StoneCastle Investment Management 2nd Quarter Update

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StoneCastle Investment Management
2nd Quarter Update
REDWOOD ASSET MANAGEMENT INC.
1
Overview
• Bear Market Indicators
• Economy
• Markets
• Sectors
• Opportunity Ahead
2
StoneCastle Investment Management
• StoneCastle Investment Management is a quantitativeoriented investment firm focused on the management of
Canadian equities.
• StoneCastle is led by Bruce Campbell, B. Comm., CFA,
CAIA a financial professional with over 22 years
experience in discretionary investment management
• StoneCastle manages two mutual funds for Redwood
using their earnings growth/relative strength focused
quantitative approach:
• Redwood Income Growth Class – Yielding Equities
• Redwood Equity Growth Class – Growth Equities
3
Fund Performance as at June 5th, 2015
Redwood Equity Growth Class
Total Return % (05/06/2014)
1-Month
3-Month
YTD
1-Year
3-Year
5-Year
2.16
8.04
10.05
14.63
23.39
12.85
Category (Canadian Small/Mid Cap Equity)
0.73
3.25
6.00
-0.36
14.55
11.48
+/- Category (Canadian Small/Mid Cap Equity)
1.43
4.79
4.05
15.00
8.85
1.37
21/200
3/-
19/193
5/187
16/147
42/120
Rank in Category / # of Funds
Redwood Income Growth Class
Total Return % (05/06/2014)
1-Month
3-Month
YTD
1-Year
3-Year
-2.10
0.62
3.70
3.40
11.10
Category (Canadian Dividend & Income Equity)
-1.32
-1.00
1.28
1.44
11.95
+/- Category (Canadian Dividend & Income Equity)
-0.78
1.62
2.42
1.96
-0.86
72/478
8/-
14/465
33/445
66/312
Rank in Category / # of Funds
Source: Morningstar Research
4
16-18 Year Cycles
5
Valuation Low
Jeff Saut – Raymond James
Source: Jeff Saut,
Raymond James
6
Structural Fair Market Vs. Bull Market
Source: Dorsey Wright & Associates
7
10 Year CAGR
10 Year CAGR is 4.4% today. Average since 1800=9.1% and
tops our in mid teens
8
Bear Market Indicators
9
LEI and 18 Month Moving Average
Source: Bloomberg
10
Energy
80% Rise in 12 Months
80% Increase = $81.52
11
Financial Conditions Index
Source: Bloomberg
12
Unemployment and 12 Month Moving Average
Source: Bloomberg
13
ISM Manufacturing
Source: Bespoke
14
Citi Economic Surprise Index
Source: Bloomberg
15
Consumer Comfort Index
Source: Bloomberg
16
Valuation
17
Equities - Favored Asset Class
Source: Dorsey Wright
18
What’s the Bond Market Telling Us?
19
NYSE Monthly Momentum
20
S&P/TSX Monthly Momentum
21
Weekly MACD Positive
22
Pros Have Given Up Control
Source: Whiteside Research
23
Pros About to Give Up Control
24
S&P/TSX Sectors
Negative
25
S&P/TSX Sectors
Positive
26
S&P/TSX Sectors
Source: Stockcharts, RRG
27
TSX Monthly Returns
May and June
Source: Bloomberg
28
S&P 500 Monthly Returns
May and June
Source: Bloomberg
29
Sector Allocation
Redwood Equity Growth Fund
SECTOR WEIGHTINGS ‐ Q1
Technology
Communications Consumer Discretionary
Consumer Staples
Energy
SECTOR WEIGHTINGS ‐ Q2
Technology
Materials
Communications Consumer Discretiona
ry
Consumer Staples
Cash
Industrials
Materials
Financials
Energy
Industrials
Financials
Health Care
Health Care
30
Sector Allocation
Redwood Income Growth Fund
SECTOR WEIGHTINGS – Q1
Transporta
Utilities
tion
Telecom
Technology
Consumer Discretionary
SECTOR WEIGHTINGS – Q2
Transportati
on
Utilities
Energy
Financials
Cash
Capital Goods
Technology
Consumer Disc
Real Estate
Health Care
Industrials
Consumer Staples
Industrials
Real Estate
Energy
Health Care
Financials
31
Fund Attributes
Attribute
S&P TSX
Redwood Income Growth
Beta
1.00
0.70
Expected Yield
2.90%
5.44%
Quarterly EPS Growth
‐4.80%
‐2.50%
NY EPS Growth
25.00%
19.40%
Attribute
S&P TSX
Redwood Equity Growth
ROE
10.50 %
11.10%
Quarterly EPS Growth
‐4.80%
4.20%
Quarterly Earnings Surprise
1.60%
3.50%
NY ESP Growth
19.40%
43.00%
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Statistics – Volatility Metrics
3‐Year Trailing
Redwood Equity Growth
S&P/TSX Completion
Canadian Small/Mid Cap Equity
Standard Deviation
10.74
8.31
9.77
Return
23.48
10.21
14.18
Sharpe Ratio
1.94
1.10
1.41
R‐Squared
36.90
100
80.36
Alpha
13.69
‐
0.50
Beta
0.79
Upside & Downside Capture
‐
1‐Year
1.00
3‐Year
Redwood Equity Growth 75.83
‐12.81
104.61
‐49.70
Canadian Small/Mid Cap Equity
78.22 72.49 88.60
50.66
Source: Morningstar. Data as of May 31, 2015
33
Statistics – Volatility Metrics
3‐Year Trailing
Redwood Income Growth
S&P/TSX Total Return
Canadian Dividend & Income Equity
Standard Deviation
7.10
7.28
6.61
Return
10.64
12.58
11.68
Sharpe Ratio
1.33
1.54
1.63
R‐Squared
29.52
100
63.66
Alpha
3.50
‐
3.19
Beta
0.53
‐
0.60
Upside & Downside Capture
1‐Year
3‐Year
Redwood Income Growth 67.15
63.87
63.78
20.38
Canadian Dividend & Income Equity
73.01
82.64 79.65
55.96
Source: Morningstar. Data as of May 31, 2015
34
The Playbook
• Indicators are in Neutral
• Seasonally weaker time of the year
• Bear market warning signs are not present
• Watch indicators for changes
35
Back to Offense
September 2010 to February 2011
32.5%
12.8%
Source: GlobeFund
36
Back to Offense
September 2012 to January 2014
39.7%
11.2%
Source: GlobeFund
37
Questions?
38
Contact Info
Bruce Campbell, CFA, CAIA
bruce@stonecastlefunds.ca
Jordan Youl, CIM
jordan@stonecastlefunds.ca
205‐1708 Dolphin Ave
Kelowna, BC
V1Y 9S4
Phone: 250‐448‐6475
Toll Free: 866‐780‐6475
39

StoneCastle Investment Management 2nd Quarter Update

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