Professional Documents
Culture Documents
&
Portfolio Strategy
Conference Call Information
Agenda | 3
Blowing
Bubbles
Never Ever Be Wrong On Your Own
Blowing Bubbles | 5
You Can Be Wrong in Company
Speculative rally is
consistent with
year three of the
presidential cycle.
Blowing Bubbles | 6
But Ultimately, Investors Must Face Reality
Secular bear
markets historically
bottom below
replacement cost.
Blowing Bubbles | 7
The Tricky Part is Getting the Timing Right
Blowing Bubbles | 8
Timing Uncertainty Creates “Career Risk”
Blowing Bubbles | 9
But Value Ultimately Pulls Stocks Back to Earth
Blowing Bubbles | 10
“Stocks for the Long Run” is a Flawed Investment Plan
- Mike Tyson
Blowing Bubbles | 11
Today’s Market
Landscape
Broadly Speaking, Stocks Are Expensive
S&P PRICED AT 24X NORMALIZED EARNINGS MARKET HAS RARELY BEEN THIS EXPENSIVE
THE RECENT RALLY HAS LEFT LITTLE PROSPECT FOR ADDITIONAL GAINS
You
are
here
SHILLER PE QUINTILES
“The best investors in the world do not target returns. They focus on risk.”
-Seth Klarman
* Asset Allocation is illustrative of the delta-adjusted exposure of our core long portfolio as of March 31, 2011 (excluding macro hedges).
Ten Themes| 19
Mr. Market’s Free Lunch - High Quality, Japanese Equities
0.0%
-0.1%
-2.0%
-2.8%
-4.0%
US Large Cap Equity US Small Cap Equity US High Quality Emerging Equity Japanese Equity
Source: GMO
Ten Themes | 20
Attractive pipeline of Special Situations – Visteon Corp
77.50
• Visteon management has addressed
75.00
loss‐making operations and reduced debt
by over $2 billion through bankruptcy.
72.50
70.00
• Net cash position with no near term
67.50 maturities and tremendous exposure to
65.00 secular growth in Asian auto sales.
62.50
60.00
• Consistently beat estimates during
Began purchasing shares at prices
bankruptcy and management has been
57.50
which valued the core business at granted 3% of restricted stock - plenty of
55.00
roughly 1x EV/EBITDA. incentive to get it right this time.
52.50
Continued accumulating shares as
price fell to levels where the market
50.00 was assigning a negative value to the • We believe VC can ultimately generate
company’s core business.
47.50 low double‐digit EBITDA margins,
45.00 relative to the 8.8% level today.
Ten Themes | 21
Education is cheap in America today – Apollo Group
Deleveraging is a delayed and lengthy process often lasting a full decade or longer.
Ten Themes | 23
Private Sector Balance Sheets Are Improving, But . . .
Ten Themes | 24
Deleveraging remains a headwind for the consumer
Ten Themes | 25
While Debt is Simply Transferred to the Public Sector
Ten Themes | 26
Invariably Leading to a Wave of Defaults
Source: This Time is Different: A Panoramic View of Eight Centuries of Financial Crisis
Ten Themes | 27
Hope is Not an Investment Process
Ten Themes | 28
The Situation in Europe Continues to Deteriorate
Ten Themes | 29
Japanese End Game - The Elephant in the Room
Ten Themes | 30
There’s No Easy Way Out
Ten Themes | 31
When All Else Fails – “Put Some Lipstick on This Pig”
• Japanese CDS:
• JGB Caps:
Ten Themes | 32
Heads I Win, Tails You Lose
Ten Themes | 33
Optimal Portfolio Must Protect Against Either Scenario
Silver: 5.1%
Gold: 1.8%
Ten Themes | 34
China – The 800 Pound Gorilla
Ten Themes | 35
A Chinese Credit Unwind Would Crush Risk Assets
Leaving “Chinese Suburbs” Highly Exposed
• AUD Swaptions:
Ten Themes | 38
Forced Selling . . . Opportunity for Patient Investors
Ten Themes | 39
Broyhill Bottom Line
Cheap Insurance
Positions designed to protect capital from impairment without pressuring portfolio returns
Ten Themes | 40
Contact Information
Appendix| 41
Disclosures
This material has been prepared solely for the purposes of illustration and discussion. “Broyhill Asset Management” is the marketing name for the investment
management business conducted by Broyhill Asset Management, LLC. and its affiliates. Broyhill Asset Management, LLC is an SEC Registered Investment
Advisor. Private investment vehicles are offered through Broyhill Wakin General Partners LLC, Surety Capital Management LLC, and Broyhill Strategic
Partners LLC, and are only offered by delivery of confidential offering memorandum and subscription materials to eligible investors who meet certain statutory
and/or regulatory criteria. Each General Partner is a separate legal entity and is affiliated with Broyhill Asset Management, LLC through common ownership
and control.
Under no circumstances should the information contained herein be used or considered as an offer to sell, or solicitation of an offer to buy any security. Any
security offering is subject to certain investor eligibility criteria as detailed in the applicable offering documents. The information contained herein is
confidential and may not be reproduced or circulated in whole or in part. The information is in summary form for convenience of presentation, it is not
complete and should not be relied upon as such.
Any information, data, statement, opinions, or projections made herein may contain certain forward looking statements, projections, and information that are
based on the beliefs of Broyhill Asset Management as well as assumptions made by, and information currently available to, Broyhill Asset Management. Such
statements reflect the view of Broyhill Asset Management with respect to future events and are subject to certain risks, uncertainties and assumptions
(including, but not limited to, changes in general economic and business conditions, interest rate and securities market fluctuations, competition from within
and without the investment industry, new products and services in the investment industry, changes in customer profiles, and changes in laws and regulations
applicable to Broyhill Asset Management). Should one or more of these other risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those described herein.
All information, including performance information, has been prepared in good faith; there are no representations or warranty expressed or implied, as to the
accuracy or completeness, of the information, and nothing herein shall be relied upon as a promise or representation as to the past or future performance. This
material may include information that is based, in part or in full, on hypothetical assumptions, models, and/or other analysis (which may not necessarily be
described herein). No representations or warranty are made as to the reasonableness of any such assumptions, models, or analysis. The information set forth
herein was gathered from various sources which are believed, but not guaranteed, to be reliable. Unless stated otherwise, any opinions expressed herein are
current as of the date hereof and are subject to change at any time. Accordingly, neither Broyhill Asset Management nor its principals or affiliates make any
representations as to the timeliness of any information in this presentation.
Appendix| 42