BMO Canadian Equity Plus ETF · NEO:ZBEC
BMO Canadian Equity Plus ETF — BMO Global Asset Management — Investor Presentation
56 slides from BMO Canadian Equity Plus ETF's investor presentation
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: Fundamental Equity Team
Fundamental Equity Team Source: BMO GAM, Bloomberg Broker/Advisor Use Only. Not for Public Distribution. 2
Slide 3: Our Purpose
• Our purpose is to deliver the exceptional outcomes our clients deserve. Our • To achieve this, we apply an Purpose unwavering focus on our long- term investment process within a team based collaborative culture. Broker/Advisor Use Only. Not for Public Distribution. 3
Slide 4: 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. 4
Slide 5: Our Core Investment Beliefs
Our Core Investment Beliefs Sustainable Long-term Risk Concentrated business value creation Management Portfolios models Construct a We are business Compounded growth Risk is inherent concentrated and high analysts, not stock creates value over the throughout our process conviction-weighted market s
Slide 6: 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 7: 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 8: The Pitfalls of Speculation
The Pitfalls of Speculation Broker/Advisor Use Only. Not for Public Distribution. 8
Slide 9: 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 10: Growth In The Dividend Is Key
Growth In The Dividend Is Key Better return profile at lower volatility = a winning investment proposition. Source: BMO Investment Strategy Group, unweighted. As at June 30, 2021 (Analysis begins in 1990. January Broker/Advisor Use Only. Not for Public Distribution.
Slide 11: Capital Return Still Front and Center
Capital Return Still Front and Center Corporate Liquidity In Great Shape Broker/Advisor Use Only. Not for Public Distribution. 11
Slide 12: Dividends Have More Than Held Up
Dividends Have More Than Held Up Broker/Advisor Use Only. Not for Public Distribution. 12
Slide 13: The HQ Recipe for Durable Value Creation
The HQ 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 14: Sustainable Dividend Moat: Dollarama Inc.
Sustainable Dividend Moat: Dollarama Inc. Stock Price DPS • Leading player in dollar store retail • Defensive business and cash flows • Industry consolidator • Strong capital allocators Citi Macro Risk Index 5Yr Dividend CAGR*=9% Source – Bloomberg. Date through June 19,2022. Dividend per share is
Slide 15: How We Think About Dividend Growth
How We Think About Dividend Growth Broker/Advisor Use Only. Not for Public Distribution.
Slide 16: Less Interested In Commodity Dividends
Less Interested In Commodity Dividends Broker/Advisor Use Only. Not for Public Distribution.
Slide 17: 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. 17
Slide 18: Our Holdings Are Delivering Dividend Growth
Our Holdings Are Delivering Dividend Growth Green rows=1yr dvd growth>3 yr trend Source: BMO GAM, Bloomberg Broker/Advisor Use Only. Not for Public Distribution.
Slide 19: Several Thematic Trends Driving Growth
Several Thematic Trends Driving Growth Broker/Advisor Use Only. Not for Public Distribution.
Slide 20: 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 Citi Macro Risk • Strong capital allocators and value Index creators 3Yr Dividend CAGR*=10% Source – Bloom
Slide 21: Taking Advantage of Market Volatility
Taking Advantage of Market Volatility Granite REIT (GRT.UN) Leading player in a high demand property asset class Strong moat built on scale and cost advantages Diversified, creditworthy tenant base Underappreciated runway of earnings growth based on in place rent growth, selective M&A and ef
Slide 22: 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 23: 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 24: 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-cap
Slide 25: Process in Action: Thomson Reuters
Process in Action: Thomson Reuters Economic Moat What Do They Do? • #1 market share in 3 main product lines Content software for law firms, • Best-in-class mission-critical software accountants, & corporations, as well • Sticky client relationships (>90% retention) as news content through Reuters Le
Slide 26: Other Examples of Long-Term Holdings
Other Examples of Long-Term Holdings Top Active Weights: • WSP Global is a top 5 global engineering • Pricing power from relatively low & design firm competitive footprint • Consistently positive organic growth + • Significant opportunity to consolidate value accretive M&A fragmented industry Unique
Slide 27: New Holdings
New Holdings • Oil & gas royalty company • Advantaged business model • Improving organic growth • Trading, capital formation & data analytics • Scale & network effects • Growing recurring revenue base • Property & Casualty insurer • Focused on specialty insurance • Industry-leading profitability and
Slide 28: Select Smaller Cap Stocks Add Additional Alpha
Select Smaller Cap Stocks Add Additional Alpha • We currently own a handful of the highest conviction Canadian small/mid-caps • Still a large-cap focused mandate – Weighted average market cap of fund is $57 billion vs. $60 billion for the TSX Composite • Downside risk is actively managed – Average B
Slide 29: Sector & Sub-Sector Exposures
Sector & Sub-Sector Exposures Energy Materials Industrials Financials IT 25% 20% 15% 10% 5% 0% Broker/Advisor Use Only. Not for Public Distribution. 29
Slide 30: Portfolio Statistics
Portfolio Statistics As of March 31, 2022 S&P/TSX Canadian Stock Selection Composite Index Quality Earnings Estimate Dispersion 10.4% 16.5% ROE 15.2% 14.0% Beta 1.0 1.0 Growth 5 Yr Sales Growth Rate 15.0% 12.7% Long-term EPS Growth Rate* 13.7% 8.7% Valuation Forward PE 17.0 13.8 Current Dividend Yie
Slide 31: 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 32: 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. 32
Slide 33: 100% Equity Strategy and 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 34: Equity Differentiation
Equity Differentiation “A fund dictated by the attractiveness of the companies in it, NOT the benchmark” Not a • Concentrated portfolio ~ 25-30 names Benchmark Fund • High active share ~ 85% Unique • Long-term secular growth trends Ideas • True all cap strategy Proven • Institutional grade investmen
Slide 35: 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 36: Two Market Concerns: Inflation & Recession
Two Market Concerns: Inflation & Recession Businesses whose earnings relatively are less Types of Pricing Power economically sensitive • Necessary Products • Differentiated Products • Contracted/Naturally hedged • Benefit from Rising Rates • Commodity All logos and trademarks of other companies are
Slide 37: Top Fund Holdings Growth in Intrinsic Value
Top 10 Fund Holdings Growth in Intrinsic Value • Portfolio holdings (weighted) have grown the value of their businesses at a 18% CAGR over last 5 years • While market narratives continue to change, for us, the real objective is compounding capital Source: Based on assumptions around appropriate metr
Slide 38: 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 39: 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 40: 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 41: 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 41
Slide 42: 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 43: 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 44: Brookfield Renewable Partners: De-Carbonization of the Grid
Brookfield Renewable Partners (BEP): De-Carbonization of the Grid Fundamentals: 77M tCO2e of Avoided Emissions, High quality global asset portfolio, long track record of accretive Equivalent to M&A, BEP adds value and earns attractive returns through: Improving operations, developing projects, assi
Slide 45: Canadian National Rail: Greening the Supply Chain
Canadian National Rail (CNR): Greening the Supply Chain Fundamentals: ~4.5X Railroads more fuel Solid track record of creating shareholder value, integral part of efficient than trucks the economy. 220+km Of 1 tonne of freight on a Environmental: single litre of fuel by train Solid track record of r
Slide 46: 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 47: Overview & Differentiation
Overview & Differentiation Small companies that grow their business for the What We Believe In long-term, profitably and on a per share basis get rewarded by the market Apply a rigorous, bottom up fundamental process to What identify under followed opportunities, combined with a We Do unique approac
Slide 48: 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 49: Portfolio Management
Portfolio Management Portfolio Construction Niche Industry Long Term Consolidation Contracted 31% Revenue 22% Underappreciated Business Model Evolution 12% All logos and trademarks of other companies are the property of those respective companies. Broker/Advisor Use Only. Not for Public Distributi
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 US • Management team has excellent track record in allocating capital & generating high ROE • US bus
Slide 51: Insight Into Our Process: Trisura Group Surety Loss Ratio
Portfolio Management Insight Into Our Process – Adding Value Through Deep Research & Understanding of Business Value (Trisura Group, TSU-T) What happened? 40% Surety Loss Ratio 35% • Trisura reported higher than expected loss ratio in 30% Surety (contractor business) in Q4 25% 20% What did the marke
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 Canada • Large fragmented market that is ripe for consolidation 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: Pulling It All Together
• Team-based collaborative culture • Unwavering focus on long-term Pulling It investment process • Concentrated portfolios All constructed with long-term sustainable business models Together • Risk Management at the stock, portfolio, and behavioral levels • Consistency of performance reflects discip
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.
Slide 56: Disclaimer
Disclaimer The BMO AM Global Absolute Return Bond Fund aims to deliver a positive return regardless of market conditions over any one-year rolling period but such a positive return is not guaranteed over this or any time period. Capital is at risk and on sale of shares in the Fund an investor may re