Gateway Capital Resubmitted Final Report

Let us provide a sure foundation
for your future.
Analysts:
Jonathan White
Kaitlyn Allen
Kevin Putnam
Martin Lamar
LOCATION:
2015 SIUE Business
District
Edwardsville, IL
gatewaycap@gc.com
Finance430 - InstructorDemirer - 4/27/2015

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G a t e w a y C a p i t a l
*Unless otherwise indicated informationhas beenacquiredfrom YahooFinance
TABLE OF CONTENTS
SectionI Client-Focused Philosophy of Gateway Capital………………………….……..3
Analyst Team
SectionII Recommended Securities…………………………………………………………………4
Apple Inc.
Caterpillar
The Walt Disney Company
Activision Blizzard, Inc.
Suncor Energy Inc.
PepsiCo, Inc.
Hologic Inc.
OpenText Corporation
SectionIII Summary Statistics for IndividualStocks…………………………………………10
Average Return
Standard Deviation
Correlation
Covariance
Beta
R-Squared
P-Value
SectionIV The Optimal Portfolio…………………………………………………………………....12
Efficient Frontier
Your Optimal Portfolio
SectionV 2015 Portfolio PerformanceEvaluation………………………………………….13
SectionVI The Foundation for Your Future……………………………………………………..15
Appendix…………………………………………………………………………………………………………...16

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Section I
Client-Focused Purpose of Gateway Capital
Our promise at Gateway Capital is to provide in-depth analysis of the portfolio that is
recommended to you as the client. The following sections will provide the background for each
sector and stock chosen as well as the data that was acquired in the analysis. Our goal is to
provide our client with the optimal portfolio. We will evaluate this portfolio over a five year
period to gain historical data. We will then provide information regarding our portfolio’s
performance in 2015 thus far. With expert analysts in each sector we can assure our clients that
we will help to achieve future gains while preparing for potential pitfalls.
Gateway Capital Team
Analyst Sector Company
Jonathan White Electronic Equipment Apple Inc.
Farm/Construction Machinery Caterpillar
Kaitlyn Allen Entertainment The Walt Disney Company
Multimedia/Graphics Software Activision Blizzard, Inc.
Kevin Putnam Independent Oil/Gas Suncor Energy Inc.
Food and Beverage PepsiCo, Inc.
Martin Lamar Medical Appliances/Equipment Hologic Inc.
Technology OpenText Corporation

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Section II
Recommended Securities
A. Selected Stocksand Our Investment Style
The stocks chosen by our company for your portfolio reflect a conservative investment style. Gateway
Capital has striven to become a sure investment foundation for our clients. We believe that we can
accomplish this with a conservative investment portfolio that provides a safe place for clients’ money.
Thisportfoliowascompiled afterselectingstocksfromvarioussectors.We believe thatthe utilizationof
diverse sectors will provide a healthy balance between risky and safe investments. Diversification of
sectorsalso allowsforcontinual growth.Highperformingcompanieswillaccountforothersthat may be
lagging within the market. This “insurance” aspect will benefit all investors.
Afterselectingoursectors,we chose stocks withincompaniesthatare knownleadersintheirrespected
industry as well as companies that are expected to dominate in the near future. We feel confidentin
investing withcompanies that boast a firm foundation such as PepsiCo Inc., The Walt DisneyCompany,
and Caterpillar. We also believe in investing in the fledgling companieswhich have great potential of
rewards in the future such as ActivisionBlizzard and Open Text. The stocks within our recommended
portfolioprovideaconsistentamountof return. Pepsicoandthe WaltDisneyCompany are drivingforces
within our portfolio. They provide a significant amount of return in the growing sectors of food and
beverage andEntertainment.Thesestocksprovideasense of stabilitywithinourportfolio.Diversification
is also a desire within the selection of our stocks. We have invested in the Multimedia and Graphics
Software,FarmandConstructionMachinery,andthe FoodandBeverage sectors.The companiesthatwe
have chosen within these sectors have boasted modest returns.
B. Gateway Capital – Portfolio Returns
Analyst: Jonathan White
Sector: Electronic Equipment
Consumerelectronicsis currently one of the fastestgrowingindustriesinthe world. With the explosion
in popularity of smart phones and tablets, there is a growing demand for these devices. The leaders in
this industry are mainly Apple, Google, Blackberry, and HP. Apple is arguably the strongest competitor
among this group which is why we have chosen it for our portfolio.
Company: Apple Inc. (AAPL)
Apple Inc. is a multinational corporation that specializes in designing, developing, and selling consumer
electronics, computer software, online services, and personal computers. It is publicly traded on the
NASDAQ. Apple is headquartered in Cupertino, California. Apple’s core product lines include the iPhone
mobile telephone, iPad personal computing tablet, and a variety of personal desktop and laptop
computers.Apple wasfoundedin1976 bySteve Jobs,Steve WozniakandRonaldWayne. Apple wasone
of the first innovators in personal computing and revolutionized consumer electronics with the iPhone
and iPod products. Today, Apple is the largest publicly traded corporation based on its market
capitalization.

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Apple is the dominant force in its industry. According to Yahoo Finance, its closest competitors are
Blackberry,Google,andHewlett-Packard. LastyearApple recordedarevenue of almost$200 billion; the
closestcompetitorwasHP at $111 Billion.Apple hadanet income of $44 billion, almostfourtimesof its
closestcompetitor. Applealsohasthe secondbiggestEPSamong its competitorsat$7.39 per share with
onlyGoogle beatingthem at $21.02 per share.Apple trails interms of its five expectedearningsgrowth
pershare at $1.09. Blackberryisthe onlycompetitorwhohasabetterearningsgrowthpershare outlook
than Apple. Apple has the third largest profit margin at .39. Apple’s financial reports support its strong
productlines. Apple iscontinuingtorelease innovativeproductssuchasthe smart watchwhichis due to
be releasedinQ2of 2015. Withthese innovativeproducts,webelievethatthe future of Apple’sfinancials
and product line is bright. Therefore, we believe it is a good pick for our portfolio.
Sector: Farm & Construction Machinery
As the world’s populationcontinuestogrow,especiallyinAsia,there isgrowingreliance onfarmingand
the food it produces. Emerging nations need strong agriculture in order to sustain economic growth. In
orderto builda stronginfrastructure,nationsneedconstructionequipmenttobuilditup. Withall of this
in mind, farming and construction machinery has a very bright outlook for the near future and beyond.
This reason is why we decided to include it in our balanced portfolio.
Company: Caterpillar (CAT)
CaterpillarisanAmericanmultinational companyandisthe world’slargestmanufacturerof construction
and mining equipment.It is publicly tradedon the NYSE. Caterpillar has almost $90 billion in assets and
accordingtoFortune 500, isthe largestcompanyinitsrespectiveindustry.Caterpillarwascreatedin1925
through a merger of Holt Manufacturing and C.L. Best Tractor Company. Caterpillar is headquarteredin
Peoria, Illinois, and is 44th
on the Fortune 500 list. Caterpillar specializes mainly in construction, mining,
and farming equipment and is widely considered an industry leader.
Caterpillar’smaincompetitorsare JohnDeere,VolvoandKomatsu.CAThasthe largestMarketCap within
the industry at $50.71 billion, with its closest competitor being John Deere at $30.65 billion. It also has
the highest net income of $3.70 billion. It’s closest competitor is John Deere at $3.16 billion. CAT trails
John Deere in terms of EPS with $5.88, while John Deere is at $8.63. Caterpillar’s gross margin is similar
to its competitors at .27. John Deere is at .30 and Komatsu is at .29. Caterpillar’s projected five year
earningsgrowthpershare rate is1.81.This ishigherthanJohnDeere’s at-7.22.Volvohasasimilaroutlook
to Cat at 1.71 while Komatsu has the projected five year PEG at 6.39. John Deere is also projected to
shrink.This allows opportunitiesforCaterpillartoacquire some of Deere’smarketshare. Caterpillarwill
lookto pounce onemergingmarketsinAsiaandSouthAmericain orderto increase itsmarketshare and
financial growth.
Analyst: Kaitlyn Allen
Sector: Entertainment
We believe that the Entertainment Service Sector is a stable industry to invest in for our portfolio
recommendation. There is a guarantee of global-wide utilizationof entertainment regardless of market

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fluctuations. Entertainment provides a way of escape from the world and uses this tactic to provide a
profit.Withthe large influx of movie,television,andsportsproductions,we can be assuredof continual
growthfor the EntertainmentSector.Entertainmentcompaniesincludethe giantcompaniesof The Walt
Disney Company (DIS), Time Warner Inc. (TMX), and Twenty-First Century Fox Inc. (FOXA). With the
public’songoingneed for more entertainment, we feel confident in selecting a stock from this sector.
Company: The Walt Disney Company (DIS)
The Walt DisneyCompanywasfoundedin1923 and isbasedinBurbank,California.Thislarge companyis
divided among the following segments: Media Networks, Parks and Resorts, Studio Entertainment,
ConsumerProducts,andInteractive.Operationssuchastelevisionchannels,resorts,andretailcompanies
existwithineachof these segments.Disney’smassive global presence isalsokeyforthiscompany.With
resorts spanning from Japan to Paris, Disney has advertised their company with pride.
The Walt Disney Company reported revenues, trailing twelve months, at $49.9 billion. This tops out
competitorTime WarnerInc.withrevenuesof $30.77 billion.The MarketCapof the company is $173.39
billion.AccordingtoYahoo Finance,revenuefromDisneyparksandresortsrose 9 percentto $3.9 billion
in the last three months of 2014. Since January 1, 2015, the share price has increased by over 12%.
Quarterly revenue growth (yoy) for the Walt Disney Company is 9 percent. This number dominates
quarterlyrevenue growthof competitorTime WarnerInc.whichreportedgrowthof 3 percent. Twenty-
FirstCenturyFox reporteda 1 percentdecrease ingrowth.We are especiallyconfidentthatthisincrease
will continue due to the video productions that are set to appear in 2015. The Walt Disney Company
provides a safe stock option for our balanced portfolio. We are especially confident that an investment
with this company will yield significant portfolio returns. Thus, it has the second largest weight in our
optimal portfolio.
Sector: Multimedia & Graphics Software
We believe that the technology industry would be an excellent addition to this diverse portfolio. The
technological sector is ever-changing and provides an element of risk for our clients. With the continual
production of new products we can be assured of the growth in the technological sector. The global
presence of technology has also helped to expand the utilization and production of new products.
Company: Activision Blizzard, Inc. (ATVI)
According to the Activision Blizzard website, Activision Blizzard was founded in 1979 as the first
independentvideo game software developer and distributor. The company is based in Santa Monica,
California,andoperatesinfifteendifferentcountries. AccordingtoYahooFinance,thecompanypublishes
online,personalcomputer(PC),videogame console,handheld,mobile,andtabletgames.We believethat
the diversityof the servicesof ActivisionBlizzardwillprovideimpressivereturnswithinthenextfewyears.
ActivisionBlizzardreportedrevenues,trailingtwelve months,at$4.41 billionwhichexceedsthe Industry
average of $208.92 million. The Market Cap of the company is $15.92 billion. Within the past year, the
stock price has increasedby14.20%. Quarterlyrevenue growthof 4percentis ontrack withthe Industry

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average of 4 percent. According to Jeff Berman, a freelance technology reporter for The Street, 2016
should be a year of growth for Activision Blizzard. Growth in various game franchises such as CALL OF
DUTY CHINA, HEROES OF THE STORM, HEARTHSTONE, OVERWATCH and the WORLD OF WARCRAFT
(WOW) will provide diversification for Activision Blizzard and enable future growth. However, until this
future projectedgrowth,historical dataexemplifiesthatwe shouldprofitonlessthanexpectedearnings
through short selling.
Analyst: Kevin Putnam
Sector: Independent Oil and Gas
We feel thatthe oil andgasindustryisinacorrectionperiod.Overthe pastsix months,thisindustryhas
experienced huge losses. However, with inventories stabilizing and the charts beginning to favor the
industry,a reboundseemstobe in the nearfuture.The charts are due to show a nice V shape,andwe
believe thatthiswill indicate averynice reboundto previouslevels.Gasis a staple of most economies
and will continue tobe so for some time.Therefore,we believe thatthisis a safe playmovingforward
inthe laterpartof 2015. Forthe time beingwe feelshortingthe oilindustrywillprovide superiorreturns
to buying the stock outright.
Company: Suncor Energy Inc. (SU)
Suncor Energy Inc., operates as an integrated energy company. Their primary focus is to develop
petroleum resource basins in Canada’sAthabasca oil sands. In addition to exploring, SU also develops,
produces and markets crude oil and natural gas in Canada and internationally. These operations
combined show why Suncor will continue to succeed and persevere when tough times arise.
SuncorEnergyhas the largestmarketcapitalizationof itscompetitorsandisalsothe fifthlargestenergy
companyinNorth America.Oil hasexperiencedovera50% dropinthe pastsix months, andwe feelthat
it isn’tdue for a reboundanytime soon. Fluctuationsinthe price of oil are a commonthing due to the
commodity being traded on the open market. Once the demand for oil rises, the price will mirror the
increase. Suncor has also maintained a best in class dividend yield of 3.3%. This yield is nearly three
timesImperial Oilwhichisata 1.2% yield.Despite lowerpricesinthe lastquarter,Suncorstilloutpaced
itscompetitorswithrevenue topping$32billion. SUalsohadgrossprofitat $19.76 billion,while closest
competitorImperial Oil Ltd(IMO) had agrossprofitof $6.74billion. ClearlySUhasfoundawaytoremain
profitable and traverse through this tough time for oil and gas companies, although its profits are
minimal because of the entire industry being on the downturn. Due to dropping oil prices, we will be
shortingSuncorwithinourportfolio. We will be shortingSUforatleastthe firsthalf of the year, oruntil
we feel that oil has bottomed and is a safe investment moving forward.
Sector: Food and Beverage
We believe thatthe Foodand Beverage Industryisverystable and will continue togrow exponentially
for years to come. The foodsegmenthas continuedtogrow at a veryhealthypace. People will always
have needforchipsor other snackfoods.Giantcompaniessuchas PepsiCoorclosestcompetitorCoca-
Cola will continue to be there to serve the consumers with staple products like Doritos and Frito-Lay.

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We feel comfortable thatthisindustrywill continue toflourishandsee increasedrevenuesbecause of
these household names. The Beverage Industry is a bit trickier due to less demand in carbonated
beveragesandmore demandinhealthy drinksandsportsdrinks. But the powerhousesinthisindustry,
such as PepsiCo, have product lines like Gatorade and Tropicana drinks to cover this segment and
continue to see revenue growth.
Company: PepsiCo, Inc. (PEP)
PepsiCoisabrandthatwill existforthe foreseeablefuture.We believe thatPepsiisacompanythatyou
can feel comfortable with putting in your portfolio and letting it ride for the next 20+ years with few
worries.PepsiCoInc.,hadabestinindustryttmrevenue of $66.85 billion,farexceedingtopcompetitor
Coca-Cola’s$46.17 billionandnextclosestMondelez’s$34.9billion.PepsiCoisverydiverse withproduct
lines such as Pepsi, Gatorade,Tostitos, Frito-Lay, and Quaker Oats. Thisallows the companyto handle
severe economic conditionsacross the globe. Pepsi recently saw international sales grow to 48%. This
provesthatPEPisapt tohandle anotherdownturnintheU.S.economy.Evenwithabestinindustryttm
revenue, PEP still had the second best quarterly revenue growth of .02 while Coca-Cola (KO) saw no
growthforthe pastquarter.The onlycompanytosee betterquarterlyrevenuegrowththanPEPwasDr.
PepperSnapple (DPS),whichcame inat.03. EPS ttmfor PEPwas 4.52, whichexceededeveryoneinthe
industrybyawide margin. EPSforcompetitorsare asfollows:KO:1.80,DPS:3.56. The industryaverage
EPS is.27. PEP has had a verygoodrun the lastfew yearsand we feel thatthiscan be a profitable asset
within our portfolio.
Analyst: Martin Lamar
Sector: Medical Appliances and Equipment
Medical appliance companies offer attractive features, especially for the growth investor. It has similar
risks to the pharmaceutical industry. There are many risks associated with this sector, but we feel as
though penetration in this market can yield significant advantages. Companies that obtain patents can
improve profitmarginsandsequentiallycanimproveearnings.Inafieldascompetitive asthis,innovation
isa necessity.Asanalysts,we mustkeepaclose eyeonspendingforresearchanddevelopment,authority
filings, and regulatory approvals. This allows us a unique diversification benefit in this sector. Medical
equipment is a necessary expense in this Industry and we feel as though the company we chose has a
good chance of Return on Assets.
Company: Hologic Inc. (HOLX)
HologicInc.,is a manufactureror image systemsdiagnosticsandsurgical products.Theyare mostknown
for their prominence in the women’s medical field. They sell their products through direct sales and
service forces and also in the independent circuit. They use a variety of avenues to distribute their
diagnostic systems. Hologic Inc. is primarily focused on STD and AIDS screening. Recent mergers and
acquisitions includingthat of *Cytyc and Gen-probe have pushed the market capitalization of Hologic (a
memberof the Russel 3K) over $8 billion.Thisiscomparativelylargerthana numberof the smallerfirms
in the S&P 500.

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Hologicoperatesinthe healthcare industry,whichisdominatedbycontinuousinnovationintechnology.
The company offers a wide range of products used in the diagnosis of human diseases. They utilize
advancedtools,suchas“The Thinprep”system, andthe Aptimafamilyof assays.Theyalsomarketbreast
healthproducts.Total revenues for2014 $2.4 billion.Accordingto YahooFinance,the rate of growthover
the lastthree yearswas12.5%. The companypostedanetIncome of $17.3 millionin2014withan annual
growth of 4.14% over the past three years. Within the industry, Hologic Inc. competes with companies
such as Alec, GE Healthcare, and Siemens. Hologic has a higher market capitalization than its closest
competitors,at$8.3 billion.Hologicenjoysahigherearningspershare,price earningsgrowth,and price
to share ratio than itsclosestpubliclyheldcompetitorAlere. Inthe medical appliancesindustry,there is
significantvolatilityasitisdominatedbyinnovation. Asinvestors,we believe thisisanopportunitytoadd
some risk to our portfolio. This will hopefully increase our returns by short selling.
Sector: Technology
The Software Applicationindustrycomeswithitsownuniquesetof riskswhichcanleadtoovervaluation
and volatile shiftsinstockprice.Keydriversinthisindustryinclude:revenue streams,subscriptionitems,
renewal contractvalue,andadiverse customerbase. Withrecentsecuritythreatsthreateningthe biggest
corporate players,customersoftenhavetoseethe valueinthe companybeforeacceptingpriceincreases.
The opportunityforprofitisderivedfromtheabilityof mostsoftwareapplication companiestopenetrate
multiple industry segments.
Company: OpenText Corporation (OTEX)
OpenText CorporationisCanada’s largestsoftware company.It is an independentcompanyprovidinga
comprehensive suite of information management software products that help people in organizations
work,interact,andinnovate ina productive way.Itisa keyplayerinthe managementsoftware industry.
Products alsoinclude social/mobile mediaandcloudcomputing.It primarilygeneratesrevenue through
its license, customer support, and professional services.
Open Text Corporation had total revenues of almost $2 billion and a market capitalization of over $7
billion. Quarterly data for 2014 indicates an average growth of 2.19%. It primarily conducts business in
the software companyindustry.Competitorsinclude EMCCorporation,IBM,andthe Oracle Corporation.
Open Text is significantly smaller in comparison of Market Capitalization which normally implies higher
volatility. Open Text Corporation has the smallest market capitalization and revenue out of its closest
competitors. Thisprovides anopportunitytoprofit as its revenuescangrow fasterthan its competitors.
Due to the previouslystatedfacts,we believe thatOTEXhas the mostoptimisticgrowthpotential.Thisis
also reflected in its earnings ratio which exceeds the average price.It also has the highest gross margin
due to its lack of size.

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Section III
Summary Statistics for Individual Stocks
Average Return
Average Returnrepresentsthe returnthatwe shouldexpectforthe amountthatwe investedinourstock.
We believe that this number will provide our Investors with accurate information about their stocks’
future potential.
The stock withthe highestaverage return withinourPortfolioisAAPLat2.74%. Overthe past fouryears,
Apple has beenthe fastestgrowingcompanywithinour portfolio.Thisismainlydue to its great success
withthe iPhone and iPadproducts.Thisfactsupports the highreturnwithinthe five-yearselectedperiod.
According to Table 1, The Open Text Corporation and the Walt Disney Company have similar returns at
2.27% and 2.26% respectively. Asstatedpreviously,we believe thatOpen Texthasgreat potential inthe
future. The Software sector is continuallygrowing and Open Text is no different. According to Yahoo
Finance,Open Texthas expandedthroughthe improvementof SAP,Microsoft packages,and Enterprise
Management Information within their product. In November Open Text announced to expand their
“strategic agreement” with SAP SE. These partnerships will help to expand the influence of Open Text.
The Walt Disney Company provides an average return of 2.26%. Disney’s historical prices exemplifya
steady increase since 2011. The continual production of entertainment sources supports the positive
average returnfor thisstock. We believethatthisstockwill continue toprovide positivereturnsforyour
portfolio.
ActivisionBlizzardhasanaverage returnof 1.54%. Thisstockprovidesariskelementtoourportfoliothat
we believe will produce rewards in the future. According to USA Today,Activision Blizzard is one of the
three stocksthat theywouldrecommendtobe purchased.The companyplansto incorporate the top 10
franchises in the VideoGame industrywithin their own portfolio. Theyalso plan to implement“free-to-
play” strategies (Stoffel). The revamp of Guitar Hero is a recent announcementthat helps to support
Activision Blizzard’s goal of continual improvement. This will help to increase the average return.
Caterpillar and Hologic Incorporated have similar returns at 1.49% and 1.28% respectively. Caterpillar is
the largest company in the Farm and Construction Machinery sector according to Fortune 500. Hologic
Inc.has seenasteadygrowthinstockpricesoverthe pastfive years. AccordingtoYahooFinance,Hologic
Inc. reported better results in the first quarter than was previously expected. It is a stock that has
continued to produce results.In our current portfolio we have chosen to short this stock. However,we
believe that in the future Hologic Inc. will be a stock that is positively utilized.
The smallestaverage returnwasSuncor at 0.54%. This isdue to the recentdownturnin the oil industry.
Pepsico has the next smallest return at 1.1%. This is possibly due to an overall shift in consumer
preferences.
Standard Deviation
Standard Deviation reflects the amount of risk that is within the Portfolio. A higher standard deviation
reflectsa larger amountof variationwithinthe portfolio.A smallerstandarddeviationreflectsa smaller

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amountof variationwithinthe portfolioresultinginlessrisk. Ourgoal istofindastockthathasthe largest
return with the smallest amount of risk.
The Walt Disney Company exemplifies one of the larger returns within our portfolio with one of the
smaller standard deviations at 5.63%. Our optimal portfolio has the second largest weight in Disney
partially due tothis factor. Accordingto Table 1, Suncor and Open Textreflectthe largestamountof risk
withinourportfolio. Suncor’sStandardDeviationof 8.71% reflectsthe riskinessof the current oil sector.
Accordingtothe FinancialTimes, loweroil pricesare expectedintothe future(Skypala). Due tothislarger
amount of risk we have decided to short Suncor in our portfolio. The least volatile stock is PepsiCo Inc.
with a standard deviation of 3.38%. PepsiCo’s low amount of risk corresponds with its low amount of
average returnreportedat 1.1%.The low amountof riskinPepsicohelpstosupportPepsicoasthe largest
weight within our optimal portfolio.
Correlation
Correlation is the measure of two variables’ relationship to one another. This relationship is measured
between -1 and 1. -1 would imply that the two stocks are 100% negatively correlated. A negative
correlation implies that when one stock’s returns increases, the other stock is going to decrease. A
correlation of 1 would mean that the two stocks are perfectly correlated and move in unison withone
another. A correlationof 0 wouldrepresentthatthe two stocks are not at all related.Correlationisnot
tobe confusedwithregressionbecausecorrelationdoesnotrepresentcausation.Allelse equal,we would
prefer two stocks to be negatively correlated in order to maintain a balanced portfolio.
According to Table 3, our highest positively correlated stocks within our portfolio were Caterpillar and
Suncor at approximately 76%. These stocks are highly correlated withone another. This factor could be
due to the dependence on oil in both companies. The remainder of our correlations are lower than this
number.We hadone negative correlationwithinourportfolio.The negativecorrelation isbetweenOpen
Text and Pepsico at -4.15%. We are confident in the diversity of our portfolio because we do not have
extremely high-correlated stocks. Therefore, we can maintain a balanced and strong portfolio for our
clients.
Beta
Betaisameasure of astock’smarketrisk. Inordertodetermineourbetavalue,we ranregressionanalysis
foreachof ourstocks’returnsagainst the S&P500.We locate ourbetabyfindingourestimatedcoefficient
value inourregressiontable.OurriskieststockisCATwhichhadabetaof 1.67. Thismeansthatif the S&P
500 returns increase by 1 percent, CAT’s will increase by 1.67 percent all else equal.Caterpillar has the
highestriskbecause theindustryCATservesisverydependentonhow the general economyisdoing.The
S&P 500 isa goodmeasure of the importantcompaniesthatrepresentthe differentindustrieswithinthe
economy.Inorder forCaterpillartodo well,the marketmustdo well.Thisalsomeansthat if the market
were to have a downturn, CAT would decrease more than the decrease within the market.

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R Squared
R squaredisa measure of howmuchof a stock’svariationcanbe explainedbythe change inmarket(S&P
500) returns through the use of our given regression model.Our highest R2 value was found for DIS at
.58. This means that 58% of the variation in the returns for DIS can be explained using our model.
P-Value
The p-value of amodel isthe measure of its statistical significance.Forexample,ata significance level of
5%, if our p-value is less than .05 we would reject the null hypothesis that the returns of our stocks and
the returnsof ourmodel are notrelatedandtherefore wewouldconcludethatthere issomerelationship.
All of ourstockshada p-value of lessthan.05. Thismeansthatall of ourstocksare statisticallysignificant.
Section IV
The Optimal Portfolio
A. The Efficient Frontier
In a graphical representation,we canidentifythe efficientfrontierasthe portionwiththe highest
amountof returnfor eachlevel of volatility.Thisprocessisalsoknownasportfoliooptimization.In
orderto performportfoliooptimization,we have usedthe SolverfunctioninExcel.We firstidentified
the stocks withthe lowestandhighestexpectedreturn.These returnswere takenfromTable 1in the
Appendix atthe conclusionof thisreport.Suncor stockhadthe lowestexpectedreturnwith0.54%while
Apple stockhadthe highestexpectedreturnwith2.74%.We usedthe range of these twostocksto
determine 17possible expectedreturnsseparatedbyequal distances.We thenappliedthese17 target
returnsto the Solverfunctiontodeterminethe expectedreturnsforeachstock.We accomplishedthis
withthe goal of achievingthe lowestpossible variance.
The efficientfrontiergraphalsoallowsustodetermine the minimumvariance portfolio. Asshowninthe
followingfigure,thispointislocatedonthe leftmostportionof the curve.The minimumvarianceportfolio
exemplifies the highest possible return at the lowest amount of risk. The minimum variance portfolio
indicatesthe leftmostportionof ourefficientfrontier.Notice thataswe move northeast on the efficient
frontier we receive a higher amount of return for a larger amount of risk.
Shortsellingisamethodusedbyinvestors.Itisaccomplishedwheninvestorssell sharesthattheydonot
own by borrowing them and selling them immediately. Investors will then buy the same share of stock
back in orderto repay the original lender.The goal of shortsellingistobuy back the borrowedsharesof
stock afterthe stockprice has fallen.Thiswill provide aprofitforthe investorwhenreplacingthe shares
that were purchased at a higher original price. A profit is not always guaranteedin the process of short
selling. If the price of the stock increases, a profit will be difficult for an investor to make.

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Efficient Frontier
B. Your Optimal Portfolio
The tangency line above shows the optimal portfolio for you as the client. In order to determine the
tangencyline we hadtocalculate the Sharpe ratio.The Sharpe ratiowill allow ustodeterminewhatlevel
of returnis acquiredwitheachnewlevel of risk.We maximizethe Sharpe ratiowithinthe Solverfunction
to determine the weights for the optimal portfolio. After completing the solver function we have
determined the following investment weights for your optimal portfolio:
AAPL CAT DIS ATVI HOLX OTEX PEP SUN
29.94% 8.76% 36.27% -5.26% -8.43% 12.96% 48.94% -23.18%
This portfolio exemplifies a large investment in Pepsico and the Walt Disney Company. We also will be
shortingthree of ourstocks. The expectedaverage returnforourstockwithinthe lastfouryearsis2.29%
with a standard deviation of 3.8%.
Section V
2015 Portfolio Performance Evaluation
We acquireddatafor dailyperformance fromJanuary2015 to the presentforour portfolioaswell asthe
S&P 500 index.ThisdataissummarizedinTable 4.The primarymeasure thatwe are usingfor the overall
stock marketisthe S&P 500 index. In2015 the S&P 500 hadan average return of 0.038%. Comparatively,
our portfolio had an average return of .098%. This return is not equivalent to our return in the past few
years, however, we are confident that this return will continue to increase throughout the year.
0
0.005
0.01
0.015
0.02
0.025
0.03
0 0.01 0.02 0.03 0.04 0.05
Return
Standard Deviation

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Another benchmark performance measure we used for our portfoliowas comparing Sharpe ratios. The
Sharpe ratio is definedaseach excessreturnthat is available perunitof risk, or standard deviation.The
Sharpe ratio for our portfolio is found by subtracting the risk free rate from the portfolio’s return and
dividing it by the portfolio’s standard deviation. The market’s Sharpe ratio is found using the same
method.Ourportfolio’sSharpe ratiowas 0.0776, whereasthe market’sSharperatiowas lowerat0.0456.
Our nextperformance measure isto compare our portfolio’sTreynorindex tothatof the market’s. The
Treynor index is similar to the Sharpe ratio formula in that it uses the same numerator, however the
denominatorusesbetaasameasure of riskinsteadof standarddeviation.Betaisameasure of aportfolio
or a stock’sperformance comparedtothe market.Betais one for the market. In order to calculate beta
for ourportfolio,we rana regressionanalysiswithourportfolio’sdailyreturnsasthe dependentvariable
and the market’s daily returns or the S&P 500 as our independent variable. Our beta coefficient has a
value of 0.96.Baseduponourestimate,ifthe marketsaveragereturnincreasesbypercent,our portfolio’s
return will increase by 0.96%. Our portfolio had a Treynor index of 0.001 whereas the market’s Treynor
was 0.0004.
Another performance measure we will consider is Jensen’s alpha, which is found using our regression
model that was previouslymentioned.Alphaisa measure of a portfolio’sexcessreturnsthat it can gain
compared to what CAPM says that it should return. A negative alpha would represent an overpriced
portfolio, whereas a positive alpha would represent an underpriced portfolio. Our alpha for the time
period was 0.0006 which shows that our portfolio was slightly over performing from what it should be
accomplishing in terms of CAPM. Another performance measure that we utilized was M2. This figure is
found by subtracting the Sharpe of the market from the Sharpe of the Portfolio and then dividing that
number by the standard deviation of the market. Our M2 was 3.85. This number is greater than 0 thus
indicatingthatthe portfoliohasbeatenthe benchmark.Ourfinal portfolioperformancewasT2thisvalue
isdeterminedbysubtractingthe Treynorof the marketfromthe Treynorof the portfolio.We thendivided
that answerbythe betaof the market.Thisvalue wasgreaterthan0 thisindicatingthatthe portfoliohas
beaten the benchmark.
Our portfoliooutperformedthe marketinall of the performance measuresthatwe lookedat. Thisisnot
consistentwithwhatCAPMsays,howeverwe are confidentthatwe canoutperformthe marketbasedon
the positions we’ve chosen with our portfolio.

15 | P a g e
Section VI
The Foundation for Your Future
Our portfolio has been delicately positioned to build wealth for our clients. From January 2010 to
December2014 ourportfolioexperiencedreturnsof 2.29%.However,overthe pastfourmonths,we have
seen the overall market steadily decline along with our portfolio. We feel that we have allocated our
stockswithinourportfoliotomaximizethe potential of the marketmovingforward. Withinourportfolio,
we have had some stocks experience pullbacks due to inventory worries (SU). However, the future of
these companies looks bright due to continued dividend increases and company growth. For example,
there are several analysts, including ourselves, who believe Apple will become the world’s first
corporationto be valuedat$1trillion.Theseare justafew examplesof whywe are confidentof thefuture
successof our portfolio. We have diligentlydesignedaportfoliothatwe believe will heedour investors’
monetary success in the coming months.

16 | P a g e
Appendix
Table 1: Summary Statistics
Avg Returns 0.0274 0.0149 0.0226 0.0154 0.0128 0.0227 0.0110 0.0054
Std Dev 0.0724 0.0843 0.0563 0.0745 0.0786 0.0874 0.0338 0.0871
Beta 0.8782 1.6720 1.1646 1.0031 1.3991 0.9565 0.4208 1.6476
R^2 0.2020 0.5396 0.5878 0.2488 0.4348 0.1641 0.2120 0.4906
P Value 0.0004 0.0000 0.0000 0.0001 0.0000 0.0015 0.0002 0.0000
*Data acquired from regressionoutput andYahoo Finance
Table 2: Covariance
AAPL CAT DIS ATVI HOLX OTEX PEP SU
AAPL 0.005234
CAT 0.00179 0.007106
DIS 0.001274 0.002277 0.003168
ATVI 0.001309 0.001503 0.001326 0.005545
HOLX 0.001518 0.003606 0.001854 0.001385 0.006174
OTEX 0.00126 0.002523 0.001659 0.00076 0.002022 0.007644
PEP 0.000118 0.000636 0.000642 0.001161 0.000863 -0.000123 0.001146
SU 0.002063 0.005609 0.002615 0.001248 0.003136 0.002104 0.000192 0.007588
*Data acquired from YahooFinance
Table 3: Correlation
AAPL CAT DIS ATVI HOLX OTEX PEP SU
AAPL 1
CAT 0.2936 1
DIS 0.3129 0.4798 1
ATVI 0.2432 0.2398 0.3164 1
HOLX 0.2671 0.5444 0.4195 0.2376 1
OTEX 0.1991 0.3422 0.3373 0.1171 0.2943 1
PEP 0.0480 0.2228 0.3373 0.4608 0.3245 -0.0415 1
SU 0.3273 0.7639 0.5336 0.1924 0.4582 0.2762 0.0652 1
*Data acquired from YahooFinance
Table 4: Portfolio Performance
Avg Rtn Standard
Deviation
Beta Sharpe Treynor Alpha M2 T2
Port 0.10% 0.0127 0.96 0.0776 0.0010 0.0006 3.849 0.000651
S&P500 0.04% 0.0083 1.00 0.0456 0.0004 N/A N/A N/A
*Data acquiredfrom YahooFinance

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Table 5: Efficient Frontier with Short Selling
2.74% 37.98% 16.63% 53.00% -4.70% -10.11% 13.57% 32.65% -39.02%
2.60% 35.54% 14.24% 47.90% -4.85% -9.60% 13.39% 37.60% -34.20%
2.46% 33.09% 11.84% 42.82% -5.03% -9.09% 13.20% 42.55% -29.38%
2.33% 30.64% 9.47% 37.73% -5.17% -8.59% 13.01% 47.48% -24.57%
2.19% 28.20% 7.05% 32.65% -5.38% -8.06% 12.82% 52.46% -19.75%
2.05% 25.75% 4.66% 27.56% -5.54% -7.55% 12.64% 57.41% -14.93%
1.91% 23.31% 2.27% 22.47% -5.71% -7.04% 12.45% 62.36% -10.11%
1.77% 20.86% -0.13% 17.39% -5.88% -6.53% 12.27% 67.32% -5.29%
1.64% 18.41% -2.52% 12.30% -6.05% -6.01% 12.08% 72.27% -0.47%
1.50% 15.97% -4.92% 7.22% -6.24% -5.49% 11.89% 77.23% 4.34%
1.36% 13.52% -7.31% 2.14% -6.41% -4.98% 11.70% 82.18% 9.16%
1.22% 11.07% -9.71% -2.95% -6.58% -4.47% 11.51% 87.14% 13.98%
1.09% 8.63% -12.10% -8.03% -6.75% -3.95% 11.33% 92.09% 18.79%
0.95% 6.18% -14.49% -13.12% -6.91% -3.45% 11.14% 97.04% 23.62%
0.81% 3.73% -16.89% -18.21% -7.08% -2.94% 10.96% 101.99% 28.43%
0.67% 1.29% -19.28% -23.29% -7.27% -2.41% 10.77% 106.95% 33.25%
0.54% -1.16% -21.68% -28.37% -7.44% -1.90% 10.58% 111.90% 38.07%
Table 6 AAPL & Competitor Financial Ratios
AAPL BBRY GOOG HPQ Industry
Market Cap: 692.74B 5.21B 361.17B 69.60B 822.52M
Employees: 92,600 8,057 53,600 302,000 840
QtrlyRevGrowth (yoy): 0.3 -0.34 0.07 -0.03 0.16
Revenue (ttm): 199.80B 3.65B 66.00B 111.45B 560.07M
Gross Margin (ttm): 0.39 0.51 0.61 0.24 0.23
EBITDA (ttm): 67.66B 696.00M 21.48B 13.15B 20.99M
OperatingMargin(ttm): 0.3 -0.01 0.25 0.08 0.03
NetIncome (ttm): 44.46B 755.00M 13.93B 5.01B N/A
EPS (ttm): 7.39 -1.43 21.02 2.62 0.02
P/E (ttm): 16.1 N/A 25.26 14.48 24.78
PEG (5 yr expected): 1.09 -1.23 1.53 1.96 1.24
P/S(ttm): 3.5 1.44 5.44 0.62 1.22
BBRY = BlackBerryLimited
GOOG = Google Inc.
HPQ = Hewlett-Packard

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Table 7 CAT & Competitor Financial Ratios
CAT DE KMTUY VOLVY Industry
Market Cap: 50.71B 30.65B N/A N/A 1.39B
Employees: 114,233 59,600 47,208 92,822 2.63K
QtrlyRevGrowth (yoy): -0.01 -0.05 0.06 0.01 0.2
Gross Margin (ttm): 0.27 0.3 0.29 0.22 0.25
EBITDA (ttm): 8.93B 6.03B 3.01B 1.76B 73.23M
OperatingMargin(ttm): 0.1 0.13 0.13 0.03 0.06
NetIncome (ttm): 3.70B 3.16B 1.37B 254.36M N/A
EPS (ttm): 5.88 8.63 1.43 0.13 1.05
P/E (ttm): 14.24 10.32 14.2 89.71 15.73
PEG (5 yr expected): 1.81 -7.22 6.39 1.71 1.41
P/S(ttm): 0.91 0.85 N/A N/A 0.87
DE = Deere & Company
KMTUY = KomatsuLtd.
VOLVY = AB Volvo
Table 8 DIS & Competitor Financial Ratios
DIS TWX FOXA Industry
Market Cap: 172.90B 67.53B 72.39B 712.30M
Employees: 180,000 34,000 27,000 730
QtrlyRevGrowth (yoy): 0.09 0.03 -0.01 0.13
Revenue (ttm): 49.90B 30.77B 32.58B 385.63M
Gross Margin (ttm): 0.46 0.46 0.34 0.4
EBITDA (ttm): 14.40B 8.23B 6.96B 23.79M
OperatingMargin(ttm): 0.24 0.24 0.18 0.05
NetIncome (ttm): 7.84B 4.29B 9.30B N/A
EPS (ttm): 4.5 4.55 4.21 0.02
P/E (ttm): 22.62 17.71 8.09 25.83
PEG (5 yr expected): 1.32 1.38 1.16 1.16
P/S(ttm): 3.48 2.19 2.19 1.96
TWX= Time Warner Inc.
FOXA = Twenty-First CenturyFox, Inc.

19 | P a g e
Table 9 ATVI & Competitor Financial Ratios
ATVI EA SNE TTWO Industry
Market Cap: 15.87B 16.83B 28.10B 2.50B 460.51M
Employees: N/A 8,300 N/A 2,530 960
QtrlyRevGrowth (yoy): 0.04 0.39 0.07 -0.72 0.04
Revenue (ttm): 4.41B 4.45B 67.89B 978.06M 208.92M
Gross Margin (ttm): 0.65 0.69 0.25 0.5 0.54
EBITDA (ttm): 1.27B 1.11B 3.42B -20.55M 5.02M
OperatingMargin(ttm): 0.27 0.2 0.01 -0.04 0.03
NetIncome (ttm): 817.00M 847.00M -1.88B -66.04M N/A
EPS (ttm): 1.13 2.59 -1.78 -0.83 N/A
P/E (ttm): 19.5 20.93 N/A N/A 21.27
PEG (5 yr expected): 2.38 1.5 N/A 0.62 0.68
P/S(ttm): 3.61 3.84 0.43 2.6 2.16
EA = Electronic Arts Inc.
SNE = SonyCorporation
TTWO = Take=Two Interactive Software Inc.
Table 10 SU & Competitor Financial Ratios
SU PVT1 IMO Industry
Market Cap: 43.92B N/A 33.51B 96.90M
Employees: N/A N/A N/A 42
QtrlyRevGrowth (yoy): -0.09 N/A -0.03 0.13
Revenue (ttm): 32.05B 21.80B1
28.46B 45.85M
Gross Margin (ttm): 0.54 N/A 0.14 0.64
EBITDA (ttm): 8.63B N/A 4.93B 2.53M
OperatingMargin(ttm): 0.14 N/A 0.14 0.09
NetIncome (ttm): 2.17B 1.71B1
3.04B N/A
EPS (ttm): 1.48 N/A 3.58 N/A
P/E (ttm): 20.56 N/A 11.05 13.84
PEG (5 yr expected): 5.73 N/A 2.66 0.26
P/S(ttm): 1.42 N/A 1.2 3.1
Pvt1 = HuskyEnergyInc.
IMO = Imperial Oil Ltd.
Industry= Independent Oil & Gas

20 | P a g e
Table 11 PEP & Competitor Financial Ratios
PEP KO DPS Industry
Market Cap: 144.77B 186.02B 15.18B 931.77M
Employees: 274,000 130,600 19,000 2.04K
QtrlyRevGrowth (yoy): 0.02 0 0.03 0.14
Revenue (ttm): 66.85B 46.17B 6.08B 1.34B
Gross Margin (ttm): 0.54 0.61 0.6 0.46
EBITDA (ttm): 12.79B 13.13B 1.46B 124.89M
OperatingMargin(ttm): 0.15 0.24 0.2 0.07
NetIncome (ttm): 6.94B 8.04B 709.00M N/A
EPS (ttm): 4.52 1.8 3.56 0.27
P/E (ttm): 21.4 23.61 21.91 23.04
PEG (5 yr expected): 2.96 5.6 2.53 2.24
P/S(ttm): 2.15 3.91 2.49 1.5
KO = The Coca-Cola Company
DPS = Dr Pepper Snapple Group, Inc.
MDLZ = MondelezInternational, Inc.
Table 12 HOLX & Competitor Financial Ratios
HOLX ALR Industry
Market Cap: 8.42B 3.56B 107.44M
Employees: 5351 17,600 154.0
QtrlyRevGrowth (yoy): 0.07 -0.02 0.17
Revenue (ttm): 2.55B 2.96B 63.32B
Gross Margin (ttm): 0.63 0.48 0.57
EBITDA (ttm): 914.4M 546.55B 1.80M
OperatingMargin(ttm): 0.16 0.05 -0.02
NetIncome (ttm): 51.80B -177.61M N/A
EPS (ttm): 0.18 -2.02 N/A
P/E (ttm): 167.06 N/A 32.66
PEG (5 yr expected): 2.44 1.95 1.75
P/S(ttm): 3.29 1.14 3.51
ALR = Alere Inc.
Table 13 OTEX & Competitor Financial Ratios

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OTEX EMC IBM ORCL Industry
Market Cap: 7.18B 54.07B 157.13 193.18B 246.25M
Employees: 8,000 N/A N/A 122,000 474.00
QtrlyRevGrowth (yoy): 0.29 0.06 -0.13 0.04 0.23
Gross Margin (ttm): 0.72 0.62 0.50 0.61 0.67
EBITDA (ttm): 557.03M 6.31B 23.03B 16.94B 4.98M
OperatingMargin (ttm): 0.22 0.18 0.20 0.39 -0.04
NetIncome (ttm): 272.91M 2.71B 15.75B 10.90M N/A
EPS (ttm): 2.23 1.32 11.90 2.40 N/A
P/E (ttm): 26.52 20.64 13.33 18.30 30.35
PEG (5 yr expected): 1.71 1.42 2.16 1.72 1.05
P/S(ttm): 3.83 2.22 1.66 4.91 3.55
EMC = EMC Corporation
IBM= International BusinessMachinesCorporation
ORCL = Oracle Corporation
Figure 1: Portfolio vs S&P 500 (Jan 1, 2015 – April 6, 2015)
*Data Acquiredfrom YahooFinance
-2.00%
-1.50%
-1.00%
-0.50%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
-40.00000% -30.00000% -20.00000% -10.00000% 0.00000% 10.00000% 20.00000%
Portfolio vs S&P 500 (Jan 1, 2015 - April 6, 2015)

22 | P a g e
Figure 2: 2015 Portfolio vs. S&P
*Data acquired from Yahoo Finance
-4.00%
-3.00%
-2.00%
-1.00%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
2015 Portfolio vs. S&P
Portfolio Returns
S&P

23 | P a g e
References
Skypala,Pauline."ThrowoutOil StockstoAvoidSectorRisks." FinancialTimes. N.p.,n.d.Web.16 Apr.
2015. <http://www.ft.com/intl/cms/s/0/54e388a2-e134-11e4-9b30-
00144feab7de.html#axzz3XO4ivle2>.
Stoffel,Brian,TamaraWalsh,andDemitriosKalogeropoulos."ThreeStocksWe're BuyingAgain." USA
Today.The MotleyFood,16 Feb.2015. Web.16 Apr.2015.
<http://www.usatoday.com/story/money/2015/02/16/three-stocks-were-buying-
again/23508337/>.

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