University of Connecticut
MBA SMF Presentation
Dec-5-2013
George Cerwinski, Lead Manager
Pornpong Lueang-A-Papong, Portfolio Manager
Robert Shedrawy, Treasurer/Secretary
Xin Wang, Technology Manager
Jonathan Coombes
Murali Kuchipudi
Yan Zhu
Agenda
 Investment Philosophy and Style
 Strategy
 Investment Process
 Processes and Procedures
 Portfolio Analysis
 Recap & Looking Ahead
 Interesting Holdings
Investment Philosophy and Style
 Value Investing
 Hybrid: Top-down / Bottom-up
 Mid to Large Cap Companies
 Corporate Social Responsibility
 3 – 5 years Investment Time Horizon
 Both Short-term and Long-term Upside Potential
Strategy
 At least 4 stock pitches per manager
 25-30 stocks when fully invested
 10 Sectors Diversified
 100% Equity Investment
Investment Process I
 Macro-Economic Analysis
• GDP Growth Rate
• Unemployment Rate / Labor Participation Rate
• Interest Rates
• Geopolitical Events
Investment Process II
 Sector and Industry Analysis
• Corporate Earnings and Reports
• Consumer Confidence
• Credit Availability
• Government Regulation
Investment Process III: Individual Stock Analysis
Strong and
sustainable business
model
Outstanding among
its peers
•Well-balanced/diversified business
units
•Strong and predictable earnings
- ROA and ROE
- P/E and PEG ratios
- Operating margins
- Leverage ratios
Intrinsic value higher
than market value
Corporate social
responsibility
- Human Rights
- Business Ethics Policy
- ESG Disclosure
- Equal Opportunity
- Emission Reduction
- Environmental Disclosure Score
Processes and Procedures
 Training and Development
 Channels of Communications
 Stock Pitches
Portfolio Analysis I
 Benchmark and Portfolio Asset Allocation
Sector
Consumer Discretionary
Consumer Staples
Energy
Financials
Health care
Industrials
IT
Materials
Telecom
Utilities
Total
Current %
S&P 500 Weight
7.5%
15.5%
8.5%
17.1%
15.2%
13.5%
7.7%
2.3%
5.5%
7.1%
100.0%
12.4%
10.2%
10.5%
16.1%
13.0%
10.9%
17.9%
3.5%
2.4%
3.1%
100.0%
Portfolio Analysis II
 Benchmark and Portfolio Asset Allocation
Portfolio Analysis III
 Holding Period Performance Review
Portfolio Growth
8.00%
7.00%
6.00%
5.00%
4.00%
3.00%
2.00%
1.00%
0.00%
6.89%
5.76%
Port Return
S&P return
Portfolio Analysis IV
 Performance Analysis
Mean Weekly Return
Geometric Weekly Return
S.D
Beta
Sharpe Ratio
Treynor Ratio
Jensons Alpha
MBA SMF
S&P 500
0.513%
0.611%
0.510%
0.608%
0.763%
0.896%
1.010
1.000
0.603
0.623
0.005
0.006
0.40%
n/a
Portfolio Analysis V
 Portfolio Snapshot as of 11/29/2013
Security
Sector
Consumer
Discretionary
PepsiCo Inc
Consumer Staples
CVS Caremark Corp Consumer Staples
Halliburton Company Energy
JPMorgan Chase &
Financials
Co
Wells Fargo
Financials
UnitedHealth Group
Health care
Inc
Amgen
Health care
General Electric Co Industrials
United Parcel Service Industrials
Altera
Technology
Alcoa
Material
American Electric
Utilities
Verizon
Telecom
Ford Motor Co
Price/Share Shares
Position
Total
Weight Div. Yield Cost/Share Gain/Loss
$17.08
3,232
$55,203
3.3%
2.35%
$18.00
-5.11%
$84.46
$66.96
$52.68
680
870
1,116
$57,433
$58,255
$58,791
3.4%
3.5%
3.5%
2.81%
1.50%
0.99%
$83.36
$65.60
$50.85
1.32%
2.07%
3.60%
$57.22
990
$56,648
3.4%
2.93%
$52.82
8.33%
$44.02
1,650
$72,633
4.3%
2.51%
$43.56
1.06%
$74.48
830
$61,818
3.7%
1.50%
$68.02
9.50%
$52,477
$57,319
$41,976
$56,438
$17,855
$51,201
$39,994
$738,040
$102,005
$846,175
$1,686,220
3.1%
3.4%
2.5%
3.3%
1.1%
3.0%
2.4%
43.8%
6.0%
50.2%
100.0%
1.60%
2.91%
2.40%
1.60%
1.22%
4.30%
4.20%
$116.50
$26.57
$100.62
$32.52
$9.05
$48.21
$50.35
-2.08%
0.34%
1.75%%
-0.83%
6.19%
-2.39%
-1.45%
$114.08
460
$26.66
2,150
$102.38
410
$32.25
1,750
$9.61
1,858
$47.06
1,088
$49.62
806
Total Equity Value
Total Cash
SPY ETF
Total Account Value
Recap & Looking Ahead I
 Recap of Our First Three Months
• Affordable Care Act and The Debt Crisis
• Volatility in Market
• Emerging Markets
• Bubble Implication
• One position in:
• Consumer Discretionary, Energy, Technology, Materials,
Telecommunication, and Utilities sectors
Recap & Looking Ahead II
 Looking Ahead
• In the Winter Break
 Continue to monitor our positions
• In the Spring Semester
 Focus on the following attributes
 Strong and fit business model
 Steady revenue and earnings
 Diversified and balanced operations
 Great growth and value prospects
 Seeking out growth stocks
Most Interesting Holdings I
 Alcoa Inc. (AA)
 Investment Thesis
 Poised to be lowest cost fully integrated Aluminum Producer
 Strengths in downstream business insulates business from volatile
Aluminum prices
 Improving economic climate indexes in Asia, EU, and NA bode well
for metals demand
 Factors Affecting Price Growth
 Upgrade from JP Morgan, among others, to overweight/overperform citing predicted upswing in Aluminum prices
 Cost cutting initiatives and closing of burdensome smelting facilities
 Worldwide economic improvement is leading to increasing demand
for Aluminum
 Domestically Auto and Airline manufacturers
Sector: Materials
Industry: Mining/Aluminum
Market Cap: $12.61B
Price @ 2/20/2014: $11.75
Purchase Price: $9.05
52 Week Range: $7.63 - $12.32
Intrinsic Value: $16.27
Market Cap at Intrinsic Value: $17.43B
Unrealized Gain: 29.83%
Most Interesting Holdings II
 Ford Motor Co. (F)
 Investment Thesis
 Only U.S automaker not to declare bankruptcy or accept a
government bailout
 One Ford plan has allowed Ford to fix balance sheet, sell
unprofitable brands, and improve the quality of vehicles
 Highest ROE 28.5% in the industry
 Strong sales and profits support our high intrinsic value
 Possible Factors Affecting Price Decline
 Speculation and concern over CEO Alan Mulally’s possible
departure
 Cyclical nature of industry and concern over a stalling recovery
 Some quality issues with SYNC product and Escape recall
Sector: Consumer Disc
Industry: Auto Makers
Market Cap: $68.3B
Price @ 11/29/2013: $17.08
Purchase Price: $18.00
52 Week Range: $9.71 - $18.02
Intrinsic Value: $26.89
Market Cap at Intrinsic Value: $102.6B
Unrealized Loss: (5.11%)
Acknowledgments
• Dr. Chinmoy Ghosh
• Dr. Michel Rakotomavo
• Patrick Terrion
• Cengiz Searfoss
• Peter Larson
• Keith LaRose
• Laurel Grisamer
• Investment Advisory Board
• UConn Foundation
Q&A
Appendix: Individual Stock Performance I
AA
AEP
ALTR
AMGN
Appendix: Individual Stock Performance II
CVS
F
ALTR
AMGN
Appendix: Individual Stock Performance III
UNH
UPS
JPM
PEP
Appendix: Individual Stock Performance IV
VZ
WFC
Appendix: Portfolio Beta
Beta
Halliburton Company
Altera Corp.
JPMorgan Chase & Co
Alcoa
Ford
Wells Fargo
General Electric Co
UPS
UnitedHealth Group Inc
Portfolio Beta =
1.01
CVS
Amgen
Verizon
PepsiCo Inc
AEP
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
Appendix: Best Performing Holding
 United Health Group(UNH)
• Our Plan for United Health Group:
 We continue to believe UNH is undervalued as a whole. The forward
P/E ratio is 12.85 with outstanding reward to shareholders via dividends
and share buyback supports the increase in stock price
 We believe that UNH will generate decent profit from Obamacare. The
company’s membership grew by 24% in the first nine months of 2013
 We will continue to monitor UNH as its stock price approaches our
calculated intrinsic value
Sector: Health Care
Industry: Managed Care
Market Cap: $75.75B
Price @ 11/29/2013: $74.48
Purchase Price: $68.02
52 Week Range: $51.09-$75.88
Intrinsic Value: $114.42
Market Cap at Intrinsic Value: $116.36B
Unrealized Gain: 9.50%