This report details performance, investment themes, and position changes to the Seton Hall University Student Managed Investment Fund Portfolio thru May 2018.

1. May 1st, 2018
Portfolio Report
bit.ly/shuportfolio
$158,100 (+$5661)
+4.57% ytd
+5.53% α
S&P 500: -0.96% ytd
Coverage:
Henry Steck
Portfolio Manager
henry.steck@student.shu.edu
Michael Roma
Portfolio Manager
michael.roma@student.shu.edu
SHU Student Managed Investment Fund (SMIF)
Spring 2018 Results
Fund Navigated Volatility Producing Success: Overweight Energy,
Overweight International, Timely Reductions in Beta
SMIF Alpha Production through Energy & International Names | Henry Steck
Although global economic conditions are improving, investors are still cautiously navigating
the slowest economic recovery since World War Two. Global growth has been robust, but
fears of inflation and central bank policy movement still loom. Most recently, these fears con-
tributed to significant spike in volatility.
The VIX remained below 12 and
trended downward to a low of 8
throughout 2017 as equities ral-
lied with little turbulence. Vola-
tility spiked in the first quarter
this year however, with the VIX
touching 37 on February during
an ~1100pt correction of the
DJIA. Beyond February, volatility
has spiked on several other occa-
sions this year.
The S&P 500, our benchmark, is currently down 0.96% so far this year amidst great volatility.
Our fund has appreciated 4.57% so far this year, 5.53% above the S&P. This is partially due to
our overweight stances in energy and in international names.
The fund currently possesses a ~12% allocation in the energy sector, or ~6% overweight ver-
sus the S&P 500. This includes allocations in China Petroleum & Chemical (HK:386, NYSE:SNP),
Statoil (OSLO:STL, NYSE:STO) and Royal Dutch Shell (NYSE:RDS.A). It is our view that $26 per
barrel WTI crude in 2016 was a major bottom. As WTI retraced into the low $50 range per
barrel in mid 2017, we moved quickly to increase our energy exposure, purchasing two of our
current energy names back-to-back (STO & SNP). Crude oil markets have tightened signifi-
cantly since mid 2017, as producers remain under OPEC/Non-OPEC production limits, global
demand is significant, and geopolitical risk remains pronounced. This produced major tail-
winds for our energy names, and our overweight position has thus allowed us to reduce our
attachment to some volatility in the broader market. SNP, STO and RDS.A have produced
33.5%, 31.5% and 33% returns respectively so far. Roughly 80% of these overall returns repre-
sent alpha.
Although hydrocarbon demand will peak at some point in the long term, our crude oil view
over the next 12 months remains bullish.
Since purchasing our first ADR in 2016, another important goal for us has been diversifying
our equity holdings internationally. International equities increase overall portfolio risk due to
higher standard deviation of returns, but also provide better opportunities for returns and
thus alpha in some market conditions on a risk-adjusted basis.

2. Beyond our excellent international picks in energy, we have uncovered alpha in other sectors internationally
including tech (Alibaba HK:1688, NYSE:BABA), and in industrials (Canadian Pacific TSX:CP, NYSE:CP). To place
our progress into perspective, two years ago, SMIF had virtually no international exposure.
We continue to strive to find the best sectors, industries and names internationally based on local economic,
demographic and political trends. Investing in international markets remains a key component of the fund’s
strategy to build portfolio alpha.
Reducing Portfolio Volatility through Lower Beta and Non-Correlated Investments | Michael “Roma”
Since the fund’s inception we have been underweight in the Consumer Staples and Utilities sectors. The
portfolio has benefitted significantly from overweight allocations in the best performing sectors such as Tech-
nology, Financials and Consumer Discretionary, as well as the timely addition of Energy exposure throughout
2017. However, much has changed since we first received capital in Spring 2015. An unexpected election out-
come, Fed tightening, WTI Crude falling from near all time highs to below $30 a barrel and then doubling head-
ing into 2018. All the while we have experienced a secular rally in equities. However, as we rolled over from
January into February, we experienced a change to the status quo. Despite no change to the fundamentals, the
S&P 500 corrected down as much as –10.16%, and the VIX spiked to three year highs, with many investors who
were short gamma getting hurt. This caused us to revaluate our portfolio’s construction, and our overweight
exposure to high-beta sectors.
Consumer Staples has been a tough space to produce alpha for portfolio managers. The sector, as well as
household names such as Procter & Gamble, Coca Cola, and Kraft Heinz have underperformed the S&P 500.
Provided the rising uncertainty surrounding equities, features of these investments such as relatively stable
dividends, and low beta may begin to draw investors to these Buffett favorites. This is why our Fund was drawn
to allocate to the space, however, we still sought to deliver alpha to the portfolio; the solution, the avocado.
We identified that the avocado has become everyone’s favorite superfood, that NAFTA will likely benefit U.S.
growers, and lastly that its shares would be stable. Then we found the name, Calavo Growers (NASDAQ:
CVGW) which has been growing the avocado since 1924, yet Calavo has outpaced Amazon in share-price
growth since 2001. With a beta of only .68, and forecasted upside of 20% over the next 12-18 months, we are
bullish on Calavo’s ability to deliver alpha if the “Goldilocks” period continues or even if we experience a draw-
down in equities.
Utilities have likewise been an underperforming sector which our portfolio has been underweight. Provided
changing market conditions, these bond proxies have begun to look a bit more attractive. Compared to their
Telecom peers, there is less uncertainty and industry shake-up given headlines such as the ongoing AT&T-Time
Warner Trial, and recent announcement that T-Mobile and Sprint have agreed to merge. Utilities, whose rates
are set by the state and local governments, also may be buoyed by changing conditions. Although the regula-
tors will keep the rates they charge customers in check, utility companies will likely be boosted by a gradually
growing customer base. With the job market improving, more millennials are leaving their parents’ home and
buying those of their own. This trend can be witnessed through rising existing home sales and prices which
were up 1% last month, and 6.3% in 2017. The U.S. housing supply is the tightest it’s been in decades, with
some of the toughest conditions being found in Florida with key markets like Orlando, Lakeland-Winter Haven,
and Melbourne experiencing 7% year over year price appreciation versus the national average of 5.7% as re-
ported by Barron’s. Expansion in Florida will benefit shares of NextEra Energy (NYSE: NEE), a Florida utility
company with a renewables-centric blend and significant market share in power equipment manufacturing.
The SMIF voted to open a position in NEE with a 4% allocation.
May 1st, 2018
Portfolio Report