Student Managed Fund 2005-2006 Undergraduates “Allocation, Selection, Performance”
Student Managed Fund
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Transcript of Student Managed Fund
Student Managed Fund
MBA Performance ReportMarch 8, 2007
MBA Managers
• Mike Amodeo• Devika
Chirayilparambu• Matt Cordeiro• Vasilios Diakogeorgiou• Samara Hollander
• Daniela Ionescu• Adam Macko• Puru Patnekar• John Salemi• Amanda Wallace
Agenda
• Investment Philosophy• Investment Process • Portfolio Performance• Firm Activity• Forward Expectations• Q & A
Investment Philosophy
• Follow a fundamental bottom-up approach
• Focus on companies with a market cap of at least $1Billion
• Target stocks that trade at a minimum 15% perceived discount to their intrinsic value
• Benchmark is to outperform the S&P 500 Index by 5% annually
• Invest across a diversified group of sectors to emulate the S&P 500 Index
Investment Process
Stock SelectionStock Selection
Fundamental Fundamental AnalysisAnalysis
Sell DisciplineSell Discipline
Stock Selection
• Seek high quality US Equities that exhibit strong growth potential within their industry
• Screeners: Yahoo! Finance MSN Money Central Reuters MagicFormulaInvesting.com
• Rank stocks based on: Earnings/Sales
growthNet/Operating
marginsROE, ROAP/E, PEG
Fundamental Analysis• Narrow down the range by
emphasizing on the following value drivers
Operating MarginsRevenue and Earnings ramp-upCapital ExpenditureR&D IntensityFree Cash Flow Growth
• Discounted Cash Flow Analysis• Relative P/E analysis• EVA analysis
Sell Discipline
• Stop loss15% stop loss on all positionsProtect down-side riskPrevent market volatility from stopping out
positions
• Re-evaluation of positionsMore than 15% gainMore than 10% lossChange in business model or expectations
Portfolio Performance
Performance Highlights
Total equity positions 1,127,166.34 $ Total cash position 808.93 $ Value (2/16/2007) 1,127,975.27 $
Allocation and Management
Performance Highlights S&P 500 SMFBeginning value (9/01/2006) 1,303.82 $ 990,089.88 $ Ending Value (2/16/2007) 1,455.53 $ 1,127,975.27 $
Returns 11.636% 13.927%
Individual Holding Performance
Ticker Company ReturnsANF Abercrombie and Fitch 23.35%LH Laboratory Corp. 18.14%HRS Harris Corp. 16.87%SHW Sherwin Williams 16.45%JEC Jacobs Engineering 14.52%SCSS Select Comfort 12.20%ADTN Adtran Inc. 12.09%GD General Dynamics 10.79%FPL Florida Power and Light 9.66%MO Altria 9.59%HRL Hormel Foods 6.22%AEOS American Eagle Outfitters 4.39%TXN Texas Instruments 3.67%AXP American Express 2.48%OXY Occidental Petroleum 1.82%NVS Novartis 1.79%BAC Bank of America 1.58%VRGY Verigy Ltd. 0.27%BTU Peabody Energy Corp. -0.70%PEP Pepsi Co. -0.87%NFX Newfield Exploration -1.35%ARJ Arch Chemicals -2.37%BER Berkeley -3.94%ORCL Oracle -7.94%
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SMF
S&P 500
Comparison with S&P 500
Sector Allocation
SMF Sector Allocation (2/16/2007)
Health Care9%
Financials12%
Energy12% Materials
8%Industrials
8%
Consumer Discretionary
13%Consumer
Staples13%
Utilities4%Telecom
5%IT16%
Portfolio Efficiency Statistics• Beta : 0.872• Alpha : 0.014• M2 : 1.85%• Modified Dietz Return (Bi-weekly)
SMF: 0.67%S&P 500: 0.5%
Rp 0.53% Rp 0.44%
Rf 0.09% Rf 0.09%
σp 1.65% σp 0.96%
Sharpe 0.267 Sharpe 0.365
SMF Sharpe Ratio S&P 500 Sharpe Ratio
S(X) = Rp - Rf / σp
Performance Attribution Analysis
Portfolio Excess Return 2.291%Contribution from stock selection 1.423%Contribution from sector allocation 0.867%Contribution from cash allocation -0.008%
Contribution from SPYDR 0.010%
Firm Activity• Verigy (VRGY)
Guidance Adjusted Upwards
• Jacobs Engineering (JEC) Guidance Adjusted Upwards
• Altria (MO) Kraft spin-off
• Novartis (NVS) FDA approval for Exforge FDA delay for Galvus
• Oracle (ORCL) Analyst Downgrade and License Sales Hyperion Acquisition
POSITIVE
POSITIVE
POSITIVE
CAUTION
CAUTION
Forward ExpectationsInterest rates remain stable
Earnings growth slows towards historical average
Stocks currently are fairly valued
Expect 2007 returns to mirror long-run average (8%-12%)
Forward Expectations
• Monetary Policy
• Fiscal Policy
• Economic Growth
• Corporate Earnings Growth
• Inflation
• Market Valuation
NEUTRAL
NEUTRAL
NEUTRAL/POSITIVE
NEUTRAL
NEUTRAL
NEUTRAL
Learning Experience
Strength in Numbers10 Managers – 10 Different Styles to Learn FromExpertise Across Different IndustriesStand Up to the Scrutiny of Peers
Look for Compelling Business StoriesWhat is the Company’s Competitive Advantage?Why Will Your Stock Outperform the Market?
Add Value Through Event-Driven ReturnsLook for Opportunities that Will Unlock Value
Acknowledgements
The University of Connecticut Foundation, Inc.
Investment Advisory Board
Dr. Chinmoy Ghosh
Questions