Investor Presentation for Endeavor Offering - June 2021 - Great Ocean Road ...
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Investor Presentation for Endeavor Offering
June 2021
Disclaimer
These materials have been prepared and are provided by Great Ocean Road Advisors on a confidential basis solely for the information and assistance of the named recipient
in connection with consideration of the matters referred to herein. These materials may not be disclosed to any third-party or circulated or referred to publicly or used for or
relied upon for any other purpose without the prior written consent of Great Ocean Road Advisors.
This presentation has been created solely for the internal use of a limited number of sophisticated persons who constitute ‘accredited investors’, ‘qualified purchasers’, ‘qualified
clients’, ‘investment professionals’, or any other appropriate categories of sophisticated persons, to whom offers may be made by way of a private placement (or by way of
other comparable means or exemptions) in compliance with all applicable laws in the jurisdictions in which they are present. Prospective investors should make their own
investigation of the investment described herein, including the merits and risks involved and the legality and tax consequences of such investment. Each prospective investor
should make its own inquiries and consult its own advisors as to Great Ocean Road Advisors’ Southern Endeavor Fund (Endeavor Fund) and this offering and as to legal, tax,
and related matters concerning an investment in the interests.
Certain information contained in this presentation may constitute forward looking statements. This includes estimates of returns or performance and any other projections,
estimates or other statements about the future. Forward looking statements are based upon certain assumptions that may change. Due to various risks and uncertainties, actual
events, results or performance may differ materially from those reflected or contemplated in forward-looking statements contained in this presentation.
This presentation does not take into account any objectives, circumstances (including any financial situation) or needs of any particular person. Before acting on the information
contained in this presentation, recipients of this presentation should consider the appropriateness of any advice, in light of their own objectives, financial situation or needs,
before acting, and should seek their own independent professional advice.
This presentation and its contents must be kept confidential, must not be used except for the sole purpose of considering and discussing the potential investment proposal, and
may not be reproduced or used by or distributed to any person other than the recipient, in whole or in part.
Strictly private and confidential June 2021 slide 2 | 12
Contents
Great Ocean Road Advisors …………….…………………………………………. 4
Why Consumer ………..……………………………………………… 5
Why GORA ………..…………………………………………….... 6
Track Record ………..…………………………………………........ 7
Investment Process ………..……………………………………………… 8
Portfolio & Administration ………..…………………………………………........ 9
Endeavor Offering ………..……………………………………………… 10
Appendix – Case Study: DPZ ………..…………………………………………….... 11
Appendix – Case Study: QSR ………..……………………………………………… 12
Strictly private and confidential June 2021 slide 3 | 12
Great Ocean Road Advisors
• Great Ocean Road Advisors (GORA) is a long-short hedge fund based in New York launching its flagship Endeavor Fund
• GORA’s purpose is to give investors material outperformance to the S&P500 with lower volatility over the long-term
• GORA applies a bottom-up, research-driven investment process to companies belonging to the Consumer sector
James O’Brien Hanh Nguyen
Portfolio Manager Operations
Prior to founding GORA: Prior to founding GORA:
Consumer Portfolio Manager at Verition Fund Management Founder and CEO at Complect
Consumer Analyst at Balyasny Asset Management Partner at Yossarian Capital Partners
Consumer Research Associate at Credit Suisse Compliance Consultant at ACA Compliance Group
Strictly private and confidential June 2021 slide 4 | 12
Why Consumer
• Largest: Consumer is the biggest sector of the economy by almost 2x with healthy and stable
growth.
• Brands to invest behind: Customer love is the best business model. Brands with loyal
customers earn returns not possible in other sectors and make attractive investments.
• Dispersion increases reward: Dispersion is greater in Consumer than other sectors.
Idiosyncratic factors driving Consumer share prices create large information asymmetries, on
which long-short strategies thrive. Investors are rewarded more for being right in Consumer
than in other sectors.
• COVID has increased volatility: Dislocations between fundamental value and market prices
widen during shocks. COVID has caused Consumer sector volatility to spike. Investors adept at
understanding the intrinsic value of affected assets profit from these periods.
Learn More
Strictly private and confidential June 2021 slide 5 | 12
Why GORA
• Specialist Advantage: By focusing on one narrow space for investments, the Consumer
sector, GORA benefits from a specialist expertise. Specialist funds outperform both
passive index funds and active funds without specialization. The competitive field is less
crowded within the Consumer space (see chart).
• Patient Capital: Investment capital gravitating to shorter-term strategies has reduced
the competition among investors with a long-term focus. Long-term investing suits
GORA’s research-driven, fundamental investing approach.
• Small Fund Advantage: Across all asset classes, geographies and time scales, small
funds (sub-$1bn in assets) outperform large funds due to their nimbleness and
alignment of incentives.
• Alignment of Interests: 100% of the Portfolio Manager’s investable assets are in GORA.
Learn More
Strictly private and confidential June 2021 slide 6 | 12
Track Record
GORA’s Portfolio Manager seeded a personal portfolio with $1,000,000 in May 2018.
By September 2020, the portfolio had accumulated to $1,637,655 – outperforming the S&P500 by 34.6ppts.
Portfolio was closed in September 2020 to prepare for fund launch. A small portfolio ideas was retained which appreciated 56% between October 2020 and May 2021 compared with
the S&P500 25%. Details can be made available upon request.
PORTFOLIO RETURNS: May 2018-Sep 2020
Gross performance: includes reinvestment of dividends and trading costs, no fund fees
70%
GORA
63.8%
60%
50%
Sharpe Max drawdown
40%
GORA 1.1x -12.9%
30% S&P500
29.1% S&P500 0.6x -23.5%
20%
Dow Jones
Dow Jones 0.3x -28.1%
10% 13.8%
Retail (XRT) Russell 2000 -0.1x -40.4%
0% 11.0%
Retail (XRT) 0.1x -48.5%
-10% Russell 2000
-5.2%
-20%
-30%
-40%
May-18 Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20 Sep-20
Strictly private and confidential June 2021 slide 7 | 12
Investment Process
• Research-driven process concentrating exclusively on known companies in the Consumer sector where our Portfolio Manager has expertise. GORA uses bottom-up, fundamental analysis to
discover securities with significant upside or downside, targeting a 6-to-18-month realization period. Portfolio is concentrated and has historically delivered a high % win-rate.
• Target long investments in companies where our research discovers upside unknown to the market, strong long-term growth, valuation upside and in industries with competitive moats.
• Target short investments in companies where our research discovers downside unknown to the market, weak long-term growth, valuation downside and in industries being disrupted.
• Among the strengths of our investment process are:
• Financial modeling – More than 70 proprietary financial models underly every investment decision we make. For a company to be in our universe, we build a model.
• Management relationships – Our Portfolio Manager has met with management of our coverage universe more than 300 times since 2016, forming ties GORA leverages in its process.
• Data signals – Our Portfolio Manager has discovered data signals underappreciated by the market that are powerful at predicting inflection points in company fundamentals.
• Risk-reward framework – We stress test our expected return on investments, requiring a 4:1 favorable skew of outcomes before executing. Greater skew drives larger position sizes.
Illustration
Investment Identify industry Discover security that Confirm thesis through Size position
Find inflection point
process theme benefits management meeting within portfolio
Historic relationships with
GORA’s Sector expertise means we Detailed financial modeling Proprietary data signals 4:1 risk-reward framework
Consumer co. mgmt.
advantage identify earlier allows us to pick the best
increase our access
discover inflections informs sizing decision
Strictly private and confidential June 2021 slide 8 | 12Portfolio Construction & Administration
Portfolio Sub-sector focus Terms Service Providers
Portfolio longs 10-15 Apparel Liquidity Monthly Administrator
Portfolio shorts 5-10 Dining Restaurants Lock-ups None Opus Fund Services
Portfolio total positions 15-25 E-Commerce Gates None
Furniture Notice 30 days Auditor
Home Goods Richey May
Net exposure limits 60-90% Home Improvement
Max position size (cost-basis) 12% Leisure Standard management fee 1.5% Banking
Gross Market Value limit 1.5x Quick-service Restaurants Standard performance fee 20% First Republic
Monthly High Watermark Yes
Pass-through exp cap 0.50% Legal
Portfolio with $10m+ daily liquidity 95% Capital Fund Law Group
1- day portfolio liquidation at 20% 99%
Structure Delaware fund Prime Brokerage
Minimum $100,000 Cowen
Strictly private and confidential June 2021 slide 9 | 12Endeavor Offering
Founders - Institutional Founders Standard
May 31st close May 31st close Open-ended
• GORA’s Endeavor Offering is currently accepting
subscriptions
Minimum $500,000 Minimum $100,000 Minimum $100,000
Management fee 1.00% Management fee 1.25% Management fee 1.50%
• Investors should subscribe by May 31st for reduced fees Performance fee 15.00% Performance fee 17.50% Performance fee 20.00%
Maximum allocable exp 0.50% Maximum allocable exp 0.50% Maximum allocable exp 0.50%
• Accredited and Wholesale Investors only
Inquire Inquire Inquire
Strictly private and confidential June 2021 slide 10 | 12Appendix – Case study: DPZ
Synopsis
Ticker DPZ
• Differentiated, research-driven long-term view leads upward stock move. New menu items, accelerating earnings growth and Position Long
a fresh repurchase authorization amplified by negative investor positioning and discounted valuation. Strength of business
Date purchased 18-Oct-19
model visible throughout, illustrated by minimal Portfolio Manager earnings revisions. Remains a favored investment.
Purchase price $256.10
Date sold Currently held
Background and Differentiation Current price $378.76
• High quality, high growth business. Revenue comes from royalties on food and beverage sales, making cash flow predictable. Return 47.9%
DPZ is a superior asset to other quick-service brands because franchisees are growing stores faster and more profitably than Annualized return 37.0%
at rivals.
• In Oct 2019 DPZ’s stock had stalled – flat over the prior two years and a large underperformer vs. peers. Decelerating sales
throughout prior quarters along with third-party data showing deceleration continuing in the current quarter. Investors relying
on short-term trends overlooked DPZ’s long-term value creation and made the stock a favored short.
• Its depressed valuation and strong long-term outlook made DPZ attractive. Financial model of the company’s supply-chain
business and two mgmt. meetings supported earnings upside. High likelihood of new product launches under the new CEO
added to prospects for sales re-acceleration. Below $220, DPZ comfortably cleared the 4:1 risk-reward framework and
became the portfolio’s largest position.
Event Path
• Management announced a share repurchase, sales accelerated, and the opening of new supply-chain facilities increased
earnings. Weak sales no longer defined the narrative for short-term investors, causing rapid covering and SP appreciation.
Strictly private and confidential June 2021 slide 11 | 12Appendix – Case study: SHAK
Synopsis
Ticker SHAK
• Discovered opportunity to short SHAK following a 20% move higher on earnings that revealed a weaker long-term outlook. We Position Short
recognized the move was a short-squeeze caused by tactical, rather than fundamental reasons, and with a detailed financial Date short sold 12-Aug-19
model confirming future downside, shorted the stock. When focus returned to fundamentals, SHAK’s share price fell.
Sale price $90.01
Date covered 05-Feb-20
Background and Differentiation Price covered $70.90
• SHAK has brand cache as an upmarket burger chain and long-term growth due to its small size. Drawn to its brand and Return 27.0%
growth, investors bid its valuation to 40x EBITDA. Annualized return 63.6%
• However, SHAK’s growth was stumbling. Same store sales lagged peers, indicating cannibalization and diminishing brand
appeal. Profit margins were contracting at the fastest rate we’d seen due to wage inflation, low quality new sites, and G&A
expense growth. Consequently, SHAK’s operating margin had fallen from 10% at the time of its IPO in 2015 to 4% in 2019.
• We differentiated our analysis of SHAK in three ways:
1. Modeled each restaurant from day of opening to create a more accurate new restaurant sales forecast
2. Tracked rainfall in New York City to assist in forecasting same store sales
3. Modeled each expense by unit week, including a build-up of their components, informed by a visit to the company’s HQ
Event Path
• Our trade did not work initially as short covering in SHAK continued after its earnings print. However, when focus returned to
slowing fundamentals the stock retraced its gains then experienced a further large down move on its next quarterly result.
Strictly private and confidential June 2021 slide 12 | 12email: inquiries@goracap.com website: www.goracap.com
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