ARE WE PRICED FOR PERFECTION? TM Richard Jenkins and Bill Kanko Black Creek Investment Management...
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Transcript of ARE WE PRICED FOR PERFECTION? TM Richard Jenkins and Bill Kanko Black Creek Investment Management...
ARE WE PRICED FOR PERFECTION?
TM
ARE WE PRICED FOR PERFECTION?
• Lehman Brothers crisis – 2008• Eurozone crisis – 2011• Tapering crisis – 2013???
We have seen similar things before ...
10-YEAR RETURNS – PATTERN OF NORMALIZATION
Returns average out over time … go where they have been lower and valuations are more attractive
Source: Paltrak
Cumulative Return from Aug 2003 to Aug 2013
147.5%
118.0%
72.6%
51.6%
20.7%
5-YEAR RETURNS
Source: Paltrak
Cumulative Return from Aug 2008 to Aug 2013
41.4%
11.0%9.1% 6.7%5.7%
GLOBAL MARKET OUTPERFORMANCE LED BY U.S.
Source: Paltrak
Cumulative Return from Aug 2011 to Aug 2013
51.1%
38.8%
29.2%
5.6%
5.3%
BLACK CREEK INTERNATIONAL EQUITY: SIGNIFICANT OUTPERFORMANCE SINCE INCEPTION OF THE FUND
Source: Paltrak
Cumulative Return from Sep 2008 to Aug 2013
28.7%
80.5%
19.9%
24.8%
BLACK GLOBAL LEADERS FUND: OUTPERFORMANCE SINCE MANAGED BY BLACK CREEK
Source: Paltrak
Cumulative Return from Jun 2006 to Aug 2013
28.3%
40.4%
18.2%
33.7%
BLACK CREEK GLOBAL BALANCED: OUTPERFORMANCE SINCE INCEPTION OF THE FUND
Source: Paltrak
Cumulative Return from Jan 2007 to Aug 2013
29.1%
8.4%
17.4%
GLOBAL STOCK MARKET VALUATIONS
• Real estate• Bonds• Cash• Equities• Commodities – hard, soft• Art, collectibles, etc.
GLOBAL STOCK MARKET VALUATIONS A
vera
ge
P/E
Source: Thomson Datastream and I/B/E/S
0
5
10
15
20
25
Austra
lia
Brazil
Canada
China
Denm
ark
Franc
e
Ger
man
yIn
dia Italy
Japa
n
Mex
ico
Nether
land
s
Norway
Russia U.S
.
Mean p/e 2012
Expected mean p/e 2013
Global equities long-term averagep/e (14x)
OUR MARKET VIEWS
• Flight to quality (defensive assets) similar to 1998-99
– Don’t confuse yield with value• There is a premium on “safety”
• European crisis – There is light at the end of the tunnel
• U.S. – has turned the corner—really!
• China – now the hard work begins!
• Africa/South America – If China catches a cold?
• Deleveraging = slower consumption-led growth – we still believe this
• Low interest rates are creating overcapacity everywhere
RELATIVE P/E VALUATION: GLOBAL STAPLES VS. BROAD MARKET
+1 standard deviation
-1 standard deviation
Source: Morgan Stanley
CURRENCY ACCORDING TO THE BIG MAC INDEX
Source: The Economist, July 2013
CURRENCY SHOULD BE A TAILWIND
USD: 18%
Mexico: 58%
Euro: 11%
Sterling: 11%
China: 54%
Korea: 39%
Russia: 18%*
CAD overvalued to: What is expensive?
Denmark: -28%Sweden: -25%Australia: -20%Switzerland: -27%
Source: OECD statistics directorate, August 30, 2013
WHY BLACK CREEK? WHY NOW?
• Focus
• Experience
• Results
• Flexible size
• Global investing should see tailwinds
• Cohesive, team-focused strategy
• The need to think long term has never been greater
OUR GOALS FOR OUR CLIENTS
• Positive returns
• Competitive returns — beat competitors, indexes and ETFs
• Beat fixed income
… So far, so good.
YTD 1YR 3YR 5YRSince
inception*
Black Creek Global Leaders Fund Class A 20.2% 35.3% 12.9% 7.8% 3.5%
MSCI World (C$) 19.0% 26.4% 13.5% 4.6% 3.8%
Black Creek International Equity Fund Class A 18.4% 41.8% 15.2% 12.5% 12.7%
MSCI EAFE (C$) 15.2% 27.3% 9.3% 1.9% 5.0%
Black Creek Global Balanced Fund Class A 11.5% 27.9% 11.0% 7.9% 4.0%
Global Balanced Index** 11.4%% 15.4%% 8.5% 8.0% 2.2%
Source: RBC Dexia, August 31, 2013 ** 60% MSCI World Index CAD/40% JPM GBI C$
** Black Creek Investment Management took over management of Global Leaders on June 15, 2006; inception date is February 2005.
BLACK CREEK PERFORMANCE
Formerly known as Castlerock Global Leaders Fund, Castlerock International Equity Fund and Castlerock Global Balanced Fund
*February 2005
*September 2008
*January 2007
As at August 31, 2013:
IT’S NOT ABOUT COUNTRY ALLOCATION BUT OUR BEST 25 BUSINESS IDEAS
• Flexible all-cap go-anywhere mandates
• Avoid areas of high valuation risk; the converse is also true
• Fewer companies to follow = depth of research/competitive analysis = conviction in our choices
• High deviation from index results in outperformance
• Disciplined BUY/SELL process – replace our least favourite idea with our newest idea
BUSINESSES YOU DO NOT FIND AT HOME
Wienerberger
Wuxi Pharmatech
Carnival Corp.
GPO Televisa
Galp Energia
Randstad Holding
Publicis Groupe
Accor
Heidelberg Cement
Christian Dior
Bricks and ceilings
Pharmaceutical supply
Cruise line
Media and television
Oil & gas
Staffing services provider
Communications
Hotel operator
Cement & building materials
Luxury consumer items
SUMMARY
• While bonds and real estate are priced for perfection, equities are fairly valued – the equity market is the place to be
• Black Creek is different, by focusing we deliver in the long term
• A world of opportunities exists. STOP reacting to the headlines, have a focused strategy to take advantage of them
• Buy the best opportunities you can find, anywhere!
• Stay flexible but disciplined
• Thank you for your support. We really mean it, we know it is hard out there for all equity investors
All charts and illustrations in this guide are for illustrative purposes only. They are not intended to predict or project investment results.
®CI Investments, the CI Investments design are registered trademarks of CI Investments Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Unless otherwise indicated and except for returns for periods less than one year, the indicated rates of return are the historical annual compounded total returns including changes in security value. All performance data assume reinvestment of all distributions or dividends and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.
Thank you
FOR ADVISOR USE ONLY
WHY INVEST GLOBALLY?
• Equities are outperforming fixed income
• The Canadian dollar is overvalued by 10% - 30%
• We seek companies that are GLOBAL leaders
(we consider Canada as well)
WHAT WE DELIVER
Our diversified global portfolios provide exposure to:
• 25 global market share leading companies
• Lower than average long-term valuations
• A proprietary view of the future of each company
• Focus, focus, focus …
• Portfolios that do not track indexes — we are trying to BEAT the index
AREAS TO AVOID GIVEN PERFORMANCE OVER THE PAST 10 TO 15 YEARS
• Real estate and banks in commodity-centric countries
• “Safe” multinationals in “safe” industries
• Consumer companies in emerging markets
• Bonds and bond proxies in safe countries
• “Dividend and income first” stories rather than those supported by a business case and valuations
• Watch return of capital deception
OUR PRODUCTS
Black Creek Global Leaders Fund
Black Creek Global Leader Corporate Class (focused equity)
Black Creek International Equity Fund
Black Creek International Corporate Class (EAFE)
Black Creek Global Balanced Fund
Black Creek Global Balanced Corporate Class
(dividend and income)
DIVIDENDS AND INCOME
• Black Creek Global Balanced Fund provides a mix of the two
• Fixed-income portfolio offers yield over 5%
• Equity portfolio near 3% yield
• BUT we buy the businesses first, and receive dividends later
BLACK CREEK’S COMPETITIVE ADVANTAGES
• Structure: owned by the investment managers
• Integrity: invest our own money in funds
• Experience: award-winning managers (global, balanced, international, European)
– More than 50 years of combined experience
– Have managed over $23 billion in assets
– Have seen booms and busts all over the world• Conviction: 25 globally leading companies – each a proprietary
idea
• Small fund size: allows for flexibility
THE CASE FOR EQUITIES
• Equity markets peaked in 2000 – not “normal” returns
• Earnings yield attractive relative to bond yields
• Free cash flow yields are even higher
• Dividend yields higher than bonds (very rare)
• Investor sentiment is terrible globally (buy low, sell higher)