Jupiter European Opportunities SICAV
Cédric de Fonclare
Citywire Fund Selector, Berlin
16th-18th November 2011
November 2011
Picking Winners Through the Market Cycle
Agenda
Our philosophy and process
Current positioning
Portfolio data
Stock picking in a macro-driven environment
1
2
Investment philosophy
Stock picking
Growth
Pragmatic approach
Performance driven
Focus on fundamentals
Structural vs cyclical
Valuation in context of cycle
Focus on risk-adjusted return
Direct company contact – know what you invest in
3
Investment process
Stock selection
1. Company meetings 2. Validation
4. Position monitoring 3. Valuation
4
Risk control
Monitoring
Performance review
Active risk ex post /
ex ante analytics (Barra)
Central dealing desk
(Charles River)
Portfolio analytics (FactSet)
Formal Informal
Deal sheets
Team framework
Index awareness
Investment process
Liaise with risk analytical team
Agenda
Our philosophy and process
Current positioning
Portfolio data
Stock picking in a macro-driven environment
5
6
Portfolio information
Top twenty holdings % Portfolio features
Source: Jupiter as at 31.10.11. Past performance is no guide to the future.
Investable market cap split
Number of holdings 58
Equities 95.0.%
Cash 5.0%
Top 10 holdings 29.3%
GlaxoSmithKline 3.7
Fresenius Medical Care 3.3
Sanofi. 3.2
SAP 3.1
Syngenta 2.8
HSBC 2.8
Reed Elsevier 2.7
Bayer 2.6
Linde 2.6
Zodiac Aerospace 2.5
SES 2.5
British American Tobacco 2.4
Intertek 2.1
Experian 2.0
Swatch 2.0
DNB NOR 1.9
Novo Nordisk 1.9
Adidas 1.8
Essilor International 1.8
Safran 1.7
Small: below €1bn
Mid: €1bn-5bn
Large: €5bn+
Excludes cash
Top 20 active positions
7
Name Active weight % Name Active weight %
Fresenius Medical Care 3.3 Bayer 2.0
Reed Elsevier 2.7 Experian 2.0
Zodiac Aerospace 2.6 Swatch 1.9
Syngenta 2.6 DNB Nor 1.9
SES 2.5 Dufry 1.8
SAP 2.4 Adidas 1.7
Linde 2.4 Safran 1.7
GlaxoSmithKline 2.3 Essilor 1.7
Intertek 2.2 Smiths Group 1.6
Sanofi 2.0 Vallourec 1.6
Source: Barra as at 31.10.11.
8
Portfolio breakdown
Geographical breakdown Sector breakdown
Source: Jupiter, FactSet as at 31.10.11.
Relative positioning
9
Sector weightings relative to FTSE World Europe
Source: Jupiter, FactSet as at 31.10.11.
Relative positioning
10
Country weightings relative to FTSE World Europe
Source: Jupiter, FactSet as at 31.10.11.
11
Examples of investment themes
Unique assets Galp
Market leaders ASML
Demographics Syngenta
Outsourcing SGS
Investment themes
Globalisation Zodiac
Emerging Markets Nokian Tyres
Energy demand Vallourec
Agenda
Our philosophy and process
Current positioning
Portfolio data
Stock picking in a macro-driven environment
12
Portfolio analysis
13
Source: Credit Suisse HOLT 9.11.11. *CFROI = Cashflow Return on Investment. **Leverage = Debt / (Debt + Equity).
Fund FTSE World Difference
Sales Growth 5yr 7.41 6.69 0.72
CFROI* (3yr Median) 11.77 8.62 3.15
CFROI 2011e 11.67 8.50 3.16
CFROI 2012e 11.88 9.05 2.84
Leverage** 25.58 35.27 -9.69
P/E 2011e 13.16 11.60 1.56
EV/EBITDA 2010 10.21 9.06 1.15
Premium for quality not significant
Jupiter European Opportunities SICAV
14
Calendar year performance
On 10.10.2005 the benchmark for this Fund was changed from the FTSE Actuaries World (Euro) to FTSE World Europe Index (Euro), all benchmark figures are using the new benchmark. Source: FE, tax gross, fees net, bid – bid, EUR, Total Return to 31.10.11. Sector: FO Equity – Europe inc UK. Past performance is no guide to the future.
YTD % 2010 % 2009 % 2008 % 2007 % 2006 % 2005 % 2004 %
European Opportunities SICAV -10.33 16.46 27.69 -38.72 1.28 32.21 29.69 18.39
FTSE World Europe -9.07 11.70 33.14 -43.23 3.61 20.69 26.80 12.59
Position in sector 111 / 193 48 / 188 122 / 186 32 / 177 85 / 150 7 / 133 30 / 121 12 / 105
Jupiter European Opportunities SICAV
15
Performance
On 10.10.2005 the benchmark for this Fund was changed from the FTSE Actuaries World (Euro) to FTSE World Europe Index (Euro), all benchmark figures are using the new benchmark. Source: FE, tax gross, fees net, bid – bid, EUR, Total Return to 17.08.01. to 31.10.11. Sector: FO Equity – Europe inc UK. Past performance is no guide to the future.
1 year % 3 years % 5 years % Since inception %
European Opportunities SICAV -4.86 29.52 -12.55 23.30
FTSE World Europe -5.56 21.56 -17.79 12.45
Position in sector 92 / 190 63 / 179 37 / 149 15 / 78
Stock contribution to return
16
Top 20 contributors to return
Source: Jupiter/FactSet, 31.10.10 to 30.10.11. Highlighted stocks no longer held. Buy and hold basis and excluding cash. Past performance is no guide to the future.
Company
Contribution to
return % Company
Contribution to
return %
GlaxoSmithKline 0.58 Adidas 0.25
SAP 0.51 CGG Veritas 0.25
Synthes 0.47 Wolseley 0.25
British American Tobacco 0.43 Telenor 0.21
ASML 0.40 Prudential 0.20
Syngenta 0.37 Sanofi 0.19
Fresenius Medical Care 0.36 Intertek 0.18
Linde 0.27 Nestle 0.18
Experian 0.27 SGS 0.17
Zodiac Aerospace 0.27 Sage 0.13
Top 20 Total 5.94%
Stock contribution to return
17
Bottom 20 contributors to return
Company
Contribution to
return % Company
Contribution to
return %
BNP Paribas -1.08 Nordea Bank -0.32
Vallourec -0.99 Actelion -0.31
YIT -0.74 Bayer -0.31
Nyrstar -0.71 HSBC -0.30
Lloyds Banking -0.57 Smiths Group -0.25
ING -0.41 Inmarsat -0.24
Credit Suisse -0.40 Allianz -0.22
Nobel Biocare -0.39 Ageas -0.20
Metro -0.38 Philips -0.18
Deutsche Boerse -0.37 AMEC -0.16
Bottom 20 Total -8.53%
Source: Jupiter/FactSet, 31.10.10 to 30.10.11. Highlighted stocks no longer held. Buy and hold basis and excluding cash. Past performance is no guide to the future.
Agenda
Our philosophy and process
Current positioning
Portfolio data
Stock picking in a macro-driven environment
18
Outlook
19
Deleveraging will take years, leading to a low growth environment
and further market volatility
20
The scale of European debt
Source: IMF Sept 2011. *Most recent data divided by annual GDP (projected for 2011). Nonfinancial corporates’ gross debt includes intercompany loans and
trade credit, and these can differ significantly across countries. **World Economic Outlook projections for 2011. Net general government debt is calculated as
gross debt minus financial assets corresponding to debt instruments. ^Gross government debt shown.
10-year sovereign yields under stress
21
Source: Bloomberg November 2011.
Greece Italy
Portugal Ireland
GDP growth forecasts are falling
22
2008 2009 2010 2011e 2012e 2013e
Private
consumption 0.3 -1.7 1.0 0.4 0.4 1.1
Public
consumption 2.3 2.0 0.7 0.3 -0.2 0.1
Low growth environment set to continue
Source: European Commission November 2011
Steps in the right direction?
What has been agreed so far (in principle)?
Bank recapitalisation plan
EFSF “leverage” via bond insurance
50% Greek haircut
What hasn’t happened yet?
Need for even greater bank recapitalisation?
Implementation of austerity – actions not words…
Will the ECB need to be more aggressive?
23
Outlook
24
Even so, European companies have global reach and strong
balance sheets, while equity valuations are supportive
25
Average international sales exposure by region
Source: Goldman Sachs Research estimates, Quantum database.
Europe is one of the most export-focused regions
26
Net income margins driven by operating margins
Source: I/B/E/S, Datastream, Worldscope, Goldman Sachs Global ECS Research, May 2011
6
8
10
12
14
16
18
20
81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11
-2
0
2
4
6
8
10
EBITDA Net income (RHS)Margins:
27
Operating costs have fallen sharply in recent years
Source: I/B/E/S, Datastream, Worldscope, Goldman Sachs Global ECS Research, May 2011
0
1
2
3
4
5
6
7
8
81 83 85 87 89 91 93 95 97 99 01 03 05 07 09
78
80
82
84
86
88
90
Depr. & Amort. Interest Tax Operating costs (RHS)Different costs as a % of sales:
28
Cash* on MSCI Europe* balance sheets
Source: Worldscope. *Bottom-up aggregated, ex-financials and companies with short record.
29
Leverage across sectors
European sector net debt/EBITDA 2012E
Source: Citigroup, DataStream, CIRA 2012 estimates.
Cyclically adjusted P/E
30
Source: Citigroup 08.11.11.
0.5
1.0
1.5
2.0
2.5
3.0
3.5
5
10
15
20
25
30
35
83 85 87 89 91 93 95 97 99 01 03 05 07 09 11
European PE - on 10yr Average Earnings European P/B, RHS
Trailing P/E ex financials
31
5
10
15
20
25
30
35
73 78 83 88 93 98 03 08
Pan Europe ex Financials - Trailing P/E
Source: Citigroup 28.10.11.
Valuation dispersion in Europe
32
200
250
300
350
400
450
500
550
600
88 90 92 94 96 98 00 02 04 06 08 10
12m Fwd P/E (Most Expensive/Cheapest Quintile)
Source: Citigroup 20.10.11.
33
European global leaders
Outlook
No quick solution to the eurozone
debt crisis…
…but politicians are taking steps in
the right direction
Domestic growth likely to remain
weak for longer…
…but European companies are
global players
Earnings expectations are falling… …but equities are cheap on
historical multiples
34
Volatility to continue, but high quality businesses can still prosper
35
Disclosure
Jupiter Asset Management Limited („JAM‟) is registered in England and Wales (no. 2036243). The registered office is 1 Grosvenor Place, London
SW1X 7JJ. JAM is authorised and regulated by the Financial Services Authority whose address is 25 The North Colonnade, Canary Wharf,
London E14 5HS.
This presentation is intended for investment professionals and not for the benefit of private investors. However any one attending the presentation
or who has the opportunity to view the accompanying slides should bear in mind that the value of an investment in a unit trust and the income from
it can go down as well as up. It may be affected by exchange rate variations and you may not get back the amount invested. Initial charges are
likely to have a greater proportionate effect on returns if investments are liquidated in the shorter term. Quoted yields are not guaranteed. Current
tax levels and reliefs will depend on the nature of the holding and details are contained in the key features documents. Past performance should
not be seen as a guide to future performance.
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2511_SCV_EUR OPPS_CDF.