Investing for The New Normal Jarrod Cahn Fund Manager - Credo - - PowerPoint PPT Presentation

Investing for “The New Normal”

Jarrod Cahn Fund Manager - Credo Global Equity Fund

Investment Philosophy

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▪ We believe that wealth is best created and preserved through patient and disciplined investing, with a focus on the long term ▪ We follow a value-based approach to investing ▪ We seek to invest in high quality companies that are attractively priced relative to their future business prospects ▪ We believe that the market’s short-term focus creates opportunities for those willing to concentrate

• n underlying business performance

▪ We view risk as permanent losses of capital and not in terms of short-term volatility

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Value over time

1967 1970’s Warren Buffet & Charlie Munger 2009 Start of 10 years

• f value

underperformance 2020 1930’s Ben Graham & David Dodd

Source: https://howmuch.net/articles/100-years-of-americas-top-10-companies | | Market Value ($bn) Inflation Adjusted September 2017 I Market Value ($bn) as of May 13th, 2020

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Defining Value at Credo

▪ A “cheap” valuation is not an absolute number ▪ Valuation should be considered relative to:

• The company’s future potential
• Peers
• Own history
• Market

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Finding Value

▪ We believe valuation dislocations can be caused by short term events such as

• Regulatory change
• Political worries
• Spin-offs
• Changes in business cycles
• Sector consolidation

▪ We look for companies where such events have not affected the long term prospects and earnings potential

What happened?

• 34%
• - MSCI World Index
• - VIX Index

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The ‘New Normal’

Unprecedented changes in demand

Long-lasting changes to society

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▪ Ability to operate the business in the new normal

• Keeping vs firing employees (e.g. IAG/British Airways)
• Closing facilities vs keeping them open at reduced capacity (e.g. Disney)
• Managing supply chain (e.g. Apple iPhone delays)

▪ Proactiveness in the face of severely reduced demand

• Operating leverage vs Flexibility to cut certain costs completely
• Skilful management team
• Adapting business model

▪ Resilience throughout the downturn (however long it lasts)

• Availability of resources – cash is king; credit facilities
• Probability of destruction of shareholder value (equity issues, convertible debt, bankruptcy)

Does this stock offer value?

Attributes of successful businesses in the ‘New Normal’

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Building our portfolio

▪ Resilient business models and balance sheets ▪ Stable compounding returns ▪ Positive or neutral impact from COVID-19 ▪ Quality franchises ▪ Business models with competitive advantage ▪ Temporary depressed by quarantine measures ▪ Affected in all aspects (profitability and operations) ▪ Potential for binary outcomes ▪ Possible cashflow and balance sheet issues

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Risk Reward

Building our portfolio

Risk Reward

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Credo Global Equity Fund

Facebook Inc 5.5 Cigna Corp 5.3 Microsoft Corp 5.2 Flutter Entertainment plc 5.0 The Walt Disney Co 4.7 IG Group Holdings plc 4.4 HCA Healthcare Inc 4.2 Frontdoor Inc 4.8 Alibaba Group Holding Ltd 3.9 Becle SAB de CV 3.3 Total 45.6

(*) As at 30/04/2020

Top 10 Holdings (%)

(*) As at 30/04/2020

Sector and Currency Allocation (%)

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Sector Allocation* (%)

2.3 20.0 3.3 2.9 71.5 AUD GBP MXN Other (EUR, HKD, ZAR) USD 7.2 17.9 17.7 9.4 1.7 20.6 12.7 3.6 9.4 Cash and Equivalents Communication Services Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology

Currency Allocation* (%)

Credo Global Equity Fund

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Long-only equities Global exposure Large capitalisation Value bias High liquidity No derivatives, gearing or hedging

BCI Credo Global Equity Fund Feeder Fund

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Herd Immunity

The information and opinions expressed in this presentation have been compiled from sources believed to be reliable. This presentation is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning Credo Capital Limited (authorised and regulated by the FCA in the UK) (Credo) and/or its UCITS Funds referred to in this presentation. Those Funds are regarded Collective Investment Schemes in Securities (CIS) and should be considered as medium to long-term investments. CISs are traded at the ruling price and can engage in scrip lending and borrowing although none of the Funds do so. A schedule of fees, charges and maximum commissions for the Funds is available on request from the Manager. A CIS may be closed to new investors in order for it to be managed more efficiently in accordance with its mandate. Performance for the Funds is calculated using net NAV to NAV numbers with income reinvested. Full performance calculations are available from the Manager on request. For any additional information such as MDDs, prospectus and supplements please go to www.credogroup.com. None of Credo, its directors, officers or employees accepts liability for any loss arising from the use hereof or reliance hereon or for any act

• r omission by any such person or makes any representations as to its accuracy and completeness. Any opinions, forecasts or estimates herein constitute a

judgement as at the date of this presentation. There can be no assurance that the future results or events will be consistent with any such opinions, forecasts or

• estimates. Investors are warned that past performance is not necessarily a guide to future performance, income is not guaranteed, share prices may go up or down

and you may not get back the original capital invested. The value of your investment may also rise or fall due to changes in tax rates and rates of exchange if different to the currency in which you measure your wealth. Companies in the Credo Group and their respective directors, members, employees and members of their families may have positions in the securities or derivatives thereof referred to in this presentation. This presentation is intended for Credo clients to whom it has been directed and should not be relied on by any

• ther persons. No part of this presentation may be reproduced or distributed in any manner without the written permission of Credo.

Prescient Management Company (RF) (Pty) Ltd is the Representative Office in South Africa for the Credo Global Equity Fund and the Credo Dynamic Fund. Boutique Collective Investments (RF) (Pty) Ltd is the Management Company for the BCI Credo Global Equity Feeder Fund.

Important Notice

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