The presentation provides an overview of the investment advisory board's real-time portfolio management for the 2016 spring season. It includes an economic overview noting strengthening US labor markets and declining corporate earnings. The agenda covers portfolio allocation, YTD transactions and performance, sector updates, and a proposal to reduce the cash allocation. Performance shows the portfolio outperforming the S&P 500 on a total return basis YTD despite underperformance in healthcare and financials.

1. Investment Advisory Board
Presentation
2016 Spring Real-Time Portfolio Management
“The past, the present, and the future are really one:
they are today” - Harriet Beecher Stowe

2. Agenda
● Economic Overview
● Portfolio Allocation Summary
● Transactions YTD
● Portfolio Performance YTD
● Sector Updates
● Proposal for Reducing Cash Allocation

3. Economic Overview
• US labor market indicators are strengthening
– Unemployment, Labor Force Participation Rate, and initial jobless
claims are showing positive signs
• Brent crude oil has increased 29% since the start of 2016
• Corporate earnings are underperforming
– Thomson Reuters is projecting a 6.1% decline in Q1 earnings for
S&P 500 companies
• FOMC concluded their third meeting of the year on April 27
– Interest rates remained unchanged due to low GDP growth
expectations for US Economy
1 Theo Francis and Kate Linebaugh, “U.S. Corporate Profits on Pace for Third Straight Decline,” The Wall Street Journal (2016).
1

4. Summary & ETF’s

5. Consumer Goods Current Holdings

6. Healthcare Current Holdings

7. Technology & Telecommunication Current Holdings

8. EMUIT Current Holdings

9. Financials Current Holdings

10. YTD Transactions

11. Portfolio Performance Dec 31/2015 - March 31/2016
*Return as of 3/31/2016

12. Dividends
*Return as of 3/31/2016

13. Top Best and Worst performing stocks
Gainers Losers
Michael Kors (KORS) +42.19% Ambarella (AMBA) -19.81%
Royal Gold (RGLD) +40.46% CBRE Group Inc (CBG) -16.66%
Enbridge Inc (ENB) +17.23% Novartis AG (NVS) -15.81%
Walmart (WMT) +11.73% Biogen Inc (BIIB) -15.03%
3M Co (MMM) +10.61% PJT Partners Inc (PJT) -14.99%
*Return as of 3/31/2016

14. Risk/Volatility
• Portfolio Beta average: 1.0545
• Active Return Average: -210 basis points
*Return as of 3/31/2016
Portfolio S&P 500
Average annualized
standard deviation
10.23% 17.60%

15. Sector Performance
South Hill Fund
Excluding Cash
South Hill Fund
Total
Market S&P
Consumer 70 39.6 302
Tech -24 -13.7 217
EMUIT 84 47.7 624
Healthcare -92 -51.8 -593
Financials -144 -81.6 -560
In Basis Points
*Return as of 3/31/2016

16. Consumer Goods
Steve Ashe | Suba Chakraborty | Alissa Cugliari | Clay Curran

17. Consumer Goods Transactions
● Michael Kors: Purchased 42 shares at $56.27
● Wal-Mart: Purchased 74 shares at $69.43
● Ecolab: Sold 45 shares at $115.12
WMT Walmart
DIS Disney
IFF Int’l Fragrance
KO Coca Cola
KORS Michael Kors
SBUX Starbucks

18. Consumer Goods Market Conditions

19. Wal-Mart has the strongest sustainable growth
ROE x Plowback = Sustainable
growth
WMT 20.88% .77 16.08%
TGT 18.05% .80 14.44%
COST 13.42% .74 9.93%

20. Wal-Mart Stores Inc. Valuation
Purchase Price: $69.50
See Appendix
FCFE Valuation
Estimate: $100.64

21. Healthcare
Stephanie O’Brien | Alex Leone | Anthony Skretny | Nick Vargas

22. AMGN Amgen
BIIB Biogen
GILD Gilead
JNJ
Johnson &
Johnson
MYL Mylan
NVS Novartis
UNH
UnitedHealth
Group
ZBH Zimmer Biomet
Current Holdings With UNH Trade

23. Opportunities
● Aging global population
● Longer life expectancy
● Increase in chronic diseases
– Obesity, high cholesterol,
dementia
● Emerging economies
– Increased access to healthcare
Risks
● Political uncertainty
● Potential drug pricing reform
● Affordable Care Act
Healthcare Industry Outlook

24. Healthcare Recent Trades
● Purchased Amgen
– Relatively low-risk investment within the biopharmaceutical sector
– Recently invested heavily into R&D
– 12 drugs currently in Phase 3 testing and 22 in the preliminary
stages
– See Appendix B
● Placed limit order on UnitedHealth Group ($126.87)
– Huge upside potential for international expansion
– Opportunity to increase profit margins by exiting 34 states where
they’re currently making losses
– Optum unit is a major competitive advantage

25. Inception:
● March 28th
● 35 shares of AMGN at $149.24
($5,223.40)
Performance:
● Currently: $160.56 (4/28 closing
price)
● Forecasted dividends of $1.00 on June
8th (ex-dividend date of May 13th)
● As of 4/29
– $5,619.60
– Up 7.59% since purchase
Amgen Purchase

26. Technology and Telecommunication
Chris Forrest | Taulant Gashi | Parin Kaba | Zamar Malik | Romano Meza Leal

27. Tech & Telecom Holdings
QCOM Qualcomm
AAPL Apple
AMBA Ambarella
AMT American Tower
EMCE EMC Corp.
FDS FactSet Research
GOOG Alphabet Class C
GOOGL Alphabet Class A
IRBT iRobot

28. Recent Trades
Purchased Apple on April 20:
● Increased holding by 30 shares to 85 total
● Market value of $9,031.38 (4/27)
Rationale:
● Beta of 0.95 (Valueline April 1, 2016)
● Conservative Growth
– g: 10%, stable growth: 5%
● Undervalued 47.11% at $108 (April 17, 2016)
– See Appendix C
● Focused in reducing cash drag

29. Performance
Apple Statement on Tuesday (4/26)
● 2nd quarter sales declined 13%
– $50.6 billion, $58 billion in previous year
– Analysts estimated $52 billion (Bloomberg survey)
● Net income declined to $10.5 billion
● 3rd quarter sales will be $41 to $43 billion
– Analysts estimated $47.4 billion (Bloomberg survey)

30. Performance
At Tuesday’s Close in New York (4/26)
● Market Capitalization $519.4 billion
● Growth opportunities in services
● Expanding Apple Pay into China, Singapore, Australia
(CNET.com, Apple.com)

31. EMUIT
(Energy, Materials, Utilities, Industrials, Transportation)
Alek Peters | Brian Krakower | Matthew Corcoran | Michael Maddahi

32. HON Honeywell
CBI Chicago Bridge & Iron
ENB Enbridge
LYB Lyondellbasell
MMM 3M
OXY Occidental Petroleum
RGLD Royal Gold
UNP Union Pacific
WY Weyerhaeuser
VLO Valero

33. Position Changes
● Occidental Petroleum
– Sold 38 shares at $69.39
● Valero Energy Corporation
– Purchased 42 shares at $63.16
● Honeywell International
– Purchased 27 shares at $114.41

34. Occidental Petroleum
• 72% of revenues from oil exploration and production
• More geopolitical and volatility risk than refiners
• Depressed oil prices forcing producers to take on debt
• 30.28% overvaluation (03/07)
– See Appendix J
Rationale

35. Valero Energy Corporation
● Maintaining oil exposure
– Refining vs. production
● Reduce Middle East exposure
– Decreases overall risk
– USA, UK, Canada
● Largest independent petroleum
refiner in US
● 16% Undervaluation (03/07)
– See Appendix J
Honeywell International Inc.
● Highly diversified company
● Operating in various business
segments
● Historically higher returns than
competitors
● Higher growth potential
● 32.35% Undervaluation (04/14)
– See Appendix K
Rationale

36. Recent Activity
● 1Q 2016 Earnings: May 3
● Current Price: $60.91
● Down 3.58% since purchase
*As of 04/28 close
Valero Energy Corporation Honeywell International Inc
● Beat earnings estimate by
$0.03 per share and revenue
estimate by $150 million
● $5 Billion Stock Buyback plan
● Current Price: $114.62
● Up 0.17% since purchase

37. Financials
Brandon Stern | Brennan D’Angelo | JB Allred | Tamal Rahman

38. FINANCIALS

39. Interest Rates
Short: 0.27%
Mid: 0.59%
Long: 0.39%

40. Rationale:
● Confidence in leadership
● Successful restructuring
– Large consumer banking
segment
● Undervalued sector
– DDM: 12.50% undervalued
– Tgt. Price: $66.58
– See Appendix Q
● Net Interest Margin: 2.03%
Performance:
● Up 3.75% from proposal on
April 13th
● Up 8.15% from before earnings
*As of 04/27 close
J.P. Morgan Chase

41. Rationale:
● New exposure of a growth
stock
– Expanding consumer
credit services
– Projected dividend
issuance
● 3.91% Undervalued
● Innovative business
platforms
● Net Interest Margin 19.04%
Performance:
● Up 11.56% since purchase
(3/9/2016)
● See Appendix L
*As of 04/27 close
Synchrony Financial

42. Synchrony Financial
Revenue Breakdown:
2015 Actual 2015 Percentage 2012-2015
Growth
Retail Card $7,425 68.5% 24.04%
Care Credit $1,717 15.8% 25.70%
Payment
Solutions
$1,691 15.6% 16.94%
*Bloomberg Data (In millions of USD) as of 4/27/16

43. The 2020 Real-Time Plan
● Step 1: Weight positions based on macroeconomic approach
– Sectors should hold approximately 6 companies
● Step 2: Sell off the weakest companies on a valuation basis in order
to reach this requirement
● Step 3: Divide the remaining cash into remaining holdings
proportionally over the course of about 4 years

44. Quasi Dollar-Cost Averaging
We propose to increase our equity exposure by 15% per year until we
reach a more desireable structure with less cash exposure.
In a no-growth portfolio, this process would take about four years to
complete.

45. SPY Limit Order Proposal

46. Outlay: Spring 2016

47. Wrap-Up
● Highlighted Key Economic Drivers
● Summarized Portfolio
● YTD Performance
● Recent Trades
● Sector Breakdowns
● Proposal for Reducing Cash

48. Appendix A -Amgen Major Drugs
● Enbrel is the #1 prescribed rheumatoid arthritis injection. Makes
up 24.8% of AMGN sales
● Neulasta/Neupogen prevent infections in patients undergoing
chemotherapy. Makes up 21.8% of sales
● Aranesp and Epogen treat anemia in patients who are HIV+ and
undergoing chemotherapy. Make up 17.6% of sales

49. Appendix B - Amgen Valuation
Based on our valuation, AMGN was
undervalued by 15.45% at the time of
purchase.

50. Appendix C - APPLE

51. Appendix D- APPLE

52. Appendix E - APPLE
April 17 2016

53. Appendix F - APPLE
April 17 2016

54. Appendix G - APPLE
April 28 2016

55. Appendix H - APPLE
April 28 2016

56. Appendix I - Comparable Analysis
Apple Microsoft
Current Price 94.83 (4/28/2016) 51.02 (4/27/2016)
Beta 1.44 1.23
Required Return Used 17.81% 15.5%
Debt/Asset 22.2% 20%
Undervaluation % -3.48% -41.72%
Growth Assumption Used 10% for 3 years, 5% stable 10% for 3 years, 5% stable
Forward P/E 9.5 17
EV/EBITDA 4.99 9.94

57. Appendix J - EMUIT Valuation
Valero (VLO) Occidental Petroleum (OXY)
Current Price (03/07 Open) 63.15 70.07
Beta 1.35 1.25
Required Return Used 9.98% 9.46%
Debt/Asset 16.35 15.85
Undervaluation % 16.03% undervalued 30.28% overvalued
Growth Assumption used Valueline 3Yr Proj Earnings Valueline 3Yr Proj Earnings
Forward P/E 8.43 (12/31/17) 52.03 (12/31/17)
EV/EBITDA 4.06 11.62

58. Appendix K - EMUIT Valution
Honeywell (HON)
Current Price (4/14 Closing) $114.52
Beta .92
Required Return Used 10.83%
Debt/Asset 24.7
Undervaluation % 32.25%
Growth Assumption Used Valueline/Bloomberg
Forward P/E (12/31/17) 15.82
EV/EBITDA 12.04

59. Appendix L - Synchrony Financial

60. Appendix M - Synchrony Financial

61. Appendix N - Synchrony Financial

62. Appendix O - Comparables Analysis
Synchrony Discover (Benchmark)
Beta (2yr adj.-Bloomberg) 1.156 1.042
Required Return 9.95% 9.25%
Debt/Asset 28.9% 28.4%
Undervaluation Pct (DDM) 3.91% 35.02%
Forward PE 10.8 9.81
EV/EBITA 6.98 6.08
*Bloomberg as of 4/28/2016

63. Appendix P - Synchrony Valuation

64. Appendix Q - J.P. Morgan Chase Valuation

65. SPY- 6 Mo.

66. SPY- 1 Yr.

67. SPY- 3 Yr.