Hsbc Holdings Plc · LSE:HSBA
Hsbc — HSBC Global Asset Management — uk equity pres
26 slides from Hsbc's investor presentation, September 2009
Slide 1: HSBC GIF UK Equity
September 2009 August 2009 HSBC GIF UK Equity For Investment Professionals only
Slide 2: Investment case
Investment case SS Me de & “PrP SG HSBC Global Asset Management
Slide 3: Portfolio characteristics
Portfolio characteristics Fund characteristics Universe UK Equities Benchmark FTSE All Share (£) Peer Group Standard & Poor’s Equity UK Objective Capital appreciation Style Core Approach Fundamental Portfolio construction Stock rather than sector 3
Slide 4: Challenge of investing
Challenge of investing Information is efficient……. …….investors are not Forecasting The illusion of knowledge Group decisions Meeting companies Believing everything you read Thinking you can outsmart everyone else Short term horizons and overtrading Source: Societe Generale 4
Slide 5: Investment approach
Investment approach INVESTMENT PHILOSOPHY X Information Advantage 9 Investor Inefficiency “What do we get?” “What do we pay?” Competitive Advantage Barriers to entry CASHFLOW STOCK MARKET Scenario RETURNS VALUATION PRICE analysis Following Wind Financial EBIT/EV strength Current Operating Shareholde
Slide 6: Exploiting investor inefficiency
Exploiting investor inefficiency Investors are sceptical about Investors underestimate competitive advantage change Compounders – high returns/asset growth Improvers – poor returns/change 15 Cashflow return on investment < cost of capital 15 Cashflow return on investment > cost of capital 10 10 5 Co
Slide 7: Investment resources
Investment resources ► Specialist analytical resource and portfolio managers ► Average experience over 10 years ► Working with other Halbis investment teams and central dealers Angus Parker Nick Dowell Phil Oakley Team Head, Insurance Energy, Technology Industrials, Utilities, Materials Portfolio Ma
Slide 8: Responsibilities
Responsibilities Quantitative Analyst Fund Manager Identifying investment candidates 9 Validation 9 9 Strengthen/Reject 9 9 Scenario analysis 9 9 Price 9 9 Decide 9 Portfolio construction 9 9 Learning/Feedback 9 9 9 8
Slide 9: Process of selecting stocks – how we take risk
Process of selecting stocks – how we take risk A: Screening for investment ideas ROCE EBITA/EV Div Yld Div Cov COV FV PER -4 -3 -2 -1 0 0 1 2 3 Hist X 0 1 2 Adecco Sa-Reg 17% 22% 21% 26% 28% 22% 18% 13% 14% 4.5% 4.4 177% -77% 5.1 6.5 9.9 Atkins (Ws) Plc 70% 46% 25% 201% 50% 16% 18% 18% 18% 5.5% 2.8
Slide 10: NPV (Free cash-flow) present value model
Present Value Model Risk CAPITA GROUP PLC (THE) RESTORE Default Inputs UPDATE Chart HEAT MAP PRINT This Analysis ? GET NEW COMPANY GET Country Tables For ERP / Corporation Tax Step 1 : Free Cash Flow / CFROI Projected % 5 Yr Ave. % Step 4 : Valuation Step 5 : Sensitivity Analysis Cash Flow % of EV V
Slide 11: Scenario analysis - heat map
Scenario analysis - heat map Two-Factor Scenario Analysis Heat Map : CAPITA GROUP PLC (TH Valuation Return To NPV Model For : FAIR VALUE : 7.37 opportunity CAPITA GROUP PLC (TH from stronger Sustainable GROWTH 7.0% 50 START STEP SIZE MARKET PRICE : 6.63 PRI CE T EBITDA Margin 15.0% 50 growth Current
Slide 12: Capturing the investment case
Capturing the investment case Is this a Compounder or Stock Target Price Current Price Up / Downside CAPITA GROUP PLC £6.38 Method PV model Valuation £7.16 Improver? Date Target Consensus What is the inefficiency we Investment Rationale: Why does the valuation provide a good risk/reward The stock is
Slide 13: Managing stock risk
Managing stock risk Disciplined analysis Attractive stock upside •Validate financial data •Margin of safety •Annual reports •Sustainable returns •Company meetings •Strong balance sheet •Scenario work •Positive asymmetry of STOCK outcomes RISK Monitoring investments •Signposts •Competitive advantage
Slide 14: Managing portfolio risk
Managing portfolio risk Taking stock risk Diversifying stock risk •Sector and Industry exposures •Significant active weights •Size distribution •Limited number of stocks – 35 •Value/Growth •Top ten active weights>20% •Currency •Max active weight 3.5% •Liquidity PORTFOLIO RISK Understanding portfolio
Slide 15: Portfolio construction parameters
Portfolio construction parameters Target Current Number of stocks 35 39 ± 350 +269 Largest stock position relative to the index (bps) -286 Active money in Top 10 stocks 20 – 30% 21.6% +752 Largest industry position relative to the index (bps) ± 1000 –784 +424 Largest sector position relative to the
Slide 16: Top overweights and underweights relative to the index
Top 10 overweights and underweights relative to the index Barclays -2.9 2.7 Wm. Morrison AstraZeneca -2.8 2.5 BG Group Rio Tinto -2.5 2.4 Carillion BP -2.3 2.3 Unilever Tesco -2.0 2.1 Amlin Standard Chartered -1.8 2.1 Resolution Diageo -1.6 2.0 Vodafone Royal Dutch Shell -1.5 1.9 RSA Insurance Recki
Slide 17: Outlook for your investments
Outlook for your investments Low global growth, Economic UK recession esing Cash Flows Robust Q2 results background Below long term Credit cycle/banking finance averages Valuations Risks Economic conditions 17
Slide 18: Appendix
Appendix SS Me de & “PrP SG HSBC Global Asset Management
Slide 19: Management team
Management team Angus Parker, Head Angus Parker is head of the European equity team and has been working in the industry since 1993. Prior to joining the firm in 2004, Angus worked for Lazard Asset Management. Angus holds an MA degree from the University of Edinburgh. He is an Associate of the Insti
Slide 20: Management team
Management team Phil Oakley Phil Oakley is a member of the European equity team with particular responsibility for Industrial stocks and has been working in the industry since 1997. Prior to joining Halbis in 2007, Phil worked for ABN Amro Bank. Phil has a BA with Honours in Economics from Nottingha
Slide 21: Management team
Management team Product specialist Marcus Pakenham Marcus Pakenham is the product specialist for the European equity and Global & UK fixed income teams in London and has been working in the industry since 1985. Previously he has managed GEM and Asian portfolios. Prior to joining the firm in 1999, Ma
Slide 22: Risk - HSBC GIF UK Equity Fund
Risk - HSBC GIF UK Equity Fund Active Risk (LHS) Beta (RHS) • Predicted Active Risk 7.0 1.4 (tracking error) has fallen 6.0 1.3 below 6%. 5.0 1.2 • Predicted Beta has been 4.0 1.1 steady at 0.9 3.0 1.0 2.0 0.9 1.0 0.8 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Source: HSBC/Barra, data to end August 2
Slide 23: Risk - HSBC GIF UK Equity Fund
Risk - HSBC GIF UK Equity Fund Stock Industry Style ► Stock risk as a % of overall has been 100 100 stable 80 80 60 60 ► Industry risk has risen with large 40 40 overweight in Industrials and large 20 20 underweights in Financials and Health 0 0 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Care ► Style
Slide 24: Fund Performance
Fund Performance 2009 2005 2006 2007 2008 3 years 5 years YTD HSBC GIF UK Equity 21.4 10.5 5.0 -28.7 6.8 -5.7 3.0 Morningstar ’s Mean 21.1 16.3 2.3 -31.6 18.0 -3.9 4.7 FTSE All Share 22.0 16.8 5.3 -29.9 17.8 -2.1 6.3 Source: Morningstar, bid-bid gross income reinvested; Morningstar Sector used Offsh
Slide 25: Fund Performance
Fund Performance 30/06/08- 29/06/07- 30/06/06- 30/06/05- 30/06/04- 30/06/09 30/06/08 29/06/07 30/06/06 30/06/05 HSBC GIF UK Equity -23.7 -14.1 13.7 16.4 15.3 Source: Morningstar, bid-bid gross income reinvested. Data in GBP. Performance information is up to 30th June 2009. The performance shown refe
Slide 26: Important information
Important information This presentation is for professional clients only. The contents of this presentation are confidential and may not be reproduced or further distributed to any person or entity, whether in whole or in part, for any purpose. The material contained in this presentation is for info