Transcript for 2010 - Threshold Capital Corp

Threshold Capital Corp.
January 21, 2011
2009
Conduct intense fundamental research on
individual ideas
Strive to invest in companies that are well
managed with high insider ownership, track
record of internal growth, dominant in their niche
market
2008 – Worst performance in the U.S. indices
since the Great Depression
March 2009 – Global markets would bottom and
rally
DJIA +18.82%
S&P 500 +23.45%
NASDAQ +43.89% Russell 2000 +25.22%
2010 Events
January 2010
US Equity Indices Attempt To Find Direction
Bernanke Confirmed for a 2nd Term
US Senate Raises the Debt Ceiling to $14.3
Trillion
February 2010
President Obama Unveils Budget - $2.5
Trillion of Taxes and $3.8 Trillion of
Spending
Greece Fiscal Problems Grab Headlines
China Raises Bank Reserve
Requirements
US Equity Indices Improving
March 2010
Federal Reserve Announces the End of its
$1.25 Trillion Purchase Program
Healthcare Reform Passes – to Begin in
2014 at a Cost of $875 Billion
US Consumer Sentiment Improving Along
With Business Confidence
April 2010
SEC Sues Goldman Sachs Over Abacus
CDO
BP Rig Explodes in Gulf of Mexico
Return of Mergers & Acquisitions Activity
Greece Rescued by the European Union
and International Monetary Fund
May 2010
Flash Crash
European Union Unveils $1 Trillion Rescue
Package
Worldwide Markets Rally, Then Fall by Midmonth
US Indices Close Down – All in the Red for
2010
June 2010
BP Well Still Uncapped
China’s Currency Becomes More Flexible
Final Revision of the US Financial Reform Bill –
FINREG
US Indices End 1st Half 2010 Down
DJIA –(6.27)%
S&P 500 –(7.57)%
NASDAQ –(7.05)%
Russell –(2.5)%
US Final Q1 GDP is 2.7% Vs 3.2% Earlier
What Are US Companies Doing? Is This A Real
Recovery?
July 2010
Goldman Sachs Settles Civil Charges for
$550 million
China Q2 GDP at 10.3% Vs 11.9% in Q1
BP – New CEO & Well Capped
August 2010
Increased M&A Activity
Rank Group to Buy Pactiv for $4.6 Billion
BHP Goes Hostile after POT for $40 Billion
INTC to Buy McAfee for $7.68 Billion
Dell/HPQ Battle over 3Par for $2.35 Billion
Housing Still Weak
DJIA Dips Below 10,000 again
September 2010
Basel III Meeting
Gold Rises to a Record $1,250/oz. – Up
14% for 2010
United Kingdom Inflation Hits 3.1%
China Declares It Has the World’s 6th
Largest Gold Reserves
NBER Declares The Recession Officially
Over
Buffet & Munger Visit China
Fair Month for Equities – But 27% of All
Mutual Funds Still Underperforming
October 2010
Bank of Japan Moves – 5 Trillion Yen Buying
Program
China Reports Holding $2.65 Trillion Foreign
Currency Reserves
Foreclosure/Robo-Signing Scandal – BAC,
WFC, C, JPM Halt Foreclosures
China Raises Interest Rates
G20 Meeting in Korea – Agree to Move
Toward Market Driven Exchange Rate
System
November 2010
World Bank Raises China Growth Forecast
US Elections – Republicans Sweep
Fed Announces QE2 Plans – Additional
$600 Billion
US Indices Rally – DJIA reaches 11,400
World Bank President Recommends the
Inclusion of Gold in a Revamped Global
Monetary System
Ireland is Rescued - $70 Billion Plus
Austerity
US Encouraging Holiday Retail Sales
December 2010
Unveiling of US Deficit Reduction Plan - $4
Trillion
Weak November Jobs Report –
Unemployment rises to 9.8%
Chairman Bernanke Interviewed on 60
Minutes
US Tax Deal
US Q3 Final GDP at 2.6%
China Raises Interest Rates
End 2010 with Solid Gains
DJIA +11.02% S&P 500 +12.78%
NASDAQ +16.91%Russell +25.31%
Core Portfolio Positions
General Electric
Makers of Jet engines, Locomotives, power
turbines, consumer products
GE Capital
Strong Industrial Orders in Infrastructure
GE Increasing Dividend – Yield 3.06%
Philip Morris International
World’s largest and most profitable publicly
traded cigarette manufacturer
Growing Emerging Markets
For 2010, PMI will earn $3.90 - $3.95; Up 20%
from 2009
Since Spinoff in 2008, PMI has increased
dividends by 39% - Yield 4.5%
Altria Group
Philip Morris USA, US Smokeless, John
Middleton, and 28.5% Stake in SAB Miller
For 2010, MO will earn $1.83 - $1.87
Yield 6.29%
Lorillard Inc.
3rd Largest Tobacco Company in US
Newport Brand - #1 in Menthol segment with
12.9% overall US market share
Successful launch of non-Menthol Newports in
Q4
Pays $1.25 dividend per Qtr – Yield 6.5%
Still considered a takeover candidate
Cost per pack in New York City - $12 (NJ $9-10 per pack)
Tax Breakdown:
Federal - $1.01 per pack (up from $0.39 in 2009)
NY State - $4.35 per pack
NYC - $1.50 per pack
Just under 60% of purchase price goes to paying taxes
Gold & Precious Metals
Large Investor Appetite for Gold in 2010
Gold prices have tripled since 2004
As the US and EU continue to pump $$$ into
their fragile financial systems, Gold will continue
to do well
Large buyers continue to be China, Russia,
India
As a currency, Gold has no liabilities – Gold
cannot Default
Gold companies in Portfolio – AEM, AUY, GDX &
GDXJ
Brazil Opportunities
10th Largest Economy in the World – GDP Growth of 7%
in 2010; higher 2011
Self-sufficient in oil; leader in alternative energy sources
World Cup in 2014 and Olympics in 2016
Massive need of Infrastructure – over $100 Billion
Ultrapar Participacoes
– Fuel Distributor & Chemical giant
– Brands Ipiranga (Fuel Stations), Oxiteno (Chemicals),
Ultracargo (shipping/storage of bulk liquids)
– Earn $3.15 for 2010; $3.65 in 2011
– Yield 2.4%
China Opportunities
1.3 Billion People – 1/5 of the Globe’s
Population
Still Growing GDP at rapid pace – 10.5% for
2010 and Range of 9 – 10% for 2011
New 12th Five Year Plan
1980 – Deng Xiaoping – “To be rich is glorious”
Inflation becoming a concern
China Yuchai International Ltd
CYI is the largest independent diesel engine
maker in China
Undergoing a tremendous shift in product mix
from light duty to medium duty and heavy duty
units
2011 Joint Ventures
Will earn over $3.00 in 2010 and estimating
$3.40 - $3.60 for 2011
Duoyuan Global Water Inc
Leading China based domestic water treatment
equipment supplier
Products for filtration, water softening, aeration,
disinfection, and reverse osmosis
Pollution has been a tragic consequence of
China’s fast GDP growth
DGW will be a great beneficiary of the new Five
Year Plan
Earn $1.50 for 2010 and estimating $1.85 for
2011
SearchMedia Holdings
One of the largest operators of integrated
outdoor billboard, transit, and in-elevator
advertising networks in China
Over 1,500 billboards and 125,000 advertising
panels in 50 cities
Committed to building the SearchMedia brand,
do smart accretive deals to contribute to top and
bottom lines
Great Executive Management & Board –
Owners of the business – 30% ownership stake
ChinaCast Education
Corporation
IR Counsel – Scott Powell of HC
International
US Economic Environment
Unemployment still high – 9.4%
Inflation is here in the US
The Fed has pushed our backs to the wall
US Interest Rates have begun to rise – 10yr at
3.3% at end of 2010
However – some encouraging news
Performance Snapshot
2010
Threshold (A) +42.80%
Threshold (B) +41.45%
DJIA
S&P 500
NASDAQ
Russell 2000
+11.02%
+12.78%
+16.91%
+25.31%
Since Inception Jan 2007
+61.49%
+66.75%
-(7.11)%
-(11.33)%
+9.84%
-(0.51)%
Deliver Positive Returns Over a Long Term Horizon With the
Ultimate Goal of Outperforming the Markets
Superior Performance Through Stock picking
Strategy for 2011
Continue with in-depth Fundamental Research –
Buy the Brands and Special Situations
New Ideas – Currently focusing on Brazil
Cautious on Europe – will Sovereign Debt issues
break apart European Union?
Economists estimating S&P Profits of $90-95 for
2011
PE Range of 13.6 – 14.3
Disclaimer – This presentation is for the
exclusive use by Threshold Capital Corp. It
expresses the opinions of Peter A Delgado II and
Threshold Capital Corp and in no way
constitutes a solicitation of business or
investment advice. It is intended for
informational purposes of the reader and the
author.