Otter Creek Advisors, LLC - July 18, 2018 | 2nd Quarter Conference Call Slide Deck - Otter Creek Funds
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Otter Creek Advisors, LLC July 18, 2018 | 2nd Quarter Conference Call Slide Deck
Table of Contents
Overview
Executive Summary
Attribution
Investment Process
Framing the Macro and Market Environment
Current Themes
Portfolio Composition
1
Firm Overview
• Otter Creek Advisors
• Fundamentally focused investors
• Value orientated
• 100% employee owned
• Launched the Otter Creek Long/Short Opportunity Fund December 30, 2013
• Fund assets are $165.3 million as of June 30th, 2018
• Total Firm assets are $230.1 million as of June 30th, 2018
Past performance does not guarantee future results 2
Executive Summary
STRATEGY
Generate absolute risk-adjusted returns with a focus on long-term capital appreciation with below
average volatility by investing in opportunities both long and short which are driven by intensive
fundamental analysis
Attempt to achieve capital preservation during periods of dislocation
Performance Returns As of June 30, 2018 Portfolio Statistics As of June 30, 2018
Since Since
1 2 2 3
Inception 1 Year 3 Year Inception OTTRX S&P 500
Institutional Class (OTTRX) 14.38% ‐0.95% 1.35% 3.04% Weekly Standard Deviation 6.1% 12.0%
Investor Class (OTCRX) 13.18% ‐1.22% 1.09% 2.80%
S&P 500 Index 61.98% 14.41% 11.94% 11.34%
Morningstar L/S Equity Category 12.99% 5.48% 2.90% 2.76%
4
Total Expense Ratio Weekly Correlation (since inception) As of June 30, 2018
2
Gross Net r r
Institutional Class (OTTRX) 2.34% 2.31% OTTRX vs. S&P 500 Index ‐0.05 0.00
Investor Class (OTCRX) 2.60% 2.57%
4 1
The Fund's i nves tment a dvi s or ha s contra ctua l l y a greed to reduce i ts fees a nd/or Cumul a ti ve return s i nce Fund i ncepti on da te of December 30, 2013
a bs orb expens es of the fund unti l a t l ea s t Februa ry 28, 2019. The expens e ra ti os a re 2
Annua l i zed return for one yea r a nd three yea rs
ba s ed on es ti ma ted a mounts a nd ma y not refl ect the a ctua l expens e ra ti os . 3
Annua l i zed return s i nce Fund i ncepti on da te of December 30, 2013
Performance data quoted is past performance. Past performance does not guarantee future results. The investment and principal value of an
investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The current performance
may be lower or higher than the performance data quoted. Performance data current to the most recent month‐end may be obtained by calling
(855) 681‐5261. Performance data quoted does not reflect the 1% redemption fee on shares held for 60 days or less. If reflected, total returns
would be reduced.
3
Attribution: Long and Short
Otter Creek Advisors focuses on generating absolute returns in both our long and short portfolio for the Fund
1 2
2018 2017
4.0% 25%
3.1% 19.3%
3.0% 20%
2.0% 15%
1.0% 10%
0.0% 5%
-1.0% 0%
-0.6%
-2.0% -5% -1.6%
-1.6% -3.6%
-3.0% -10%
-4.0% -15%
-4.1%
-5.0% -20% -17.9%
Long Short Cash Net Long Short Cash Net
3 4 5
2016 2015 2014
15% 12% 14.0%
11.7% 9.5% 12.5%
10% 12.0%
9.8%
10% 10.0%
8%
5.5% 5.8% 8.0%
6%
5%
6.0%
4%
0.1% 4.0%
0%
2%
2.0%
-1.8% 0%
-5% 0.0%
-2% -2.0%
-0.7%
-1.9% -1.7%
-10% -8.7% -4% -4.0%
Long Short Cash Net Long Short Cash Net Long Short Cash Net
1 4
For the period from January 1, 2018 through June 30, 2018 For the period from January 1, 2015 through December 31, 2015
2 5
For the period from January 1, 2017 through December 31, 2017 For the period from January 1, 2014 through December 31, 2014
3
For the period from January 1, 2016 through December 31, 2016 Source: Company Reports
Past performance does not guarantee future results 4
Fund Attribution
2018 2nd Quarter
Quarter‐to‐Date Sector Attribution
Long Short Net
Consumer Discretionary ‐0.2% ‐3.1% ‐3.4%
Information Technology ‐0.1% 1.1% 1.1%
Materials 0.9% 0.0% 0.9%
Industrials 0.3% 0.6% 0.8%
Financials 1.1% ‐0.4% 0.6%
Utilities 0.5% 0.0% 0.5%
Energy 0.4% 0.0% 0.4%
Real Estate ‐0.1% ‐0.1% ‐0.1%
Consumer Staples 0.2% ‐0.3% ‐0.1%
Health Care 0.2% ‐0.2% 0.0%
Other 0.0% 0.0% 0.0%
Gross Return 3.2% ‐2.5% 0.6%
Net Expenses ‐0.2%
Net Return 0.4%
Past performance does not guarantee future results 5
Fund Contributors and Detractors
2018 2nd Quarter
Security Security
Return Portfolio Return Portfolio
Top 5 Contributors Long/Short (Q2) Contribution Top 5 Detractors Long/Short (Q2) Contribution
Symantec Corp Short ‐19.8% 1.6% Canada Goose Holdings Inc Short 76.1% ‐1.0%
Seacoast Banking Corp of Florida Long 19.3% 0.8% Financial Engines Inc Short 28.5% ‐0.9%
The Middleby Corp Short ‐15.6% 0.8% Tesla Motors Inc Short 28.9% ‐0.6%
Teradyne Inc Short ‐16.5% 0.7% Netflix Inc Short 32.5% ‐0.6%
Ashland Inc Long 12.4% 0.6% Ollies Bargain Outlet Holdings Inc Short 20.2% ‐0.6%
Notable Changes
Covered our entire position in Symantec Corp and sold our puts
Covered our entire position in Middleby Corp and sold our puts
Covered our entire position in Teradyne Inc. and sold our puts
Covered our entire position in Canada Goose Holdings Inc.
Covered our entire position in Financial Engines Inc.
Covered our short equity position in Netflix Inc. and replaced with put exposure
Past performance does not guarantee future results
Fund holdings and allocations are subject to change at any time and should not be considered a recommendation to buy or sell any securities 6
The Otter Creek Investment Process
Fundamentally Driven
INVESTMENT PROCESS
INVESTABLE UNIVERSE
Wilshire 5000 & American Depositary Receipts Narrow investment universe by:
Any listed security in capital structure • Develop a macroeconomic thesis
Most attractive risk/reward in capital structure • Frame bond and equity market valuations
• Identify thematic ideas
• Identify secular trends
CONCENTRATED PORTFOLIO IDEA GENERATION
Typically 30‐35 longs and 30‐35 shorts Industry conferences
Equity put exposure ranges from 1% ‐ 5% of capital Financial screens
Network base
COMPANY CHARACTERISTICS
LONG SHORT
• Operating margins > 10% • Aggressive accounting
• Return on Equity > 15% • Deteriorating balance sheet metrics
• #1 or #2 market share position • Low quality earnings
• Low‐to‐moderate financial leverage • High financial leverage
• Consistent and growing dividends • High level of insider selling
7
2Q Review: Tech sector outperformance, significant
short squeeze, weakness in international markets
Euphoria?
Historic inflows into the tech sector in 2018
Growth stocks within the S&P 500 have outperformed the
value stocks by 11 percentage points this year
Worst YTD performance for the value style factor in over a
decade
Source: As of 06/31/2018 Source: BoAML, EPFR Global
160 Global Market Returns
155 115.00
(Index 100)
Massive Short Squeeze: Most
150 shorted stocks index up 22%
110.00
145 since mid-May
140 105.00
135 100.00
130
95.00
125
120 90.00
Jan‐18
Jan‐18
Jan‐18
Jan‐18
Feb‐18
Feb‐18
Mar‐18
Mar‐18
Mar‐18
May‐18
May‐18
May‐18
May‐18
Jun‐18
Jun‐18
Jun‐18
Jul‐18
Apr‐18
Apr‐18
Apr‐18
115
Apr‐18 May‐18 Jun‐18
Goldman Discretionary Most Short Index S&P 500 Nasdaq Composite Global Composite*
Source: Bloomberg as of 06/21/2018 Source: Bloomberg, Composite: Japan, HK, Shanghai, Germany, London
8
Global Macro: U.S. growth strong, potential for
growing stress in EM and Europe
57 Manufacturing and services growth strong, potential 58
likelihood 1H was peak manufacturing growth 57
56
56
55 55
54 54
53
53 52 Eurozone macro data points, especially
52 51 manufacturing, continue to weaken
50
51
49
50 48
Jul‐15
Sep‐15
Nov‐15
Jul‐16
Sep‐16
Nov‐16
Jul‐17
Sep‐17
Nov‐17
Jan‐16
Mar‐16
May‐16
Jan‐17
Mar‐17
May‐17
Jan‐18
Mar‐18
May‐18
US Mfg PMI US Non Mfg PMI
Source: Bloomberg 6/30/18 Source: Yaredeni Research, Haver
Economic growth forecasts
diverging after a year of
synchronized and accelerating
growth
Source: Nordea Markets, Macrobond Source: Morgan Stanley Research
9US Consumer: Spending strong, but largely
driven by increase in credit and lower savings
rate supporting spending
8 12 Surge in credit borrowing supporting retail sales… higher inflation
7 eating into personal income growth despite rising wages
10
6
5 8
4
6
3
2 4
1
2
0
‐1 0
Jul‐15
Sep‐15
Nov‐15
Mar‐16
Jul‐16
Sep‐16
Nov‐16
Mar‐17
Jul‐17
Sep‐17
Nov‐17
Mar‐18
May‐15
Jan‐16
May‐16
Jan‐17
May‐17
Jan‐18
May‐18
Real Personal Income Growth Monthly % Change in Consumer Credit
Core Retail Sales % Change
Source: Bloomberg 6/30/18 Source: Bloomberg 6/30/18
4.2 Headwinds to Future Spending 16
15.5
3.7
15
3.2 14.5
14
2.7 13.5
13
2.2
12.5
1.7 12
Jun‐13
Oct‐13
Feb‐14
Jun‐14
Oct‐14
Feb‐15
Jun‐15
Oct‐15
Feb‐16
Jun‐16
Oct‐16
Feb‐17
Jun‐17
Oct‐17
Feb‐18
Jun‐18
US Average Gasoline Price Average Consumer Credit Card APR (RHS)
Source: Nordea Markets, Macrobond Source: Bloomberg 6/30/18
10Market Fundamentals
Robust earnings growth driven by favorable
macro environment in 2Q and low taxes.
Sales growth and margin expansion (input cost
pressure) potentially slows later in the year and
2019
Foreign exchange tailwinds turning to
headwinds for multi-nationals
Source: Strategas as of 07/12/2018
S&P 500 Sales Growth
12%
Sales growth strong, but fades into year end
10%
8%
6%
4%
2%
0%
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2016 2016 2016 2017 2017 2017 2017 2018 2018 2018 2018
Est Est
Source: Bloomberg 7/11/18 Source: Bloomberg, Stifel
11Market Observations: QT Unintended
consequences: Where we see risk
Change in financial conditions
since January
Source: Citigroup Research
Record debt levels could
become issue in rising
rate environment
Source: Gluskin Sheff
12Market Observations: QT Unintended
consequences: Where we see risk
First signs of credit
spreads widening
Signs market bracing for
slower global growth
Source: Morgan Stanley
Financial stocks- typically
leading indicators- diverging
from rest of the market
Source: BBG, Nedbank CIB Source: Strategas
13Relatively Low Gross and Net Fund Exposure
• We look for attractive absolute return opportunities
• We maintain a high cash balance for when absolute return opportunities increase
Historical Delta-adjusted Gross Exposure As of June 30, 2018 Historical Delta-adjusted Exposure As of June 30, 2018
Long Delta Short Delta Net Delta
100%
180%
84.0%
80%
160%
60%
40%
140%
20%
120% 0%
-20%
100%
-40%
-60%
80%
-80%
-81.0%
60% -100%
01/31/14
04/30/14
07/31/14
10/31/14
01/31/15
04/30/15
07/31/15
10/31/15
01/31/16
04/30/16
07/31/16
10/31/16
03/31/17
06/30/17
09/30/17
12/31/17
03/31/18
06/30/18
01/31/14
04/30/14
07/31/14
10/31/14
01/31/15
04/30/15
07/31/15
10/31/15
01/31/16
04/30/16
07/31/16
10/31/16
03/31/17
06/30/17
09/30/17
12/31/17
03/31/18
06/30/18
Gross delta‐adjusted exposure 165.0% Net delta‐adjusted exposure 3.0%
Source: Company Reports Source: Company Reports
14Investment Themes
LONG INVESTMENT THEMES
THEME RATIONALE COMPANY
America First Companies that are beneficiaries from the current administration's agenda Leidos (LDOS), FLIR Systems (FLIR), Kirby Corp (KEX)
Financial Deregulation Benefits from deregulation should provide a multi-year tailwind to earnings and Seacoast Bank Corp. (SBCF), Ameris Bancorp (ABCB)
drive higher capital returns to shareholders via higher share repurchases and CenterState Bank Corp. (CSFL)
dividends
Hard Asset Companies that should benefit from higher inflation and commodity prices PotlatchDeltic (PCH) , Occidental Petroleum (OXY),
Newmont Mining (NEM), Archer-Daniels-Midland (ADM), Nutrien (NTR)
Demographic Changes: Millennials spending habits are changing, new demands for healthier foods and Calavo Growers (CVGW), Thermo Fisher (TMO)
Millennials & Baby Boomers using e-commerce Abbott Laboratories (ABT), Zimmer Biomet (ZBH)
Aging population will drive long term secular demand for healthcare
Special Situations Visibility on tax rates, tax repatriation, improved business confidence will result in KLX (KLXI), E*TRADE (ETFC), Ashland (ASH), CDK Global (CDK),
higher M&A DowDupont (DWDP)
Companies going through value-enhancing break-ups
SHORT INVESTMENT THEMES
THEME RATIONALE COMPANY
Interest Rate Risks Companies that could be negatively impacted from rising interest rates, in addition Snap-on (SNA), Polaris Ind. (PII), Elli Mae (ELLI)
face increased competition, rising input costs
Competitive Risk in Retail Companies with low barrier to entry, exhibit no pricing power, benefited from Ollie's Bargain Outlet (OLLI), Urban Outfitters (URBN),
temporary fundamental tailwinds, trading at elevated valuations American Eagle (AEO), Ralph Lauren Corp. (RL)
Peak Semis Peak stock prices don't reflect the potential profit slowdown over the next 6-12 Skyworks (SWKS), Broadcom (AVGO), Intel Corp (INTC)
months
Profitless Growth Companies growing sales, but losing incrementally more money, facing increased Tesla (TSLA), Shopify (SHOP), Wayfair Inc. (W)
competition
Red = new
position or
theme
As of 06/30/2018
15Notable Portfolio Position Changes
Long Portfolio Short Portfolio
• Reduced (sold) cyclical and financial • Covered profitable shorts in:
exposure: • Symantec Corp (SYMC)
• United Technologies (UTX) • The Middleby Corp (MIDD)
• Nucor Corp (NUE) • Thor Industries (THO)
• Rio Tinto (RIO) • Skechers USA Inc (SKX)
• Goldman Sachs Corp (GS) • Sprouts Farmers Market (SFM)
• Bank of America (BAC) • Teradyne (TER)
• LCI Industries (LCII)
• Continue to add to hard assets:
• Archer-Daniels-Midland (ADM) • Added or Increased names in the restaurant
• Nutrien (NTR) & apparel space:
• BJ’s Restaurant Inc (BJRI)
• Added to Consumer Staples exposure: • Dine Brands (DIN)
• Mondelez International (MDLZ) • Urban Outfitters Inc (URBN)
• Covered unprofitable shorts and swapped
into puts
• Shopify (SHOP)
• Planet Fitness (PLNT)
• Canada Goose Holdings (GOOS)
• Wayfair Inc (W)
16Otter Creek Long/Short Opportunity Fund
Investment Themes As a Percent of Invested Capital
Source: Company Reports
As of 07/13/2018
17Long Book Review
Long portfolio has generated approximately 100bps of excess return relative to market in 2018 despite
limited exposure to large-cap technology stocks
OTTRX Long Performance VS. S&P 500 Since Inception
65%
55%
45%
35%
25%
15%
5%
‐5%
Jan‐14 Jul‐14 Jan‐15 Jul‐15 Jan‐16 Jul‐16 Jan‐17 Jul‐17 Jan‐18
SPX OTTRX
18Long Book: We Still See Upside in YTD Laggards
Aramark (ARMK) (-9% YTD) CDK Global (CDK) (-5% YTD)
• Provider of food and facilities management in the U.S. • Provider of information technology (software) and digital marketing
• Long-term growth opportunities (1) public companies < 10% of solutions for the automotive retail industry.
industry (2) less than 50% of market is outsourced • Spun-off from ADP in 2016
• Medium-term management opportunity – margins are 100bps below • Leading market share (40%), operates in a consolidated industry
closest peer • Primarily U.S. focused business
Why the opportunity now? Why the opportunity now?
• Sales growth acceleration from new business wins • Transformation plan expected to improve margins and close
• Continued execution on margin expansion margin cap to closest peer (private, Reynolds & Reynolds)
• Potential spin-off of uniform business • Potential for activists (Elliot Management) to force a sale of
• Valuation – ARMK trades at 10x EBITDA relative to leading the company
competitor, Compass, at 14x EBITDA. • Valuation – CDK trades for 18x earnings relative to software peers >
20x.
Leidos (LDOS ) (-3% YTD) Zimmer Biomet (ZBH) (-5% YTD)
• Government IT services company • Leading orthopedic device manufacturer
• Beneficiary from favorable government spending environment going • Attractive profitability – 70% gross margins, 34% EBITDA margins
forward • Temporary supply issues have reduced sales growth near-term
• Margin expansion opportunity via recent acquisitions (merged with Why the opportunity now?
Lockheed's IT business) • New and highly regarded CEO should be a positive “change
Why the opportunity now? agent”
• Potential for significant sales growth acceleration in 2H18 • Supply issues abate 2H18 and 2019 should provide an
driven by new business wins opportunity for sales growth to return to market growth rates
• Opportunity to accelerate capital return via faster dividend • Valuation – ZBH trades 14x earnings relative to peers 18x-22x
growth
• Valuation – LDOS trades 14x earnings relative to peers 18x-19x
*YTD Prices as of 7/13/18
19Short Name: Dine Brands Global Inc. (DIN)
Company Discretion: Dine Brands Global (DIN)
• Owner of Applebee's & IHOP Brands 90
Investment Thesis: 80
• Operates in secularly challenged casual dining industry 2nd largest Franchisee Files for Bankruptcy
• Shift to fast casual and delivery 70
• Over-capacity of units in casual dining
60
• Franchisee profitability falling – declining EBITDA and
stagnant free cash flow IHOP Temporarily Changes
50 Name to IHOB for Burger
• Deteriorating Balance Sheet – leverage 7x Roll Out
40
Other notable shorts: BJ’s Restaurants (BJRI)
• Faces long-term competitive challenges 30
• Margins are at risk due to labor pressure Jul‐17 Aug‐17 Sep‐17 Oct‐17 Nov‐ Dec‐17 Jan‐18 Feb‐18 Mar‐ Apr‐18 May‐ Jun‐18 Jul‐1
• High levels of insider selling 17 18 18
Source: Bloomberg as of 07/13/2018
Dine Brands Global (DIN) Dine Brands Global Net Debt/EBITDA
75 7x
70 7x
65
6x
60
55 6x
50
5x
45
40 5x
4x
ADJ EBITDA (LHS)
Source: Bloomberg as of 07/03/2018 Source: Bloomberg as of 07/03/2018
20Short Name: Adtalem Global Education (ATGE)
Company Description:
• Adtalem Global Education (formally DeVry Education
Group Inc.), through its subsidiaries, is a for-profit
provider of higher education programs and Services.
• Offers bachelor’s, and master’s degrees primarily in
nursing.
Investment Thesis:
• Slowing enrollment growth
• Increased competition in nursing
• Pricing pressure from new competition
• Chamberlain tuition cost is in the top quintile
of programs
Source: Company Filings, Compass Point Research
Online RN‐BSN Program Costs Adtalem Operating Income by Program
$30
Thousands
$25 8.2%
$20 Medical and Healthcare
14.8% (Chamberlain)
$15
$10
Business, Technology and
$5 Management
International, K‐12 and
Professional
76.9%
Source: Company Filings Source: Company Filings 10K
21Short Theme: Apparel
Company Description: Urban Outfitters (URBN)
• Urban Outfitters, Inc. is a specialty retail 50
company that offers a variety of lifestyle 45
merchandise to highly defined customer niches 40
• Urban Outfitters targets young adults aged 18 35
to 28 30
25
20
Investment Thesis:
15
• Operates in structurally challenged and
Apr‐14
Apr‐15
Apr‐16
Apr‐17
Apr‐18
Jul‐13
Oct‐13
Jan‐14
Jul‐14
Oct‐14
Jan‐15
Jul‐15
Oct‐15
Jan‐16
Jul‐16
Oct‐16
Jan‐17
Jul‐17
Oct‐17
Jan‐18
Jul‐18
extremely competitive industry
• Shift in spending to experiences relative to
Source: Bloomberg as of 05/31/2018
apparel
• Skeptical recent same-store-sales growth is Urban Outfitters Sales and Comp Growth
sustainable 15.00% We expect comps to
meaningfully decelerate
10.00%
Valuation - trading 18-19x vs historical multiple of 5.00%
13-14x 0.00%
‐5.00%
Other short positions in apparel – American Zero to negative growth
‐10.00%
Eagle (AEO), Abercrombie and Fitch (ANF)
Sales Comparable Sales
Source: Bloomberg as of 07/19/2018
22Short Theme: Managing Risk with Puts
Total Momentum ETF Assets
12
Uneconomic businesses that fail to 10
Under $2 billion in assets to
generate profits and carry unsustainable 8 $10 billion in 2 years
valuations, in our view
6
4
2
0
Sep‐13
Sep‐14
Sep‐15
Sep‐16
Sep‐17
Jun‐13
Dec‐13
Mar‐14
Jun‐14
Dec‐14
Mar‐15
Jun‐15
Dec‐15
Mar‐16
Jun‐16
Dec‐16
Mar‐17
Jun‐17
Dec‐17
Mar‐18
Source: Bloomberg as of 06/30/2018
W, SHOP, NFLX, TSLA Cumulative Sales W, SHOP, NFLX, TSLA Cumulative Earnings
32500 100
0
27500
‐100
22500 ‐200
‐300
17500 ‐400
‐500
12500
‐600
7500 ‐700
Mar‐15
May‐15
Jul‐15
Sep‐15
Nov‐15
Jan‐16
Mar‐16
May‐16
Jul‐16
Sep‐16
Nov‐16
Jan‐17
Mar‐17
May‐17
Jul‐17
Sep‐17
Nov‐17
Jan‐18
Mar‐18
Mar‐15
May‐15
Jul‐15
Sep‐15
Nov‐15
Jan‐16
Mar‐16
May‐16
Jul‐16
Sep‐16
Nov‐16
Jan‐17
Mar‐17
May‐17
Jul‐17
Sep‐17
Nov‐17
Jan‐18
Mar‐18
Source: Bloomberg as of 06/30/2018 Source: Bloomberg as of 06/30/2018
23Otter Creek Long/Short Opportunity Fund
Current Sector Exposure
Source: Company Reports
As of 06/30/2018
24Otter Creek Long/Short Opportunity Fund
Valuation of Portfolio
Weighted Averages As of July 13, 2018 Market Cap As of June 30, 2018
Market Cap 1
P/E '18 2
Gross Exposure 2
Long Portfolio $43,390 14.7x Mega (>= 100 billion) 5.7%
Short Portfolio $48,580 32.2x Large (>= 10 billion & < 100 billion) 93.1%
S&P 500 17.5x Mid (>= 1 billion & < 10 billion) 57.6%
1
Market Cap is in millions of dollars Small (< 1 billion) 8.6%
2 2
P/E estimated based on non‐Generally Accepted Accounting Principles (GAAP) Gross Exposures are Delta Adjusted
Source: Bloomberg
Top 10 Securities As of March 31, 2018 Top 10 Securities As of June 30, 2018
% of Net Assets % of Net Assets
KLX Inc 6.4% KLX Inc 7.3%
Leidos Holdings Inc 5.6% Leidos Holdings Inc 6.2%
FLIR Systems Inc 4.8% CDK Global Inc 5.0%
CDK Global Inc 4.3% Ashland Inc 4.9%
Ashland Inc 4.3% Zimmer Biomet Holdings Inc 4.1%
Berkshire Hathaway Inc‐CL B 3.5% FLIR Systems Inc 3.9%
Potlatch Corporation 3.4% Aramark Corp 3.8%
NextEra Energy Partners LP 3.3% Seacoast Banking Corp of Florida 3.8%
Kirby Corp 3.3% E‐Trade Financial Corp 3.5%
Seacoast Banking Corp of Florida 3.3% Snap‐on Inc ‐3.5%
25Drawdown Analysis
S&P 500 Drawdowns of 3% Since Inception of OTTRX
Source: Company Reports
As of 06/30/2018
Performance data quoted is past performance. Past performance does not guarantee future results. The investment and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The current performance may be lower or higher than
the performance data quoted. Performance data current to the most recent month‐end may be obtained by calling (855) 681‐5261. Performance data quoted
does not reflect the 1% redemption fee on shares held for 60 days or less. If reflected, total returns would be reduced.
26Definitions
• Correlation is a statistical measure of how two securities move in relation to each other. The correlation coefficient (r) is a measure that determines the degree to which two
variable's movements are associated. The coefficient of determination (r2) is a measure used in statistical model analysis to assess how well a model explains and predicts future
outcomes.
• Delta is the ratio comparing the change in price of the underlying asset to the corresponding change in the price of a derivative.
• Delta‐adjusted equity exposure is a representation of the portfolio's equity exposure which has been adjusted to take into account the combined effect of options and equity
positions.
• The EPS Growth is the change from year to year in the earnings per share of the S&P 500.
• P/E or Price‐to‐Earnings is a ratio derived by dividing the price of a stock by the earnings per share of the company.
• Standard deviation is a measure of the dispersion of a set of data from its mean.
• A basis point (BP) is 1/100 of a percentage point. The Largest Drawdown is the greatest percentage peak‐to‐trough decline (high point to low point over consecutive days) since
inception of the fund.
• GDP reflects the Gross Domestic Product of a country. It is the monetary value of all the finished goods and services produced within a country's borders in a specific time period.
• Generally Accepted Accounting Principles (GAAP) are a common set of accounting standards and procedures which companies should use to compile their financial statements in
order to ensure consistency across different companies.
• The Price to Sales Ratio (P/S) is calculated by dividing the company’s market capitalization by its total sales over a twelve month period.
• The Book Value is the total value of a company which is calculated by taking the total assets minus the intangible assets (patents, goodwill, etc.) and liabilities.
• The Market Capitalization (Market Cap) is the current market value of a company. It is derived by taking the outstanding shares times the current price.
• FX and FOREX are acronyms that stand for Foreign Exchange. This is the idea of purchasing one currency by selling another.
• Free cash flow is a measure of financial performance calculated as operating cash flow minus capital expenditures.
• Capital expenditure, or CapEx, are funds used by a company to acquire or upgrade physical assets such as property, industrial buildings or equipment. It is often used to
undertake new projects or investments by the firm.
• Duration is a measure of the sensitivity in the value for a security whenever there is a change in interest rates.
• Cash Flow is the net amount of cash and cash‐equivalents moving into and out of a business.
• The Enterprise Multiple (EV/EBITDA) is a ratio used to determine the value of a company. It is calculated by taking the Enterprise Value and dividing it by EBITDA.
• The Enterprise Value to Sales ratio (EV/sales) is a way to measure a company’s enterprise value versus its sales.
• The Enterprise Value (EV) is a measure of a company’s value. It is calculated as market cap plus debt, minority interest and preferred shares, minus total cash and cash
equivalents.
• EBITDA is an acronym for Earnings Before Interest, Taxes, Depreciation, and Amortization expenses. It is a measure used to analyze and compare profitability between companies
of different characteristics because it largely eliminates the effect of accounting and financing decisions.
• Earnings growth is the annual rate of growth of earnings from investments.
27Definitions
• The Standard and Poor's 500 Index (S&P 500) is a capitalization‐weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy
through changes in the aggregate market value of 500 stocks representing all major industries.
• The Wilshire 5000 Index is a capitalization‐weighted index of over 5,000 securities. The index is designed to measure performance of all US equity securities with readily available
price data.
• The Institute for Supply Management (ISM) Manufacturing Purchasing Managers’ Index is an index which is comprised of surveys from purchasing managers in the
manufacturing sector. It can be used as an indicator of the economic health of the manufacturing sector.
• The Non‐Manufacturing ISM is a report produced by The Institute of Supply Management (ISM) for all sectors of the economy other than manufacturing. It can be used as an
indicator of the overall economic condition for the non‐manufacturing sector.
• The Institute for Supply Management (ISM) Purchasing Managers’ Composite Index is an index which is comprised of surveys from purchasing managers across all sectors of the
economy It can be used as an indicator of the economic health of the economy as a whole.
• NASDAQ is a global electronic marketplace for buying and selling securities as well as the benchmark index for U.S. technology stocks.
• The NASDAQ Composite Index is a broad‐based capitalization‐weighted index of stocks in the NASDAQ marketplace.
• The Federal Reserve Bank of New York (FRBNY) Underlying Inflation Gauge captures sustained movements in inflation from information contained in a broad set of price, real
activity and financial data.
• The Goldman Sachs Discretionary Most Short Index is an index of the most shorted consumer discretionary stocks which is compiled from data at Goldman Sachs Prime
brokerage and New York Stock Exchange short interest data.
• The EM10FX Spot Index is an index comprised of the 10 largest Emerging Market currencies as measured against the US Dollar.
It is not possible to invest directly in an index 28Legal Disclaimers
Otter Creek Advisors, LLC is the Advisor to the Otter Creek Long/Short Opportunity Fund which is distributed by Quasar Distributors, LLC.
The Fund's investment objectives, risks, charges, and expenses must be considered carefully before
investing. The statutory and summary prospectuses contain this and other important information about the
investment company, and may be obtained by calling 1‐855‐681‐5261 or visiting
www.ottercreekfunds.com. Read carefully before investing.
Mutual fund investing involves risk; Principal loss is possible. The Fund is non‐diversified meaning it may concentrate its assets in fewer individual
holdings than a diversified fund. Therefore, the Fund is more exposed to individual stock volatility than a diversified fund. Investments in debt
securities typically decrease when interest rates rise. This risk is usually greater for longer‐term debt securities. Investments in lower‐rated and
non‐rated securities present a greater risk of loss to principal and interest than higher rated securities. Investments in Asset‐Backed and Mortgage‐
Backed securities include additional risks that investors should be aware of including credit risk, prepayment risk, possible illiquidity and default,
as well as increased susceptibility to adverse economic developments. Investments in foreign securities involve political, economic, and currency
risks, greater volatility, and differences in accounting methods. The Fund may use certain types of exchange traded funds or investment
derivatives. Derivatives involve risks different from, and in certain cases, greater than the risks presented by more traditional investments.
Derivatives may involve certain costs and risks such as liquidity, interest rate, market, credit, management and the risk that a position could not be
closed when most advantageous. Investing in derivatives could lose more than the amount invested. ETF investments involve additional risks such
as the market price trading at a discount to its net asset value, an active secondary trading market may not develop or be maintained, or trading
may be halted by the exchange in which they trade, which may impact a fund's ability to sell its shares.
Short sales of securities involves the risk that losses may exceed the original amount invested. Investments in Master Limited Partnerships (MLPs)
which concentrate investments in the natural resource sector and are subject to the risks of energy prices and demand and the volatility of
commodity investments. Damage to facilities and infrastructure of MLPs may significantly affect the value of an investment and may incur
environmental costs and liabilities due to the nature of their business. MLPs are subject to significant regulation and may be adversely affected by
changes in the regulatory environment. Investments in IPOs are subject to market and liquidity risks and such investments may have a magnified
impact on the performance of the Fund. To qualify for treatment as a regulated investment company ("RIC") under the Internal Revenue Code
("Code"), the Fund must meet certain income source, asset diversification and annual distribution requirements. If, in any year, the Fund fails to
qualify as a RIC for any reason, the Fund would be taxed as an ordinary corporation and would become (or remain) subject to corporate income
tax. The resulting corporate taxes could substantially reduce the Fund's net assets, the amount of income available for distribution and the amount
of the Fund's distributions.
It is not possible to invest directly in an index.
EPS Growth is not a measure of the Fund’s future performance
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