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OVERVIEW WHAT’S INSIDE

OVERVIEW

OUR MAIN INVESTMENT IDEA 1. Playtech plc

INVESTMENT INSIGHTS

WHAT HAPPENED? Market & Sector Analysis

HINDESIGHT DIVIDEND UK Portfolio # 1 (August 2018)

APPENDIX I: THE WAY WE THINK

APPENDIX II: HOW WE THINK

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ISSUE 45 - AUGUST 2018 WWW.HINDESIGHTLETTERS.COM

“It’s a game of two halves” goes the often-used football pundit’s line. Well, in the economic world, it would certainly look like a world of two halves to the visiting Martian. On one side, we have the USA with its strong currency and cyclically low unemployment rates which are producing high global purchasing power.

The US wealth feelgood factor is clearly there for all to see in the current valuations of the US stock market. John Hussman’s favourite cyclically-adjusted CAPE is still there in all its glory and the FAANG stocks (Facebook, Amazon, Apple, Netflix and Google-Alphabet) are a huge part of this.

A hat-tip to John Maudlin’s Frontline this week for bringing us the Small Business Optimism index, a long-running series by the National Federation of Independent Business. Things really couldn’t get any better in the US, where as much as half of the country still seems to actively hate their president. Business

2 HINDESIGHT Dividend UK Letter

owners, clearly, are almost the most optimistic in history. What could possibly go wrong?

However, many countries throughout the rest of the world are facing big problems. The trade wars and sanctions that so far have the most visible problems are in Turkey and Iran, but China, Russia, India and Argentina, among others, are also feeling the pressure. Even in countries with relatively strong economies, such as the UK, the weakening currency, amid rising interest rates and inflation, is decidedly worrying.

Historically, global crises have come about after periods of excessively easy monetary policy leading to growth. But it is often largely debt-inspired growth, where the search for yield has led to lower rates everywhere and higher risks. It is often the emerging market that sees the problem first, with weakening currencies, inflation and capital flight, before the full-blown world crisis occurs. So it should not surprise anyone if history repeats itself once again.

THE COMPANY

Mark Mahaffey

Ben Davies

Aalok Sathe

HindeSight Publishing which runs HindeSight Letters is a unique blend of financial market professionals – investment managers, analysts and a financial editorial team of notable pedigree. The co-founders of Hinde Capital, Ben Davies and Mark Mahaffey, a successful alternative investment management company joined forces with the financial journalist David Stevenson best known for his regular columns in the FT Weekend, Money Week and numerous other global media titles to deliver something different in the financial newsletters segment – simply put it’s a reliable newsletter version of a managed fund.

Our writers actually run money, not just write about it, so they are the right mix of book smarts and street smarts. Truly a team of individuals that make up a formidable pool of knowledge, wherever the investing landscape shifts to.

CONTRIBUTORS

CO-FOUNDER & CFO OF HINDE CAPITAL

CO-FOUNDER & CEO OF HINDE CAPITAL

FUND MANAGER

Source: NFIB, John Maudlin.

ISSUE 45 - AUGUST 2018 3

Playtech launched its first casino product in 2001, after Teddy Sagi formed a joint venture with partners

from the casino, software engineering and multimedia industries. The company has gone on to become the world’s leading international designer, developer and licensor of web and mobile application software to the

digital gaming industry. It is also the largest. Over the years, Playtech has acquired several blue-chip customers, including Paddy Power, William Hill, Ladbrokes, Bet365, Snai and Sisal. Furthermore, the company has added certain governments and regulated agencies to their list of clients.

AALOK SATHE

Playtech plc is one of the leading software development companies within the gambling and gaming industry. The company was formed by Teddy Sagi in 1999 and was based in Estonia. Over the years, it has developed into a company that provides software for online casinos, poker rooms, bingo games, online betting, scratch-card games, mobile gaming and fixed-odds arcade games online. The company was listed on the London Stock Exchange in 2006 and it currently has a market capitalisation of just over £1.2bn.

FUND MANAGER ATHINDE CAPITAL

Price (£)Turnover (£mm)Net Income (£mm)Market Cap (£mm)Fwd P/E RatioDividend Yield (%)Payout Ratio (%)Total Debt to Total Equity (%)FCF to Market Cap (%)ROIC (%)

542.0707.4217.51,640.09.36.90%-90.1%-4.8%

PLAYTECH PLC

INVESTMENT IDEA #1 PLAYTECH PLC


Playtech’s history has been turbulent one, to say the least. In 2006, the company saw its share price drop by over 40% in one day, following the passage of the Unlawful Internet Gambling Enforcement Act. Following this period of negativity, there was significant consolidation within the online gambling industry that saw Playtech acquire several companies, including pokerstrategy.com, PT Turnkey Services, YoYo Games and Quickspin. PT Turnkey Services turned out to be the most controversial buyout, as the company was owned by Teddy Sagi, and it received significant bad publicity. Furthermore, their planned takeover of Plus500 was terminated.

In 2015, Playtech announced that all its casino sites would be leaving the German market, but this was followed by positive news that saw the company branch out into Eastern Europe through the launch of its casino studio in Bucharest. This was designed to provide live casino games to the local gambling industry, which has seen significant growth in the past decade. When Playtech's licensing contract with Marvel Comics expired on 31 March 2017, the provider announced a new partnership with Warner Bros in February 2017 for the development of slots, based on DC Comic feature films, such as Batman v Superman: Dawn of Justice, The Dark Knight Trilogy, Suicide Squad and Justice League.

The gaming industry is rife with fraud and, as a result, Playtech has been doing everything in its power to implement systems that will help it to reduce this activity. The company has been looking to add analytical and behavioural systems with the aiming of identifying problems early. Further to this, the company has been finalising its integration of machine learning fraud detection platform.

More recently, Playtech has announced its move into Asia with the focus being on China, and agreed to be the provider of the Polish National Lottery earlier this year.

Playtech’s Performance

Since mid-2017, Playtech plc has fallen over (45%) and close to (XX%) on an absolute and relative basis. Its performance relative to itself and the broader market has been hovering close to its lows on an oscillation basis.

The firm’s share price has come under attack due to:

• Asian Market Issues• Game Industry Headwinds• Mystery Market Sellers

Asian Market Issues

In the past year, Playtech twice warned its investor base of issues within its Asian target regions. Running gambling websites in countries that do not regulate (grey market) is a risky strategy, as Playtech found out over the past year when Malaysian authorities suddenly banned online gaming on a temporary basis in 2017, forcing sales growth across Asia to fall. The sudden halt in business in Malaysia has effectively ended access to one of its largest Asian markets. Furthermore, Playtech warned of issues in its Chinese territory, where it is technically illegal to gamble. However, the firm serves gambling operators in the country through licences obtained in the Philippines. Unfortunately, China has seen a rise in new entrants, which has forced prices lower and hit Playtech’s financials. The company’s valuation has traded down aggressively, but we believe that it now looks far too cheap relative to the market and its peer group.

Gaming Industry Headwinds

Earlier this year, there were several murmurs within the market of impending headwinds within the global gaming industry. Growth has still been positive, although it has slowed down compared to previous years. Playtech is considered a proxy for the global betting industry and, therefore, a deceleration in growth was taken in a negative manner and the share price downturn was been somewhat overdone.

Mystery Market Sellers

To add to the negativity surrounding Playtech, an unidentified investor sold a large stake in the company prior to the last earnings call, which has created further unrest within the investor community.


Cheap Valuations

Playtech’s market value has fallen dramatically over the past year. It is vital to understand that the stock has reached a long-term support level. This is the lowest it has been since 2013. As a large amount of negativity is priced into the stock’s valuations, this is an unusual opportunity to invest in a leading global company that generates significant free cash flow and who we are expecting to go through noteworthy changes. Relative to the index, Playtech is trading at its lowest level in X years and was one of the highest ranked opportunities within our quantitative model (below), making it one of the dogs of the FTSE350. Ultimately, we believe the stock will revert higher to its natural mean.

Don’t Worry About Asia

Despite all the worries surrounding Asia and Playtech’s despair in Malaysia, it is important to understand that the company is focusing on China for the long term. Even though they have come under pressure through new players within the Chinese market, these are just short-term issues and we believe that ultimately the firm’s product offering and flexibility will help them to overcome these smaller players. Furthermore, investors should not be worried as the company has shown real endeavour while developing new business across the world. Very recently, Playtech announced their intention to forge strong business ties throughout Eastern Europe, with their first deal being the operator of the Polish National Lottery. With Playtech also looking to develop long-term ties in Japan, investors should not be worried about the short-term setbacks they have faced in Asia. Playtech has managed to overcome the previously regulatory issues it

has faced and we believe they will once again show this grit and determination to adapt and progress forwards.

All Stocks Have Sellers

The market made a huge fuss about Playtech having a large seller working against it, yet it is important to acknowledge that all stocks have buyers and sellers. For the one large seller, Playtech has several institutional owners, These have been adding significantly or initiating completely new positions in the software provider. This should provide the investment community with confidence that even larger players are unworried about Playtech’s apparent negatives and are, instead, allocating further to this leading company. High on the Model / Trend Exhausted / Low RSI

Over the years, we have developed a series of models, which when combined, produce positively skewed opportunities. Playtech plc fits this framework, where it is high on our quantitative equity model, trend exhausted and low on a relative strength basis. This set-up has provided us with powerful opportunities in the past and we believe that Playtech will prove to be similar in the future.

Analysts’ Corner

With Playtech being a leading software specialist within the gaming industry, the company is well covered across the research community. It has been attributed with an average target price (TP) of 882p, which would represent an upside of over 55%, from current levels.

A change in global regulations have put Playtech plc under significant pressure, as it has temporarily impacted the firm’s financial position at times. Negative news coming out of Asia has seen the stock’s valuation fall rapidly as China and Malaysia form a significant proportion of the firm’s revenue generation. We believe this fall has been too great, relative to the news that flew into the public domain. Global industry headwinds have created worries amongst investors and with the largest institutional investors selling their investment in Playtech plc, this has not helped its situation. This high-yielding, stable software producer seems to have ample negativity baked into its current valuation. It enters the HindeSight Dividend Portfolio, offering a healthy 5.7% dividend yield, and this is well protected by the firm’s growing free cash flow. The company trades at a forward P/E of just 9.33x, which is not a level that has been visited for some time. With much negative news out in the public domain, we believe that Playtech plc is overdue a recovery and offers significant downside protection.


Summary

Playtech has come under severe pressure since 2017 due to fears about its poor performance in Asia, general industry worries and investors fretting that certain large funds will reduce their positions in the company. We, however, believe the company is well prepped to handle the regulatory issues it is facing in Asia, having already had prior experience of similar situations. Their strong, ever-evolving product line-up will ultimately outshine the offerings that are provided by smaller new entrants in large markets, such as China. All the negativity surrounding this software giant has forced its share price down to support levels that have not been seen in years. We believe there will be a momentous upside for this cash-generating company.

Source: Bloomberg


Baron Rothschild, an 18th-century British nobleman who is rumoured to have made fortunes at the time

of the Battle of Waterloo, is usually credited with the expression, “Buy when the blood is in the streets”. The other derivative, “Buy on the sound of cannons, sell on the sound of trumpets”, is also often attributed to the same famed banking dynasty.

The general interpretation is that one of the tenets of successful and profitable investing relies on buying when there is obviously bad news and sell when there is seemingly only good news. In last August’s HSL, we showed the chart below, which shows how UK stock prices were at an extreme low around the time of the evacuation of the British Expeditionary Force from France and the Battle of Britain in 1940. The blood was certainly on the streets then.

Every asset class, including currencies and interest rates over time, has oscillations that historically can be shown to be low-cheap to high-expensive, around a typical mean average. The cycles of these asset classes may be measured in months, years, decades or longer, but their relevance places market timing at the very heart of investment gains.

In times of crisis, many assets are priced down dramatically and wealth transfers and losses are the main story. In normal times, some assets are very cheap while other assets are considered to be very expensive. Whether this is irrational or not, many assets are very highly valued at the pinnacle of exuberance and huge paper gains are the bragging points. Until the start of 2018, we were arguably at the latter point, with most investments worldwide smugly soaring to the moon. This was largely aided by the longest decline in interest rates in recorded history. For the most part, interest rates have dropped on average from the early 1980s to the lows last year, and are still negative in many countries.

INVESTMENT INSIGHTS


These low interest rates, largely a result of the extreme monetary policy that followed the financial crisis of 2008, fuelled valuations to nose-bleed territories and very few assets could be considered cheap on standard metrics. Now, in the late summer of 2018, times have started to change enough that it’s worth discussing the age-old adage, ‘The best and worst time to invest.’

Well, the trumpets are certainly blaring very loud in the US stock market. In global currency terms, US stocks are priced for perfection and are so historically lacking in both value and margin of safety, it should be obvious that your money could be better deployed almost anywhere else, while you still have time. Worryingly, US retail investors at stockbrokers like Charles Schwab have very little cash in their portfolios and remain heavily invested.

Almost the polar opposite of this would be investing in some of the emerging markets, like Turkey, whose currency and stock market has been truly battered to a potential point of extreme value. While the situation may well get worse in Turkey, it’s hard to see a reason why some dollar cost averaging isn’t worth starting immediately as the market has clearly priced in complete catastrophes. Turkey has a large young population, which is uniquely positioned in Asia and Europe. Politically, things look terrible, but in business, companies tend to recover from short-term disasters.

Closer to home, the UK currency, GBP, is back in the doldrums again. It is not only close to its all-time lows versus the US dollar, but it is also facing similar lows

across many other currencies. Much must be blamed on the continued uncertainty of Brexit and the ‘no-deal’. From a global investor point of view, our weak currency makes many of our assets, such as property, bonds and equities, attractive and if there is more weakness into March 2019, they may be seen as even more so.

As managers of the Hinde Gold Fund, we are long-term believers in the power of gold in any portfolio for insurance and diversification. Gold is also one of the assets that is currently very cheap over most metrics, especially in US dollar terms.

Certainly, many Turkish people would have been well-served to have held gold in their time of crisis. In ratio terms against the US SP500 index, gold is back to levels last seen in the 2005-2007 pre-financial crisis era. Coupled with the very positive seasonal time of year, it is very oversold on a technical Relative Strength Index weekly basis and very under-owned by traditional speculators (Commitment of Traders report).


Whether it’s a currency, equity, bond or commodity, there are usually identifiable cycles. Closer to home, our proprietary Hinde Sight Dividend Model works in much the same way. It systematically weeds out and ranks all the UK stocks in the FTSE 350, from cheap to rich, under the written rules. The highest-ranking stocks invariably suffer from some well-known problems, industry or specific. These are accompanied by poor headlines and the market has driven the price lower to reflect these issues. However, the cycle of mean-reversion and margin cycles often make this the best time to invest. The current model’s ranking was shown earlier in the Playtech write-up.

Investing or disinvesting at different times has been often been shown to be the way to make considerably better returns than passively holding a ‘mixed’ portfolio. One of my biggest worries is that the long-term decline in interest rates, led by the central bank, has made investing seem much easier, especially in the vein of buy and hold,

because assets over time ‘have to go up’. Unfortunately, I believe many people are going to find out the hard way investing is going to be much, much harder in the future, as interest rates will not decline to the same extent again and will probably have to start rising. The need for timing will be significantly more relevant.


UK MARKET VALUATIONS

PORTFOLIO UPDATE - WHAT HAPPENED?MARKET & SECTOR ANALYSIS

UK INDICES PRICE/EARNINGS RATIO PRICE/BOOK RATIO DIVIDEND YIELD(%)

FTSE 100 INDEXFTSE 250 INDEX

17.1618.28

1.892.01

4.05%3.05%


HINDESIGHT DIVIDEND UK PORTFOLIO # 1 (AUGUST 2018)PORTFOLIO UPDATE AND CONSTRUCTION

MERLIN ENTERTAINMENT PLC On the 16th of August, 2018, Merlin Entertainment plc paid

a dividend of 2.50 p. PORT

FOLI

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UPD

ATE


We passionately believe that dividends really,really matter. William Thorndike in his fascinating book

'The Outsiders- Eight Unconventional CEOs and Their Radically RationalBlueprint for Success' examined one of the most impor tant aspects of running a business a CEO must undertake: Capital Allocation. He summarised how a CEO deploys capitalin order to best utilise cash flow generated from his or her business operations. Essentially,CEOs have 5 ways of deploying capital:

• Investing in existing operations• Acquiring other businesses• Repaying debt• Repurchasing their own stock (buybacks)• Paying dividends

Dividend payments are a crucial operation in creating stakeholder wealth. It is this aspect of a business that we are so fixated by - the propensity for a company to produce and continue to grow dividends so that we may accrue wealth over a generation. But as readers will know we can't just grab stocks with the highest yield for fear that this signals some cash flow or even solvency issues for the firm. So it is with this very real threat in mind we explore only well-capitalised FTSE 350 companies.

This letter's purpose is to help inform readers on dividend investing so that they can construct a portfolio of sound UK dividend stocks based on our recommendations. Our prerequisite is that any stocks selected for this let ter

must be liquid,well-capitalised with a strong free cash flow and a progressive dividend policy.

Our System

• Every month we will provide a write up of 3 to 4 stocks untilwe create a portfolio of 25 UK dividend stocks. This will be the HindeSight UK Dividend Portfolio #1

• You wiII bealerted by subscriber email intra-month when these stocks become a buy. Timing is critical to the strategy, not only buying quality stocks but buying them at the right time

• Theentry points willthen be recorded in the next month ly in the HindeSight UK Dividend Portfolio section and the stock(s) wr itten up in full

• We will run our winners but tend to rotate every 6 months depending on specific criteria which would elevate cheaper companies into the portfolio relative to stocks that had performed

• The basis for stock and portfolio selection is derived from our quantitative systematic methodology which screens these companies using the Hinde Dividend Value Matrix, (HDVMdl), a proprietary stock-rating system

• In the section on ETPs we will highlight our invest ment philosophy and the investment process behind our stock selections. This is the b*is of our dynamic risk and money management in our portfolio con struction for you. You can also read the stand-alone Hinde Dividend Value Strategy document to see the methodology behind our stock selection.

APPENDIX I

THE WAY WE THINK


“We have met the enemy, and he is us.” Walt Kelly

Our key to long-term performance investing is premised on the following:

• Systematic rule-based strategy• Systematic risk and money management• Occam’s razor, aka ‘K.I.S.S.’, Keep It Simple Stupid• Consistency• Discipline

All our investment ideas are rule-based methodologies driven by systematic and quantitative models.

Hinde Dividend Value Strategy

Hinde Dividend Value Strategy seeks to generate a total return from an actively managed basket of UK dividend-paying stocks. The strategy selects 20 highly liquid, mid-to-large capitalised stocks on an equally-weighted basis, which offer the highest total return potential. The 50%

Hedge version of the strategy would then be subject to a strategic Beta Hedge*, which is designed to cover 50% of the value of the UK stock basket at all times.

The 50% hedge is maintained using UK equity benchmark indices to reduce exposure to overall market volatility, but without reducing overall total returns to the market over the long run. The Hinde Dividend Value Strategy (100% Hedge) would deploy a full beta hedge at all times.

Hinde Dividend Value Matrix ®

The strategy employs a quantitative, systematic methodology, whereby FTSE 100 and FTSE 250 constituent stocks are screened using the Hinde Dividend Value Matrix®, a proprietary stock-rating system. We use the same system to select stocks for any of our strategies, long-only, 50% Hedge or 100% Hedge. The only difference is clearly the extent of the hedge on the exposure to the overall market.

APPENDIX II

HOW WE THINK


The basic premise of the strategy is to accelerate returns by selecting relatively high yielding stocks that offer the highest potential for capital revaluation. The dynamic rotation of stocks each quarter enables us to sell stocks where the capital revaluation and dividend has been captured, and use this additional capital to invest in more undervalued quality companies. If successful, this cycle of capture and re-investment offers the chance to significantly improve the total return generated by the Dynamic Portfolio.

The basis of the stock selection process is the Hinde Dividend Value Matrix®, which is a derived process that looks at 3 crucial variables:

* Beta is the stock’s sensitivity to market movements, e.g. if a share has a beta of 1.5 its price tends to move by 1.5% for each 1% move in the index

1. Dividend Screen

The top ranking stocks will be those offering a relatively high dividend. A composite of the following criteria comprises the Dividend Rank:

• Relative Dividend Yield• Dividend Capture• Payout ratios

The Relative Dividend Yield assesses if a company pays a higher dividend than the Index it derives from (the FTSE 100 or FTSE 250). The Dividend Capture criteria explain how quickly and how much of the dividend is paid at any point in time. The Payout Ratio gives a snapshot of whether a company will be able to maintain and grow its dividend. It helps us to assess how much of a company’s revenue, profit or cash flow is paid out in dividends.

The lower the amount of dividends paid out as a percentage of profits, the healthier future dividend potential will be. History is for once a good guide as to whether companies will continue to pay and grow their dividends. A stock with an excessively high yield relative to its sector or the overall market is invariably showing signs of heightened risk to its dividend sustainability and often the viability of the company itself. The screen incorporates a limit on yield dispersions from the overall market.

The strategy is emphatically not a yield chaser. It is the Performance and Value screens that are used to assess the total return potential of a stock by analysis of how undervalued it is relative to its fundamentals, sector and overall market index.

2. Performance Screen

The top ranking stocks have the poorest relative

performance to their index over multiple time horizons.

A composite rank of the following criteria provides the Performance Rank:

• Stock relative performance ranked over multiple time periods

• Average of time periods taken to select rank of stocks

3. Value Screen

The top ranking stocks by key fundamental criteria show stable fundamentals and exhibit upside momentum growth potential. The following are some of the criteria that provide the Value Rank:

• Value - Price to Book (intangible book adjustment), Free Cash Flow metrics

• Quality - Return on Investment and Earnings metrics

• Financial Stability - Debt levels, Coverage and Payout ratios

• Volatility - Stock variance, Dividend variance

• Momentum - Sales Growth, Cash flow metrics

• Liquidity - Minimum market capitalisation relative to index, Shares outstanding

Implementing the Hinde Dividend Value Matrix ®

The FTSE 100 and FTSE 250 stocks are ranked using the Dividend, Performance and Value screens. An equally-weighted composite rank is then taken of these 3 ranks, which provides a final ranking from which a selection of 20 stocks is made for the portfolio.

The stocks with the highest ranking are compiled for the FTSE 100 and the FTSE 250. The top 10 from each index are then taken, subject to diversification rules, which entail that normally only 1 stock per sector per index can be invested in. For example, if the top 10 stocks are all mining companies, the selection process would take the first of these and then move on to select the next top stock from another sector. As long as a stock has the highest score in its sector, the fact that it has appeared in the final ranking means it is already eligible for investment. In exceptional circumstances, it may be that more than one stock has to be selected from an individual sector.


DISCLAIMER

This newsletter is intended to give general advice only on the importance of dividends within the equity space. The investments mentioned are not necessarily suitable for any individual, and you should use this information in conjunction with other advice and research to determine its suitability for your own circumstances and risk preferences. The value of all securities and investments, and the income from them, can fall as well as rise. Your investments may be subject to sudden and large falls in value and you may get back nothing at all. You should not buy any of the securities or other investments mentioned with money you cannot afford to lose. In some cases there may be significant charges which may reduce the value of your investment. You run an extra risk of losing money when you buy shares in certain securities where there is a big difference between the buying price and the selling price. If you have to sell them immediately, you may get back much less than you paid for them. The price may change quickly, particularly if the securities have an element of gearing. In the case of investment trusts and certain other funds, they may use or propose to use the borrowing of money to increase holdings of investments or invest in other securities with a similar strategy and as a result movements in the price of the securities may be more volatile than the movements in the price of underlying investments. Some investments may involve a high degree of ‘gearing’ or ‘leverage’. This means that a small movement in the price of the underlying asset may have a disproportionately dramatic effect on your investment. A relatively small adverse movement in the price of the underlying asset can result in the loss of the whole of your original investment. Changes in rates of exchange may have an adverse effect on the value or price of the investment in sterling terms, and you should be aware they may be additional dealing, transaction and custody charges for certain instruments traded in a currency other than sterling. Some investments may not be quoted on a recognised investment exchange and as a result you may find them to be ‘illiquid’. You may not be able to trade your illiquid investments, and in certain circumstances it may be difficult or impossible to sell or realise the investment. Investment in any of the assets mentioned may have tax consequences and on these you should consult your tax adviser. The opinions of the authors and/or interviewees of/in each article are their own, and are not necessarily those of the publisher. We have taken all reasonable care to ensure that all statements of fact and opinion contained in this publication are fair and accurate in all material respects. All data is from sources we consider reliable but its accuracy cannot be guaranteed. Investors should seek appropriate professional advice if any points are unclear. Ben Davies and Mark Mahaffey the editors of this newsletter, are responsible for the research ideas contained within. They or any of the contributors or other associates of the publisher may have a beneficial interest in any of the investments mentioned in this newsletter.

Disclosures of holdings: None relevant to any content discussed within this issue of the newsletter

This score is derived from 3 inputs that have been obtained from all the external analysts at leading institutions who are covering the stock:

1. The 12 month target price in relation to current price

2. The number of analysts covering the stock

3. The recommendation analysis, e.g. STRONG SELL, SELL, UNDERPERFORM or HOLD

This score is used to observe the other analysts’ view of the stock and is helpful when understanding the methodology that other analysts use to determine their 12-month target price. We ultimately get a blend of price targets that is based on different valuation metrics.

EAS Score Output:

1. The combined score will vary from 30-702. A stock with a lowest score of 30 shows the majority

of analysts not only have a full sell/underweight recommendation, but also a low 12-month target

price in relation to current price.3. A stock with the highest score of 70 shows the majority

of analysts not only have a full buy/overweight recommendation, but also a high 12-month target price in relation to current price.

Note:

On a standalone basis, the EAS score must be viewed in the following context:

• Equity analysts issue far more positive recommendations than negative

• If all analysts are overwhelmingly bearish or bullish, then this can signal a contrarian position be held, but this is determinate on the where the stock is valued.

However, in conjunction with the HDVM ®, we have found the score to be useful when it is high or momentum is turning higher, as this suggests that the stock offers deep value.

EXTERNAL ANALYST SCORE (EAS)

overview what’s inside - hinde capital · including paddy power, william hill, ladbrokes, bet365,...

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