Transcript for 2011 - Threshold Capital Corp

Threshold Capital Corp.
January 27, 2012
End of 2010
Clients fully invested with small cash cushion
China – 40% - CAST,CYD,DGW,IDI
Brazil – 25% - BRXX,UGP,VIV
Tobacco – 18% - MO,LO,PM
Gold – 15% - GDX,GDXJ,AEM,AUY,NEM
US – 2.6% GDP; Unemployment 9.6%
China – 9.6% GDP
Brazil – 6.9% GDP
Threshold Capital – Will Europe prove to be a tipping point in
2011?
Q1 - 2011
President Obama delivers State of the Union address
Uprisings in the Arab World
China raises Interest rates
JP Morgan accepts gold as collateral
Egyptian President H. Mubarak resigns
Q1 – 2011 cont.
Earthquake off the coast of Japan
Continued Middle East unrest – rebels take control of oil
areas in Libya
Saudi King Abdullah ventures out in public
Encouraging US jobs report – 216k jobs added in March
2011
End Q1
Q2 – 2011
Republicans propose 2012 Budget
China raises Interest Rates
Portugal requests bailout of $129 Billion
European Central Bank – ECB – raises rates
Standard & Poor’s changes US Outlook – “stable” to
“negative”
Gold rises above $1,500 per oz.
Standard & Poor’s downgrades Greece to single B from
double B minus
Q2 – 2011 cont.
China raises Reserve requirements
US Unemployment rises to 9.1% (May 2011)
DJIA falls below 12,000
Greek Parliament approves austerity plan – DJIA rallies to
12,500
Bank of America takes $20 Billion Charge
US Federal Reserve ends QE2 Program
Threshold Capital raises cash for Clients – liquidates
positions in CAST,DGW,CYD
DJIA +7.23%
S&P 500 +5.01%
NASDAQ +4.55%
Russell 2000 +5.5%
Europe – Why are things so Bad?
Culture – European Banks are drastically different than US
Counterparts
No TARP Program in 2008 for Europe Banks – LTRO Plan
(December 2011) by ECB
Enormous Amount of Sovereign Debt Issued
Political Promises = Fiscal Irresponsibility
Euro Crisis? Mislabeled – Threshold Capital believes “Solvency
Crisis” is better characterization
Q3 – 2011
Moody’s downgrades Portugal to Junk Status
OECD Releases Report on Consumer Prices
China Raises Interest Rates
ECB Raises Interest rates
US Unemployment rises to 9.2% (June 2011)
Moody’s downgrades Ireland to Junk
President Obama Walks Out On Republican Leadership Over
US Deficit Talks – Moody’s and S&P reviewing US Debt Rating
Gold Rises to $1,600 per oz.
Q3 – 2011 cont.
US House & Senate pass $2.4 Trillion debt ceiling package
Global financial firms announce large layoffs
S&P removes AAA Rating on US debt – Indices plummet;
gold soars
DJIA drops to 11,000 on Europe & global economic
slowdown
Berkshire Hathaway invests $5 Billion in BofA
ECB announces it has been purchasing Billions in Italian &
Spanish bonds
Moody’s Downgrades debt of BofA, WFC & C
US Federal Reserve launches “Operation Twist”
End Q3
Q4 – 2011
Franco-Belgian bank Dexia fails
Brazil cuts interest rates
US Federal Reserve reports household debt continues to fall
US GDP for Q3 = 2.5%
US Fed Chairman Bernanke signals Fed is ready to act if
needed
ECB cuts interest rates to 1.25% from 1.5%
Interest rates in Italy Spike over 7%
PM’s of Greece and Italy resign
European Bond markets sell-off
US indices have worst Thanksgiving week since 1942
Joint action by global central banks to calm Euro fears
US adds 120K jobs In November
Q4 – 2011 cont.
Standard & Poor’s puts 15 Eurozone nations on watch for
possible downgrade
ECB cuts rates to 1%
Fitch downgrades 7 of the world’s largest banks – BofA, CS,
BNP, Barclays, Deutsche Bank, GS, and C
Crude oil spikes above $100/bbl on Iran comments
Euro reached 15 month low vs. US$ - $1.2961
US adds 200k jobs in December – Unemployment drops to
8.5%
End 2011
DJIA +5.53%
S&P 500 0.0%
Nasdaq -(1.80)%
Russell 2000 -(5.45)%
Threshold Capital adds new positions to Client Portfolios as US
economy and job market improved
Purchased – BEAM and XYL
Core Portfolio Positions
Philip Morris International
• World’s largest and most profitable publicly traded
cigarette manufacturer
• Growing Emerging Markets
• For 2011, PMI will earn $4.75 - $4.80; Up 21% from
2010
• Yield 4.5%
Altria Group
• Philip Morris USA, US Smokeless, John Middleton,
and 28.5% Stake in SAB Miller
• For 2011, MO will earn $2.01 - $2.07
• Yield 5.79%
Lorillard Inc.
• 3rd Largest Tobacco Company in US
• Newport Brand - #1 in Menthol segment with 39.2%
share of US Menthol market
• Continued strength of non-menthol Newport –
Newport Red
• Pays $1.30 dividend per Qtr – Yield 4.6%
Beam, Inc.
• Spun – off from Fortune Brands in October 2011
• BEAM is the 4th largest premium spirits company on the globe;
largest US based spirits Company
• Top Brands – Jim Beam Bourbon, Makers Mark Bourbon, Knob
Creek Bourbon, Canadian Club, Teachers Scotch Whiskey,
Courvoisier Cognac, Sauza Tequila, Cruzan Rum, & Skinnygirl
• Generated sales of $2.7 Billion in 2010; expecting $3.5 Billion
in 2011 and earn $2.10 per share
• Potential takeover candidate by Diageo Plc or Pernod Ricard
SA
Xylem, Inc.
• Spun – off from ITT Corp.
• XYL is a world leader in the design, manufacturing, and
application of highly engineered technologies for the global
water industry
• Maker of pumps, measuring instruments, water & waste
management services to municipal, residential, & commercial
users
• Global water usage is expected to grow exponentially over the
next 20 years
• Potential takeover by GE or Siemens
Brazil Opportunities
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8th largest economy in the world
GDP Growth slowed in 2011 to 3%
Papal visit in 2013, World Cup in 2014, Olympics in 2016
Beginning massive infrastructure projects
Threshold Capital Client Positions
BRXX – EG Shares Infrastructure
Ultrapar Participacoes
Telefonica Brasil SA
Gold & Precious Metals
• Threshold Capital has owned this asset class for Clients since
mid 2009
• Gold up 10% for 2011 – Mining stocks were down
• Large buyers continue to be China, India, Russia
• As a currency – Gold has no liabilities – Gold cannot default
• Threshold Capital Client Positions:
Market Vectors ETF Gold Miners – GDX
Yamana Gold – AUY
Newmont Mining – NEM
SearchMedia Holdings Limited
Chief Executive Officer – Mr. Paul Conway
Performance Snapshot
Threshold (A)
Threshold (B)
2012
+8.84%
+7.02%
Since Inception Jan 2007
+10.86%
+41.52%
DJIA
S&P 500
NASDAQ
Russell 2000
+4.41%
+5.44%
+8.18%
+7.38%
+2.36%
-(6.50)%
+16.69%
+1.01%
Deliver Positive Returns Over a Long Term Horizon With the Ultimate
Goal of Outperforming the Markets
Superior Performance Through Stock picking
Outlook for 2012
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Europe still primary focus
US Presidential election
Implementation of Volker rule – July 2012
US – will QE3 be in play?
Threshold Capital Asset Allocation
30% Tobacco – MO,LO,PM
27% Brazil & China – BRXX,VIV,UGP,IDI
17% Metals/Mining – GDX,AUY,NEM
16% US Businesses – BEAM,XYL
• 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.