artemis capital fund
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Artemis Capital Fund. Mark Tyndall. Jacob de Tusch-Lec. April 2006. Artemis Capital Fund. UK Equity Fund using the SmartGARP process One of Three Artemis SmartGARP funds Global, European & UK FTSE All-Share Index Benchmark Benchmark aware, not benchmark-driven - PowerPoint PPT PresentationTRANSCRIPT
Artemis Capital Fund
Mark TyndallJacob de Tusch-LecApril 2006
2
Artemis Capital Fund
– UK Equity Fund using the SmartGARP process
– One of Three Artemis SmartGARP funds
– Global, European & UK
– FTSE All-Share Index Benchmark
– Benchmark aware, not benchmark-driven
– Up to 20% non-UK stocks in the portfolio
3
75 Filters
Artemis SmartGARP Process
Capturing Common Sense in a Systematic Fashion
500 UK Stocks & 500 Overseas
Stocks200 Economists
300 Fund Managers
2,000 Analysts
6 Categories
Reality Check & Risk Control
Decision
– Growth
– Value
– Earnings revisions
– Price Momentum
– Economic variables e.g. yield curve slopes and GDP growth
– Fund manager sentiment
Source: Internal.
4
BUY STOCKS
– which are growing faster than average
– which are less highly valued than average
– where earnings forecasts are going up
AVOID
– everything else
Artemis SmartGARP Philosophy
5
Hunting for Profit Clusters
– Don’t pick stocks to fit a theme or top down beliefs
– Discover investment and macro themes from the stocks highlighted by SmartGARP
– Current Themes– Large Caps looking relatively better vs. Mid Caps
– Mining and Industrials seeing significant earnings upgrades
– UK Banks & European Credit Cycle in Shape
– Corporate Spending and Capex picking up
– The biggest sector overweights are in Mining, Industrials, and Banks
– The biggest sector underweights are in Food & Beverages, Health Care, and Insurance
6
FTSE100 vs. FTSE250: The Gap Opening
UK: Big Caps vs Mid Caps
0.55
0.60
0.65
0.70
0.75
0.80
0.85
0.90
0.95
1.00
01 02 03 04 04 05 06
0.65
0.67
0.69
0.71
0.73
0.75
0.77
0.79
0.81
0.83
0.85
Price Relative to FTSE 250 Ex Invt Bench (GB) Forward 12M EPS Relative to FTSE 250 (GB)
...but earnings dynamics better for
FTSE100
FTSE 250 continues to outperform FTSE100...
Source: JCF as at 23rd April 2006.
7
Result: Big Cap Exposure on the Rise
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Apr-03 Dec-03 Aug-04 Apr-05 Dec-05
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%LargeMediumSmall
Source: Internal as at 31st March 2006.
8
UK’s Top 25 SmartGARP Scorers
Of the 25 highest scoring UK SmartGARP stocks, 10 are Industrials and 9 are from the Basic Resources Sector.
Industrial Goods & Services Basic Resources Other Sectors
Travis Perkins 100 Vedanta 100 Countrywide 99
Ashtead Group 99 Aquarius Platinum 100 Pendragon 98
Chemring Group 99 Xstrata 99 Northern Rock 97
Charter 98 BHP Billiton 97 HSBC 97
Michael Page 98 Anglo American 97 Sportingbet 94
Group 4 Securicor 96 Rio Tinto 95 British Energy 93
Northgate 95 Antofagasta 95
Hays 95 Corus Group 94
Cookson Group 93 Kazakhmys 94
Babcock Int'l 93
Source: Internal as at 21st April 2006.
100 = good 0 = bad
9
Stock Clusters: Mining Stocks
Red Line = 12mth forward EPS relative to FTSE Allshare EPS; Black Line = price relative to FTSE Allshare Index.Source: Datastream, 21st April 2006.
21/4/06
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 200610
20
30
40
50
60708090
100110120
VEDANTA RESOURCES10
20
30
40
50
60708090
100110120
Source: DATASTREAM
21/4/06
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 200620
30
40
50
60
70
8090
100110120130
XSTRATA20
30
40
50
60
70
8090
100110120130
Source: DATASTREAM
21/4/06
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 200610
20
30
40
50
60708090
100110
ANGLO AMERICAN10
20
30
40
50
60708090
100110
Source: DATASTREAM
21/4/06
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 200620
30
40
50
60
70
8090
100110120
RIO TINTO20
30
40
50
60
70
8090
100110120
Source: DATASTREAM
10
Stock Clusters: Industrials & Capex Story
21/4/06
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 200620
30
40
50
60
70
8090
100110120
ROLLS-ROYCE GROUP20
30
40
50
60
70
8090
100110120
Source: DATASTREAM
Red Line = 12mth forward EPS relative to DJ World Index EPS; Black Line = price relative to DJ World Index.Source: Datastream, 21st April 2006.
24/4/06
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 200610
20
40
60
80
100120140160180
VALLOUREC10
20
40
60
80
100120140160180
Source: DATASTREAM
11
Investing in Non-UK Companies
21/4/06
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 20060
20
40
60
80
100
120
140
160
180
PATTERSON UTI EN.0
20
40
60
80
100
120
140
160
180
Source: DATASTREAM
21/4/06
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 200650
60
70
80
90
100
110
120
WOOD GROUP (JOHN)50
60
70
80
90
100
110
120
Source: DATASTREAM
Red Line = 12mth forward EPS relative to DJ World Index EPS; Black Line = price relative to DJ World Index.Source: Datastream, 21st April 2006.
12
Artemis Capital Fund
– UK Equity Fund using the SmartGARP process
– One of Three Artemis SmartGARP funds
– Global, European & UK
– FTSE All-Share Index Benchmark
– Benchmark aware, not benchmark-driven
– Up to 20% non-UK stocks in the portfolio
Target Portfolio Characteristics Current Positioning
50 - 70 Holdings 59 Holdings
50% - 80% Large Cap 76.1%
20% - 40% Mid-Cap 22.0%
0% - 10% Small-Cap 1.0%
0 - 20% Overseas Holdings 19.0%
*
* as at 21st April 2006.
13
Artemis Capital Fund Performance
Source: Datastream, 21st April 2006; Benchmark is FTSE Allshare.
ARTEMIS CAPITAL FUND VS ALL SHARE
2003 2004 2005 200698
100
102
104
106
108
110
112
114
116
118
ARTEMIS CAPITAL FUND
98
100
102
104
106
108
110
112
114
116
118
Source: DATASTREAM
ARTEMIS CAPITAL FUND & ALL SHARE
2003 2004 2005 200680
100
120
140
160
180
200
220
FT ALL SHAREARTEMIS CAPITAL FUND
80
100
120
140
160
180
200
220
Source: DATASTREAM
14
Important Notice
This document is issued by Artemis Investment Management Limited which is authorised and regulated by the Financial Services Authority. This document is intended solely for institutional investors and professional advisers authorised under the Financial Services and Markets Act 2000 and should not be passed, either in whole or in part, to private investors who would be unable to place any reliance on the information contained herein.
Any research or analysis contained in this document has been procured by Artemis for its own use and may be acted on in that connection. The contents of the document are based on sources of information believed to be reliable; however, save to the extent required by applicable law or regulations, no guarantee, warranty or representation is given as to its accuracy or completeness. The document may include forward-looking statements which are based on Artemis’s current opinions, expectations and projections. It is provided to you only incidentally, and any opinions expressed are subject to change without notice.
Artemis and the Artemis Coin are trademarks of Artemis Investment Management Limited.
1200/04/06/KM
15
Top 20 Holdings by Score
100 = good 0 = bad
Stock Sector % of Fund SmartGARP Rank
Vedanta Resources Plc Basic Resources 2.1 100
Societe Generale Banks 1.5 100
Rowan Companies Inc Oil & Gas 1.0 99
Vallourec SA Industrial Goods & Services 1.1 99
Eads Industrial Goods & Services 1.5 99
Ashtead Group Industrial Goods & Services 1.1 98
Xstrata Plc Basic Resources 2.1 98
Buhrmann Industrial Goods & Services 0.9 97
Charter Industrial Goods & Services 1.0 96
Anglo American Plc Basic Resources 2.3 96
Credit Agricole Banks 2.0 96
Capitalia Spa Banks 1.4 96
Global Santa Fe Corp Oil & Gas 1.7 95
Northern Rock Banks 2.0 95
Rio Tinto Basic Resources 1.2 94
Group 4 Securicor Industrial Goods & Services 1.5 94
Hsbc Holdings Banks 4.7 94
Sportingbet Plc Travel & Leisure 1.1 94
KBC Groupe SA Banks 1.9 91
Capita Group Industrial Goods & Services 1.8 90
Source: Internal as at 21st April 2006.
16
Our Sector Bets TodayArtemis Capital Fund
% of Fund% of FTSE All-Share Spread Total
Basic Resources 11.0 7.0 4.0 100Automobiles & Parts 0.0 0.3 -0.3 94Banks 21.8 17.7 4.0 88Industrial Goods & Services 14.4 6.6 7.8 82Financial Services 5.8 4.2 1.6 76Construction & Materials 2.7 1.7 1.0 71Travel & Leisure 5.1 3.1 2.0 65Personal & Household Goods 2.7 3.4 -0.7 59Technology 0.0 0.9 -0.9 53Retail 2.4 5.1 -2.8 47Media 1.0 3.5 -2.5 41Insurance 1.1 4.2 -3.1 35Chemicals 0.0 1.0 -1.0 29Oil & Gas 18.5 18.1 0.4 24Food & Beverage 0.0 4.7 -4.7 18Utilities 6.5 4.2 2.3 12Health Care 1.9 8.4 -6.5 6Telecommunications 3.3 5.8 -2.6 0
Declining score corresponds with negative sector spreads
Source: Internal as at 21st April 2006.
17
Risk Aversion
Risk Appetite Quite Strong at the Moment...
Source: Datastream and Internal as at 21st April 2006.
2001 2002 2003 2004 2005 2006-1.00
-0.50
0
0.50
1.00
1.50
2.00
RISK AVERSION COMPOSITE
-1.00
-0.50
0
0.50
1.00
1.50
2.00
Source: DATASTREAM
18
Risk Aversion (II)
Any increase in risk aversion would probably favour FTSE 100
Source: Datastream as at 21st of April 2006.
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006-3
-2
-1
0
1
2
2.50
-30
-20
-10
0
10
20
25
RISK AVERSION Y/Y CH.FTSE100/FTSE250 % Y/Y CH(R.H.SCALE)
Source: DATASTREAM
19
Reasons to Be Cheerful ... Dividend Growth
Source: Datastream as at 21st of April 2006.
12M TRAILING DPS GROWTH
66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 0406-10
0
10
20
30
40
50
UK MARKETLONG TERM AVERAGE
-10
0
10
20
30
40
50
Source: DATASTREAM
20
Reasons to Be Cheerful ... PE-Multiples
Source: Datastream as at 21st of April 2006.
76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 065
10
15
20
25
30
UK-DS Market - PER20 YR AVERAGE
5
10
15
20
25
30
Source: DATASTREAM
21
Stellar EPS Growth... As Good as it Gets?
Source: Datastream as at 21st of April 2006.
86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06-20
-15
-10
-5
0
5
10
15
20
25
30
UK 12M TR. EPS GR. Y/Y20 YR AVERAGE
-20
-15
-10
-5
0
5
10
15
20
25
30
Source: DATASTREAM