BMO Strategic Autocallable Income US Large Cap ETF USD · TSX:ZACU.U
BMO Strategic Autocallable Income US Large Cap ETF USD — BMO Global Asset Management — Investor Presentation (2023)
55 slides from BMO Strategic Autocallable Income US Large Cap ETF USD's investor presentation, 2023
Slide 1: BMO Global Asset Management Architect Equity Solutions
Broker/Advisor Use Only. Not for Public Distribution. BMO Global Asset Management Architect Equity Solutions Lutz Zeitler, CFA, Managing Director & Head of Fundamental Canadian Equities Philip Harrington, MFin, CFA, Director & Portfolio Manager Jordan Luckock, MSc, CFA, Vice President & Portfolio Ma
Slide 2: Our Purpose
• Our purpose is to deliver the exceptional outcomes our clients deserve. Our • To achieve this, we apply Purpose an unwavering focus on our long-term investment process within a team based collaborative culture. Broker/Advisor Use Only. Not for Public Distribution. 2
Slide 3: Our Culture
Our Culture Integrity Independent Accountability Research/ Analysis Team Continuous Collaboration Learning Commitment Culture of to Process Excellence Responsible Investment Broker/Advisor Use Only. Not for Public Distribution. 3
Slide 4: Our Core Investment Beliefs
Our Core Investment Beliefs Sustainable Long-term Risk Concentrated business value Management Portfolios models creation Construct a We are business Compounded growth Risk is inherent concentrated and high analysts, not stock creates value over the throughout our conviction-weighted market speculato
Slide 5: Our Fundamental Five Pillar Process
Our Fundamental Five Pillar Process Investment decisions based on careful analysis across five key pillars Leadership Growth Economic Responsible Business Potential Moat Investment Value Shareholder value creation Exceptional businesses carry these attributes Broker/Advisor Use Only. Not for Public
Slide 6: Architect Dividend Equity: Driving and Delivering Growth with Dividends
Broker/Advisor Use Only. Not for Public Distribution. Architect Dividend Equity: Driving and Delivering Growth with Dividends Lutz Zeitler, CFA, Managing Director & Head of Fundamental Canadian Equities Philip Harrington, CFA, Director & Portfolio Manager
Slide 7: Why Dividends As Your Core Equity Strategy
Why Dividends As Your Core Equity Strategy • Cash returns are tangible and make up an important part of total return • Dividends represent an acid test of the profitability of a business • Dividends instill a level of capital allocation discipline on management • Attractive relative yields with a gr
Slide 8: In the Long Run…..Growth In The Dividend Is Key
In the Long Run…..Growth In The Dividend Is Key Better return profile at lower volatility = a winning investment proposition. Source: BMO Investment Strategy Group, unweighted. As at September 14, 2023 (Analysis begins in January 1990). Broker/Advisor Use Only. Not for Public Distribution.
Slide 9: Canadian Dividends Keep Growing
Canadian Dividends Keep Growing Dividends Up by a Third from the End of 2019! 9
Slide 10: The High-Quality Recipe for Durable Value Creation…
The High-Quality Recipe for Durable Value Creation… Translate into higher levels of recurring revenues, profitability, growth, free cash flow and franchise value Broker/Advisor Use Only. Not for Public Distribution.
Slide 11: Sustainable Dividend Moat: Dollarama Inc.
Sustainable Dividend Moat: Dollarama Inc. Regardless of Macro Backdrop Stock Price DPS • Leading player in dollar store retail • Defensive business and cash flows • Industry consolidator • Strong capital allocators Citi Macro Risk Index Stock price has compounded with dividend growth despite the mac
Slide 12: How We Think About Dividend Growth
How We Think About Dividend Growth Broker/Advisor Use Only. Not for Public Distribution.
Slide 13: Inflation—Pricing Power Supportive of Dividend Growth
Inflation—Pricing Power Supportive of Dividend Growth Contracted protection: Lower Competition: Necessary Products: Differentiated Products: Cost Passthrough: Broker/Advisor Use Only. Not for Public Distribution. 13
Slide 14: Our Holdings Are Delivering Dividend Growth
Our Holdings Are Delivering Dividend Growth Dividend Aristocrats Emerging Dividend Growers Building For Tomorrow’s Dividend Increases Source: BMO GAM, Bloomberg. Broker/Advisor Use Only. Not for Public Distribution.
Slide 15: Sustainable Dividend Grower: Brookfield Infrastructure Partners
Sustainable Dividend Grower: Brookfield Infrastructure Partners (BIP.un) Stock Price DPS • Leading player in global infrastructure • Defensive business and cash flows • Wide moat based on scale • Strong capital allocators and value Citi Macro Risk Index creators Dividends Have Grown Every Year since
Slide 16: Several Thematic Trends Driving Growth
Several Thematic Trends Driving Growth Broker/Advisor Use Only. Not for Public Distribution.
Slide 17: Recent New Addition: Pet Valu Inc
Recent New Addition: Taking Advantage of Market Volatility and Team Collaboration Pet Valu Inc (PET): An Emerging Dividend Grower Leading player in pet retail in Canada Strong moat built on value proposition and brand Franchise-led operating model Very attractive industry growth with recessi
Slide 18: BMO Asset Management Canadian Stock Selection
Broker/Advisor Use Only. Not for Public Distribution. BMO Asset Management Canadian Stock Selection Jordan Luckock, MSc, CFA, Vice President & Portfolio Manager
Slide 19: Key Reasons to Own
Key Reasons to Own Core Canadian Long-term Deeply researched, equity exposure that outperformance high-conviction, all-cap driven by stock is differentiated vs. Canadian portfolio selection the benchmark Broker/Advisor Use Only. Not for Public Distribution.
Slide 20: Our Differentiation
Our Differentiation Not a 35-40 35-40 high conviction holdings Benchmark • 35-40 conviction holdings Portfolio • Top 10 makes up ~50% of the fund; active share ~60% Unique • Concentrated in best ideas across entire Canadian equity universe Ideas • Own a handful of the highest conviction small/mid-ca
Slide 21: Process in Action: Element Fleet Management
Process in Action: Element Fleet Management Economic Moat • Oligopoly with rational pricing What Do They Do? • Economies of scale (leverage with OEMs, financing Largest pure play commercial fleet terms) manager with operations in North America, and Australia/New Zealand • High switching costs Fleet
Slide 22: Other Examples of Long-Term Holdings
Other Examples of Long-Term Holdings Large Cap: • Dominant brand and value proposition • Significant scale advantage • Growth from stores and higher price points • Consistently better than peer results Small/ Mid-Cap: • Near monopoly in Canadian • Decentralized, entrepreneurial culture overnight car
Slide 23: New Holdings
New Holdings • >175 royalty and streaming agreements • 99% precious metals, 80% in N. America • 5-yr CAGR in production >10% • Market leader in recession-resilient business • Capital-light, high free cash flow, high ROIC • Mid-teens EPS growth from new stores and same- store-sales growth • High grow
Slide 24: How Do We Think About Resource Stocks?
How Do We Think About Resource Stocks? • Highest quality assets - economics, reserves, regions, infrastructure • Diversification - risk spread over multiple assets • Management - track record of execution (including responsible investment) • Growth - ability to grow profitably and within cash flow o
Slide 25: Sector & Sub-Sector Exposures
Sector & Sub-Sector Exposures 20% Energy Materials Industrials Financials IT 15% 10% 5% 0% Stock Selection TSX Broker/Advisor Use Only. Not for Public Distribution. 25
Slide 26: Portfolio Characteristics
Portfolio Characteristics As of June 30, 2023 Canadian Stock S&P/TSX Selection Composite Index Quality Earnings Estimate Dispersion 9.4% 13.4% Beta 0.96 1.00 Growth 3-Year Sales Growth Rate 17.5% 14.0% 2-Year Forward EPS CAGR 14.5% 7.8% Valuation Forward P/E 17.2 13.9 Current Dividend Yield 2.5% 3.5
Slide 27: BMO AM Enhanced Balanced / Enhanced Total Equity
Broker/Advisor Use Only. Not for Public Distribution. BMO AM Enhanced Balanced BMO AM Enhanced Total Equity Jennifer So, CFA, CPA, Vice-President & Portfolio Manager
Slide 28: Key Reasons to Own
Key Reasons to Own Equity: Asset Allocation: Enhanced Strategy: Exceptional Creates portfolio Fundamental stock business that can with core picking + asset compound capital over characteristics and allocation risk mitigation the long-term Broker/Advisor Use Only. Not for Public Distribution. 28
Slide 29: 100% Equity Strategy vs Balanced Strategy
100% Equity Strategy Balanced Strategy Bench: 50% S&P/TSX, 50% MSCI ACWI Bench: 30% S&P/TSX, 30% MSCI ACWI, 40% TMX Universe All equity portfolio with an objective of delivering strong Balanced portfolio with an objective of delivering strong risk adjusted returns from both bottom-up security risk a
Slide 30: Equity Differentiation
Equity Differentiation “A fund dictated by the attractiveness of the companies in it, NOT the benchmark” Not a • Concentrated portfolio ~ 25-35 names Benchmark Fund • High active share ~ 85% Unique • Long-term secular growth trends Ideas • True all-cap strategy Proven • Institutional grade investmen
Slide 31: How We Work
How We Work We Focus on We Avoid • Managing a concentrated portfolio • Speculating • Assessment of quality, value and risk • High amounts of Leverage • Bottom-up investing focussed on long-term • High trading • Minimizing downside risk • Excessive commodity & cyclical exposure • Being disciplined, a
Slide 32: Exposure to Strong Secular Trends
Exposure to Strong Secular Trends Fund flow to ‘Alternatives’ Transition to cashless society E-commerce Cloud / AI Digital Surgeries All logos and trademarks of other companies are the property of those respective companies. Holdings are of June 30, 2023. 32
Slide 33: Portfolio Holding – United Healthcare (UNH-US)
Portfolio Holding – United Healthcare (UNH-US) Largest Managed Care operator in the U.S. Sustainable Competitive Advantage • #1 market share in Medicare Advantage, key secular growth (aging population) • Significant scale drives strong economic advantage • “Recurring” like revenue, strong retention
Slide 34: Portfolio Holding – Brown & Brown (BRO-US)
Portfolio Holding – Brown & Brown (BRO-US) 6th largest insurance brokerage company in the world Durable Competitive Advantage & Growth • Differentiated focus on the profitable middle-market segment • Strong organic growth + disciplined acquisitions Strong Capital Allocation Source: Brown & Brown. •
Slide 35: BMO GAM Sustainable Canadian Equity Portfolio
Broker/Advisor Use Only. Not for Public Distribution. BMO GAM Sustainable Canadian Equity Portfolio Jennifer So, CFA, CPA, Vice-President & Portfolio Manager
Slide 36: Our Philosophy
Our Philosophy We believe in: • Taking a long-term approach • High conviction concentrated portfolios We focus on: 1. Sustainability: companies whose products and services address a sustainability challenge 2. Fundamental: quality, growth companies that can compound cash flows 3. Active ownership: w
Slide 37: Sustainability Framework
Sustainability Framework 1) Focus on companies whose products and services stand to benefit or contribute to trends in sustainable development Sustainability challenge Revenue growth potential Cost reduction potential How does a company’s Is exposure expected to grow? Opportunity to reduce costs? pr
Slide 38: Fundamental Framework: Investment Pillars
Fundamental Framework: 5 Investment Pillars Investment decisions based on careful analysis across five key pillars Economic Growth Responsible Business Leadership Moat Potential Investment Value Shareholder value creation 38
Slide 39: Active Ownership
Active Ownership We focus on encouraging companies to address strategic issues including environmental, social and governance factors, with a view to reducing risk and supporting long-term performance. Effective Engagement Requires Deep understanding Long-term relationships with Local knowledge Acce
Slide 40: Examples of Themes
Examples of Themes If Companies Addresses …There’s an Opportunity to Grow By providing clean energy solutions Energy transition • Current (renewable) Environment: • Emerging (hydrogen, carbon capture) Green-ablers Resource efficiency By greening the supply chain Health & well-being By providing heal
Slide 41: WSP Global (WSP): Environmental Leader
WSP Global (WSP): Environmental Leader, Designs Critical Infrastructure with a Climate Adaptation Lens Global provider of design and engineering services. Fundamental investment thesis ~19% • Moat: Significant scale in design and engineering, Annualized technical expertise is leveraged across geogra
Slide 42: Cameco Corporation (CCO): Nuclear Renaissance
Cameco Corporation (CCO): Nuclear Renaissance Portfolio of high-grade uranium mines and nuclear services (announced 49% interest in Westinghouse) Fundamental investment thesis • Moat: High grade mines, low-cost production underpinned by long term contracts • Capital allocation: Track record of disci
Slide 43: BMO Canadian Small Cap Growth
Broker/Advisor Use Only. Not for Public Distribution. BMO Canadian Small Cap Growth Valentin Padure, CFA, Vice President, Portfolio Manager
Slide 44: Overview & Differentiation
Overview & Differentiation Small companies that grow their business for the long What We Believe In term, profitably and on a per share basis get rewarded by the market Apply a rigorous, bottom up fundamental process to identify What under followed opportunities, combined with a unique We Do approac
Slide 45: Pulling It All Together
• Team-based, collaborative culture • Unwavering focus on long-term Pulling It All investment process Together • Concentrated portfolios constructed with long-term sustainable business models • Risk management at the stock, portfolio and behavioural levels • Consistency of performance reflects disci
Slide 46: How We Work
How We Work We focus on • Managing a concentrated portfolio • Assessment of quality, value and risk • Bottom up investing focused on long-term • Minimizing downside risk • Being disciplined, avoiding short term ‘noise’ • Speculating We avoid • High amounts of leverage • High trading • Excessive
Slide 47: Small Cap Market Cheaper Than Ever
Small Cap Market Cheaper Than Ever TSX SmallCap Forward P/E Ratio Canada: Small Cap Fwd. P/E Ratio Relative to Large Caps 2.50 2.50 45 2.25 Small caps trading at 2.25 40 Average: 17.6x premium to large caps Current: 13.6x 2.00 2.00 35 1.75 1.75 30 +1 Stdev. 1.50 1.50 25 +1 Stdev. 1.25 1.25 20 1.00 1
Slide 48: BMO Small Cap Top 10 Analysis
BMO Small Cap Top 10 Analysis • YTD performance has lagged but fundamentals still intact (multiple contraction main driver) • Long track record of operating success and strong equity returns • Companies have proven to add significant value over longer term horizon, tested through several economic cy
Slide 49: Insight Into Our Process – Pet Valu
Portfolio Management Insight Into Our Process – Deeply Discounted and Misunderstood Quality Compounder (Pet Valu, PET-T) • Growth driven by pet spend in Canada which has proven to be incredibly resilient. Positive comp since 1995 • Higher interest rates has limited impact on business not dependent o
Slide 50: Insight Into Our Process – Trisura Group
Portfolio Management Insight Into Our Process – Adding Value Through Deep Research & Understanding of Business Value (Trisura Group, TSU-T) Leadership & Responsible Investment Successful Expansion in U.S. • Management team has excellent track record in allocating capital & generating high ROE • U.S.
Slide 51: Insight Into Our Process – Trisura Valuation
Portfolio Management Insight Into Our Process – Adding Value Through Deep Research & Understanding of Business Value (Trisura Group, TSU-T) What happened? Trisura Valuation vs Peers & Historic • Trisura delayed Q4/22 results and ultimately reported a $84 million write-down (<5% of premiums). This wa
Slide 52: Long-Term Core Holding Example: StorageVault Canada
Portfolio Management Long-Term Core Holding Example: StorageVault Canada Inc. (SVI-T) Leadership & Responsible Investment Economic Moat & Growth Potential • StorageVault is the largest self storage operator in • Large fragmented market that is ripe for consolidation Canada with 232 locations, over 3
Slide 53: Long Term Core Holding Example: Andlauer Healthcare Group
Portfolio Management Long Term Core Holding Example: Andlauer Healthcare Group (AND-T) Leadership & Responsible Investment Economic Moat & Growth Potential • Andlauer is a specialized healthcare distribution & • Organic + acquisition growth; track record 8-10% supply chain services company organic g
Slide 54: Disclaimer
Disclaimer This document has been prepared for information purposes only and should not be construed as a solicitation for, or offering of, an investment in securities in any jurisdiction where such offer or solicitation would be prohibited. While the information contained in this document is believ
Slide 55: Thank You
Levering a disciplined process to identify high quality, sustainable dividend growers, we build high conviction, concentrated portfolios focused on creating shareholder value. Thank You Broker/Advisor Use Only. Not for Public Distribution.
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