D’Artagnan Capital Fund
Williams College of Business
Xavier University
3800 Victory Parkway
Cincinnati, OH 45207-5162
6 Months Ending 9-28 Report
March 30, 2012 – September 28, 2012
Prepared by: Matt O’Driscoll, Greg Rose, Justin Coop, Drew Janzen TABLE OF CONTENTS
Returns and Interpretation of Data ..........................................................................3
Best and Worst Performance ....................................................................................4
Top Holdings .............................................................................................................4
Attribution Analysis and Security Selection ............................................................. 5
Economic Summary .................................................................................................. 5
Strategy .....................................................................................................................6
Trades ........................................................................................................................6
Compliance…………………………………………………………………………………………………..7
Conclusion ................................................................................................................. 7
Appendix ................................................................................................................... 7
2 | D C F M a r c h R e p o r t D’ARTAGNAN CAPITAL FUND MONTHLY
PERFORMANCE
(3/30/2012 – 9/28/2012)
RETURNS Statistics
Total Return
Sharpe Ratio
Treynor Ratio
Beta
Alpha
M^2
DCF
S&P 500
1.09%
2.388
.008
1.12
-2.73%
-1.10%
3.43%
3.855
.032
1.0
INTERPRETATION OF DATA Total Return
Overall, the portfolio underperformed in the 6 months since the beginning of our fiscal year,
returning 1.09%. In comparison, the benchmark of the S&P 500 Index returned 3.43% over the
same time period. In total, the portfolio underperformed by 2.34%.
Beta
The fund’s Beta of 1.12 for the six month period is slightly higher than the implied beta of 1.0 for
its benchmark. The higher beta indicates for the six month period the portfolio experienced
more volatility of returns and was more risky than the market as represented by the S&P 500
benchmark.
Sharpe Ratio
The Sharpe Ratio is the excess return of the portfolio over its standard deviation. The portfolio
returned a Sharpe Ratio of 2.388. In comparing this to the benchmark’s ratio of 3.855, it can be
determined that on a risk-adjusted basis the portfolio underperformed the market and
experienced less return per unit of total risk.
Treynor Ratio
The Treynor Ratio is the return of the portfolio less the risk-free rate over its beta. The portfolio
returned a Treynor of .008. In comparing this to the benchmark’s ratio of 0.032, it can be
determined that on a risk-adjusted basis the portfolio underperformed the market, given its
exposure to market risk.
3 | D C F M a r c h R e p o r t Alpha
During the month of September, the portfolio returned an alpha of -2.73%. This indicates that
the portfolio underperformed our benchmark by 2.73% on a systematic risk adjusted basis.
M2
The portfolio returned an M2 measure of -1.10%. On a total risk adjusted return for the month of
September, the portfolio returned 1.10% below the S&P 500 when adjusted for the deviation of
the portfolio relative to our benchmark.
BEST AND WORST PERFORMANCE Best Performers
1) NRG Energy Inc.
2) Watson Phar. Inc
3) AT&T Inc.
4) Time Warner
5) Google Inc.
Return
37.12%
26.99%
23.95%
18.23%
17.66%
Worst Performers
1) Peabody Energy
2) Caterpillar Inc.
3) Intel Corporation
4) Chesapeake Energy
5) Nike, Inc.
Return
-22.49%
-18.37%
-18.13%
-17.08%
-14.44%
The most volatile sector was the Energy sector with NRG Energy our top performer returning
37.12%, however Peabody Energy was our worst performer returning -22.49%. The Information
Technology/Telecom sector provided two of the top performers in Google Inc. (returned
17.66%) and AT&T Inc (returned 23.95%). Watson Pharmaceuticals Inc. provided the second
best security performance with a return of 26.99%.
TOP HOLDINGS Top Holdings
(9/28/2012)
1) Apple Inc.
2) Visa Inc.
3) PNC Financial
4) Microsoft Corp.
5) Cognizant Tech.
% of
Portfolio
5.83%
5.74%
4.53%
4.24%
3.6%
*It’s the fund’s policy to keep holdings underneath 6% of the total portfolio.
4 | D C F M a r c h R e p o r t ATTRIBUTION ANALYSIS AND SECURITY SELECTION Sector
Information Technology
Consumer Staples
Health Care
Industrials
Energy
Financials
Utilities
Materials
Telecommunication
Services
Consumer Discretionary
Total
Excess Return
Attribution
Relative
Weight to
Benchmark
+
+
-
Asset
Allocation
Return
+
+
+
+
Security
Selection
Return
+
+
+
-
+
-
+
-
+
-
-.09%
-4.28%
Total
Excess
Return
+
+
+
-
The fund has over-weighted information technology, industrials, and telecommunication
services. On the other hand, the fund has underweighted consumer staples, health care, energy,
financials, utilities, materials, and consumer discretionary. The majority of the fund’s
underperformance can be attributed to our security selection, as opposed to our asset allocation.
The financial, utility, and telecommunication services sectors all over-performed.
Economics Summary Over the last six months central banks around the world have engaged in money printing, or
quantitative easing as it is often referred to. In the United States, Federal Reserve Chairmen Ben
Bernanke announced the third round of Quantitative Easing, in which the Fed will buy $40
billion of mortgage backed securities per month, with the possibility that they could continue to
ease if there is no economic improvement. The European Central Bank also has announced that
they are prepared to come to the aid of struggling countries, most notably Greece and Spain who
have experienced rising interest rates. Domestically, the possibility of the fiscal cliff and the
election have led to a sense of uncertainty in markets, and an unemployment rate that was above
8% throughout the spring and summer has fallen to 7.8% in September, although this has partly
been attributed to Americans continuing to leave the labor force. Internationally, tensions with
Iran remain and have resulted in economic sanctions, mostly related to oil, imposed by the US,
Europe, and other countries. The Arab Spring has also continued into the fall, as uprisings and
rebellion in Syria have continued from the summer. China’s economic growth has slowed, from
9.2% in 2011 to a government projected 7.5% in 2012; also of note is the transition in leadership
the country will go through that happens once a decade.
5 | D C F M a r c h R e p o r t Strategy Statement As the school year was came to an end in the spring the Fund entered into more defensive
positions, such as Phillip Morris, and decided to put all cash received as dividends into the
Spyder ETF in order to stay competitive with the market. With the resumption of school in the
fall the Spyder was liquidated and our cash position was reduced in order to take advantage of
opportunities in the market place, such as our purchase of shares in Express Scripts, Toronto
Dominion Bank, and Nike.
TRADES Date
5/9/2012
Ticker
WYNN
Buy/Sell
BUY
# of
Shares
290
Price
$127.36
5/9/2012
WPI
BUY
12
$73.66
5/9/2012
V
SELL
-80
$81.07
5/9/2012
TD
BUY
355
$43.18
5/9/2012
QCOM
SELL
-600
$62.04
5/9/2012
PEP
SELL
-600
$65.92
5/9/2012
PM
BUY
70
$89.05
5/9/2012
NKE
BUY
285
$111.66
5/9/2012
INTC
BUY
700
$27.92
5/9/2012
GM
SELL
-200
$22.24
5/9/2012
GM
SELL
-700
$22.23
5/9/2012
EMN
BUY
450
50.77
5/9/2012
DOW
SELL
-725
32.32
5/31/2012
SPY
BUY
35
132.56
6/29/2012
SPY
BUY
30
131.32
7/31/2012
SPY
BUY
14
136.4
6 | D C F M a r c h R e p o r t 9/21/2012
APPL
SELL
10
$700.06
9/21/2012
ESRX
BUY
125
$63.01
9/28/2012
NKE
BUY
60
$95.73
9/28/2012
SPY
SELL
79
$146.11
9/28/2012
TD
BUY
70
$84.87
COMPLIANCE Into the spring and the summer we remained in compliance with our prospectus by keeping our
cash position below 10% and rolling dividends into the SPYDR ETF. Each sector weight
remained within the limits relative to the S&P 500. No single position exceeded 8% of the
portfolio; however due to Apple’s price appreciation it exceeded our internal control limit set of
6% of the portfolio. Since reconvening in August, the DCF has engaged in several security
transactions; we liquidated 10 shares of Apple which had risen above 6% of the portfolio and
sold our position in Chesapeake Energy, which had been less than 1% of the portfolio.
CONCLUSION For the six months from March 31, 2012 to September 28, 2012 the D’Artagnan Capital Fund
underperformed the S&P 500 benchmark by 2.34%, which can be attributed more to our
security selection than asset allocation; our beta was slightly higher than the market. Our top
two holdings for the period were Apple and Visa. NRG Energy was our top performer returning
37.12% while Peabody Energy was our worst performer returning -22.49%.
APPENDIX Weight
Portfolio
Weight
Benchmark
Return
Portfolio
Return
Benchmark
Contribution
Portfolio
Total
100.00
100.00
0.87
5.24
0.87
Information Technology
25.96
19.52
1.26
0.25
0.16
VISA INC
5.74
0.48
14.40
14.40
0.81
QUALCOMM INCORPORATED
0.49
0.75
-8.92
-7.43
-0.25
MICROSOFT CORPORATION
4.24
1.87
-6.51
-6.51
-0.31
INTEL CORPORATION
3.57
0.96
-18.13
-18.13
-0.75
GOOGLE INC.
2.49
1.19
17.66
17.66
0.42
COGNIZANT TECHNOLOGY
SOLUTIONS
APPLE INC.
3.60
0.14
-9.17
-9.17
-0.45
5.83
4.17
11.74
11.74
0.68
Financials
11.93
13.24
1.33
-0.08
0.04
U.S. BANCORP
1.61
0.45
9.57
9.57
0.15
7 | D C F M a r c h R e p o r t TORONTO-DOMINION BANK, THE
1.44
0.00
3.05
0.02
PNC FINANCIAL SERVICES GROUP
4.53
0.24
-0.88
-0.88
-0.11
JPMORGAN CHASE & CO
1.95
1.06
-10.64
-10.64
-0.28
CHUBB CORP.
2.40
0.14
11.60
11.60
0.25
Health Care
10.76
11.59
6.87
8.11
0.74
WATSON PHARMACEUTICALS INC.
1.04
0.07
26.99
26.99
0.25
UNITEDHEALTH GROUP INCORP
2.78
0.43
-5.27
-5.27
-0.16
JOHNSON & JOHNSON
1.76
1.34
6.43
6.43
0.13
Express Scripts Holding Co
1.54
0.27
15.60
15.60
0.23
CARDINAL HEALTH, INC.
0.01
0.10
-1.56
-8.53
-0.03
BRISTOL-MYERS SQUIBB CO.
1.52
0.42
1.99
1.99
0.04
ABBOTT LABORATORIES
2.12
0.74
13.70
13.70
0.28
Consumer Staples
7.81
11.46
1.84
3.52
0.04
PROCTER & GAMBLE CO.
2.15
1.31
4.97
4.97
0.11
PHILIP MORRIS INTERNATIONAL IN
2.09
1.11
3.40
3.40
0.07
PEPSICO INC.
0.50
0.80
-5.24
8.31
-0.14
KELLOGG CO.
1.67
0.13
-1.99
-1.99
-0.05
CAMPBELL SOUP CO.
1.40
0.08
4.66
4.66
0.06
Consumer Discretionary
9.47
11.65
-8.24
3.42
-0.95
WYNN RESORTS LTD
1.62
0.08
-8.47
-6.61
-0.29
TIME WARNER CABLE INC.
1.73
0.19
18.23
18.23
0.32
NIKE, INC.
1.53
0.27
-14.44
-11.86
-0.34
MCDONALD'S CORPORATION
2.58
0.68
-5.00
-5.00
-0.16
MACY'S RETAIL HOLDINGS INC.
1.50
0.11
-4.29
-4.29
-0.09
GENERAL MOTORS COMPANY
0.51
0.25
-13.53
-11.31
-0.39
Industrials
13.51
10.79
-2.70
20.23
-0.28
ILLINOIS TOOL WORKS INC.
2.79
0.19
5.52
5.52
0.13
General Electric Co
1.93
1.56
15.00
15.00
0.30
DONNELLEY (R.R.)& SONS CO.
2.12
0.00
-10.87
CSX CORP.
2.84
0.17
-2.35
-2.35
0.05
Caterpillar Inc
2.71
0.43
-18.37
-18.37
-0.64
3M COMPANY
1.12
0.45
4.98
4.98
0.06
Materials
2.90
3.56
-2.46
1.09
-0.09
The Dow Chemical Company
0.31
0.27
-6.83
-14.61
-0.11
EASTMAN CHEMICAL COMPANY
1.23
0.05
13.34
11.43
0.21
ALCOA INC
1.36
0.07
-11.02
-11.02
-0.18
Energy
10.74
10.97
-2.29
3.02
-0.27
TOTAL - ADS (REPRE: 1 ORD - SDL:
B15C557)
PEABODY ENERGY CORPORATION
1.87
0.00
0.69
1.29
0.05
-22.49
-22.49
-0.40
MURPHY OIL CORP.
2.22
0.07
-3.47
-3.47
-0.07
HALLIBURTON COMPANY
1.34
0.22
2.10
2.10
0.02
CHEVRON CORPORATION
3.10
1.54
10.58
10.58
0.35
CHESAPEAKE ENERGY CORP
0.91
0.09
-17.08
-17.83
-0.18
Unclassified
0.40
1.09
11.30
0.53
0.08
STANDARD & POOR'S - SPDR S&P
500
Cash
0.40
0.00
11.30
0.08
0.20
0.00
0.12
0.00
CASH
0.20
0.00
0.12
Utilities
3.10
3.18
23.08
1.74
0.66
PROGRESS ENERGY INC.
1.13
0.06
15.83
15.83
0.19
-0.18
0.01
0.00
8 | D C F M a r c h R e p o r t NRG ENERGY INC.
1.57
0.00
37.12
0.55
DUKE ENERGY CORP (HOLDING
CO)
Telecommunication Services
0.41
0.21
-6.17
5.19
-0.08
3.24
2.95
23.95
21.77
0.74
AT&T INC.
3.24
1.53
23.95
23.95
0.74
9 | D C F M a r c h R e p o r t