1. U NIVERSITY OF N ORTHERN C OLORADO
SAFF I NFORMER
L ETTER F ROM SPRING 2010
T HE E DITORS Name Title
Jake Fells Portfolio Manager
As managers of the Spring 2010 semes-
ter, we have set an optimistic outlook of Austin Elm Portfolio Manager
the current economy. Compared to the Ashley Malsalm Equity Manager I NSIDE T HE I SSUE
negative economic outlook forecasted
by management of the prior semester, Caleb Westmore Equity Manager
we had to work exceptionally hard to Josh Daugherty Fixed Income Manager A BOUT S AFF 2
change and alter the portfolio to reach
our positive economic stance. Andrew Ibarra Fixed Income Manager
E CONOMIC 2
Brent Erickson Webmaster F ORECAST
Throughout this semester, the 14 of us
Corey Sheesley Webmaster
have learned a great deal concerning day
to day duties, and more importantly re- Reynaldo Mendez Newsletter Editor E QUITY 3
sponsibilities, of a portfolio manager. Darrell Lomelino Newsletter Editor
We‟ve had the opportunity to put forth F IXED I NCOME 3
the knowledge we have gained through- Erica Ferge Special Projects Manager
out our years at the Monfort School of Abraham Jauregui Special Projects Manager
Business to make informed, sound deci- L ARGEST H OLDINGS 4
sions in a unique, real-world portfolio Donald Green Special Projects Manager
management environment. Ryan Roggow Special Projects Manager B EST /W ORST 4
P ERFORMING S TOCKS
This is an amazing program, which most undergraduate finance students never have an
opportunity to experience, and for this we are tremendously grateful. We would like to P URCHASES AND 4
thank you for taking the time to read about the status of our portfolio, as well as what L IQUIDATIONS
we have accomplished as a team throughout this semester.
- Darrell Lomelino & Reynaldo Mendez O VERWEIGHTS 5
L ETTER F ROM T HE P ORTFOLIO M ANAGERS U NDERWEIGHTS 5
The portfolio managers in the SAFF class returned a 0.52% gain over the bench- S PECIAL P ROJECTS 6
mark‟s return of 3.57%. In other words, the total Quarter 1 return was 4.09%. This
semester‟s team forecasted a continuing recovery both domestically and internation- R.I.S.E. X 7
ally, thus allocating 60% to equity, 35% to fixed income, and 5% to cash. Moreover,
this is slightly more aggressive than the previous semester‟s asset allocation of 55%
equity, 40% fixed income, and 5% cash. PORTFOLIO 8
SNAPSHOT
Large decisions had to be set as governmental and political reforms impacted securi-
ties‟ returns, some being: healthcare reform, governmental spending, and struggling S PECIAL T HANKS 9
economies such as Greece and Spain. In addition to the readjustment of equities,
fixed income strategies needed to be redefined. With short-term interest rates remain- T EAM P ORTRAIT 9
ing at historical lows, the team had to adjust the fixed income portfolio to account for
future interest rate fluctuations. With this we forecasted a flattening of the yield-curve. P ROFOUND Q UOTES 9
- Jake Fells

2. P AGE 2
A BOUT S AFF
The “Student and Foundation Fund”, a Following an application and interview sectors, in addition to the appropriate
real world investment class here at the process, a team of portfolio managers sector weightings against the benchmarks.
Monfort College of Business, is com- are selected each semester and guided A strategy is then set for fixed income, in
monly referred to in its abbreviated form by Dr. John Clinebell, the founder and respect to the forecasted yield curve.
simply as “SAFF”. SAFF provides stu- head advisor of the class. The spring
dents the opportunity to actively manage managing team of 2010 is made up of With these targets and guidelines set by
a portfolio of real assets comprised of an 14 members. the foundation, individual stocks are care-
ever changing balance of equities, bonds, fully screened and selected to construct
and cash reserves. The first class was Each new team begins by forecasting the portfolio. Performance is tracked on a
allotted $200,000 by the UNC Founda- the state of the economy over the up- quarterly basis by comparing the returns
tion to oversee, when the program was coming six, twelve, and thirty-six of the SAFF portfolio against established
established in 1992. After additional months. Based upon the forecast, the benchmarks, the S&P 500 and the Bar-
donations and sound management deci- team determines the balances allocated clays Aggregate Bond Index.
sions over the past 18 years, the fund to equity, fixed income, and cash re-
currently stands at just over $1 million. serves. Equity is then allocated - Corey Sheesley
amongst: growth, value, and income
Economic Forecast
supply decreases we should also see a bound to be inflation, after very little in-
A fundamental element of the Student strengthening of the dollar relative to flation over the last year. Inflation of 3%
and Foundation Fund class is to prepare other currencies. The decrease in value is likely for 6 months and 3.8% is our
an economic forecast for the upcoming of the dollar is also backed by the educated figure for 3 years. Another eco-
6 months, 1 year, and 3 years. After speculation that Moody‟s will re- nomic indicator that we see improving is
weeks of discussion, we have reached evaluate the T-Bonds ratings. The last the return on U.S. Treasuries; we see the
our conclusion on the economic state of major input that we focused on was T-Bill going from .4 to .85 in 6 months
the world. Our outlook is positive, in taxes for both individuals and compa- while the T-Note goes from 3.66 to 3.8
general, but there are negative aspects as nies. For individuals we see taxes re- and the T-Bond goes from 4.54 to 4.65.
well. Before conducting an economic maining stable with some cuts coming As for in one year we see the rates for T-
forecast we had to consider: energy with certain tax credits but increases Bills, T-Notes, and T-Bonds being 1.2,
prices, money supply, the value of the coming from new legislation. We then 4.05, and 2.8, respectively. And in three
dollar, individual taxes and company see the taxes increasing in the future as years the rates will be 3.2 for the bills,
taxes. a way to cover the debt that the United 4.25 for the notes, and 5 for the bonds.
States Government has created. On the
Energy prices have been known to con- other hand, we predict that small busi- One of the most widely used economic
sistently increase in the past with some ness will see tax breaks in the future to indicators other than GDP, is the stock
decrease due to lack of demand. Over help stimulate growth; however, there market. As a group, we see indications
the next three years we believe energy is legislation (i.e. healthcare, cap and amongst the economic factors that make
prices will continue to increase; eco- trade) in the work that could have large us believe that the stock market will bring
nomic prices, after a six month period of tax affects on major corporations in the higher returns than we have seen lately.
stability, will also begin to increase along long-run. For the Dow Jones Industrial Average,
with the economy. Next, the money we forecast the average growing from
supply has been greatly increased this Since the economy is a combination of 10603.15 to 11,000 in 6 months, 11,500 in
year because of TARP funds and a large these traits it is important that we place one year and 12,500 in three years. As for
amount of that money still has not been them together to get a view of the the Standards and Poor‟s 500, we see it
spent. Therefore, the certain outcome is economies‟ future. The predicted out- increasing from 1138 to 1188 in 6
the increase of the money supply in the comes from economic factors are an months, to 1240 in one year to 1360 in
short-run, as the U.S. Government improving economy that will continue three years.
spends the rest of the TARP funds. To with economic growth. The impact of
counteract this increase, in the long-run spending, reduction in taxes, and in- These indicators make us believe that we
the Federal Reserve will have to restrict creasing energy prices will result in a will come out of the recession with a
the money supply to help reduce the risk growth of GDP over the next 6 strong market with a slight possibility of a
of hyperinflation. Furthermore, the large months and three years, 1% and 3%, „double dip‟. Therefore, we have used this
amount of U.S. Dollars in circulation respectively. This follows the 2009 3rd information in creating our asset alloca-
decreases the value of the currency be- quarter GDP growth of 2.2%. How- tion strategy and sector rotation strategy.
cause it increases the supply and makes ever, with the large amount of money
it less valuable. However, as the money being pushed into the economy there is - Brent Erickson

3. P AGE 3
E QUITY believe that the economic situation reporting of revenues. Due to these
will be improving over the next major changes in the investing envi-
This semester, we had a positive re-
year. ronment, we have made what we feel
turn in our equity portfolio. The
are the appropriate adjustments to the
S&P 500 has increased over the last
Next to our own domestic market, equity portfolio in order to surpass
couple of quarters, which has im-
we have considered international our client‟s expectations and goals.
proved our overall performance.
impacts as well. With approximately
Equity returns for the fourth quarter
40% of the portfolio‟s revenues - Ashley Malsam &
of 2009 were .58% and .34% for the
derived from foreign countries, eco- Caleb Westmore
first quarter in 2010 over the bench-
nomic uncer-
mark, the S&P 500. Our total equity
tainty exists.
performance for the fourth quarter
For example,
of 2009 and the first quarter of 2010
insecurity in
were 6.90% and 5.45%, respectively.
European
countries can
Over the last two quarters, it has
cause uncer-
been difficult to assess the economic
tainty in ex-
situation due to uncertainty in gov-
change rates
ernment policies. This includes
thus directly
healthcare reform and new regula-
affecting the
tions within the financial sector. We
F IXED I NCOME The success can be attributed to the year maturities and 15% in each of the
excellent bond selections by last four shorter maturity categories (0-2,
The fixed income portion of our semester‟s SAFF management team. 2-4, 4-6, 6-8). With the decision to
portfolio outperformed our bench- After creating our economic fore- increase the total equity investment,
mark, the Barclays US AGG Index, cast, we realized that in order to fixed income would need to decrease
in both the fourth quarter of 2009 take advantage of a recovering by $30,000.
and the first quarter of 2010. In the economy, it was important to
fourth quarter of 2009, our return slightly decrease the fixed income After setting a target strategy and du-
was 3.91% compared to Barclays‟ weighting to 35% so we could in- ration, we then allocated our fixed
0.14%, while the first quarter 2010 vest more in the potential upside of income between government, mort-
return was 2.28% compared to our individual equities. Believing that gage-backed, and corporate issued
benchmark‟s return of 1.62%. For interest rates will increase in the securities. In order to obtain an ex-
these two quarters, we have earned a next couple of years, we decided to cess return, we decided to perform a
total of 6.28% return on our fixed modify our previous ladder strategy spread analysis between these three
income investment compared to the and increase our duration to 4.50 types of bonds.
1.76% yield of Barclays. years. We decided to transition into
more long- From the analysis we noticed that
term bonds corporate bond rates would most
with the likely increase the least in comparison
anticipation to the others, and provide the best
of a higher return, we decided to weigh our hold-
increase in ings in government at 40%, mortgage-
short-term backed at 30%, and corporate hold-
interest ings at 30%.
rates. Our
strategy is - Josh Daugherty
to have
40% in 8+

4. P AGE 4
B EST & W ORST P ERFORMING S TOCKS
Our five best performers (YTD return): Our five worst performers (YTD return):
1. Netflix (79.52%)...Cyclical 1. Flir Systems (-11.67%)...Technology
2. Chipotle Mexican Grill (53.03%)...Cyclical 2. Qualcomm (-8.83%)...Technology
3. General Electric (25.31%)...Industrials 3. Devron Energy (-8.49%)...Energy
4. Apple (23.9%)...Technology 4. Total (-6.61%)...Energy
5. Caterpillar (20.95%)...Industrials 5. AT&T (-5.67%)...Telecom
L ARGEST H OLDINGS
Our five largest holdings (of equity):
1. Apple (5%)...Technology
2. Netflix (4.07%)...Cyclical
3. Caterpillar (3.91%)...Industrial
4. Peabody Energy Company (3.88%)...Healthcare
5. Chipotle Mexican Grill (3.58%)...Cyclical
- Andrew Ibarra
E QUITY P URCHASES & L IQUIDATIONS
Our economic forecast and sector allocation strategy for this semester led us to many sell proposals in the healthcare sec-
tor: we sold all 1000 shares of MannKind Corporation due to the reoccurring postponement of patent approvals. We also
made some changes to our staples sector in which we sold 29 percent of Phillip Morris to diversify the sector. Due to the
changes in our sector weightings, we were faced with the challenge of finding new stocks to purchase. We have purchased
Google and Research in Motion to meet our sector allocation for the technology sector. Below is a snapshot of what
transactions occurred throughout the semester:
Sells: Buys:
 Diageo (DEO) all 100 shares  Urban Outfitters (URBN) 220 shares
 International Business Machines (IBM) all 40 shares  Research in Motion (RIMM) 200 shares
 AstraZeneca (AZN) partial 150 shares  Google (GOOG) 25 shares
 MannKind Corporation (MNKD) all 1000 shares  Green Mountain Coffee (GMCR) 100 shares
 Pinnacle West Capital (PNW) all 300 shares  Eli Lilly & Co (LLY) 300 shares
 Sysco Corporation (SYY) all 550 shares  Strayer (STRA) 60 shares
 Phillip Morris (PM) partial 100 shares  Potash (POT) 130 shares
 Disney (DIS) all 300 shares  Orion Marine Group (ORN) 700 shares
 Apple (AAPL) partial 20 shares
- Donald Green

5. P AGE 5
E QUITY S ECTOR O VERWEIGHTS
Based on our expectations of recov- starting to see positive signals. weight energy; based on expectations
ery in the economy as well as energy Based on our economic forecast, we for the next six months, we decided
prices increasing within the next project a 3% increase in GDP to weight the energy sector to 12.5%
three years, we selected to over- growth; in addition, we predict the from 12.27%. We believe that energy
weight technology, energy, materials S&P to reach 1400 by the end of prices will stay relatively stable for the
and cyclical sectors. the three year term. With that said, next 6 months and gradually increase
our sector weight in technology is over the next 3 years as the economy
Technology, cyclical, and materials now 20% compared to our original stabilizes.
go hand in hand in reaping the bene- weight of 17%. As for the cyclical
fits from GDP growth, typically seen sector, we chose to change the We have set forth these weightings
during an economic recovery. Mate- weight to 12% of the equity portfo- based on what we expect will occur in
rials will be experiencing increased lio, from its original 8.9%. Our ma- the next three years and we believe
demand. This will lead to higher pro- terials sector currently holds a 4.5% that the allocations made will benefit
duction, which will satisfy demands weighting compared to our original our portfolio and provide positive
in the technology and cyclical sec- weight of 4.04%, which is not a returns.
tors. We have seen the market re- large adjustment. We chose to over-
bound within the last year and we are
- Abraham Jauregui
E QUITY S ECTOR U NDERWEIGHTS
compared to the S&P 500‟s weight defensive characteristics. Given our
Given our expected recovery in the
of 14.59%. economic forecast of a recovery in the
economy, we have decided that the
market, we believe that these securi-
following sectors should be under- Companies in the staples sector are ties will not provide us with a sub-
weighted: financial services, staples, largely involved in the production stantial returns as would those sectors
and utilities. The companies that fall and distribution of consumer goods which are more cyclical in nature.
under the financial sector are still which are typically purchased with With this reasoning we have decided
under a great deal of scrutiny by the non-discretionary income. We be- on an underweight of 18.3% relative
government. Several investment lieve that discretionary spending is to the benchmark.
firms, such as Bear Stearns, made correlated with economic recovery
unethical decisions, which lead the and have underweighted the staples By underweighting these particular
economy into a recession. We be- sector by 13.6% relative to the S&P sectors, we believe that our portfolio
lieve that both public and private 500. will be given the greatest potential
views of this industry will take a long opportunity for positive returns while
time to recover; therefore, we have The companies in the utilities sector simultaneously maintaining diversity
given the sector a weight of 11.5% have been known to have strong during this eco-
nomical recovery.
- Ryan Roggow

6. P AGE 6
S PECIAL P ROJECTS
T HE CFA I NSTITUTE G LOBAL I NVESTMENT R ESEARCH C HALLENGE
The CFA Challenge was explained in detail in last semester‟s newsletter. As a refresher, the chal-
lenge is a global competition sponsored by The CFA Institute that provides students the opportunity to compete with
other schools in equity research and company analysis based on a company, chosen by The CFA Institute. The com-
pany chosen for the competition was Chipotle. The competition consisted of both a written analysis and an oral presen-
tation given to esteemed members of the finance field. Unfortunately, SAFF students lost to the University of Denver‟s
graduate program students who proposed that Chipotle should be sold with a fair value of $70. SAFF students, who
proposed Chipotle‟s valuation to be at $121, were told their valuation was too optimistic and that the stock would never
reach its proposed price. However, two months later, Chipotle reached the $121 valuation.
SAFF S TUDENTS P LACE I N FMA N ATIONAL Q UIZ B OWL
Three members of SAFF placed 2nd in the National Quiz Bowl at the 2010 Finance Leaders‟ Confer-
ence in Chicago, Illinois: Jay Fells, Ashley Malsam, and Erica Ferge. The competition was divided
into two sections: a 50 question multiple choice quiz proceeded by a round of jeopardy for the three
highest scoring teams. In addition to the competition, members were able to tour the Chicago Mercantile Exchange
and the Chicago Board of Trade. The conference also enabled attendees to interact with financial professionals
through various workshops and seminars.
- Erica Ferge
C APITAL IQ
Information is useful only if it is un- Insight, Charles Schwab, Morning
derstandable and easy to access. As a Star, and Bloomberg. Each service
tedious manual data entries. Graphs
way of improving the comprehen- provider has its special advantages
can also be created instantly.
sion and ease-of-access to financial pertaining to investments, but Capi-
information the Monfort College of tal IQ combines all of these quali- A particular tool that Capital IQ pro-
Business (MCB) purchased Capital ties into one, making it more con- vides and has been very beneficial to
IQ, a division of Standard and Poor‟s venient. Though useful, Research SAFF is the screening and analytics
business. All upper-classmen with Insight and Bloomberg both take a tab which allows the user to screen
an emphasis in finance have a per- lot of time to become accustomed companies and fixed income easily.
sonal log-in which allows them to to and are only available within the Users can search for companies in
track specific companies pertaining MCB building. However, Capital different sectors and industries with
to personal interest and class assign- IQ is web-based so any student specified historical growth rates, ra-
ments. Any student may access this with a personal log-in may have tios, estimates, and many other char-
new program in the Finance Trading immediate access. acteristics that a portfolio manager
Center on several computers with may look for.
constant access. This acquisition has One helpful feature is that Capital
been most beneficial for the Student IQ shows the source and calcula- Capital IQ is now a valuable asset to
and Foundation Fund (SAFF). tions of any provided ratio. In addi- SAFF and allows its managers to ac-
tion, all of the financial information quire easier and more understandable
SAFF managers currently have ac- provided by Capital IQ can be information, ultimately helping main-
cess to financial information and quickly downloaded into Excel tain the SAFF portfolio.
analytical tools provided by Stan- which eliminates the necessity of
dards and Poor‟s through Research - Andrew Ibarra

7. P AGE 7
class to learn first-hand current top- petition. Attending members pre-
R.I.S.E. X ics regularly discussed by various sented our current portfolio and
companies. It was a general consen- strategy to a panel of judges. Re-
The Redefining Investment Strategy
sus by the students who attended that sults proved that judges were very
Education (RISE) Conference is an
these panel discussions were most impressed with our knowledge and
international event that brings to-
enlightening into our current eco- strategy investment of our portfolio.
gether students, faculty, and invest-
nomic times. The team received superb reviews
ment professionals to share knowl-
from the judges.
edge at the largest student investment The following days consisted of spe-
forum in the world. This conference cialized break-out sessions, in which The RISE conference was extremely
allowed members of the SAFF class individual speakers would discuss beneficial to all of the SAFF mem-
to experience one of the most knowl- various topics ranging from risk man- bers who attended. RISE X atten-
edgeable and informative symposi- agement, equity analysis, portfolio dees learned a tremendous amount
ums available to young business pro- management, credit default swaps, of new information, and the experi-
fessionals. The RISE conference is and various other select categories ence was one that will never be for-
held at the University of Dayton and within the financial realm. In addi- gotten.
has been a continuing tradition for tion to these sessions, The SAFF
the past ten years. team participated in a portfolio com- - Austin Elm
The convention lasted for three days
and consisted of various dis-
cussion panels on the first day
and specialized break-out ses-
sions the following two days.
Topics discussed in different
panels ranged from current
market conditions, corporate
governance, risk management,
and energy and sustainability.
The speakers on these panels
were business professionals,
economists, and leading direc-
tors from different companies
in the business community.
These panel discussions were
very informative and allowed
for members of the SAFF

8. P AGE 8
P ORTFOLIO S NAPSHOT ( AS OF MAY 3, 2010 )

9. P AGE 9
S PECIAL T HANKS
The 2010 SAFF class would like to recognize those who made SAFF possible this semester:
Thank you Dr. Clinebell for all of your hard work and determination; without a strong Portfolio Advisor we could not have made
this a successful semester. With such a friendly and welcoming attitude you have truly made this an enjoyable experience. We
would also like to thank Kristi Cozbey, our Administrative Assistant; her strong work ethic and open willingness to help are much
appreciated. Our Bloomberg expert, Chris Vegter, who is always willing to assist with technological issues and Matthew Blair, our
CFA Advisor, who made our CFA challenge experience a great memory. Another special thanks goes out to Christine
McClatchey and her fiancé Shane Wagner, thank you for your generous contribution to SAFF and continued support with the
RISE project.
There are numerous people to which we owe our many thanks. This was a great opportunity and we are thankful that the UNC
foundation continues to trust its students by providing them with real life exposure to portfolio management.
Thank You!
- Reynaldo Mendez & Darrell Lomelino
SPRING 2010
SAFF TEAM
(Left to Right)
Front Row:
Brent Erickson, Reynaldo Mendez,
Darrell Lomelino, Ryan Roggow,
Abraham Jauregui, Caleb Westmore,
Erica Ferge, Jake Fells, Donald
Green, Andrew Ibarra, Josh
Daugherty,
John Clinebell.
Back Row:
Corey Sheesley, Ashley Malsam,
Austin Elm
P ROFOUND QUOTES FROM THE ELITE SPRING 2010 SAFF CLASS
“Have chair will travel.” - Dr. John Clinebell
“This isn‟t research, it‟s leisure. I love reading annual reports.” - Jake Fells
“You can tell them to leave, but they are going to come right back in.” - Monique
“I don‟t care what you decide, you‟re going to be so far off anyway.” - Dr. John Clinebell
“Finally, an Accounting major makes himself useful.” - Ashley Malsam
“If only I could buy puts on my grade in this class.” - Jake Fells
“Investing is like cutting grass.” - Ashley Malsam
“It‟s not Debby Downer. It is Negative Nancy.” - Brent Erickson
“Don‟t buy something you don‟t understand.” - RISE Speaker
“One drop of vinegar ruins a glass of wine.” - RISE Speaker
“Good research pays off.” - Matthew Blair

10. SPRING 2010
SAFF INFORMER
MONFORT COLLEGE OF BUSINESS
University of Northern Colorado NONPROFIT ORGANIZATION
Kenneth W. Monfort College of Business US POSTAGE PAID
School of Finance and Quantitative Methods PERMIT NO. 21
501 20th Street– Campus Box 128 EVANS COLORADO
Greeley, Colorado 80639-0019