FPA Queens Road Small Cap Value Fund Institutional Class · NASDAQ:QRSIX
FPA Queens Road Small Cap Value Fund Institutional Class — FPA Crescent Fund — Q2 2022 Earnings Presentation
24 slides from FPA Queens Road Small Cap Value Fund Institutional Class's earnings presentation, Jul 27, 2022
Slide 1: FPA Crescent Fund Second Quarter 2022 Webcast Presentation
L P rs, is o d v FPA Crescent c A Fund (FPACX) i f i a c Second Quarter 2022 Webcast Presentation t P Presented by: Steven Romick, Mark Landecker, Brian Selmo July 27, 2022 i r s F Follow us on:
Slide 2: Performance
Performance Market Cycle P Trailing Performance Trailing Performance (%) (%) Market Cycle Performance Performance L 3/25/00- 3/25/00- 10/10/07- 10/10/07- 1/4/22- As of As of Date: Date:6/30/2022 6/30/2022 Inception* Inception* 20 Years 20 Years 15 Years 15 Years 10 Years 10 Years 5 Years 5 Years 3 Y
Slide 3: Executive summary
Executive summary ■ Between January 5th and June 30th, the global equity market declined more than 20%, from peak to trough, for the third L P time since the great financial crisis.¹ rs, o ■ During the same period, with its 75% average net risk exposure, the FPA Crescent Fund (“Fund”) captured 64% o
Slide 4: Fund philosophy
Fund philosophy Investment objective: The FPA Crescent Fund seeks to generate equity-like returns over the long-term, take less risk than the market and avoid permanent impairment of capital. L P Philosophy rs, ■ Flexible approach is o ‒ We utilize a go-anywhere approach with a broad mandate allowin
Slide 5: Quarter and Trailing Twelve-Month Performance vs. Indices
Performance Quarter and Trailing Twelve-Month Performance vs. Indices L P Crescent – FPACX* Q2 2022 rs, Trailing 12-month o -9.32% -10.69% is Crescent – Long Equity** -13.63% -14.48% MSCI ACWI NR USD S&P 500 d v -15.66% -16.10% -15.75% -10.62% 60% MSCI ACWI NR USD / 40% Bloomberg US Agg c A -11.36%
Slide 6: Greatest weakness has been in growth stocks
Greatest weakness has been in growth stocks Trailing Twelve-Month Performance vs. Indices L P 0% rs, -5% -10% -4.86% -8.12% is o -10.62% -10.69% v Return d -15% -14.34% -14.48% -15.75% -16.41% A -20% -19.42% c -25% -23.46% -30% i f i -25.28% c S&P 500 MSCI S&P 500 FPACX* MSCI FPACX MSCI S&P 500 MSCI
Slide 7: Most expensive stocks have declined the most
Most expensive stocks have declined the most S&P 500 First Half 2022 Return Composition L P Most Expensive 10% Based on Price/Sales vs Remaining 90% rs, o 0% is -5% v -10% Average YTD Return -15% -20% -25% A d -14.29% -30% i -29.60% f i c c -35% Top 10% Remaining 90% P a t Price/Earnings 1 Year Forw
Slide 8: Market valuations have moved more in line
Market valuations have moved more in line Valuation Spreads – The Cheapest Quintile Compared to the Market Average (1926 – June 30, 2022)1 L P rs, is o d v c A i f i a c t P i rs ■ In March 2020, valuation spreads (cheapest 20% vs. market average) nearly reached 2008 levels. Today, they are no longe
Slide 9: Active stock selection has driven differentiated returns
Active stock selection has driven differentiated returns Long Equity Carve-Out Gross Performance vs. Indices L P CAGR CAGR 1/1/07 to 1/1/11 to 6/30/22 6/30/22 2022 YTD 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 rs, 2011 2010 2009 2008 2007 FPACX Long Equity 9.59% 11.61% -17.68% 23.18% 12.55%
Slide 10: Performance contribution
Performance contribution Trailing Twelve-Month Contributors and Detractors L P Contributors Performance Contribution Percent of Portfolio Detractors rs, Performance Contribution Percent of Portfolio Sound Holding FPS LLC 1.03% 0.70% 0.5% 1.1% Meta Platforms Comcast is o -1.55% -1.04% 2.5% 3.3% Glenc
Slide 11: Portfolio Composition
Portfolio Composition FPA Crescent Fund Asset Class Composition L P Risk Asset 6/30/2022 3/31/2022 rs 6/30/2021 , Average Since Inception* Common Stock, Long Common Stock, Short 70.0% 0.0% 71.5% -0.5% is o 72.9% -3.2% 57.1% -4.8% Credit, Long Credit, Short 1.5% 0.0% 0.6% 0.0% d v 2.8% -0.3% 10.3% -0
Slide 12: Equity valuation metrics vs market
Equity valuation metrics vs market FPA Crescent Fund Long Equity Holding Valuations and Earnings Growth vs. Stock Market L P Price/Earnings 1 Year Forward 6/30/2021 6/30/2022 Price/Book 6/30/2021 6/30/2022 3-Year Trailing EPS Growth 6/30/2021 rs, 6/30/2022 3-Year Forward Estimated EPS Growth 6/30/20
Slide 13: Global breadth
Global breadth Net Equity Geographic Exposure L P United States Domicile 62.5% Revenue rs 40.2% , International Developed 37.5% 33.1% is o 59.8% 15.8% Emerging Mark ets d v 4.4% 10.5% Rest of World (Uncategorized) c A - 33.5% i f i Foreign exposure increased from 20.3% to 37.5% between Q4 2017 and Q
Slide 14: International stocks remain cheaper than US stocks
International stocks remain cheaper than US stocks Twelve-Month Forward Price to Earnings Ratio Discount MSCI AC World Index ex-US vs S&P 500 Index L P rs, is o d v c A i f i a c t P F As of June 30, 2022. i rs Source: Factset, MSCI, Standard & Poor's, J.P. Morgan Asset Management Guide to the Marke
Slide 15: High-yield beginning to get interesting
High-yield beginning to get interesting US High-Yield Effective Yield and Option-Adjusted Spread L P 12% Recessions ICE BofA US High Yield Index Effective Yield rs, ICE BofA US High Yield Index Option-Adjusted Spread o 11% is 10% 9% 8% d v 7% c A 6% 5% i f i 4% a c 3% 2% t P rs Jun-14 Jun-15 Jun-16
Slide 16: Q&A
L P rs, is o d v Q&A c A i f i ac t P F i rs 16
Slide 17: Appendix
L P rs, is o d v Appendix c A i f i ac t P F i rs 17
Slide 18: Fund holdings as of June 30, 2022
Fund holdings as of June 30, 2022 Communication Services Alphabet Comcast Charter Communications 14.8% 5.3% 3.2% 2.1% Industrials Sound Holdings Howmet Aerospace Safran 8.8% 1.4% 1.3% 1.1% Credit – Long McDermott International Gulfport Energy L P 0.3% 0.3% 0.0% Meta Platforms Activision Blizzard Net
Slide 19: Growth has fallen, but still trades at premium
Growth has fallen, but still trades at premium Median Price/Revenue Ratios of S&P 500 Components by Valuation Decile L P rs, is o d v c A i f i a c t P As of April 2022. F i rs Source: Hussman Strategic Advisors, ‘Repricing a Market Priced for Zero’; John P. Hussman, Ph.D. April 27, 2022. https://ww
Slide 20: Important disclosures
Important disclosures P These slides are intended as supplemental material to the Second Quarter 2022 FPA Crescent Fund audio presentation and transcript that are posted on FPA's website at www.fpa.com. , L This presentation is for informational and discussion purposes only and does not constitute,
Slide 21: Important disclosures (continued)
Important disclosures (continued) P You should consider the Fund's investment objectives, risks, and charges and expenses carefully before you invest. The Prospectus details the Fund's objective and policies and other matters of interest to a prospective investor. Please read the Prospectus carefull
Slide 22: Important disclosures (continued)
Important disclosures (continued) Investing in Special Purpose Acquisition Companies (“SPACS”) involves risks. Because SPACs and similar entities have no operating history or ongoing business other than seeking L P acquisitions, the value of their securities is particularly dependent on the ability
Slide 23: Important disclosures (continued)
Important disclosures (continued) MSCI ACWI Growth Index captures large and mid-cap securities exhibiting overall growth style characteristics across 23 Developed Markets (DM) countries and 24 Emerging Markets P (EM) countries. The growth investment style characteristics for index construction are d
Slide 24: Important disclosures (continued)
Important disclosures (continued) Other Definitions (cont’d) number of a company's outstanding shares by the current market price of one share. L P Market Capitalization refers to the total dollar market value of a company's outstanding shares of stock. Commonly referred to as "market cap," it is ca