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ValuFolio – October 2018 A monthly report of the return performance and contribution of all

ValuAnalysis investment strategies:

o Global: ValuFocus, eRoC global 90, eRoC global Sector 30

o Regional: eRoC USA 60 and eRoC Europe 50

o Risk-adjusted (“safety net”): eRoC Global S 60, eRoC USA S 40

and eRoC Europe S 30

The table on the right shows the most and least contributing stocks in

each fundamental strategy.

Best two CTR % Worst two CTR %

Walmart Inc. 0.14% Atos SE -0.80%

Novartis AG 0.06% ABB Ltd. -0.77%

Walgreens Boots Alliance 0.33% China Mengniu Dairy Co. Ltd. -0.45%

Philip Morris International 0.27% ProSiebenSat.1 -0.36%

Walgreens Boots Alliance 0.11% International Business Machines -0.27%

Omnicom Group Inc. 0.10% Celgene Corporation -0.22%

Walgreens Boots Alliance 0.16% Western Digital Corporation -0.43%

Omnicom Group Inc. 0.15% International Business Machines -0.40%

Novartis AG 0.08% Valeo SA -0.44%

Nestlé S.A. 0.07% WPP plc -0.38%

eROC USA 60

eROC Europe 50

Monthly Contribution to Total Return, Best and Worst, Selected Strategies

ValuFocus

eROC Global Sector 30

eROC Global 90

Issue 10 – 5th November 2018

Pascal Costantini (+44) 203 058 2931 | Joakim Darras (+44) 203 058 2933 | Janet Lear (+44) 203 058 2934 | Diarmid Ogilvy (+44) 203 058 2932

ValuFolio | 2

Contents

VALUANALYSIS EQUITY STRATEGIES ........................................................................................................................................................... 3

STRATEGIES FACTSHEETS.............................................................................................................................................................................. 4

GLOBAL STRATEGIES..................................................................................................................................................................................... 4

VALUFOCUS ..................................................................................................................................................................................................................... 5

EROC GLOBAL 90 ........................................................................................................................................................................................................... 6

EROC GLOBAL SECTOR 30 ............................................................................................................................................................................................... 7

REGIONAL STRATEGIES ................................................................................................................................................................................. 8

EROC USA 60 ................................................................................................................................................................................................................ 9

EROC EUROPE 50 .......................................................................................................................................................................................................... 10

SAFETY NET STRATEGIES .............................................................................................................................................................................. 11

EROC GLOBAL S 60 ....................................................................................................................................................................................................... 12

EROC USA S 40............................................................................................................................................................................................................ 13

EROC EUROPE S 30 ....................................................................................................................................................................................................... 14

GLOSSARY.................................................................................................................................................................................................... 16

DISCLAIMER ................................................................................................................................................................................................. 18

ValuFolio | 3

ValuAnalysis Equity Strategies

ValuAnalysis uses its proprietary “eROC” models (economic Return on Capital) to value and select stocks in order to build strategies and

portfolios for institutional investors. All strategies below are based on our approach to Franchise and Intrinsic value, a detailed exposé of

which can be found on our website, The Theory and Practice of Franchise and Intrinsic Value Analysis.

Strategy

Name

Live

Since Region Description Page ValuFocus 12-Jun-17 Global The reference portfolio is constructed from 3 lists of stocks: Core Franchises (franchises with little dispute from competitors or

from investors and an economic rent of 10%-20%), Emerging Franchises (franchises stemming from an unusual business model,

a genuine new sector or an old industry reinventing itself) and Contentious Franchises (franchises under threat with a higher risk

/ reward proposition). These three sub-portfolios are given a weighting depending on ValuAnalysis' view of their relative potential

and these views are outlined in the ValuFocus research reports.

5

eROC Global 90 08-Apr-16 Global The reference portfolio is composed of 90 liquid & large cap global stocks selected and weighted equally on a quarterly basis.

Stocks exhibiting a sustainable “economic franchise” with a strong "shareholder pay-out ratio" at a "reasonable price" are selected.

6

eROC Global

Sector 30

30-Dec-16 Global The reference portfolio is composed of 30 liquid & large cap global stocks selected and weighted equally on a quarterly basis. The

selection is the result of a two-pronged analysis: an initial fundamental valuation appraisal ranks all industry sectors by their

median valuation. The 3 industry sectors with the lowest valuations are kept, represented by the 10 most "reasonably priced"

stocks within these sectors. In case less than 10 stocks are below the sector median, additional stocks with the lowest valuation

outside these sectors are also included.

7

eROC USA 60 22-Sep-17 USA The reference portfolio is composed of 60 liquid & large cap US stocks selected and weighted equally on a quarterly basis. Stocks

exhibiting a sustainable “economic franchise” at a "reasonable price" are selected.

9

eROC Europe

50

22-Sep-17 Europe The reference portfolio is composed of 50 liquid & large cap European stocks selected and weighted equally on a quarterly basis.

Stocks exhibiting a sustainable “economic franchise” at a "reasonable price" are selected.

10

eROC Global S

60

08-Apr-16 Global The reference portfolio is composed of 60 liquid & large cap global stocks selected and weighted equally on a monthly basis. The

selection is the result of a two-pronged analysis: an initial fundamental valuation appraisal followed by a financial risk analysis.

First, 90 stocks exhibiting a sustainable “economic franchise” with a strong "shareholder pay-out ratio" at a "reasonable price" are

pre-selected. Thereafter, a “safety net approach” (hence the letter S in the name) excludes the 30 more volatile and least stable

stocks according to advanced risk metrics.

12

eROC USA S 40 22-Sep-17 USA The reference portfolio is composed of 40 liquid & large cap US stocks selected and weighted equally on a monthly basis. The

selection is the result of a two-pronged analysis: an initial fundamental valuation appraisal followed by a financial risk analysis.

First, 60 stocks exhibiting a sustainable “economic franchise” at a "reasonable price" are pre-selected. Thereafter, a “safety net

approach” (hence the letter S in the name) excludes the 20 more volatile and least stable stocks according to advanced risk

metrics.

13

eROC Europe S

30

22-Sep-17 Europe The reference portfolio is composed of 30 liquid & large cap European stocks selected and weighted equally on a monthly basis.

The selection is the result of a two-pronged analysis: an initial fundamental valuation appraisal followed by a financial risk analysis.

First, 50 stocks exhibiting a sustainable “economic franchise” at a "reasonable price" are pre-selected. Thereafter, a “safety net

approach” (hence the letter S in the name) excludes the 20 more volatile and least stable stocks according to advanced risk

metrics.

14

ValuFolio | 4

Global Strategies

ValuFolio | 5

Live since : 12-Jun-17 Strategy inception : 12-Jun-17

Benchmark : MSCI World LC (USD)

Selection method : Active

Stock weighting : Discretionary

Rebalancing frequency : Discretionary

Style : Long Only

Available as : Calculated by VA

Region : Global

1 m 3 m 6 m YTD Live 1 Y 3 Y 5 Y 10 Y

Return VA FOCUS -6.8% -5.4% -2.3% -2.8% 6.1% 2.8% n/a n/a n/a

MSCI World LC -7.0% -5.0% -1.2% -1.4% 6.4% 2.0% n/a n/a n/a

Excess Return 0.1% -0.4% -1.1% -1.3% -0.3% 0.8% n/a n/a n/a

Risk Larg. Drawdown VA FOCUS -9.1% -9.7% -9.7% -11.1% -11.1% -11.1% n/a n/a n/a

MSCI World LC -9.3% -9.6% -9.6% -10.1% -10.1% -10.1% n/a n/a n/a

Volatility VA FOCUS 17.2% 12.2% 10.6% 12.2% 10.6% 11.5% n/a n/a n/a

MSCI World LC 16.4% 11.7% 10.1% 11.8% 9.8% 11.0% n/a n/a n/a

Ratio Ret / Vol VA FOCUS -40% -44% -22% -23% 58% 24% n/a n/a n/a

MSCI World LC -42% -43% -12% -12% 65% 18% n/a n/a n/a

The portfolio is constructed from 3 lists of stocks: Core Franchises

(franchises with little dispute from competitors or from investors and an

economic rent of 10%-20%), Emerging Franchises (franchises stemming

from an unusual business model, a genuine new sector or an old

industry reinventing itself) and Contentious

Franchises (franchises under threat with a higher risk / reward

proposition). These three sub-portfolios are given a weight depending

on ValuAnalysis' view of their relative potential. These views are outlined

in the ValuFocus research reports.

Source: ValuAnalysis. Assumes reinvestment of dividends net of withholding taxes. Gross of fees or transaction costs. Proforma back testing up to the LIVE date. Live thereafter.

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From: 12-Jun-17 to: 31-Oct-18 (daily)

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ValuFocus

Strategy Description Cumulative Performance (daily) Relative Performance (daily)

Historical Top & Bottom 5 Contributors in the monthSector Split

Annualised<1 y0% 10% 20% 30% 40%

Cons. Disc.

Cons. Staples

Energy

Financ/Real Est

Healthcare

Industrials

IT

Materials

Telecom.

Utilities

October 2018

Top 5 Contributors CTR (%) Status

Walmart Inc. 0.14 hold

Novartis AG 0.06 hold

Nestlé S.A. 0.03 hold

Grifols, S.A. 0.03 hold

Pandora A/S 0.00 hold

Bottom 5 Contributors CTR (%) Status

Atos SE -0.80 hold

ABB Ltd. -0.77 hold

Alphabet Inc. -0.48 hold

Novo Nordisk A/S -0.42 hold

Kimberly-Clark Corporation -0.41 hold

Strategy live date Strategy live date

ValuFolio | 6

Live since : 08-Apr-16 Strategy inception : 10-Jan-06


Selection method : Systematic (Franchise, Value, Dividends)

Stock weighting : Equal

Rebalancing frequency : Quarterly

Style : Long Only

Available as : Independently calculated by S&P

Region : Global

1 m 3 m 6 m YTD Live 1 Y 3 Y 5 Y 10 Y

Return EGL 90 -6.6% -5.3% -1.0% 0.0% 11.7% 3.1% 9.6% 9.8% 15.4%

MSCI World LC -7.0% -5.0% -1.2% -1.4% 11.2% 2.0% 8.2% 7.0% 9.8%

Excess Return 0.4% -0.2% 0.2% 1.5% 0.4% 1.1% 1.4% 2.8% 5.6%

Risk Larg. Drawdown EGL 90 -8.9% -9.6% -9.6% -9.8% -9.8% -9.8% -13.7% -17.5% -23.5%

MSCI World LC -9.3% -9.6% -9.6% -10.1% -10.1% -10.1% -13.9% -17.6% -31.5%

Volatility EGL 90 15.6% 11.4% 9.9% 11.3% 10.2% 10.6% 11.1% 11.4% 15.4%

MSCI World LC 16.4% 11.7% 10.1% 11.8% 9.7% 11.0% 10.6% 10.8% 15.7%

Ratio Ret / Vol EGL 90 -42% -46% -10% 0% 114% 29% 86% 86% 100%

MSCI World LC -42% -43% -12% -12% 116% 18% 77% 64% 62%

The reference portfolio is composed of 90 liquid & large cap global

stocks selected and weighted equally on a quarterly basis. Stocks

exhibiting a sustainable “economic franchise” with a strong

"shareholder payout ratio" at a "reasonable price" are selected.


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From: 29-Oct-10 to: 31-Oct-18 (daily)

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eROC Global 90



Annualised<1 y0% 10% 20% 30%

Cons. Disc.

Cons. Staples

Energy

Financ/Real Est

Healthcare

Industrials

IT

Materials

Telecom.

Utilities

October 2018


Walgreens Boots Alliance, Inc. 0.11 hold

Omnicom Group Inc. 0.10 hold

Philip Morris International, Inc. 0.09 hold

Xilinx Inc. 0.08 hold



International Business Machines Corporation-0.27 hold

Celgene Corporation -0.22 hold

SKF AB -0.21 hold

Parker-Hannifin Corporation -0.21 hold

Johnson Matthey Plc -0.21 hold


ValuFolio | 7

Live since : 30-Dec-16 Strategy inception : 10-Jan-06


Selection method : Systematic (Value)


Rebalancing frequency : Quarterly

Style : Long Only


Region : Global

1 m 3 m 6 m YTD Live 1 Y 3 Y 5 Y 10 Y

Return ESEC 30 -2.6% -2.8% 1.5% 2.1% 16.5% 6.9% 14.5% 13.6% 18.3%

MSCI World LC -7.0% -5.0% -1.2% -1.4% 10.7% 2.0% 8.2% 7.0% 9.8%

Excess Return 4.3% 2.2% 2.7% 3.5% 5.8% 4.9% 6.3% 6.7% 8.5%

Risk Larg. Drawdown ESEC 30 -4.9% -6.9% -6.9% -9.6% -9.6% -9.6% -19.1% -24.4% -25.3%

MSCI World LC -9.3% -9.6% -9.6% -10.1% -10.1% -10.1% -13.9% -17.6% -31.5%

Volatility ESEC 30 11.3% 10.2% 9.4% 10.6% 9.2% 10.3% 12.8% 13.5% 17.5%

MSCI World LC 16.4% 11.7% 10.1% 11.8% 9.1% 11.0% 10.6% 10.8% 15.7%

Ratio Ret / Vol ESEC 30 -23% -27% 16% 19% 180% 67% 113% 101% 104%

MSCI World LC -42% -43% -12% -12% 118% 18% 77% 64% 62%


stocks selected and weighted equally on a quarterly basis. The selection

is the result of a two-pronged analysis: an initial fundamental valuation

appraisal ranks all industry sectors by their median valuation.

The 3 industry sectors with the lowest valuations are kept, represented

by the 10 most "reasonably priced" stocks within these sectors. In case

less than 10 stocks are below the sector median, additional stocks with

the lowest valuation outside these sectors are also included.


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ESEC 30 MSCI WORLD LC


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eROC Global Sector 30



Annualised<1 y0% 10% 20% 30% 40%

Cons. Disc.

Cons. Staples

Energy

Financ/Real Est

Healthcare

Industrials

IT

Materials

Telecom.

Utilities

October 2018





Molson Coors Brewing Company 0.12 hold

H&R Block, Inc. 0.10 hold


China Mengniu Dairy Co. Ltd. -0.45 hold

ProSiebenSat.1 Media SE -0.36 hold

AGL Energy Limited -0.31 hold

CVS Health Corporation -0.27 hold

Nikon Corporation -0.25 hold


ValuFolio | 8

Regional Strategies

ValuFolio | 9

Live since : 22-Sep-17 Strategy inception : 10-Jan-06

Benchmark : MSCI USA (USD)

Selection method : Systematic (Franchise, Value)


Rebalancing frequency : At least Quarterly

Style : Long Only


Region : USA

1 m 3 m 6 m YTD Live 1 Y 3 Y 5 Y 10 Y

Return EUS 60 -7.9% -5.9% -1.6% -1.5% 7.5% 6.5% 10.6% 10.5% 16.8%

MSCI USA -7.0% -3.6% 2.9% 2.5% 8.8% 6.6% 10.7% 10.5% 12.6%

Excess Return -0.9% -2.4% -4.5% -4.0% -1.3% -0.1% -0.2% 0.0% 4.2%

Risk Larg. Drawdown EUS 60 -10.4% -11.8% -11.8% -12.5% -12.5% -12.5% -15.2% -19.9% -27.7%

MSCI USA -9.8% -9.9% -9.9% -10.0% -10.0% -10.0% -13.5% -14.2% -31.5%

Volatility EUS 60 21.8% 14.8% 12.7% 15.4% 14.0% 14.5% 13.7% 13.6% 18.6%

MSCI USA 21.9% 14.4% 12.2% 15.2% 13.5% 14.1% 12.3% 12.6% 18.1%

Ratio Ret / Vol EUS 60 -36% -40% -12% -10% 54% 45% 77% 77% 90%

MSCI USA -32% -25% 24% 16% 65% 47% 87% 83% 70%

The reference portfolio is composed of 60 liquid & large cap US stocks

selected and weighted equally on a quarterly basis. Stocks exhibiting a

sustainable “economic franchise” at a "reasonable price" are selected.


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EUS 60 MSCI USA Index


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eROC USA 60



Annualised<1 y0% 10% 20% 30% 40%

Cons. Disc.

Cons. Staples

Energy

Financ/Real Est

Healthcare

Industrials

IT

Materials

Telecom.

Utilities

October 2018






The Hershey Company 0.08 hold


Western Digital Corporation -0.43 hold


DXC Technology Company -0.37 hold


AbbVie Inc. -0.29 hold


ValuFolio | 10

Live since : 22-Sep-17 Strategy inception : 10-Jan-06

Benchmark : MSCI Europe (EUR)

Selection method : Systematic (Franchise, Value)


Rebalancing frequency : At least Quarterly

Style : Long Only


Region : Europe

1 m 3 m 6 m YTD Live 1 Y 3 Y 5 Y 10 Y

Return EEU 50 -5.3% -8.1% -4.8% -5.3% -2.4% -5.9% 2.1% 8.5% 13.3%

MSCI Europe -5.4% -7.1% -4.8% -4.7% -2.4% -5.8% 1.6% 4.9% 7.7%

Excess Return 0.1% -1.0% 0.0% -0.6% 0.0% -0.1% 0.5% 3.6% 5.6%

Risk Larg. Drawdown EEU 50 -9.0% -11.1% -11.8% -11.8% -11.8% -11.8% -16.3% -17.6% -24.7%

MSCI Europe -8.8% -9.5% -10.4% -10.4% -10.4% -10.4% -21.1% -25.9% -31.8%

Volatility EEU 50 15.7% 11.8% 11.2% 12.2% 11.5% 11.8% 14.2% 15.0% 17.9%

MSCI Europe 13.9% 11.2% 11.6% 12.4% 11.4% 11.7% 14.9% 15.8% 19.2%

Ratio Ret / Vol EEU 50 -34% -69% -43% -44% -21% -50% 15% 57% 74%

MSCI Europe -39% -64% -42% -38% -21% -50% 11% 31% 40%

The reference portfolio is composed of 50 liquid & large cap European

stocks selected and weighted equally on a quarterly basis. Stocks

exhibiting a sustainable “economic franchise” at a "reasonable price" are

selected.


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EEU 50 MSCI Europe


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eROC Europe 50



Annualised<1 y0% 10% 20% 30% 40%

Cons. Disc.

Cons. Staples

Energy

Financ/Real Est

Healthcare

Industrials

IT

Materials

Telecom.

Utilities

October 2018




Sanofi 0.06 hold

Koninklijke KPN N.V. 0.05 hold

Pandora A/S 0.05 hold


Valeo SA -0.44 hold

WPP plc -0.38 hold

SKF AB -0.33 hold


ABB Ltd. -0.26 hold


ValuFolio | 11

“Safety Net” Strategies

ValuFolio | 12

Live since : 08-Apr-16 Strategy inception : 10-Jan-06


Selection method : Systematic (Franchise, Value, Dividends, Risk)


Rebalancing frequency : Monthly

Style : Long Only


Region : Global

1 m 3 m 6 m YTD Live 1 Y 3 Y 5 Y 10 Y

Return EGL S60 -5.5% -3.3% 0.8% 1.1% 9.8% 4.3% 8.5% 10.3% 14.6%

MSCI World LC -7.0% -5.0% -1.2% -1.4% 11.2% 2.0% 8.2% 7.0% 9.8%

Excess Return 1.5% 1.7% 2.0% 2.5% -1.4% 2.3% 0.3% 3.4% 4.8%

Risk Larg. Drawdown EGL S60 -7.4% -8.0% -8.0% -9.4% -9.4% -9.4% -11.1% -14.1% -22.2%

MSCI World LC -9.3% -9.6% -9.6% -10.1% -10.1% -10.1% -13.9% -17.6% -31.5%

Volatility EGL S60 13.0% 9.8% 8.7% 10.4% 9.3% 9.8% 10.0% 10.5% 13.3%

MSCI World LC 16.4% 11.7% 10.1% 11.8% 9.7% 11.0% 10.6% 10.8% 15.7%

Ratio Ret / Vol EGL S60 -42% -34% 9% 11% 106% 44% 85% 98% 110%

MSCI World LC -42% -43% -12% -12% 116% 18% 77% 64% 62%


stocks selected and weighted equally on a monthly basis. The selection is

the result of a two-pronged analysis: an initial fundamental valuation

appraisal followed by a financial risk analysis.

First, 90 stocks exhibiting a sustainable “economic franchise” with a

strong "shareholder payout ratio" at a "reasonable price" are pre-

selected. Thereafter, a “safety net approach” (hence the letter S in the

name) excludes the 30 more volatile and least stable stocks according to

advanced risk metrics


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EGL S60 MSCI WORLD LC


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eROC Global S 60



Annualised<1 y0% 10% 20% 30%

Cons. Disc.

Cons. Staples

Energy

Financ/Real Est

Healthcare

Industrials

IT

Materials

Telecom.

Utilities

October 2018





CRH plc 0.12 added





ABB Ltd. -0.26 hold

Hengan International Group Company Limited-0.25 hold

Robert Half International Inc. -0.24 hold


ValuFolio | 13

Invested since : 22-Sep-17 Strategy inception : 10-Jan-06

Benchmark : MSCI USA (USD)

Selection method : Systematic (Franchise, Value, Risk)



Style : Long Only

Available as : Tracker

Region : USA

1 m 3 m 6 m YTD Live 1 Y 3 Y 5 Y 10 Y

Return EUS S40 -6.1% -3.0% 2.4% 2.9% 8.7% 7.8% 10.7% 11.8% 16.3%

MSCI USA -7.0% -3.6% 2.9% 2.5% 8.8% 6.6% 10.7% 10.5% 12.6%

Excess Return 0.9% 0.6% -0.5% 0.4% 0.0% 1.2% 0.0% 1.3% 3.8%

Risk Larg. Drawdown EUS S40 -9.0% -9.7% -9.7% -10.3% -10.3% -10.3% -11.6% -14.0% -23.7%

MSCI USA -9.8% -9.9% -9.9% -10.0% -10.0% -10.0% -13.5% -14.2% -31.5%

Volatility EUS S40 20.8% 14.0% 11.9% 14.5% 13.1% 13.6% 12.3% 12.5% 16.0%

MSCI USA 21.9% 14.4% 12.2% 15.2% 13.5% 14.1% 12.3% 12.6% 18.1%

Ratio Ret / Vol EUS S40 -29% -21% 20% 20% 67% 57% 87% 94% 102%

MSCI USA -32% -25% 24% 16% 65% 47% 87% 83% 70%

The reference portfolio is composed of 40 liquid & large cap US stocks

selected and weighted equally on a monthly basis. The selection is the

result of a two-pronged analysis: an initial fundamental valuation


First, 60 stocks exhibiting a sustainable “economic franchise” at a

"reasonable price" are pre-selected. Thereafter, a “safety net approach”

(hence the letter S in the name) excludes the 20 more volatile and least

stable stocks according to advanced risk metrics


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eROC USA S 40



Annualised<1 y0% 10% 20% 30%

Cons. Disc.

Cons. Staples

Energy

Financ/Real Est

Healthcare

Industrials

IT

Materials

Telecom.

Utilities

October 2018






The Hershey Company 0.12 hold



DXC Technology Company -0.58 hold


AbbVie Inc. -0.45 hold

Leggett & Platt, Incorporated -0.44 hold


ValuFolio | 14

Invested since : 22-Sep-17 Strategy inception : 10-Jan-06

Benchmark : MSCI Europe (EUR)

Selection method : Systematic (Franchise, Value, Risk)



Style : Long Only

Available as : Tracker

Region : Europe

1 m 3 m 6 m YTD Live 1 Y 3 Y 5 Y 10 Y

Return EEU S30 -4.0% -7.6% -2.5% -6.5% -4.3% -7.8% 0.8% 8.1% 12.4%

MSCI Europe -5.4% -7.1% -4.8% -4.7% -2.4% -5.8% 1.6% 4.9% 7.7%

Excess Return 1.4% -0.5% 2.3% -1.8% -1.8% -1.9% -0.7% 3.1% 4.7%

Risk Larg. Drawdown EEU S30 -6.7% -9.5% -9.5% -11.3% -11.3% -11.3% -14.0% -14.8% -19.7%

MSCI Europe -8.8% -9.5% -10.4% -10.4% -10.4% -10.4% -21.1% -25.9% -31.8%

Volatility EEU S30 15.2% 11.5% 11.1% 12.4% 11.6% 11.9% 13.9% 14.6% 15.5%

MSCI Europe 13.9% 11.2% 11.6% 12.4% 11.4% 11.7% 14.9% 15.8% 19.2%

Ratio Ret / Vol EEU S30 -26% -66% -23% -52% -37% -65% 6% 55% 80%

MSCI Europe -39% -64% -42% -38% -21% -50% 11% 31% 40%

The reference portfolio is composed of 30 liquid & large cap European

stocks selected and weighted equally on a monthly basis. The selection is

the result of a two-pronged analysis: an initial fundamental valuation


First, 50 stocks exhibiting a sustainable “economic franchise” at a

"reasonable price" are pre-selected. Thereafter, a “safety net approach”

(hence the letter S in the name) excludes the 20 more volatile and least

stable stocks according to advanced risk metrics


500

1000

1500

2000

2500

3000

3500

10/2010 03/2012 07/2013 12/2014 04/2016 09/2017Pri

ce

-R

eb

as

ed

at

10

00

Date

EEU S30 MSCI Europe


500

750

1000

1250

1500

1750

2000

10/2010 03/2012 07/2013 12/2014 04/2016 09/2017

Re

lati

ve

Pe

rfo

rma

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Date EEU S30 Vs MSCI Europe


eROC Europe S 30



Annualised<1 y0% 10% 20% 30%

Cons. Disc.

Cons. Staples

Energy

Financ/Real Est

Healthcare

Industrials

IT

Materials

Telecom.

Utilities

October 2018




Sanofi 0.10 hold

Koninklijke KPN N.V. 0.09 hold

Roche Holding AG 0.08 hold


Burberry Group plc -0.49 sold

BASF SE -0.38 sold

Compagnie Generale DES Etablissements Michelin SCA-0.38 hold

Experian plc -0.28 hold

Smith & Nephew plc -0.27 hold


ValuFolio | 15

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GLOSSARY

Cash Yield The inverse of the normalised net free cash flow multiple

Competitive Advantage Period (CAP) The period during which a firm can generate a return (see Rent) above the cost of capital.

Economic Profits Cash profits or Free Cash Flow minus the notional cost of capital.

Excess Return The level of return above the cost of capital.

Fade The rate of normalisation of the competitive position of the firm, defined as its level of Rent and

growth rate. By construction, an excess return cannot be assumed to be perpetual, and the market

always assumes an eventual normalisation towards the cost of capital.

Franchise Value One of the three sources of value, defined as the net present value of a firm’s sustainable level of

Economic Profits over its Competitive Advantage Period.

Gross economic Capital (GeC) The sum of all operating capital used by the firm pre-depreciation, including all tangible assets,

capitalised intangible assets and operating leases, Other Long Term Assets (OLTA) and concession

assets.

Growth Value One of the three sources of value, defined as the residual of: Market Value minus Replacement

Value and Franchise Value.

Intrinsic Value The sustainable value of a firm, defined as Replacement Value plus Franchise Value.

Net economic Capital (NeC) The depreciated value of GeC, according to the principles of economic depreciation.

Net Free Cash Flow Gross cash flow minus all capital spending.

Operating Free Cash Flow Gross cash flow minus maintenance capital spending.

Rent or Rent Yield The ratio of FCF over Net economic Capital. We refer to it as “asset yield” or “cash return” as well.

Replacement Value One of the three sources of value, equal to Net economic Capital.

Residual Income Model A valuation framework defining the price of an asset as the net (depreciated) value of this

asset plus the net present value of its sustainable level of economic profits.

Sustainable Growth The (usually debt-free funded) sustainable growth rate of assets.

Total Expected Return (TER) Cash yield and sustainable growth

Worst of TER Same as above calculated with the worst of the assumptions between the VA-input

normalised FCF level and the market-implied level.

ValuFolio | 17

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ValuFolio | 18

DISCLAIMER

This document is provided by ValuAnalysis Limited, which is authorised and regulated by the Financial Conduct Authority (firm reference

number 710908). This document is only permitted for individuals or firms who would fall within the definition of a professional client as

defined by the Financial Conduct Authority’s rules.

This document does not provide personal recommendation based on your individual circumstances. By making this information available

to you, ValuAnalysis is not advising you or making any recommendation. Investments carry risk, including the risk that you will not recover

the sum that you invested.

The views expressed in this document are as of the published date and based on information available at the time. ValuAnalysis does

not assume any duty to update any of the information contained in this document.

The information herein is believed to be reliable and has been obtained from sources believed to be reliable, but we make no

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nature, scale and complexity of ValuAnalysis’ business.

As at the time of writing, ValuAnalysis does not perform services for any issuer mentioned in this report. Notwithstanding, ValuAnalysis

may, to the extent permitted by law, perform services for, solicit business from, or otherwise be interested in the investments, directly

or indirectly, of any issuer mentioned in this report.

ValuAnalysis prohibits its analysts, professionals reporting to analysts and members of their households from making personal

transactions in any issuer in the analyst's area of coverage for a period of 10 days before and after the publication of research pertaining

ValuFolio | 19

to the issuer. ValuAnalysis prohibits its analysts, persons reporting to analysts or members of their households from serving as an officer,

director, advisory board member or employee of any company in the analyst's area of coverage.

ValuAnalysis has no agreements with issuers with respect to dissemination of recommendations. Analysts do not, nor will they, receive

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Analysts are paid in part based on the overall profitability of ValuAnalysis.

In line with the European Union’s Market Abuse Regulation, ValuAnalysis provides quarterly statistics on the overall ratio of "Buy”, “Hold”

and “Sell” in ValuAnalysis recommendations in financial instruments and the proportion of issuers corresponding to each of those

categories to which such person has supplied material services of investment firms over the previous 12 months. These are as follows:

“Buy”, “Hold” and “Sell” recommendations Investment services provided to these issuers in previous 12 months

Recommendation Number % of total Number % of total

Buy 29 72 0 0

Hold 0 0 0 0

Sell 11 28 0 0

The above table covers the period 12th June 2017 to 15th October 2018. This disclosure is reviewed and updated on a quarterly basis. Last

updated 7th September 2018.

VALUFOLIO

For more information:

Pascal Costantini

Founding Partner

The Clubhouse, 8 St. James's Square

London SW1Y 4JU

(+44) 203 058 2931

[email protected]

Joakim Darras

Founding Partner


London SW1Y 4JU

(+44) 20 3058 2933

[email protected]

Janet Lear

Partner


London SW1Y 4JU

(+44) 203 058 2934

[email protected]

Diarmid Ogilvy

Founding Partner


London SW1Y 4JU

(+44) 203 058 2932

[email protected]

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