Year NAV % cum. %2005 20132006 20142007 20152008 20162009201020112012
‐10.1% ‐14.0%131.53 4.3% 31.5% 82.91 ‐3.6% ‐17.1%126.13 26.1% 26.1% 86.05
55.84 ‐65.5% ‐44.2%68.52 ‐17.4% ‐31.5%161.72 23.0% 61.7%77.22 12.7% ‐22.8%
149.85 27.6% 49.9%117.48 110.4% 17.5%
95.68 ‐3.6% ‐4.3%99.27 ‐33.8% ‐0.7%
NET PERFORMANCEPeriod FundYear‐to‐date1 month rolling3 months rolling1 year rolling3 years rolling5 years rollingSince inceptionAnnualized return
8.9%12.7%
‐6.8%12.7%
‐46.4%‐20.7%
‐2.3%‐22.8%
KEY DATADividend yield (aggregated Bloomberg estimate) 2.7%Standard deviation (annualized, s.i.) 29.4%Sharpe ratio (risk free, s.i.) ‐0.1Alpha (vs. index, s.i.) ‐2.0%Beta (vs. index, s.i.) 1.4Expected return (as estimated by SIA) 17.7%Intrinsic value (as estimated by SIA) € 144Number of equity positions 30
88 / 89© 2016 SIA Group – www.s-i-a.ch
SIA Funds AG
. Alpenblickstrasse 25
. 8853 Lachen
. Switzerland
. Tel: +41 55 617 28 70
. Fax: +41 55 617 28 71
. website: www.s‐i‐a.ch
. e‐mail: info@s‐i‐a.ch
Contacts
89 / 89© 2016 SIA Group – www.s-i-a.ch
LTIF (SIA) Classic, Stability A Cap and Natural Resources. Performance up to 31.05.06 is that of the BVI‐based LTIF, of which the LTIF Luxembourg is an identical successor. Previous performance is audited by Ernst &
Young. Past performance is neither a guarantee nor a reliable indicator of future results. Performance data does not include the commissions and fees chargedat the time of subscribing for or redeeming shares. This information has been furnished to you upon request and solely for your information and may not bereproduced or redistributed to any other person. It is not intended as an offer or solicitation with respect to the purchase or sale of shares of the Sicav. Neitherthe Central Administration Agent nor the Investment Manager assume any liability in the case of incorrectly reported or incomplete information. Please beaware that investment funds involve investment risks, including the possible loss of the principal amount invested. For a detailed description of the risks inrelation to each share in the investment fund, please see the latest version of the prospectus, simplified prospectus, annual and semi‐annual reports, whichmay solely be relied upon as the basis for investment decisions; these documents are available on www.s‐i‐a.ch or from the Central Administration AgentFundPartner Solutions (Europe) SA, 15A, avenue J.F. Kennedy, L ‐ 1855 Luxembourg. LTIF Classic, Stability A Cap and Natural Resources (previously GlobalEnergy Value) were approved for distribution in and from Switzerland by the Swiss Financial Market Supervisory Authority (FINMA) according to Art. 19 al. 1 ofthe Collective Investment Schemes Act, paying agent is Banque Pictet & Cie SA, Route des Acacias 60, 1211 Geneva 73, Switzerland. Legal representative inSwitzerland is FundPartner Solutions (Suisse) SA, Route des Acacias 60, 1211 Geneva 73, Switzerland; notified to the Austrian Finanzmarktaufsicht according to§36 of the Investment Funds Act; authorised in France by the Autorité des Marchés Financiers (AMF) pursuant to Art. 411‐58 of the AMF General Regulation;authorised by the German Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) according to §132 of the Investment Act; authorised in Italy by the Bank ofItaly and the CONSOB according to Article 42 of Legislative Decree no. 58 of 24 February 1998; registered in the register of foreign collective investmentschemes commercialized in Spain by the Comisión Nacional del Mercado de Valores (CNMV) pursuant to Art. 15 of the Law on Collective Investment Vehicles;recognised in the United Kingdom by the Financial Services Authority (FSA) as a recognised scheme within the meaning of Section 264 of the Financial Servicesand Markets Act 2000.
LTIF Stability (SIA Funds). Performance up to 30.09.06 is that of the LTIF BVI Fund restated in CHF, of which the LTIF Stability is an identical successor. Previous performance is audited by
Ernst & Young. Reports are available from SIA Group. Past performance is neither a guarantee nor a reliable indicator of future results. Performance data doesnot include the commissions and fees charged at the time of subscribing for or redeeming shares. This information has been furnished to you upon requestand solely for your information and may not be reproduced or redistributed to any other person. It is not intended as an offer or solicitation with respect to thepurchase or sale of shares of the Sicav. Neither the Fund Management Company nor the Investment manager assume any liability in the case of incorrectlyreported or incomplete information. Please be aware that investment funds involve investment risks, including the possible loss of the principal amountinvested. For a detailed description of the risks in relation to each share in the investment fund, please see the latest version of the prospectus, simplifiedprospectus, annual and semi‐annual reports, which may solely be relied upon as the basis for investment decisions; these documents are available from theFund Management Company FundPartner Solutions (Suisse) SA, Route des Acacias 60, 1211 Geneva 73, or the Investment manager, SIA Funds AG, Parkweg 1,CH‐8866 Ziegelbrücke (www.s‐i‐a.ch).
Disclaimer