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Created by the 10 Student Fund Managers under the direction of Dr. Michael Melton, this presentation discusses our portfolio during the Fall 2012 semester. Furthermore, the presentation is meant to ...

Created by the 10 Student Fund Managers under the direction of Dr. Michael Melton, this presentation discusses our portfolio during the Fall 2012 semester. Furthermore, the presentation is meant to serve as an example of the advanced techniques learned while in the Center for Advanced Financial Education.

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Final CAFE Presentation Final CAFE Presentation Presentation Transcript

  • Roger Williams Mario J. Gabelli School of BusinessUniversity Student Investment Fund Performance – Fall 2012 Student Fund Managers Mr. David Aldo, Mr. Thomas Custance, Mr. Michael Densmore, Mr. Matthew DiPlacido, Mr. Matthew Hoff, Mr. Matthew T. Paige, Mr. Maximilian Recker, Mr. Sean Reilly, Mr. Daniel Walser, Mr. Charles Weidmuller Associate Director Ms. Lauren Tierney Under the Supervision of: Michael Melton Ph.D. Director, Center for Advanced Financial Education Professor of Finance Center for Advanced Financial Education
  • FNCE 450 – Portfolio AnalysisRoger Williams University Mario J. Gabelli School of Business
  • Research In Motion Limited, Inc Friday, September 27, 2012 • Acquired 2 million Analysts’ Estimates: Actual Earnings: new subscribers -$0.46 -$0.27 • Posted $2.2 billion in cash Earnings • Introduced new Surprise beta version of BlackBerry 10 SFM Prediction: -$0.30 $0.19Roger Williams University Mario J. Gabelli School of Business
  • Research In Motion Limited, Inc •The top arrow indicates the purchase price of $6.96 on September 27, 2012 •RIMM was sold at $8.17 for a gain of $516 or 16.7% on September 28, 2012Roger Williams University Mario J. Gabelli School of Business
  • Center for Advanced Financial Education • “State-of-the-art” • “Global” markets never sleep - 24 hours a day • 16 computer screens + a “Big Board” • Driven by Real-time Financial Platforms • Perform every aspect of fund management throughout the dayRoger Williams University Mario J. Gabelli School of Business
  • How Our Program Is Unique CAFÉ Program Other Schools• Do not inherit portfolio from previous • May inherit previous semester’s portfolio semester • Do not execute own trades – Active Management • Must answer to a advisory board• Execute own trades via Ameritrade • Do not deal in real-time• Do not seek trade approval from an – Need extended time to get trades advisory board approved• Deal in real-time • Limited ability to maximize potential – Trades only need approval from returns Associate Director or Managing Director – Cannot take advantage of momentum• Maximize potential returns trading – Take advantage of momentum trading • Classroom Setting• Real-World Setting• Real-Dollar Portfolio Roger Williams University Mario J. Gabelli School of Business
  • Portfolio Objective • Utilizing Top-Down Analysis Approach • Global Mid-Large Cap Blend – Over $2B market capitalization – Provides hedge against market risk – Allows opportunity for growth • Markowitz Portfolio Theory – 8-9 Sectors – 17 Industries – 20-25 CompaniesRoger Williams University Mario J. Gabelli School of Business
  • Global Economic Analysis Economic Sector Industry CompanyRoger Williams University Mario J. Gabelli School of Business
  • International Economic Analysis Market Market Country Overall Performance GDP "Inflation" Unemployment since 1/1/11 Performance CPI China Bullish -26.65% Bearish Bullish Neutral Neutral Hong Kong Bullish -6.86% Bearish Bullish Neutral Neutral Chile Bullish -16.13% Bullish Bullish Bullish Neutral United Kingdom Bullish -0.99% Bullish Bullish Bullish Bullish Israel Bullish 3.23% Bullish Bullish Bullish Bullish Malaysia Bullish -1.57% Bullish Bullish Bullish Bullish Brazil Bullish -17.55% Bullish Bullish Bullish Bullish Canada Bullish -7.90% Bullish Bullish Neutral Bullish Australia Bullish -8.84% Bullish Bullish Bullish Bullish Switzerland Bullish 3.26% Neutral Bullish Bullish Bullish Ireland Neutral 13.06% Bearish Bullish Bearish Neutral Russia Neutral -21.00% Bullish Bearish Bullish Neutral Germany Neutral 5.29% Bullish Neutral Bearish Neutral Austria Neutral -28.29% Bullish Bearish Neutral Bearish Colombia Neutral 8.33% Bullish Bearish Neutral Bearish Czech Republic Neutral -28.40% Bullish Bullish Bearish Bearish South Africa Neutral 11.28% Bullish Bullish Neutral Bearish Norway Neutral 9.80% Bullish Bullish Bullish Neutral Japan Neutral -13.51% Bearish Bearish Neutral Bearish Philippines Neutral 21.92% Bullish Bearish Neutral Bullish South Korea Neutral -6.84% Neutral Bullish Bullish Bullish Luxembourg Neutral -16.09% Neutral Bullish Bullish Bearish United Emirates Neutral -5.90% Bullish Bullish Bullish Neutral Mexico Bearish 3.81% Bearish Bearish Bullish Bullish Argentina Bearish -36.10% Bearish Bearish Neutral Bearish Egypt Bearish -2.00% Bearish Bearish Bearish Bearish Spain Bearish -20.84% Bearish Neutral Bearish Bearish Greece Bearish -98.00% Bearish Bullish Bearish Bearish Poland Bearish -11.80% Neutral Bearish Bearish Bearish Iceland Bearish N/A Bearish Bullish Bearish Bearish Portugal Bearish -27.47% Bearish Bullish Bearish Bearish France Bearish -9.94% Bullish Bullish Bearish Bearish Italy Bearish 4.24% Bearish Bearish Bearish Bearish Denmark Bearish 9.26% Neutral Bearish Bearish Bearish Sweden Bearish -7.64% Bullish Bullish Neutral Bearish Finland Bearish -23.49% Neutral Bearish Bearish Bearish Belgium Bearish -6.28% Bearish Bearish Bearish BearishRoger Williams University Mario J. Gabelli School of Business
  • Global Economic Analysis Economic Analysis Sector Analysis Industry Analysis Company AnalysisRoger Williams University Mario J. Gabelli School of Business
  • Domestic Economic Analysis Leading Bullish Economic Indicator Lagging Trend Bearish Coincidental Neutral Housing Starts Leading Upward Bullish Industrial Production/ Capacity Utilization Leading Upward Bullish Retail Sales Leading Upward Moderately Bullish Business Sales and inventories Leading Upward Neutral (Inventory/Sales Ratio) Yield on 10-year Treasury Bonds Leading Downward Bullish S&P 500 Stock Index Leading Upward Moderately Bullish CCI Leading Upward Neutral Nonfarm Payroll Employment Lagging Downward Neutral Advance Durable Goods Shipments, New Lagging Upward Bullish Orders and Unfilled Orders Lightweight Vehicle Sales Lagging Upward Neutral Unemployment Lagging Downward Bullish M2 Coincidental Upward Bullish MCSI Coincidental Upward Bullish Real Gross Domestic Product (GDP) Coincidental Upward Bullish Consumer Price Index (CPI) Coincidental Upward BullishRoger Williams University Mario J. Gabelli School of Business
  • Domestic Economic Analysis Economic Indicator Outlook Reasoning Over the past few months, unemployment rates have declinedUnemployment Rate Bullish to numbers unseen since early 2009. We see this strong trend continuing into the near future, as jobless rates decline. Since monetary easing was expected through Bernanke’s QE3,Consumer Price Index (CPI) Bearish we were bearish on the future outlook for inflation in the United States. Historically, United States GDP has risen at a stable andGross Domestic Product (GDP) Bullish consistent rate. We see this growth continuing strong into the coming years. Interest rates have continued to drop since the Federal ReserveInterest Rates Bullish introduced monetary easing following the 2008 crisis. Bernanke pledged to keep interest rates low until 2015, a bullish indicator for stocks. As consumer confidence is correlated to many of the economicConsumer Confidence Index (CCI) Bullish indicators, such as unemployment and housing starts, we are confident in increased consumer confidence going into Q4. This is reiterated by a decrease in unemployment and an increase in housing starts. Going into the fourth quarter, we were bullish in retail sales.Retail Sales Bullish This is affirmed as retail sales tend to have a cyclical upward trend in the later months of the year. Roger Williams University Mario J. Gabelli School of Business
  • Portfolio Construction: Top Down Approach Economic Analysis Sector Analysis Industry Analysis Company AnalysisRoger Williams University Mario J. Gabelli School of Business
  • Sector Analysis Overweight Bullish Energy Sector Marketweight Neutral Underweight Bearish Industrials Technology Overweight Bullish Healthcare Conglomerates Marketweight Neutral Basic Consumer Goods Overweight Bullish Materials Utilities Underweight Bearish Consumer Staples Services Marketweight Neutral Basic Materials Marketweight NeutralConsumer Utilities Healthcare Underweight BearishDiscretionary Financials Underweight Bearish Industrial Goods Overweight Bullish Financials Technology Source: Sam Stovall, BusinessWeek Online, “A Cyclical Take on Performance.” Roger Williams University Mario J. Gabelli School of Business
  • Portfolio Construction: Top Down Approach Economic Analysis Sector Analysis Industry Analysis Company AnalysisRoger Williams University Mario J. Gabelli School of Business
  • Industry Analysis Bad Economy/Sector ≠ Bad Industry Bullish Industries Bullish Industries Internationally Domestically• Chemicals • Gaming Manufacturing • Retail• Casinos & Gaming • Consumer Financial• Education Services Services• Computer Services • Personal and Household ProductsRoger Williams University Mario J. Gabelli School of Business
  • Portfolio Construction: Top Down Approach Economic Analysis Sector Analysis Industry Analysis Company AnalysisRoger Williams University Mario J. Gabelli School of Business
  • Company Evaluation and Selection Process Fundamental Behavioral Technical AVOID SFM Consensus WATCH BUYRoger Williams University Mario J. Gabelli School of Business
  • Fundamental Analysis • Price/Earnings • Liquidity • Price/Earnings • Management Growth Effectiveness • Price/Cash Flow • Profitability Key Ratio Financial Analysis Ratios Financial EPS Statement Analysis Analysis • Historical • Common Sizing Surprise • Trend Analysis • EPS GrowthRoger Williams University Mario J. Gabelli School of Business
  • Valuation CF Industries Holdings (CF) Sociedad Quimica Industry:Valuation Ratios CF Industries (CF) (SQM) ChemicalsTrailing P/E Ratio 8.2 24.44 14.44Forward P/E Ratio 7.1 21.36 -PEG Ratio 0.99 1.31 -Price to Sales 2.03 6.76 2.45Price to Book 2.6 7.31 1.86Price to Cash Flow 7.07 21.05 8.67 Price per Share P/E Ratio = Lower than Competitor Earnings per Share Price/Earnings Growth PEG Ratio = Close to or less than 1.0 Earnings Growth Share Price Price to Cash Flow = Lower than Competitor Cash Flow per Share Roger Williams University Mario J. Gabelli School of Business
  • Ratio Analysis Nu Skin (NUS) NU Skin Avon Products Industry: Profitability Ratios (NUS) (AVP) Personal Products Gross Margin (TTM) 0.84 0.62 0.63 EBITD Margin (TTM) 0.16 0.07 -0.02 Operating Margin (TTM) 9.95 4.3 2.02 Net Profit Margin (TTM) 10.34 2.3 2.08 Management NU Skin Avon Products Industry: Effectiveness (%) (NUS) (AVP) Personal Products Return on Assets (TTM) 19.43 6.07 8.58 Return on Investment (TTM) 28.05 11.64 15.75 Return on Equity (TTM) 34.19 28.96 19.91 NU Skin Avon Products Industry: Personal Financial Strength (NUS) (AVP) Products Quick Ratio (MRQ) 1.73 1.02 1.5 Current Ratio (MRQ) 2.01 1.45 1.95 LT Debt to Equity (MRQ) 0.33 1.79 0.21 Total Debt to Equity (MRQ) 0.33 1.79 20.98 Interest Coverage (TTM) 48.24 3.85 91.29Roger Williams University Mario J. Gabelli School of Business
  • Earnings Per Share Consensus Honeywell (HON) EPS Consensus Perspectives: Honeywell (HON) This Next Long-Term Recent Perspective This Year Next Year Growth this year Quarter Quarter Growth Current Consensus EPS Estimate 1.11 1.14 4.48 4.95 10.43% 10.49% Mean of 3 most recent estimates 1.1 1.11 4.49 4.95 10.67% 10.24% Age of the oldest from the three most recent estimatechanges 10 days 11 days 10 days 9 days 11 days Earnings Report: Honeywell (HON) This Quarter Next Quarter Earnings Estimates 12-Dec 13-Mar This Year Next Year Number of Estimates 16 6 19 20 Average Estimate 1.11 1.14 4.48 4.95 Low Estimate 1.08 1.09 4.45 4.79 High Estimate 1.16 1.19 4.53 5.05 Historical EPS Surprises: Honeywell (HON) 13-Sep 13-Jun 12-Mar 11-Dec 11-Sep Estimate 1.13 1.11 0.99 1.04 0.99 Actual 1.2 1.14 1.04 1.05 1.1 Difference 0.07 0.03 0.05 0.01 0.11 Surprise 6.19% 2.70% 5.05% 0.96% 11.11% Roger Williams University Mario J. Gabelli School of Business
  • Financial Statement Analysis Discover Financial Services (DFS) Income Statement: Nominal Figures Common Sized Trend Analysis 11/30/2011 11/30/2010 11/30/2009 11/30/2008 11/30/2007 11/30/2011 11/30/2010 11/30/2009 11/30/2008 11/30/2007 TrendSales $8,550.31 $8,241.21 $7,985.67 $6,957.02 $6,434.28 100.00% 100.00% 100.00% 100.00% 100.00%Cost of Goods $986.77 $1,150.50 $1,187.08 $1,199.43 $1,044.57 11.54% 13.96% 14.87% 17.24% 16.23% DecreasingGross profit $7,563.53 $7,090.71 $6,978.59 $5,757.58 $5,389.71 88.46% 86.04% 85.13% 82.76% 83.77% IncreasingSelling & Administrative & $3,554.51 $5,389.37 $4,613.49 $4,011.41 $4,106.67 41.57% 65.40% 57.77% 57.66% 63.82% VariableDepr. & Amort ExpensesIncome AfterDepreciation & 46.89% 20.64% 27.36% 25.10% 19.94% IncreasingAmmorization $4,009.02 $1,701.34 $2,185.10 $1,746.17 $1,283.04 0.00% 0.00% 0.00% 0.00% 0.00%Non-Operating Income $0.00 $0.00 $0.00 $0.00 $0.00 5.82% 5.25% 0.80% 1.27% 5.25% IncreasingInterest Expense $497.77 $432.48 $64.20 $88.56 $337.84Pretax Income $3,511.24 $1,268.85 $2,120.89 $1,657.60 $945.19 41.07% 15.40% 26.56% 23.83% 14.69% IncreasingIncome Taxes $1,284.53 $504.07 $844.71 $594.69 $356.56 15.02% 6.12% 10.58% 8.55% 5.54% IncreasingMinority Interest $0.00 $0.00 $0.00 $0.00 $0.00 0.00% 0.00% 0.00% 0.00% 0.00%Investment Gains/Losses $0.00 $0.00 $0.00 $0.00 $0.00 0.00% 0.00% 0.00% 0.00% 0.00%Other Income/Charges $0.00 $0.00 $0.00 $0.00 $0.00 0.00% 0.00% 0.00% 0.00% 0.00%Income From Cont. 26.04% 9.28% 15.98% 13.34% 9.15% IncreasingOperations $2,226.70 $764.78 $1,276.18 $927.75 $588.63Extras & Discounted 0.00% 0.00% 0.00% 0.00% 0.00%Operations $0.00 $0.00 $0.00 $0.00 $0.00 26.04% 9.28% 15.98% 13.34% 9.15% IncreasingNet Income $2,226.70 $764.78 $1,276.18 $927.75 $588.63 Roger Williams University Mario J. Gabelli School of Business
  • Technical Analysis• A method of assessing securities based on charts and past price history.• Identify trends using indicators and patterns.• Useful for timing buy and sell decisions. Technical Indicators Used• Indicators when used alone • Relative Strength Index • Stochastic Oscillator are not enough, but they are • MACD Oscillator a powerful tool. • Volume • Price Patterns (Head and Shoulder)Roger Williams University Mario J. Gabelli School of Business
  • Relative Strength Index (RSI) CF Industries Holdings (CF)The RSI on a scale from 1-100Quantifies price momentumOversold Scenario • Below 30 • Buy opportunityOverbought Scenario • Above 70 • Sell opportunityPurchase Price: $193.00Current Price: $213.30 Purchased on 10/15$ Return: $ 252.36% Return: 10.90% Roger Williams University Mario J. Gabelli School of Business
  • Stochastic Oscillator NU Skin Enterprises Inc. (NUS) Used to judge a stock’s momentum Short-term moving average Long-term moving average Overbought above 80 Oversold below 20 Sold for 8.847% gain on 11/2 Purchase Price: $41.85 Current Price:$44.93 Combined % Return: 10.087%Roger Williams University Mario J. Gabelli School of Business
  • MACD OscillatorNew Oriental Education & Technology Group Inc. (EDU) MACD: Moving Average Convergence Divergence 12-day moving average •Red Line 26-day moving average •Blue Line Strong indicator Purchased on 11/9 Whipsaw on 11/29 Purchase Price: $16.72 Current Price: $20.96 $ Return: $ 529.76 % Return: 20.57% Roger Williams University Mario J. Gabelli School of Business
  • Trend Analysis Similar500 (May 2008-Present) S&P Funds’ Performance Ceiling: 1465 Floor: 1330Roger Williams University Mario J. Gabelli School of Business
  • Behavioral AnalysisRoger Williams University Mario J. Gabelli School of Business
  • Company Specific News Ecolab (ECL)• Acquisition of Champion Technologies• Growing popularity of unconventional drilling methods Purchased Champion• Became #1 Technologies manufacturer of energy field chemicals in North America Roger Williams University Mario J. Gabelli School of Business
  • Sector Cyclicality• Certain Sectors Perform well in Different time periodsConsumer Goods/Services• Holiday shopping• 75% of annual revenue• Correlation with consumer spendingActivision Blizzard Inc (ATVI)• Released Call of Duty Black Ops 2• Since the release the stock has seen an steady increase in stock price• ATVI overall has been trending up Roger Williams University Mario J. Gabelli School of Business
  • Investor Sentiment Standard & Poor’s 500 (SPX) S&P 500 Black Friday 2011Black Friday & CyberMonday• Start of the holidayshopping season• Projection of quarterly sales S&P 500 Black Friday 2012 Market Reaction •This year sales fell 1.8% store visits climbed 3.5% •Comparison to a weak Black Friday Roger Williams University Mario J. Gabelli School of Business
  • Institutional & Insider Activity LyondellBasell (LYB) When institutions purchase shares it leads to a bullish trend, adversely when institutions sell shares it leads to a bearish trend. In terms of insider transactions, this rule does not always remain true. LyondellBasell Industries CEO sold $4.7 million in shares causing a 12.5% decrease in stock priceRoger Williams University Mario J. Gabelli School of Business
  • Portfolio Construction SIMFRoger Williams University Mario J. Gabelli School of Business
  • Correlation Matrix TRMB GXYEY CSL DFS ECL CF BRK.B RJF NUS HON BIDU EDU MRK MAT BEAV AWK CBI ATVI UTX DIS TEF LYB ORLY S&PTRMB 1GXYEY 0.434568 1CSL 0.235003 0.624076 1 Green: -1 to -0.0001DFS 0.1046 0.789343 0.77375 1 Strongly CorrelatedECL -0.1913 0.453177 0.733249 0.774419 1 Yellow: 0 to 0.7499CF 0.092154 0.703035 0.535107 0.830389 0.522876 1 Moderately CorrelatedBRK.B -0.06084 0.70496 0.625304 0.913512 0.696633 0.883213 1 Red: 0.75 to 1RJF 0.601457 0.819605 0.546486 0.609542 0.254599 0.637426 0.606863 1NUS 0.53126 -0.16785 -0.42242 -0.46521 -0.54968 -0.3168 -0.52854 0.037122 1 Negatively CorrelatedHON 0.541875 0.745514 0.411569 0.547201 0.173933 0.624502 0.558635 0.882824 0.093506 1BIDU 0.554324 -0.20575 -0.47238 -0.51387 -0.67023 -0.36348 -0.58943 -0.04453 0.782616 0.069456 1EDU 0.407324 -0.36951 -0.29126 -0.64863 -0.47966 -0.74601 -0.74372 -0.20343 0.515311 -0.32057 0.551004 1MRK -0.24469 0.644373 0.541393 0.867277 0.720351 0.862327 0.945891 0.483725 -0.549 0.470796 -0.64478 -0.85072 1MAT 0.218142 0.779836 0.631806 0.923549 0.630722 0.846091 0.865521 0.686575 -0.2785 0.697137 -0.30952 -0.6554 0.816427 1BEAV 0.707716 0.13838 0.06154 -0.18805 -0.21689 -0.19918 -0.27716 0.410275 0.628395 0.361291 0.518577 0.658834 -0.41239 -0.05764 1AWK -0.07745 0.602278 0.58869 0.887439 0.67237 0.864016 0.877219 0.455473 -0.51057 0.491245 -0.5004 -0.83358 0.883692 0.878976 -0.38303 1CBI 0.64567 -0.0429 -0.28579 -0.42817 -0.62396 -0.15043 -0.3974 0.304959 0.771338 0.372871 0.715847 0.4787 -0.4907 -0.22258 0.715081 -0.44038 1ATVI 0.423668 -0.31481 -0.1147 -0.46075 -0.46658 -0.38001 -0.51456 -0.12965 0.48018 -0.15336 0.593635 0.492899 -0.60939 -0.40957 0.348094 -0.50205 0.491463 1UTX 0.758647 0.35598 -0.01637 0.064812 -0.32416 0.291986 0.050056 0.620221 0.520541 0.678218 0.54064 0.112698 -0.07666 0.299171 0.575063 0.06333 0.753865 0.204123 1DIS -0.13092 0.606179 0.667538 0.931126 0.776734 0.801144 0.931651 0.427882 -0.61886 0.36577 -0.65709 -0.74067 0.896236 0.850942 -0.38614 0.901265 -0.58639 -0.5289 -0.09641 1TEF 0.348566 -0.12449 -0.50213 -0.52968 -0.68379 -0.18584 -0.35194 0.241079 0.527669 0.25668 0.499561 0.366665 -0.39879 -0.34735 0.447591 -0.47816 0.781397 0.29067 0.614479 -0.58105 1LYB 0.235732 0.844726 0.524308 0.818681 0.499681 0.874139 0.846921 0.798657 -0.27215 0.813037 -0.31595 -0.62859 0.816844 0.865445 -0.02943 0.793523 -0.07854 -0.4836 0.396534 0.723299 -0.04846 1ORLY 0.346109 -0.0387 0.314292 -0.05853 0.057683 -0.37082 -0.30646 -0.13012 0.110597 -0.18644 0.230877 0.515991 -0.41993 -0.14584 0.356615 -0.25427 0.034748 0.409602 -0.10934 -0.17094 -0.36441 -0.38864 1S&P 0.440764 0.813493 0.555622 0.803667 0.373871 0.876946 0.813823 0.84083 -0.08065 0.820512 -0.09921 -0.50628 0.701222 0.880858 0.114086 0.733205 0.101743 -0.19677 0.561041 0.695619 -0.01585 0.878321 -0.19058 1 Roger Williams University Mario J. Gabelli School of Business
  • Expected Return Minimum Variance Portfolio 100% equities high SIMF risk & return MVP 100% fixed income low risk & low return Expected RiskRoger Williams University Mario J. Gabelli School of Business
  • Portfolio Holdings Company Ticker Purchase Price Current Price # of Shares Cost Value Beta Weight Weighted Beta Yield Sector Country Accenture Plc ACN $66.27 $67.92 33 $2,186.91 $2,241.36 0.87 0.0298 0.0259 2.49% Technology Ireland Activision Blizzard ATVI $10.96 $11.46 203 $2,224.88 $2,325.37 0.54 0.0309 0.0167 4.52% Technology U.S.American Water Works AWK $36.29 $38.17 72 $2,612.88 $2,748.24 0.65 0.0365 0.0237 5.18% Utilities U.S. B/E Aerospace BEAV $44.09 $47.36 102 $4,497.18 $4,830.72 1.22 0.0642 0.0783 7.42% Industrial Goods U.S. Baidu BIDU $103.28 $96.31 21 $2,168.88 $2,022.51 1.79 0.0269 0.0481 -6.75% Technology China Berkshire Hathaway BRK.B $83.46 $88.08 48 $4,006.08 $4,227.84 0.82 0.0562 0.0461 5.54% Conglomerate U.S. Chicago Bridge Inc. CBI $37.40 $40.63 60 $2,244.00 $2,437.80 1.43 0.0324 0.0463 8.64% Industrial Goods Netherlands CF Holdings CF $193.00 $214.03 12 $2,316.00 $2,568.36 1.15 0.0341 0.0393 10.90% Basic Materials U.S. Carlisle Companies CSL $55.53 $56.67 58 $3,220.74 $3,286.86 1.45 0.0437 0.0633 2.05% Consumer Goods U.S. Discover Financial DFS $39.00 $41.61 77 $3,003.00 $3,203.97 1.28 0.0426 0.0545 6.69% Services U.S. Walt Disney DIS $47.33 $49.66 50 $2,366.50 $2,483.00 1.12 0.0330 0.0370 4.92% Services U.S. EcoLab ECL $67.09 $72.08 57 $3,824.13 $4,108.56 0.82 0.0546 0.0448 7.44% Consumer Goods U.S. New Oriental EDU $16.72 $20.16 154 $2,574.88 $3,104.64 1.08 0.0413 0.0446 20.57% Services ChinaGalaxy Entertainment GXYEY $31.53 $38.09 100 $3,153.00 $3,809.00 1.44 0.0506 0.0729 20.81% Services China Honeywell HON $60.42 $61.33 37 $2,235.54 $2,269.21 1.31 0.0302 0.0395 1.51% Industrial Goods U.S. LyondellBasell LYB $54.22 $49.73 61 $3,307.42 $3,033.53 0.53 0.0403 0.0214 -8.28% Basic Materials Netherlands Mattel MAT $35.70 $37.51 104 $3,712.80 $3,901.04 0.92 0.0519 0.0477 5.07% Consumer Goods U.S. Merck MRK $43.74 $44.30 96 $4,199.04 $4,252.80 0.65 0.0565 0.0367 1.28% Healthcare U.S. NuSkin NUS $45.30 $45.40 89 $4,031.70 $4,040.60 1.19 0.0537 0.0639 0.22% Consumer Goods U.S. OReilly Auto Parts ORLY $89.96 $94.08 39 $3,508.44 $3,669.12 0.99 0.0488 0.0483 4.58% Services U.S. Raymond James RJF $37.08 $37.75 62 $2,298.96 $2,340.50 1.35 0.0311 0.0420 1.81% Financial U.S. Telefonica TEF $13.20 $13.03 157 $2,072.40 $2,045.71 1.67 0.0272 0.0454 -1.29% Technology Spain Trimble TRMB $47.22 $55.64 64 $3,022.08 $3,560.96 1.71 0.0473 0.0809 17.83% Technology U.S. United Technologies UTX $76.29 $80.11 34 $2,593.86 $2,723.74 1.19 0.0362 0.0431 5.01% Conglomerate U.S. 15 October to 30 November 2012 Roger Williams University Mario J. Gabelli School of Business
  • Top Gainer & Losers Gainers Losers • Galaxy Entertainment • Baidu Inc Group Ltd (BIDU) -6.71% (GXYEY) 20.81% • American Eagle Outfitters • New Oriental Education & Technologies Group (AEO) -8.02% (EDU) 20.57% • LyondellBasell Industries • Trimble Navigation Ltd NV (TRMB) 17.83% (LYB) -8.26%Roger Williams University Mario J. Gabelli School of Business
  • Portfolio Weightings 15 October to 30 November 2012Roger Williams University Mario J. Gabelli School of Business
  • Portfolio Weightings Sector Weightings 5.81% 3.24% 16.38% Technology21.08% 3.61% Utilities Industrial Goods Conglomerate 12.45% Basic Materials Consumer Goods Services 9.22% Healthcare 20.72% Financial 7.50% 15 October to 30 November 2012Roger Williams University Mario J. Gabelli School of Business
  • Portfolio Statistics Beta Trailing P/E Forward P/E PEG Dividend Yield .94 15.49 14.89 1.12 1.33% 15 October to 30 November 2012Roger Williams University Mario J. Gabelli School of Business
  • Similar Funds Performance 15 October to 29 November 2012Roger Williams University Mario J. Gabelli School of Business
  • SIMF vs. S&P 500 15 October to 29 November 2012Roger Williams University Mario J. Gabelli School of Business
  • Risk-Adjusted Performance Sharpe Ratio Treynor Ratio ( Rp - rf ) ( Rp - rf ) sp bp SIMF: 1.938% SIMF: 0.023% S&P: -1.996% S&P: -0.0177% CGI: .6313% CGI: 0.0055% Jensen’s Alpha a = Rp - é Rp - b p ( Rm - Rp)ù ë û vs S&P: 3.8% vs CGI: 1.48%Roger Williams University Mario J. Gabelli School of Business
  • Lessons Learned “Valuable knowledge gained through a hands-on learning approach” • Calculating our own data • Regression Analysis • Earnings Announcements • EPS isn’t the only factor • Stop-Losses • Understanding a stock’s volatility • Hedging • Use of various- ETF’sRoger Williams University Mario J. Gabelli School of Business
  • Calculating our Own Data Discover Financial Services (DFS) Zacks Fundamentals Yahoo Finance Reuters CAFE 1.47 .96 1.45 1.28 Regression Statistics Multiple R 0.679291 R Square 0.461437 Adjusted R Square 0.458966 Standard Error 0.012228 Observations 220 ANOVA df SS MS F Significance F Regression 1 0.02793035 0.02793 186.7807751 4.00566E-31 Residual 218 0.03259874 0.00015 Total 219 0.06052909 Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Intercept 0.001536 0.00082828 1.853846 0.065112168 -9.69585E-05 0.003168 DFS vs S&P 500 1.280846 0.09371966 13.66678 4.00566E-31 1.096132981 1.465558Roger Williams University Mario J. Gabelli School of Business
  • Earnings AnnouncementsMattel (MAT)• Stock price was lower than the day before• Earnings surprised analysts estimates• They beat EPS from the previous year by 22%• Stock Price Surged after Opening bell.Purchase Price: $35.70Current Price:$37.51Percent Return: 5.07% Roger Williams University Mario J. Gabelli School of Business
  • Stop-Losses Hillenbrand (HI)Hillenbrand (HI)• A trailing stop loss was triggered during pre-market trading on October 17th• Missed a 20% price increase• Misjudged the stock’s VolatilityPurchase Price: $18.68Sell Price:$19.28Percent Return: 3.21%Roger Williams University Mario J. Gabelli School of Business
  • Hedging ETF Exchange Traded Market Close Funds News is released of probably President Obama re-election • Stocks that represent sectors, commodities, Credit swaps 4 AM Report etc. Confirmation of the re-election of • Used as a hedge to prevent losses President Obama • Helped regain losses. Market Open Cash Purchased SDS in anticipation of the reaction • Balance of 10- 15% at all times • Gave us room to make momentum Purchase Price: $56.10 trades Sell Price:$56.90 Percent Return: 1.4%Roger Williams University Mario J. Gabelli School of Business
  • Future Global Economic Outlook Bullish Countries ReasoningGermany Strongest economy in Europe.United Kingdom Highly correlated to the U.S. economySwitzerland Limited risk associated with other European marketsChina Large GDP growth rateBrazil Leading emerging market Roger Williams University Mario J. Gabelli School of Business
  • Future Domestic Economic Outlook Post November 30, 2012 Pros ConsIndustrial and Basic Materials Sectors are expected to Financial Sector expected to underperform.outperform. Bearish on Money Center Banks Bullish on Residential Construction, and Industrial Metals and Materials IndustriesAmerica’s Infrastructure is expected to improve, as cited by US Fiscal Cliff could potentially pull U.S. economy back intoPresident Barack Obama recession.Bullish signals in consumer spending and confidence, housing Potential political gridlock following reelection of US Presidentstarts, and existing home sales. Barack Obama. Increased government regulation and implementation of new tax policies could pull down the Financial Sector. Roger Williams University Mario J. Gabelli School of Business
  • Economic Behavioral Factors Pros Cons Multinational Health Care companies will GDP will decrease outperform Unemployment will increase Generic pharmaceutical companies will outperform. Taxes will rise for nearly everyone Funding for federal programs cut Real Estate Investment Trusts specializing in Health Already seeing affects of fiscal cliff Care facilities or hospitals will outperform Hiring rate down Fewer large investment decisions Moderately bullish outlook for 2013 Aerospace and defense will underperformRoger Williams University Mario J. Gabelli School of Business
  • Conclusion • CAFÉActive ManagementIndustry • Fiduciary Responsibility • Qualitative Skills • Quantitative Skills • TeamRoger Williams University Mario J. Gabelli School of Business
  • Gabelli Funds Sponsored Trip to Mainland ChinaRoger Williams University Mario J. Gabelli School of Business
  • Beijing Foreign Studies UniversityRoger Williams University Mario J. Gabelli School of Business
  • Shanghai Stock ExchangeRoger Williams University Mario J. Gabelli School of Business
  • Shanghai Futures ExchangeRoger Williams University Mario J. Gabelli School of Business
  • Gabelli Asset Management Company Shanghai OfficeRoger Williams University Mario J. Gabelli School of Business
  • Shanghai International Studies UniversityRoger Williams University Mario J. Gabelli School of Business
  • BeijingRoger Williams University Mario J. Gabelli School of Business
  • Shanghai World Financial CenterRoger Williams University Mario J. Gabelli School of Business
  • Special Thanks • Mr. Mario J. Gabelli CEO, Gabelli Asset Management • Dr. Jerry Dauterive Dean, Mario J. Gabelli School of Business • Dr. Michael Melton, (Doc) Director, Center for Advanced Financial Education The CAFÉ Program would like to thank Rhody Couture (www.rhodycouture.com) for providing neckwear for the Student Fund Managers.Roger Williams University Mario J. Gabelli School of Business
  • Questions?Roger Williams University Mario J. Gabelli School of Business