“beyond the fiscal cliff” – foord asset management
TRANSCRIPT
SENATE GROUP
Mike Soekoe & Heather McCulloch,
15 March 2013
AGENDA
• Introduction
• Investment philosophy
• Performance
• Macro: Beyond the Fiscal Cliff
MARCH 2013 FOORD ASSET MANAGEMENT 2
INVESTMENT PHILOSOPHY
4 MARCH 2013
• 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
PERFORMANCE
6
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
BEYOND THE FISCAL CLIFF
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
GLOBAL GROWTH ON TRACK
MARCH 2013 FOORD ASSET MANAGEMENT 9
USA GDP GROWTH 13 Consecutive quarters of positive growth
MARCH 2013 FOORD ASSET MANAGEMENT 10
Source: I-NET
US HOUSING MARKET Pent up demand building
MARCH 2013 FOORD ASSET MANAGEMENT 11
AFFORDABILITY OF HOMES Underpins recovery
MARCH 2013 FOORD ASSET MANAGEMENT 12
MARCH 2013 FOORD ASSET MANAGEMENT 13
Source: I-NET
US EMPLOYMENT CREATION Sensitive to housing market recovery
US EMPLOYMENT CREATION Don’t fight the Fed
MARCH 2013 FOORD ASSET MANAGEMENT 14
OUTLOOK FOR EUROPE No lasting improvement in sight shorter term
MARCH 2013 FOORD ASSET MANAGEMENT 15
Source: I-NET
MARCH 2013 FOORD ASSET MANAGEMENT 16
EURO AREA Euro contagion risk has reduced substantially
CHINESE ECONOMIC GROWTH Rebalancing from investment to consumption
MARCH 2013 FOORD ASSET MANAGEMENT 17
Source: Macquarie Research
CHINESE ECONOMIC GROWTH Still some way to go…
MARCH 2013 FOORD ASSET MANAGEMENT 18
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
MARCH 2013 FOORD ASSET MANAGEMENT 19
MARCH 2013 FOORD ASSET MANAGEMENT 20
CONSUMER FAVOURED OVER GDFI
GDFI GROWTH Driven by SOE’s and government
MARCH 2013 FOORD ASSET MANAGEMENT 21
Source: I-NET
CONSUMPTION GROWTH Driven by real wage increases
MARCH 2013 FOORD ASSET MANAGEMENT 22
Source: RMB Global Markets Research
DETERIORATING C/A DEFICIT
MARCH 2013 FOORD ASSET MANAGEMENT 23
Source: I-NET
FURTHER RAND DEPRECIATION LIKELY with sporadic rallies due to foreign asset inflows
MARCH 2013 FOORD ASSET MANAGEMENT 24
Source: I-NET
EQUITIES REMAIN THE ASSET CLASS OF CHOICE Especially over the Long term
MARCH 2013 FOORD ASSET MANAGEMENT 25
STRATEGY
26 MARCH 2013 FOORD ASSET MANAGEMENT
• 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
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
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)
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
MARCH 2013 FOORD ASSET MANAGEMENT 29
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