Prudent Corporate Advisory Services Limited · NSE:PRUDENT
Prudent Corporate Advisory Services — DSP BlackRock US Flexible Equity Fund — Investor Presentation (July 2012)
32 slides from Prudent Corporate Advisory Services's investor presentation, Jul 17, 2012
Slide 1: NFO Period: July 17, 2012 to July 31, 2012
NFO Period: July 17, 2012 to July 31, 2012 * An Open Ended Fund Of Funds Scheme Investing In a US Equity Fund (*The term “Flexible” in the name of the Scheme signifies that the Investment Manager of the Underlying Fund can invest either in growth or value investment characteristic securities placing
Slide 2: DSP BlackRock US Flexible Equity Fund
DSP BlackRock US Flexible* Equity Fund (USD 1.3 billion*) Indian Investors BlackRock Global Funds (BGF) US Flexible Equity Fund Accessing one of the Flagship funds of BlackRock in the category Source: Internal; *AUM as at May 31, 2012. *The term “Flexible” in the name of the Scheme signifies that th
Slide 3: Contents
Contents • Why US equities? - Access to the world’s largest equity market - US Equities are a core component of global equity portfolios/indices - Amongst the most well diversified markets - Represents numerous global investment themes - Resilient economy • Why invest now? - Attractive valuations -
Slide 4: Why US equities?
Why US equities?
Slide 5: Access to the largest equity market in the world
Access to the largest equity market in the world Top 10 Equity Markets by Market Capitalization (US$ trillion) 18 15.7 16 14 12 USD trillion 10 8 6 4 3.3 3.0 2.9 2.9 1.8 2 1.4 1.2 1.1 1.1 0 US Japan UK China Hong Kong Canada France Germany Australia Brazil US market capitalization is greater than th
Slide 6: US equities are a core component of global equity portfolios/indices
25 50 75 100 00 25 50 75 100 MSCIACWI MSCIACWI S&P S&P Global Global 1200 1200 Source: Internal, as at May 31, 2012 FTSE FTSE Developed Developed Index Index US as a % of Global Equity Indices S&P S&P Global Global 100 100 FTSE FTSE All All World World Index Index MSCI MSCI World World 25 50 75 100
Slide 7: US is amongst the most well diversified markets
US is amongst the most well diversified markets Cons. Cons. MSCI Wt(%) Energy Materials Industrial Financial Pharma Tech Telecom Utilities Top 2 Disc Staples US 10.7 3.6 10.1 11.9 11.2 14.0 11.7 20.0 3.2 3.7 34.0 Japan 1.6 6.9 20.8 20.0 6.7 17.4 6.7 12.1 4.4 3.5 40.8 UK 19.5 11.3 6.2 6.2 17.2 17.8 8
Slide 8: Represents numerous global investment themes
Represents numerous global investment themes Global Trend Investable Company Themes Examples* Apple Inc. Technology Google Lifestyle Shifts Microsoft New Media IBM New Health Pfizer Services Abbot Labs Demographic Shifts Johnson & Johnson Economic Shift Proctor & Gamble Expedia Niche Growth NASDAQ P
Slide 9: Resilient economy
Resilient economy US unemployment rate 12 10 8 (%) 6 4 2 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 Significant decrease in unemployment numbers after each economic slowdown thereby exhibiting economic resilience Source: ISI. Data through December
Slide 10: Resilient economy (economic indicators)
(Base YoYYoY (Base 2007, YearYear Seasonally 2007, Seasonally ('000s, 4 Week ('000s, Moving 4 Week Average Moving Average Adjusted) Adjusted) ,Seasonally Adjuated) ,Seasonally Adjuated) -5 0 5 -20 -15 -10 10 200 250 300 350 400 450 500 550 600 650 700 -5 0 5 -20 -15 -10 10 200 250 300 350 400 450 50
Slide 11: Reasons to invest in US equities now
Reasons to invest in US equities now
Slide 12: Attractive valuations: S&P Forward P/E Ratio
Attractive valuations S&P 500 Forward P/E Ratio 30.0 28.0 26.0 24.0 Forward PE 22.0 20.0 18.0 Average = 16.9x 16.0 14.0 12.0 10.0 Nov/92 Feb/96 Feb/97 Dec/93 Dec/08 Mar/98 Nov/07 Feb/12 Sep/89 Sep/90 Jan/95 Apr/99 May/00 Oct/91 Jan/10 Jan/11 Aug/03 Aug/04 Sep/05 Oct/06 Jun/01 Jun/02 S&P500 forward P
Slide 13: Attractive valuations
Attractive valuations Spread between S&P 500 Earnings Yield and 10-Year Yields Stocks Expensive 2.5 1.5 0.5 -0.5 -1.5 -2.5 -3.5 -4.5 -5.5 Stocks Cheap -6.5 -7.5 64 67 70 73 76 79 82 85 88 91 94 97 00 03 06 09 Most US stocks are currently available at near 30 year low prices* Source: UBS. Data throug
Slide 14: Attractive valuations
Attractive valuations P/E P/E Company* (Mar 31, 2000) (May 31, 2012) Microsoft 57.0 9.7 Hewlett Packard 35.0 8.3 Disney 55.0 16.6 JPMorgan Chase 20.0 9.3 Amgen 60.0 10.0 Exxon Mobil 24.0 10.0 Halliburton 71.0 17.0 Lockheed Martin 18.0 11.5 Medtronic 50.0 11.5 Kimberly-Clark 17.0 18.9 IBM 31.5 14.4 G
Slide 15: US Markets: Continued out-performance in recent times
US Markets: Continued out-performance in recent times Percentage of companies reporting positive EPS surprises by region (4Q’11) 80% 69% 67% 70% 60% 60% 55% 53% 53% 50% 43% 40% 30% 24% 20% 10% 0% S&P 500 Russell 1000 Russell 2000 Europe ACWI BRIC EM Japan Source: FactSet, Bloomberg. Past Performance
Slide 16: Global portfolios are overweight on the US region
Global portfolios are overweight on the US region Geographic equity preferences of portfolio managers* Current Next 12-M US Overweight Overweight Europe Underweight Underweight Japan Underweight Underweight Emerging markets Overweight Overweight *Source- Bank of America Merrill Lynch Portfolio Manag
Slide 17: Strong corporate balance sheets
Strong corporate balance sheets Free cash flow yields: 1998 vs. Today 9% 7.9% 8% 7.2% 7% 6% 5% 4% 3% 2.8% 2.3% 2% 1% 0% 1998 Today Emerging Markets US Source: Bloomberg. “Today” data as at Feb 29, 2012. Indices used are MSCI Emerging Markets Index and MSCI US Index. Past Performance may or may not b
Slide 18: Dividends & buybacks hit a record high
Strong Corporate balance sheets: Dividends & buybacks hit a record high Buybacks plus dividends ($bn) 1,200 1050 1,000 858 880 761 800 706 652 USD bn 587 600 491 363 372 353 350 400 324 329 298 254 222 145 144 156 170 200 132 0 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 Calend
Slide 19: Why DSP BlackRock US Flexible Equity Fund?
Why DSP BlackRock US Flexible* Equity Fund? (*The term “Flexible” in the name of the Scheme signifies that the Investment Manager of the Underlying Fund can invest either in growth or value investment characteristic securities placing an emphasis as the market outlook warrants)
Slide 20: BlackRock: World's largest Asset Management Company
BlackRock: World’s largest Asset Management Company One of the world’s pre-eminent asset management companies – USD 3.68 trillion assets under management with USD 1.74 trillion in equity assets – Broad product range available through mutual funds, ETFs, commingled funds, and separate accounts – Fidu
Slide 21: BGF Fund: A portfolio well-positioned
BGF US Flexible Equity Fund: A portfolio well-positioned Overweight Underweight • Free cash flow • Dividend yield • Domestically-sourced earnings • Europe -sourced earnings • Health care & energy • Financials & utilities • Adding to consumer discretionary • Reducing consumer staples Areas of focus/i
Slide 22: BGF Fund: A well-positioned portfolio
BGF US Flexible Equity Fund: A well-positioned portfolio Healthcare Financials • Predictable earnings • Contagion risks from Europe • Performs well when profits decelerate • Net interest margin pressure • Big pharma cheap and unloved • Regulatory risks Risk: Patent cliffs, government austerity Risk:
Slide 23: BGF Fund: Portfolio Characteristics
BGF US Flexible Equity Fund: Portfolio Characteristics (as at May 31, 2012) Characteristics Sector allocation Portfolio Russell 1000® Est. 3-5 Year EPS Growth 9.94% 11.64% Consumer discretionary 19.25 Number of Holdings 107 977 12.15 Consumer staples 3.76 Dividend Yield 2.0 2.1 10.42 Wtd. Avg. Marke
Slide 24: BGF Fund: Portfolio Management Team
BGF US Flexible Equity Fund: Portfolio Management Team Portfolio Management Team Chris Leavy, CFA (20) Peter Stournaras, CFA (17) CIO, Fundamental Equity (Americas) Portfolio Manager Portfolio Manager BlackRock Large Cap Series Resources Analysts Product Specialist Dan Hanson, CFA (19) Brett Shaver,
Slide 25: Bridging Quantitative and Fundamental Investing
BGF US Flexible Equity Fund: Bridging Quantitative and Fundamental Investing Best of Both Worlds Quantitative Fundamental analysis research Integrated Fundamental Quantitative Analysis Fundamental & Research Actual Quantitative portfolio Subjective Objective Pragmatic Idiosyncratic Scalable Guided f
Slide 26: Investment Process: Idea Generation
BGF US Flexible Equity Fund: Investment Process: Idea Generation Quantitative Stock Opportunities Research Prioritization Meeting Research List • Prioritize opportunity • Set research agenda Fundamental • Set initial conviction • Focus research attention Stock Opportunities • Determine portfolio • R
Slide 27: Idea Generation- Internal Quantitative Model
BGF US Flexible Equity Fund: Idea Generation- Internal Quantitative Model Priced Attractively Accounting we can rely on Fundamental Momentum Investment Sentiment - How much we pay for - Accruals - Growth - Price Momentum earnings, assets and cash - Pensions - Stability of Growth - Analyst Revisions
Slide 28: Research Process
BGF US Flexible Equity Fund: Research Process • Individual company template – Analysis tool and discussion framework • Identify key drivers/pivotal issuers – Top risks and opportunities • Review independent/external bull -bear case • Review company filings and conference call transcripts • Internal
Slide 29: Risks
Risks • US macroeconomic data continues to demonstrate recovery, although it is a slow recovery • Sustained job creation is a major challenge • Fiscal tightening likely in 2013 as spending cuts take effect • De -leveraging by US households likely to continue impacting consumer spending • Worsening o
Slide 30: Summary: Why invest in DSP BlackRock US Flexible Equity Fund
Summary: Why invest in DSP BlackRock US Flexible* Equity Fund • Valuations of US equities at multi year lows • Relative strength of economy compared to other developed countries • Corporate balance sheets of most large and mid cap US companies are in good shape • US equities are likely to continue o
Slide 31: Scheme Features
DSP BlackRock US Flexible* Equity Fund: Scheme Features Name of Fund DSP BlackRock US Flexible* Equity Fund (DSPBRUSFEF) Type of Fund Open ended Fund of Funds Scheme investing in a US Equity Fund Benchmark Russell 1000 Index Minimum investment Rs. 5,000/- and multiples of Re. 1/- thereafter amount O
Slide 32: Disclaimer
Disclaimer Investment objective: The primary investment objective of DSP BlackRock US Flexible Equity Fund (Scheme) is to seek capital appreciation by investing predominantly in units of BlackRock Global Funds US Flexible Equity Fund (BGF - USFEF). The Scheme may, at the discretion of the Investment
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