Student Managed Investment Portfolio Organization (SMIPO)

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  • Not Finished!!!!
  • **Note: Handout on sector strategy templates **Note: Handout on sector allocations summary
  • 5% underweight maintained in financials through most of the year. However, good stock selections saw the sector bring its weight to a market weight by the end of the year. Ex. 15 percent outperformance compared to s&p in november Energy was overweighted through the beginning of the year...
  • Healthcare weighted as much as seven percent over the s&p healthcare sector. Another area that helped our portfolio’s outperform compared to the s&p Technology was particularly weak in 08. We underweighted the sector and held onto tech stalwarts IBM, HPQ, and CSCO who all had outstanding balance sheets and outstanding growth prospects. Because of the below average growth and highly competitive conditions, especially in a saturated U.S. market, Comtech was a strong selection due to its position to capture government contracts.
  • Weakening consumer confidence and weakening abilities to spend saw SMIPO underweight consumer discretionary through all of 08. However, McDonalds’ dollar menu and continuously expanding business helped this sector outperform its S&P counterpart.
  • To monitor our stocks every meeting we come with the most recent important news that pertains each stock in our portfolio. We focus on issues that may have a major impact on future cash flows like new products or mergers and acquisitions. Also all major changes of management are announced this is one of the best ways for us make sure our assets are performing like we want them to. To value companies our spread sheet has a Discounted Cash Flow Model built in. The CAPM is also utilized to determine an expected stock price. From this spread sheet we fill out our Quantitative Analysis and Economic Analysis sheet that are focused the individual company we are researching.
  • DEC 2008 returns??
  • DEC 2008 returns
  • Student Managed Investment Portfolio Organization (SMIPO)

    1. 1. Radford University
    2. 2. <ul><li>After attending RISE II in 2002, SMIPO was formed with an initial $100,000 endowment. In 2004 SMIPO received an additional $150,000. Again, in 2006 we received another $100,000 endowment. </li></ul><ul><li>SMIPO is a fully student-managed organization. None of our 29 members receive credit for participation in the organization. </li></ul><ul><li>Since SMIPO’s creation in 2002, the organization has been selected to present as finalists at RISE five out of six years. </li></ul>
    3. 3. Board of Directors Info Tech Jr. Investment Sr. Investment VP of Investments VP of Operations VP of Finance President Chief Accountant Chief Economist Human Resources Economist Accountant Archivist Marketing
    4. 4. <ul><li>To allow Radford University students the opportunity to gain practical experience in the management and decision-making activities of a corporate structured organization by participating in hands-on management of the funds of Radford University Foundation's endowment to a Student Managed Investment Portfolio Organization. </li></ul>
    5. 5. <ul><li>Top Down Portfolio Management </li></ul><ul><li>Economic Analysis </li></ul><ul><li>2008 strategy </li></ul><ul><li>Sector Allocation </li></ul><ul><li>Stock Selection Process </li></ul><ul><li>Exit Strategy </li></ul><ul><li>Benchmarking Our Performance </li></ul><ul><li>SMIPO’s Performance in 2008 </li></ul><ul><li>Basic Portfolio Stats </li></ul><ul><li>SMIPO’s Direction in 2008-2009 </li></ul>
    6. 6. <ul><li>Develop economic forecasts. </li></ul><ul><li>Asset allocations between equities and cash. </li></ul><ul><li>Apply economic forecasts to the sector allocation decision. </li></ul><ul><li>Choose beta exposure, style exposure </li></ul><ul><li>Stock selection consistent with our economic views. </li></ul><ul><li>Constant monitoring of sectors and holdings. </li></ul><ul><li>Realization of Gains/Losses. </li></ul>
    7. 7. <ul><li>Identify Investment Opportunities </li></ul><ul><ul><ul><li>Quarterly Sector Outlook </li></ul></ul></ul><ul><ul><ul><ul><li>Broad macro-economic indicators </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Industry Trends </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Sector Specific Indicators </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Sector Growth </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Analyst Coverage </li></ul></ul></ul></ul></ul><ul><li>Convey data contained in these reports to investment analysts in a relevant and actionable manner. </li></ul>
    8. 8. <ul><li>Favorite Economic Indicators </li></ul><ul><ul><li>CPI & Core CPI </li></ul></ul><ul><ul><li>Crude Oil </li></ul></ul><ul><ul><li>Case-Shiller Housing Price Index </li></ul></ul><ul><ul><li>Initial Job Claims and Unemployment rate </li></ul></ul><ul><ul><li>Exchange Rates </li></ul></ul><ul><ul><ul><li>Current account balance </li></ul></ul></ul><ul><ul><ul><li>Fiscal Policy </li></ul></ul></ul><ul><ul><ul><li>Monetary Policy </li></ul></ul></ul>
    9. 9. <ul><li>Presidential Election </li></ul><ul><ul><li>Policies and regulations </li></ul></ul><ul><ul><li>Fiscal Policy: Spending / Taxation </li></ul></ul>
    10. 10. <ul><li>Large Cap, low risk companies </li></ul><ul><li>High Dividend yield </li></ul><ul><li>Decrease portfolio beta </li></ul>
    11. 11. <ul><li>The economy will remain in a recession for the remainder of 2009. </li></ul><ul><li>GDP growth will continue to be sluggish. </li></ul><ul><li>Factors driving economic outlook </li></ul><ul><ul><li>Bailout concerns </li></ul></ul><ul><ul><li>Stimulus package </li></ul></ul><ul><ul><li>Financial sector </li></ul></ul><ul><ul><li>Housing Market </li></ul></ul>
    12. 12. <ul><li>Requirements: </li></ul><ul><ul><li>Sector allocations are set relative to our benchmark (S&P 500) </li></ul></ul><ul><ul><li>Each sector’s analysts are responsible for a sector allocation strategy. </li></ul></ul><ul><ul><li>Deviations from benchmark weights are explained in a written sector allocation report. </li></ul></ul><ul><ul><li>Sector allocations must be re-evaluated each quarter. </li></ul></ul><ul><ul><li>ETF’s may be used as temporary holdings and provide quick execution of sector reallocation. </li></ul></ul>
    13. 13. <ul><li>Financials: Underweight </li></ul><ul><ul><li>Uncertainty in Sub-prime lending </li></ul></ul><ul><ul><ul><li>Goldman Sachs Group Inc. </li></ul></ul></ul><ul><ul><ul><li>Charles Schwab Corp. </li></ul></ul></ul><ul><li>Energy: Underweight </li></ul><ul><ul><li>Good growth, but high volatility </li></ul></ul><ul><ul><ul><li>Transocean </li></ul></ul></ul><ul><li>Utilities: Market weight </li></ul><ul><ul><li>Defensive, above average dividend yields </li></ul></ul><ul><ul><ul><li>Exelon </li></ul></ul></ul>
    14. 14. <ul><li>Health Care: Overweight </li></ul><ul><ul><li>Defensive and strong growth </li></ul></ul><ul><ul><ul><li>Johnson & Johnson </li></ul></ul></ul><ul><ul><ul><li>Gilead Sciences </li></ul></ul></ul><ul><li>Technology: Underweight </li></ul><ul><ul><li>Weakened consumer demand </li></ul></ul><ul><ul><ul><li>IBM </li></ul></ul></ul><ul><li>Telecom: Underweight </li></ul><ul><ul><li>Below average growth and hypercompetitive environment </li></ul></ul><ul><ul><ul><li>Comtech Telecommunications </li></ul></ul></ul>
    15. 15. <ul><li>Basic Materials: Slight overweight </li></ul><ul><ul><li>Low volatility and good performance excluding home materials </li></ul></ul><ul><ul><ul><li>Sigma Aldrich </li></ul></ul></ul><ul><li>Industrials: Underweight </li></ul><ul><ul><li>Weak global economic conditions </li></ul></ul><ul><ul><ul><li>Ametek </li></ul></ul></ul><ul><li>Consumer Discretionary: Underweight </li></ul><ul><ul><li>Economic Concerns on Consumer Spending </li></ul></ul><ul><ul><ul><li>McDonald’s </li></ul></ul></ul><ul><li>Consumer Staples: Overweight </li></ul><ul><ul><li>Defensive balance and strong dividends </li></ul></ul><ul><ul><ul><li>Colgate Palmolive </li></ul></ul></ul><ul><ul><ul><li>Phillip Morris </li></ul></ul></ul>
    16. 17. <ul><li>Investment Process </li></ul><ul><ul><li>Screening & Research </li></ul></ul><ul><ul><li>Spreadsheets and Workbook </li></ul></ul><ul><ul><li>Presentation with Q&A </li></ul></ul><ul><li>Voting Process </li></ul><ul><ul><li>Majority is needed for BUY or SELL </li></ul></ul><ul><li>After BUY </li></ul><ul><ul><li>Constant monitoring to Identify fundamental changes </li></ul></ul>
    17. 18. <ul><li>Sources of Information: </li></ul><ul><ul><li>Thomson One Student Research Edition </li></ul></ul><ul><ul><li>ValueLine </li></ul></ul><ul><ul><li>Zacks.com </li></ul></ul><ul><ul><li>Yahoo! Finance </li></ul></ul><ul><ul><li>StandardandPoors.com </li></ul></ul>
    18. 19. <ul><li>10-K </li></ul><ul><li>10-Q </li></ul><ul><li>Positives/Negatives </li></ul><ul><li>Risks/Exposures </li></ul><ul><li>Competitor Comparison </li></ul><ul><li>Analyst Estimates/Price Targets </li></ul><ul><li>Valuations </li></ul>
    19. 23. <ul><li>Dividend Current = $2.00 </li></ul><ul><li>Value Line Estimated Growth Rate = 8.87% </li></ul><ul><li>CAPM = 10.53% </li></ul><ul><li>DDM: ($2.00*(1+.0887))/(.1053-.0887) </li></ul><ul><li>= $131.00 </li></ul><ul><li>Highly undervalued (Optimistic?) </li></ul><ul><li>Bargain Purchase </li></ul><ul><li>Strong earnings and dividends. </li></ul>
    20. 24. <ul><li>Investment Analysts Constantly Monitor Sectors for unexpected variations in stock value </li></ul><ul><li>Weekly Updates on Stock Positions </li></ul><ul><li>Changes to sector allocations </li></ul><ul><ul><li>Reassess holdings </li></ul></ul>
    21. 25. <ul><li>Automatic Reevaluation Trigger </li></ul><ul><ul><li>If a security drops or gains in market value by 10% within a rolling five trading day period or 20% within a rolling twenty trading day period </li></ul></ul><ul><ul><li>Does Not Mean SELL </li></ul></ul><ul><li>Examples: </li></ul><ul><ul><li>MEMC </li></ul></ul><ul><ul><li>Aflac </li></ul></ul>
    22. 26. <ul><li>S&P 500 is benchmark for SMIPO </li></ul><ul><li>Investment Analyst performance is compared to sector returns from S&P </li></ul><ul><li>Analysts expected to meet or exceed returns for given sector </li></ul>
    23. 29. SMIPO S&P 500 2008 Return: (34.99) (39.84) Dividend Yield: 2.16% 3.66% PE (TTM): 10.54 10.75 Beta : (Historical) 0.913 1.0 EPS Growth: (5 Year) 11.98% 10.32% ROE: 30.44% 22.05%
    24. 30. SMIPO S&P 500 Alpha: 5.20% Annualized --- Treynor: (0.153) (0.177) Sharpe: (0.033) (0.037) Beta (2008): 1.04 1.00 Standard Deviation: 0.226 0.210
    25. 31. <ul><li>Organization </li></ul><ul><ul><li>Continuous Improvement of Investment Techniques </li></ul></ul><ul><ul><li>Develop valuation methods for each sector </li></ul></ul><ul><li>Portfolio </li></ul><ul><ul><li>Sector Allocations </li></ul></ul><ul><ul><li>Beta Timing </li></ul></ul><ul><ul><li>Style Timing </li></ul></ul>

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