smead us value ucits fund - smead capital management · featured stock: walgreens boots alliance....

Opinions expressed are those of Smead Capital Management, are subject to change, are not guaranteed, and should not be considered recommendations to buy or sell any security.

© 2017 Smead Capital Management (SCM), All Rights Reserved.www.smeadcap.com/UCITS

Institutional Investor Use Only

2nd Quarter 2017 Webcast

Smead US Value UCITS Fund

This material is provided for informational purposes only and should not be construed as investment advice. Forecasts and opinions reflect the personal

judgments of the presenter and may not reflect those of Smead Capital Management. Statements and opinions are subject to change.


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Today’s Agenda

Performance, Characteristics and Top 10 HoldingsCole Smead, CFA, Portfolio Manager

Featured Stock: Walgreens Boots AllianceTony A. Scherrer, CFA, Portfolio Manager

What Doesn't Kill You Makes You Stronger!Bill Smead, Lead Portfolio Manager


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Quarter-End PerformanceAverage Annualized Total Returns (%) as of 30/6/2017

Gross Expense Ratio 1.15%

Investors should carefully read the prospectus, the key investor information document and all other relevant documentation before investing in the Fund. Performance data quoted represents past performance realized within Pareturn – Smead US Value Fund (the Absorbed Sub-Fund), whose assets and liabilities have been transferred to the Sub-Fund with effect 22 February 2016; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Currency fluctuations may have a negative impact on the value of an investment in the Fund. Net performance results are calculated after management fees and certain operational costs, commissions, fees and other charges that could have a negative impact on performance. The performance figures given are a measure of the change in net asset value of the Fund which are net of all Fund fees and expenses but do not take into account taxes or charges.

Quarter YTD 1 Year 3 Years

SinceInception

(29/11/2013)

Smead US Value UCITS Fund I USD ACC 2.83% 10.13% 18.44% 7.27% 8.34%

Russell 1000 Value Index 1.34% 4.66% 15.53% 7.36% 9.26%

S&P 500 Index 3.09% 9.34% 17.90% 9.61% 10.86%


Past performance does not guarantee future results.4

Smead US Value UCITS FundKey Facts and Characteristics as of 30/6/2017


Fund holdings and sector allocations are subject to change at any time and are not recommendations to buy or sell any security. 5

Smead US Value UCITS FundTop Ten Holdings as of 30/6/2017

4.75%

4.84%

5.00%

5.09%

5.21%

5.28%

5.43%

5.46%

5.86%

5.93%

0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00%

Lennar Corp

Aflac Inc

PayPal Holdings Inc

eBay Inc

Bank of America Corporation

American Express Co

JPMorgan Chase & Co

Berkshire Hathaway Inc B

Amgen Inc

NVR Inc

Percentage of Fund


Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security. 6

Portfolio Additions / DeletionsSecond Quarter 2017

> Buys:– Target Corporation (TGT)

> Sells: – Express Scripts (ESRX)

> Adds to position weightings:– AmerisourceBergen Corp. (ABC)– Nordstrom (JWN)– Lennar (LEN)– Scripps Networks Interactive, Inc. (SNI)– Walgreens Boots Alliance (WBA)

> Trims to position weightings:– NVR Inc. (NVR)


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Today’s Agenda




CFA is a registered trademark owned by the CFA Institute.


Past performance is no guarantee of future results. Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security. 8

1. Meets an economic need

2. Strong competitive advantage (wide moats or barriers to entry)

3. Long history of profitability and strong operating metrics

4. Generates high levels of free cash flow (FCF)

5. Available at a low price in relation to intrinsic value

Featured Stock: Walgreens Boots Alliance

Our Eight Criteria

Favored, but not required

Required over entire holding period

May also relate to timing/portfolio weighting

For companies that don’t meet one of these, we believe our required criteria will ultimately correct or overwhelm.

6. Management’s history of shareholder friendliness

7. Strong balance sheet

8. Strong insider ownership(preferably with recent purchases)


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Featured Stock: Walgreens Boots AllianceWalgreens Boots Alliance: Meets an Economic Need

Past performance is no guarantee of future results. Source: Walgreens Boots Alliance press release “Walgreens and Alliance Boots to Combine” on August 6, 2014.


Past performance is no guarantee of future results. Source: Transcript, Q3 Earnings Conference Call, 201710

Featured Stock: Walgreens Boots AllianceWalgreens Boots Alliance: Strong Competitive Advantage


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Featured Stock: Walgreens Boots AllianceWalgreens Boots Alliance: Long History of Profitability & Operating Metrics

Past performance is no guarantee of future results. Source: Jefferies report, October 17, 2016


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Featured Stock: Walgreens Boots AllianceWalgreens Boots Alliance: High Levels of Free Cash Flow

Past performance is no guarantee of future results. Source: Bloomberg as of 6/30/2017. EBIDTA: Earnings before interest, tax, depreciation and amortization, OCF: Operating Cash Flow, CapEx: Capital Expenditure, FCF: Free Cash Flow, FCF per Share: Free Cash Flow per Share, EPS: Earnings Per Share, FCF Sales: Free Cash Flow to Sales, FCF Yield: Free Cash Flow Yield. See definitions at the end of this presentation.


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Featured Stock: Walgreens Boots AllianceWalgreens Boots Alliance: Low Price in Relation to Intrinsic Value

Past performance is no guarantee of future results. Source: ThomsonReuters Baseline

Forw

ard

Pric

e-to

-Ear

ning

s (P

/E)

Forw

ard

Pric

e-to

-Sal

es (P

/S)


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Featured Stock: Walgreens Boots AllianceWalgreens Boots Alliance: History of Shareholder Friendliness

Past performance is no guarantee of future results. Source: Bloomberg as of 12/31/2016.


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Featured Stock: Walgreens Boots AllianceWalgreens Boots Alliance: Strong Balance Sheet

Past performance is no guarantee of future results. Source: Bloomberg as of 2/28/2017.


Past performance is no guarantee of future results. Source: The Washington Service as of 6/30/2017.16

Featured Stock: Walgreens Boots AllianceWalgreens Boots Alliance: Insider Ownership


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Today’s Agenda




Opinions expressed are those of Smead Capital Management, are subject to change, are not guaranteed, and should not be considered recommendations to buy or sell any security.

© 2017 Smead Capital Management (SCM), All Rights Reserved.www.smeadcap.com/UCITS


Presented by:Lead Portfolio Manager Bill Smead

What Doesn't Kill You Makes You Stronger!


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Today’s Agenda

What is Killing Investor Enthusiasm?

How Does This Make Us Stronger?

Today's Circumstances

Where Are The Bargains?


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What Doesn't Kill You Makes You Stronger!What is Killing Investor Enthusiasm?

Indexing

Past performance is no guarantee of future results. Source: http://www.marketwatch.com/story/how-can-active-fund-management-be-dead-if-indexing-represents-only-5-of-all-assets-2017-01-13. Data for the time period 1/1/2007-11/30/2016.

http://www.marketwatch.com/story/how-can-active-fund-management-be-dead-if-indexing-represents-only-5-of-all-assets-2017-01-13


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FANG

Past performance is no guarantee of future results. Source: Stifel, June 1, 2017. Data for the time period 12/31/2014 – 5/30/2017. FANG stocks include Facebook (FB), Amazon (AMZN), Netflix (NFLX) and Alphabet (GOOGL).

S&P


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Polarized Politics

Past performance is no guarantee of future results.


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Anemic Economic Growth

Past performance is no guarantee of future results. Source: JP Morgan Guide to the Markets Q1 2017. Data for the time period 7/1/2009 – 3/31/2017. GDP: Gross Domestic Product.


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Expensive Stocks & No Stock Splits

Past performance is no guarantee of future results. Data for the time period 1/1/1980 – 12/31/2012.


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Today’s Agenda






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What Doesn't Kill You Makes You Stronger!How Does This Make Us Stronger?

Bargains

Past performance is no guarantee of future results. Source: https://seekingalpha.com/article/4054803-s-and-p-500-sector-weights-lot-changed-8-years?page=2. Data for the time period 3/9/2009 – 3/9/2017.

https://seekingalpha.com/article/4054803-s-and-p-500-sector-weights-lot-changed-8-years?page=2


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Mania Avoidance

Past performance is no guarantee of future results. Source: Strategas Research Partners. Data for the time period 1/1/2012 - 1/23/2017.

S&P

500

Cons

umer

St

aple

s Se

ctor

(pric

e)S&

P 50

0 Co

nsum

er S

tapl

es

Sect

or (b

read

th)


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Historical Long-Term Patience

Past performance is no guarantee of future results. Source: http://www.thinkadvisor.com/2015/08/31/why-and-when-active-managers-shine-and-how-to-spot. Data for the time period 1/1/1995 – 12/31/2013.

http://www.thinkadvisor.com/2015/08/31/why-and-when-active-managers-shine-and-how-to-spot


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Demographic Opportunities

Past performance is no guarantee of future results. Source: BofA Merrill Lynch “Tracking the U.S. Consumer,” September 16, 2016/ Data for the time period 1/1/1990 – 12/31/2015. Data is projected through 12/31/2030.


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Today’s Agenda






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What Doesn't Kill You Makes You Stronger!Today's Circumstances

Historically Low Rates

Past performance is no guarantee of future results. Source: ThomsonReuters Baseline. Data for the time period 1/1/1969 – 6/28/2017.


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Historically Low Rates

Past performance is no guarantee of future results. Source: Strategas Research Partners. Data for the time period 1/1/2011 – 6/23/2017. MA: Moving Average.

U.S

. 10-

Year

Yie

ldU

.S. 1

0-Ye

ar Y

ield


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Past performance is no guarantee of future results. Source: Smead Capital Management and Bloomberg. P/E: Price-to-Earnings Ratio.

Bifurcated Stocks

S&P

500

Trai

ling

P/E


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Benefits of Low Turnover

Past performance is no guarantee of future results. Source: Source: Financial Analyst Journal Jan/Feb 2013 “Shedding Light on “Invisible” Costs: Trading Costs and Mutual Fund Performance”, by Roger Edelen, Richard Evans, and Gregory Kadlec. A bid-ask spread is the amount by which the ask price exceeds the bid price for an asset in the market. Data for the time period 1/1/1995 – 12/31/2006.


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Meeting the Economic Need in Housing

Past performance is no guarantee of future results. Source: ISI Group as of 7/31/2016. Y axis represents percentage of U.S. Population. Blue line represents houses for sale per U.S. Population. Shaded areas represent recession periods. Black line represents 3-Mo. Average. Data as of 7/31/2016.


36

Today’s Agenda






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What Doesn't Kill You Makes You Stronger!Where Are The Bargains?

Media

Past performance is no guarantee of future results. Source: http://www.businessinsider.com/cable-tv-subscriber-losses-q2-chart-2017-6. Data for the time period 1/1/2012 – 12/31/2016. Data for 2017 and 2018 is estimated.

http://www.businessinsider.com/cable-tv-subscriber-losses-q2-chart-2017-6


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Healthcare

Past performance is no guarantee of future results. Source: Bloomberg. Data for the time period 1/1/2011 – 6/30/2017.

BEst

P/E

Rat

io


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Homebuilding

Past performance is no guarantee of future results. Source: Bloomberg. Data for the time period 1/1/2011 – 3/31/2017.


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Retail

Past performance is no guarantee of future results. Source: https://www.slideshare.net/jbatistich/understanding-amazoncom-the-worlds-most-disruptive-company. Data for the share position chart is as of 12/31/2016. Data for the store closures site is as of 3/31/2017.

https://www.slideshare.net/jbatistich/understanding-amazoncom-the-worlds-most-disruptive-company


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Today’s Agenda






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Today’s Agenda





Basis point: A basis point is one hundredth of one percent, used chiefly in expressing differences of interest rates.Bond Ratings: All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moody’s, Standard & Poor’s or Fitch. When a bond is rated by more than one organization, Smead Value Fund uses the highest rating available. Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself. Book Value: A company's common stock equity as it appears on a balance sheet, equal to total assets minus liabilities, preferred stock, and intangible assets such as goodwill.Capital expenditure, or CapEx, are funds used by a company to acquire or upgrade physical assets such as property, industrial buildings or equipment.Cash Flow: A revenue or expense stream that changes a cash account over a given period.CDS Spread: The buyer of the protection in a credit default swap pays a premium to the seller, and this premium is called the CDS spread.Debt/Equity: A measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity.Debt/Total Capital: A company's debt-to-capital ratio or D/C ratio is the ratio of its total debt to its total capital, its debt and equity combined.Earnings before interest, tax, depreciation and amortization (EBITDA) is a measure of a company's operating performance. Earnings per share (EPS) is the portion of a company's profit allocated to each outstanding share of common stock. Free Cash flow: measures the cash generating capability of a company by adding non-cash charges (e.g. depreciation) and interest expense to pretax income. Free cash flow per share is a measure of a company's financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding. Free cash flow to sales (FCF Sales) is a valuation ratio that measures a company's surplus cash flow against sales revenues.Free cash flow yield is an overall return evaluation ratio of a stock, which standardizes the free cash flow per share a company is expected to earn against its market price per share.

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Definitions


The Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit. It is calculated using several factors related to borrower eligibility (credit score, loan type, loan-to-value ratio, etc.). These metrics and underwriting criteria for over 95 lenders/investors are combined by MBA using data made available via the AllRegs® Market Clarity® product and a proprietary formula derived by MBA to calculate the MCAI, a summary measure which indicates the availability of mortgage credit at a point in time.MSCI World ex US Index: A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the world.Intrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business, in terms of both tangible and intangible factors.Leverage: The relationship of debt to equity.Mutual Fund Portfolio Turnover: A measure of the trading activity in the fund's portfolio of investments. In other words, how often securities are bought and sold.Operating Cash Flow (OCF): refers to the amount of cash a company generates from the revenues it brings in, excluding costs associated with long-term investment on capital items or investment in securitiesPrice/Earnings (P/E): the ratio of a firm’s closing stock price & its trailing 12 months’ earnings/share. Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard, or tangible, book value as reported in the company's balance sheet. Russell 1000 Index: The Russell 1000 Index is an index that represents the highest-ranking 1,000 stocks in the Russell 3000 Index, which represents about 90% of the total market capitalization of that index.S&P 500 Index: A market-value weighted index consisting of 500 stocks chosen for market size, liquidity, and industry group representation.

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Definitions


The information contained herein represents the opinion of Smead Capital Management and is not intended to be a forecast of future events, a guarantee of future results, nor investment advice.

This does not constitute the solicitation of an offer to purchase or subscribe for any investment, financial instrument or service in any jurisdiction where such a solicitation of an offer is unlawful. The Fund is only available for investment by non-US citizens who are not residents of the US. The Fund is not offered for sale or sold in the US, its territories or possessions. The Fund is not registered for sale to the public in all jurisdictions. The information contained herein has not been reviewed in light of your personal circumstances.Subscriptions will only be received and shares issued on the basis of the current prospectus for the Fund, the most recent financial reports and the simplified prospectus. Smead Capital Management is the investment manager of the Smead US Value UCITS Fund.

Smead Funds - Smead US Value UCITS Fund, incorporated on December 4, 2015, is a UCITS organized as an investment company with variable capital, with one Sub-Fund (Société d’investissement à capital variable, “SICAV”) under the laws of Luxembourg, and is regulated by the Commission de Surveillance du Secteur Financier (“CSSF”) which is the Luxembourg supervisory authority. Further information about the Sub-Fund, including copies of its prospectus, the last annual reports and any subsequent half yearly reports can be obtained free of charge, in English, at the registered office of the Fund, Central Administrator, the Custodian Bank, the Fund distributors or online at www.smeadcap.com. These agreements may be amended by mutual agreement of the parties involved. Luxembourg taxation regime may have an impact on the personal tax position of the investors. Depending on your own country of residence, this might have an impact on your investment. For further details you should consult a tax adviser. Duff & Phelps (Luxembourg) Management Company S.à r.l. was appointed as Management Company of the Fund with effect 4 December 2015 and may be held liable solely on the basis of any statement contained in this document that is misleading, inaccurate or inconsistent with the relevant parts of the prospectus for the Fund. Smead Capital Management is the Delegated manager of this Sub-Fund. This Fund is authorized in Luxembourg and regulated by the Commission de Surveillance du Secteur Financier. Duff & Phelps (Luxembourg) Management Company S.àr.l. is authorized in Luxembourg and regulated by the Commission de Surveillance du Secteur Financier.

Frank Russell Company is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes.Russell® is a trademark of Russell Investment Group.

The information contained within this document has not been reviewed in light of your personal circumstances.

Information provided does not constitute investment advice and no investment decisions should be made based on any information provided. Information reflects the views of Smead Capital Management as of a particular time. Such views are subject to change without notice. Information regarding holdings, allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations. This information is not a recommendation to purchase or sell a security or follow any strategy or allocation. Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts. While Smead Capital Management has used reasonable efforts to obtain information from reliable sources, no representations or warranties are made as to the accuracy, reliability or completeness of third-party information presented in this material. This material is not to be duplicated or recreated without prior written consent of Smead Capital Management.

Smead Capital Management UK (LTD) is authorised and regulated by the Financial Conduct Authority.

Disclosures

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| Questions & Answers

Email [email protected] or call +44 (0)20.8819.6490

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smead us value ucits fund - smead capital management · featured stock: walgreens boots alliance....

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