THERE ARE NO WARRANTIES, EXPRESSED OR IMPLIED, AS TO ACCURACY, COMPLETENESS, OR RESULTS OBTAINED FROM ANY INFORMATION
DISCUSSED DURING HAWKTRADE MEETINGS. Past performance does not guarantee future results. Investment returns and principal value will fluctuate, so that
investors' shares, when sold, may be worth more or less than their original cost. Investing in any financial instruments does not guarantee that an investor will make
money, avoid losing capital, or indicate that the investment is risk-free. There are no absolute guarantees in investing. HAWKTRADE and its members do not bear any
responsibility for losses or gains made by members trading on their personal accounts based on analysis from HAWKTRADE meetings.
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Administrative Info
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Bonds Bonds Bonds
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Current Market Events
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We meet every Sunday at 7:15PM – 8:15PM at W151 in
PBB
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Membership Dues: $25/semester
 Food/Drinks every meeting
 Investment information and education
 Great trading tips and strategies
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Investment Competition: $15/semester
 Best way to gain experience and learn
 Past prizes include iPads, Apple TVs, gift cards
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Fun Discussion atmosphere, member involvement
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Roughly 8 members who have an interest in
expanding their knowledge of capital markets
Responsible for following one economic
sector and presenting to the club
Great resume experience
Will write for the HawkTrade blog on the
Motley Fool (www.fool.com)
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Platform: Wall Street Survivor
League: HawkTrade Competition
Link:
http://www.wallstreetsurvivor.com/league/Ha
wkTradeCompetition
$15 fee to join
Ability to win great prizes!!!
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League Settings:
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Start Date: 9/15/2014
End Date: 12/ 05/2014
Portfolio Size: $100,000
Maximum Trade Position: 25%
Able to trade derivatives and options
If you have any questions, comments, or
concerns, contact me: danielmuggee@uiowa.edu
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Pick a stock.
Tweet the stock ticker symbol to
@HawktradeUI or email it to studorghawktrade@uiowa.edu.
Top 3 gainers on the week win a Chipotle
giftcard.
http://iowahawktrade.com/
Twitter - @HawktradeUI
The Fixed Income Market
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A debt investment in which an investor loans
money to an entity (corporate or
governmental) that borrows the funds for a
defined period of time at a fixed interest rate.
Bonds are used by companies, municipalities,
states and U.S. and foreign governments to
finance a variety of projects and activities.
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Coupon – the interest rate that an investor
receives for lending the principal, quoted
annually but often times paid semi-annually
Principal – Also know as face value, amount
which will be repaid to bondholder at
maturity, generally ($1000)
Maturity – date at which the principal will be
repaid to the bondholder
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Secured/Unsecured – whether or not the
bond is backed by collateral, in the case that
the issuer defaults
Liquidation Preference – In the case of a
bankruptcy, money is returned to debt
holders/equity holders in accordance with
seniority
Taxability – Municipal bonds are tax-exempt
Callability – Bond can be called before
maturity
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Credit/Default Risk – the risk associated with
the issuer not being able to make interest
payments or repay the principal on a bond
Prepayment Risk – typically through a call
provision, risk of missing out on interest
payments through early repayment of
principal
Interest Rate Risk – the risk of interest rates
dramatically changing
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Three main bond rating agencies: S&P,
Moody’s, and Fitch
Issuer ratings for Corporations, Municipalities
or Governments based on likelihood to
default
Also issue ratings on specific debt
instruments, secured debt typically has
higher rating than unsecured
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Yield to maturity (YTM) is the most
commonly cited yield measurement. It
measures what the return on a bond is if it is
held to maturity and all coupons are
reinvested at the YTM rate. Because it is
unlikely that coupons will be reinvested at the
same rate, an investor's actual return will
differ slightly.
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Coupon Rate > Market Interest Rate
Bond is sold at Premium
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Coupon Rate < Market Interest Rate
Bond is sold at Discount
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Yield
Price
- Price
- Yield
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A measure of the sensitivity of the price (the
value of principal) of a fixed-income
investment to a change in interest rates.
Duration is expressed as a number of years.
Higher duration: longer maturity, lower
coupon
Lower duration: shorter maturity, higher
coupon
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Corporations – repaid by cash flows, backed
by assets
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US Government – assumed to be risk-free
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Municipalities – backed by taxing power or
project revenue
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Sovereign Governments – taxing power
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Significant free cash flow generation
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Sufficient collateral to insure investment
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Strong leverage
 Total Debt/EBITA(R)
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Strong interest coverage ratios
 Funds from Operations/Interest Expense
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Industry metrics, competition, macro factors
Technology
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The technology sector can be broken down
into four mega sectors
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Semiconductors
Software
Networking and Internet
Hardware
Stagnant growth over the last six month\
 Software and IT grew the fastest
 PC markets has been struggling
2013
301.8
227.2
CAGR: 2009–13
SOURCE: MARKETLINE
4.4%
4.1%
M AR KE TL IN E
Figure 1: North America IT service s industry value: $ billion, 2009–13
SOURCE: MARKETLINE
M AR KE TL IN E
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The technology industry is characterized by
high premiums
High expenditures in research and
development
Above average of companies that have not
reported positive cash flows
Investors have done well by investing in
product leaders and firms that challenge the
status quo
Spin-Offs
 Companies are
trimming down and
focusing their
operations
 Notably this week are
household names:
 Hewlett-Packard & Co
(HPQ)
 Symantec Corp (SYMC)
 eBay Inc. (EBAY)
New Technologies
 The smart phone
market is saturating,
and companies are
shifting towards
wearable devices
 3D printing continues
to gain attention,
 Cloud storage and data
security are hot topics
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CEO Meg Whitman will
give in to Street and
split HP into two
divisions:
 Corporate computing
services
 PC and printing
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Comes after
experiencing
prolonged of stagnant
growth
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Provides security,
backup and availability
solutions
 Security: $4.2 billion
 Information
Management: $2.5
billion
Tax-free distribution to
shareholders
 Split will come at a
cost to employees
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The IMF World Economic Report & Oil
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Overall negative tone of the report sent
equities tumbling
Reported stated that valuations are “frothy”
Criticized the banking system, saying that the
largest banks could not support financial
recovery
Called for changes in banking business
models
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Over supply continues to drive oil prices
lower.
Domestic oil production bodes well for GDP
growth, in the short term.
Lower oil prices is good for consumers at the
pumps.
Shows possible signs of economic weakness.