Investing in equities

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18 Νοε 2013 (πριν από 3 χρόνια και 11 μήνες)

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Investing in equities

Christopher Selth


Five Oceans Asset Management

The seeds of potential future failure

2

2

Disclaimer

Information contained herein is current as at 25 August 2010 unless otherwise specified and is
provided by Five Oceans Asset Management Pty Limited ABN 90 113 453 160 AFSL 290540 (Five
Oceans). Portfolio and performance information contained in this presentation relates to the Five
Oceans World Fund, an onshore Australian based unit trust denominated in Australian dollars and is
provided by Challenger Managed Investments Limited (Challenger) ABN 94 002 835 592 AFSL 234
668, the issuer of the Five Oceans World Fund (Fund). Five Oceans Asset Management is the
Investment Manager for the Fund. It is intended solely for the recipient who is a wholesale investor
within the meaning of the Corporations Act 2001 (Cth). It must not be passed on without the prior
written consent of Five Oceans. It should be regarded as general information only rather than advice.
Any information provided or conclusions made, whether express or implied, do not take into account
the investment objectives, financial situation and particular needs of any particular investor. Because
of that, each person should, before acting on any such information, consider its appropriateness,
having regard to their objectives, financial situation and needs. Each person should obtain a copy of a
current relevant offer document and consider that before making any decision to invest. Past
performance is not an indication of future performance. For further information please call +612
99947490 or email ryoungman@5oam.com or see our website:
www.5oam.com
.

3

Valuation: Bull reading

4

Bear reading


Shiller PE

5

S&P500 sector EPS moves

Source: Factset, Five Oceans Asset Management

6

Emerging market valuations not
expensive if earnings growth is
sustainable

Source: MSCI, IBES, Morgan Stanley Research

7

Equity risk premium

Source: Goldman Sachs

8

Stocks have become highly
correlated

Source: Bernstein Research (Sourcing: Factset, Bernstein analysis)

9

Growth versus value… massive
convergence

Source: Bernstein Research (Sourcing: Factset, Bernstein analysis)

10

Stock selection within sectors
significant

Source: Bernstein Research (Sourcing: Factset, Bernstein analysis)

11

The rise of the two speed economy:
something changed a decade ago

Source: BEA, Morgan Stanley Research

12

The globalisation of equities

13

Winners versus losers

Price Outperformance of Apple over Micrsoft
-100%
0%
100%
200%
300%
400%
500%
600%
May-05
Dec-05
Jul-06
Jan-07
Aug-07
Feb-08
Sep-08
Mar-09
Oct-09
May-10
Nov-10
PE NTM
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
May-05
Dec-05
Jul-06
Jan-07
Aug-07
Feb-08
Sep-08
Mar-09
Oct-09
May-10
Nov-10
MSFT
AAPL
Source: Factset, Five Oceans Asset Management

14

Technology growth drivers

in both the developed and

developing world

Global PC penetration

Source: Gartner, Credit Suisse

Age of corporate desk tops


global

Source: CLSA

15

Commodities vs industrial production

Source: IMF

Global Iron Ore - Market Balance
-20
-15
-10
-5
0
5
10
15
20
2003
2004
2005
2006
2007
2008
2009
2010F
2011F
2012F
2013F
2014F
2015F
-250
-200
-150
-100
-50
0
50
100
150
200
250
China Iron Ore Usage (YoY Mt)
ROW Iron Ore Usage (YoY Mt)
Seaborne Market Balance (LHS)
16

Mining sector discounted on

LT cashflows

Source: Deutsche Bank

Rio Tinto


P/NPV


LT history

0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
May-98
May-00
May-02
May-04
May-06
May-08
May-10
P/NPV (x)
LT avg 0.96x

Post Alcan Trough 0.24x

Current 0.78x

17

Penetration of financial products

18

Financial product penetration of
India

19

Comparing bank valuations

Based on 2012 estimates
CBA ($AUD)
Wells Fargo ($USD)
ICICI Bank (Rp)
Current Share Price
50.3
25.38
1000
P/TE
2.60x
1.45x
1.80x
Return on Assets
1.03%
1.50%
1.50%
Leverage
18.2x
10.7x
7.3x
Loan to Deposits
127%
104%
99%
2012 Earnings
4.62
3.82
68.43
2012 PE
10.89x
6.64x
14.61x
Source: Company Reports, Factset

20

Comparing amounts of debt

21

Australia’s two speed economy

Australia's Monthly Exports
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
$18,000
Jul-77
Jul-79
Jul-81
Jul-83
Jul-85
Jul-87
Jul-89
Jul-91
Jul-93
Jul-95
Jul-97
Jul-99
Jul-01
Jul-03
Jul-05
Jul-07
Jul-09
Rural Goods
Mining Related
Other
Source: ABS

22

30%
40%
50%
60%
70%
80%
90%
100%
Mar-02
Mar-03
Mar-04
Mar-05
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
Aussie Mortgage Debt to GDP
US Mortgage Debt to GDP
Australia buried in mortgage debt

Supply side squeeze

Over
-
valued by
~35%

Source: Morgan Stanley

Source: Morgan Stanley

Value of housing stock to GDP

0%
50%
100%
150%
200%
250%
300%
350%
Jun-88
Jun-90
Jun-92
Jun-94
Jun-96
Jun-98
Jun-00
Jun-02
Jun-04
Jun-06
Jun-08
Australian Residential Real Estate Value to GDP
US Residential Real Estate Value to GDP
23

AUD versus equities

A changed relationship

0.50
0.55
0.60
0.65
0.70
0.75
0.80
0.85
0.90
0.95
1.00
1985
1989
1993
1997
2001
2005
2009
0
200
400
600
800
1000
1200
1400
1600
1800
AUD
SPX
Source: Bloomberg

24

Why international?

Snail trail
-

ASX 200 vs MSCI World (ex Aust)

As at 31 July 2010


Snail Trail - ASX 200 Vs MSCI World (ex AUS)
-50
-40
-30
-20
-10
0
10
20
30
40
50
-10
-8
-6
-4
-2
0
2
4
6
8
10
Risk (%) - difference in standard deviation
Return (%) - difference in rolling 1 year return
Source: Bloomberg

25

Why international?

Snail trail


ASX 200 vs International beta hedged strategies

As at 31 July 2010


Rolling 1 year returns, since inception of Five Oceans W/S World Fund


Snail Trail - ASX 200 versus International beta hedged strategis
-50
-40
-30
-20
-10
0
10
20
30
40
50
-10
-8
-6
-4
-2
0
2
4
6
8
10
Risk (%) - difference in standard deviation
Return (%) - difference in rolling 1 year return
Source: Bloomberg

26

Risk adjusted performance


Snail trail


Combined returns

As at 31 July 2010

Rolling 1 year returns, since inception of Five Oceans W/S World Fund

Portfolio represents equal weighting of Five Oceans World Fund and S&P/ASX 200 AI

Snail Trail - combined returns
-30
-20
-10
0
10
20
30
-8
-6
-4
-2
0
2
4
6
8
Risk (%) - difference in standard deviation
Return (%) - difference in roliing 1 year return
Source: Bloomberg

27

27

Disclaimer

Information contained herein is current as at 25

August 2010 unless otherwise specified and is
provided by Five Oceans Asset Management Pty Limited ABN 90 113 453 160 AFSL 290540 (Five
Oceans). Portfolio and performance information contained in this presentation relates to the Five
Oceans World Fund, an onshore Australian based unit trust denominated in Australian dollars and is
provided by Challenger Managed Investments Limited (Challenger) ABN 94 002 835 592 AFSL 234
668, the issuer of the Five Oceans World Fund (Fund). Five Oceans Asset Management is the
Investment Manager for the Fund. It is intended solely for the recipient who is a wholesale investor
within the meaning of the Corporations Act 2001 (Cth). It must not be passed on without the prior
written consent of Five Oceans. It should be regarded as general information only rather than advice.
Any information provided or conclusions made, whether express or implied, do not take into account
the investment objectives, financial situation and particular needs of any particular investor. Because
of that, each person should, before acting on any such information, consider its appropriateness,
having regard to their objectives, financial situation and needs. Each person should obtain a copy of a
current relevant offer document and consider that before making any decision to invest. Past
performance is not an indication of future performance. For further information please call +612
99947490 or email ryoungman@5oam.com or see our website:
www.5oam.com
.