Turtle Creek Asset Management
Presented to: The Centre for the Advancement of Value Investing Education
July 24, 2015
An independent investment management firm focused on long term capital growthfor a clientele of high net worth individuals, families and institutions
PRIVATE & CONFIDENTIAL
Page 2
Turtle Creek Overview
• 17 years (since October 1998)
• Long only, North American equities (primarily Canadian)
• Average $7 billion market capitalization
• 25 holdings
• Fund size of $1 billion
PRIVATE & CONFIDENTIAL
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Five Distinct Markets Over 17 Years
-100%
-50%
0%
50%
100%
150%
200%
250%
300%
350%
400%
Inception
to mid '00
'00 - '03 '03 - '07 Credit
Crisis
'09 to
present
Retu
rn
Total Return
0%
500%
1000%
1500%
2000%
2500%
3000%
3500%
4000%
4500%
5000%
Since Inception
Retu
rn
Since inception, 17 years ago, $1 invested in Turtle Creek has grown to
$45.16 (26% compound annual return net to investors)
Source: Bloomberg, TCAM. Please see Performance Disclosures in Appendix. As at June 30, 2015.
S&P 500 is a Total Return Index. All data is in a common currency (Canadian dollars).
Focus on Risk Reduction Leads to Higher Returns
Turtle Creek
S&P 500
S&P 500
Turtle Creek
PRIVATE & CONFIDENTIAL
Page 4
Investment Approach
Security Selection – Seek out highly intelligent organizations
Valuation – Exclusively cash flow focused
Complexity
Uncertainty
Balanced
Portfolio Construction
PRIVATE & CONFIDENTIAL
Page 5
Portfolio Construction
• Portfolio weightings are chiefly determined by long term expected
returns – based on a dollar invested today, the more cash we expect
a company to pay out to shareholders in the future the larger the
relative weighting.
• Overall portfolio construction is based on a proprietary multi-factor
model that has been used (and refined) since Turtle Creek was
founded.
• Additional factors include:
i. Relative risk assessment
ii. Quality of management
iii. Alignment with shareholders
Result is an Optimized Portfolio
PRIVATE & CONFIDENTIAL
Page 6
Continuous Portfolio Optimization
• As prices change, long term expected returns change and the
portfolio is no longer optimal.
• In response we incrementally take money from those holdings that
are in market favour (where prices are rising and expected returns
are falling) and invest in those that are out of favour (where prices
are declining and expected returns are increasing).
• This price to value discipline is used in all market environments – our
approach has not changed over the past 17 years.
• This price to value discipline reduces risk.
Continuous Portfolio Optimization (CPO) is a key source of
outperformance and risk mitigation
PRIVATE & CONFIDENTIAL
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0%
5%
10%
15%
20%
Dec-98 Dec-00 Dec-02 Dec-04 Dec-06 Dec-08 Dec-10 Dec-12 Dec-14
Sample Holding: Open Text Corporation
Investment Process Example
Source: Bloomberg, TCAM. As at June 30, 2015.
Po
rtfo
lio
Weig
hti
ng
(lin
ear
scale
)
Pri
ce &
In
trin
sic
Valu
e (
US
$)
(lo
g s
cale
)
Intrinsic Value Per Share
$2
$4
$8
$16
$32
$64
$128
$0
Portfolio
Weighting
CAGR: 16%
PRIVATE & CONFIDENTIAL
Page 8
Sample Holding: Open Text Corporation
Investment Process Example
Source: Bloomberg, TCAM. As at June 30, 2015.
Po
rtfo
lio
Weig
hti
ng
(lin
ear
scale
)
Intrinsic Value Per Share
Share Price
$2
$4
$8
$16
$32
$64
$128
$0
Portfolio
Weighting
0%
5%
10%
15%
20%
Dec-98 Dec-00 Dec-02 Dec-04 Dec-06 Dec-08 Dec-10 Dec-12 Dec-14
Pri
ce &
In
trin
sic
Valu
e (
US
$)
(lo
g s
cale
)
PRIVATE & CONFIDENTIAL
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0%
5%
10%
15%
20%
Dec-98 Dec-00 Dec-02 Dec-04 Dec-06 Dec-08 Dec-10 Dec-12 Dec-14
Sample Holding: Open Text Corporation
• Turtle Creek annualized IRR of 64% vs. 11% annualized holding period return.
Investment Process Example
Source: Bloomberg, TCAM. As at June 30, 2015.
Po
rtfo
lio
Weig
hti
ng
(lin
ear
scale
)
Intrinsic Value Per Share
Share Price
$2
$4
$8
$16
$32
$64
$128
$0
Portfolio
Weighting
Pri
ce &
In
trin
sic
Valu
e (
US
$)
(lo
g s
cale
)
PRIVATE & CONFIDENTIAL
Page 10
0%
5%
10%
15%
20%
Dec-98 Dec-00 Dec-02 Dec-04 Dec-06 Dec-08 Dec-10 Dec-12 Dec-14
Sample Holding: Open Text Corporation
• Turtle Creek annualized IRR of 64% vs. 11% annualized holding period return.
Investment Process Example
Source: Bloomberg, TCAM. As at June 30, 2015.
Po
rtfo
lio
Weig
hti
ng
(lin
ear
scale
)
Intrinsic Value Per Share
Share Price
Portfolio
Weighting$2
$4
$8
$16
$32
$64
$128
$0
10%
20%
30%
Green lines represent the price levels at which the long term expected return
from the Company's cash payments to shareholders is 10%, 20% and 30%10%
10%
20%
30%
30%
20%
Pri
ce &
In
trin
sic
Valu
e (
US
$)
(lo
g s
cale
)
PRIVATE & CONFIDENTIAL
Page 11
0%
5%
10%
15%
20%
Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14
Sample Holding: TransForce Inc.
Source: Bloomberg, TCAM. As at June 30, 2015.
Investment Process Example
Portfolio Weighting
$2
$4
$8
$16
$32
$64
Po
rtfo
lio
Weig
hti
ng
(lin
ear
scale
)
$0
Pri
ce &
In
trin
sic
Valu
e (
C$)
(lo
g s
cale
)
Intrinsic Value Per Share
PRIVATE & CONFIDENTIAL
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0%
5%
10%
15%
20%
Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14
Sample Holding: TransForce Inc.
Source: Bloomberg, TCAM. As at June 30, 2015.
Investment Process Example
Portfolio Weighting
Share Price
$2
$4
$8
$16
$32
$64
Po
rtfo
lio
Weig
hti
ng
(lin
ear
scale
)
$0
Intrinsic Value Per Share
Pri
ce &
In
trin
sic
Valu
e (
C$)
(lo
g s
cale
)
PRIVATE & CONFIDENTIAL
Page 13
Sample Holding: TransForce Inc.
• Turtle Creek annualized IRR of 44% vs. 15% annualized holding period return.
0%
5%
10%
15%
20%
Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14
Source: Bloomberg, TCAM. As at June 30, 2015.
Investment Process Example
Portfolio Weighting
Share Price
$2
$4
$8
$16
$32
$64
Po
rtfo
lio
Weig
hti
ng
(lin
ear
scale
)
$0
Intrinsic Value Per Share
Pri
ce &
In
trin
sic
Valu
e (
C$)
(lo
g s
cale
)
PRIVATE & CONFIDENTIAL
Page 14
Sample Holding: TransForce Inc.
• Turtle Creek annualized IRR of 44% vs. 15% annualized holding period return.
0%
5%
10%
15%
20%
Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14
Source: Bloomberg, TCAM. As at June 30, 2015.
Investment Process Example
Portfolio Weighting
Share Price10%
$2
$4
$8
$16
$32
$64
Po
rtfo
lio
Weig
hti
ng
(lin
ear
scale
)
$0
20%
30%
10%
10%
20%
20%
30%
30%
Intrinsic Value Per Share
Green lines represent the price levels at which the long term expected return
from the Company's cash payments to shareholders is 10%, 20% and 30%
Pri
ce &
In
trin
sic
Valu
e (
C$)
(lo
g s
cale
)
PRIVATE & CONFIDENTIAL
Page 15
Disclosures
Disclosures
This document should not be considered as a solicitation. Turtle Creek Equity Fund is offered by Offering Memorandum only
to investors who meet certain eligibility or minimum purchase requirements. The Offering Memorandum contains important
information about the Fund and investors are urged to read it before investing.
This publication may contain confidential and proprietary information. Circulation, disclosure, or dissemination of all or any
part of this material to any unauthorized persons is prohibited. Unauthorized reproduction or distribution of all or any part of
this material is prohibited.
Turtle Creek Asset Management Inc. has expressed its own views and opinions in the document, and these may change.
Performance Disclosures
Turtle Creek's performance is of Turtle Creek Investment Fund Class A Units ("TCIF") to November 1, 2008 and Turtle Creek
Equity Fund thereafter and is net of all fees, carried interest, and expenses. Since Turtle Creek Equity Fund maintains an
almost identical portfolio with that of TCIF (with the exception of TCIF’s private company investments), historical performance
for TCIF has been combined with that of Turtle Creek Equity Fund. There were no private investments in TCIF before 2003
and, in aggregate, the private investments had a negligible impact on TCIF's returns to November 1, 2008. TCIF’s carried
interest structure is not the same as Turtle Creek Equity Fund’s (details available upon request). Past performance must never
be construed as investment advice or a prediction of future performance.
