kopernik global all-cap 4q 2015... · kopernik global all-cap 4q 2015 conference call presented by:...
TRANSCRIPT
Kopernik Global All-Cap4Q 2015 Conference Call
Presented by:
David B. Iben, CFA
CIO & Lead Portfolio Manager
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Bear Market StrategyA market condition in which the prices ofsecurities are falling, and widespreadpessimism causes the negative sentiment tobe self-sustaining. As investors anticipatelosses in a bear market and selling continues,pessimism only grows.
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“Buy when others are despondently selling and
sell when others are avidly buying.”
John Templeton
“People are always asking me where the
outlook is good, but that’s the wrong question.
The right question is: Where is the outlook most
miserable?”
John Templeton
“Be fearful when others are greedy and greedy
when others are fearful.”
Warren Buffett
“The time to buy is when there's blood in the
streets.”
Baron Rothschild
“How much more can I take”
The Go-Gos
“The waiting is the hardest part”
Tom Petty and the Heartbreakers
Relevant Thoughts
Performance Around the Globe (as of January 19, 2016)
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Returns in USD
Location 12 Month 3 Year 5 Year P/EP/Tangible
BookEV/Sales
Venezuela 269.01 1,932.99 14,918.92 38.x 10.48x
Denmark 7.88 41.68 90.97 24.5x 4.2x 2.16x
Ireland 12.42 50.09 78.36 22.x 3.65x 1.67x
United States -
NASDAQ-3.32 42.94 62.00 27.3x 9.62x 2.33x
United States –
Large Cap-8.07 25.26 43.75 17.3x 6.1x 2.02x
New Zealand -13.23 1.38 29.33 19.7x 2.46x 2.04x
Belgium -3.33 19.41 27.76 22.7x 3.16x 1.47x
United States –
Small Cap-15.95 10.77 22.46 33.5x 3.28x 1.51x
Switzerland -11.48 3.94 19.73 17.x 4.89x 2.54x
Japan 0.26 19.75 12.64 17.9x 1.9x 1.13x
Germany -11.18 2.93 10.62 20.5x 3.61x .88x
China -
Shanghai-8.72 22.67 9.20 15.9x 1.94x 1.63x
Mexico -1.51 -10.06 7.54 28.x 6.48x 2.16x
Thailand -25.97 -27.74 2.76 16.6x 2.06x 1.32x
France -7.54 -0.64 -7.16 21.4x 3.9x 1.07x
United Kingdom -14.47 -10.57 -7.62 29.2x 3.09x 1.3x
Sweden -14.07 -10.22 -10.63 16.1x 3.16x 1.86x
China -
Shenzhen-7.79 5.22 -12.85 32.6x 4.12x 2.98x
Finland -5.46 8.94 -14.84 20.9x 2.56x 1.4x
Indonesia -20.37 -29.92 -16.92 25.4x 2.54x 2.31x
South Korea -11.24 -16.66 -17.55 14.x 1.02x .95x
Netherlands -6.56 -3.83 -19.15 3.08x .64x
Returns in USD
Location 12 Month 3 Year 5 Year P/EP/Tangible
BookEV/Sales
Hong Kong -17.94 -17.47 -19.98 8.7x 1.21x 1.69x
Argentina -27.14 13.07 -19.99 10.5x 1.02x 2.05x
Norway -20.98 -28.42 -20.78 1.63x 1.37x
Taiwan -19.77 -12.39 -25.29 12.3x 1.47x .98x
Italy -6.37 -9.13 -25.59 147.4x 1.03x
Australia -21.83 -32.48 -30.65 18.9x 2.5x 2.39x
Spain -20.72 -18.43 -34.30 16.3x 2.15x 1.77x
Nigeria -29.12 -42.67 -36.94 13.8x 1.31x 1.36x
Poland -21.90 -31.41 -37.00 15.1x 1.21x .95x
South Africa -32.43 -37.00 -38.50 34.x 2.5x 2.08x
Canada -31.40 -35.95 -39.14 18.4x 2.51x 2.38x
Austria -7.34 -29.44 -41.13 1.13x 1.08x
Turkey -38.76 -52.60 -45.22 9.2x 1.27x 1.22x
Peru -5.30 -49.54 -46.40
Chile -18.88 -49.15 -49.44
Czech Republic -10.58 -34.80 -49.97 7.1x 1.63x 1.1x
Portugal -12.95 -38.63 -50.64 2.79x 1.35x
Russia -13.87 -58.88 -64.63 9.3x .66x .95x
Columbia -43.37 -68.26 -65.50 14.7x 1.56x 2.39x
Greece -35.27 -52.98 -69.98 .04x .15x
Brazil -47.94 -68.93 -77.53 20.2x 1.32x 1.47x
Ukraine -59.51 -76.19 -92.08 .32x .43x
Source: Bloomberg
MSCI ACWI ex USA
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100
125
150
175
200
225
250
275
300
325
350
375
Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15
MSCI ACWI ex USADecember 31,1999 - January 19, 2015
Source: Bloomberg
FANG – The New Nifty Fifty?
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$700
$900
$1,100
$1,300
$1,500
$1,700
$1,900
$2,100
$2,300
$2,500
Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15
Facebook, Amazon, Netfix, GooglePerformance
December 2013 – December 2015
Facebook Amazon Netflix Google
Source: Bloomberg
Gold – Fundamental Disconnect
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$-
$250
$500
$750
$1,000
$1,250
$1,500
$1,750
$2,000
$2,250
$2,500
$2,750
$3,000
May-06 May-07 May-08 May-09 May-10 May-11 May-12 May-13 May-14 May-15
Gold and Gold Miners PerformanceGrowth of $1k
May 2006 - December 2015
Market Vectors Gold Miners ETF NYSE ARCA GOLD BUGS INDEX Price of Gold
Source: Bloomberg
Oil
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$-
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
$110
$120
$130
$140
Brent Crude Oil (CO1 Comdty)1988 - Current
Source: Bloomberg
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Oil Fundamentals
Coal
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$35
$40
$45
$50
$55
$60
$65
$70
$75
Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15
Australia Thermal Coal (COASNE55 Index)October 2013 - Current
Source: Bloomberg
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Coal Fundamentals
Uranium
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$-
$20
$40
$60
$80
$100
$120
$140
$160
Uranium Price2004 - Current
Spot Price Long Term Price
Source: https://www.cameco.com/invest/markets/uranium-price
Uranium – Fundamental Disconnect
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$-
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15
Cameco & UraniumGrowth of $1k
June 2014 - Current
Uranium Cameco Corp
Source: Bloomberg
Baltic Dry Index
14Source: Bloomberg
$-
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
$10,000
1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
Baltic Dry Index1985 - 2015
The only reason for time is so that everything doesn’t happen at once.
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With outstanding potentialis “WHEN” the right question?
Buy when they give it away. What are they giving away now? In 1977, we were walkinguptown in New York City with a friend who worked for a prominent trust company. He told usthat the trustees of an estate had just sold a triplex on East End Avenue for $1. The reason?The $3,000 per month maintenance was “depleting the assets of the estate”. We can’timagine the return on that apartment ever since. Around the same time, top Manhattantownhouses were selling for $40,000 – and today are easily worth 1,000 times that. This wasalso the era when two of the greatest real estate investments in Modern American historywere made – the purchase of the Uris properties by the Reichmann’s Olympia & York andthe Irvine Ranch by Don Bren.
Fast forward to the collapse in commodities in the early to mid-1980s. A friend of ours wasthe controller of a major oil company, which had purchased at very high prices, a number ofaluminum and base metal assets during the hyperinflation of the late 1970s. By the mid-1980s, these assets were hemorrhaging losses and my friend was able to purchase from hisemployer an aluminum property in the West at zero cost. Within a few years, thataluminum smelter was generating profits of $100 million a year.
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Source: www.13d.com
Recent Observations by Kiril Sokoloff
Last week, Glencore sold the Cosmos nickel mine for AU$24.5 million. In 2008, XstrataPlc paid AU$3.1 billion for Jubliee Mines to gain control of Cosmos – the Perth-basedcompany’s flagship operation. Last year, Glencore sold the secondary Sinclair project toTalisman Mining for $8 million plus a $2 million contingency. While full accounting is not sostraightforward, in simplest form, the properties were bought and resold 7 years later at a99% loss. Xstrata, which was purchased by Glencore in 2013, acquired Jubilee when nickelwas selling for about $32,000 a metric ton – 2.5 times higher than where it now trades.Bloomberg recently noted that Rio Tinto Group similarly sold Mozambique coal assets lastyear that it bought in 2011 with AU$3.9 billion takeover of Riversdale Mining. The sellingprice? $50 million.
For what its worth, Javier Blas tweeted this week that, based on data from Citi Research,90% of all M&A that miners did since 2007 has been written off. Makes you wonder aboutthe current boom…
It’s interesting to note how little is being written in the West about One Belt, OneRoad. China Development Bank notes that the number of cross-border projects underway inthe Silk Road effort already amount to $980 billion. Reportedly, Asia’s infrastructure needsare close to $8 trillion by 2020.
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Source: www.13d.com
Recent Observations by Kiril Sokoloff
Global All-Cap – Representative Account (as of 12/31/15)
Portfolio weights and characteristics above are based on the holdings of a representative account as of December 31, 2015. Portfolio characteristics, sector and country designations are calculated using data from Bloomberg.
Harmonic weighted average is a method of calculating an average value that lessens the impact of large outliers. Weighted average is a method of calculating an average in which each value is assigned a weight.
The MSCI All Country World Index is a broad-based securities market index that captures 2,491 primarily large and mid cap companies across 23 developed and 23 emerging market countries as of December 31, 2015. The
MSCI All Country World Index is different from the strategy in a number of material respects, including being much more diversified among companies and countries, having less exposure to emerging market and small cap
companies, and having no ability to invest in fixed income or derivative securities.
Top Ten CompaniesCountry % of Portfolio
Cameco Corp Canada 5.1
Newcrest Mining Ltd Australia 4.8
Gazprom PAO Russia 4.2
Sberbank of Russia Russia 3.8
Centrais Eletricas Brasileiras Brazil 3.7
Japan Steel Works Ltd Japan 3.6
Electricite de France SA France 3.4
RusHydro PJSC Russia 3.4
Mitsui & Co Ltd Japan 3.3
Kinross Gold Corp Canada 3.2
Portfolio Characteristics
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0
5
10
15
20
25
30
Cons.Disc.
Cons.Staples
Energy Financials HealthCare
Industrials Info.Tech.
Materials Telecom Utilities
% of Portfolio % of MSCI ACWI
0
10
20
30
40
50
60
Canada EmergingMarkets
Europe ex UK Japan Pacific exJapan
UK US
% of Portfolio % of MSCI ACWI
Portfolio Region Weights
Portfolio Sector Weights
Capitalization Portfolio Benchmark
Weighted Average $7.92B $94.74B
Median $1.57B $8.64B
Portfolio Portfolio MSCI ACWI
Weighted Harmonic Harmonic
Trailing P/E 15.82 14.38 16.75
Trailing P/CF 1.87 2.89 5.09
Trailing P/B 0.48 0.49 1.91
Trailing P/TBV 0.52 0.53 2.17
Trailing EV/S 0.81 1.16 1.68
Yield (TTM) 1.91 1.65 1.55
THANK YOU
Q&A Session
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A copy of this presentation is available on www.kopernikglobal.com.
Appendix
Kopernik Global Investors, LLC (“Kopernik”) is a global equity investment management specialist, organized to ensure a culture centered on client success
• Leadership and ownership by investment professionals
• 100% employee owned
• Equity participation for all professionals
• Principals invest alongside clients
• Capacity to be limited, enhancing return potential
• Founded by David Iben – July 2013
Mutual Funds37%
Private Funds
7%
UCITS7%
Separate Accounts49%
Centering on Client Success
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Total Managed and Advisory Only Assets by Type (As of 12/31/2015)
Assets as of December 31, 2015 are preliminary.
Managed Assets
Mutual Funds $562.81 MM
Private Funds $103.50 MM
UCITS $116.12 MM
Separate Accounts $751.71 MM
Total Firm AUM $1,534.14 MM
Advisory Only Assets
Separate Accounts $72.99 MM
Total Managed and Advisory Only Assets: $1,607.13 MM
Total Firm AUM
Investing with a Distinctive Philosophy
The likely outcome of a distinctive philosophy consistently implemented by skilled investors –sustainable investment success and low correlations to other managers
• We view ourselves as owners of businesses:
- Market inefficiencies present numerous opportunities to identify quality businesses that we believe are mispriced
- Independent research of a company’s business, industry supply/demand, competitive positioning and management uncovers
opportunities
• We predicate our intensive, original research on:
- A global perspective to enhance understanding of markets and companies
- A long-term investment horizon to allow for inherent value to be realized
- Value as a prerequisite, not a philosophy
- Bottom-up, fundamental analysis to gain a thorough understanding of a company’s business and valuation
- Industry-tailored valuation metrics to assess distinct industry characteristics and success drivers
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Uncovering Value with Industry Specialists
• Far-reaching investment experience in global markets with a long record of success
• Searching for market anomalies with industry specialists who have diverse backgrounds and distinct perspectives
• Group vetting to challenge ideas and develop high conviction
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The information presented herein is proprietary to Kopernik Global Investors, LLC. This material is approved for a presentation to authorized individuals only and,
accordingly, this material is not to be reproduced in whole or in part or used for any purpose except as authorized by Kopernik Global Investors, LLC.
Please consider all risks carefully before investing. The accounts managed according to the Global All-Cap investment strategy are subject to certain risks such as
market, investment style, interest rate, deflation, and illiquidity risk. Investments in small and mid-capitalization companies also involve greater risk and portfolio
price volatility than investments in larger capitalization stocks. Investing in non-U.S. markets, including emerging and frontier markets, involves certain additional
risks, including potential currency fluctuations and controls, restrictions on foreign investments, less governmental supervision and regulation, less liquidity, less
disclosure, and the potential for market volatility, expropriation, confiscatory taxation, and social, economic and political instability. Investments in energy and
natural resources companies are especially affected by developments in the commodities markets, the supply of and demand for specific resources, raw materials,
products and services, the price of oil and gas, exploration and production spending, government regulation, economic conditions, international political
developments, energy conservation efforts and the success of exploration projects. There can be no assurances that investment objectives will be achieved.
Kopernik Global Investors, LLC is an investment adviser registered under the Investment Advisers Act of 1940, as amended.
This document, as of December 31, 2015 is descriptive of how the Kopernik team manages the Global All-Cap strategy. There is no guarantee that any strategy’s
investment performance objectives will be achieved. This profile is not legally binding on Kopernik Global Investors, LLC or its affiliates.
© 2015 Kopernik Global Investors, LLC | Two Harbour Place | 302 Knights Run Avenue Suite 1225 | Tampa, Florida 33602 | 813.314.6100 | www.kopernikglobal.com
Important Information
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