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Student Managed Fund

Student Managed Fund. MBA Performance Report December 1, 2006. Mike Amodeo Devika Chirayilparambu Matt Cordeiro Vasilios Diakogeorgiou Samara Hollander. Daniela Ionescu Adam Macko Puru Patnekar John Salemi Amanda Wallace. MBA Managers. Agenda. Investment Philosophy

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Student Managed Fund

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  1. Student Managed Fund MBA Performance Report December 1, 2006

  2. Mike Amodeo Devika Chirayilparambu Matt Cordeiro Vasilios Diakogeorgiou Samara Hollander Daniela Ionescu Adam Macko Puru Patnekar John Salemi Amanda Wallace MBA Managers

  3. Agenda • Investment Philosophy • Investment Process • Economic Outlook • Portfolio Strategy • Portfolio Summary • Portfolio Performance • Future Considerations • Q & A

  4. Investment Philosophy • Fundamental bottom-up approach • Companies with a market cap of at least $1 Billion • Invest across a diversified group of sectors • Trade at a minimum 15% perceived discount to intrinsic value • Exhibit strong growth potential within industry • Benchmark – outperform the S&P 500 index by 5% annualized

  5. M $ F Investing Process Stock Selection Fundamental Analysis Sell Discipline Valuation

  6. Stock Selection Screeners: • Yahoo! Finance • MSN Money • Reuters • MagicFormulaInvesting.com Screen inputs: • High Sales/Earnings Growth • High Gross/Operating/Net Margins • High ROE, ROA, ROIC • Low P/E, PEG

  7. Fundamental Analysis Goal: To identify high quality firms Value drivers • Gross and operating margins • Revenue and earnings ramp-up • Capital spending efficiency • R&D intensity • Free cash flow growth Industry metrics • Retailers – same store sales • Banks – net interest margin

  8. Valuation Analysis • Projecting future free cash flow • Method A – use analyst estimates (S&P, Value Line or Yahoo! Finance) • Method B – historic growth rate of cash flows • Discount Rate – WACC • Cost of Debt – Weighted average yield to maturity • Cost of Equity – CAPM • Risk free rate – 10 year treasury bond • Average Return – 10.4% (Ibbotson’s Yearbook 2005) • Beta – based on analyst estimates or regression models (or both)

  9. Sell Discipline • Stop loss • 15% stop loss on all positions • Prevent market volatility from stopping out positions • Protect down-side risk • Re-evaluation of positions • More than 15% gain • More than 10% loss • Change in business model or expectations

  10. Macroeconomic Overview ComponentSMF Outlook • Monetary Policy • Discount Rate stable at 5.25% • Fiscal Policy • Likely tax rate increases • Increased possibility of trade barriers • Economic Growth • Slowing GDP • Corporate Earnings • Decelerating into 2007 • Inflation • Unemployment increasing slightly • Core CPI at 2.5% over next 6-12 months • Market Valuation • Current S&P 500 P/E of approximately 17 ________________________________________________________________________________________________________________________________________________________________________ Overall SMF Macroeconomic Outlook NEUTRAL NEGATIVE NEGATIVE NEUTRAL NEUTRAL POSITIVE NEUTRAL/NEGATIVE

  11. Asset Allocation Strategy Top-Down Sector Analysis (25%) SMF Portfolio (75%) Bottom-Up Fundamental Analysis

  12. Sector Overview • Consumer – Staples • Pepsi (PEP) • Altria Group (MO) • Hormel Foods (HRL) • Consumer – Discretionary • American Eagle Outfitters (AEOS) • Energy • Occidental Petroleum (OXY) • Peabody Energy (BTU) • Financials • Bank of America (BAC) • Healthcare • Laboratory Holdings (LH) • Industrials • General Dynamics (GD) • Information Technology • Oracle Corp (ORCL) • Materials • Sherwin-Williams (SHW) • Telecommunications • Harris Corp (HRS) • Utilities

  13. SMF Current Allocation

  14. Holdings

  15. Portfolio Statistics Positions – 12 Average Holding – $46,392

  16. Portfolio Performance

  17. Sector Performance

  18. Individual Holding Performance

  19. Future Considerations • Consumer staples sector will be reexamined due to its current weight in our portfolio • Energy prices are volatile and will move upwards based on OPEC’s production cuts; current investments will be reevaluated in 2007 • Current investments in Telecommunications and Industrials are well-positioned to take advantage of industry trends

  20. Future Considerations • Investment in Utilities • Portfolio beta to approach 1.00 • Investment in CT based companies

  21. Acknowledgements • The University of Connecticut Foundation, Inc. • Investment Advisory Board • Dr. Chinmoy Ghosh

  22. Questions

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