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