Kathrein Online-Outlook - Equity investments in turbulent times Vienna, 14th of October 2020 - Kathrein Privatbank
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Kathrein Online-Outlook
Equity investments in turbulent times
Vienna, 14th of October 2020
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2
Market Review
33
Market Development of Global Equities (in EUR) Past performance is not a reliable indicator for future returns. Source: Bloomberg L.P., Kathrein Privatbank 4
Market Development – Bond Review
▪ Typical risk-on investments such as EUR high-yield -4,1%
bonds or EUR corporate bonds were able to achieve US Treasuries 4,2%
the best performance. In the search for yield, investors 1,6%
EUR Sovereigns Q3
are once again increasingly switching to lower-rated but 3,7%
higher-yielding securities, as almost 40 % of euro YTD
0,4%
government bonds currently have negative yields. German Government Bond 2,7%
▪ Nevertheless, the typical risk-off investments such as
Global Sovereigns -0,7%
EUR government bonds and also German 1,7%
government bonds were able to post price gains
again. EUR Corporates 2,0%
0,8%
▪ US government bonds recorded the largest decline in
1,6%
euro terms. However, this was mainly due to currency EUR Inflation Linked Bonds 0,0%
developments, which also affected the performance of
USD high-yield bonds, which were only able to EM Corporates -1,7%
-0,9%
generate a marginally positive performance for euro
investors. The USD lost around 4 % against the EUR. EUR HY Corporates 2,6%
-2,7%
▪ Emerging market local currency bonds posted a
decline of around 2.5 %, with concerns about Covid 19 USD HY Corporates 0,2%
-3,7%
developments in developing countries weighing on the
EM currencies, which posted a loss of 1.5 % against EM Local Currency -5,8% -2,5%
the euro.
-10% -5% 0% 5% 10%
in EUR
Source: Bloomberg, Kathrein Privatbank, Data per 30.09.2020 5
Market Development – Currencies – Review: EUR/USD Source: Bloomberg, Kathrein Privatbank 6
Asset Allocation Desicions Q4 2019 – Q2 2020
Jan. 20 Sale of US Small Caps (10 % of the US stock weighting).
Jan. 20 Due to the dissolution of the Pfandbrief+, the weighting is shifted to the Yield+.
Mar. 20 Sharp reduction of the equity exposure and shift to the dynamic part, due to the spread of
the coronavirus in Europe and the resulting risk of recession. Increase of the Global Enterprise
weighting within the equity quota, because more defensive stocks should perform better than the 1. Quarter 2020
overall market in a correction phase.
Mar. 20 Merger of Euro Core Government Bond Fund and Euro Inflation Linked Bond Fund with Euro
Bond Fund.
Mar. 20 Sell all EUR and US high yield bonds and reduce the weighting of EM government bonds in
local currency (-5 %) and shift into Euro government bonds, global government bonds and Euro
corporate bonds in order to reduce risk in the bond segment due to expected recession.
May 20 Increase the equity component to neutral weighting and reduce the dynamic component.
Reduce the Global Enterprise weighting within the equity component.
2. Quarter 2020
Aug. 20 Shift from IG corporate bonds (-8%) and EM local currency bonds (-1%) to EUR government
bonds (+6%), EUR HY bonds (+2%) and EM corporate bonds (+1%).
Aug. 20 5% of the bond weighting shifted from the SPDR Bloomberg Barclays Emerging Markets Local 3. Quarter 2020
Bond Fund to the Kathrein Sustainable EM Local Currency Bond Fund.
Sep. 20 10% of the equity weighting shifted into the Kathrein Sustainable Global Equity Fund, half of the
corporate bond weighting shifted from the Kathrein Corporate Bond Fund into the Kathrein
Sustainable Bond Select Fund.
Source: Kathrein Privatbank 7
Market Outlook
- US-Election
- Value Stocks
88
US Presidential Election: General Election Poll Source: realclearpolitics.com, Kathrein Privatbank 9
US Presidential Election: Not a popular vote election Source: realclearpolitics.com, Kathrein Privatbank 10
US Presidential Election: Electoral College (2016) Source: realclearpolitics.com, Kathrein Privatbank 11
US Presidential Election: Electoral College (2020) Source: realclearpolitics.com, Kathrein Privatbank 12
US Presidential Election: Electoral College (2020) No Toss Ups Source: realclearpolitics.com, Kathrein Privatbank 13
US Presidential Election: Yes, but Hillary was also leading in the polls. True, but Biden is leading by more Source: realclearpolitics.com, Kathrein Privatbank 14
US Presidential Election: But in battle ground states Biden lead is smaller than Clintons Source: realclearpolitics.com, Kathrein Privatbank 15
US Presidential Election: Nevertheless the lead is significant, and pollsters have indicated they have improved their methods Source: realclearpolitics.com, Kathrein Privatbank 16
US Presidential Election: Electoral College (2020)
Trump Wins
Trump wins TX, OH, IA and swing States FL, NC, AZ (270 to win),
but still needs either PA (6.3 %) or MI(-6.2%) to win
Source: realclearpolitics.com, Kathrein Privatbank 17US Senate Election: 1/3 of Senators up for re-election every two years Source: realclearpolitics.com, Kathrein Privatbank 18
US House Election: Entire House is elected every
two years
232 197
Source: realclearpolitics.com, Kathrein Privatbank 19Thank you very much for your attention!
Questions?
20Development of Value Stocks
21
21Russell 1000 Value vs. Russell 1000
Russell 1000 Value stocks are
attractively valued
Russell 1000 Value companies, i.e. stocks
with an attractive
price/book value ratio.
The 1000 largest US
stocks last had a
comparably high
Log-Scaled relative performance
(=outperformance) to
Relative Performance Russell 1000 Value vs. Russell 1000 value stocks in 2000.
Value stocks better in downward phases
Russell 1000 Value/Russell 1000 The main reason is the
performance of a
handful of mega-cap
growth stocks.
The Russell 1000 Index consists of the largest 1000 companies in the Russell 3000 Index. The Russell 1000 Value Index measures the performance of those Russell 1000 companies
with lower price-to-book ratios and lower forecasted growth values.
Source: Bloomberg, Kathrein Privatbank 22US Equities - Concentration
The share of the S&P 500
S&P 500 Index market capitalization of the
top 20 companies increased
from 28% to 38% in the last
5 years.
Weak growth and flat/inverse
yield curves advantageous
for growth stocks.
Market share of top 20 stocks as %
of total S&P 500 market capitalisation Growth stocks are stocks
where above-average
growth rates in sales,
profits and investments are
expected.
Source: Bloomberg, Kathrein Privatbank 23US Equities - Concentration
Facebook
FANMAG market capitalization on the
total S&P 500 market capitalization
Apple
Netflix
Microsoft
Amazon
Google (Alphabet)
Share of FANMAG profits in total S&P 500 profits The share of the S&P 500
market capitalization of
the FANMAG companies
increased from about 5%
to almost 20% in the last
10 years.
The share of profits of the
large FANMAG titles is also
increasing steadily.
Source: Bloomberg, Kathrein Privatbank 24US Equities Performance and Movement
FANMAG
S&P 500 Index
S&P 500 exkl. FANMAG
Index (marketcap weighted) Performance p.a. Performance % year to date Without FANMAG
31.12.2014 – 09.10.2020 companies, the S&P 500
FANMAG 29.79 % 46.29 % would have been in the
S&P 500 Index 9.49 % 7.63 % red since the beginning
S&P 500 exkl. FANMAG 6.17 % -0.14 % of the year
Source: Bloomberg, Kathrein Privatbank 25US Equities Performance and Movement
FANMAG Price-Earnings-Ratio
Strong increase in
valuation ratios (more
expensive than ever
before).
Comparison history is,
FANMAG Price-Sales-Ratio
however, short.
Source: Bloomberg, Kathrein Privatbank 26Russell 1000 Value vs. Russell 1000
Periods in which Value performed better and worse.
Value worse than market 29
Value better than market 28
Max. Duration of Outperformance 30
Max. Duration of Underperformance 38
Avg. Duration of Outperformance 7
Avg. Duration of Underperformance 10
Similar development as in 2000, Value
had clearly outperformed in the years
after 2000. Value worse than market 12
Value better than market 11
Max. Duration of Outperformance 84
Max. Duration of Underperformance 63
Avg. Duration of Outperformance 17
Avg. Duration of Underperformance 23
Value worse than market 12
Value better than market 11
Max. Duration of Outperformance 95
Max. Duration of Underperformance 86
Avg. Duration of Outperformance 14
Avg. Duration of Underperformance 24
Data: Performance over rolling 12, 36, 60 month periods, Source: Bloomberg, Kathrein Privatbank 27Sector weight in value and market capitalization index
MSCI World Value Index MSCI World Index Differenz
Information Technology 7.68% 22.10% -14.42%
Consumer Discretionary 8.17% 11.83% -3.66%
Communication Services 7.15% 8.85% -1.70%
Health Care 12.70% 13.75% -1.05%
Real Estate 3.91% 2.80% 1.11%
Materials 5.59% 4.47% 1.12%
Consumer Staples 9.69% 8.22% 1.47%
Industrials 12.35% 10.38% 1.97%
Energy 5.05% 2.48% 2.57%
Utilities 6.62% 3.25% 3.37%
Financials 21.09% 11.86% 9.23%
Source: MSCI, Kathrein Privatbank per 30.9.2020 28Divdend payers cheap vs. Non-Payers
▪ So-called "bond proxies" also
tend towards value. E.g.
Utilities, Real Estate and
Consumer Staples.
▪ As interest rates are likely to
remain low, investors are
turning to dividend stocks as
yield alternatives. Bond
proxies could be a bright spot
Cheap
within the value universe as the
bull market matures.
2000-
2002
Source: NDR, Kathrein Privatbank 29Kathrein Global Enterprise: Fund Concept and Goals
T: AT0000A0Y0Z3
A: AT0000A0Y0Y6
▪ Investment in globally attractively valued companies, which are selected according to predefined
criteria.
▪ The selection approach is based on portfolio management theory and the long-term research of
Benjamin Graham and David Dodd (Value Investing).Titles with a poor DEFEX score are excluded.
▪ In the course of the ongoing selection and optimization process, those stocks are selected which
show the least fluctuation in portfolio optimization.
▪ Due to the long-term investment approach, shifts within the portfolio are kept low, thus reducing
costs (transaction costs).
30Investment Process and Implementation
▪ Investment universe: world ▪ Selection of leading global companies from a universe
stocks (around 1600 titles) of around 1600 stocks
▪ Selection of companies using the following selection
DEFEX DPS criteria:
EPS Last 10 Yrs.
Last 10 Yrs. − Sustainable generation of profits over the last 10 years
(EPS)
Interest − Continuous dividend payments over the last 10 years
cover (DPS)
current
− Attractive ratio between operating profit and interest
1. Selection step expenses (interest coverage ratio)
− Attractive DEFEX Score
Valuation of selected shares based
on intrinsic value ▪ Evaluation of the relative attractiveness of all
2. Selection step companies selected in the first step based on their
intrinsic value.
Selection and Optimisation of ▪ 30 of the most attractive companies are selected and
about 30 Equities optimized for the fund in a final step. The aim of the
(Minimum Variance Portfolio) optimization is to reduce the risk of fluctuation.
Source: Kathrein Privatbank 31Performance GEP vs. Global Equities
Value stocks (shown here in the form of the
World Value Index and the Societé General
(SG) Quality Index) have underperformed the
broader market in recent years.
The difference in performance between the
World Value Index and the World Index is at its
highest level since the fund was launched.
In the medium term we expect the two indices
to converge again and outperform Value
Shares vs. the World stocks.
Performance Difference: Kathrein Global Enterprise – Global Equities
Maximum temp. losses:
Performance Difference: Kathrein Global Enterprise – Global Equities World equities: -33.6%
World equities Value: -36.4%
Global Quallity Income: -33.6%
Kathrein Global Enterprise: -25.9%
Source: Bloomberg, Kathrein Privatbank. Daily Data from 15.3.2013 to 9.10.2020 in EUR. 32Kathrein Global Enterprise in Loss Phases
The equity portfolio has
historically been more stable
than global equities in
corrections (< -10%) and bear
markets (GEP Valuation
Price-book ratio
Kathrein Globale Enterprise World stocks
World stocks Kathrein Globale Enterprise
Price-earnings ratio The dividend yield of the Kathrein Global
World stocks
Enterprise Fund is significantly higher than that of
the world share index.
Kathrein Globale Enterprise Valuations (price-book ratio and price-earnings
ratio - P/E ratio) of the Kathrein Global Enterprise
Fund are continuously more attractive than those of
world stocks.
Source: Wilshire. Kathrein Privatbank. Data from 31.12.2013 to 22.9.2020 34Summary
▪ The market development is still liquidity driven.
▪ No interest rate increases have been priced into the market for the coming years.
▪ The valuations of value stocks (P/E, P/B, dividends) have remained stable, while the key figures of the MSCI
World are currently above pre-crisis levels.
▪ Valuation differences between value stocks and the global stock market, as in the current market situation, have
always been balanced in the past.
▪ The relative performance/valuation differences are currently at about the same level as in 2000.
▪ As a rule, investors flocked to stable growth stocks when the earnings growth of the S&P 500 was slower than a year
ago.
▪ Value tended to outperform growth when economic growth accelerated.
▪ As earnings recover from their COVID collapse, conditions for Value should be favorable. However, the recovery
should be long-term.
▪ Continued low interest rates make "bond proxies" within Value stocks appear attractive.
35Thank you very much for your attention!
Questions?
36Disclaimer
Diese Unterlage ist eine Marketingmitteilung im Sinne des Wertpapieraufsichtsgesetzes (WAG) und dient ausschließlich Ihrer Information. Diese Information unterliegt daher nicht den Vorschriften des
Wertpapieraufsichtsgesetzes, die für die Verbreitung von Finanzanalysen vorgesehen sind.
Obwohl wir der Meinung sind, dass die für diese Mitteilung herangezogenen Quellen von dritten Anbietern verlässlich sind, können wir keine Haftung für Vollständigkeit, Richtigkeit und Aktualität der hier wieder
gegebenen Informationen übernehmen.
Die Analysen und Schlussfolgerungen sind genereller Natur und berücksichtigen daher nicht die individuellen Bedürfnisse der Anleger hinsichtlich der Ertragsziele und der Risikobereitschaft. Der Inhalt dieser
Unterlage ist nicht rechtsverbindlich und stellt keine Handlungsempfehlung und kein Angebot zum Kauf oder Verkauf von Wertpapieren oder sonstigen Finanzinstrumenten dar. Eine Investitionsentscheidung
bezüglich aller Wertpapiere oder sonstiger Finanzinstrumente sollte nur auf Grundlage eines Beratungsgespräches und nicht allein auf Basis dieser Marketingmitteilung erfolgen.
Performance-Hinweis
Die Wertentwicklung der Vergangenheit lässt keine verlässlichen Rückschlüsse auf die zukünftige Entwicklung einer Veranlagung zu. Sämtliche dargestellte Performancezahlen nach OeKB-Methode entsprechen
einer Nettoperformance, d.h. Kosten wie Verwaltungs-Gebühren oder sonstige dem Fondsvermögen angelastete Kosten werden bereits berücksichtigt. Nicht berücksichtigt wird ein möglicher Ausgabeaufschlag oder
Rücknahmeabschlag oder Steuerabgaben wie Kapitalertragssteuer oder Quellensteuern. Diese wirken sich bei Berücksichtigung in Abhängigkeit der konkreten Höhe entsprechend mindernd auf die Wertentwicklung
aus. Wir weisen darauf hin, dass für Anleger mit anderer Heimatwährung als der Fondswährung, die Rendite infolge von Währungsschwankungen steigen oder fallen kann. Es ist zu beachten, dass Investments in
Fonds neben Chancen auch Risiken bergen, so können Wert und Ertrag steigen, aber auch fallen.
Kathrein Privatbank Aktiengesellschaft erbringt keine Steuerberatung und übernimmt keine Haftung für eventuelle steuerliche Nachteile im Zusammenhang mit Wertpapiertransaktionen und Wertpapierveranlagungen
ihrer Kunden. Die Besteuerung der Kapitaleinkünfte hängt von den persönlichen Verhältnissen des Anlegers ab und kann künftigen Änderungen unterworfen sein..
Simulierte künftige Erträge sind somit kein verlässlicher Indikator für die tatsächliche künftige Wertentwicklung einer Veranlagung. Allfällige in dieser Unterlage enthaltene Simulationsrechnungen beruhen nicht auf
tatsächlichen Transaktionen, sondern rein auf historischen Daten.
Prospekthinweis
Die jeweils gültigen und veröffentlichten Prospekte bzw. Informationen gegenüber Anlegern nach § 21 AIFMG sowie die Kundeninformationsdokumente (Wesentliche Anlegerinformationen - KID) der von Kathrein
Privatbank Aktiengesellschaft verwalteten Fonds stehen Ihnen in deutscher Sprache kostenlos auf der Website www.rcm.at und/oder www.kathrein.at sowie bei der Kathrein Privatbank Aktiengesellschaft zur
Verfügung.
Offenlegungspflichten nach § 25 Mediengesetz
Die Angaben nach § 25 Mediengesetz (MedienG) finden sich im Impressum auf unserer Homepage: http://www.kathrein.at
Jede Form der Veröffentlichung oder Weitergabe ist untersagt.
© Kathrein Privatbank Aktiengesellschaft, Wipplingerstraße 25, 1010 Wien, Handelsgericht Wien, FN 144838y
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