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INVESTMENT CLUB

INVESTMENT CLUB. April 4 th 2014. OVERVIEW. Market Update Portfolio Overview Wealth Management Intro Buy Presentation. MARKET UPDATE. FBI PROBE HIGH FREQUENCY TRADING. Investigating high-speed trading firms and potential insider trading Potentially cancel trades to create confusion

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INVESTMENT CLUB

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  1. INVESTMENT CLUB • April 4th 2014

  2. OVERVIEW • Market Update • Portfolio Overview • Wealth Management Intro • Buy Presentation

  3. MARKET UPDATE

  4. FBI PROBE HIGH FREQUENCY TRADING • Investigating high-speed trading firms and potential insider trading • Potentially cancel trades to create confusion • Manipulating other investors • Tool to cover up insider information • Question if firms use fasterdata streams

  5. YELLEN CALMS MARKETS • Confirmed that interest rates would remain low for foreseeable future • Unsurprising given Yellen’s dovish tendencies • Cited weak job market • Long-term unemployed • 7 million Americans working part-time • Slow wage growth

  6. U.S. TRADE GAP WIDENS • Exports fell due to weak demand overseas • Largest trade deficit since September • Economists lowered GDP forecasts for 1st Qtr. • Following increase in exports last month • Overseas demand was unsustainable • Growth continues to slow in China • Europe volatile

  7. U.S. STOCK MARKET • Fell on Thursday for 1st time all week • Investors worried about export data • Looking forward to today’s job report • U.S. economy supposed to add 200,000 jobs • Unemployment estimates = 6.6%

  8. ABROAD • Asia • Nikkei 225 + 3.10% • Hang Seng + 2.86% • Europe • FTSE 100 + 1.26%

  9. ASIA • China’s official Purchasing Managers Index rose in March. • 1.5% expected inflation in Japan

  10. EUROPE • Data raises inflationary concerns • Hints for QE

  11. PORTFOLIO UPDATE GEORGE RAKIC ERIC TILSON IRVIN CEDILLO OTHMAN GUENNOUN

  12. CURRENTLY • Invested: $463,002.42 (93.35%) • Cash: $33,000.00 (6.65%) • Total $496,002.42 • 37 single name equities

  13. SECTORS

  14. FIVE LARGEST POSITIONS

  15. POSITIONS UNDER 2%

  16. OPPORTUNITIES • George Rakicrakicd@lafayette.edu

  17. INTRODUCING PRIVATE BANKING / WEALTH MANAGEMENT MARKET JASON SHAVEL Some Slides Borrowed and/or edited from Phil Molyneux

  18. DEFINITION OF WEALTH MANAGEMENT & PRIVATE BANKING • Wealth Management: • financial services provided to wealthy clients, mainly individuals and their families , typically with $100,000+ investable assets • deals with managing both the assets & liabilities side of clients’ balance sheets • Private banking: • more exclusive, subset of wealth management, typically with $1 million + of investable assets. • banking services (deposit taking and payments), • discretionary asset management, • brokerage, • limited tax advisory services

  19. WEALTH MANAGEMENT - PRODUCTS • While asset management is a key feature, wealth management has a greater emphasis on financial advice and is concerned with gathering, maintaining, preserving, enhancing and transferring wealth. • Products include: • Brokerage. • Core banking-type products • Lending products (credit cards, mortgages and private jet finance) • Insurance and protection products, • Advice in all shapes and forms: asset allocation, wealth structuring, tax and trusts, various types of planning (financial, inheritance, pensions, philanthropic), family-dispute arbitration – even psychotherapy to children suffering from ‘affluenza’. • A wide range of concierge-type services, including yacht broking, art storage, real estate location, and hotel, restaurant and theatre booking.

  20. CLIENT SEGMENTS • Private banking targets only the very wealthiest clients or high net worth individuals (HNWIs): broadly speaking, those with more than around $1 million in investable assets. • Wealth management, by contrast, targets clients with assets as low as $100,000, i.e. affluent as well as high net worth (HNW) clients.

  21. DEFINING THE WEALTH MANAGEMENT SERVICE PROPOSITION • The following three criteria differentiate a firm as a wealth manager: • The relationship that wealth managers have with their clients, both in terms of breadth (where providers emphasise terms such as ‘holistic’, ‘comprehensive’ and ‘all-inclusive’) and depth (‘intimate’ and ‘individualised’). • The products and services provided, with a particular emphasis on estate planning and multigenerational planning services, as well as tax advisory expertise and alternative investments. • The specific objectives of wealthy clients, such as investment performance, wealth preservation or wealth transfer.

  22. INVESTMENT MANDATES • Custodianfor a client’s assets. That involves, essentially, asset safekeeping, income collection, fund disbursement and associated reporting. • Execution-only mandate, the wealth manager executes, or selects brokers to execute, securities transactions on behalf of the client. Not investment advice, service aimed primarily at self-directed clients. • Advisory mandate • Discretionary mandate

  23. DISCRETIONARY MANDATES • The wealth manager usually has sole authority to buy and sell assets and execute transactions for the benefit of the client, in addition to providing investment advice. Starts off with: • Construction of a brief with the client, detailing investment aims, level of risk-aversion and other factors that will influence the portfolio (In some discretionary accounts, the wealth manager is given only limited investment authority). However, in all cases, major investment decisions, such as changing the account’s investment strategy or asset allocation guidelines, may be subject to the client’s approval. • The wealth manager is generally paid on the basis of a flat-fee arrangement linked to the value of the assets under management.

  24. ONSHORE & OFFSHORE WEALTH MANAGEMENT • Onshore wealth management is the provision of products and services within the client’s main country of residence. • Offshore wealth management, by contrast, serves clients wishing to manage their wealth outside their main country of residence for reasons such as: • financial confidentiality; • legal-system flexibility; • tax considerations; • the lack of appropriate products and services onshore; • a low level of trust in domestic financial markets and governments; and • the need for safety and geographical diversification in response to domestic political and macroeconomic risks. Some clients treat their offshore account(s) primarily as a ‘vault’.

  25. MAIN PLAYERS • Pure private banks • Trust banks • Retail and universal banks • Family offices • Financial advisors • Stockbrokers and wirehouses (US term for large brokerage houses) • Direct banks • Asset managers • Investment banks • Others – insurance companies, accountants, solicitors, financial planners

  26. CONCLUSION • Do you have a million dollars? • Do you want to work with people who have millions of dollars? • If not then Wealth Management is not for you

  27. SOUTHWESTERN ENERGY BUY PRESENTATION 170 SHARES @ $46.80

  28. BACKGROUND • Independent Energy Company • Natural Gas and Crude Oil Exploration , Development and Production • Fayetteville Shale in Arkansas • Marcellus Shale in Pennsylvania • Niobara Formation in Colorado • Owns other land in Canada, Louisiana, Arkansas, and Colorado • Midstream Services • Transportation of Natural Gas to Market • Marketing of Gas Production

  29. FUNDAMENTALS/COMPARISON

  30. THESIS Technological advances and new drilling techniques have unlocked vast North American natural gas reserves Will allow the US to move away from dependence on foreign oil Natural gas is preferable to coal and other fossil fuels because it is clean burning, easily transportable, and much more affordable Demand for natural gas is increasing and is expected to be the 2nd largest source of energy worldwide by 2035 Currently natural gas pricing is starting to rise Resulting in higher income for natural gas companies

  31. COMPETITIVE ADVANTAGE Strong Management Large land holdings in the right locations Diversified Business Model Multiple Sources of Revenue

  32. FINANCIAL STATEMENTS 2013 • Revenue: • 2011: 3.0B • 2013: 3.4B • Net Income: • 2011: 637.8M • 2013: 703.5M • Income Before Income Tax: • 2011: 1.0B • 2013: 1.2B • Net Cash Provided by Operating Activities: • 2011: 1.7B • 2013: 1.9B • Lots of Cash

  33. EXECUTIVE COMPENSATION Executives all own stock and have stock options Incentive based contracts Aligns interests of board members and shareholders Helps decrease excessive risk Chairman of the Board owns ~150,000 shares

  34. WORD ON THE STREET Consensus Buy Rating Goldman Sachs and Deutsche Bank each lifted target price Banner Year in 2013 Project to Break Many Earning Records in 2014

  35. RISKS Volatile Industry Unknowns of fracking Efforts largely concentrated in three spots Supply is greater than demand Stock is close to 52 week high

  36. CONCLUSION Industry is starting to heat up Alternative source of energy for the US Growth Potential Land holdings have proven to be quite profitable New sector for our portfolio to enter

  37. VOTE • 170 Shares @ $46.80

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