Transcript www.sba.uconn.edu

Performance Report
Student Managed Fund
MBA class of 2005
March 3, 2005
2
MBA Fund Managers
 Christophe Pane
 Jie Wan
 Luis Prandini
 Ashley Martella
 Stephen Petretto
 Yun Cai
 Igor Lemagic
 Amit Kumar
 Rajiv Iyer
 Sampita Ray
 Gabriel Joanes
3
Performance Highlights (Sept 24,2004 thru February 11,2005)
SMF
PORTFOLIO
S & P 500
Portfolio Value (9/24/04)
$410,918.25
1,110.11
Portfolio Value (2/11/05)
$958,082.81(*)
1,205.30
Holding Period
Return (9/24/04 thru 2/11/05)
11.48%
8.57%
Annualized Return (%)
29.93%
22.36%
Beta
0.89
1
Annualized Standard
Deviation
10.04%
11.11%
Sharpe Ratio**
2.57
1.64
Treynor Index**
28.95
18.18
Alpha
4.67%
*An additional
$500,000 was
added to the
portfolio as of
Jan,19 2005.
**Based on riskfree rate of 4.2%.
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Agenda
 Investment Methodology
 Portfolio Performance &
Attribution Analysis
 Economic Outlook and
Allocation
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Investment Strategy and Style
 Blend Strategy
 Combination of value and growth
 Multi-Cap Fund
Market Capitalization
Large Caps
23 stocks
Small Caps
1 stock
Mid Caps
5 stocks
Number of holdings as of 02/25/05: 29
 Primarily investments in large-cap stocks
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Investment Philosophy
 Fundamental analysis





Historical performance
Valuation models
Business models
Future Prospects
Economic outlook for the industry
 Long-term (3-5 year)
investment horizon
 Benchmark: S&P500 Index
 Selecting stocks with potential
 Close monitoring of the portfolio
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Investment Approach
Top Down Approach
Sector Allocation
Stock Selection
Fundamental
Analysis
•Business Model
Analysis
•Ratio Analysis
•Future
Prospects
Valuation
Models
•PEG and P/E
Models
•Dividend
Discount Model
•Free Cash Flow
Model
8
Stock Selection Criteria
We look for:
 Solid financials
 Strong management
 Earnings growth
 Attractive valuation relative to peers
 Higher return/risk relative to industry
“If the choice is between a questionable business at a comfortable
price or a comfortable business at a questionable price, we much
prefer the latter.”
Buy & Sell Discipline
 Buy Criteria

Steady growth rates

Intrinsic value > market value
Above average expected returns

 Sell Review Criteria


Stock reaches our target return
Predetermined stop loss prices
Risk/reward profile deteriorates

Actual earnings figures lower than estimates

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Management Style
 Active Management
 Report presentation and voting
 Performance Monitoring
 Stop Loss Measures (15%)
 Appreciation Reevaluation (20%)
 Continuous Monitoring & Dynamic Response
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Sector Allocation (as of 02/11/2005)
S&P 500
Current SMF allocation
25.00%
Top 5 sectors:
20.00%
Financials
Industrials
Consumer Disc.
IT
Health Care
15.00%
10.00%
5.00%
Te IT
le
co
m
Ut
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at
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0.00%
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Detailed Sector Allocation (as of 02/11/2005)
COMPANY NAME
TRADE
DATE
#
SHARES
COST ($)
CURRENT
PRICE ($)
CURRENT
VALUE ($)
%
RETURN
% OF
PORTFOLIO
HEALTHCARE
Aetna Inc.
27-Oct-04
200
$89.41
$133.50
$26,700.00
*49.31%
2.79%
$61.43
$30,715.00
39.61%
3.21%
ENERGY
Valero Energy
27-Oct-04
500
$44.00
FINANCIALS
Citigroup
22-Oct-04
500
$42.80
$49.40
$24,700.00
15.42%
2.58%
Commerce Bancorp
22-Dec-04
600
$60.03
$57.74
$34,644.00
-3.81%
3.62%
Hartford F.
Services
12-Nov-04
350
$62.00
$73.76
$25,816.00
18.97%
2.69%
9-Nov-04
300
$26.71
$29.31
$8,793.00
9.73%
0.92%
ING Group (ADR)
CONSUMER STAPLES
Coca-Cola
22-Sep-04
300
$40.46
$42.76
$12,828.00
5.68%
1.34%
Walgreen's
22-Nov-04
400
$37.93
$42.81
$17,124.00
12.87%
1.79%
* Best Performer
until 02/11
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Detailed Sector Allocation (as of 02/11/2005)
CONSUMER DISCRETIONARY
Comcast Corp.
15-Oct-04
375
$28.77
$31.53
$11,823.75
9.59%
1.23%
Starwood Hotels
28-Dec-04
350
$59.01
$59.00
$20,650.00
-0.02%
2.16%
Lions Gate Entertain.
11-Feb-05
3000
$10.42
$10.44
$31,320.00
0.19%
3.27%
6-Oct-04
500
$35.21
$37.44
$18,720.00
6.33%
1.95%
Viacom B
INDUSTRIALS
Fedex Corp.
15-Nov-04
260
$95.12
$98.01
$25,482.60
3.04%
2.66%
Masco Corp.
22-Dec-04
500
$36.46
$37.19
$18,595.00
2.00%
1.94%
3M Corp.
15-Nov-04
200
$82.64
$84.04
$16,808.00
1.69%
1.75%
INFORMATION TECHNOLOGY
Cisco Systems
Flextronics
SAP AG (ADR)
3-Dec-04
1000
$19.50
$17.70
$17,700.00
-9.23%
1.85%
28-Dec-04
1000
$13.80
$14.15
$14,150.00
2.54%
1.48%
8-Feb-05
750
$39.24
$39.86
$29,895.00
1.58%
3.12%
$70.63
$10,594.50
5.88%
1.11%
$75,775.56
6.97%
7.91%
UTILITIES
Dominion
Resources
23-Nov-04
150
$66.71
INDEX FUND and CASH
Vanguard S&P500 Index
CASH
27-Jan-05
686
$103.26
$110.46
$485,248.40
50.65%
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Performance Highlights (Sept 24,2004 thru February 11,2005)
SMF
PORTFOLIO
S & P 500
Portfolio Value (9/24/04)
$410,918.25
1,110.11
Portfolio Value (2/11/05)
$958,082.81(*)
1,205.30
Holding Period
Return (9/24/04 thru 2/11/05)
11.48%
8.57%
Annualized Return (%)
29.93%
22.36%
Beta
0.89
1
Annualized Standard
Deviation
10.04%
11.11%
Sharpe Ratio**
2.57
1.64
Treynor Index**
28.95
18.18
Alpha
4.67%
*An additional
$500,000 was
added to the
portfolio as of
Jan,19 2005.
**Based on riskfree rate of 4.2%.
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Portfolio Performance Attribution
Period: September 24, 2004 to February 11, 2005
Basis
points
400
200
290
339
0
-2
-200
Portfolio
Excess
Return
Stock
Selection
Attribution
Sector
Allocation
Attribution
-47
Cash
Position
Attribution
S1
Excess Return = Stock Selection + Sector Allocation +
Cash Position
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Current State of the SMF Portfolio (since Feb. 11)
Positions Added:
Apache Corporation, PetroChina (Energy)
Ameritrade, E*Trade, MBNA (Financials)
Invitrogen (Health Care)
Sysco Foods (Consumer Staples)
Dunn & Bradstreet, Tyco International (Industrials)
Florida Power & Light Group, Inc. (Utilities)
Positions Increased:
Comcast and Starwood Hotels (Consumer
Discretionary)
Hartford Financial Services (Financials)
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Portfolio Summary
Market Value at Feb. 25, 2005: $967,397
Current number of stocks: 29
Total amount yet to be allocated: $160,653
Top 10 holdings:
Apache Corporation – 4.43%
Dun & Bradstreet – 4.45%
Tyco International – 4.24%
Hartford Financial Services – 4.12%
E*Trade - 4.07%
FPL Group - 4.06%
MBNA Corporation - 4.04%
Invitrogen Corp. – 3.97%
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Portfolio Summary
Top 10 holdings:
Commerce Bancorp – 3.72%
Sysco Foods – 3.63%
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Economic Outlook
Expected GDP growth of over 3% for 2005, albeit
lower than 2004.
Core Inflation expected to rise; prices rose 2.3%
from a year earlier.
Long-term interest rates are still low; flattening
yield curve.
Federal Reserve is expected to continue
increasing the federal-funds rate at “measured”
pace.
Mergers-and-acquisitions market is picking up
steam – favorable development for equities.
Situation in Iraq puts pressure on oil price and
maintain high level of uncertainty.
Energy,industrials,materials, utilities expected to
lead market.
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Industry Outlook
Sector
Weight
Outlook
Consumer
Discretionary
Overweight
Favorable
Consumer
Staples
Underweight
Favorable
Energy
Neutral
Favorable
Financials
Overweight
Favorable
Healthcare
Underweight
Favorable
Industrials
Overweight
Favorable
IT
Underweight
Unfavorable
Materials
Underweight
Favorable
Telecom
Underweight
Unfavorable
Utilities
Underweight
Favorable
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WRAP UP
Fulfilled Portfolio Objectives
Performance surpassed S&P 500
Lower Risk Level
Invested primarily in Large Cap U.S. Equities
Chose only fundamentally strong companies
Top Performers
Worst Performers
Aetna (AET)-49.31%
Cisco (CSCO)- (9.23%)
Valero (VLO)-39.61%
Pfizer (PFE)- (16.83%)
Hartford (HIG)-18.97%
CACI (CAI)- (16.98%)
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Takeaways
Valuation Highly Dependent on Analyst’s
Assumptions
Stop Losses can sometimes work against you
Have patience
Stick to your strategy and convictions
Enjoy the extraordinary learning opportunity
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Thank you.
University of Connecticut Foundation Inc.
Investment Advisory Board
Dr. Chinmoy Ghosh
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Q&A?