Snippets from the Schroder Recovery Fund presentation of April 2015

All information relevant at April 2015

Full PDF:

CAPE in 0-7 => 10 yr subsequent annualised return: 10-11% ( no current candidates)
CAPE 7 -14 => 6-7% return (currently tobacco)
CAPE 14 -21 => 5% (travel and lesiure, utilities, chemicals, food and drug retailers, homebuilders, food and beverages)
CAPE 21 – 28 => 1% (financial svs, industrials, health care, banks, insurance, real estate, gen retail, basic resources)
CAPE 28 – 35 => neg (no candidates)
CAPE 35+ => unknown (oil and gas, media, telecoms, tech)

Market traded on CAPE of 27.1

estimates UK CAPE at 12.8 as of 30.10.2015]

Portfolio activity in last 12 months [highlights]:
New positions: Asian Citrus [fraud?], Centrica [Woodford sells], Chemring [too much debt?], Lonmin [oh my God, tell me it isn’t so]
Added: Apollo Education [Jim Chanos: “national shame”]
Reduced: Hewlett-Packard [another Chanos short?], Tinity Mirror [at
least they figured out it was in long term decline], Johnston Press [Paul Scott: “almost certainly terminal”]
Complete sales: Next [their one decent holding]

[holy cows, guys, you must have really held your noses when buying
that bunch of garbage. They’re contrarian, I’ll give them that!]


significant discount to asset value
balance sheet is strong

[I bought Lonmin, but bailed out, thankfully. Schroder’s call was
just plain wrong here, the rights issue pretty much zapped existing


the most attractive sector
balance sheets have vastly improved yet valuations are still depressed

[the possible downside is that banks will not be able to earn
attractive returns on equity. Schroder’s don’t make a bad argument,
but time will tell if the results will bear out.]


About mcturra2000

Computer programmer living in Scotland.
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