1 undergraduate student managed fund spring 2014 presentation march 6, 2014
TRANSCRIPT
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Undergraduate Student Managed Fund
Spring 2014 PresentationMarch 6, 2014
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2Student Managed FundFund ManagersSpring 2014 Presentation
Fund Managers
Officers:Lead Manager: Robert BaileyPortfolio Manager: Duston HodgkinsSecretary: Tom Blankemeier
Managers: Alexander Anisimov David Boudreau
Eric BourassaMichael Cox
Joseph GriecoMatthew MastrogiorgioLina Posada
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Agenda
1) Investment Objective and Philosophy2) Investment Process3) Economic Outlook4) Portfolio Overview
1) Interesting Holdings2) Performance3) Attribution Analysis
5) Lessons Learned
Student Managed FundAgendaSpring 2014 Presentation
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4Student Managed FundInvestment Objective & PhilosophySpring 2014 Presentation
Investment Objective & PhilosophyObjective• Outperform the S&P 500• Learn to analyze as value investors
Philosophy• Search for undervalued securities based on estimation of
intrinsic value compared to current market price
Style• Bottom-up approach
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5Student Managed FundIndustry ManagersSpring 2014 Presentation
Industry Managers• Basic Materials: Matthew Mastrogiorgio• Consumer Discretionary: Robert Bailey, David Boudreau• Consumer Staples: Thomas Blankemeier, Duston Hodgkins• Energy: Alexander Anisimov, Michael Cox, Lina Posada• Financials: Thomas Blankemeier, David Boudreau, Joseph Grieco• Healthcare: Eric Bourassa, Robert Bailey, Alexander Anisimov• Industrials: Matthew Mastrogiorgio, Lina Posada• Real Estate: Eric Bourassa, Michael Cox• Transportation: Michael Cox• Technology: Joseph Grieco, Duston Hodgkins
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6Student Managed FundInvestment StrategySpring 2014 Presentation
Investment Strategy
• High ROE & ROIC• i.e. ORCL
• Sustainable Barriers to Competition• i.e. ACN
• Consistent Return to Shareholders• i.e. SLB
• Strong Business Models• i.e. DTV
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7Student Managed FundInvestment ToolsSpring 2014 Presentation
Investment Tools
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8Student Managed FundInvestment ProcessSpring 2014 Presentation
Investment Process
Step 1
• Manager Researches Chosen Company
Step 2
• Presents Research to Other Managers
Step 3
• Thorough Discussion on Company Research
Step 4
• Majority of Managers Vote for Approval
Step 5
• If Yes Vote on Allocation of Capital• If No Conduct Further Research
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9Student Managed FundPortfolio ApproachSpring 2014 Presentation
Portfolio Approach
• Seek to take positions at various percentage increments depending on a variety of factors
6% or under position• Strong fundamentals• Fairly valued• Carry more risk
6% or larger position• Safe/predictable• Strong upside
potential• Strong downside
protection• Undervalued
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10Student Managed FundEconomic OutlookSpring 2014 Presentation
• Quantitative Easing and recent tapering • Unemployment in the US • Eurozone Recovery and Deflation
Economic Outlook
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11Student Managed FundEconomic OutlookSpring 2014 Presentation
Quantitative Easing
The growth of the Fed’s Balance Sheet and Interest Rates
2008 2009 2010 2011 2012 2013$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Federal Reserve Balance Sheet 10yr Treasury
Tot
al A
sset
s (U
SD
$bn)
Inte
rest
Rat
e (%
)
Source: Bloomberg LP
• Interest rates appear to be on the rebound with the recent tapering of mortgage-backed securities and 30-year Treasury purchases
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12Student Managed FundEconomic OutlookSpring 2014 Presentation
QE’s Affect on the US Equity Market
Correlation of Balance Sheet and Equity Performance
Source: Bloomberg LP
2008 2009 2010 2011 2012 2013$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
Federal Reserve Balance Sheet S&P Index
Tot
al A
sset
s (U
SD
$bn)
S$P
500
Ind
ex le
vel
• With QE looking to halt by year end, will the equity market be able to maintain this positive trend without being artificially stimulated?
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13Student Managed FundEconomic OutlookSpring 2014 Presentation
Strength of the US EconomyThe Unemployment rate 2007 – Present
Source: Bloomberg LP
Sep-07
Mar-08
Sep-08
Mar-09
Sep-09
Mar-10
Sep-10
Mar-11
Sep-11
Mar-12
Sep-12
Mar-13
Sep-13
456789
10
61.062.063.064.065.066.067.0
Unemployment Rate Participation Rate
Une
mpl
oym
ent (
%)
Par
ticip
atio
n ra
te (
%)
1970 1975 1980 1985 1990 1995 2000 2005 201059
61
63
65
67
Participation Rate
Par
ticip
atio
n ra
te (
%)
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14Student Managed FundEconomic OutlookSpring 2014 Presentation
• Slow Recovery• Deflation• European Central Bank and Outright Monetary Transaction
(OMT) program
Conditions in the Eurozone
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Portfolio Breakdown
Student Managed FundPortfolio BreakdownSpring 2014 Presentation
• Average weight per company: 5.88%
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16Student Managed FundSector AllocationSpring 2014 Presentation
Sector Allocation
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Portfolio Performance
Student Managed FundPortfolio PerformanceSpring 2014 Presentation
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Portfolio Performance
Student Managed FundPortfolio PerformanceSpring 2014 Presentation
Undergraduate SMF Portfolio S&P 500
Beginning Value(9/13/2013) $1,567,133.91 Beginning Value 1,687.99Current Value(2/28/2014) $1,731,941.92 Current Value 1,859.45OverallProfit/(Loss) $164,808.01
OverallProfit/Loss 171.46
Return 10.51%Return 11.18%
• Undergraduate SMF portfolio has underperformed the S&P 500 by 0.67% (67 BPS)
• Beta = 0.97, Sharpe Ratio = 2.48, Treynor Ratio = 0.29
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Individual Stock Performance
Student Managed FundPortfolio PerformanceSpring 2014 Presentation
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Best Performing Stock - NVR• Real Estate: Homebuilder• Unrealized gain of 26.12%• Strong Q4 earnings EPS $21.15 vs.
estimates of $16.08• On December 18th management authorized
an additional $300 million buyback program
Student Managed FundPortfolio PerformanceSpring 2014 Presentation
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Worst Performing Stock – Bed Bath and Beyond
Reason• Q4 guidance lowered• Worried about holiday season
Reinvestment• Growth opportunities• Free cash flow stability• Lower cost basis
Student Managed FundPortfolio PerformanceSpring 2014 Presentation
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Attribution Analysis
Student Managed FundAttribution AnalysisSpring 2014 Presentation
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23Student Managed FundAttribution AnalysisSpring 2014 Presentation
Attribution Analysis – Allocation Effect
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24Student Managed FundAttribution AnalysisSpring 2014 Presentation
Attribution Analysis – Selection Effect
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25Student Managed FundAttribution AnalysisSpring 2014 Presentation
Attribution Analysis – By Sector
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Risk Management
Student Managed FundRisk ManagementSpring 2014 Presentation
• Rigorous screening and analysis process• Purchased half of stocks analyzed or pitched
• Diversification across sectors to avoid aggregation risk• Stop-loss• Focus on long-term performance, not concerned with
short-term volatility
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Lessons Learned
Difficulties• Record high market conditions• Corporate social responsibility
Lessons• Corporate social responsibility initiative• Company price tracking• Teamwork and personal responsibility
Student Managed FundLessons LearnedSpring 2014 Presentation
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Acknowledgements
• UConn Foundation Board• Investment Advisory Board• Pat Terrion• Jeff Annello• Dr. Chinmoy Ghosh• Dr. Michel Rakotomavo• Laurel Grisamer
Student Managed FundAcknowledgementsSpring 2014 Presentation