Sprott Inc. · TSX:SII
Sprott — Sprott Asset Management — Investor Presentation (November 2006)
25 slides from Sprott's investor presentation, November 2006
Slide 1: Sprott Asset Management Inc.
Sprott Asset Management Inc. Sprott Offshore Fund, Ltd. Sprott Capital, L.P. November 2006 November 06 Slide 1
Slide 2: The Firm's History
THE FIRM’S HISTORY In 1981, Eric Sprott, CA founded Sprott Securities Ltd. – an institutionally based broker/dealer. In 1982, Eric Sprott began managing money by way of discretionary ‘long-only’ managed accounts. In 1997, the ‘long-only’ Sprott Canadian Equity Fund was launched. In the year
Slide 3: Sprott Asset Management Inc. Overview
SPROTT ASSET MANAGEMENT INC. Overview Based in Toronto, Canada USD $3.5 Billion in assets under management (as of October 31/06) 39 Employees – 17 Research & Trading professionals Investment Team includes: • Eric Sprott • Sasha Solunac • Ashley Kennedy • John Embry • Kevin Bamborough • Andrew
Slide 4: Investment Products
INVESTMENTS PRODUCTS as of October 31, 2006 3 Hedge Fund Strategies 4 Long-Only Strategies** Sprott Hedge Fund L.P.* Sprott Managed Accounts**** Launched Nov 7, 2000 Began Managing in 1982 US$1324M Sprott Hedge Fund L.P. II Sprott Canadian Equity Fund Launched Aug 31, 2002 Launched Sept, 1997 Sprott
Slide 5: Investment Products and Performance
INVESTMENT PRODUCTS AND PERFORMANCE Annualized and net of fees as of October 31/06 1 Year 3 Year 5 Year Since Inception For International Investors (Long/Short) Sprott Offshore Fund, Ltd.(2002) 27.56% 23.26% 27.59% Sprott Capital LP (2002) 27.36% 22.95% 27.11% Sprott Strategic Offshore Gold Fund, Lt
Slide 6: The Strategy
THE STRATEGY … Sprott Offshore Fund, Ltd. Sprott Capital Fund, L.P. Due to the Master Feeders structure* the Sprott Offshore Fund returns will be quoted throughout to simplify the presentation November 06 Slide 6
Slide 7: Master Fund Structure
MASTER FUND STRUCTURE SAMGENPAR, Ltd. Sprott Asset (Bermuda) Management, Inc. (Ontario Corp.) U.S. Taxable Investment General Non-U.S. U.S. and Investors Manager Investors Canadian Partner Tax-Exempt Investors Sprott Capital, L.P. Sprott Offshore Fund, Ltd. (Delaware LP) (Cayman Corp.) (i.e. U.S. Fe
Slide 8: Biography
BIOGRAPHY Eric Sprott, C.A. Chief Executive Officer Eric Sprott has accumulated 35 years of experience in the investment industry. After earning his designation as a chartered accountant, Eric entered the investment industry as a research analyst at Merrill Lynch. In 1981, he founded Sprott Securiti
Slide 9: Sprott Offshore Fund, Ltd.
SPROTT OFFSHORE FUND, LTD. Monthly Performance (%) Net of Fees Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Year 2006 11.44% -2.42% 10.16% 8.84% -3.99% -3.70% 3.18% 3.92% -9.10% 3.28% 21.34% 2005 -1.10% 6.68% -1.73% -3.39% -3.50% 1.64% 2.49% 3.69% 9.33% -4.79% -1.50% 6.73% 14.26% 2004 0.08%
Slide 10: Investment Style
INVESTMENT STYLE Overall Long/Short North American Equity Top-down / bottom-up approach with macro view emphasized Long Typically 10 –15 “core” long holdings with a total of 150 – 200 long positions Maximum Gross Long exposure = 100% Value Driven (Sound Fundamental Analysis - earnings momentum key d
Slide 11: Gross Long and Short Exposure
GROSS LONG AND SHORT EXPOSURE 120% 100% 80% 60% 40% 20% Gross Long Gross Short Gross Long Equities (excluding Bullion) 0% 1 /02 2/02 3/02 4/02 1/03 2/03 3/03 4/03 1/04 2/04 3/04 4/04 1/05 2/05 3/05 4/05 1/06 2/06 3/06 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q November 06 Slide 11
Slide 12: Net Exposure
NET EXPOSURE 40% 30% 20% 10% 0% -10% -20% -30% Net Exposure Net Equity Exposure (ex. Bullion) -40% 1 /0 2 2 /0 2 3 /0 2 4 /0 2 1 /0 3 2 /0 3 3 /0 3 4 /0 3 1 /0 4 2 /0 4 3 /0 4 4 /0 4 1 /0 5 2 /0 5 3 /0 5 4 /0 5 1 /0 6 2 /0 6 3 /0 6 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q November 06 Slide 12
Slide 13: Country Exposure (Long Portfolio)
COUNTRY EXPOSURE as a % of long portfolio CANADA US INTERNATIONAL 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1 /0 2 2/0 2 3 /02 4 /0 2 1 /0 3 2 /0 3 3 /0 3 4 /0 3 1/0 4 2 /04 3 /0 4 4 /0 4 1/0 5 2 /05 3 /0 5 4 /05 1 /0 6 2 /0 6 3 /0 6 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q November 06 Slide 13
Slide 14: Country Exposure (Short Portfolio)
COUNTRY EXPOSURE as a % of short portfolio CANADA US INTERNATIONAL 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1 /02 2/02 3 /0 2 4/02 1/03 2 /0 3 3/03 4/03 1 /0 4 2/04 3/04 4 /0 4 1/05 2/05 3/0 5 4/05 1/06 2 /0 6 3 /06 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q November 06 Slide 14
Slide 15: Investment Process – Top Down / Bottom Up Approach
INVESTMENT PROCESS – Top Down / Bottom Up Approach Macro Economic Market Liquidity Analysis Analysis Analysis Asset Allocation Determine Favorable Market Sectors Stock Selection (Veto Power) Actively Monitor Company Valuations Buy / Sell November 06 Slide 15
Slide 16: Top Down – History of Being a Contrarian
TOP DOWN – History of Being a Contrarian Launch of Sprott Hedge Fund LP Our thesis: we are entering a secular bear market. Excess of the ’90s coming to an end. November 06 Slide 16
Slide 17: Top Down – History of Being a Contrarian
TOP DOWN – History of Being a Contrarian GOLD – London PM Fix 2000 – 2006 Launch of Sprott Gold & Precious Minerals Fund Source: www.kitco.com As of April 7, 2006 S&P TSX Capped Energy Launch of Sprott Energy Fund (TTEN-I) Source: Globeinvestor.com November 06 Slide 17
Slide 18: Bottom Up Analysis – Investment Process (Long)
BOTTOM UP ANALYSIS – Investment Process “Long” Portfolio - Capitalizing on Market Inefficiencies To successfully capitalize on what we believe to be market inefficiencies, SAM employs the following investment approach. 1. Identification of Superior Companies - As defined by “Characteristics of Super
Slide 19: Characteristics of Superior Companies
CHARACTERISTICS OF SUPERIOR COMPANIES: SAM purchases shares in companies that possess the majority of the following characteristics. Low price-earnings and cash flow multiples. Undervalued securities in favorable macro economic sectors. Superior cash flow and earnings growth. Conservative Fi
Slide 20: Bottom Up Analysis – Short Portfolio
BOTTOM UP ANALYSIS Investment Process “Short” Portfolio - Identifying overvalued situations “Market” Shorts – Sector may have difficulties based on “Macro view” of the Financial Markets. - Identify the most ‘overvalued’ stocks in the sector based on fundamental analysis. “Analytic” Shorts – Individu
Slide 21: Current Major Portfolio Themes
CURRENT MAJOR PORTFOLIO THEMES Longs Shorts ¾ Energy ¾ Financials ¾ Gold ¾ Retailers ¾ Special Situations ¾ Consumer Products ¾ Housing For a detailed rationale on our “macro view” visit www.sprott.com November 06 Slide 21
Slide 22: Portfolio Parameters / Risk Management
PORTFOLIO PARAMETERS / RISK MANAGEMENT Maximum leverage employed is 2x the capital base: - for every $1 of invested capital, we limit the portfolio to: $1 dollar long stocks (no margin is used on the long side under normal market conditions) $1 dollar short stocks (acts as a risk parameter for
Slide 23: The Offering
THE OFFERING The Fund: Sprott Offshore Fund, Ltd. / Sprott Capital L.P. Minimum: US $500,000 / US $500,000 Management Fee: 1% annually / 1% annually Incentive Fee: 20% of net profits / 20% of net profits Minimum Term: 5% Penalty if redeemed within 1 year / 5% Penalty if redeemed within 1 year Redemp
Slide 24: Contact Information
CONTACT INFORMATION Sprott Asset Management Inc. Royal Bank Plaza, South Tower Suite 2700 Toronto, ON M5J 2J1 Telephone: 866-299-9906 Fax: 416-362-4928 Email: [email protected] Web: www.sprott.com November 06 Slide 24
Slide 25: Disclaimer
DISCLAIMER SAM is the investment manager to the Sprott Canadian Equity Fund, Sprott Gold and Precious Minerals Fund, Sprott Energy Fund, Sprott Growth Fund, Sprott Hedge Fund L.P., Sprott Hedge Fund LP II, Sprott Bull/Bear RSP Fund, Sprott Opportunities Hedge Fund L.P, Sprott Opportunities RSP Fund,
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