Aberdeen University Trading and Investment Society
Annual Report
Index
1. President’s Comment
2. The committee
3. Event summary
4. Acadmic year analysis
5. Offline Portfolio positioning and analysis
6. Online Portfolio positioning and analysis
7. Profit and Loss Account
8. Statement of financial position.
9. Prospective insight on market and activities.
10. Next years committee
11. Conclusion
1. President’s comment
Although in our infancy Aberdeen University Trading and Investment Society has, this academic year,
propelled itself into prominence. Carrying on the culture established by the founding committee we
have emboldened our presence at The University of Aberdeen. This year we have secured
sponsorship, secured a stockbroker, opened our bank account, taken our equity placements live,
held our first socials, doubled the active member count and affiliated ourselves with the university:
all whilst seeing the portfolio grow. I would like to thank our connections at Aberdeen Asset
Management and Stocktrade, as well as the core members of the society, for their enthusiasm and
involvement throughout the year.
Harry Grieve
President 2012-2013
2. The Committee:
Harry Grieve
Ally Dickson
Sasan Munro
President
Secretary
Treasurer
MA Economics and Finance
LLB Law
LLB Law
3. Even Summary
This year the society has:
Obtained official sponsorship by Aberdeen Asset Management.
Our friends at AAM have granted us a £500 sponsorship for the purposes of investing in equities. At
the onset of the academic year we cited this as a central goal. We achieved it very early on after a
lot of work and we are certain it will, literally, reap dividends in the future.
Secured Stocktrade as our stockbroker.
Stocktrade, based in Edinburgh, have granted us their brokerage services at a very attractive price.
Opened a treasurer account.
The university uses Bank of Scotland for all their banking purposes- so we simply have to use them.
We not have a fuly operational account.
Offline portfolio.
We now have a fully accounted for and profitable offline portfolio which has been running from the
27th of November to the 3rd of April.
Online portfolio.
We took three equities ‘online’ from the offline portfolio. They have each been granted a £100
posistion. They are; Vodafone, British American Tobacco, W S Atkins.
Aberdeen Business Group.
The president has been actively involved in the Aberdeen Business Group. As a founding member,
he liased with the other business school presidents to organise the Business Ball and other socials.
All were large successes.
Logo.
The committee have, with the help of a designer, created a new logo to represent the society. (See
the cover of this report).
Apparel.
A selection of shirts, jumpers and ties will be made available for the start of the coming academic
year.
Constitution ammendement.
We have amended the constitution to provide a structure for purchasing equities. With specific
reference to the timing of the positioning.
QUOTE
Consistent weekly meetings.
As the society is dependent on face time, we have made a point of keeping up the tradition of
weekly meetings. These have been hugely beneficial and populated with a diverse and involved
selection of students.
Grant.
We were not granted any money from the university this year.
Active member count.
More than doubled estimate from 7 last year to 15. A number we, as a committee, like.
4. Academic year market analysis
Starting in November 2012, the Society was looking to the infamous fiscal cliff in the United States
that was looming ahead along with the contractionary policies being implemented in Europe. GDP is
widely regarded as a leading indicator in relation to long-term stock market trends so it will be
helpful to review the data. While the United States has managed an average of over 2% YOY growth
over the academic year, back home we have averaged 0.4% reflecting weaker consumer demand
driven by the public sector cuts and the inability of exports to make up the difference. While the
government has used low interest rates (the base rate is now at 0.5%) and quantitative easing as a
means of currency devaluation to drive exports, the current account deficit has widened to 3.7% of
GDP from 1.3%. Some have attributed this to the fact that since all countries are attempting to
devalue their way out of a recession, none of them will be able to do so. However the news for the
UK stock market has been much more positive with the FTSE 100 moving in tandem with the S&P
500 at a 15% gain over the past academic year. Whether this is due to the fact that many FTSE
constituents have global revenue exposure or whether the FTSE will revert to reflect the state of the
UK economy will remain to be seen. While the fiscal cliff has been largely averted, the economies of
Europe have remained depressed averaging a -0.75% YOY GDP growth rate over the past academic
year.
The UK has also been stripped of its AAA credit rating by Moody on account of weak GDP and rising
debt-to-GDP. However the effects have been mainly felt by the currency markets with sterling
closing at two years low against the dollar.
In terms of bonds, the ten-year has remained yielding 1.8% and with CPI growth at 2.8%, this means
that investors face losing 1% in real terms. These dangerously low yields have meant that investors
are gradually moving towards dividend payers and with the FTSE 100 yielding 3.5%, we are sure to
see many more move towards stocks.
In spite of the obvious troubles in Europe, the MSCI Europe index has gained 19% over the past
academic year ahead of both the FTSE and the S&P. Some have attributed the gain to its outright
monetary transactions programme which has allowed the ECB to buy peripheral bonds thus bringing
down borrowing costs. The result has been a sharp decrease in peripheral bond yields and a rise in
regional stock markets as risk of EU break-up has diminished. However the debt crisis has not been
resolved with a political crisis in Italy and and a bank panic in Cyprus but faith in the ECB has
stemmed fears. Additionally stock markets seemed to be supported by resilient corporate profit
growth, fuelled by strong demand overseas.
5. Offline portfolio positioning and analysis.
We started with a completely blank portfolio this year. Equities are voted in on a democratic
majority-vote basis. We use a conservative stock picking model[1] which all members are taught to
use. If a member wishes to pitch a stock: then they are ecounraged to do so. This adds value to
their employability as we believe the ability to pitch an idea is regarded essential in the corporate
world.
This year we had lots of pitches. However, only some of the equities pitched made it into the
portfolio. Here are all the proposed additions, with the corresponding votes and date of
posistioning:
The Royal Bank of Scotland (2-10 Approx OUT)
Swallowfield (LON: SWL) (10-0 IN) 26/11/2012
W S Atkins (LON: ATK) (9-1 IN) 26/11/2012
Vodafone (LON: VOD) (IN) 11/03/2013
Lookers PLC (LON: LOOK) (OUT)
British American Tobbaco (LON: BAT) (IN) 3/12/2012
Talk Talk (LON: TALK) (OUT)
Each equity was granted a £1,000 posistion in a £10,000 portfolio of ‘fake money’. The overall
portfolio performace to the decommissioning of the offline version was .
[CHART]
[ANALYSIS]
6. Online portfolio positioning and analysis
The equities we took to the live portfolio were:
Vodafone PLC (LON VOD)
British Ameican Tobacco (LON: BAT)
W S ATKINS (LON ATK)
The portfolio has 5 equity ‘slots’ with a 3/2 ratio between income and capital growth stocks. The
investment horizon is medium- long term and, like the offline portfolio, is currently limited to
London listed equities.
7. Profit and Loss Account
8. Statement of financial position.
9. Prospective insight on market and activities.
Looking to the market in the year ahead we can expect many of the same issues to dominate. While
the fiscal cliff has been averted, the debt crisis in Europe persists and UK growth remains sluggish.
While, as we have noted above, this doesn’t appear to have affected corporate earnings or stock
market returns, it is entirely possible that the bourses start reflecting their constituent economies in
the year ahead. From a valuation perspective, risk premiums (i.e. expected returns above the risk
free rate) are at all time highs of over 6% on indexes such as the S&P 500 and even more so on the
FTSE 100. However critics have maintained that this is due to the fact that risk-free rates (i.e. 10 year
government bond yields in both the US and the UK) are at all time lows and thus has been the main
factor in the increasing spread. Additionally commentator’s cite Prof Shiller’s 10 year CAPE (cyclically
adjusted price to earnings) which indicates that the stock market is historically very expensive. While
the economic conditions on this side of the pond may favour defensive stocks (i.e. food, beverage,
pharma, telecoms) which are less susceptible to drops in discretionary consumer spending, the GDP
growth in the US indicates that a move into cyclicals could be the way forward if our own bourse
continues to track the S&P 500. Lastly the sell in ‘May and go away’ principle has shown that on
average the stock market tends to underperform from May to Halloween and outperform from
Halloween to May which may indicate that we will be well placed to start investing in the next
academic year.
8. Next years committee.
Harry Grieve
Alasdair Dickson
David Hart
President
Vice President
Treasurer
MA Economics and Finance
LLB Law
MA Finance
David Brunett
Jonatahan Koos
Secretary
Marketing Executive
LLB Law
MA Finance
9. Conclusion.
We believe this report adequately reflects the strength have gained and we keenly await the year
ahead. Please direct any enquiries to: abdn.autis@hotmail.com
10. Appendix