1. Name:
Course: Investments
Team: Advantage Fund
Professor: (can be provided if needed)
Assignment: Stocktrak Investment Report
Date: November 19, 2013
AdvantageFund Stocktrak Report:
This is a report analysis that explains our main strategy for the Stocktrak exercise throughout
this semester. Strategically, our main objective was to construct a well-diversified portfolio.
Being that we wanted our portfolio to consist the least risk assets possible, to accomplish this
goal we turned our focus toward researching and purchasing securities that were going to
alleviate our level of both systematic and unsystematic risk in the portfolio.
Our group was formed with five students, and we named it the Advantage Fund. Simply the
Advantage Fund because we felt that participating in this exercise provided us a one of a
lifetime advantage, or opportunity if you will to showcase our understanding of the financial
markets. Above all, our final result proved our ability to analyze companies. In addition to the
latter, this exercise gave us an opportunity to showcase our collective knowledge in sharing
ideas, deeply analyzing and predicting markets and future growth opportunities. Even more,
our success in this exercise proved that we were excellent team players in terms of
collaboration. In its entirety, this exercise taught us so much in terms of individual strength
and weakness.
Before starting to invest in our portfolio, we came up with a strategy, and that was to assign
two different portfolio managers each week to monitor daily activities in the portfolio, and the
rest of us acted as research analysts for the week that we were not assigned to manage the
portfolio. That way we were able to allow each member of our team to take on more
leadership role and proved her ability to manage a successful portfolio. Nevertheless, each
member understood that he/ she was granted full authority to access the account and
executed any trade that he/she felt was necessary at any time. Being that her decision would
be in the group’s best interest; that person was allowed to do what she was desired to do.
At the beginning of the exercise, we were allowed to spend $1 million in our account, and as of
November 19, we have increased this amount to $1.09 million net of gains. Overall, our cash
increased by 9% during the period. Our portfolio performance was similar to that of the S&P
500 during this time frame. Since the fund inception, the S&P 500 return was about 9%
compared to our relative return of 9%. We were pretty consistent with the S&P 500
performance and we believed our consistency was due to our strategy and investment thesis.
Below are two screen shots showing some of the securities that were part of our portfolio on
November 19.

2. As you can see from the screen shots provided above, the Advantage Fund has taken
some losses on investments during the time frame; however, our diversification has helped us
achieved comparable returns to the S&P 500. Looking back on the fund, we highlighted five
stocks that have either had a large contribution to our returns or surprised us with their
losses. Five stocks that we have taken major position in throughout the time frame are
Chipotle, Apple, Nike, Facebook, and LinkedIn. These stocks were all purchased because we
felt that they were undervalued compared to their current price or comparable metrics using
their competitors as benchmark.

3. Portfolio Short List (Five Stocks chosen)
Company Stock
Ticker
Quantity Market Value % Return
Chipotle CMG 500 $269,080.00 25.18%
Apple, Inc. AAPL 500 $259,775.00 11.61%
Nike NIKE 3,500 $272,335.00 11.22%
Facebook FB 5,000 $231,800.00 (-1.13%)
Linked In LNKD 1,200 $265,656.00 (-3.74%)
Advantage Fund
Gross Return
8.9%
S&P 500 Index 9%
Losses
Facebook (FB)
We purchased Facebook at a price of $46.69, which we felt was very cheap at the time and
that purchase turned out to be very profitable for us at first due to the price appreciation.
However, during the final week of the competition, the stock started to trade at a price of
$46.16 below the purchased price. This resulted in a small loss for our fund.
Upon deciding to purchase the stock we conducted a fundamental analysis and felt
comfortable that the stock was trading at a cheap price based on its P/E ratio of 120.36 and
P/S ratio of 18.80. These ratios were then compared to some of the company’s competitors
such as LinkedIn Corp. (P/E of 992.75, P/S of 19.31), Amazon (P/E of 1,421.38) and Google
(P/E of 28.70 and P/S of 6.17).
The main reason why the stock was down was because in mid-November, the company
showed sign of slowed growth in signing new users. Being able to sign new users and figuring
out how to monetize user’s activities on mobile are very significant for a company like
Facebook. At the close of this assignment we were at a loss of -1.13% in our investment of
Facebook.
LinkedIn (LNKD)

4. Similar to our thesis of Facebook, LinkedIn was another stock that we invested in. We bought
the stock at $229.99 and it closed at $221.38 on November 19. By the closing date of this
assignment we took a loss of -3.74% due to LinkedIn price depreciation. In effect, this is all
mostly due to analyst’s being bearish on the company’s future earning prospect and ability to
continue to increase its user base and attract more advertising dollars. Our investment in
LinkedIn was based on the company's fundamentals and current position in the marketplace
to strategically execute its objectives. Unlike its peers in the tech sector, LinkedIn business
corporate strategies is very unique and prove to be difficult to imitate, which to us is a great
benefit to the company’s future. Nonetheless, we are very optimistic of the company’s future.
Actually, our current forecast of the company’s growth opportunities could not have been
better. In fact, during the time of our investment, the company had reported earnings that
beat analyst estimate and so we felt that the company had potential to grow at a much faster
and higher revenue growth rate than currently reported at (55.90%).
Winners
Chipotle Mexican Grill, Inc. (GMG)
We had Chipotle in our portfolio at the very start of this exercise because our analysis
indicated that the stock was undervalue, and so we decided that the stock had great potential
to trade at a much higher price than $429.91. The recent shift that we observed in consumer’s
behavior and their much appreciated attitude toward eating healthier food should play in the
company’s benefit. At the close of this assignment Chipotle was trading at market price value
of $538.16 a share.
We also took this position because we needed to diversify our portfolio and (CMG) , and
underhand that the company had a very low beta of 0.55, as well as a consistent year-over-
year quarterly revenue of 18.00% and quarterly earnings growth record of 15.30%. These
attributes made Chipotle restaurant very attractive to us. Given the company’s position in the
marketplace, we felt pretty confident that the company would continue to be profitable due to
its popularity among health conscious consumers, whom we believe are the educated group
and are financially capable of paying for food at a premium.
Apple Inc. (AAPL)
We purchased this stock at $465.51a share and it closed at $519.55 on November 19. Our
return on this investment was about 12%. We believed Apple’s current valuation understates
the company’s intrinsic value principally because of its ability to generate very high profit
margin, capability to sell high volume of products, ability to generate great return on
investment. Furthermore, the company had a clean balance sheet and a management that
showed that it had leadership conviction, and ability to improve the company’s profit margin
at the highest percentage possible. We believed base on estimated revenue growth, its global
footprint, global brand awareness, the company should be traded at a higher price than it’s
currently traded at. In addition, the fundamentals looked very attractive with an EPS of
$39.75 and price P/S at $519.55 and a very low beta of 0.61.

5. When compared Apple to some of its biggest competitors (Amazon and Google) the company
has the lowest P/E ratio of 14.12 compared with Amazon at 1428.38 and Google at 28.70. At
the time of our investment the company introduced its IPad Air, which we believed would sell
very well during the holiday and would continue to be so in the foreseeable future. In
addition, we are very optimistic about the potential for the IPhone 5S and 5C to sell in record
amount due to high estimated demand. Relatively, the 5C, we felt could help attract new
consumers in the lower end of the market, and that will help the company to increase revenue
that should ultimately help increase profit margin. Event greater than that, this should help
the company to increase its market share in the mobile business.
Nike (NKE)
We bought (NKE) at $69.96 and it closed at $77.81 on November 19. Our return on this
investment was about 11.22%. The decision to purchase the stock was also very much in line
with our investment thesis. In focus of keeping our portfolio diversified and at the same time
finding company that had great potential to generate great earnings. Nike was another
company that our research suggested had the potential to consistently see high earning
growth (37.60%). This growth should continue because of the company’s ability to
successfully stay ahead of its competitors by being a trendsetter in applying new and advance
technology.
Conclusion
Overall, the StockTrak assignment was pretty exciting and strategically challenging because it
required a lot of intensive research analysis and security valuation to be able to construct the
best investment portfolio. Some research tools were not used because of our limited access to
better-sophisticated financial tools. Nonetheless, knowing what we know now, we feel that
more of a focus on intensive research analysis (growing perpetuity, conference call with firm
top managers) would have helped us greatly.
Naturally, all of those research tools would have positioned us to better understand and
perform better analysis of the target company’s market environment, both macro and micro
forces that can potentially affect the company’s business operation. Furthermore, more
advance financial tools would have potentially helped in predicting managers intention, as to
where the company was heading in the future compared to its competitor. We know that now
because we have experienced a few losses because we missed out on some very good
opportunities because of not executing trades as information was released. For example, our
position in Facebook would have been different had we spent more time researching analyst
opinion about the company’s future and spent more time reading the company’s 10k and 10Q.
We would have also learned more about Facebook’s current management concerns and
decline in user base growth (It was mentioned in their 10Q and 10K). Overall, this experience
was great, and has convinced us, that the finance market can be challenging but at the same
time, the reward for hard work can be limitless.