Presentation slide describing a potential portfolio of 6, well-known tech companies. Includes short descriptions of each of the component firms, a review of the portfolio as a whole, and historical returns of each firm for the past 5 years.

1. Patrick Hsiang
Tuesday, August 8, 2017
Portfolio concerning:
GOOG, APPL, FB, NVDA, MSFT, INTC
The InfoTech6 Portfolio
1

2. Agenda
2
 For Whom, Why, and How
 Industry Background
 Our Portfolio
 The Six Companies
 Portfolio Composition
 Risks
 Conclusion

3. For Whom, Why and How
3

4. For Whom?
4
 Passive, institutional investors seeking stable,
long-term growth
 Individual investors new to investing in Tech,
interested in a portfolio with brand names
 Growth-oriented investors looking for a long
position

5. Why Technology?
5
First, why no to tech?
 “trade big payoff for certain payoff” – Warren
Buffet
 Avoid tech stocks that have high valuations and
difficult to understand business models – Peter
Lynch
 Dot-com Bust – high valuation, no profit-
generation
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Caveat:
 Nasdaq 100 outperform S&P 500: 150% vs 65%
from 2006 to 2016

6. How was this created?
6
Key vocab:
 Minimum variance:
portfolio has assets that are risky on their own, but
have lower risk when pooled together, given an
expected return
 Beta:
volatility of an asset’s value compared to market as
a whole
 Alpha:
excess return of an asset compared to a benchmark
index

7. Looking Ahead
7
 3 Core Areas of Competition:
1. Intelligent Analytics – predictive analysis
2. Intelligent Process – better functionality used
automatic response
3. Intelligent User Experience – system adapts to
user preferences
 More focus on data center and cloud
 Nvidia: 206% data center revenue growth Q1 2017
 Intel: 7% decline in Client Computing (Chips,
processors), 15% growth in cloud and data center in
2016

8. Industry Background
8

9. Decline of the PC Market
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 Increase of 30% more sales in 2010, decrease to
10% less in 2016

10. Rise of Mobile Devices
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 Developing nations buy more smartphones
 1.5 billion unit sales worldwide in 2016

11. New products on the way
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Companies are adjusting to meet this change:
 New Technologies:
 self-driving cars
 Waymo
 More AI assistants
 Siri, Google Assistant, Cortana
 Machine learning/deep learning
 Core ML, Pixel,
“More recently, scientists working in a new field of AI called deep learning, discovered th
critical to creating algorithms that enable computers to learn from experience and data,
similar to how the human brain works. In a short period of time, AI algorithms rapidly ou
code written manually by programmers. As a result, deep learning has become a strate
for companies across many industries.”
-Rob Csongor, Nvidia VP,
Testimony to US Senate, 6/4/2017

12. Our Portfolio: The Six Companies
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13. How we chose our Companies
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1. Market Capitalization in Core Business
2. Consistent or Increasing ROI (shown below)
Company June 30,
2016
Sept. 30,
2016
Dec. 31,
2016
Mar. 31,
2017
Apple 23.25% 21.29% 18.82% 18.57%
Alphabet 13.7% 14% 13.78% 14.01%
Microsoft 23.33% 23.57% 24.37% 25.55%
Nvidia 16.31% 20.26% 26.23% 27.17%
Intel 11.43% 11.45% 11.22% 12.01%
Facebook 12.24% 14.35% 18.28% 19.69%

14. Company – Google/Alphabet
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Strategy:
 Closed-system profit generation
 All products are inter-connected; found by ads
 Uses cutting-edge lead as competitive advantage
 Multiple new products in a variety of fields
Risks:
 Concentration of revenue from ads in Search and
Youtube; about $67 billion out of $89 billion or 75%
in 2016
 New products not major successes; Google Home,
Google+
 Fault for regulation; EU fine for $2.7 billion

15. Company - Apple
15
Strategy
 Unique devices and apps; strong branding
advantage
 All major products connected to digital content
platforms
 iMac, iPhone, iPad, Apple TV
 Self-operated stores to enhance customer
experience
Risks
 Dependent on foreign manufacturing and logistics
 Main market in smartphones highly competitive,
requiring frequent new introductions

16. Company - Nvidia
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Strategy:
 Strong advantage due to leader in and creator of
GPU applications
 Sales team highly technical and manages network
of users whose responses are collected for future
feature releases
Risks:
 Reliant on small number of customers for 67% of
revenue
 Sales model reliant on “design wins” competitions in
order for products to be used

17. Company - Facebook
17
Strategy:
 Competitive advantage is strong brand and ability to
retain and gain more Monthly Average Users (MAU)
 Collection of user data and activities, and sale of
data to advertisers for targeted ads on News Feed
 Buying out rival social media sites and producers
Risks:
 Reliance on ad revenue; 97% in Q1 2017
 Digital content producers do not like loss of control
over placement and timing of their ads
 2013: Nissan pulls ads after finding them on Pages making
fun of sexual violence

18. Company - Microsoft
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Strategy:
 Competitive advantage in branding and product
diversity
 Move away from PC, towards cloud and Office
products
 Restructure into 3 main divisions:
1. Productivity/Business - Office
2. Cloud/Intelligent AI – Azure and Enterprise Services,
3. Personal – Windows OS, Xbox, Windows Phone
Risks:
 Transition to mobile/cloud is costly, competing with
free products
 New products and acquisitions not successful

19. Company - Intel
19
Strategy:
 Virtuous Circle of Growth:
 Smart “things” need cloud/data center products, which leads
to new :things”
 Reorganization into 6 new divisions
 Acquisition of current leading companies
 Mobileye purchased in June 2017
Risks:
 55% revenue from PC-related chips and
processors, declining
 New product areas already have established
heavyweights

20. Our Portfolio: Composition and
Comparison
20

21. Our Portfolio: Broken Down
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7.79%
19.78%
21.01%24.21%
20.21%
7.00%
Nvidia
Apple
Intel

22. Our Portfolio: In Comparison
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Name 1 year returns 5 year
returns
InfoTech 6 (5-year rtn expected) 41.31% 206.55%
S&P North American Technology Sector
Index 22.41% 56.18%
iShares North American Tech ETF 70.36% 144.90%
First Trust Dow Jones Internet Index Fund
67.95% 182.18%
First Trust Nasdaq-100 Technology Sector
Index Fund 68.82% 172.61%
Vanguard Information Technology ETF
58.41% 128.19%

23. Our Portfolio: Dissecting the Comparisons
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 Lagging on 1 year forecast; very strong in 5 year
expected returns
Why the lag?
 Intel and Apple growth slowing down; Intel stock
value grew 7.69% last year

24. Historical Performance – excluding
GOOG
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0
20
40
60
80
100
120
140
160 6/1/2012
10/1/2012
2/1/2013
6/1/2013
10/1/2013
2/1/2014
6/1/2014
10/1/2014
2/1/2015
6/1/2015
10/1/2015
2/1/2016
6/1/2016
10/1/2016
2/1/2017
Apple
Microsoft
Intel
Facebook
Nvidia
Nvidia and Facebook lead in Portfolio growth,
with Nvidia gaining >200% returns in 2016

25. Historical Performance
25
0
100
200
300
400
500
600
700
800
900
6/1/2012
10/1/2012
2/1/2013
6/1/2013
10/1/2013
2/1/2014
6/1/2014
10/1/2014
2/1/2015
6/1/2015
10/1/2015
2/1/2016
6/1/2016
10/1/2016
2/1/2017
Apple
Microsoft
Intel
Facebook
Nvidia
Google
Shows why portfolio is composed more of Microsoft and Intel
– stability of value

26. Portfolio Risks – General to Specific
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 Susceptible to general market conditions
 Growth stocks may be subject to earnings
disappointments
 Value Stocks may not recover
 Concentrated industry and small amount of
components means greater risk from “undiversified”
status
 short product cycles or technological obsolescence,
downward competitive pressures, or changes in
regulation

27. Conclusion
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28. Conclusion
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 Intelligent analysis, intelligent process, intelligent
UE becoming the future focus
 Growth in cloud, data center, and ML products will
drive growth  more returns from mobile devices
and supporting infrastructure
Recommendation: BUY AND HOLD