Pitch Deck - Wealth Management

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  • Rational, independent thinking

    INSTITUTIONAL PITCH DECK

    September 2014

  • TABLE OF CONTENTS

    1. Executive Summary 3

    2. Who We Are 5

    3. Our Team 6

    4. What We Do 7

    5. Investment Philosophy 9

    6. Investment Process 15

    7. Portfolio Philosophy 24

    8. Silver Heights Performance 30

    9. Why Silver Heights? 36

    Appendices: Case Studies, Biographies

    2silverheights.com

  • EXECUTIVE SUMMARY

    Rational, independent thinking

    Intelligent Concentration

    Superior risk-adjusted absolute returns

    Investment First ethos

    3

    Silver Heights is a high-conviction, absolute return manager.

    silverheights.com

  • EXECUTIVE SUMMARY

    Alpha created through high-conviction, absolute return investment

    management

    Clear and direct alignment with clients interests

    Co-founders and senior employees have over 95% of their liquid net worth invested

    in the same securities that clients hold

    No financial leverage

    Tight-knit team with zero turnover in staff since inception in 2006

    History of generating consistent, strong, risk-adjusted absolute returns

    Very disciplined in adhering to investment philosophy and approach

    4silverheights.com

  • WHO WE ARE

    Founded in 2006 by Ming Lam and Kevin Kuebler

    Friends for over 30+ years; colleagues for over 12 years in investment management

    Very stable business partnership 50/50 ownership of Silver Heights

    40 years of combined experience in finance and investment management

    We are building our team carefully and rationally

    Our aim is not to be the biggest, but to be among the most well-respected in what

    we do. We are very selective about who we add to our team.

    Our size is part of our strength: nimble enough to take advantage of investment

    opportunities that help us create alpha.

    5silverheights.com

  • OUR TEAM

    6silverheights.com

    We will carefully and selectively add skills and talent as we grow our assets,

    but always with a view to keeping our firm lean.

    Ming Lam

    Co-Founder & Owner

    Investment Decisions

    Securities Trading

    Kevin Kuebler

    Co-Founder & Owner

    Investment Decisions

    Compliance & Operations

    Yahphen Yvonne Chang

    VP, Business Development

    Client Relationships

    Melissa Brown

    Compliance and

    Operations

    Richard Walkowiak

    Manager, Compliance and

    Operations

  • WHAT WE DO

    We seek high-quality businesses that we can purchase at a significant discount

    to their intrinsic value.

    We build concentrated portfolios of 12-20 stocks.

    We manage fully segregated portfolios.

    Every client receives fully customized, disciplined and patient deployment of their

    capital.

    We focus on the long term.

    7silverheights.com

    High-quality businesses which are patiently acquired at favourable prices

    lessen the risk of capital impairment and increase potential returns.

  • WHAT WE DO

    We pride ourselves on delivering a very high level of client service.

    Portfolio managers always accessible

    Team members always accessible

    Face-to-face meetings as requested by client

    Written quarterly updates

    8silverheights.com

  • INVESTMENT PHILOSOPHY RATIONAL, INDEPENDENT THINKING

    Silver Heights goal is to create alpha while minimizing the risk of permanent capital

    impairment. We aim to achieve superior, long-term, risk-adjusted absolute returns by

    investing in high-quality businesses. We only acquire shares when prices are below the

    intrinsic value of the business, thereby putting less capital at risk and enhancing potential

    returns. When we find the opportunities in which we have a strong conviction, we will

    take meaningful positions. We do not use leverage. It is our belief that the optimal

    approach to grow capital to ensure that future liabilities can be comfortably funded is by

    having the greatest exposure to our best ideas.

  • How do we achieve our goal?

    Own excellent businesses.

    Acquire these businesses at a discount to their true economic worth.

    Why are we able to do this? What creates these opportunities?

    Our lens is wide open we do not let commonly-used filters such as relative

    weightings, sector targets, geographic limits, beta, or GIC

    codes limit our opportunity set.

    10silverheights.com

    INVESTMENT PHILOSOPHY RATIONAL, INDEPENDENT THINKING

    There are excellent investment opportunities that fall

    between the cracks of these conventional approaches.

  • 11silverheights.com

    INVESTMENT PHILOSOPHY RATIONAL, INDEPENDENT THINKING

    Generally, investing for the long-term in good companies will yield good

    returns simply by virtue of being patient. Exceptional returns are more likely to

    be earned by being both patient and picking high-quality companies

    that are mispriced or misunderstood.

    Inefficient markets

    Emotions irrational behaviour

    Others short time horizons

    MISPRICED

    STOCKS

    EXCELLENT

    INVESTMENT

    OPPORTUNITIES=

  • What is an excellent business? If you could own any business, what would you

    look for?

    Predictable prospects / sustainable competitive advantage

    Strong balance sheet

    Strong free cash flow

    High returns on invested capital

    Reasonable growth

    Excellent, high-integrity management who are good capital allocators

    Appropriate compensation structures

    12silverheights.com

    INVESTMENT PHILOSOPHY RATIONAL, INDEPENDENT THINKING

  • Patience and temperament

    An excellent business, by itself, is insufficient for investment success.

    Overpaying for any business, even an excellent one, exposes one to more risk and

    very likely, subpar returns.

    Although simple in principle, being patient in practice is not the norm in an industry

    where frequent trading is more typical.

    Temperament and patience are perhaps the most underappreciated tools that

    investors have at their disposal.

    13silverheights.com

    INVESTMENT PHILOSOPHY RATIONAL, INDEPENDENT THINKING

    Following the herd has been a primary contributor

    to virtually every stock market and financial crisis in history.

  • Silver Heights applies a merchant banking approach to publicly-traded

    securities.

    Think like owners and operators rather than traders

    Longer time horizon

    Search for management teams with the same characteristics as those we would desire

    in partners in a private business venture

    Concentrated portfolios

    Absolute return focused

    Capital preservation top of mind

    Principals invested alongside our clients

    14silverheights.com

    INVESTMENT PHILOSOPHY RATIONAL, INDEPENDENT THINKING

  • 15silverheights.com

    INVESTMENT PROCESS

    GLOBAL EQUITY UNIVERSE

    IDEA GENERATION

    VALUATION & ASSESSMENT

    PORTFOLIO CONSTRUCTION

    MONITOR INVESTMENTS

    MONITOR WISH LIST

    SELL DISCIPLINE

  • 16silverheights.com

    Our investment process is disciplined, rigorous & repeatableINVESTMENT PROCESS

    We use S&Ps Capital IQ. Its global database contains over

    60,000 public companies (99% of global market cap).

    Screen investable universe of companies across geographies,

    sectors and industries.

    We use customized search criteria, specifically coded for Silver

    Heights.

    Having very high standards helps us efficiently narrow down the

    opportunity set:

    GLOBAL EQUITY UNIVERSE

    IDEA GENERATION

    VALUATION & ASSESSMENT

    PORTFOLIO CONSTRUCTION

    MONITOR INVESTMENTS

    MONITOR WISH LIST

    SELL DISCIPLINE

  • Ideas come from multiple sources

    Business and industry publications and reports Extensive business network and contacts Management meetings Research analysts

    Search for high-quality businesses. The perfect business would have these characteristics:

    Sustainable competitive advantage Strong balance sheet High free cash flow High returns on invested capital (>25%) Good growth prospects High insider ownership High-integrity management who are good capital allocators Appropriate compensation structures

    Develop a preliminary investable universe of companies develop a Wish List

    17silverheights.com

    Our investment process is disciplined, rigorous & repeatableINVESTMENT PROCESS

    GLOBAL EQUITY UNIVERSE

    IDEA GENERATION

    VALUATION & ASSESSMENT

    PORTFOLIO CONSTRUCTION

    MONITOR INVESTMENTS

    MONITOR WISH LIST

    SELL DISCIPLINE

  • In-depth fundamental analysis review historical financial

    statements (typically 10-20 years, when applicable)

    Determine intrinsic value of companies by valuing business on

    a private-enterprise basis, independent of the stock markets

    attributed value

    Discounted cash flow

    Very conservative assumptions

    o 10% discount rate

    o No growth after initial 5 years

    o Low terminal multiple

    Focus on best risk-adjusted, absolute return, investment

    opportunities

    18silverheights.com

    Our investment process is disciplined, rigorous & repeatableINVESTMENT PROCESS

    GLOBAL EQUITY UNIVERSE

    IDEA GENERATION

    VALUATION & ASSESSMENT

    PORTFOLIO CONSTRUCTION

    MONITOR INVESTMENTS

    MONITOR WISH LIST

    SELL DISCIPLI