First General Meeting
Finance & Investment Club
September 12th, 2012
Introduction of the 2012-2013 Executive Board
Christopher Kovalik
President
Stefan Bell
VP - Corporate Relations
Joseph McNiff
VP - Investment Research
Ashwin Telukuntla
VP - Investment Management
Xun Yao Chen
VP - Investment Research
Knut Kirchoff
VP - Operations
Andrei Tapliga
VP - Technology
2
Introduction to the Finance Club at Boston University
Long-term Goals
Education
 To offer an educational, real-life opportunity for
aspiring investment professionals
Community
 To foster lasting relationships amongst our
membership in Boston University and beyond
Alpha
 To continue professional procedures to
maintain an alpha generating process
Growth
 Personal, career and fund growth
3
Introduction to the Finance Club at Boston University (Cont’d)
Talk to Anyone Within the Club!
Executive Board Members
Investment Management Focused
Industries:
Materials, Industrials, Energy, Real
Estate, Healthcare, Technology,
Telecommunications & Media,
Consumer Products, and Fixed
Income
Investment Research Focused
Industries:
Materials, Industrials, Energy, Real
Estate, Healthcare, Technology,
Telecommunications & Media, and
Consumer Products
President, VP Corporate Relations, VP
Investment Management, VP Investment
Research, VP Operations, VP Technology
Responsible for planning and executing
strategic direction of the club
Sector Heads
Responsible for managing the Undergraduate
Investment Fund, and its performance.
Investment Associates
Responsible for finding investment
opportunities across several industries within
teams.
Senior Analysts
Responsible for engaging and training junior
analysts in creating quality investment research
and presentations.
Junior Analysts
Responsible for researching and analyzing
industries and companies, working side by side
with other junior analysts and senior analysts.
4
Introduction to the Finance Club at Boston University (Cont’d)
“A Week in the Club”
IR Sector Meetings
E-Board Meeting
SAs schedule meeting to work on
presentation deliverables and focus on JA
research & education. (Every day)
SAs schedule meeting to work on
presentation deliverables and focus on JA
research & education.
Monday
Tuesday
General Club Events
Note: Periodically each semester there are
various conferences and networking events
open to all members of club.
Wednesday
Thursday
IM Team Meeting
Friday
General Club Meeting
Meeting of all members focused on senior
member presentations, discussions led by EBoard, guest speakers and portfolio updates.
VP IM, SHs and IAs discuss sector
developments, potential investments and
current portfolio holdings.
Saturday
Sunday
Senior Analyst Forum
VPs of IR hold meeting with SAs to teach
core valuation and financial research
concepts with sector presentation updates.
5
Introduction to the Finance Club at Boston University (Cont’d)
Semester Schedule
Industry Research and Analysis
Fall Semester
1. Identify sub-industry for
research
2. Find industry data
3. Understand industry drivers
4. Recommend outlook for the
industry over the next one year
period
Company Research and Analysis
Spring Semester
1. Identify company drivers
2. Conduct financial analyses
3. Value companies and assess
investment risk
4. Provide buy or sell
recommendation with a one
year outlook
Investment Recommendation
End of Spring Semester
1. Deliver investment
recommendations
2. Investment decision and
tracking
3. Best sector presentations,
best junior analysts, and best
senior analysts awards will be
announced.
6
Introduction to the Finance Club at Boston University (Cont’d)
Typical General Meeting Agenda
General Meeting Agenda
September 12th, 2012
SMG 105 6:00pm – 7:10pm
 Opening remarks from Executive Board
 Portfolio performance update
 Overview of deliverables for IR team
 Stock pitch and sector update
 Guest speaker Garrett Bauer on insider trading
7
Our new Faculty Advisor
Steven Segal
BU Executive-in-Residence
Faculty Advisor




Teaches graduate and undergraduate Private Equity and Leveraged Buyouts courses
Special Limited Partner of J.W. Childs Associates
Over 20 years of private equity investment experience
Board memberships:







Trustee, Combined Jewish Philanthropies
W/S Packaging Group, Inc.
Trustee, Temple Emanuel; Chair, Endowment Committee
The NutraSweet Company, Inc.
Trustee, Hebrew College; Chair, Finance Committee
Round Grill Inc. (d/b/a FiRE + iCE)
Fitness Quest, Inc.
8
Investment Management: Summer Investment Management Program
2012-2013 Investment Management Division Goals:
 Increase the BUFC Investment Fund through strategic investments, S.H & Associate collaboration and
constant fund adjustments to maximize alpha.
 Create a summer program that generates new investment ideas and recommendations on current
investments to ultimately strengthen the investment fund.
Investment Management Focused
Industries:
Materials, Industrials, Energy, Real
Estate, Healthcare, Technology,
Telecommunications & Media, and
Consumer Products
Sector Heads
Responsible for covering current investment
positions in each sector as well as identifying
possible micro-sectors for investment
opportunities.
Associates
Responsible for making investment
recommendations in certain sectors and microindustries identified by Sector Heads.
Summer Investment Management Assignment:
 S.H Deliverable: Research and present stock pitches for the investment management team.
 Associate Deliverable: Research and report on current positions in the fund and make recommendations on
increasing/decreasing/exiting current investments.
9
Investment Research: Summer Senior Analyst Program
2012-2013 Investment Research Division Goals:
 Strengthen BUFC Brand through top notch investment research, SA leadership and JA retention, ultimately
developing the future leaders of the club.
 Create a summer program that strengthens the leadership skills of our Senior Analysts as well as gives them
the opportunity to explore and prepare skills necessary to enhance their investment research and analysis.
Investment Research Focused
Industries:
Materials, Industrials, Energy, Real
Estate, Healthcare, Technology,
Telecommunications & Media, and
Consumer Products
Senior Analysts
Responsible for engaging and training junior
analysts in creating quality investment research
and presentations.
Junior Analysts
Responsible for researching and analyzing
industries and companies, working side by side
with other junior analysts and senior analysts.
Summer Senior Analyst Assignment:
 First Deliverable: Reading of multiple HBR case studies to understand effective leadership and management
while providing reflections and recommendations of Finance Club.
 Second Deliverable: An 8 minute PowerPoint industry analysis presentation focused upon a micro-sector of
6-8 companies within Senior Analyst Industry.
»Industry breakdown / trends / risks / outlook / recommendation
10
Home Building Industry
Sector: Real Estate
Senior Analyst: Kento Okamoto
Industry Summary
Industry Revenue ($MM)
Rating
Neutral/Overweight
Upside Potential
Indication of modest recovery
Potentially undervalued due to
skepticism
Downside Risk
•
•
•
20
500,000
10
400,000
0
300,000
-10
200,000
-20
100,000
-30
0
Possibility of another economic
disaster
High elasticity due to uncertainty
•
600,000
-40
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Growth %
Revenue $ million
Action Statement
Housing market seems to be on its path for recovery with mixed factors that can
potentially shift the market outcome in different directions. Some major factors are:
Case-Shiller Index 20-city composite
250.00
Signs of recovery in residential home price
Housing price increased for the first time since Sep-2010. Some concrete
signs of modest recovery.
200.00
150.00
30 year mortgage interest rate at all time low
Golden opportunity for financing real estate purchases. Increase in prime
mortgage to support future growth of the market.
100.00
50.00
 Subliminal
Sep-11
Apr-12
Jul-10
Feb-11
Dec-09
Oct-08
May-09
Mar-08
Jan-07
Aug-07
Jun-06
Nov-05
Sep-04
Apr-05
Jul-03
Feb-04
Dec-02
Oct-01
May-02
Mar-01
Jan-00
Aug-00
0.00
risk of high demand elasticity
Still concerned market may over-react to negative market news.
Industry Definition – House Construction
• Firms in this industry are primarily engaged in construction and
remodeling of single-family houses and residential buildings. These
firms may also hold their own financial services arm to provide
clients with customized financial solution. Firms in this industry
operate in multiple states, yet tend to hold strong position in their
indigenous states.
NYSE: PHM
NYSE: KBH
NYSE: DHI
NYSE: LEN
NYSE: RYL
NYSE: TOL
Industry Breakdowns
Industry breakdown by region
Industry breakdown by market cap ($MM)
14
5407.58
1158.3
12
5983.6
829.78
6060.06
5080.91
# of States
10
8
DHI
KBH
LEN
PHM
RYL
TOL
Industry breakdown by revenue ($MM)
6
891
4
1476
3637
1405
4137
2
3428
0
East
Midwest
South
West
Pulte Group
D.R.Horton
Lennar Corp
KBHomes Inc.
Ryland Group
Toll Brothers Inc.
DHI
KBH
LEN
PHM
RYL
TOL
General Business Model
Home Builders
Material Cost
Construction
Home
Building
Supplier
Customer
Base Material
Mortgage Loans
Land
Purchase
Mortgage
Banking
Payments + Interest + (Collateral)
Economic Landscape
“Supply Side”
Home
Builders
“Demand Side”
New
Residences
Housing
Market
Financial
Entities
Foreclosed
Properties
Collateral
Financing
Demand
Consumers
Absorption of Existing Inventory
Existing Home Sales and Remaining Inventory
$300
90.0
80.0
5,000,000
$250
70.0
4,500,000
y = 892.91x - 3E+07
R² = 0.4075
4,000,000
$200
60.0
50.0
$150
40.0
3,500,000
$100
30.0
20.0
3,000,000
y = -1933.6x + 8E+07
R² = 0.6493
2,500,000
$50
10.0
$0
0.0
2,000,000
1,500,000
National Median Housing price
HOI
What does this trend tell us?
1,000,000
•
•
•
500,000
0
Inventory
Existing Home Sales
Linear (Inventory)
Linear (Existing Home Sales)
Foreclosure rate down 2.99% in June v.PY
Steady decrease in existing house inventory
Government support to prevent foreclosure
Recovering consumer appetite for real estate
purchase
Projected demand surplus, leading to
opportunity for new home building
30-yr Mortgage rate and
New Home Sales
Mortgage rate movement and New
home sales
450
With low home price, what matters to
potential purchaser is the interest payment
5.00
y = -0.002x + 85.741
R² = 0.848
400
4.50
4.00
350
•
Current 30-yr mortgage rate down to approx. 3.5%
v. 8.3% pre – 2008 crash
• Significant decrease in total interest payment
for property purchases
•
Signs of increasing demand in second home
purchase by retired population
• Projected increase in prime mortgage, which
could support the recovery of the real estate
market as a whole
3.50
300
2.50
200
2.00
150
1.50
100
1.00
50
0.50
0
0.00
East
Midwest
South
West
30yr Mtg.
Linear (30yr Mtg.)
%
In 000’s
3.00
250
Golden opportunity to purchase a superior property
in minimum sunk-cost and interest payment
Future Outlook
$MM
Time-series analysis on total revenue,
orders, and profitability
600,000
General Outlook
40.0%
30.0%
y = -0.0064x + 0.2112
R² = 0.1055
500,000
20.0%
400,000
Industry to experience organic recovery/growth
•
•
Strong projected growth in total industry revenue and
company orders
Profitability to recover with less loss from depreciated
property/options value
10.0%
0.0%
300,000
-10.0%
y = 0.0813x - 0.455
R² = 0.6866
200,000
Risks to Consider
Sizable negative market news
•
-20.0%
As the market begins its process to recovery, a
sizable negative news on the market could scare
out potential demand.
-30.0%
100,000
-40.0%
0
-50.0%
Jun-06
Jun-07
Jun-08
Jun-09
Jun-10
Jun-11
Jun-12
Total Industry Revenue
Median Orders (Selected)
Gross Margin % (Selected)
Linear (Median Orders (Selected))
Linear (Gross Margin % (Selected))
Loss of federal support or/and continuous overregulation in lending standard
•
Loss of federal lending support or overly strict
lending policy could take away the golden
opportunity for financing real estate purchase.
Recommendation
Reiterate a Neutral/Overweight rating:
• Promising signs of modest market recovery seen in various key
statistics and indicators
• Possibility of significantly outperforming the total real estate
market as shortage in supply may become more imminent
• Contains subliminal risk of high demand elasticity as market
confidence is still under repair
Good potential for outstanding performance, yet with
recognizable risk of disappointing outcome
Appendix
Company Comparable
Scale
1,000,000
Currency
USD
Key Financials & Effectiveness
Sales
Year/Year
Net Margin
TTM
Net Margin
FY1
EPS
TTM
EPS
Year/Ye
ar
ROIC
TTM
Name
Ticker
Sales
TTM
PULTEGROUP, INC.
PHM
4,354.72
1.10
(1.95%)
3.98%
(0.22)
0.07
(3.93%)
KB HOME
KBH
1,404.60
0.99
(4.68%)
(5.25%)
(0.85)
0.39
2.05%
LENNAR CORPORATION
LEN
3,427.86
1.14
14.89%
16.12%
2.42
4.40
2.59%
D.R. HORTON, INC.
DHI
4,116.10
1.18
21.67%
22.26%
2.58
32.25
2.31%
THE RYLAND GROUP, INC.
RYL
1,000.22
1.19
(1.93%)
2.30%
(0.43)
0.24
(2.77%)
TOLL BROTHERS, INC.
TOL
1,677.74
1.16
5.41%
5.92%
0.54
1.19
5.52%
Median
1,404.60
1.12
(1.93%)
3.37%
(0.36)
0.43
1.98%
High
7,552.00
1.35
21.67%
22.26%
2.58
32.25
5.52%
Low
921.66
0.99
(13.38%)
(5.25%)
(1.67)
(0.57)
(3.93%)
Net Debt/
EV
Name
Ticker
Price
52 Week
High
Price/
Book Value
Price/
BV Tangible
EV Multiples & Credit Ratios
Market Data & Price Multiples
Name
Ticker
EV/Sales
TTM
PULTEGROUP, INC.
PHM
1.51
0.23
PULTEGROUP, INC.
PHM
13.28
13.91
1.76
2.80
KB HOME
KBH
1.45
0.59
KB HOME
KBH
10.72
13.12
1.51
2.24
LENNAR CORPORATION
LEN
2.79
0.32
LENNAR CORPORATION
LEN
32.27
32.85
1.63
1.94
D.R. HORTON, INC.
DHI
1.69
0.11
D.R. HORTON, INC.
DHI
18.62
19.35
1.68
1.71
THE RYLAND GROUP, INC.
RYL
1.56
0.23
THE RYLAND GROUP, INC.
RYL
26.01
27.15
2.51
-
TOLL BROTHERS, INC.
TOL
TOL
4.05
0.20
TOLL BROTHERS, INC.
32.41
33.68
1.81
2.07
Median
1.69
0.23
Median
22.32
23.25
1.72
2.07
High
4.05
0.71
High
32.41
33.68
2.51
2.80
Low
1.01
0.11
Low
10.72
13.12
1.51
1.71
Generic Pharmaceuticals
Finance & Investment Club
Healthcare Sector
Summer 2012
Senior Analyst: Roy Tong
Executive Summary – Generic Pharmaceutical Manufacturing
Generic Drugs
Industry in Growth
Stage
• Growth in revenue outpaces that of GDP
• Acceptance of Generics evident in growing domination of sales mix
at the expense of brand names
Generics Growth
Fuelled by Low Prices
• Lower cost to manufacture than brand names
• Sales further driven by patent expiry of brand names
Use of Generics Aided
by Government
Spending and Reform
• Increased government Medicare and Medicaid spending leading to
more consumer access to prescription drugs as opposed to OTC
• Most insurances (both private and public such as Medicare) do not
cover brand names when generics are available
Aging Population and
Unhealthy American
Lifestyle
• Large aging population increasing – elderly more vulnerable to
diseases that require medication to treat
• Unhealthy American lifestyle, too much fat and calories, inadequate
exercise and fiber, breed obesity and other diseases
24
Industry Definition – Generic Pharmaceutical Manufacturing
• Generic pharmaceutical and medicine manufacturers develop prescription drug
products that are used to prevent or treat illnesses in humans or animals
• Generic drugs are produced, marketed and distributed without patent protection, yet
at the same time comparable to brand listed drug products (if existent) in dosage,
strength, administration, quality, performance and intended use
• Firms are allowed to manufacture generics of brand name drugs AFTER the
expiration of patents protecting the branded drugs, and are able to do so at a much
lower cost due to the bypassing of discovery costs
Ligand Pharmaceuticals
NASDAQ: (LGND)
Avanir Pharmaceuticals
NASDAQ: (AVNR)
Sagent Pharmaceuticals
NASDAQ: (SGNT)
Source: Yahoo Finance Industry Center, Various Firms’ 10K & IBISWorld Analysis
Catalyst Pharmaceuticals
NASDAQ: (CPRX)
Hi Tech Pharmaceuticals
NASDAQ: (HITK)
25
Health Care Sector Breakdown
Industry Breakdown by Market Cap ($BLN)
Breakdown by Market Cap
20.1%
28.5%
Health Care
$2,384.26B
(100%)
25.3%
23.1%
Drug Manufacturers
and Related
$1,423B
(61.23%)
3.1%
Selected Companies Market Cap
Generic Drug
Manufacturer
$45B
(1.89%)
LGND
$317.78M
SGNT
$364.84M
AVNR
$399.33M
HITK
$450.88M
CPRX
$48.57M
Total
$1.58B
Source: Yahoo Finance Industry Center & Various Firms’ 10K Analysis
26
Industry at a Glance
Revenue
$52.8B
Annual Growth
(07-12)
5.4%
Profit
$7.8B (14.7%)
Expected Growth
(12-17)
6.3%
Exports
$19.6B
Businesses
1,103
Breakdown by LTM Revenue (Total: $427.28M)
7.10% 2.48%
54.38%
36.03%
0.00%
Medicinal and Botanical
Biological Products
Products
6%
10%
In-Vitro Diagnostic
Substances Products
Pharmaceutical Prep for
6%
Psychotherapeutic Drugs
6%
Pharmaceutical Prep for
Central Nervous System
Drugs
11%
Product
Segmentation
Pharmaceutical Prep for
Cardiovascular Drugs
12%
Pharmaceutical Prep for
Metabolic Drugs
14%
Source: Yahoo Finance Industry Center, Various Firms’ 10K and IBISworld Analysis
Pharmaceutical Prep for
Other Drugs
35%
27
Generic Drug Manufacturers Revenue Generation
Manufacturers
Research and Development Partners
Pipeline
Pre Clinical
Trials
Pass
Stage I
Marketed
and Sold
Royalties
or
Licenses
Pass
FDA
Approval
Stage II
FDA
Review
Pass
Stage III
New Drug
Application
(NDA)
Pass
Institutions
Through
Partner
Sales Team
or Retailers
Direct through
Sales Team
Source: Various Firms’ 10K and Firms’ Website Analysis
Retailers
End User
3rd Party
28
Geographical Distribution of Generic Pharma Manufacturers
•
Mid-Atlantic and West
regions with most
manufacturers but sales
branches typically located
close to end market
•
Advantage of locating near
other manufacturers include
local specialize workforce,
experienced business
services & availability of
facilities that are specialized
and expensive to build
•
Sales of generics follow
population trends –
Southeast, home to
significant portion of elderly,
accounts for largest region
in terms of revenue
Source: IBISworld Analysis
29
2011 Revenue Generation Breakdown by Segments
9%
42%
40%
20%
58%
31%
Health Care
Products (OTC)
8%
100%
Source: Various Firms’ 10K Analysis
100%
ECR
Pharmaceuticals
(Branded)
6%
Hi-Tech Generics
86%
30
80
800
70
700
60
600
50
500
40
400
30
300
20
200
10
100
0
0
2003
2004
2005
2006
2007
2008
2009
Generic Drugs Revenue
2010
2011
2012(est) 2013(est) 2014(est) 2015(est) 2016(est) 2017(est)
Medicare Spending
Medicaid Spending
•
Revenue – Medicare Spending Correlation: 0.98
•
Based off anticipated US government spending on Medicare and Medicaid (which can be found from
records and projections from the US Government Office of Budget and Administration), we can reason that
a comparable growth rate will be found in projected revenue of the generic drugs industry
Projected Revenue (Billion $) = 6.601 + 0.112*Medicare – 0.68*Medicaid Spending (Billion $)
Accurate within +/- 3 Billion $
•
•
$ in Billions
$ in Billions
Time Series Analysis
Source: Office of Management and Budget, IBISworld & BUFC Analysis
•
Revenue – Medicaid Spending Correlation: 0.86
31
Trend 1 – Growth of Generics Revenue > GDP Growth
125%
• The value that industry (revenue)
adds to the US economy is growing
at a much faster pace than US
GDP
• Rapid introduction of products and
brands coincides with growing
customer acceptance of products
• This is seen in how market share
has grown substantially at CAGR of
5.4% for past 15 years compared to
brand name drugs’ decline
120%
115%
% of 2007
• Generic pharmaceutical
manufacturing shows key features
of an industry in its Growth stage
Generics Revenue
110%
105%
100%
US GDP
95%
90%
2007
2009
2010
2011
% Distribution of Brand vs Generic Sales Mix
80
CAGR: 5.4%
70
60
50
40
30
20
10
0
1995
Source: US Census Bureau, Mintel & IBISworld Analysis
2008
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
32
Trend 2 – Competitive Edge in Low Costs
180.00
•
•
•
•
•
Lure of generics are obvious, with a
74% difference in average retail prices
as of 2010
Virtually all major pharmacy chains offer
generics at extremely inexpensive
prices, leading to price wars
Result of this has been an increase in
sales of generics, often at the expense
of brand names
In 2010, 93% of physicians prescribed
generics when they were available –
compared to 83% in 2003
Some 75% of prescriptions dispensed in
2011 were generic drugs – compared to
40% in 2000
Source: US Census Bureau, Mintel & IBISworld Analysis
160.00
Average Retail Prices of Brands vs Generic ($)
140.00
120.00
100.00
80.00
60.00
40.00
20.00
0.00
1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Pharmacy
Chain
Offer
Price
Walmart
30 Day
$4
CVS
90 Day
$9.99
Kroger
30/90 Day
$4/$10
United
Healthcare
Provides for
co-payments
for Medicare
Part D
$2
33
Trend 3 – Government and Private Insurance Coverage
Does Not Cover
Prescription Drugs
7%
Prescription Drugs Covered
but Doctor Will Not Prescibe It
(i.e. Xanax for Anxiety)
12%
Unknown
3%
Doctor Willing to Prescribe
Drug, But Not Covered (i.e.
Viagra for Sexual Dysfunction)
16%
Covers
Prescription Drugs
90%
Will Pay for Certain Brand
Names, Does Not Cover
Generics
13%
Wil Not Pay for Brand Name if
Generic is Available
59%
• Of the pool of respondents in a Mintel study, 90% of the total indicated that their
insurance covers prescription drugs
• Furthermore, close to 60% of respondents indicated that their insurance would not
pay for Brand Name drugs should a Generic be available
Source: Mintel & IBISworld Analysis
34
Trend 3 (Con’t) – Federal Health Care Spending & Reform
• As a result, industry demand
increases with the population’s ability
to afford the industry’s products
Federal Medicare & Medicaid Spending
700
Spending in Millions
• When Medicare and Medicaid receive
more funding from the government,
more consumers gain prescription
drug coverage
800
CAGR: 6.7%
600
Medicare
500
Medicaid
400
300
200
100
CAGR: 8.7%
0
• Coverage by these government aids
usually will not cover the cost of brand
name drugs if generics are available
• Health Care reform in 2010 expected
to benefit generic pharmaceutical
manufacturers - PPACA
Source: Office of Management and Budget, Mintel & IBISworld Analysis
2006
2007
2008
2009
2010
2011
2012
(est)
2013
(est)
2014
(est)
2015
(est)
Patient Protection and Affordable Care Act
(PPACA)
Section 10609
Prevents brand-name
manufacturers from
making label changes
to the brand-name or
listed drugs, thereby
delaying generic
products
35
100,000
28%
90,000
27%
80,000
26%
70,000
60,000
25%
50,000
24%
40,000
23%
30,000
%
Population Over 55 Years Old
Trend 4 – Aging Population
22%
20,000
21%
10,000
0
20%
2006
2011
>55
2016(Est)
>55 % of Total Population
•
American population is an aging one, with Americans aged 65-74 estimated to see the greatest
hike from 2011-2016, followed by 55-64s
•
This means that the 2 fastest growing demographics are at or approaching the age when the
aging process will place them at greater risk for a variety of age-related ailments
•
The elderly are more vulnerable to certain diseases, including Alzheimer’s, heart disease,
diabetes, cancer etc, which require preventive or treatment measures provided by
pharmaceuticals
Source: Mintel & IBISworld Analysis
36
Comps Financials
Closing
% of 52 P/E EV/EBIT
Debt/Eq LTM Quick
Price
EPS
wk High Ratio
DA
uity
ROE Ratio
(Aug 28)
16.36
82% 32.08 85.3x 0.51 3.31 60% 0.71
Company
Market Cap
(In Millions)
Ligand (LGND)
326.17
Avanir (AVNR)
403.1
2.96
73%
(5.8)
(4.8x) (0.51)
0
(85%) 5.93
Catalyst (CPRX)
46.73
1.52
77%
(7.24)
7.6x
0
(170%) 7.47
Sagent (SGNT)
233.69
14.68
55%
(15.29) (17.9x) (0.96) 0.03
Hi Tech (HITK)
460.14
35.26
79%
9.82
4.5x
3.59
0.01
20%
4.74
Industry
45,000
-
-
50.1
-
-
-
7.6%
-
High
460.14
35.26
82%
32.08
85.3x
3.59
3.31
60%
7.47
Low
46.73
1.52
55%
(15.29) (17.9x) (0.96)
Median
326.17
14.68
77%
(5.8)
4.5x
(0.21) 0.01
(19%) 4.74
Mean
293.97
14.17
73%
2.71
14.9x
0.48
(39%) 4.15
(0.21)
0
0.67
(19%) 1.89
(170%) 0.71
*does not include industry values
Source: Yahoo Finance Industry Center, Google Finance, MacroAxis & Various Firms’ 10K Analysis
37
Conclusion and Recommendation
Industry: Positive
• Growth stage industry fuelled by continual acceptance of products, low prices of goods
and federal health care spending
• State and behavior of American population set to have positive effects on prescription
drugs and therefore generic industry in the next 5 years
Industry Risks to
Overcome
• Competition from brand name manufacturers that attempt to keep generics off the
market for a longer period of time
• Must stay responsive to potentially new government regulations and health care
reforms, especially during election years
Why Recommended
Firm
• HITK is profitable, with 4.7 Quick Ratio showing good financial health and liquidity in
addition to having minimal debt (0.01 Debt-Equity Ratio)
• LGND with diverse revenue generation, yet could mean complicated business model
• ROE well above industry average and poised to take advantage of trends
38
Investment Research: Summer Senior Analyst Program
2012-2013 Investment Research Division Goals:
 Strengthen BUFC Brand through top notch investment research, SA leadership and JA retention, ultimately
developing the future leaders of the club.
 Create a summer program that strengthens the leadership skills of our Senior Analysts as well as gives them
the opportunity to explore and prepare skills necessary to enhance their investment research and analysis.
Investment Research Focused
Industries:
Materials, Industrials, Energy, Real
Estate, Healthcare, Technology,
Telecommunications & Media, and
Consumer Products
Senior Analysts
Responsible for engaging and training junior
analysts in creating quality investment research
and presentations.
Junior Analysts
Responsible for researching and analyzing
industries and companies, working side by side
with other junior analysts and senior analysts.
Summer Senior Analyst Assignment:
 First Deliverable: Reading of multiple HBR case studies to understand effective leadership and management
while providing reflections and recommendations of Finance Club.
 Second Deliverable: An 8 minute PowerPoint industry analysis presentation focused upon a micro-sector of
6-8 companies within Senior Analyst Industry.
»Industry breakdown / trends / risks / outlook / recommendation
39
Your Future in Finance
Our Biggest Event of the Fall Semester – Start Networking Now
When: Saturday, September 29th from 8:15am to 4:15pm
Block 1: Exploring a Career in Finance, Managing your Career Progression, Global Career Perspectives
Block 2: Valuation Analysis, How to Pitch a Stock, Techniques in Microsoft Excel
Block 3: Retail & Finance, Credit Analysis, and Networking Etiquette
Mock Interviews will also be held during Block 1 – first come first served
Register at BUinvest.com TONIGHT! We will send you an email!
Formal deadline 9/21/2012, but spots are limited
40
Day on the Job With the Equity Department @
MFS Investment Management
Friday, September 28 – 11am to 1pm
Enjoy pizza with us and learn about our firm, and the field of Investment Management.
-
Meet our recruiters, and learn about our recruitment process for the Equity Research Associate Program
Hear from post-undergrad associates about entry into the field
Talk to post-MBA analysts about their stock-picking process
Listen to experiences from Portfolio Managers
Network with BU alums at MFS
Learn more about our culture ahead of recruitment
11:00-11:30am: Welcome with Managers of the Equity Research Associate Program
11:30-12:00pm: Q+A with BU Alumni at MFS
12:00-12:45pm: Lunch Panel with Equity Research Associates
Who we are:
Boston-based global asset manager with $285 Billion in assets under management
20 global offices
Our Equity Research Associate Program
Working on a sector team, our equity research associates assist analysts in recommending stocks to portfolio managers.
Associates assist heavily with building models, project-oriented proprietary research, and in meetings with company
management teams. We have opportunities to work in multiple sectors and gain knowledge on stock-picking across
industries, in an academic environment that encourages constant learning.
41
To Participate…
You must… register! (Also available at BUinvest.com)
Information required:
 Name, contact information, class, school,
concentration / major (if decided)
 Also provide which position you would like to
apply for; positions available:
 Junior Analyst
 Senior Analyst
 Investment Associate
42
Next Steps
Come talk to us!
Today’s dinner spot:
Scoozi
Next Meeting:
Wednesday, 9/19 in PHO 206
Come in business casual; we have a
speaker!
E-mail (BUinvest@bu.edu) with any questions
43