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GSCM Presentation 2011


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GSCM Presentation 2011

  1. 1. Investor Presentation – 2011 2100 McKinney,  Suite 1420 Dallas, Texas  75201 Phone: 214‐367‐6170 Fax: 214‐367‐6180
  2. 2. IntroductionName:  Greenfield Seitz Capital Management, LLCOrganization:  Registered Investment Advisor Organization: Registered Investment AdvisorLocation:  Dallas, TexasStyle:  Mid/Large‐Cap GARPAssets Under Management:  $300 millionInvestment Professionals:  2Account Minimum:  $1 millionYear Initially Founded:  1964Ownership:  100% owned by Principals O hi 100% db P i i l 1
  3. 3. Introduction Investment Objective Provide US Growth Equity investors a superior rate of return over the long‐term, while simultaneously maintaining a commitment to capital preservationterm while simultaneously maintaining a commitment to capital preservation As thematic investors, we look to identify attractive investment themes thatare not fully valued/appreciated Investment Philosophy  Independent Thought Process d d h h  Strategic Sector Allocation  Fundamentally Oriented Fundamentally Oriented  Focus on Outstanding Management  Steadfast Conviction In Our Ideas Steadfast Conviction In Our Ideas  Patience & Long‐Term Perspective 2
  4. 4. GSCM Team Yancey Seitz joined Greenfield Seitz in 1983. Mrs. Seitz has been a  principal member of Greenfield Seitz Capital Management for more  than 20 years. She earned a bachelor’s degree in finance from the  University of Oklahoma.  Mrs. Seitz spent 20 years working with the  University of Oklahoma Mrs Seitz spent 20 years working with the founder of GSCM, Eric Greenfield, and has considerable experience in  applying our investment process in a multitude of environments. Stuart Greenfield, CFA joined Greenfield Seitz in 2002. His investment  career started with Luther King Capital Management and later in  equity research at Donaldson, Lufkin & Jenrette and Bear Stearns &  Co. At DLJ, he received all‐star analyst votes. After working on the sell‐ side, he was a Portfolio Manager at Smith Group Asset Management.  Stuart graduated from Texas Christian University with a bachelor’s  degree in finance and is a CFA Charterholder degree in finance and is a CFA® Charterholder.• 4‐person staff has 70+ years combined investment experience• Staff has average tenure of 14 years at GSCM Staff has average tenure of 14 years at GSCM 3
  5. 5. GSCM is Different  Experienced Team  – Investment staff averages 17 years in the investment industry  Proven Process Proven Process  – 45 years and going strong  Tax Efficient  – S Superior After‐Tax Returns i Aft T R t – Low Turnover (<10% annualized)  Long Term Investment Horizon  Loyal investor base  – Average client invested with GSCM more than 20 years  Internal Research Internal Research  Focus on real returns and not Benchmark allocation  Conviction  – Greenfield & Seitz’s family are largest investors 4Investing involves risk and you may incur a profit or a loss. Past performance is not indicative of future results. Visit for additional disclosures.
  6. 6. Size Matters: Small is Better  GSCM was named “Top Gun Manager of Decade” by PSN Informa (3/1/2010 and 3/1/2011) – GSCM ranked Top 10 out of more than 3,000 managers (1999‐2009) – GSCM only firm to ever repeat as Top Gun Manager of Decade (2000‐2010) – Five of the Top 10 equity managers had less than $3 billion in AUM  Numerous Academic Studies show Emerging Managers Outperformance Numerous Academic Studies show Emerging Managers Outperformance – Passionate and Hungry  – Focused on stock selection (not client relations & speaking obligations) – Multi‐Billion AUM leads to small investible universe and trading difficulties  Access to Manager & Portfolio Transparency g p y  Large does not equal lower risk – Amaranth, Absolute, Atticus, Bear Stearns, BP, Carlyle, Galleon, GLG, Highland, Lancer, Lehman Bros, Long‐Term  Capital, Madoff, Ospraie, Peloton, Pequot, and Sowood…… were all large & respected Research by Ted Krum (Northern Trust) “Potential Benefits of Investing with Emerging Managers” – Investors with minimum assets under management requirements often excluded top‐performing managers. 40% of  core U.S. equity managers in the top quartile of performance managed less than $2 billion. – Emerging investment managers outperformed larger firms at the median, as well as at the top and bottom quartile  levels. This result was consistent across all major style groups and implies that manager‐selection skill may be better  rewarded when applied to the small firm universe. rewarded when applied to the small‐firm universe. – Small firms delivered better performance in down markets. “Almost 20 years of data show that emerging firms have been more nimble,” says Robert Furnari, managing director of  Emerging Manager Programs at Northern Trust. “They can make adjustments to the portfolio in times of distress more  quickly than larger firms.” 5Investing involves risk and you may incur a profit or a loss. Past performance is not indicative of future results. Visit for additional disclosures.
  7. 7. Investment Process Proactive Idea Generation from Multiple Sources Opportunistic, Go‐Anywhere Approach Identify Attractive Investment Themes and Industries (Top – Down) y p Find Actionable Securities to Profit from Macro‐Theme (Bottom – Up) Rigorous Qualitative Analysis – Management Assessment – Industry Analysis – Identify Misperception or Catalyst Fundamental Analysis – Proven history of EPS Growth (2 years, ideally 5+ years) Proven history of EPS Growth (2 years ideally 5+ years) – Valuation (PEG below 1.5, ideally below 1.0) – ROE (Above 20%) – Low Debt/Equity (Below 20%, ideally zero) – Balance Sheet Strength 6
  8. 8. Portfolio Construction Parameters  Market Capitalization above $1 billion  Positive EPS  Trade in  both U.S. common  or ADR’s  Maximum International Exposure: 40% M i I i lE 40%  Portfolio Holdings: 50 – 70  Maximum Position in Single Stock: 10%  Target Asset Allocation: 90% equities & 10% cash.  • Will vary with tactical allocation 7
  9. 9. Search for Excellent Management Qualitative Factors  Run Business for Long‐Term  Shareholder Friendly  Conservative Accounting  Judge Leadership on Past Actions, Not Words  Tenure at Firm Quantitative Factors  Quantitative Factors  EPS Growth above 15%  Consistent Earnings Over Time  High ROE  High ROE  Low debt levels 8
  10. 10. Sell Discipline Negative EPS  • We aim to only own stocks with positive EPS V l ti Valuation  • If stock becomes popular with investors and valuations become  excessive, we will move onto something out of favor Industry Dynamics change  • Purchase based on our favorable macro‐view of industry, as business  cycle changes we sell Deteriorating Fundamentals  • Decline in profit margin, market share, ROE, or EPS Swap for similar company with better fundamentals and valuation p p y Trim any single stock exposure < 10% 9
  11. 11. Diversified Portfolio Sector Diversification Tech, 6% Materials, 9% Industrials, 16% Cash, 15% Healthcare, 14% Cons Disc 4% Disc, Cons Stpls, Financials, 7% 10% Energy, 19% Wtd-Avg Market-Cap: $74 billion Median Market-Cap : $48 billion Trailing P/E: 16x Benchmark: Russell 1000 Holdings: 75 Pct Top 10 Holdings: 41% International investing involves additional risks such as currency fluctuation, different accounting methods, and possible political and economic instability. These risks are greater in emerging markets. Companies engaged in the technology industry are subject to fierce competition and their products and services may be subject to rapid obsolescence. 10
  12. 12. Capital Preservation  Focus on Management • Proven Leadership  Diversified Holdings   • 70‐80 holdings across multiple sectors/industries • Global exposure improves opportunity  Avoid Speculative or Trendy stocks  • High P/E‐G Ratio, High P/E, no EPS, High Beta   Conservative Accounting  g • Indicative of good management  Cash Allocation  Increase cash exposure during market stress periods  Balanced Portfolio  Sector and position limits  Upside / Downside Capture Ratio  95 Upside / 65 Downside *  Consistent Top Quartile Performance * pQ GSCM Investment Process Has Been Successful For Over 45 Years * see Zephyr Analytics on following pages  see Zephyr Analytics on following pages 11Investing involves risk and you may incur a profit or a loss. Past performance is not indicative of future results. Visit for additional disclosures.
  13. 13. Consistent Top Decile Performance - 36 Consecutive Quarters (5 –yr rolling) 12
  14. 14. Consistent Alpha Generation 13Investing involves risk and you may incur a profit or a loss. Past performance is not indicative of future results. Visit for additional disclosures.
  15. 15. Multi-Statistic Analysis 14
  16. 16. Risk / Return 15
  17. 17. Performance - Growth of $1 16
  18. 18. Composite Data 17
  19. 19. GIPS Verification 18
  20. 20. GIPS Disclosures Performance Disclosure: Firm Information: Greenfield Seitz Capital Management ("GSCM") is a registered investment advisor based in Dallas, Texas. GSCM specializes in managing separate investment accounts for high net-worth individuals, with a focus on equities. GSCM is a structured as a Limited Liability Corporation. procedures relating to the management of investment portfolios for high net-worth clients. GSCM utilizes Raymond James Financial, Inc. as its broker/dealer and custodian of assets. Composite Characteristics: The Greenfield Seitz Capital Management Core Composite is comprised of accounts whose primary objective is growth of principle by investing primarily in stocks of U.S. and international companies. Before investing with GSCM, all clients agree to the investment style so all accounts are employing GSCMs investment strategy. The composite contains all disretionary accounts that exceed the minimum asset level. The GSCM Core Composite is the only composite for GSCM and contains no carve-outs. A complete list and description of all firm composites is available upon request (GSCM Core Composite is the only composite for Greenfield Seitz C it l Management). The minimum portfolio size for the GSCM C G fi ld S it Capital M t) Th i i tf li i f th Core CComposite i $1 000 000 Accounts may include up t 20% fi d i it is $1,000,000. A t i l d to fixed income i investments. A a whole, fi d income securities represent less t t As h l fixed i iti tl than 5% of total composite assets. The start date for the GSCM Core Composite was January 1, 1997 and the composite was created in October 2004. The composite benchmark is the S&P 500 Index, which represents two- thirds of U.S. equity market value. New accounts are added to the composite at the beginning of the first full calendar month that they meet the composite definition. Closed account data is included in the composite as mandated by the standards in order to eliminate a survivorship bias. Accounts are removed on a monthly basis from the composite when assets fall below 30% of the minimum. Dispersion is only shown on annual periods. Calculation Methodology: Valuations and returns are computed and stated in U.S. dollars, and individual portfolios are revalued monthly. Pricing information is supplied by ISS. The firm uses the trade date monthly returns and links these returns geometrically to produce an accurate time-weighted rate of return. Prior to January 2002, some accounts may have employed the use of settlement date accounting to calculate performance results. Time- weighted total returns include both capital appreciation and reinvested dividends. The GSCM Composite performance is the total return including cash and cash equivalents, of an assset-weighted composite of all discretionary portfolios managed by Stuart Greenfield and Yancey Seitz. Composite returns are asset-weighted. Net of fees returns are calculated net of management fees, transaction costs, and custodian fees. To calculate gross of fees Seitz asset weighted fees costs fees returns, please review our fees and add applicable fees back into returns accordingly. Returns are calculated gross of all withholding taxes on foreign dividends. The dispersion measure is the asset-weighted standard deviation of accounts in the composite for the entire year. On 2/28/06, the composite changed software to Advent Axys. After the change in software programs, composite returns are now calculated using modified dietz and cash-basis dividends. Key Manager Change: In February 2002, Stuart Greenfield assumed co-responsibilty for stock selection and investment management from Eric Greenfield. Yancey Seitz has shared investment management responsibility during all periods of the Composite. Net-of-fee performance: Net of fee performance shown reflects the deduction of actual fees. To calculate gross of fees returns, please review our fees and add applicable fees back into returns accordingly. Actual fees are expected to be lower than the maximum scheduled rate of 1%. All charts and tables are shown Net of Fees. Benchmark: The S&P 500 is an unmanaged index of the shares of large U.S. companies. It includes reinvested dividends and is presented gross of fees. Statistical Definitions: Tracking error/Standard Devation is the square root of the variance. Beta is measure of a portfolio’s volatility relative to the market. R2 is the relative predictive power of a model. Alpha is the extra return above what CAPM determines for the amount of risk taken, risk adjusted return. Excess Return is returns in excess of the risk-free rate. Sharpe Ratio measure risk-adjusted performance using standard devation. Alpha measures performance on a risk-adjusted basis. Sortino ratio differentiates between good and bad volatility. Treynor measures returns earned in excess of that which could have been earned on a riskless investment per each unit of market risk. Custodian Transfer: On 4/1/05, GSCM changed asset custodians. There were no disruptions in peformance and no trading activity during transfer. Fee Schedule: 1.00% on assets under management Other Disclosures: Greenfield Seitz Capital Management has received a firm-wide GIPS® Verification for the period January 1, 1997 - September 30, 2009 from Beacon Verification Services+B33. Past performance does not guarantee future results. This performance report should not be construed as a recommendation to purchase or sell any particular securities held in composite accounts Market conditions can vary widely over time and can result results accounts. in a loss of portfolio value. To obtain performance data current to most recent month end, please contact us. You should consider our investment objectives, risks, and fees carefully before you invest. Additional information regarding policies for calculating and reporting returns is available upon request. 19