smead value fund - smead capital management...nvr inc percentage of fund 6 current and future...

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

1st Quarter 2017 Webcast

Smead Value 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: Lennar CorporationTony A. Scherrer, CFA, Portfolio Manager

Own Meritorious Businesses, Not Stock MarketsBill Smead, Lead Portfolio Manager

*Institutional Shares were renamed I1 shares on 11/21/2014 with a new ticker SVFFX

Investor Shares Gross Expense Ratio 1.26%A Shares Gross Expense Ratio 1.22%I1 Shares Gross Expense Ratio 1.00%

Performance data quoted represents past performance; 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. Performance data current to the most recent month end may be obtained by calling 877-807-4122. Performance for SVFAX (w/load) reflects maximum sales charge of 5.75%. Performance for SVFAX does not reflect maximum sales charge of 5.75%. If reflected, the load would reduce the performance amount quoted. SVFAX applies a maximum Deferred Sales Charge on Class A shares only to purchases of $1,000,000 or more that are redeemed within 18 months of purchase. Performance data does not reflect the redemption fee. If it had, returns would be reduced.

Investor Class shares of the Fund commenced operations on January 2, 2008. I1 Class shares of the Fund commenced operations on December 18, 2009. Performance shown for I1 Class shares prior to its inception reflects the performance of Investor Class shares. Class A shares of the Fund commenced operations on January 24, 2014. Performance shown for Class A shares prior to its inception reflects the performance of Investor Class shares, adjusted to reflect Class A expenses.

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Quarter-End PerformanceAverage Annualized Total Returns (%) as of March 31, 2017

Qtr YTD 1 Year 3 Year 5 YearSince

Inception

Smead Value Fund Investor Class (SMVLX) 7.15% 7.15% 14.44% 7.55% 14.67% 7.79%

Smead Value Fund A Share w/ load (SVFAX) 0.97% 0.97% 7.89% 5.43% 13.21% 6.92%

Smead Value Fund A Share w/o load (SVFAX) 7.14% 7.14% 14.49% 7.53% 14.56% 7.61%

Smead Value Fund I1 Share Class (SVFFX)* 7.21% 7.21% 14.76% 7.84% 14.96% 8.01%

Russell 1000 Value Index 3.27% 3.27% 19.22% 8.67% 13.13% 6.59%

S&P 500 Index 6.07% 6.07% 17.17% 10.37% 13.30% 7.59%

Past performance does not guarantee future results.4

Smead Value FundKey Facts and Characteristics as of March 31, 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 Value FundTop Ten Holdings as of March 31, 2017

4.16%

4.41%

4.67%

5.06%

5.14%

5.26%

5.43%

5.58%

5.78%

6.57%

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

PayPal Holdings Inc

Tegna Inc

Aflac Inc

eBay Inc

American Express Co

Bank of America Corp

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 / DeletionsFirst Quarter 2017

> Adds to position weightings:– Express Scripts (ESRX)– Nordstrom (JWN)– Lennar (LEN)– Walgreens (WBA)

> Trims to position weightings:– Bank of America (BAC)– JPMorgan & Co. (JPM)– Comcast Corporation (CMCSK)– Home Depot (HD)– NVR Inc. (NVR)– TEGNA Inc. (TGNA)

> Sells: – Cabela's (CAB)– Gannett Co. Inc. (GCI)

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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

Own Meritorious Businesses, Not Stock Markets

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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Own Meritorious Businesses, Not Stock MarketsLennar Corporation: meets an economic need

Past performance is no guarantee of future results. Source: Lennar slide deck, May 17, 2016, JP Morgan conference. Data for the time period 1/1/1970-12/31/2015. Data from 1/1/2016 – 12/31/2018 is projected.

Past performance is no guarantee of future results. Source: Bloomberg. All charts are as of 12/31/2016.10

Own Meritorious Businesses, Not Stock MarketsLennar Corporation: strong competitive advantage

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Own Meritorious Businesses, Not Stock MarketsLennar Corporation: long history of profitability & operating metrics

Past performance is no guarantee of future results. Source: Bloomberg. For the first chart, data is for the time period 1/1/1990-12/31/2016. For the second chart, data is for the time period 1/1/2010-12/31/2016.

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Own Meritorious Businesses, Not Stock MarketsLennar Corporation: high levels of free cash flow

Past performance is no guarantee of future results. Source: Bloomberg. Data for the time period 1/1/2000-12/31/2016. Data projected through 12/31/2018.

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Own Meritorious Businesses, Not Stock MarketsLennar Corporation: low price in relation to intrinsic value

Past performance is no guarantee of future results. Source: ThomsonReuters Baseline. Data is as of 3/30/2017.

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Own Meritorious Businesses, Not Stock MarketsLennar Corporation: history of shareholder friendliness

Past performance is no guarantee of future results. Source: Bloomberg. Data for the time period 1/31/1990-3/31/2017.

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Own Meritorious Businesses, Not Stock MarketsLennar Corporation: strong balance sheet

Past performance is no guarantee of future results. Source: Lennar slide deck, May 17, 2016, JP Morgan conferenceBofA Merrill Lynch report, Feb 12, 2016. Data for the time period 1/1/2000-12/31/2015. LTM: Last twelve months.

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Own Meritorious Businesses, Not Stock MarketsLennar Corporation: strong balance sheet

Past performance is no guarantee of future results. Source: Bloomberg. Data for the time period 1/1/2011-11/30/2016. LT: Long-term, BV: Book Value, PS: position, CDS: CDS Spread, BP: basis point and FY: Fiscal Year.

Strong Balance Sheet Data as of 2/28/2017 Enterprise Value $15.3Bn$1.1 Bn in Cash & Cash-Equiv Debt/Equity ratio: 63% Book Value ps $29.96$4.6 Bn in Long-Term Debt Debt/Total Cap ratio: 39% Tangible BV ps $29.80$4.6 Bn in TOTAL Debt Net Cash (Debt) ps: -$15.04 Price / Tgbl BV 1.7x$7.2 Bn in Equity Interest Coverage Ratio of 4.5x ; FCF could wipe out Debt in 10.6

5-Yr CDS Spread 78 bp (1-Yr Default Likelihood 0.03%); S&P LT Credit Rating BB; Moody's LT Credit Rating Ba1

Past performance is no guarantee of future results. Source: Bloomberg, The Washington Service. Data as of 3/31/2017.17

Own Meritorious Businesses, Not Stock MarketsLennar Corporation: insider ownership

Top Insider Holders % held ValueMILLER STUART A 68.06% $897.3 Mil

GROSS BRUCE E 0.19% $2.6 MilLAPIDUS SIDNEY 0.13% $1.7 Mil

JAFFE JONATHAN M 0.12% $1.6 MilLANDON R KIRK 0.07% $0.9 Mil

BESSETTE DIANE J 0.02% $0.3 MilHUDSON SHERRILL W 0.02% $0.2 Mil

LENNAR CORP - B SHSLENNAR CORP-A

Top Insider Holders % held ValueMILLER STUART A 0.57% $59.6 Mil

BECKWITT RICHARD 0.55% $56.7 MilGROSS BRUCE E 0.29% $29.8 Mil

JAFFE JONATHAN M 0.23% $24 MilBESSETTE DIANE J 0.12% $12.2 Mil

SUSTANA MARK 0.09% $9.1 MilLAPIDUS SIDNEY 0.06% $6.4 Mil

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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

Presented by:Lead Portfolio Manager Bill Smead

Own Meritorious Businesses, Not Stock Markets

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Today’s Agenda

The risk in the S&P 500

A Potentially Bright Future for Main Street

Sell Joy, Buy Misery Part II

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Own Meritorious Businesses, Not Stock MarketsThe risk in the S&P 500

Dow Jones + S&P 500 1966 to 1982

Past performance is no guarantee of future results. Bloomberg. Data for the time period 12/31/1965-12/31/1982. Date range was chosen as a comparison time period where investors have favored tech stocks and indexing.

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Growth v. Value in the Market

Past performance is no guarantee of future results. Source: Fundstrat Fall 2016 “State of the Market”, page 72. Data for the time period 1/1/1995 – 3/31/2017.

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Money has Piled Into Passive

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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Agnostic and Undifferentiated Capital!

Past performance is no guarantee of future results. Source: Merrill Lynch, Jan 2017 “The Active-Passive Debate” and U.S. Trust; FactSet. Data for the time period 1/1/1990-9/30/2016.

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Past performance is no guarantee of future results.

Expensive stocks extremely expensive

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Pioneering euphoria in ‘Glam Tech’

Past performance is no guarantee of future results. Source: https://seekingalpha.com/article/4054803-s-and-p-500-sector-weights-lot-changed-8-years. Data for the time period 1/1/1990-3/31/2017.

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

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Future P/E contraction from higher future interest rates?

Past performance is no guarantee of future results. Source: http://www.tradingeconomics.com/united-states/government-bond-yield. Data for the time period 1/1/1950-12/31/2015.

http://www.tradingeconomics.com/united-states/government-bond-yield

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Today’s Agenda




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Own Meritorious Businesses, Not Stock MarketsA Potentially Bright Future for Main Street

Birth rates exploding

Past performance is no guarantee of future results. Source: National Center for Health Statistics. Data for the time period 1/1/1975-12/31/2015.

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Household formation way up as 35-44 population soars

Past performance is no guarantee of future results. Source: BofA Merrill Lynch Global Research Data for the time period 1/1/1990-12/31/2030. Forecasted data is projected.

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Has Rent Reached a Pain Point?

Past performance is no guarantee of future results. Source: http://www.businessinsider.com/peak-rent-2017-3. Data as of 2/28/2017.

http://www.businessinsider.com/peak-rent-2017-3

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Mortgage demand should soar driving interest rates


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Is Share of Labor Ready to Broaden?

Past performance is no guarantee of future results. Source: https://www.bloomberg.com/view/articles/2017-02-15/monopolies-are-worse-than-we-thought. Data for the time period 1/1/1982-12/31/2012.

https://www.bloomberg.com/view/articles/2017-02-15/monopolies-are-worse-than-we-thought

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Today’s Agenda




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Own Meritorious Businesses, Not Stock MarketsSell Joy, Buy Misery Part II

Sell ‘Glam Tech’

Past performance is no guarantee of future results. Source: https://www.wired.com/2017/02/programming-is-the-new-blue-collar-job/

https://www.wired.com/2017/02/programming-is-the-new-blue-collar-job/

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Past performance is no guarantee of future results. Source: The Economist

Sell ‘Glam Tech’

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Sell overpriced energy


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Sell ‘Glam Staples’

Past performance is no guarantee of future results. Source: Bloomberg Data for the time period 1/1/2007-3/31/2017.

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Sell Safety / Buy Risk

Past performance is no guarantee of future results. Source: NACUBO-Commonfund Study of Endowments, Data for the time period 1/1/2002-12/31/2016.

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Buy homebuilding and home formation (LEN, NVR, HD, CMCSK, SNI, DIS)

Past performance is no guarantee of future results. Source: Bloomberg. Data for the time period 1/1/1997-12/31/2016. LEN (Lennar), NVR (NVR, Inc.), HD (Home Depot), CMCSK (Comcast), SNI (Scripps Networks Interactive) and DIS (Disney).

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Buy homebuilding and home formation (LEN, NVR, HD, CMCSK, SNI, DIS)

Past performance is no guarantee of future results. Source: https://www.wsj.com/articles/what-will-the-housing-market-do-next-1491211806. Data for the time period 1/1/1960-12/31/2016. LEN (Lennar), NVR (NVR, Inc.), HD (Home Depot), CMCSK (Comcast), SNI (Scripps Networks Interactive) and DIS (Disney).

https://www.wsj.com/articles/what-will-the-housing-market-do-next-1491211806

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Homebuilding’s Affect on GDP

Past performance is no guarantee of future results. Source: https://www.wsj.com/articles/sluggish-housing-recovery-took-300-billion-toll-on-u-s-economy-data-show-1490526643. Data for the time period 1/1/1959-12/31/2016. GDP: Gross Domestic Product.

https://www.wsj.com/articles/sluggish-housing-recovery-took-300-billion-toll-on-u-s-economy-data-show-1490526643

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Financials: Net Interest Margin Nowhere Near Peak Levels

Past performance is no guarantee of future results. Source: Fundstrat / Bloomberg, Data for the time period 1/1/1994-12/31/2016. Shaded areas represent historical recession time periods. The end of the red arrows mark the start and finish of the recessionary periods.

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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.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.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. 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.Price/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

Past performance is no guarantee of future results.

Consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. The statutory and summary prospectuses contain this and other information about the Fund and is available at www.smeadcap.com or by calling 877-807-4122. Read carefully before investing.

Mutual fund investing involves risk. The Fund is non-diversified, meaning it may concentrate its assets in fewer individual holdings than a diversified fund. Therefore, the fund is more exposed to individual stock volatility than a diversified fund.

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 Fourth-party information presented in this material. This material is not to be duplicated or recreated without prior written consent of Smead Capital Management.

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 Smead Value Fund is distributed by ALPS Distributors, Inc. ALPS Distributors, Inc. and Smead Capital Management are not affiliated.

Disclosures

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| Questions & Answers

Email [email protected] or call 877.701.2883

| SMEAD CAPITAL MANAGEMENT600 University Street, Suite 2412Seattle, WA 98101

SVF000259 Exp. 7/31/2017

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smead value fund - smead capital management...nvr inc percentage of fund 6 current and future...

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