Snippets from the Schroder Recovery Fund presentation of April 2015

All information relevant at April 2015

Full PDF: http://citywire.co.uk/docs/presentations/Schroders.pdf

CAPEs
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

[Sidenote: http://www.starcapital.de/research/stockmarketvaluation
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!]

Lonmin:

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
holders]

Banking:

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.]

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About mcturra2000

Computer programmer living in Scotland.
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