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Partner presentations final 2012
The document summarizes the performance of the Aquamarine Fund from 1997 to 2012. Over this period, the fund outperformed the S&P 500 and other indices, achieving an annualized return of 9.2% compared to 4.7% for the S&P 500. More recent investments since 2008 have also seen strong returns, with some investments appreciating over 150%. The document reviews the fund's portfolio and strategy, and outlines the manager's expectations for continued outperformance of the market indices in the long run. It concludes with a Q&A session to discuss any questions.
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Partner presentations final 2012
- 1. Welcome! 2012 Partners Meeting Zurich – London – New York
- 2. Agenda Performance review & expectations Post mortem on past holdings Q&A
- 3. Year Fund S&P 500 2012 (ytd) 20.9 15.6 2011 -3.1 2.1 2010 19.2 14.8 2009 39.3 23.5 2008 -46.7 -38.5 2007 17.0 3.5 2006 37.1 13.6 2005 7.2 3.0 2004 11.2 9.0 2003 29.5 26.4 2002 -1.6 -23.4 2001 1.9 -13.0 2000 21.4 -10.1 1999 -6.7 19.5 1998 26.1 33.6 1997 2.5^ 5.5%^
- 4. Comparison of changesin $100,000 invested in Aquamarine Fund Inc. vs S&P 500 400,000.00 350,000.00 Aquamarine Fund Inc 300,000.00 S&P 500 250,000.00 USD 200,000.00 150,000.00 100,000.00 50,000.00 - 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
- 5. Percentage Increase ofAquamarine Fund since Inception 300% 250% 200% 150% 266.1% 100% 131.0% 50% 95.0% 83.1% 0% Fund DJIU S&P 500 FT 100 5
- 6. Investment Performance (As of August 2012 net of fees since inception – Sep 1997 Fund DJIU S&P 500 FT 100 Cumulative Return 276.9% 137.4% 99% 87.8% Annualized Return 9.2% 5.9% 4.7% 4.3% Historical performance represents Aquamarine Fund, Inc.
- 7. Investment Results As a multiple of Original Investment Rate of Return Years of Operation 9.1% 5.8% 4.1% 5 1.6 1.3 1.2 15 3.7 2.4 1.9 30 14.0 5.6 3.5 Historical performance represents Aquamarine Fund, Inc.
- 8. Performance Expectations • 85%of mutual funds lag the S&P 500 Index after all fees and expenses. Just 0.5% of Mutual Funds beat the Indices by over 3%. (Source: Bogle) • My goal is to beat the three indices over the long haul. Beating all three indices is likely to put us in the top 10% of all US mutual funds and hedge funds. • I am quite confident we’ll beat the indices over the long haul. Not sure by how much
- 9. Aquamarine Fund ValueProposition • Low / No management fees • Spier family is the largest investor – we eat our own cooking • No performance fees until fund regains new highs • No leverage, No margin loans, No short positions, no complexity
- 10. 0% Management FeeClass Update Year End Percentage of Total Assets 2007 0% 2008 3% 2009 4% 2010 6% 2011 13% August 2012 16%
- 11. Aquamarine Capital AssetsUnder Management ($ in millions) $125 $100 $75 $50 $25 $0 Dec 97 Dec 99 Dec 00 Dec 01 Dec 02 Dec 03 Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 Dec 11 Aug-12
- 12. Investment Entered before2008 exited Post Annualized Return on Investment 53% 17% 8% -3% -8%
- 13. Investment Entered before2008 exited Post Annualized Entered Exited $ Profit Total Return Return Heineken Mar 2003 June 2012 1.3 105% 8% Holdings Harley Apr 2006 June 2012 1.0 138% 17% Davidson* Alaska Apr 2007 June 2012 7.5 398% 53% Milk Smart Feb 2008 March 2012 -1.3 -28% -8% Balance Discover Jul 2007 Oct. 2011 -0.16 -13.5% -3% Financial
- 14. Investment Entered before2008 exited Post Annualized Entered Exited Total Return Return Heineken 10X 13X 105% 8% Holdings Harley 15X 16X 138% 17% Davidson* Alaska Milk <6X 14X 398% 53% Smart >30X >30X -28% -8% Balance Discover 20X 15X -13.5% -3% Financial
- 18. 99% Annualized% Return on Investment 99% 78% 46% 30% 21%
- 19. Investment Entered since2008 $ Profit Total Annualized Entered Exited (mm) Return Return Cresud Nov ’08 Apr ’11 0.9 305% 78% London Mining Dec ’08 Aug ’11 1.7 166% 46% Brookfield Office Jul ’09 Jun ’12 1.3 113% 30% Capital Source Dec ’09 Jun ‘12 0.8 59% 21% International Coal Mar ’10 May ’11 3.2 150% 99% Terex Corp May ‘11 Aug ‘12 0.7 83% 99%
- 20. Portfolio Developments in2012 Sales • Alaska Milk • Heineken Holdings • Harley Davidson • Capital Source • Brookfield Office Properties • Terex Cash Recycled
- 21. Current Status • AUM$115 million • 42% GARP & Better Businesses • 52% Deeply Discount & Special Situations • 6% Cash • Intrinsic value $150-180 million • New Cash invested = $2.7 million • Redemptions = $1.5 million
- 22. Terex Corporation Market Enterprise Revenue EBIT NI Cap Value 2007 7,976 814 613 8,500 9,200 2011 6,504 151 -90 1,500 3,500 20XX ≈10,000 ≈1,000 ≈750 ≈6,000 Collection of unique assets required for construction to function Consolidating industry, using the downturn to consolidate (e.g Demag Cranes) No dear term debt maturities low risk of enterprise failure Eventual recovery of housing and construction activity. Collapse in share price finely tuned forecasting not necessary
- 23. Terex Corporation Purchase Sales $10.94 (avg) $21.64 (avg)
- 24. Brookfield Office Properties BruceFlatt / Brookfield Asset Management Location Location Location Charlie Munger formula for success: Best office property, McDonalds, auto dealership • 2008 financial crisis • 33% offices in NYC • BAC/MER 2013 merger vacancy overhang But: • No funding issues / 95% non-recourse debt • Trading at below replacement & book value. • Markets substantially recovering in mid-2009 • Merrill partner in World Financial Center
- 25. Brookfield Office Properties Purchase$8.93 (avg) Sale: $16.59 (avg)
- 31. • Plan forsuccess at all times • Adjust the mission as circumstances change • Accept where you are. • Accept past mistakes and move on • Massive risk care in taking risks • Never feel sorry for yourself • Accept the difficulties • Accept and work with the imperfections in your team • Never give up
- 32. • Before Investing,run a checklist • Take buy and sell decisions when the market is closed • Buy to hold for at least two years • Reduce toxic relationships, increase productive ones • Create Useful Partnerships • Create a distance from the “madding crowd” • Sequence information appropriately • Maximize positive feedback loops • Invoke useful circuit breakers
- 33. Considerations on Investingwith someone else • 1. Investing their own money • 2. Sole focus • 3. Activity, not a Business • 4. Good • 5. Fiduciary gene
- 34.
- 35. Thank You 35