Recommendation: Buy Och-Ziff (OZM) Green&Gold Fund
Key Investment Points • Stellar risk adjusted performance of their funds • Good dividend • Unfairly discounted valuation • Opportune entry point
Industry Overview • Focus on operational excellence, growth, performance, risk management, and compliance • Asset Management CEOs most optimistic out of any industry • Very capable of adaptation and reinvention • Asset allocation shift towards Alternative Assets
Industry Overview (Asset allocation shift)
Company Profile (Business Model)
Company Profile (Investment Strategy) Merger arbitrage Convertible arbitrage Equity Restructuring Credit and distressed debt Private Equity (to a lesser extent) Real Estate (to a lesser extent)
Company Profile (Allocation Strategy)
Investment Information Prev Close: 1 y Target Est: 52 wk Range: Avg Vol (3 m): Market Cap: P/E (ttm): EPS (ttm): Div & Yield: 3 Year Price Graph (Morningstar) 9. 48 12. 44 7. 32 -17. 56 1, 798, 120 955. 41 M 18. 96. 50. 36 (3. 90%) Forward P/E: 7. 82
SWOT Analysis Strengths Alignment of Interest Team based culture Synergies among investment strategies Focused on infrastructure Dividend Low leverage Weaknesses Uncorrelated Equity vs. Fund performance Extensive regulation No sunset provision/high water mark reset Opportunities Expansion of global presence Structured Credit 3 -year money contribution to revenue Threats China breakdown and global economic effects New debt and AUM covenants Loss of key partner(s) Exchange of Group A unit for Class A share Investors demand lower fees
Investment Thesis • We should own this stock to take advantage of performance fees not yet priced in. Management fees make up most of the current valuation and 3 year money is scheduled to boost management fees significantly in 2012 and 2013.
Valuation (multiples based) Historical average industry P/E 12 -13 OZM earnings Earnings (ttm) 1. 11 Value 13. 32 – 14. 43 Earnings (2011 forecast). 50 Value 6. 00 -6. 5 Earnings (2012 forecast) 1. 19 Value 14. 28 – 15. 47 Average 2011/2012 forecast Current Value 10. 14 – 10. 98 Stock currently undervalued
Portfolio Placement / Recommendation Sector : Alternatives Industry Group: Asset Management Current Holdings: ODMAX, PRPFX, MOO, GXG Target Sector Allocation: 10%, $47, 641 Current Sector Allocation: 7. 5% , $35, 696 Remaining Allocation: 2. 5%, $11, 945 BUY 800 shares of OZM at Limit Price of 9. 48 (approx. $7, 584 1. 5% of portfolio) Holding Period/Exit Strategy: 12 months, Consider selling if stock price rises above $15.
Recommendation: Buy i. Shares MSCI Canada Etf (ECW) Green&Gold Fund
Key Investment Points • Second largest oil reserve behind Saudi Arabia • Financially stable country • Resource rich • Chemicals, Energy, Minerals
Industry Overview • Better GDP growth than US 2. 7% vs. 1. 8% yet the index has lagged the S&P 500 -15% vs. 2. 11% • More expansion potential in terms of agriculture due to growth in arable land • Low fiscal public debt to GDP ratio 34% • Less exposure to European crisis than US or emerging markets • Currently trading at about par with the dollar despite the dollar’s rise
Sector Breakdown • Financials 31. 98% • Energy 26. 66% • Materials 21. 32% • Industrials 5. 79% • Consumer D 3. 47% • Telecom 3. 28% • Consumer S 3. 01% • Utilities 1. 29% • Information T 1. 22% • Health Care 1. 18% • Other . 81%
Top 10 Holdings Royal Bank of Canada TD Bank of Nova Scotia Suncor Energy Barrick Gold Canadian Natural Res Potash of Sask Goldcorp Bank of Montreal Canadian Natural Rail 6. 14% 5. 67% 4. 64% 4. 22% 4. 06% 3. 41% 3. 22% 3. 08% 3. 04% 2. 89%
Investment Information Prev Close: 1 y Target Est: 52 wk Range: Avg Vol (3 m): Market Cap: P/E (ttm): EPS (ttm): Div & Yield: 3 Year Price Graph (Morningstar) 27. 63 12. 44 23. 48 -34. 57 2, 512, 750 4. 47 B 13. 61 2. 00. 39 & 2. 60% Forward P/E: N/A
SWOT Analysis Strengths Financially stable country Financially stable holdings Exposure to Oil Low exposure to European Weaknesses Slow global growth Oil production cumbersome Low population crisis Opportunities Increase global trade outside of US Overlooked upside potential Increase Oil production Threats China breakdown and global economic effects
Investment Thesis • We should own this security to diversify out of dollar denominated assets as a result of potential QE 3 and gain exposure to Canada's rich resources and financial stability. This is an opportune time to take advantage of the divergence in the index's performance and the country's fundamentals.
Portfolio Placement / Recommendation Sector : Alternatives Industry Group: Asset Management Current Holdings: ODMAX, PRPFX, MOO, GXG Target Sector Allocation: 10%, $47, 641 Current Sector Allocation: 7. 5% , $35, 696 Remaining Allocation: 2. 5%, $11, 945 BUY 400 shares of EWC at Limit Price of 27. 63 (approx. $11, 052 2. 32% of portfolio) Holding Period/Exit Strategy: 12 months, Consider selling if stock price rises above $34.
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