This report details performance and position changes to the Seton Hall University Student Managed Investment Fund Portfolio in October 2017.

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Strategy: Diversification
In Focus: Complacency Risk
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Portfolio Update
Coverage:
Emanuelle G. Sedita
Portfolio Manager
Seton Hall University SMIF
seditae@gmail.com
Henry J. Steck
Portfolio Manager
Seton Hall University SMIF
Henry.Steck@student.shu.edu
Seton Hall Univ. SMIF:
$147,589.75
+10900.41 (7.89%)
(α: 0.09%)
S&P 500 (Benchmark):
2591.83 +55.90 (2.22%)Performance Overview
In October, our portfolio navigated a historically tough month for equities with ease
and posted record gains in our holdings. Highlights from October include an unfortu-
nate increase in domestic terrorism, the introduction of the GOP’s tax reform outline,
strong economic data, and upcoming changes at the Federal Reserve. The Seton Hall
University Student Managed Investment Fund (SMIF) finished the month up 7.89%, or
5.67% above our S&P 500 benchmark.
Changes to Portfolio Holdings
During October 2017, the SMIF Portfolio Managers voted 5 to 2 to sell the remainder of
its position in Chevron (CVX). The SMIF also voted 6 to 1 to open a position in Sinopec
(SNP), with an allocation of 3%. Sinopec is based in Beijing, China and operates an
energy business mainly focused on petro-chemicals and diverse energy assets. SMIF
also voted 6 to 1 to open a position in O’Reilly Auto Parts (ORLY), with an allocation of
3%. O’Reilly sells parts directly to consumers and auto shops nationwide with a focus on
creating an online presence. The fund also voted to close half of its position in General
Motors (GM) capturing gains from over a year of holding, while remaining cautious of
auto sales over the next year. We also voted to acquire XPO Logistics in a 6 to 1 vote to
purchase with an allocation of 2%. XPO provides transportation and logistics services in
the US and Europe offering many different services with a focus around new age
technology. With each acquisition, the fund removes exposure to our SPY holding.
Introduced during in Spring 2017, allocating SPY remains an effective strategy
compared to holding onto cash during strong market cycles.
Continued Portfolio Strategy
The portfolio continues to remain weighted comparably in a few sectors to the S&P 500
with a few changes since September due to portfolio entries and exits. Our exposure in
Healthcare (14.12% vs. S&P 14.50%) and the Materials sector (2.49% vs. S&P 3.00%)
remain closely weighted tracking the S&P. We are just under a 1.7% difference
overweight/underweight in tracking with our consumer cyclical, consumer
discretionary, and industrial sectors. We continue with no exposure in Real Estate (S&P
- 3.08%), Utilities (S&P - 3.25%), and Telecoms (S&P - 2.20%) due to our bullish views in
other sectors.
Our PM’s continue to remain bullish and in turn; overweight in the Technology sector
by 4.90%. Alibaba (BABA) and Paypal (PYPL) have been top performers for the fund over
the past year followed by recent gainers Adobe (ADBE) and Global Payments (GPN).
While technology has been a top alpha producing sector for our fund, we will begin to
revaluate our holding of Acacia Communications over the next few weeks due to its
current negative drawdown on the portfolio.
Our overweight position in Energy reflects the fund’s stance on current geopolitical risk
in the middle east. The fund remains 6.5% overweight compared to the S&P in energy.
Iran’s recent aggression with Saudi Arabia reflects directly why our strategy of higher oil
prices may be on the horizon. Our closure of the Chevron position reflects our ideals
that there are stronger and undervalued choices elsewhere globally. In our case, we
have found better valuations and opportunity in China, Norway, and the Netherlands.
October ‘17 Portfolio Performance Report
October ‘17 Results
10 November 2017

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1 November 2017
Royal Dutch Shell (RDS/A) provided the fund 24% upside excluding dividend payments, while Statoil (STO) and Sinopec
(SNP) have provided 7% and 5% respectively.
(Statoil—White; Royal Dutch Shell—Orange; Brent Crude—Yellow; Sinopec—Purple) Source: Bloomberg
Changes in Portfolio Strategy
The need for fresh diversification in the SMIF portfolio was realized in early October. With the acquisitions of XPO Logis-
tics, O’Reilly Automotive, and Sinopec; the SMIF portfolio was able to find opportunity while enhancing our portfolio’s
allocation strategy. The divesture of Chevron (CVX) was decided based on our weak outlook of domestic based oil
companies. We still hold heavy conviction in the energy sector and found opportunity in Sinopec and Statoil to be the
most compelling. With the sale of half of our General Motors positon, a combination of technical analysis and long-term
catalyst put together a good exit while remaining partially exposed to China and US auto markets. General Motors
remains to be the most undervalued auto manufacture in the world and money managers have only recent begun to
realize its value. The fund has recently begun to realize that capturing gains on certain equities is key to refreshing the
portfolio and encourages portfolio managers to seek more upside elsewhere in new opportunities.
When looking at the transportation industry, our portfolio managers agreed that an overweight view in technology
should directly tie into our pick in transportation. Placing our bets with XPO Logistics (XPO) has played off well thus far
and we believe that as a young team of managers, we must look towards the future in finding our plays. XPO’s supply
chain arm contains technology far superior than other supply chain providers and gives them a significant advantage
against other transport companies. They also have a diverse revenue stream compared to other transports who rely
heavily on bulk freight. Unlike our postal based holding FedEx, XPO gives us exposure to bulk freight and supply chain
logistics.
YTD, O’Reilly Automotive (ORLY) is down almost 25%. With this in mind, our acquisition of ORLY introduces a contrarian
play into our portfolio. Revised guidance pushed the company down further over the past year with the major
disruptions in retail. Amazon has been the major player in the disruption space. We see automotive being something
Amazon will struggle to take control of. O’Reilly revamped their online presence to be a strong one stop shop for DIY’ers
and commercial interests alike. Additionally, nearly half of O’Reilly’s revenues stem from auto parts sales go to commer-
cial entities. With this in mind, Amazon will have a difficult time undermining the prices that O’Reilly can competitively
provide to commercial shops.
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1 November 2017
Our closure of half the General Motors positon reflects how timing can never be perfect, but allows us to use cash for better equity opportunities.
In Focus: Complacency Risk
As any good portfolio manager knows: you can never hold on to your best picks forever. Learning how to tolerate
greed is as good as knowing how to research and valuate a company. From SMIF’s inception, a focus on pitching
clouds our ability to analyze and judge our portfolio closely. In this month’s focus, we will discuss causation and
solutions to better managing our portfolio from a more wholesome view.
The generous influx of $50,000 into the portfolio was rewarded to our managers to expand the fund and attest to the
performance year over year. While we love any opportunity to grow the initial position of the fund, our managers
must quickly digest this amount into new holdings. This indirectly disincentives the fund from divesting current owner-
ship in companies. At an average allocation size of 3.5%, it takes the fund 15 successful pitches to fully allocate this
amount. With a mere 8 portfolio managers requiring only a single pitch per semester, it takes a whole year to consume
our newly acquired funds. Our current solution for parking cash in the SPY, proposed by graduate John Gallagher,
proven to be a successful way to track the S&P 500, but not achieve our objective of beating that benchmark.
We have many positions that need re-evaluating; seeking if our initial catalysts payed off, or are beginning to lose their
glow. For November, the fund realized its urgency to take profits on certain positions. We have initially begun doing so
with our sales of General Motors and Chevron. Our realization sparked the idea of holding off pitches until we can
re-evaluate each company and present our outlooks and ideas of whether or not they are still suitable for the portfo-
lio. This will give us the opportunity to divest and provide fresh ideas to the portfolio managers.
We must not be complacent in our fund. Complacency risk is prevalent and can cause us to lose out on profits.
November 8th of last year marked the great bull run. While we do not have the ability to predict when the steam runs
dry, it has been a whole year since we created initial positions in several different equities. It is time we begin to
re-evaluate and search for risks in our portfolio. From November to the end of our fall semester, the fund will begin a
deep reevaluation of our holdings and report back to our portfolio managers to find new opportunity.
Source: Bloomberg
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