Section II OSAM Quarterly Commentary: International ADR Past performance is no guarantee of future results. Please see important disclosure information at the end of this presentation. osam.com 1 1Q13 AND LTM FACTOR PERFORMANCE Strategy Performance Summary of Excess Factor Performance QTD LTM Best of Value Excess Return* QTD LTM International ADR 5.51% 12.14% (higher excess is better) MSCI EAFE Index 5.13% 11.25% Value Composite ‐1.3% ‐1.9% *Returns vary relative to our ADR All Stocks Universe which returned +4.5% for the quarter and +0.8% LTM . Momentum Composite 4.6% 15.5% Company Name QTD QTD Worst of Quality Excess Return* QTD LTM Weight Contribution (lower excess is better) Quarter‐to‐Date ‐ Top Contributors from Return Earnings Quality ‐2.8% ‐12.4% Fuji Heavy Industries Ltd. ADS 3.4% 0.80% Financial Strength 0.8% ‐3.0% Allied World Assurance Company Holdings, AG 4.6% 0.79% Earnings Growth ‐1.1% ‐6.5% Quarter‐to‐Date ‐ Top Detractors to Return Altisource Portfolio Solutions S.A. 1.6% ‐0.24% Quarter‐to‐Date Comments: Hellenic Telecommunications Organization S.A. 1.5% ‐0.26% What Helped Returns: ‐The Momentum Composite performed well and contributed positively. ‐Our Earnings Quality Composite contributed to strategy returns. Company Name LTM LTM What Did Not: Weight Contribution ‐The Value Composite underperformed and detracted from returns. Quarter‐to‐Date ‐ Top Contributors from Return ‐Our Financial Strength Composite did not screen out poor performers. Telstra Corp. Ltd. ADS 4.7% 2.03% Last‐Twelve‐Month Comments: Fuji Heavy Industries Ltd. ADS 1.6% 1.68% What Helped Returns: Quarter‐to‐Date ‐ Top Detractors to Return ‐The Momentum Composite significantly outperformed for the period. Companhia Energetica de Minas Gerais‐CEMIG 1.4% ‐0.67% ‐Our Earnings Quality Composite contributed positively. Xyratex Ltd. 0.7% ‐0.85% What Did Not: ‐The Value Composite underperformed and detracted from returns. ‐An overweight to Energy detracted from performance. Factors Used to SELECT Stocks (Quintiles: Positive is Better) Factors Used to AVOID Stocks (Quintiles: Negative is Better) ‐4.0% ‐3.0% ‐2.0% ‐1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% Fin Strength Earnings Quality Earnings Growth ‐14.0% ‐12.0% ‐10.0% ‐8.0% ‐6.0% ‐4.0% ‐2.0% 0.0% 2.0% Fin Strength Earnings Quality Earnings Growth ‐2.0% ‐1.5% ‐1.0% ‐0.5% 0.0% 0.5% Cumulative Excess Return Value Composite ‐4.0% ‐3.5% ‐3.0% ‐2.5% ‐2.0% ‐1.5% ‐1.0% ‐0.5% 0.0% Cumulative Excess Return Value Composite -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% Momentum Composite 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% Momentum Composite Quarter‐to‐Date Last‐Twelve‐Month Source: Compustat, OSAM Calculations
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Section II OSAM Quarterly Commentary: International ADR
Past performance is no guarantee of future results. Please see important disclosure information at the end of this presentation.
osam.com 1
1Q13 AND LTM FACTOR PERFORMANCE Strategy Performance Summary of Excess Factor Performance QTD LTM Best of Value Excess Return* QTD LTM International ADR 5.51% 12.14% (higher excess is better) MSCI EAFE Index 5.13% 11.25% Value Composite ‐1.3% ‐1.9% *Returns vary relative to our ADR All Stocks Universe which returned +4.5% for the quarter and +0.8% LTM .
Momentum Composite 4.6% 15.5%
Company Name QTD QTD Worst of Quality Excess Return* QTD LTM
Weight Contribution (lower excess is better) Quarter‐to‐Date ‐ Top Contributors from Return Earnings Quality ‐2.8% ‐12.4% Fuji Heavy Industries Ltd. ADS 3.4% 0.80% Financial Strength 0.8% ‐3.0% Allied World Assurance Company Holdings, AG 4.6% 0.79% Earnings Growth ‐1.1% ‐6.5% Quarter‐to‐Date ‐ Top Detractors to Return Altisource Portfolio Solutions S.A. 1.6% ‐0.24% Quarter‐to‐Date Comments: Hellenic Telecommunications Organization S.A. 1.5% ‐0.26% What Helped Returns:
‐The Momentum Composite performed well and contributed positively. ‐Our Earnings Quality Composite contributed to strategy returns.
Company Name LTM LTM What Did Not:
Weight Contribution ‐The Value Composite underperformed and detracted from returns. Quarter‐to‐Date ‐ Top Contributors from Return ‐Our Financial Strength Composite did not screen out poor performers. Telstra Corp. Ltd. ADS 4.7% 2.03% Last‐Twelve‐Month Comments: Fuji Heavy Industries Ltd. ADS 1.6% 1.68% What Helped Returns: Quarter‐to‐Date ‐ Top Detractors to Return ‐The Momentum Composite significantly outperformed for the period. Companhia Energetica de Minas Gerais‐CEMIG 1.4% ‐0.67% ‐Our Earnings Quality Composite contributed positively. Xyratex Ltd. 0.7% ‐0.85% What Did Not: ‐The Value Composite underperformed and detracted from returns. ‐An overweight to Energy detracted from performance.
Factors Used to SELECT Stocks(Quintiles: Positive is Better)
Factors Used to AVOID Stocks
(Quintiles: Negative is Better)
‐4.0%
‐3.0%
‐2.0%
‐1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
Fin Strength Earnings Quality Earnings Growth
‐14.0%
‐12.0%
‐10.0%
‐8.0%
‐6.0%
‐4.0%
‐2.0%
0.0%
2.0%
Fin Strength Earnings Quality Earnings Growth
‐2.0%
‐1.5%
‐1.0%
‐0.5%
0.0%
0.5%
Cumulative Excess Return
Value Composite
‐4.0%
‐3.5%
‐3.0%
‐2.5%
‐2.0%
‐1.5%
‐1.0%
‐0.5%
0.0%
Cumulative Excess Return
Value Composite
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
Momentum Composite
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
Momentum Composite
Quarter‐to‐Date
Last‐Twelve
‐Mon
th
Source: Compustat, OSAM Calculations
Section II OSAM Quarterly Commentary: International ADR
Past performance is no guarantee of future results. Please see important disclosure information at the end of this presentation.
osam.com 2
OSAM Quarterly Commentary: International ADR 1Q13 AND LTM FACTOR PERFORMANCE
The goal of this commentary is to walk through the characteristics
OSAM uses in its investment process and highlight those
characteristics that were rewarded and those that were not during
the period (Section I). This section covers the most recent quarter
and the last twelve months for the ADR All Stocks universe, which
consists of companies included in the COMPUSTAT database and
listed on U.S. exchanges meeting our market capitalization
requirements. Inference is drawn by looking at how stocks did from
different market capitalization ranges and economic sectors,
followed by portfolios formed on the top quintiles of factors used in
OSAM strategies. Section II includes commentary on our specific
strategies. All of the data throughout the commentary is in U.S.
dollars.
Most equity markets were positive in the first quarter of 2013. The MSCI
EAFE Index delivered a total return of 5.28% for the quarter. International
markets primarily focused on a spirited election contest in Italy before
turning to the debt crisis negotiations in Cyprus. Fears that the Cypriot
bank recapitalization via deposit haircuts would set precedent for future
bailouts have, thus far, proved to be unfounded. Though it received little
attention, the Organization for Economic Cooperation and Development
raised their estimated growth of the G7 economies to a 2.4% annualized
rate for Q1 2013 despite struggles in the euro area. Concerns around a
hard landing for the Chinese economy, which has implications for
commodity prices, global exports and ultimately global growth, subsided
as reports of economic growth showed improvement for the latter half of
2012.
OSAM RESEARCH TEAM
Jim O’Shaughnessy Chris Meredith, CFA Scott Bartone Travis Fairchild, CFA Patrick O’Shaughnessy Ashvin Viswanathan, CFA
PRODUCT MANAGEMENT
Ehren Stanhope, CFA
CONTENTS
Section I
MARKET CAPITALIZATION
ECONOMIC SECTORS
COUNTRIES INVESTMENT FACTORS
Value Composite Price-to-Sales Price-to-Earnings EBITDA-to-Enterprise Value Free Cash Flow-to-Enterprise Value Shareholder Yield
Earnings Quality Composite Current Accruals-to-Assets Change in Operating Assets Total Accruals Depreciation-to-CapEx
Section II
O'SHAUGHNESSY INTERNATIONAL ADR
MARKET OUTLOOK
OSAM CONTACT INFORMATION:
Ari Rosenbaum, Director of Financial Advisor Services ■ 203.975.3340 Tel ■ [email protected]
O’Shaughnessy Asset Management, LLC ■ Six Suburban Avenue ■ Stamford, CT 06901 ■ 203.975.3333 Tel ■ 203.975.3310 Fax
Section II OSAM Quarterly Commentary: International ADR
Past performance is no guarantee of future results. Please see important disclosure information at the end of this presentation.
osam.com 3
MARKET CAPITALIZATION
The market rally in the first quarter was led by small cap stocks, which were up +6.5%. Mid cap and large cap
stocks also had positive returns of +3.8% and +2.0%, respectively, but lagged the small cap universe. All of the
market cap portfolios are constructed by equally weighting names within the specific market cap grouping.
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
Cum
ulat
ive
Ret
urn
QTD Cumulative Return by Market Capitalization - ADR All Stocks
Large Cap Mid Cap Small Cap
The ADR All Stocks Universe was relatively flat over the last twelve months returning +0.8%. The returns for the
market cap universes were mixed and offsetting. The total returns for the last twelve months were +6.0%, +4.6%,
and -2.7% for large cap, mid cap, and small cap stocks, respectively.
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
Cum
ulat
ive
Ret
urn
LTM Cumulative Return by Market Capitalization - ADR All Stocks
Large Cap Mid Cap Small Cap
Source: Compustat, OSAM Calculations
Source: Compustat, OSAM Calculations
Section II OSAM Quarterly Commentary: International ADR
Past performance is no guarantee of future results. Please see important disclosure information at the end of this presentation.
osam.com 4
ECONOMIC SECTORS
There was significant divergence among the economic sectors during the first quarter. Based on market cap
weighted returns for each sector in the ADR All Stocks Universe, Health Care performed the best with a return of
+10.9%. Consumer Staples also performed well with a return of +9.3%. Materials was the worst performing sector
at -11.2%, followed by Energy at -5.4%.
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
Cum
ulat
ive
Ret
urn
QTD Cumulative Return by Economic Sector - ADR All Stocks
Energy Materials Industrials Cons Disc Cons Staples
Health Care Financials Info Tech Telecom Utilities
Over the last twelve months, Energy was the worst performing sector at -8.6%. Materials also lagged other
sectors and returned -5.9%. Health Care performed the best at +25.5%, followed by Consumer Staples at
+19.9%.
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
Cum
ulat
ive
Ret
urn
YTD Cumulative Return by Economic Sector - ADR All Stocks
Energy Materials Industrials Cons Disc Cons Staples
Health Care Financials Info Tech Telecom Utilities
Source: Compustat, OSAM Calculations
Source: Compustat, OSAM Calculations
Section II OSAM Quarterly Commentary: International ADR
Past performance is no guarantee of future results. Please see important disclosure information at the end of this presentation.
osam.com 5
COUNTRIES
Looking at market-cap weighted country returns in the ADR Universe, the country returns were mixed in the first
quarter and there was significant deviation in the range of returns. The European countries represented had
mixed returns in the quarter, the best performers were Ireland (+27.6%) and Switzerland (+12.5%) while the worst
were Spain (-6.3%) and Italy (-9.6%). In addition, Japan (+7.4%) and Australia (+4.1%) performed well relative to
other countries while China (-7.0%) and Hong Kong (-7.5%) were some of the worst performers for the quarter.
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
Cum
ulat
ive
Ret
urn
QTD Cumulative Return by Country - ADR UniverseUNITED KINGDOM AUSTRALIA JAPAN BRAZIL FRANCESWITZERLAND HONG KONG NETHERLANDS CHINA GERMANYSPAIN TAIWAN ITALY IRELAND PORTUGAL
Looking at performance over the last twelve months most countries held up well. There was significant deviation
in the range of returns. The European countries represented had mixed returns in the period. The best
performers were Switzerland (+23.7%) and the Netherlands (+14.3%) while the worst were Italy (-2.6%) and
Spain (-3.6%). In addition, Australia (+18.9%) and Portugal (+10.4%) performed well relative to other countries.
China (-1.7%) and Brazil (-16.7%) were some of the worst performers over the period.
-40.0%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
Cum
ulat
ive
Ret
urn
YTD Cumulative Return by Country - ADR UniverseUNITED KINGDOM AUSTRALIA JAPAN BRAZIL FRANCESWITZERLAND HONG KONG NETHERLANDS CHINA GERMANYSPAIN TAIWAN ITALY IRELAND PORTUGAL
Source: Compustat, OSAM Calculations
Source: Compustat, OSAM Calculations
Section II OSAM Quarterly Commentary: International ADR
Past performance is no guarantee of future results. Please see important disclosure information at the end of this presentation.
osam.com 6
INVESTMENT FACTORS
O’Shaughnessy Value Composite℠
During the first quarter, the various individual value factors were mixed but the Value Composite underperformed.
Price/Earnings was the worst relative performer (-4.0%). EBITDA/Enterprise Value (-2.0%) and Price/Sales
(-1.6%) also underperformed. The Value Composite was aided by outperformance from Free Cash
Flow/Enterprise Value (+3.6%) and Shareholder Yield (+1.4%), but the composite still underperformed by -1.3%.
-5.0%-4.0%-3.0%-2.0%-1.0%0.0%1.0%2.0%3.0%4.0%5.0%
Cum
ulat
ive
Exce
ss R
etur
n
QTD Cumulative Excess Return by Value - ADR All Stocks
Price/Sales Price/Earnings EBITDA/EV Free Cash Flow/EV Shareholder Yield Value Composite
Over the last twelve months, the value factors were very mixed, and the Value Composite underperformed.
Price/Earnings (-9.9%), EBITDA/Enterprise Value (-7.7%) and Price/Sales (-4.8%) underperformed relative to the
ADR All Stocks Universe. Investing on Shareholder Yield (+8.6%) and Free Cash Flow/Enterprise Value (+2.1%)
performed well. Overall, the Value Composite underperformed the ADR All Stocks Universe by -1.9%.
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
Cum
ulat
ive
Exce
ss R
etur
n
YTD Cumulative Excess Return by Value - ADR All Stocks
Price/Sales Price/Earnings EBITDA/EV Free Cash Flow/EV Shareholder Yield Value Composite
Source: Compustat, OSAM Calculations
Source: Compustat, OSAM Calculations
Section II OSAM Quarterly Commentary: International ADR
Past performance is no guarantee of future results. Please see important disclosure information at the end of this presentation.
osam.com 7
O’Shaughnessy Momentum Composite℠
3-Month, 6-Month, and 9-Month Momentum all had strong returns during the first quarter. The total relative
performance versus the ADR All Stocks Universe for the quarter was +2.1%, +3.1%, and +4.6% for 3-Month, 6-
Month, and 9-Month Momentum, respectively. Stocks with Low Price Volatility outperformed for the quarter with
an excess return of +2.2%. Combining momentum and low volatility, the Momentum Composite outperformed by
+4.6%.
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
Cum
ulat
ive
Exce
ss R
etur
n
QTD Cumulative Excess Return by Momentum - ADR All Stocks
Best 9 Month Momentum 4.58% 11.47% Worst of Financial Strength Composite 0.80% -3.04%
Lowest Return Volatility 2.25% 11.88%
Best of Momentum Composite 4.57% 15.49% Worst Change in Operating Assets -2.43% -11.89%
Worst Total Accruals -1.47% -11.44%
Worst Current Accruals to Assets -4.21% -21.09%
Worst Depreciation to Capex 0.04% -12.10%
Worst of Earnings Quality Composite -2.82% -12.40%
Excess Factor Returns vs. ADR All Stocks: 1st Quarter 2013
VALUE EARNINGS GROWTH
MOMENTUM & VOLATILITY
FINANCIAL STRENGTH
EARNINGS QUALITY
Source: Compustat, OSAM Calculations
Section II OSAM Quarterly Commentary: International ADR
Past performance is no guarantee of future results. Please see important disclosure information at the end of this presentation.
osam.com 16
International investing involves a greater degree of risk and increased volatility. Changes in currency exchange rates and differences in accounting and taxation policies outside the U.S. can raise or lower returns. Also, some overseas markets may not be as politically and economically stable as the United States and other nations. Investments in emerging markets can be more volatile.
Notes
All factor portfolios cited in this attribution report are calculated using a compositing methodology. Monthly portfolios are created with a 12-month holding period based on a single characteristic within a universe of stocks. The 12 monthly portfolios are then combined together to create the composite portfolio.
Universes
1. The All Stocks Universe includes all stock included in the Compustat Database listed on a U.S. exchange with a market value greater than $200mm and a price per share greater than $1.
2. The Large Stocks Universe consists of all the stocks in the All Stocks Universe where the market capitalization is greater than the universe average. 3. The ADR All Stocks Universe consists of all the stocks where the headquarters are domiciled outside of the United States and Canada. 4. The ADR Large Stocks Universe consists of all the stocks in the ADR All Stocks Universe where the market capitalization is greater than the universe average.
Characteristics
1. Market Capitalization Ranges are defined follows: Small Cap stocks range from $200m to $2bn, Mid Cap from $2bn to $10bn, Large Cap stocks greater than $10bn. Market capitalizations are inflation-adjusted to December 2008. Universes are equally weighted
2. Dividend Yield is calculated by the indicated annual dividends in IDC ex-Share divided by the current market capitalization. 3. Price to Sales is calculated by the trailing 12-month revenues from Compustat divided by the current market capitalization. 4. Momentum is the total return of the stock over the period indicated, including price appreciation and dividends. 5. Earnings Growth is a one-year calculation, looking at the percentage change in Earnings per Share in the last twelve months versus the twelve months before. To account
for negative earnings, the scalar is taken as an absolute value.
General Legal Disclosure/Disclaimer and Backtested Results
It should not be assumed that your account holdings correspond directly to any comparative indices. Individual accounts may experience greater dispersion than the composite level dispersion (which is an asset weighted standard deviation of the accounts in the composite for the full measurement period). This is due a variety of factors, including but not limited to, the fresh start investment approach that OSAM employs and the fact that each account has its own customized re-balance frequency. Over time, dispersion should stabilize and track more closely to the composite level dispersion. Gross of fee performance computations are reflected prior to OSAM’s investment advisory fee (as described in OSAM’s written disclosure statement), the application of which will have the effect of decreasing the composite performance results (for example: an advisory fee of 1% compounded over a 10 year period would reduce a 10% return to an 8.9% annual return). Portfolios are managed to a target weight of 3% cash. Account information has been compiled by OSAM derived from information provided by the portfolio account systems maintained by the account custodian(s), and has not been independently verified. In calculating historical asset class performance, OSAM has relied upon information provided by the account custodian or other sources which OSAM believes to be reliable. OSAM maintains information supporting the performance results in accordance with regulatory requirements. Please remember that different types of investments involve varying degrees of risk, that past performance is no guarantee of future results, and there can be no assurance that any specific investment or investment strategy (including the investments purchased and/or investment strategies devised and/or implemented by OSAM) will be either suitable or profitable for a prospective client’s portfolio. OSAM is a registered investment adviser with the SEC and a copy of our current written disclosure statement discussing our advisory services and fees continues to remain available for your review upon request.
Hypothetical performance results shown on the preceding pages are backtested and do not represent the performance of any account managed by OSAM, but were achieved by means of the retroactive application of each of the previously referenced models, certain aspects of which may have been designed with the benefit of hindsight.
The hypothetical backtested performance does not represent the results of actual trading using client assets nor decision-making during the period and does not and is not intended to indicate the past performance or future performance of any account or investment strategy managed by OSAM. If actual accounts had been managed throughout the period, ongoing research might have resulted in changes to the strategy which might have altered returns. The performance of any account or investment strategy managed by OSAM will differ from the hypothetical backtested performance results for each factor shown herein for a number of reasons, including without limitation the following:
Although OSAM may consider from time to time one or more of the factors noted herein in managing any account, it may not consider all or any of such factors. OSAM may (and will) from time to time consider factors in addition to those noted herein in managing any account.
OSAM may rebalance an account more frequently or less frequently than annually and at times other than presented herein.
OSAM may from time to time manage an account by using non-quantitative, subjective investment management methodologies in conjunction with the application of factors.
The hypothetical backtested performance results assume full investment, whereas an account managed by OSAM may have a positive cash position upon rebalance. Had the hypothetical backtested performance results included a positive cash position, the results would have been different and generally would have been lower.
The hypothetical backtested performance results for each factor do not reflect any transaction costs of buying and selling securities, investment management fees (including without limitation management fees and performance fees), custody and other costs, or taxes – all of which would be incurred by an investor in any account managed by OSAM. If such costs and fees were reflected, the hypothetical backtested performance results would be lower.
The hypothetical performance does not reflect the reinvestment of dividends and distributions therefrom, interest, capital gains and withholding taxes. Accounts managed by OSAM are subject to additions and redemptions of assets under management, which may positively or negatively affect performance depending
generally upon the timing of such events in relation to the market’s direction. Simulated returns may be dependent on the market and economic conditions that existed during the period. Future market or economic conditions can adversely affect the