Is 2021 going to be the year of a value rotation? - VALEUR INTRINSEQUE FOCUS - Fourpoints IM
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Is 2021 going to be the year of a value rotation?
VALEUR INTRINSEQUE FOCUS
For professional investors only March 2021
FOURPOINTS IM
I - ANALYSIS - A DECADE OF BULL MARKETS BOOSTED BY CENTRAL BANKS
FED balance sheet Source : Bloomberg
The stock markets were supported by the big central banks (Fed, BoJ, ECB…) which bought trillions of assets, supporting the price of
financial assets. These central banks now hold the equivalent of 30% of global GDP.
In 2021, there should be no major changes in the monetary policies of the major central banks.
FOURPOINTS IM
II- 2021 : MONETARY AND BUDGETARY SUPPORT
M2 (in $ Billions) in USA
21000
19000
17000
15000
13000
+24% in2020
11000
9000
7000
5000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source : Fred
In Europe a recovery plan of nearly 750 billion was voted, while
in the United States a recovery plan of 1 900 billion was voted
(of a magnitude three times greater than the fall of the
activity), including 1 000 billion in direct aid to households.
In 2021, the expansionary monetary policy will continue. Above
are the monthly injections from the major central banks as a%
of nominal GDP.
FOURPOINTS IM
II - STIMULUS PACKAGES - THE IMPACT ON THE AMERICAN CONSUMER
Despite a record level of indebtedness, the weight of
debt within households continues to decrease thanks
to the fall in interest rates and the increase in
income.
The behavior of American consumers will be crucial given
the current average savings rate, which stands at around 13
percentage points of GDP compared to a usual level of 3
percentage points.
This global saving should logically fuel consumption and
therefore the economic recovery in the coming quarters.FOURPOINTS IM
III – CRISIS RECOVERY AND ITS PRESSURE ON PRICES
90
Price of containers 40
China and US quarterly growth +33,4
85 30
20
80
10
75 0
-10
70
-20
65 -30
-40 -31,4
60
août-15
août-16
août-17
août-18
août-19
août-20
avr.-15
avr.-16
avr.-17
avr.-18
avr.-19
avr.-20
déc.-14
déc.-15
déc.-16
déc.-17
déc.-18
déc.-19
déc.-20
Chine Etats-Unis
3000
SOX Semiconductor Index
2500
The economic recovery, particularly in China, inventories
effect, strict health precautions are all factors favoring a
2000 bottleneck in the production chain.
1500
These tensions have created an imbalance between supply
1000 and demand leading to an increase in prices of raw
materials, certain products such as semiconductors or even
500 sea freight, which in Asia, for lack of available containers,
sees its prices take off.
0
juin-15
sept-15
juin-16
Dec 2015
sept-16
juin-17
juin-19
juin-20
Dec 2016
sept-17
juin-18
Dec 2017
sept-18
Dec 2018
sept-19
Dec 2019
sept-20
Dec 2020
mars-15
mars-16
mars-17
mars-18
mars-19
mars-20
Source : BloombergFOURPOINTS IM
III – CRISIS RECOVERY AND ITS PRESSURE ON PRICES
120 12000
Bloomberg Commodities Index Price of Copper
110 10000
100 8000
90
6000
80
4000
70 +61% in1 year
2000
60
0
50
déc.-14 déc.-15 déc.-16 déc.-17 déc.-18 déc.-19 déc.-20
Source : Bloomberg
Copper and Nickel are at an all time high since 2011. Copper, considered as a leading indicator of the
Lumber is at an all time high. Sugar hit a 4 year high. economy, is at its highest for 10 years. The rise in
commodity prices and the change in the economic
model of China (which has long exported disinflation)
raise the risk of hike in inflation in the United States.FOURPOINTS IM
IV – PRESSURE ON INTEREST RATES IN 2021
The US 10 years and 30 years have been on an 3
upward trend for over 6 months now. In Europe, 2,5
the movement is more recent and less violent.
2
The market is now anticipating a first rate hike in 1,5
March 2023. 1
0,5
0
-0,5
Inflation swap forward 5y5y
3
-1
2,5 déc.-19 mars-20 juin-20 sept.-20 déc.-20
2
10 years Treasury yield 30 year Treasury yield OAT 10 ans
1,5
1
The sharp rise in the expected inflation rate from its low at the
end of last March, to 2.2% today, attests to the risk of a return
0,5
of inflation in the United States.
0
2015 2016 2017 2018 2019 2020 2021
Etats-Unis Europe
Nonetheless, we believe that inflation should materialize more
USA
in an increase in goods and services (with monetary creation
resulting from "helicopter money"), rather than in an increase
Source : Bloomberg
in financial assets as in the last decade.FOURPOINTS IM
V – 2021, THE RETURN OF VALUE QUALITY / CYCLICAL STOCKS?
115
From February 12 to March 17
110
7,6%
105
1,5%
100
-5,2%
95
90
85
80
-20,8%
75
12-févr. 19-févr. 26-févr. 5-mars 12-mars
Nasdaq Chinext S&P 500 S&P Cyclicals
Since the beginning of the year, a sector rotation has started, from "growth" sectors such as technology and "proxy bonds" to
cyclical sectors (Banks, energy, auto, industrial).FOURPOINTS IM
V – 2021, THE RETURN OF VALUE QUALITY / CYCLICAL STOCKS?
6
2,3
2,1 5
in % (en %)
1,9
4
Growth/Value
américain
1,7
3
1,5
yield
10 years10USans
1,3 2
1,1
1
0,9
0,7 0
Source : Bloomberg
Russell 1000 Growth / Russell 1000 Value 1010ans
years
US US yield
Inflation and economic recoveries are generally favorable environments for discounted companies.
In our opinion, this movement should continue in the coming months.
The gap between growth stocks and discounted stocks is closing sharply (blue curve).
There is a significant correlation (0.84) between the rise of the 10-year US dollar and the outperformance of value stocks compared
to growth stocks.VA L E U R I N T R I N S E Q U E F O C U S
VALEUR INTRINSEQUE
A SIGNIFICANT REBOUND SINCE NOVEMBER 2020 TO MARCH 12TH
140
139
Valeur Intrinseque evolution
135
130 The vast majority of the portfolio drove the performance of the
125
portfolio.
120 120
This movement has continued since the beginning of the year
115
110
105
100
oct.-20 nov.-20 déc.-20 janv.-21 févr.-21
MSCI World DNR Valeur Intrinseque
18 1,8
Valeur Intrinsèque and US yield (10 y)
16 1,6
14 1,4
12
1,2
10
1
8
0,8
6
0,6
4
2 0,4
0 0,2
octobre-20 novembre-20 décembre-20 janvier-21 février-21
-2 0
Performance relative de Valeur
Relative performance Intrinseque/MSCI
Valeur World
Intrinseque/MSCI Taux 10 ans US
10 years US yield
World DNRRECENT HISTORY
A transition period between the acquisition of Pastel & Associés by Fourpoints at the end of 2018 and the departure of David
Pastel at the end of 2019.
Started in 2019, the portfolio renewal was accelerated during 2020. Thanks to our active monitoring, we took advantage of
strong market discrepencies caused by the COVID-19 crisis. We focused on companies that were impacted in the short term by
the health crisis but which will eventually emerge stronger.
In 2020: 19 new stocks, 4 disposals and cash ratio down from 30% to 5%.
Following this renewal, the portfolio is now more diversified, with 30 holdings in various sectors and geographies.
Around 50% of the portfolio was invested last year in great companies at very attractive cost prices.
Le contenu du document ne constitue ni une recommandation, ni une offre d'achat, ni une proposition de vente, ni une incitation à
l'investissement. Il ne constitue en aucun cas un élément contractuel. Reproduction interdite. 12
Les performances passées ne sont pas un indicateur fiable des performances futures.A YEAR OF OPPORTUNITIES
MAIN TRADES IN 2020
NEW POSITIONS DISPOSALS
Titres Secteurs Pays Titres Secteurs Pays
Foot Locker Sporting goods retailer United States Randstad Temporary Staffing Netherlands
MSC Industrial Direct Industrial distribution United States Thermador Groupe Distribution of heating and plumbing products France
Groupe SEB Manufacturing of small household equipment France Mohawk Industries Flooring manufacturer United States
W.W. Grainger Industrial distribution United States Greggs Bakery chain United Kingdom
Pirelli Tire manufacturer Italy
Compass Group Food services United Kingdom
MARR Distribution of food products Italy
Alphabet Technological services Unites States
LafargeHolcim Building materials Switzerland
Carrier Global Air conditioning / Refrigeration United States
Otis Elevator manufacturer United States
Henry Schein Distribution for healthcare professional United States
Photo-me InternationalPhotographic booths and laundries United Kingdom
Autoliv Manufacturing of airbags and seat belts United States
Beneteau Boat Manufacturer France
Greggs Bakery chain United Kingdom
World Fuel Services Fuel Distribution United States
Palfinger Manufacturer of innovative lifting Austria
Mitie Group Facilities Management United Kingdom
STRENGTHENED POSITIONS REDUCED POSITIONS
ISS Facilities management Danemark Covestro AG Industry Germany
Sodexo Food services / Facilities management France Markel Corp Investment company United States
Takkt Business equipment distribution Germany Loews Corp Investment company United States
Berkshire Hathaway Investment company United States
Next Apparel retailer United Kingdom
Le contenu du document ne constitue ni une recommandation, ni une offre d'achat, ni une proposition de vente, ni une incitation à
l'investissement. Il ne constitue en aucun cas un élément contractuel. Reproduction interdite. 13
Les performances passées ne sont pas un indicateur fiable des performances futures.A MORE DIVERSIFIED PORTFOLIO
P ORTFOLIO EVOLUTION
February 2021
Outsourcing services
Investment companies
Professional distribution
Construction / Renovation
Consumer discretionary
Retail
Oil & Gas services
Industry
Cash
0% 5% 10% 15% 20%
United States
France
UK
Canada
Norway
Italy
Germany
Switzerland
Austria
Denmark
Sweden
Cash
0% 5% 10% 15% 20% 25% 30%
Le contenu du document ne constitue ni une recommandation, ni une offre d'achat, ni une proposition de vente, ni une incitation à
l'investissement. Il ne constitue en aucun cas un élément contractuel. Reproduction interdite. 14
Les performances passées ne sont pas un indicateur fiable des performances futures.TOP 15 AS OF FEBRUARY 26, 2021
Number of positions : 31 - Invested Portfolio : 94,9%
COMPANIES SECTORS COUNTRIES WEIGHT
Subsea 7 Offshore project management Norway 9.1%
Sodexo Food services / Facilities management France 6.5%
Fairfax Financial Investment companies Canada 6.4%
Takkt Business equipment distribution Germany 4.1%
IPSOS Market research France 3.5%
Compass Group Food services UK 3.4%
Markel Investment companies USA 3.4%
Foot Locker Sporting goods retailer USA 3.3%
Pirelli Tire manufacturer Italy 3.3%
Alleghany Investment companies USA 3.2%
Marr Distribution of food products Italy 3.0%
Palfinger Construction - Renovation Austria 3.0%
LafargeHolcim Building materials Switzerland 3.0%
ISS Facilities management Denmark 2.9%
Next Clothing retailer UK 2.6%
Wei ght of the fi rs t 15 pos i tions 60.6%
Number of hol di ngs 31
Ca s h 4,80%
Le contenu du document ne constitue ni une recommandation, ni une offre d'achat, ni une proposition de vente, ni une incitation à
l'investissement. Il ne constitue en aucun cas un élément contractuel. Reproduction interdite. 15
Les performances passées ne sont pas un indicateur fiable des performances futures.HISTORIQUE DE PERFORMANCE
AS OF FEBRUARY 26, 2021
300
153,0%
250
145,3%
200
150
100
50
0
Valeur Intrinsèque P MSCI World DNR €
FUND FUND FUND (P
MSCI World MSCI World MSCI World
(P share) (P share) share)
2001* 14.8 -14.9 2008 -38.1 -37.6 2016 31.8 10.7
2002 -22.1 -32.0 2009 57.2 25.9 2017 8.4 7.5
2003 32.9 10.7 2010 19.7 19.5 2018 -18.7 -4.1
2004 16.3 6.5 2011 -17.4 -2.4 2019 1.8 30.0
2005 14.5 26.2 2012 22.6 14.0 2020 3.4 6.3
2006 13.2 7.4 2013 26.8 21.2 2021 7.6 2.4
2007 -11.3 -1.7 2014 -3.1 19.5 Annualized Performance 4.8 4.7
2015 -16.6 10.4 Cumulative Performance 153,0 145.3
Retail share and MSCI World TNR Performance as of February 26th in percentage. I share class performance is available on our website. Past performance
does not guarantee future performance. *Fund's inception on June 6th 2001
Le contenu du document ne constitue ni une recommandation, ni une offre d'achat, ni une proposition de vente, ni une incitation à
l'investissement. Il ne constitue en aucun cas un élément contractuel. Reproduction interdite. 16
Les performances passées ne sont pas un indicateur fiable des performances futures.VALEUR INTRINSÈQUE FEATURES
INTERNATIONAL EQUITY FUND
All-cap equity fund investing in
companies from North America, Europe
and the UK.
BOTTOM-UP APPROACH LONG TERM HORIZON
Stock picking based on a For company outlook as
purely fundamental analysis well as time for investment
of companies and Private to bear fruit.
Equity valuation methods.
CONCENTRATED PORTFOLIO INDEPENDENCE
Between twenty and thirty
stocks with potentially high We don’t follow investment
weights. fads.
We don’t rely on external
research or advice.
Seeking a reasonable return with low risk by investing in
good companies at a fair price
Le contenu du document ne constitue ni une recommandation, ni une offre d'achat, ni une proposition de vente, ni une incitation à
l'investissement. Il ne constitue en aucun cas un élément contractuel. Reproduction interdite. 17
Les performances passées ne sont pas un indicateur fiable des performances futures.WHAT IS A GOOD COMPANY FOR US?
A PROVEN AND PROFITABLE • We need to understand the business
BUSINESS MODEL • Resilience of the business in the future
A STRONG COMPETITIVE • Will allow company to preserve or increase profitability
POSITION • Ability to compound growth
• Sustainability of the company in tough times
LOW INDEBTNESS
• Unforeseen negative events will eventually happen
• Reinvestment in the company with a good rate of return
A GOOD CAPITAL ALLOCATION • External growth that makes sense
• Return excess cash to shareholders
AN EXPERIENCED MANAGEMENT • Shows consistency in the strategy
TEAM WITH STOCK OWNERSHIP • Alignment of interests
Le contenu du document ne constitue ni une recommandation, ni une offre d'achat, ni une proposition de vente, ni une incitation à
l'investissement. Il ne constitue en aucun cas un élément contractuel. Reproduction interdite. 18
Les performances passées ne sont pas un indicateur fiable des performances futures.HOW DO WE SET A FAIR PRICE?
• Idea of seeking economic return on our investment
THINKING LIKE OWNERS
• Time for the investment to bear fruit
SHARE PRICE IS NOT AN • « Mr Market » is only there to serve us
INDICATOR OF VALUE • Price and value tend to converge over time
• In the past: how has the company fared over the past 10 years?
LONG TERM HORIZON
• In the future: what are the company’s prospects in 3-5 years?
VALUATION BASED ON • Use of fundamentals to evaluate intrinsic value of the company
"FREE CASH FLOWS“ • No market consideration in valuation
• Conservative assumptions in our valuation
MARGIN OF SAFETY
• Looking for investments with favorable odds
Le contenu du document ne constitue ni une recommandation, ni une offre d'achat, ni une proposition de vente, ni une incitation à
l'investissement. Il ne constitue en aucun cas un élément contractuel. Reproduction interdite. 19
Les performances passées ne sont pas un indicateur fiable des performances futures.EXAMPLE : FOOT LOCKER
INVESTMENT INITIATED IN JANUARY 2020
SPORTSWEAR AND FOOTWEAR RETAILER
TURNOVER $ 8MM, MARKET CAP $ 4MM
MORE THAN 3000 STORES AROUND THE WORLD
70% OF TURNOVER IN THE UNITED STATES
Le contenu du document ne constitue ni une recommandation, ni une offre d'achat, ni une proposition de vente, ni une incitation à
l'investissement. Il ne constitue en aucun cas un élément contractuel. Reproduction interdite. 20
Les performances passées ne sont pas un indicateur fiable des performances futures.EXAMPLE : FOOT LOCKER
A PROVEN AND PROFITABLE BUSINESS MODEL
Average revenue growth of 5% over the past 10 years.
EBIT margin 9-10%.
Average ROE of18%. 9 000 30,0%
8 000
25,0%
7 000
6 000 20,0%
5 000
15,0%
4 000
3 000 10,0%
2 000
5,0%
1 000
0 0,0%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Revenues (in M$) EBIT margin ROE
A STRONG COMPETITIVE POSITION
World largest footwear specialist: economies of scale on procurement, marketing and distribution.
Close relationship with Nike.
Brand awareness.
Le contenu du document ne constitue ni une recommandation, ni une offre d'achat, ni une proposition de vente, ni une incitation à
l'investissement. Il ne constitue en aucun cas un élément contractuel. Reproduction interdite. 21
Les performances passées ne sont pas un indicateur fiable des performances futures.EXAMPLE : FOOT LOCKER
LOW INDEBTNESS
Historically in a net cash position.
$800M net cash at the time of the initial investment (vs market cap of $4MM).
A GOOD CAPITAL ALLOCATION
Reducing the number of stores in the US while expanding abroad.
Growth of online sales (16% of revenues vs 12% 5 years ago).
Cash return to shareholders through dividend and share buybacks.
180 1,6
160
1,2
140
120
0,8
100
80
0,4
60
40 0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Outstanding shares (in m) Annual dividend ($)
AN EXPERIENCED MANAGEMENT TEAM WITH STOCK OWNERSHIP
Richard Johnson CEO since 2014, at Foot Locker since 1997.
Le contenu du document ne constitue ni une recommandation, ni une offre d'achat, ni une proposition de vente, ni une incitation à
l'investissement. Il ne constitue en aucun cas un élément contractuel. Reproduction interdite. 22
Les performances passées ne sont pas un indicateur fiable des performances futures.EXAMPLE : FOOT LOCKER
VALUATION
Net cash representing 25% of the market capitalization.
Average Free cash flow over 5 previous years above $450M.
Upside potential of 50-100% compared to entry level.
Foot Locker Share Price
90
80
70 Initiated
Trimmed
60
50
40
30
Strengthened
20
10
0
Le contenu du document ne constitue ni une recommandation, ni une offre d'achat, ni une proposition de vente, ni une incitation à
l'investissement. Il ne constitue en aucun cas un élément contractuel. Reproduction interdite. 23
Les performances passées ne sont pas un indicateur fiable des performances futures.CONTACT
Cédric Michel Julien Mathou FOURPOINTS IM
Head of business Development Investor relations 162 boulevard Haussmann
cmichel@fourpointsim.com jmathou@fourpointsim.com
75008 Paris – France
+33 1 86 69 60 65
Phone: +33(1) 86 69 60 65
+33 1 86 69 60 61 www.fourpointsim.com
+ 33 6 80 18 09 53
Disclaimer: This document does not constitute or form part of an offer to issue or sell, or of a solicitation of an offer to subscribe or buy, any securities nor
does it constitute a financial promotion, investment advice or an inducement to participate in any product, offering or investment. The expectations
expressed about the stocks, the market, the economy and other factors represent the opinion of the FOURPOINTS IM and may not be realised in the future.
Performance is presented for a specific period. Performance may be different in the future. Performance for an index is presented. The fund is not
managed to track the benchmark and will likely differ in terms of industry weights, market capitalisation weights and in terms of number of securities held.
Therefore performance for the fund will likely differ from performance of the index in any particular period.
Le contenu du document ne constitue ni une recommandation, ni une offre d'achat, ni une proposition de vente, ni une incitation à
l'investissement. Il ne constitue en aucun cas un élément contractuel. Reproduction interdite. 24
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