(PUB) Investing 2016

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7 Morningstar FundInvestor April 2016
Data through March 31, 2016 FINRA members: For internal or institutional use only.
Sequoia Ticker
SEQUX
Yield
0.0%
Total Assets
$5,470 mil
Mstar Category
Large Growth
Benchmark 1: Russell 1000 Growth TR USD
Benchmark 2: S&P 500 TR USD
Morningstar Analyst Rating 03-24-16
´
Morningstar Pillars
Process ∞ Positive
Performance ¶ Neutral
People ∞ Positive
Parent ∞ Positive
Price ¶ Neutral
Morningstar Analyst Rating
Morningstar evaluates mutual funds based on five key pillars, which its
analysts believe lead to funds that are more likely to outperform over the
long term on a risk-adjusted basis.
Analyst Rating Spectrum
Œ „ ´ ‰ Á
Pillar Spectrum
∞ Positive § Negative ¶ Neutral
10.0
15.0
20.0
25.0
Historical Profile
Return
Risk
Rating
Below Avg
Below Avg
QQ
Below Avg
7 7 7 7 7 7 7 7 Investment Style
Equity
Growth of $10,000
Investment Values of
Fund
Investment Values of
Benchmark 1
) & & ) & & * * ) ) ) Performance Quartile
(within Category)
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 03-16 History
152.75 139.12 95.27 109.90 129.29 145.50 168.31 222.92 235.00 207.26 183.85 NAV
8.34 8.40 -27.03 15.38 19.50 13.19 15.68 34.58 7.55 -7.29 -11.30 Total Return %
-0.73 -3.41 11.41 -21.83 2.78 10.55 0.42 1.09 -5.50 -12.96 -12.04 +/- Bmark 1
-7.45 2.91 9.97 -11.08 4.43 11.08 -0.33 2.19 -6.14 -8.68 -12.64 +/- Bmark 2
0.00 0.31 0.31 0.02 0.29 0.00 0.00 0.00 0.00 0.00 0.00 Income Return %
8.34 8.10 -27.33 15.36 19.21 13.19 15.68 34.58 7.55 -7.29 -11.30 Capital Return %
97 25 3 97 7 1 42 42 78 98 99 Total Rtn % Rank Cat
0.00 0.45 0.42 0.02 0.31 0.00 0.00 0.00 0.00 0.00 0.00 Income $
15.60 27.12 6.72 0.00 1.65 0.82 0.00 3.40 4.54 10.51 0.00 Capital Gains $
1.00 1.00 1.00 1.05 1.04 1.03 1.03 1.02 1.03 1.03 . Expense Ratio %
-0.50 0.30 0.30 0.01 0.00 -0.34 -0.26 -0.37 -0.26 -0.42 . Income Ratio %
14 13 12 15 23 3 5 2 8 10 . Turnover Rate %
3,600 3,513 2,486 2,868 3,511 4,895 5,828 8,037 8,070 6,744 5,470 Net Assets $mil
Performance 03-31-16
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total
2012 10.76 -4.95 6.48 3.20 15.68
2013 10.77 3.50 7.60 9.09 34.58
2014 1.78 -0.86 -0.65 7.28 7.55
2015 7.67 1.98 -7.12 -9.09 -7.29
2016 -11.29 — — — —
Trailing Total
Return%
+/- Bmark
1
+/- Bmark
2
%Rank
Cat
Growth of
$10,000
3 Mo -11.30 -12.04 -12.64 99 8,871
6 Mo -19.36 -27.47 -27.84 100 8,064
1 Yr -23.62 -26.14 -25.41 100 7,638
3 Yr Avg 2.43 -11.18 -9.39 99 10,746
5 Yr Avg 7.13 -5.25 -4.45 91 14,111
10 Yr Avg 6.02 -2.26 -0.99 69 17,941
15 Yr Avg 6.92 0.89 0.03 11 27,287
Tax Analysis Tax Adj Rtn% %Rank Cat Tax-Cost Rat %Rank Cat
3 Yr (estimated) 1.74 98 0.67 16
5 Yr (estimated) 6.68 74 0.42 13
10 Yr (estimated) 5.24 62 0.73 39
Potential Capital Gain Exposure: 55% of assets
Rating and Risk
Time
Period
Load-Adj
Return %
Morningstar
Rtn vs Cat
Morningstar
Risk vs Cat
Morningstar
Risk-Adj Rating
1 Yr -23.62
3 Yr 2.43 Low +Avg Q
5 Yr 7.13 -Avg -Avg QQ
10 Yr 6.02 Avg Low QQQ
Incept 13.61
Other Measures Standard Index Best Fit Index
Alpha -2.1 -5.6
Beta 0.45 0.56
R-Squared 14 30
Standard Deviation 13.46
Mean 2.43
Sharpe Ratio 0.24
Portfolio Analysis 12-31-15
Total Stocks: 39
Share change since 09-30-15 Sector YTD Ret % % Assets
TValeant Pharmaceuticals I Hlth Care — 19.31
Berkshire Hathaway Inc A Finan Svcs 7.91 8.33
TJX Companies Inc Cnsmr Cyc 10.79 6.92
O'Reilly Automotive Inc Cnsmr Cyc 7.99 6.20
Fastenal Co Industrl 20.77 5.28
Berkshire Hathaway Inc B Finan Svcs 7.45 4.92
MasterCard Inc A Finan Svcs -2.74 4.30
Precision Castparts Corp Industrl — 4.13
IDEXX Laboratories Inc Hlth Care 7.41 3.40
Mohawk Industries Inc Cnsmr Cyc 0.80 3.21
Constellation Software In Technology — 2.61
Rolls-Royce Holdings PLC Industrl — 2.35
Sirona Dental Systems Inc Hlth Care — 2.03
Alphabet Inc A Technology -1.94 1.86
Alphabet Inc C Technology — 1.82
Waters Corp Hlth Care -1.98 1.67
Jacobs Engineering Group Industrl 3.81 1.38
Miscellaneous Securities — — 1.29
Danaher Corp Industrl 2.30 1.05
Omnicom Group Inc Cnsmr Cyc 10.67 1.04
Current Investment Style
Large Mid Small
Value Blend Growth Market Cap %
Giant 45.6
Large 29.2
Mid 23.6
Small 1.6
Micro 0.0
Avg $mil:
35,531
Value Measures Rel Category
Price/Earnings 19.88 0.95
Price/Book 3.28 0.92
Price/Sales 2.06 0.91
Price/Cash Flow 13.35 1.06
Dividend Yield % 0.75 0.57
Growth Measures % Rel Category
Long-Term Erngs 12.00 0.96
Book Value 11.04 1.24
Sales 11.22 1.39
Cash Flow 20.55 1.62
Historical Erngs 10.83 0.87
Profitability %
Return on Equity 24.68
Return on Assets 8.92
Net Margin 11.36
Sector
Weightings
% of
Stocks
Rel
Bmark 1
h Cyclical 44.01 1.49
r BasicMat 2.22 0.71
t CnsmrCyc 21.76 1.14
y FinanSvcs 20.03 3.90
u Real Est 0.00 0.00
j Sensitive 25.00 0.58
i CommSrvs 0.00 0.00
o Energy 0.06 0.12
p Industrl 16.68 1.31
a Technlgy 8.26 0.34
k Defensive 30.99 1.12
s CnsmrDef 0.98 0.09
d Hlthcare 30.01 1.84
f Utilities 0.00 0.00
Composition - Net
Cash 5.2
Stocks 93.9
Bonds 0.9
Other 0.0
Foreign 29.8
(% of Stock)
Morningstar's Take by Kevin McDevitt, CFA 03-24-16
Sequoia's Morningstar Analyst Rating has been changed
to Bronze following manager Bob Goldfarb's resignation
and given revisions to the fund's process. Manager David
Poppe and his team remain, however, and have the
experience and skill to get the fund back on track.
Goldfarb stepped down as comanager of this fund on
March 23, 2016, following the implosion of the Valeant
Pharmaceuticals VRX stake. This was a mutual decision,
but the fund's board and others at the firm felt that
decision-making had become too centralized and others
on the team needed to have more input. Although this
isn't how the firm envisioned this transition, it has been
preparing for it for years, having added six analysts to the
12-person team during the past decade.
Going forward, the team plans to introduce new risk
controls to avoid future blowups. Poppe will establish an
investment committee with himself and three senior
analysts. The plan is to make the process more
collaborative, as well as to introduce checks and
balances. For example, the other three members of the
investment committee could override Poppe on a buy/sell
decision.
While the damage has been done, Valeant no longer
dominates the portfolio. The fund sold 1.5 million shares
in mid-March to raise cash and book capital losses. That,
coupled with Valeant's nearly 70% year-to-date decline,
means the position is now likely less than 7% of assets.
The sale left the fund with $800 million in cash, or about
14.5% of assets. This gives the fund a bit of a buffer as it
likely continues to deal with outflows, which were an
estimated $300 million over the three months through
February.
Despite the Valeant disaster, this fund still has real
strengths.Poppe isanexperienced investorwith talented
analysts supporting him. However, even though they plan
to stick with the firm's classic approach, their increased
emphasis on risk control will change the fund's character.
Although concentration brought risks, it was also a key
to the fund's strong returns. How efforts to reduce risk
will affect returns is an open question for now.
Address: Sequoia Fund Inc Minimum Purchase: $5000 Add: — IRA: $2500
New York, NY 10153-4798 Min Auto Inv Plan: $5000 Add: —
800-686-6884 Sales Fees: No-load
Web Address: Management Fee: 1.00%
Inception: 07-15-70 Actual Fees: Mgt:1.00% Dist:—
Advisor: — Expense Projections: 3Yr:$328 5Yr:$569 10Yr:$1259
Subadvisor: None Income Distribution: Annually
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