Undergraduate
Student Managed Fund
Spring 2014 Presentation
March 6, 2014
1
Fund Managers
Officers:
Lead Manager: Robert Bailey
Portfolio Manager: Duston Hodgkins
Secretary: Tom Blankemeier
Managers:
Alexander Anisimov
David Boudreau
Eric Bourassa
Michael Cox
Joseph Grieco
Matthew Mastrogiorgio
Lina Posada
Student Managed Fund
Fund Managers
Spring 2014 Presentation
2
Agenda
1)
2)
3)
4)
Investment Objective and Philosophy
Investment Process
Economic Outlook
Portfolio Overview
1)
2)
3)
Interesting Holdings
Performance
Attribution Analysis
5) Lessons Learned
Student Managed Fund
Agenda
Spring 2014 Presentation
3
Investment Objective & Philosophy
Objective
• Outperform the S&P 500
• Learn to analyze as value investors
Philosophy
• Search for undervalued securities based on estimation of
intrinsic value compared to current market price
Style
• Bottom-up approach
Student Managed Fund
Investment Objective & Philosophy
Spring 2014 Presentation
4
Industry Managers
•
•
•
•
•
•
•
•
•
•
Basic Materials: Matthew Mastrogiorgio
Consumer Discretionary: Robert Bailey, David Boudreau
Consumer Staples: Thomas Blankemeier, Duston Hodgkins
Energy: Alexander Anisimov, Michael Cox, Lina Posada
Financials: Thomas Blankemeier, David Boudreau, Joseph Grieco
Healthcare: Eric Bourassa, Robert Bailey, Alexander Anisimov
Industrials: Matthew Mastrogiorgio, Lina Posada
Real Estate: Eric Bourassa, Michael Cox
Transportation: Michael Cox
Technology: Joseph Grieco, Duston Hodgkins
Student Managed Fund
Industry Managers
Spring 2014 Presentation
5
Investment Strategy
• High ROE & ROIC
• i.e. ORCL
• Sustainable Barriers to Competition
• i.e. ACN
• Consistent Return to Shareholders
• i.e. SLB
• Strong Business Models
• i.e. DTV
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Investment Strategy
Spring 2014 Presentation
6
Investment Tools
Student Managed Fund
Investment Tools
Spring 2014 Presentation
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Investment Process
Step 1
Step 2
Step 3
Step 4
• Manager Researches Chosen Company
• Presents Research to Other Managers
• Thorough Discussion on Company Research
• Majority of Managers Vote for Approval
• If Yes  Vote on Allocation of Capital
Step 5 • If No  Conduct Further Research
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Investment Process
Spring 2014 Presentation
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Portfolio Approach
• Seek to take positions at various percentage increments
depending on a variety of factors
6% or under position
6% or larger position
• Strong fundamentals
• Fairly valued
• Carry more risk
Student Managed Fund
Portfolio Approach
Spring 2014 Presentation
• Safe/predictable
• Strong upside
potential
• Strong downside
protection
• Undervalued
9
Economic Outlook
• Quantitative Easing and recent tapering
• Unemployment in the US
• Eurozone Recovery and Deflation
Student Managed Fund
Economic Outlook
Spring 2014 Presentation
10
Quantitative Easing
•
Interest rates appear to be on the rebound with the recent tapering of mortgagebacked securities and 30-year Treasury purchases
The growth of the Fed’s Balance Sheet and Interest Rates
Federal Reserve Balance Sheet
10yr Treasury
$4,500
4.5
$4,000
4.0
3.5
$3,000
$2,500
3.0
$2,000
2.5
$1,500
Interest Rate (%)
Total Assets (USD$bn)
$3,500
2.0
$1,000
1.5
$500
$0
1.0
2008
2009
2010
2011
2012
2013
Source: Bloomberg LP
Student Managed Fund
Economic Outlook
Spring 2014 Presentation
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QE’s Affect on the US Equity Market
•
With QE looking to halt by year end, will the equity market be able to maintain
this positive trend without being artificially stimulated?
Correlation of Balance Sheet and Equity Performance
S&P Index
$4,500
$2,000
$4,000
$1,800
$3,500
$1,600
$1,400
$3,000
$1,200
$2,500
$1,000
$2,000
$800
$1,500
$600
$1,000
$400
$500
$200
$0
S$P 500 Index level
Total Assets (USD$bn)
Federal Reserve Balance Sheet
$0
2008
2009
2010
2011
2012
2013
Source: Bloomberg LP
Student Managed Fund
Economic Outlook
Spring 2014 Presentation
12
Strength of the US Economy
The Unemployment rate 2007 – Present
67.0
66.0
65.0
64.0
63.0
62.0
61.0
Participation rate (%)
Participation Rate
10
9
8
7
6
5
4
Participation Rate
Participation rate (%)
Unemployment (%)
Unemployment Rate
67
65
63
61
59
1970
1975
1980
1985
1990
1995
2000
2005
2010
Source: Bloomberg LP
Student Managed Fund
Economic Outlook
Spring 2014 Presentation
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Conditions in the Eurozone
• Slow Recovery
• Deflation
• European Central Bank and Outright Monetary Transaction
(OMT) program
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Economic Outlook
Spring 2014 Presentation
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Portfolio Breakdown
• Average weight per company: 5.88%
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Portfolio Breakdown
Spring 2014 Presentation
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Sector Allocation
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Sector Allocation
Spring 2014 Presentation
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Portfolio Performance
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Portfolio Performance
Spring 2014 Presentation
17
Portfolio Performance
Undergraduate SMF Portfolio
Beginning Value
(9/13/2013)
Current Value
(2/28/2014)
Overall
Profit/(Loss)
Return
S&P 500
$1,567,133.91 Beginning Value
1,687.99
$1,731,941.92 Current Value
Overall
$164,808.01 Profit/Loss
1,859.45
10.51%Return
11.18%
171.46
• Undergraduate SMF portfolio has underperformed the S&P
500 by 0.67% (67 BPS)
• Beta = 0.97, Sharpe Ratio = 2.48, Treynor Ratio = 0.29
Student Managed Fund
Portfolio Performance
Spring 2014 Presentation
18
Individual Stock Performance
Equity Performance Compared to SPY
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
ACN
AXP
BBBY
DE
DTV
XOM
LH
LOW
MKC
MDT
NSC
NVR
ORCL
PPG
SLB
USB
DIS
-5.00%
-10.00%
-15.00%
Equity Performance
Series1
S&P 500 Performance
Series2
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Portfolio Performance
Spring 2014 Presentation
19
Best Performing Stock - NVR
• Real Estate: Homebuilder
• Unrealized gain of 26.12%
• Strong Q4 earnings EPS $21.15 vs.
estimates of $16.08
• On December 18th management authorized
an additional $300 million buyback program
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Portfolio Performance
Spring 2014 Presentation
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Worst Performing Stock – Bed Bath and Beyond
Reason
• Q4 guidance lowered
• Worried about holiday season
Reinvestment
• Growth opportunities
• Free cash flow stability
• Lower cost basis
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Portfolio Performance
Spring 2014 Presentation
21
Attribution Analysis
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Attribution Analysis
Spring 2014 Presentation
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Attribution Analysis – Allocation Effect
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Attribution Analysis
Spring 2014 Presentation
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Attribution Analysis – Selection Effect
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Attribution Analysis
Spring 2014 Presentation
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Attribution Analysis – By Sector
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Attribution Analysis
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Risk Management
• Rigorous screening and analysis process
• Purchased half of stocks analyzed or pitched
• Diversification across sectors to avoid aggregation risk
• Stop-loss
• Focus on long-term performance, not concerned with
short-term volatility
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Risk Management
Spring 2014 Presentation
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Lessons Learned
Difficulties
• Record high market conditions
• Corporate social responsibility
Lessons
• Corporate social responsibility initiative
• Company price tracking
• Teamwork and personal responsibility
Student Managed Fund
Lessons Learned
Spring 2014 Presentation
27
Acknowledgements
•
•
•
•
•
•
•
UConn Foundation Board
Investment Advisory Board
Pat Terrion
Jeff Annello
Dr. Chinmoy Ghosh
Dr. Michel Rakotomavo
Laurel Grisamer
Student Managed Fund
Acknowledgements
Spring 2014 Presentation
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