Graduate Student Managed Fund IAB Presentation Presenting: Michael
Graduate Student Managed Fund IAB Presentation Presenting: Michael Misluk - Team Lead Portfolio Manager Ying (Cheryl) Chen - Co-Portfolio Manager Tianjiao (Talia) Chai - Fund Manager Abhishek Srivastava - Portfolio Risk Manager Team Members: Alisher Ganiev - Co-Portfolio Manager Kevin Hebreo - Communications Manager Lucy Adjei - Digital Media Manager Reginald Joazil - Co-Portfolio Manager Suzan Talo - Fund Manager Yizhen (Chelsea) Zhou - Treasurer December 6, 2018 1 Philosophy & Style
The S&P 500 Index is the funds benchmark. Mid to Large Cap Value portfolio primarily in U.S. based securities. Seek Undervalued Assets (Intrinsic Value > Market Value) with: stable, easy to understand business models; strong balance sheets; consistent, predictable future cash flows or dividends. Top-Down Investment Approach to focus our research into desirable sectors based on a late stage market cycle. Fundamental Analysis - Looking for Individual Stocks Leaders in their Industry w/Continued Strong Performance next 3-5 yrs Valuation Methods - PE Multiples, DDM, DCF 2
Strategy Perform an economic and market outlook analysis to determine what sectors to be invested in and at what target percentages; Research ETFs for approximately 85% of our expected portfolio allocation that seem to align with our sector allocation decision; Make initial purchases in five sector ETFs while we perform detailed individual company fundamental analysis; As individual stocks are approved, sell out of the corresponding ETF and purchase into the individual position; Evaluate and monitor each position for changes that would affect our purchasing decision and adjust the portfolio accordingly. 3 Process - Administrative
Process No of people required Quorum for a meeting 6 members Voting on administrative issues Simple majority of members present Pre-authorize a stock pitch 7 members Approve a position in a stock 7 members
Exit a position 5 members Stop Loss Parameter 15% Downside Set Upon Purchase 4 Process - Stock Pitch Pre-Authorization Stock Pitch
Basic Reasons Familiarity Recent News Is it Worth It? Generate Enough Interest Research Time 7 Votes Majority of Quorum Update After 3 Meetings In Depth Research Valuation Thesis/Risks Projections
Business Model/Strategy Sustainable Differentiate 7 Votes All Members 5 Sector Outlook Overweight Information Technology, Consumer Discretionary, Industrials Sectors with good previous performance in short & long run, or good in the past few years but not so well in recent years (momentum and reversal effect) Sectors with emerging industries or large growth potential Market weight Financials, Healthcare, Utilities Sectors with stable growth but partly constrained by capital and/or regulations Underweight / No Weight Consumer Staples, Energy, Telecommunications, Materials, Real Estate Sectors without much risk but little stable growth Sectors with single, concentrated growth in few sub-sector
6 Exchange Traded Funds (ETFs) ETFs purchased on 10/3/18 as soon as funds were available Decided on ETF Strategy on 6/29/18, would have liked to have purchased here Wanted ~85% of Our Portfolio Allocated to Five Sectors Decided the following Lined Up with the Sector Analysis We Performed: VGT - Technology, XLF - Financials, XLY - Consumer Discretionary, XHE - Medical Equipment, XAR - Aerospace & Defense 7
Portfolio Allocation @ 11/30/18 8 Portfolio Performance @ 11/30/18 9 28 Total Considered Positions 10 Current Portfolio Holdings Listed in Order of Purchase ~$1.4M Initially Invested in the 5 ETFs, ~$569k Initially Invested in Individual Stocks 11 United Healthcare Group (UNH)
Why choose UNH? Stock Performance Word-of-mouth (Low Marketing cost) Strong Financial statement Diligence to clients Innovator in the healthcare management industry Future Outlook Developing software for storing and analysing
healthcare information ($ 7B) New on-demand healthcare and new designs for the eligible and Medicare advantage participants hold promise for continued growth Current P/B: 5.5 times 7.65 Current ROE %: 25 Current EBIT margin %: 12 NextEra Energy (NEE) Strengths:
Market Position: World leader in electricity generation from Renewable Resources.. Growth Plans: The company is building some of the lowest-cost universal solar ever. Cost and Operational Efficiency: 15.6% inc in operating income). (Operating Margin 30.9%, to 28.5%). Increase in Electricity Demand: Expected to increase to 3,924.4 TWh by 2022. Rise of electric vehicles will give impetus. Salient Metrics: P/E Ratio Industry P/E : 16.13(TTM) : 27.54 Net margin Debt/Equity
: 49.10% : 0.78 13 Potential Risks Position Risks Mastercard - MA - Increasing regulations of certain aspects of payment - Limitations of ability to restrict merchant surcharging NextEra Energy - NEE - Natural disasters, particularly in Florida
PepsiCo - PEP - Concerns over the long-term decline in soda sales and the corresponding drag on both revenue and earnings - Low potential for growth in mature markets UnitedHealth Group - UNH - Competition - Data security and privacy concerns - Changing regulations Cognizant Technology Solutions - CTSH - Intense competition from other service providers - Global operations subject to complex risks, beyond company control 14 Future Plans
Companies in the Pipeline for Pre-Authorization Walt Disney (DIS), TJX Companies (TJX), Ball Corporation (BLL) Matson (MATX), Foot Locker (FL) and Pfizer (PFE) Shelved Stocks for Reconsideration CVS Health Corp (CVS), Nvidia Corp (NVDA), XPO Logistics (XPO) and Caterpillar (CAT) Continue Working Toward 20 Individual Positions Move Completely Out of the Sector ETFs Re-Evaluate our Target Weighting Percentages, IT, Consumer Discretionary, Healthcare and Telecommunications 15
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