Nicholas Fund · NASDAQ:NICSX
Nicholas Fund — Nicholas Company — Investor Presentation (March 2006)
53 slides from Nicholas Fund's investor presentation, Mar 31, 2006
Slide 1: Nicholas Company, Inc. Performance and Portfolio Statistics
Nicholas Company, Inc. Performance and Portfolio Statistics as of March 31, 2006 Randall P. North Vice President - Institutional Sales rnorth@nicholasfunds.com
Slide 2: Nicholas Company, Inc. founded in 1967 by Albert "Ab" Nicholas
Nicholas Company, Inc. founded in 1967 by Albert “Ab” Nicholas Senior Management Committee David Nicholas, CFA – President and Chief Investment Officer Jeffrey May, CPA – Sr. Vice President and Chief Compliance Officer Lawrence Pavelec, CFA – Sr. Vice President Investment Professionals total 11 with
Slide 3: Investment Philosophy
Investment Philosophy Research focus on small- and mid-cap companies that we feel have consistent and sustainable earnings growth potential A Value Approach to Growth Investing
Slide 4: Investment Process
Investment Process Uncover high quality growth companies in growth industries Determine companies that hold dominant positions within their industries Utilize our analyst network to develop proprietary, fundamental research Invest in stock of companies trading at reasonable valuations
Slide 5: Stock Selection
Stock Selection Nicholas invests for the long-term in high quality growth companies trading at reasonable valuations, which meet our criteria: • Occupy a leading or strategic position within industry • Own an enduring franchise, product or brand • Undiscovered, under followed or out-of-favor company
Slide 6: Nicholas Research
Nicholas research is the compilation Industry of inputs, which Publications in turn uncovers Company Financial Statements Industry Conferences potential purchase Nicholas Research candidates Inputs Company Supplemental Management Wall Street Interviews Information Customers, Vendors & Competitors
Slide 7: Fundamental Business Analysis
Fundamental Fundamental Valuation Business Analysis Financial Assessment Analysis Industry Growth Operating Low relative P/E Rate Margins Ratio Industry/ Strength of Balance EPS Growth Competitive Sheet Position Quality of Management Free Cash Flow Price/Sales Please refer to Glossary for definition
Slide 8: Quality and Price Drive Our Buy and Sell Decisions
Quality and Price Drive Our Buy and Sell Decisions • Market volatility is treated as an opportunity to buy high quality growth companies • A stock price not supported by sound business and financial fundamentals is sold Quality Price
Slide 9: Managing Risk
In-depth Valuation Knowledge Discipline of Companies Managing Risk Sector Weighting Diversify Portfolio Awareness A disciplined valuation approach provides less volatility in down markets, while offering participation in bull markets
Slide 10: Portfolio Management
Portfolio Management Investment Fundamental Ideas Analysis Valuation Buy Monitor portfolio for buy and sell candidates
Slide 11: Four Main Equity Styles
Four Main Equity Styles Large-Cap Growth/Blend Portfolios Mid-Cap Growth Portfolios Small-Cap Growth Portfolios Equity Income Portfolios
Slide 12: Nicholas Funds
Nicholas Funds Must be preceded or accompanied by a prospectus. Mutual Fund investing involves risk. Principal loss is possible. Please refer to glossary for index definitions. Quasar Distributors, LLC, Distributor (10/2005)
Slide 13: Nicholas Funds Performance as of March 31, 2006
Nicholas Funds as of March 31, 2006 Average Annual Assets (in millions) Last Quarter Year-to-Date Last 12 Mths Last 3 Years Last 5 Years Last 10 Years/ Since Inception* Nicholas Fund $ 2,504.9 5.65% 5.65% 12.25% 19.02% 4.86% 6.93% S&P 500 4.21% 4.21% 11.72% 17.21% 3.97% 8.95% Morningstar Large Blend
Slide 14: Nicholas Funds Calendar Year Performance
Nicholas Funds calendar year 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 Nicholas Fund 5.60% 11.80% 28.66% -21.85% -10.98% -1.47% 1.70% 13.12% 37.02% 19.78% S&P 500 4.91% 10.87% 28.68% -22.09% -11.88% -9.10% 21.04% 28.58% 33.38% 22.96% Morningstar Large Blend Category 5.74% 10.10% 27.65% -21.8
Slide 15: Morningstar Ratings
Nicholas Funds Morningstar Ratings™ period ended March 31, 2006 Morningstar Category Morningstar Ratings Fund Overall 3-Year 5-Year 10-Year Nicholas Fund Large Blend ⋆⋆⋆ ⋆⋆⋆⋆ ⋆⋆⋆⋆ ⋆⋆ 1478 Funds 1478 Funds 1162 Funds 422 Funds Nicholas II Class I Mid-Cap Growth ⋆⋆⋆ ⋆⋆ ⋆⋆⋆⋆ ⋆⋆⋆ 796 Funds 796 Funds 622
Slide 16: Nicholas Fund
Nicholas Fund “You should be skeptical, but you have to inherently be an optimist to be in this business. Pessimism makes you very little money.” -Ab Nicholas, Founder and Portfolio Manager The Fund may invest in smaller companies, which involve additional risks such as limited liquidity and greater
Slide 17: Nicholas Fund Historical Performance
Nicholas Fund Historical Performance As of March 31, 2006 Average Annual Last Quarter Year-to-Date Last 12 Mths Last 3 YearsLast 5 YearsLast 10 Years Nicholas Fund 5.65% 5.65% 12.25% 19.02% 4.86% 6.93% S&P 500 4.21% 4.21% 11.72% 17.21% 3.97% 8.95% Morningstar Large Blend Category 4.56% 4.56% 12.76%
Slide 18: Nicholas Fund Portfolio Characteristics
Nicholas Fund As of March 31, 2006 Portfolio Characteristics Portfolio S&P 500 Top 10 Holdings Net Assets $2,504.9 million - Affiliated Managers Group, Inc. 6.54% Weighted Avg. Market Capitalization $29,313.3 million $88,417.2 million Berkshire Hathaway Inc.- Class A 5.66% Weighted Median Market Cap
Slide 19: Nicholas Fund Sector Comparison
Nicholas Fund Sector Comparison As of March 31, 2006 Sector Portfolio S&P 500 Difference Consumer Discretionary 15.35% 10.25% 5.10% Consumer Staples 8.72% 9.30% -0.58% Energy 13.57% 9.81% 3.76% Financials 28.97% 21.04% 7.93% Health Care 20.07% 12.99% 7.08% Industrials 10.07% 11.59% -1.52% Informatio
Slide 20: Nicholas Fund Portfolio Stratification by Market Cap
Nicholas Fund Portfolio Stratification by Market Cap As of March 31, 2006 Market Capitalizations % of Portfolio Capitalizations > $25 Billion 33.64% Capitalizations $10 Billion to $25 Billion 16.91% Capitalizations $2 Billion to $10 Billion 46.05% Capitalizations < $2 Billion 3.40%
Slide 21: Nicholas II
Nicholas II “Management is an important part of successful mid-cap companies…these are the people who are driving the bus.” – Dave Nicholas, President and Portfolio Manager The Fund may invest in smaller companies, which involve additional risks such as limited liquidity and greater volatility.
Slide 22: Nicholas II Historical Performance
Nicholas II Historical Performance As of March 31, 2006 Average Annual Last Quarter Year-to-Date Last 12 Mths Last 3 Years Last 5 Years Last 10 Years Nicholas II Class I 6.67% 6.67% 16.45% 20.09% 8.49% 7.49% Russell Midcap Growth 7.61% 7.61% 22.68% 25.75% 8.99% 9.39% Morningstar Mid-Cap Growth Categ
Slide 23: Nicholas II Portfolio Characteristics
Nicholas II As of March 31, 2006 Russell Portfolio Characteristics Portfolio Midcap Growth Top 10 Holdings Net Assets Class I $576.4 million - Fiserv, Inc. 2.26% Weighted Avg. Market Capitalization $8,018.4 million $8,233.9 million O'Reilly Automotive, Inc. 2.03% Weighted Median Market Capitalizatio
Slide 24: Nicholas II Sector Comparison
Nicholas II Sector Comparison As of March 31, 2006 Russell Sector Portfolio Midcap Growth Difference Consumer Discretionary 20.39% 22.06% -1.67% Consumer Staples 2.50% 2.34% 0.16% Energy 4.79% 9.91% -5.12% Financials 13.77% 9.36% 4.41% Health Care 20.42% 15.69% 4.73% Industrials 8.96% 13.62% -4.66%
Slide 25: Nicholas II Portfolio Stratification by Market Cap
Nicholas II Portfolio Stratification by Market Cap As of March 31, 2006 Market Capitalizations % of Portfolio Capitalizations > $10 Billion 25.08% Capitalizations $2 Billion to $10 Billion 70.75% Capitalizations < $2 Billion 4.17%
Slide 26: Nicholas Limited Edition
Nicholas Limited Edition The Fund invests in smaller companies, which involve additional risks such as limited liquidity and greater volatility.
Slide 27: Nicholas Limited Edition Historical Performance
Nicholas Limited Edition Historical Performance As Of March 31, 2006 Average Annual Last Quarter Year-to-Date Last 12 Mths Last 3 Years Last 5 Years Last 10 Years Nicholas Limited Edition Class I 9.98% 9.98% 21.40% 24.88% 12.39% 6.95% Russell 2000 Growth 14.36% 14.36% 27.84% 28.14% 8.59% 5.51% Morni
Slide 28: Nicholas Limited Edition Portfolio Characteristics
Nicholas Limited Edition As of March 31, 2006 Russell Portfolio Characteristics Portfolio 2000 Growth Top 10 Holdings Net Assets Class I $187.7 million - iShares Russell 2000 Growth Index Fund 2.25% Weighted Avg. Market Capitalization $2,281.4 million $1,368.9 million FLIR Systems, Inc. 2.19% Weight
Slide 29: Nicholas Limited Edition Sector Comparison
Nicholas Limited Edition Sector Comparison As of March 31, 2006 Russell Sector Portfolio 2000 Growth Difference Consumer Discretionary 8.14% 15.12% -6.98% Consumer Staples 0.51% 2.09% -1.58% Energy 3.91% 7.99% -4.08% Financials 15.68% 9.06% 6.62% Health Care 20.83% 19.74% 1.09% Industrials 15.65% 15
Slide 30: Nicholas Limited Edition Portfolio Stratification by Market Cap
Nicholas Limited Edition Portfolio Stratification by Market Cap As of March 31, 2006 Market Capitalizations % of Portfolio Capitalizations > $2 Billion 43.30% Capitalizations $1 Billion to $2 Billion 33.04% Capitalizations $500 Million to $1 Billion 14.89% Capitalizations < $500 Million 8.77%
Slide 31: Nicholas Equity Income
Nicholas Equity Income The Fund may invest in smaller companies, which involve additional risks such as limited liquidity and greater volatility. Additionally, the Fund may invest in debt securities. Investments in debt securities typically decrease in value when interest rates rise. This risk is us
Slide 32: Nicholas Equity Income Historical Performance
Nicholas Equity Income Historical Performance As of March 31, 2006 30-Day Average Annual SEC Yield Last Quarter Year-to-Date Last 12 Mths Last 3 Years Last 5 Years Last 10 Years Nicholas Equity Income Class I 2.60% 5.97% 5.97% 6.96% 18.40% 6.68% 5.53% S&P 500 - 4.21% 4.21% 11.72% 17.21% 3.97% 8.95%
Slide 33: Nicholas Equity Income Portfolio Characteristics
Nicholas Equity Income As of March 31, 2006 Portfolio Characteristics Portfolio S&P 500 Top 10 Holdings Net Assets Class I $29.0 million - Crosstex Energy, Inc. 4.52% Weighted Avg. Market Capitalization $23,330.5 million $88,417.2 million Kayne Anderson MLP Investment Company 3.57% Weighted Median M
Slide 34: Nicholas Equity Income Sector Comparison
Nicholas Equity Income Sector Comparison As of March 31, 2006 Nicholas Sector Equity Income S&P 500 Difference Consumer Discretionary 10.63% 10.25% 0.38% Consumer Staples 11.15% 9.30% 1.85% Energy 16.27% 9.81% 6.46% Financials 25.27% 21.04% 4.23% Health Care 5.45% 12.99% -7.54% Industrials 9.63% 11.
Slide 35: Top Ten Holdings by Dividend Yield
Nicholas Equity Income Top Ten Holdings by Dividend Yield As of March 31, 2006 Issue Yield ● CharterMac 8.28 ● Citizens Communications Company 7.54 ● Kayne Anderson Energy Total Return Fund, Inc. 7.07 ● National Health Realty, Inc. 6.68 ● Kayne Anderson MLP Investment Company 6.54 ● Health Care Prop
Slide 36: Nicholas High Income
Nicholas High Income Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. Investment by the Fund in lower-rated and non-rated securities presents a greater risk of loss to principal and interest than higher
Slide 37: Nicholas High Income Historical Performance
Nicholas high income Historical Performance As of March 31, 2006 30-Day Average Annual SEC Yield Last Quarter Year-to-Date Last 12 Mths Last 3 Years Last 5 Years Last 10 Years Nicholas High Income Fund Class I 6.89% 2.86% 2.86% 6.66% 10.45% 5.33% 4.19% Merrill Lynch U.S. High Yield Master II - 2.87%
Slide 38: Nicholas High Income Portfolio Characteristics
Nicholas High Income As of March 31, 2006 Merrill Lynch Portfolio Characteristics Portfolio U.S. HY Master II Top 10 Holdings Net Assest Class I $101.4 million - General Motors Acceptance Corporation 3.11% Weighted Average Quality B1 B1 DaVita, Inc. 2.94% Weighted Average Maturity 5.30 years 7.10 ye
Slide 39: Nicholas Liberty
Nicholas Liberty “A concentrated Fund with the freedom to focus solely on beating the S&P 500.” -Mark Giese, Portfolio Manager The Fund may invest in smaller companies, which involve additional risks such as limited liquidity and greater volatility. The Fund is non-diversified, meaning it may concen
Slide 40: Nicholas Liberty Historical Performance
Nicholas Liberty Historical Performance As of March 31, 2006 Average Annual Last Quarter Year-to-Date Last 12 Mths Last 3 Years Last 5 Years Since Inception* Nicholas Liberty Fund (Inception Date: 11/30/01) 6.91% 6.91% 10.54% 19.91% N/A 6.73% S&P 500 4.21% 4.21% 11.72% 17.21% N/A 4.81% Lipper Multi-
Slide 41: Nicholas Liberty Portfolio Characteristics
Nicholas Liberty As of March 31, 2006 Nicholas Portfolio Characteristics Liberty Fund S&P 500 Top 10 Holdings Net Assets $8.1 million - DaVita, Inc. 7.42% Weighted Avg. Market Capitalization $14,168.6 million $88,417.2 million Hiland Partners, LP 5.79% Weighted Median Market Capitalization $5,335.6
Slide 42: Nicholas Liberty Sector Comparison
Nicholas Liberty Sector Comparison As of March 31, 2006 Sector Portfolio S&P 500 Difference Consumer Discretionary 31.23% 10.25% 20.98% Consumer Staples - 9.30% -9.30% Energy 6.49% 9.81% -3.32% Financials 9.66% 21.04% -11.38% Health Care 11.91% 12.99% -1.08% Industrials 6.60% 11.59% -4.99% Informati
Slide 43: Addendum
Addendum
Slide 44: Investment Staff
Nicholas Company Investment Staff Albert O. Nicholas, CFA, Chairman & Chief Executive Officer Founded Nicholas Company, Inc. 1967 – Present Marshall & Ilsley Bank, Milwaukee, 1959 -1967 Northwestern National Insurance Company, Milwaukee, 1955 – 1959 University of Wisconsin, B.A. 1952, M.B.A. 1955 Da
Slide 45: Investment Staff (cont.)
Investment Staff (cont.) Jeffrey T. May, CPA, Senior Vice President, Portfolio Manager Nicholas Company, Inc. 1987 – Present Arthur Andersen, 1984 – 1987 University of Wisconsin – Oshkosh, B.B.A. 1984 Mark J. Giese, CFA, Vice President, Portfolio Manager and Research Analyst Nicholas Company, Inc. 1
Slide 46: Investment Staff (cont.)
Investment Staff (cont.) Jeffrey P. Kinnel, Associate Research Analyst Nicholas Company, Inc. 2004 - Present MBO Cleary, 2003 - 2004 Guaranty Bank, 2001 - 2003 University of Wisconsin-Milwaukee, M.B.A. 2004 Miami of Ohio, B.S. 2001
Slide 47: Glossary of Terms
Glossary of Terms Alpha A portfolio's alpha measures the difference between its actual returns and its expected returns given its risk level as measured by its beta. A positive alpha indicates the portfolio has performed better than its beta would predict, while a negative alpha indicates a portfoli
Slide 48: Glossary of Terms (Con't)
Glossary of Terms (Con’t) Bond Ratings A - obligations deemed to be of high quality, with low credit risk B -Considered speculative, subject to high credit risk BB - Considered speculative, subject to substantial credit risk BBB - obligations subject to moderate credit risks. Below B -Very high cred
Slide 49: Glossary of Terms (Con't)
Glossary of Terms (Con’t) Dividends The distribution of earnings to stockholders by a company. Dividends are usually paid out from current earnings. Dividend Yield The annual dividends per sahre divided by the price per share expressed as a percentage. Dow Jones Industrial Average (DJIA) The Dow Jon
Slide 50: Glossary of Terms (Con't)
Glossary of Terms (Con’t) Lehman Ba Corporate High Yield Lehman Ba Corporate High Yield Bond Index is the component of the Lehman U.S. Corporate High Yield Bond Index Bond Index (Index), which includes bonds rated Ba by two of the three major rating agencies. The Index is a universe of fixed rate, n
Slide 51: Glossary of Terms (Con't)
Glossary of Terms (Con’t) Merrill Lynch U.S. High Yield Master The Merrill Lynch U.S. High Yield Master II Index is an unmanaged portfolio constructed to mirror the public high yield debt II Index market. This index includes US dollar publicly issued corporate bonds and includes PIKS (payment-in-kin
Slide 52: Glossary of Terms (Con't)
Glossary of Terms (Con’t) Russell 1000® Index The Russell 1000® Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index. One cannot invest directly in an index. Russell 20
Slide 53: Glossary of Terms (Con't)
Glossary of Terms (Con’t) Unit Cost Average cost per share. Unrealized Gain/Loss A tentative gain or loss on an investment that has not been realized. A gain or loss becomes realized once the investment is actually sold. Yld Yield - annual income from the investment (dividends, interest, etc.) divid
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