“Beyond the fiscal cliff” – Foord asset management
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Transcript of “Beyond the fiscal cliff” – Foord asset management
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SENATE GROUP
Mike Soekoe & Heather McCulloch,
15 March 2013
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AGENDA
• Introduction
• Investment philosophy
• Performance
• Macro: Beyond the Fiscal Cliff
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INVESTMENT PHILOSOPHY
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• Take a long term view and be patient
• Ignore the benchmark when building portfolios
• Diversify and manage risk
• Provide clients with the highest return at the lowest risk
• Top down macro economic analysis, and
• Fundamental, bottom up research
• Understanding drivers of company earnings
– Balance sheet / income statement / cash flow analysis
– Economic cycles and industry changes
– Qualitative research
• Concentrated portfolio of best ideas
• Avoid the losers
INVESTMENT PHILOSOPHY
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PERFORMANCE
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Source: Morningstar
MARCH 2013 FOORD ASSET MANAGEMENT
1 year 2 years 3 years 5 years 7 years 10 years
Foord Balanced Fund 19.6% 16.4% 16.1% 10.8% 12.7% 18.5%
Average (Domestic AA Prudential Variable Equity)
15.0% 11.9% 12.0% 8.0% 10.1% 16.0%
Rank 9/103 4/89 4/76 3/65 3/46 3/23
Foord Equity Fund 20.7% 20.3% 21.7% 13.3% 14.9% 22.0%
Average 15.5% 13.1% 15.0% 8.3% 12.0% 19.9%
Rank 19/110 6/98 1/92 4/80 7/62 6/45
Foord Flexible FoF 28.8% 23.2% 21.2%
Average 21.5% 14.6% 12.7%
Rank 3/21 1/19 1/18
Foord International FF 31.3% 18.6% 12.8% 6.3%
Average 27.2% 15.9% 10.7% 3.5%
Rank 1/18 3/17 5/17 3/17
FOORD UNIT TRUSTS LIMITED Performances to 28 February 2013
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BEYOND THE FISCAL CLIFF
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INTERNATIONAL OUTLOOK
• US recovery continues
– Partial resolution of fiscal cliff
– Supported by improvements in housing market
– Labour markets geared to residential market recovery
• Chinese growth accelerates
– Recovery in investment spend
– Shift to consumption supported by wage growth
• European decline stabilises
– Public and private consumption not recovering fast
• Commodity prices supported by China & US recovery
• US dollar the preferred developed market currency
MARCH 2013 FOORD ASSET MANAGEMENT 8
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GLOBAL GROWTH ON TRACK
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USA GDP GROWTH 13 Consecutive quarters of positive growth
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Source: I-NET
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US HOUSING MARKET Pent up demand building
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AFFORDABILITY OF HOMES Underpins recovery
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Source: I-NET
US EMPLOYMENT CREATION Sensitive to housing market recovery
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US EMPLOYMENT CREATION Don’t fight the Fed
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OUTLOOK FOR EUROPE No lasting improvement in sight shorter term
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Source: I-NET
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MARCH 2013 FOORD ASSET MANAGEMENT 16
EURO AREA Euro contagion risk has reduced substantially
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CHINESE ECONOMIC GROWTH Rebalancing from investment to consumption
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Source: Macquarie Research
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CHINESE ECONOMIC GROWTH Still some way to go…
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SOUTH AFRICAN OUTLOOK
• SA GDP growth remains pedestrian
– Led by private and government consumption, SOE investment
– Consumption growth supported by real wage increases; grants
• Terms of trade remains weak
– Falling mining output
– Fast growing imports at higher prices due to weaker currency
• Current account deficit remains a threat to the rand
– On-going foreign investment required to fund deficit
• Higher bond yields likely
– Ratings downgrades; higher bond yields globally
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CONSUMER FAVOURED OVER GDFI
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GDFI GROWTH Driven by SOE’s and government
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Source: I-NET
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CONSUMPTION GROWTH Driven by real wage increases
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Source: RMB Global Markets Research
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DETERIORATING C/A DEFICIT
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Source: I-NET
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FURTHER RAND DEPRECIATION LIKELY with sporadic rallies due to foreign asset inflows
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Source: I-NET
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EQUITIES REMAIN THE ASSET CLASS OF CHOICE Especially over the Long term
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STRATEGY
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• Equity markets remain attractively priced
– Short term risks
– Time is required to realise potential returns
• Quality companies preferred
– Strong balance sheets, management teams, dividends
• Bond yields should rise significantly, but timing uncertain
– Negative real returns the most likely outcome
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Questions
Foord Asset Management (Pty) Ltd and Foord Unit Trusts Ltd are authorised
Financial Services Providers (FSP: 578 & 21476)
Past performance is not necessarily an indication of future performance
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INVESTMENT TEAM
MARCH 2013 28 FOORD ASSET MANAGEMENT
Main Responsibilities & Qualifications Experience At Foord Responsibility
Dave Foord CIO, Portfolio Manager
B Com, CA(SA) 35 31
Strategy, Balanced, Absolute return, Equity, Foreign, Company Research
Brian Davey Portfolio Manager, Analyst
B Com, CA(SA) 21 17 Equity, Company research, Private clients
Dane Schrauwen Portfolio Manager, Equities
BA LLB 20 4 Equity, Balanced, Company research, Private clients
Mike Townshend Head: Company Research
B Sc (Hons), BA, MBA 15 7 Company research, sector research
William Fraser Portfolio Manager, Strategy
B Com Actuarial, Cert (Financial Engineering) 13 7 Strategy, Balanced, Bonds, Property, Medical Aid
Mike Soekoe Head of Retail & Institutional Business
Member of SA Institute of Stockbrokers, CFP ® 32 4 Private clients
Nicholas Balkin Portfolio Manager, Research Analyst
B Com (Hons) Finance, CFA 10 7
Equity, Absolute return, Company research, Private clients
Vincent Ee Portfolio Manager, Head: International Research
B Sc (Hons) Acct & Finance, CFA 16 - Company research (Foreign)
Carolyn Levin Portfolio Manager, Research Analyst
B Bus Sc (Hons), CA(SA), CFA 7 5 Company research (SA and Foreign)
Andrew Coultas Equity Research Analyst
B Com (Hons), M Com, CA(SA) 4 2 Company research (Foreign)
Guy Shirtliff Equity Research Analyst
B Bus Sc (Hons), Cert (Financial Mkts & Instr) 6 1 Company research (Foreign)
Pravarshan Murugasen
Equity Research Analyst
CA(SA) 2 1 Company research (SA)
Daniel Gerdis Equity Research Analyst
CA(SA) 2 1 Company research (SA)
Wim Murray Equity Research Analyst
BA LLB 1 - Company research (SA)
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FOORD BALANCED FUND Current Top 10 equity positions
% of portfolio
BHP Billiton 4.9
SABMiller 3.3
Aspen 3.3
Sasol 3.1
British American Tobacco 2.9
Standard Bank 2.9
CF Richemont 2.8
Anglos 2.8
Bidvest 2.4
RMB Holdings 2.3
30.7
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FEBRUARY 2013 FOORD ASSET MANAGEMENT 30
FOORD EQUITY FUND Top 10 equity positions
% of portfolio
BHP Billiton 8.3
Sasol 6.0
SABMiller 5.9
Anglos 5.2
CF Richemont 5.1
Standard Bank 4.9
British American Tobacco 4.6
Bidvest 4.6
Aspen 4.4
Coronation 3.9
52.9