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Student Managed Fund

Student Managed Fund. Undergraduate Portfolio April 24, 2003. Scott Bores Eric Burns Kevin Conlon Ellen Huebner Andreas Miliotis Lisa Lin Javed Singha Lucas Smith Jonathon Striker Jared Thal. Student Managed Fund. Overall Performance

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Student Managed Fund

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  1. Student Managed Fund Undergraduate Portfolio April 24, 2003 Scott Bores Eric Burns Kevin Conlon Ellen Huebner Andreas Miliotis Lisa Lin Javed Singha Lucas Smith Jonathon Striker Jared Thal

  2. Student Managed Fund • Overall Performance • Portfolio Allocation • Strategy

  3. Portfolio Performance

  4. Performance

  5. Target Asset Allocation 75% Equities 15% Bonds 10% Money Market

  6. Current Asset Allocation Individual Equities 78.95% S&P 500 Index 12.6% Money Market 8.45%

  7. Reasons for Allocation • Shift Initiated by Foundation • Liquidity for future purchases • Bullish on overall market

  8. Change in Portfolio Value

  9. Sector Allocation

  10. Portfolio Holdings

  11. Portfolio Objectives • Outperform the S&P 500 index • Build a well-diversified portfolio • Invest in a manner that is consistent with our market forecasts • Use valuation models to justify investment decisions • Practice informed buy and sell decisions

  12. Stock Selection Process • Industry Selection • Preliminary Research Using Valueline • — Sales Growth — Free Cash Flow • — Earnings Growth — Earnings Yield • — Return on Equity & Invested Capital • Detailed Research • — Management — Strategy • — Insider Trading — Pipeline • — Other Qualitative Factors — Competition • — Capital Structure — Financial Statements

  13. Stock Selection Process • Footnotes of Annual Statement • Research and Development • Prospects for the Future • Small Cap Investments • Tend not to coincide with our investment philosophy

  14. Stock Selection Process • Valuation Models • 10 Year Equity/Bond Model • Holding Company Valuation • P/E Model • Presentation to Student Managers • Discussion • Group Vote • Stop Loss Orders • Number of Shares to Purchase

  15. Ten-Year Equity Bond Model • Step 1. Shareholder Equity * (1+Annual Return)^10 =Equity value in 10 yrs • Step 2. Equity value in 10 yrs / # of Shares = Equity per Share • Step 3. Equity per Share * Return on Equity = Earnings per Share • Step 4. Earnings per share * Projected PE Ratio = Price in 10 yrs • Step 5. Using future and present price, calculate expected return

  16. Holding Company Evaluation • To Value Holding Companies we use a liquidation model • Find the recent value of all assets and divide them by the total shares outstanding • Sum all the values together and find a liquidation value for each share

  17. Protection Strategies • Highest Return at the lowest risk • Stock selection process • Diverse portfolio • Sell Strategies

  18. Sell Strategy • Stop-Loss Orders • 15% to 25% maximum initially • Allows for volatility in a highly volatile market • Review and Adjust sell price to lock-in profits • Replaceable Stocks (Are there better or equal opportunities elsewhere?) • Upside and Downside Reviews

  19. What We Learned • Practical Experience in Money Management • Application of Classroom to Real World • Growth and Return on Invested Capital Drive Value

  20. Thank You • University of Connecticut Foundation • Investment Advisory Board • School of Business • Mr. Pat Terrion • Dr. Chinmoy Ghosh • Dr. Tom O’Brien

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