cabot wealth management's roadmap to retirement

WELCOME TO CABOT’S25TH ANNUAL INVESTMENT & WEALTH MANAGEMENT CONFERENCE

Your interests and goals always come first.

Curing Cancer, In The Clouds

& The Final Frontier

PRESENTED BY:

DENNIS WASSUNG, CFA® , PORTFOLIO MANAGERCRAIG GORYL, CFA® , PORTFOLIO MANAGER

Dennis Wassung, CFA®

Portfolio Manager

Cabot Wealth Management, Inc.216 Essex Street

Salem, Massachusetts 01970800-888-6468 eCabot.com

Curing CancerGenomics & Biotechnology

GenomicsWhat is it?

Genomics – The study of organisms’ hereditary information. An

organism’s genome is its complete set of DNA.

DNA – The chemical compound containing instructions for developing

and directing all the body’s activities. An identical copy is in each cell.

DNA Sequencing – The process of determining the exact order of the

chemical bases that make up DNA, about 6.2 billion in total for a human.

The map of a person’s DNA can tell us a lot about them, from their eye

color to their likelihood of developing cancer. Scientists understand

parts of the map, but most of it is still a mystery.

GenomicsWhy is this important?

Predictive Medicine – Based on my DNA, what are my chances of developing a particular disease?

Testing & Diagnostics – What disease is this? Is it an aggressive form in need of treatment, or is it better to wait?

Therapeutics – What causes this disease, and what drugs will cure it?

At the heart of genomics is the promise of personalized medicine. Because of differences in DNA, treatments do not work the same for everyone. Someday our current practice - prescribing the same drug for everyone who has a given disease - will seem archaic. This is truly a revolution in healthcare.

Why We Need Better, Targeted Drugs

Lower Cost Per Genome Drives Adoption

Next-Generation Sequencing (NGS)

Source: Illumina, Inc.

Oncology Market Evolving

Source: Illumina, Inc. & U.S. Department of Energy Office of Science

Evolving Biotechnology & Biopharma Landscape

Source: Quintiles Transnational, Inc.

Market Evolution Toward The Patient

Source: Quintiles Transnational, Inc.

Where Are We Headed?

Source: Illumina, Inc.

Investment Opportunities Gene Sequencing – Equipment & Technology

solutions to rapidly and cost-effectively sequence DNA

Biotechnology – New Drug Development & Commercialization, Genetically-targeted drugs

Testing & Diagnostics – Testing for & diagnosing specific genetically defined diseases and condition.

Bioinformatics & Data Analytics – Analyzing the massive amounts of data created and gleaning critical information from gene sequencing

In The Clouds…Cloud Computing – A Major Transition

Cloud Computing Benefits

$410 Billion Worldwide Software Market

Enterprise Software Market Evolution

Source: Veeva Systems, Inc.

Moving To The Cloud Saves Money

Source: IDC Research Cloud Software Analysis, Sep 2012; Veeva Systems

Industry-Specific Cloud Platforms

Sources: Demandware, Euromonitor, Gartner,eMarketer Global eCommerce

Investment Opportunities Cloud Software (aka “Software-as-a-Service” or SaaS) –

Enterprise Software “lease” business model gaining wide adoption – CRM, Marketing, HCM, ERP – Lots of attention from the Big Guys (Acquisitions)

Cloud Infrastructure – Internet and data center infrastructure needed to enable the “Cloud” in all of its forms

Industry Cloud Software Applications – Companies are developing and gaining traction with industry-specific cloud platforms – life sciences, financial services, eCommerce, etc.

Cybersecurity technology – Software and hardware solutions to protect consumers and companies, whose personal or business data reside in the cloud

Frontier Markets-Next to EmergeCRAIG GORYL, CFA

PORTFOLIO MANAGER

CABOT WEALTH MANAGEMENT

What are Frontier Markets? Frontier Markets are less developed than Emerging Markets. We view the investment universe in classes.

In order of market maturity (with examples):

1. United States*

2. Developed Markets (Germany, Canada, Japan)

3. Emerging Markets (Brazil, China, Russia, Mexico)

4. Frontier Markets (Kuwait, Nigeria, Argentina, Pakistan)

In terms of development, Frontier Markets are like Emerging Markets 20 years ago. But they are catching up at a faster rate.

*US is a Developed Market- a special case as our home country and the most advanced

What are Frontier Markets?

Source: Wall Street Journal

What are Frontier Markets? Frontier markets hold 35% of the world’s population, produce 16% of its economic output, and represent 4% of global market value

Source: Everest Capital

Why Frontier Markets?1) ATTRACTIVE DEMOGRAPHICS

Growing working age population, the prime time for fertility and economic productivity

Kuwait Nigeria US Japan05

1015202530

% of Pop. Over 65 today

Kuwait Nigeria US Japan-5

0

5

10

15

20

% Growth of Working Age Pop, 2015-2020

Low “elderly dependency ratio,” the resource transfer from young to old

Why Frontier Markets?2) “LEAPFROGGING”

Skipping generations of technologies saves time, money and resources. Examples: photography, M-Pesa

Access to modern political and economic theory through an increasingly global education system

Source: Franklin Templeton

68%

50%

29%

24%

13%

11%

% of Mobile Phone Users Regularly Making or Receiving Payments on their Phone

Why Frontier Markets?3) RESOURCE RICH

Frontier markets contain about 40% of the world’s natural resource reserves and nearly 26% of gas reserves

They have an opportunity to avoid the “resource curse,” where corruption and inequality follow abundant natural resources (Russia, Mexico, South Africa)

Source: Everest Capital

Why Frontier Markets?4) GROWING FAST 5)REASONABLY PRICED 6) GOOD QUALITY

Growth: Valuation: Quality: Est. Sales

Growth Rate '13-15

Est. EPS Growth

Rate '13-16 Price/

Earnings Est. Price/

Earnings Price/ Book

Dividend Yield

Return on

Equity

Operating Profit

Margin Debt/ Equity

Debt/ Assets

United States 5% 12% 18.1 16.8 2.7 1.9% 15.0 14.0 104.8 23.9 Developed Int'l 2% 15% 17.6 15.1 1.6 3.3% 10.6 9.6 180.6 24.5 Emerging Mkts 4% 8% 13.4 12.2 1.5 2.7% 10.9 10.9 109.3 22.4 Frontier 28% 25% 12.0 11.2 1.8 3.7% 15.4 18.7 88.3 16.7

Green represents the most attractive metric. Red is least attractive.

Data: Bloomberg 9/19/14

Risky? Less Than You ThinkLOW DEPENDENCE ON FOREIGN CAPITAL

Frontier economies are self-sustaining. Infrastructure investment is fed by citizen savings, not hot foreign money.

LOW CORRELATION TO OTHER MARKETS

These markets and economies respond to military coups, typhoons, oil discoveries etc., not broad global macro events. Each country has idiosyncratic drivers.

Single country volatility is high, but low correlations mean lower collective volatility- see the chart.

Source: Wall Street Journal

Other Risks?BALANCE

The main benchmark (MSCI Frontier Markets Index) is not well balanced.

Kuwait and Nigeria comprise almost half the index. Banks and other financial companies dominate.

Solution: Frontier markets should be part of a diversified portfolio

LIQUIDITY

Market access, company size, and share availability are barriers.

Most Frontier companies trade less than $3mil in value per day, raising the cost of entry and exit.

Solution: US-traded funds like FM & TFMAX are liquid but don’t solve the underlying issue

Return Comparison (2-year)

Thank you

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