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Threshold Capital Corp.Threshold Capital Corp.
January 23, 2009January 23, 2009
1Q 20081Q 2008
March 17 – Bear Stearns CollapseMarch 17 – Bear Stearns Collapse
September 2008September 2008
September 7 – US Govt Seizes Fannie September 7 – US Govt Seizes Fannie Mae and Freddie MacMae and Freddie Mac
September 15 – Lehman Brothers Files for September 15 – Lehman Brothers Files for BankruptcyBankruptcy
September 15 – Merrill Lynch Bought by September 15 – Merrill Lynch Bought by Bank of AmericaBank of America
September 16-19 – Reserve Primary Fund September 16-19 – Reserve Primary Fund ($62 B MM Fund) “Breaks the Buck”($62 B MM Fund) “Breaks the Buck”
September 2008 (cont.)September 2008 (cont.)
September 16 – AIG Rescue by US GovtSeptember 16 – AIG Rescue by US Govt
September 21 – Goldman Sachs & September 21 – Goldman Sachs & Morgan Stanley Granted Bank Holding Morgan Stanley Granted Bank Holding Company StatusCompany Status
September 26 – Washington Mutual Inc. September 26 – Washington Mutual Inc. Files for BankruptcyFiles for Bankruptcy
October 2008October 2008
October 2 – Congress Passes TARPOctober 2 – Congress Passes TARP
October 3 – Wells Fargo and Wachovia October 3 – Wells Fargo and Wachovia Agree to MergeAgree to Merge
October 9 – Iceland’s Financial System October 9 – Iceland’s Financial System CollapsesCollapses
November/December 2008November/December 2008
November 21November 21stst – Dow hits low of 7449 – Dow hits low of 7449
November 24 – Citigroup on the Brink, US November 24 – Citigroup on the Brink, US Treasury Steps InTreasury Steps In
December 8 – Madoff Fraud and ArrestDecember 8 – Madoff Fraud and Arrest
December 19 – GM/Chrysler Auto Industry December 19 – GM/Chrysler Auto Industry Bailout (loans)Bailout (loans)
December 31 – Year Ends with Worst December 31 – Year Ends with Worst Performance since Great DepressionPerformance since Great Depression
2008 Broad Market Performance2008 Broad Market Performance
-42
-40
-38
-36
-34
-32
-30
DJIA S&P 500 NASDAQ R2000-80
-70
-60
-50
-40
-30
-20
-10
0
Brazil Russia India China Japan UK Germany
Trillions Have Been LostTrillions Have Been Lost
All Asset Classes Have Been EffectedAll Asset Classes Have Been Effected
Hedge Funds – Sophisticated Investors saw Huge Hedge Funds – Sophisticated Investors saw Huge LossesLosses
Private Equity and Venture FundingPrivate Equity and Venture Funding
Threshold Capital StrategyThreshold Capital Strategy
Conduct intense fundamental research on Conduct intense fundamental research on individual ideasindividual ideasStrive to invest in companies that are well Strive to invest in companies that are well managed with high insider ownership, track managed with high insider ownership, track record of internal growth, dominant in their niche record of internal growth, dominant in their niche marketmarketIdeas may be inefficiently priced due to lack of Ideas may be inefficiently priced due to lack of awareness or misperceptions of the businessawareness or misperceptions of the businessGreat opportunities in distressed, turnaround, or Great opportunities in distressed, turnaround, or special situationsspecial situations
Core Portfolio PositionsCore Portfolio Positions
General ElectricGeneral Electric
Makers of Jet engines, locomotives, power Makers of Jet engines, locomotives, power turbines, consumer appliances, light bulbsturbines, consumer appliances, light bulbs
GE Capital – 40-50% of overall GE GE Capital – 40-50% of overall GE businessbusiness
Strong Infrastructure BacklogStrong Infrastructure Backlog
Buffett invests $3 BillionBuffett invests $3 Billion
CEO – Jeff Immelt – reiterates 2009 CEO – Jeff Immelt – reiterates 2009 guidanceguidance
Unilever PlcUnilever Plc
Global Diversified Products – Consumer Goods, Global Diversified Products – Consumer Goods, Home Goods, & Personal CareHome Goods, & Personal Care
2006 – 2008 Hit with Rising Commodity Prices2006 – 2008 Hit with Rising Commodity Prices
2008 – Began cost cutting Program with Non-2008 – Began cost cutting Program with Non-Core Diversification, Price IncreasesCore Diversification, Price Increases
Great Global Brands – Hellman’s, Wishbone, Great Global Brands – Hellman’s, Wishbone, Knorr, Ragu, Ben & Jerry’s, Breyers, Slim-Fast, Knorr, Ragu, Ben & Jerry’s, Breyers, Slim-Fast, Ponds, Suave, VaselinePonds, Suave, Vaseline
New CEO – Paul PolmanNew CEO – Paul Polman
Whole Foods Market IncWhole Foods Market Inc
Chain of Natural & Organic Food Chain of Natural & Organic Food SupermarketSupermarket
Currently Characterized as a Value & Currently Characterized as a Value & Turnaround SituationTurnaround Situation
2 New Investors2 New Investors– Leonard Green & Partners – 17%Leonard Green & Partners – 17%– Ron Burkle – Yucaipa Cos. – 7%Ron Burkle – Yucaipa Cos. – 7%
Lorillard IncLorillard Inc
33rdrd Largest US Tobacco Company Largest US Tobacco Company
Newport Brand - #1 menthol, Ranked #2 Newport Brand - #1 menthol, Ranked #2 overall in US with 33.7% Market Shareoverall in US with 33.7% Market Share
Committed to Paying out 70-75% of Committed to Paying out 70-75% of Earnings to Shareholders – Yield 6.10%Earnings to Shareholders – Yield 6.10%
Takeover Candidate?Takeover Candidate?
Altria GroupAltria Group
Philip Morris USA, US Smokeless Philip Morris USA, US Smokeless Tobacco, John Middleton, 28.5% stake in Tobacco, John Middleton, 28.5% stake in SAB MillerSAB Miller
January 6, 2009 – Completed Purchase of January 6, 2009 – Completed Purchase of UST for $11.7BUST for $11.7B
Current Yield of 7.6%Current Yield of 7.6%
Philip Morris InternationalPhilip Morris International
World’s Largest & Most Profitable Publicly World’s Largest & Most Profitable Publicly Traded Cigarette MakerTraded Cigarette Maker
August 2008 – Began Selling Marlboro in August 2008 – Began Selling Marlboro in ChinaChina
November 2008 – Re-affirmed EPS of November 2008 – Re-affirmed EPS of $3.32$3.32
Current Yield of 5.10%Current Yield of 5.10%
China OpportunitiesChina Opportunities
Still Compelling Situations Despite Still Compelling Situations Despite Slowing GDP GrowthSlowing GDP Growth2007 GDP of 13% - Now Ranked 32007 GDP of 13% - Now Ranked 3rdrd Worldwide after the US & JapanWorldwide after the US & Japan2008 GDP Expected in 8-9% Range Even 2008 GDP Expected in 8-9% Range Even With Contraction in Q4With Contraction in Q4Cutting Interest Rates AggressivelyCutting Interest Rates AggressivelyImplementing Massive Stimulus Package Implementing Massive Stimulus Package Worth $584 BillionWorth $584 Billion
China BAK Battery IncChina BAK Battery Inc
One of the Largest Manufacturers of One of the Largest Manufacturers of Lithium Base Battery CellsLithium Base Battery Cells
2008 – Record Revenues - $245.3 Million 2008 – Record Revenues - $245.3 Million – Up 68.2%; Return to Profitability in Q4– Up 68.2%; Return to Profitability in Q4
Improving MarginsImproving Margins
Continued Success in Transition from Continued Success in Transition from Replacement Market to OEM MarketReplacement Market to OEM Market
China Yuchai International LtdChina Yuchai International Ltd
Founded in 1951 – CYI is the Largest Founded in 1951 – CYI is the Largest Independent Diesel Engine Maker in Independent Diesel Engine Maker in ChinaChina
The “Cummins Engine” of ChinaThe “Cummins Engine” of China
2007 EPS - $2.00; 2008 EPS 1.75 Est2007 EPS - $2.00; 2008 EPS 1.75 Est
New Letter to the Board of CYI sent on New Letter to the Board of CYI sent on Dec 30 2008Dec 30 2008
Lingo Media CorpLingo Media Corp
Michael P Kraft - CEOMichael P Kraft - CEO
Current Domestic EnvironmentCurrent Domestic Environment
US EconomyUS Economy
US Federal Government’s Final US Federal Government’s Final “Guarantee”“Guarantee”
Crisis of Confidence Combined with Crisis Crisis of Confidence Combined with Crisis of Capitalof Capital
New AdministrationNew Administration
Any Good News?Any Good News?
Strategy for 2009Strategy for 2009
Continue with In-depth Fundamental Continue with In-depth Fundamental Research – Buy the “Brands” & Special Research – Buy the “Brands” & Special SituationsSituations
New Ideas – Beaten Down Technology, New Ideas – Beaten Down Technology, Gold, Oil (other commodities)Gold, Oil (other commodities)
Continue to Avoid Financials Continue to Avoid Financials
Disclaimer – This presentation is for the Disclaimer – This presentation is for the exclusive use by Threshold Capital Corp. exclusive use by Threshold Capital Corp. It expresses the opinions of Peter A It expresses the opinions of Peter A Delgado II and Threshold Capital Corp Delgado II and Threshold Capital Corp and in no way constitutes a solicitation of and in no way constitutes a solicitation of business or investment advice. It is business or investment advice. It is intended for informational purposes of the intended for informational purposes of the reader and the author.reader and the author.