Intrepid Capital Fund Insti Class Shares · NASDAQ:ICMVX
Intrepid Capital Fund Insti Class Shares — Intrepid Capital Management — Investor Presentation (February 2017)
35 slides from Intrepid Capital Fund Insti Class Shares's investor presentation, Feb 2, 2017
Slide 1: Portfolio Manager Update
PORTFOLIO MANAGER UPDATE FEBRUARY 2, 2017 www.intrepidcapitalfunds.com
Slide 2: Disclosures
Disclosures The Fund’s investment objectives, risks, charges and expenses must be considered carefully before investing. The statutory and summary prospectuses contain this and other important information about the investment company, and may be obtained by calling 866-996-FUND or visiting www.intre
Slide 3: Definitions
Definitions Market Indices S&P 500 Index: A widely recognized, unmanaged index of 500 stocks chosen for market size, liquidity and industry grouping, among other factors. Russell 3000 Index: Measures the performance of the largest 3,000 US companies representing approximately 98% of the investable U
Slide 4: Definitions
Definitions Exchange-Traded Fund (ETF): An investment fund traded on stock exchanges, much like stocks. An ETF holds assets such as stocks, commodities, or bonds and trades close to its net asset value over the course of the trading date. Forward P/E: A measure of the price-to-earnings (P/E) ratio u
Slide 5: Performance
Performance As of December 31, 2016 Intrepid Capital Fund Total Return Average Annual Return Expense Ratios Inception Date 3 Month YTD 1 Year 3 Year 5 Year 10 Year Since Inception Gross Net Intrepid Capital Fund – Inv. 1/3/2005 2.34% 14.88% 14.88% 4.14% 7.51% 6.91% 6.84% 1.45% 1.40% Intrepid Capital
Slide 6: Performance
Performance As of December 31, 2016 Intrepid Disciplined Value Fund Total Return Average Annual Return Expense Ratios Inception Date 3 Month YTD 1 Year 3 Year 5 Year Since Inception Gross Net Intrepid Disciplined Value Fund – Inv. 10/31/2007 1.89% 12.02% 12.02% 5.15% 8.77% 5.83% 1.34% 1.30% S&P 500
Slide 7: Performance
Performance As of December 31, 2016 Intrepid International Fund Total Return Average Annual Return Expense Ratios Inception Date 3 Month YTD 1 Year 3 Year 5 Year Since Inception Gross Net Intrepid International Fund – Inv. 12/30/2014 0.05% 16.71% 16.71% - - 5.90% 2.50% 1.40% MSCI EAFE Net Index -0.7
Slide 8: Top Ten Holdings
Top Ten Holdings As of December 31, 2016 (% OF NET (% OF NET (% OF NET INTREPID CAPITAL FUND INTREPID ENDURANCE FUND INTREPID DISCIPLINED VALUE FUND ASSETS) ASSETS) ASSETS) Berkshire Hathaway, Inc. – Class B 3.7% Corus Entertainment, Inc. – Class B 4.1% Western Digital Corp. 4.4% Royal Mail PLC 3.3%
Slide 9: Investment Discipline
Investment Discipline Intrepid Capital Management, Inc. has been in business since 1994 and currently has approximately $900 million in assets under management. VALUE-DRIVEN • Focus on underlying business value, not changing stock price • Buy only good businesses at good prices, using detailed funda
Slide 10: The Value of Being Active
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Slide 11: Valuations are Stretched
Valuations are Stretched Equity valuations & debt yields are both at historically expensive levels EV/EBITDA Yield to Worst BofA Merrill Lynch High Yield Index 20 25% 20% 15 15% 10 10% 5 5% Russell 2000 S&P 500 0 0% Source: Bloomberg
Slide 12: Indexing – A Fair Weather Strategy?
Indexing – A Fair Weather Strategy? $504.8 BILLION RECORD 2016 NET INFLOWS TO PASSIVE FUNDS -$340.1 BILLION RECORD 2016 NET OUTFLOWS FROM ACTIVE FUNDS Source: Morningstar Asset Flows Commentary, Jan. 11 2017
Slide 13: Low Volatility – The Indexer's Friend
Low Volatility – The Indexer’s Friend VIX Index (6 years) 50 Treasury downgrade Market drop, 45 China fears “Don’t confuse lack of volatility 40 with stability, ever.” 35 ~Nassim Taleb 30 Election jitters 25 20 15 1/24/2011 17.65 10 1/24/2017 11.07 5 0 Oct-11 Oct-12 Oct-13 Oct-14 Oct-15 Oct-16 Jan-1
Slide 14: DOL Rule & Unintended Consequences
DOL Rule & Unintended Consequences “Fiduciary rule” requires brokers/advisors to act in clients’ best interest Intention is good, but pressures advisors to use lowest fee strategies Creates artificial incentive to shift toward passive investment products May be accelerating asset flows into index-ba
Slide 15: Intrepid is Different
Intrepid is Different “If you want the SAME OUTCOME as everyone else, do what everyone else is doing. We are NOT doing what everyone else is doing.” MARK TRAVIS
Slide 16: What is Active Share?
What is Active Share? Measure of Difference Between a Fund and its Benchmark 𝑛 1 𝐴𝑐𝑡𝑖𝑣𝑒 𝑆ℎ𝑎𝑟𝑒 = 𝑤𝑒𝑖𝑔ℎ𝑡𝑝𝑜𝑟𝑡𝑓𝑜𝑙𝑖𝑜,𝑖 − 𝑤𝑒𝑖𝑔ℎ𝑡𝑏𝑒𝑛𝑐ℎ𝑚𝑎𝑟𝑘,𝑖 2 𝑖=1 Example Benchmark Fund has one index has 5 stock from stocks benchmark & 4 other Each weighted 20% INDEX FUND…
Slide 17: Why Active Share Matters
Why Active Share Matters Study indicates funds with highest Active Share produce Alpha1 Fund Active Share Category Intrepid Endurance Fund 99.89% Russell 2000 Intrepid Capital Fund (equity only*) 97.91% S&P 500 Intrepid Disciplined Value Fund 97.49% S&P 500 Intrepid International Fund 99.98% MSCI EA
Slide 18: Context – Thinking Outside the Box
Context – Thinking Outside the Box Benchmark can impact Active Share Median Fund Active Share 95% 75% Large Cap Small Cap All Intrepid Funds are among highest Active Source: Fidelity Investments; “Active Share: A Misunderstood Measure in Manager Selection” Share compared to their respective benchmar
Slide 19: Example: Intrepid International Fund
Example: Intrepid International Fund Since Inception Cumulative Total Return (%) Intrepid International Fund v. MSCI EAFE Net Index 1/1/15 to 12/31/16 15 ICMIX 12.2% 10 MSCI EAFE 5 Net Index 1.1% 0 -5 -10 Source: Bloomberg -15 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug
Slide 20: Sharpe Ratio - Return per unit of Risk
Sharpe Ratio - Return per unit of Risk 𝑟𝑝 − 𝑟𝑓 𝑆ℎ𝑎𝑟𝑝𝑒 𝑅𝑎𝑡𝑖𝑜 = 𝜎𝑝 Fund Inception Fund Benchmark Benchmark Difference* Date Sharpe Sharpe Intrepid Endurance Fund 10/3/2005 0.70 Russell 2000 0.46 0.24 Intrepid Capital Fund 1/3/2005 0.64 S&P 500 0.49 0.15 Intrepid Disciplined 10/31/2007…
Slide 21: Trump Administration Policy Proposals
Trump Administration Policy Proposals
Slide 22: The 2016 Election: Assessing the Impact
The 2016 Election: Assessing the Impact PRESIDENT TRUMP & CONGRESS HAVE PROPOSED NEW POLICIES THAT COULD IMPACT CORPORATE EARNINGS Post-Election U.S. Index Returns Nov. 8, 2016 – Jan. 24, 2017 18% 16% 14% 12% 13.10% 10% 8% 6% 6.31% 4% 2% S&P 500 Russell 2000 Source: Bloomberg 0% 8-Nov 15-Nov 22-Nov
Slide 23: Various Proposals
Various Proposals CORPORATE TAX RATE CUT REDUCE BUSINESS REGULATIONS FROM 35% TO 15% ELIMINATE TAX DEDUCTIBILITY INSTITUTING TARIFFS OR BORDER OF INTEREST TAXES IMMEDIATE EXPENSING OF CAPEX REPATRIATION OF OVERSEAS CASH AT LOW ONE-TIME TAX RATE $1 TRILLION INFRASTRUCTURE SPENDING Nothing is a done d
Slide 24: Market Developments
Market Developments RISING INTEREST RATES STRONG DOLLAR 10 Year Treasury Yield (1 yr.) U.S. Dollar Index (1 yr.) 2.8% 104 2.6% 102 2.4% 100 2.2% 2.0% 98 1.8% 96 Election 1.6% Election 94 1.4% 1.2% 92 Source: Bloomberg Source: Bloomberg 1.0% 90 Oct-16 Oct-16 Nov-16 Nov-16 Jan-16 Apr-16 May-16 Jan-16
Slide 25: Today's Market Narrative
Today’s Market Narrative LOWER TAXES Lift earnings, incite 1 animal spirits LESS REGULATIONS 2 Reduce business’s costs to operate CAPITAL SPENDING WRITE-OFF 3 Capital investment will grow
Slide 26: Today's Market Narrative
Today’s Market Narrative INFRASTRUCTURE SPENDING 4 Boost GDP & benefit connected industries REPATRIATION HOLIDAY Bring cash back to U.S. 5 to be used for M&A, dividends, repurchases BORDER TAXES Protect American jobs 6 & help reduce trade deficit
Slide 27: The Other Side of the Coin
The Other Side of the Coin Newton’s law: “FOR EVERY ACTION, THERE IS AN EQUAL AND OPPOSITE REACTION.” Maybe not precisely true as it applies to the economy, but good advice nonetheless
Slide 28: The Other Side of the Coin
The Other Side of the Coin Large, multinational companies already enjoy LOW TAX RATES STRONG DOLLAR hurts translated $ earnings; headwind to reducing trade deficit INFRASTRUCTURE SPENDING likely to add to debt; long-run benefits are questionable Cutting taxes without cutting spending will add to def
Slide 29: The Other Side of the Coin
The Other Side of the Coin REPATRIATION – most investors already give companies credit for cash held overseas, and they don’t discount it! Border taxes, tariffs, and tweets could all spark trade wars RISING INTEREST RATES raise borrowing % costs, have historically resulted in a contraction of valuat
Slide 30: Portfolio Examples
Portfolio Examples Tax reduction Interest deductibility Capex expensing Infrastructure/Military spending Regulations Border tariff Cash repatriation Net Impact POSITIVE NEUTRAL NEGATIVE Estimated impact of each policy proposal is based on Intrepid Capital internal research.
Slide 31: Priced In?
Priced In? 1-yr. Russell 2000 Price & EV/EBITDA 22 1,348 1,400 1,350 21 Election 1,300 20.5 1,250 20 1,200 19 1,150 1,100 18 1,050 1,000 17 950 16 900 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Price EV/EBITDA Source: Bloomberg
Slide 32: Priced In?
Priced In? Russell 2000 Price & EV/EBITDA 23 1600 Price EV/EBITDA 20.5 21 1400 1,348 19 1200 17 1000 EV/EBITDA 15 Price 800 13 600 11 400 9 7 200 5 0 Source: Bloomberg
Slide 33: Priced In?
Priced In? Yield to Worst BoA Merrill Lynch High Yield Index 11% 10% 9% 8% 7% 6% 5% 4% Source: Bloomberg
Slide 34: Conclusions
Conclusions 1 2 3 PROBABILITY OF PASSAGE MACRO IMPACT COMPANY IMPACT Some seem more likely than Not uniformly positive See positive & negative others to be enacted Not permanent (elections effects to near-term earnings every two years) of portfolio companies 4 5 6 INVESTOR VIEWS ONE-SIDED BENEFITS S
Slide 35: Questions & Answers
QUESTIONS & ANSWERS Thank you for your interest in Intrepid Capital! www.intrepidcapitalfunds.com
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