Information Technology
Sector Recommendation
Agenda
—  Overview
—  Discussion of stocks
—  Business analysis
—  Financial analysis
—  Valuation
—  recommendation
Sector and Industry Overview
S&P Sector Weights vs. SIM Sector Weights
—  The Information Technology sector is the largest holding within
the SIM Portfolio.
—  We reiterate our recommendation to remain over-weight in
the SIM Portfolio.
Stocks we currently own in
SIM
SIM Information Technology Holdings
(by weight within sector)
GPN
[PERCENTAGE]
Apple
23%
Vantiv
16%
EMC
11%
Qualcomm
10%
Apple
Google
27%
EMC
Google
Qualcomm
Vantiv
GPN
From 5/30/2014
- Student Investment Management Fund
(SIM)
Company overview—Apple
—  Apple Inc. is an American
multinational corporation
headquartered in Cupertino,
California, that designs,
develops, and sells consumer
electronics, computer
software, online services, and
personal computers.
Stock
Apple (AAPL)
Recommendation
HOLD
P/E
14.90
EPS
5.96
Div%
2.01%
Beta
0.93
Consensus Price Target*
96.75 (<1% upside)
PEG
1.24
EV/EBITDA
9.39
Profit Margin
21.42%
ROE
29.25%
% of SIM Holdings
5.06%
* Source: Yahoo Finance
Apple Technical Analysis
Company Overview—EMC
—  EMC Corporation (stylized as
EMC²) is an American multinational
corporation
—  It offers data storage, information
security, virtualization, analytics, cloud
computing and other products and
services that enable businesses to
store, manage, protect, and analyze
data.
Stock
EMC (EMC)
Recommendation
HOLD
Forward P/E
14.12
EPS
1.26
Div%
1.72%
Beta
1.28
Consensus Price Target*
30.04 (12% upside)
PEG
1.29
EV/EBITDA
9.46
Profit Margin
11.59%
ROE
12.17%
% of SIM Holdings
2.27%
* Source: Yahoo Finance
EMC Technical Analysis
Company Overview—Google
—  Google is an American
multinational corporation
specializing in Internetrelated services and products.
These include online
advertising technologies,
search, cloud computing, and
software. Most of its profits
are derived from AdWords.
Stock
Google (GOOG/
GOOGL)
Recommendation
P/E
EPS
Div%
Beta
SELL GOOG
22.14
19.01
0.00%
1.18
Consensus Price Target*
PEG
661.28 (12% upside)
1.38
EV/EBITDA
18.90
Profit Margin
ROE
% of SIM Holdings
20.91%
14.76%
5.82%
* Source: Yahoo Finance
Google Technical Analysis
Company Overview—Qualcomm
—  Qualcomm Incorporated is an
American global semiconductor
company that designs and
markets wireless
telecommunications products
and services. Headquartered in
San Diego, CA, USA, the
company has 157 worldwide
locations.
Stock
Qualcomm (QCOM)
Recommendation
P/E
EPS
Div%
Beta
HOLD
15.66
3.99
2.10%
1.11
Consensus Price Target*
PEG
85.49 (6% upside)
1.04
EV/EBITDA
13.89
Profit Margin
ROE
% of SIM Holdings
26.90%
17.09%
2.08%
* Source: Yahoo Finance
Qualcomm Technical Analysis
Company Overview—Vantiv
—  Vantiv, Inc. is a U.S.-based
payment processing and
technology solutions provider
headquartered in the greater
Cincinnati, Ohio area.
Stock
Vantiv (VNTV)
Recommendation
BUY
P/E
18.04
EPS
0.88
Div%
0.00%
Beta
Consensus Price Target*
0.98
35.50 (12%
upside)
PEG
1.01
EV/EBITDA
11.72
Profit Margin
6.31%
ROE
15.35%
% of SIM Holdings
3.51%
*Source: Yahoo Finance
Vantiv Technical Analysis
Financial Highlight & Catalysts
For the year ended December 31, 2013,
Revenue increased 13% to $2,108.1 million from $1,863.2 million in 2012.
—  Income from operations increased 16% to $352.8 million from $304.9 million
in 2012.
—  Net income increased 88% to $208.1 million from $110.8 million in 2012.
—  Net income attributable to Vantiv, Inc. increased 132% to $133.6 million from
$57.6 million in 2012.
—  Emerging trend and opportunities in the payment
processing industry
—  new technologies, new products, new services, and etc.
—  evolving new business model and new entrants
Risks
—  Rapid developments and changes within the
industry
—  if fail to provide services to clients, service could
decline and reduce revenue
—  Peer companies competitions
—  could adversly affect current business
—  Unauthorized leakage of data
—  whether it's due to computer viruses or otherwise, the
company reputation will be damaged
—  Regulations
—  Failure to comply with regulations may result
—  suspension or revocation of licenses or registrations
—  the limitation, suspension or termination of services
—
the imposition of civil and criminal penalties,
including fines
Vantiv DCF
Analyst: Chen Chen
7/7/2014
(000s)
Year
Revenue
Terminal Discount Rate =
Terminal FCF Growth =
2014E
2,400,000
% Grow th
Operating Income
Operating Margin
Interest Income
Interest % of Sales
Taxes
Tax Rate
Net Income
% of Sales
Plus/(minus) Changes WC
% of Sales
Subtract Cap Ex
Capex % of sales
Free Cash Flow
% Grow th
2,600,000
8.3%
480,000
20.0%
40,902
1.7%
132,802
30.0%
273,369
% Grow th
Add Depreciation/Amort
2015E
520,000
20.0%
40,902
1.6%
166,210
30.0%
301,369
10.2%
362,400
390,000
15.1%
15.0%
(1,187)
(20,000)
0.0%
122,400
5.1%
512,182
-0.8%
98,800
3.8%
572,569
11.8%
2016E
1,700,000
-34.6%
340,000
20.0%
40,902
2.4%
194,161
30.0%
175,369
-41.8%
255,000
15.0%
90,000
5.3%
68,000
4.0%
452,369
-21.0%
2017E
1,836,000
8.0%
367,200
20.0%
44,174
2.4%
96,908
30.0%
226,118
28.9%
91,800
5.0%
97,200
5.3%
73,440
4.0%
341,678
-24.5%
2018E
1,982,880
8.0%
396,576
20.0%
47,708
2.4%
104,660
30.0%
244,208
8.0%
99,144
5.0%
104,976
5.3%
79,315
4.0%
369,012
8.0%
10.00%
4.25%
2019E
2,062,195
4.0%
412,439
20.0%
49,616
2.4%
108,847
30.0%
253,976
4.0%
103,110
5.0%
109,175
5.3%
82,488
4.0%
383,773
4.0%
2020E
2,144,683
4.0%
428,937
20.0%
51,601
2.4%
113,201
30.0%
264,135
4.0%
85,787
4.0%
113,542
5.3%
85,787
4.0%
377,677
-1.6%
2021E
2,230,470
4.0%
446,094
20.0%
53,665
2.4%
117,729
30.0%
274,700
4.0%
89,219
4.0%
118,084
5.3%
89,219
4.0%
392,784
4.0%
2022E
2,297,384
3.0%
459,477
20.0%
55,275
2.4%
121,261
30.0%
282,941
3.0%
91,895
4.0%
121,626
5.3%
91,895
4.0%
404,568
3.0%
2023E
2,366,306
3.0%
473,261
20.0%
56,933
2.4%
124,898
30.0%
291,430
3.0%
94,652
4.0%
125,275
5.3%
94,652
4.0%
416,705
3.0%
2024E
2,437,295
3.0%
487,459
20.0%
58,641
2.4%
128,645
30.0%
300,172
3.0%
97,492
4.0%
129,033
5.3%
97,492
4.0%
429,206
3.0%
Company Overview—Global Payments
—  Global Payments Inc. is a
provider of electronic
transaction processing services
for merchants, Independent
Sales Organizations, financial
institutions, government
agencies and multi-national
corporations
Stock Global Payments (GPN) Recommendation SELL P/E 18.00 EPS 3.16 Div% 0.11% Beta 1.13 Consensus Price Target* 73.81 (<1% upside) PEG 1.95 EV/EBITDA 11.09 Profit Margin 9.38% ROE 18.7% % of SIM Holdings
2.85%
* Source: Yahoo Finance
Global Payments Technical Analysis
Business Analysis
—  Macroeconomic headwinds in
key international markets
—  Spain/Russia/Asia-Pacific Region
—  9.1% Return on revenue
—  Fairly valued on P/E with
peers
—  23.52 vs. 24.64 Ind. Avg.
—  18.7% Return on equity
—  Sub-Industry Outlook*:
Neutral
—  Data Processors are benefiting
from entry into international
markets, which offsets the
slow-growth mature markets
—  Lofty EPS expectations (12%
growth)
Risks
—  Downward Price Risk: stock
—  Increase in costs due to security
has gone up 57% over the
past year
upgrades, increased regulation
—  1 month daily volume down
25%
—  Resistance at $65/share
—  Widespread bankruptcies
amongst their merchants,
clients and high turnover in
their ISO channel.
—  data breach in 2012
—  Increased expansion and
integration costs, further cutting
into thin margins
—  Emerging market exposure
—  High unemployment (Europe)
—  Decreasing consumption
—  Pricing pressure from local
competition
Global Payments DCF
Company Overview-Activision Blizzard
—  Activision Blizzard, Inc. is the
American holding company for
Activision and Blizzard
Entertainment. In 2009
Activision Blizzard was the
world's second-largest gaming
company by revenue after
Nintendo
Stock Activison Blizzard
(ATVI) Recommendation P/E EPS Div% Beta BUY 17.33 0.88 0.89% 0.92 My Price Target PEG 26.58 (17% upside) 1.1 EV/EBITDA 12.6 Profit Margin ROE 19.38% 9.18% Activision Technical Analysis
Technical Analysis Continued
Activision Catalysts
•  Major transformation in capital structure
•  Bought out 49% of Vivendi stake
•  Better aligns ATVI management and its shareholders views
•  Current CEO/Co-Chair created and investment group (VC’s and
Tencent Holdings) own a 25% stake in ATVI
•  Management raised FY14 Revenue and EPS guidance
•  Beaten their own estimate for 11 consecutive quarters
•  Beaten analysts consensus estimate 10 out of last 11 quarters
•  Expecting solid results from upcoming game launches in 2014 on the new
generation consoles
•  New Call of Duty, 2 World of Warcraft’s, and Destiny
•  See opportunity in high-margin lines with new consoles (downloadable
add-ons)
Risks
—  Product sales for previous
generation consoles went down
more than expected
—  Product sales for new
generation consoles increases
more than expected
—  Competition is fierce, yet they
have great brand loyalty
—  Adapting to new gaming
—  Less packaged games
—  More downloaded games
—  Decreased cap-ex due to
loss of Vivendi’s majority
stake
—  Rise of casual games (cell
phone games) threaten
makers of games like
Activision
—  Low ROE 9.18%
—  Uncertain segment profit
margins year over year
Activision DCF
Case Against GPN and Why GOOG
Global Payments Inc.
—  Risk vs. Reward pay-off
—  Gross Margin Contraction
—  Increasing costs and increased
—
—
—
—
regulation
Emerging market exposure
Stock increasing to record high
on decreasing volume
Overlap with Vantiv within the
SIM Portfolio
Weakening fundamentals and
technicals within the IT service
industry (Ned Davis Research)
Google Inc.
—  Currently our Google
positions (GOOG/GOOGL)
make up 5.82% of our whole
portfolio
—  5% weight maximum
—  Need to sell to maintain
diversity within the SIM
Portfolio
—  Also our tech sector
investments need subindustry diversity
Sell Recommendations
—  Sell all 285 basis
points of Global
Payments Inc.
—  Sell all 130 basis
points of Google Class
C shares (GOOG)
Buy Recommendations
—  Buy 285 basis points
—  Increase holding of
of Activision Blizzard
(ATVI)
Vantiv by 130 basis
points
Summary of Recommendations
Stock Recommendation Price
Target Price Est. Return
(%) Current
Weight Rec. Weight
Change Rec. Weight Apple (AAPL) HOLD 95.97
96.75
<1
506 bps
0
506 bps
EMC (EMC) HOLD 26.86
30.04
12
227 bps
O
227 bps
Google (GOOG/
GOOGL) SELL GOOG 590.46
661.28
12
582 bps -130 bps 452 bps
Qualcomm (QCOM) HOLD 80.82
85.49
6
208 bps
Global Payments (GPN) SELL 73.43
73.81
<1
285 bps -285 bps
Vantiv (VNTV) BUY 34.31
35.50
12
351 bps +130 bps 481 bps
Activison Blizzard
(ATVI)
BUY
22.59
26.58
17
0
0
208 bps
0 bps
+285 bps 285 bps
Class vote