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General Body Meeting 09-12-12

General Body Meeting 09-12-12. Welcome. Two Minute Drill. Guest Lecturer:. Zachary Peskin. Topic:. FOMC. MICC South Korea Strategy. 4. Agenda. 5. Introduction Thesis China/Asian Slowdown? Macro Overview Manufacturing Analysis Fundamental Quant Proposal. Nexen Tire Corp.

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General Body Meeting 09-12-12

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  1. General Body Meeting 09-12-12

  2. Welcome

  3. Two Minute Drill Guest Lecturer: Zachary Peskin Topic: FOMC

  4. MICC South Korea Strategy 4

  5. Agenda 5 • Introduction • Thesis • China/Asian Slowdown? • Macro Overview • Manufacturing • Analysis • Fundamental • Quant • Proposal

  6. Nexen Tire Corp • Current EPS: 878 KRW • Est. EPS: 1,596 KRW • Current P/E: 22.44 • Estimated P/E: 12.55 • Est. Peg Ratio: .46 • Considering alliance with Michelin & Cie. • 10% of Plants have been closed, so oversupply will disappear

  7. Questions 7 • Why stocks instead of an ETF? • Why is Asia still a good place to invest? • Guarantees of future growth • Why should we move into these specific stocks? • Pricing • Performance

  8. Introduction 8 • Held EWY (iShares-Korea) since the end of last semester. • Invest in ETF as we do not actively manage over the summer. • Hedge against European uncertainty. • We can now move into individual stocks. • Save management fees & maximize returns.

  9. Korean Economy 9 • ETF is not diversified. • Neither is the Korean economy. • Tech, Auto & Heavy. • 105 total holdings.

  10. ETF Composition -Top 10 Holdings 10

  11. Questions 11 • Why Stocks instead of ETF? ✓ • Why is Asia still a good place to invest? • Guarantees of future growth • Why should we move into these specific stocks? • Pricing • Performance

  12. Asia 12 • Manufacturing slowdown due mostly to slowing exports to US and Europe • Should recover with new ECB action and stability after the US election • Quantitiative easing by China encourage investment • Services PMI, more reflective of the health of the domestic Chinese economy, has shown continuous expansion through the slowdown, suggesting that growth never really stopped

  13. Asia 13 • Rising wages are creating a new Chinese middle class, creating an enormous new pool of consumers • China’s services sector is growing. • Service transactions are more difficult to track than industrial ones • GDP is most likely understated • Electricity usage argument flawed • Service industry uses much less electricity

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  18. 18 • Manufacturers in China expanded rapidly, without worrying if goods would be sold. • Demand (from Europe) dropped, resulting in oversupply. • Inventory buildup, Production plants closing. • Manufacturing appears to be bottoming out. Supply has adjusted to demand. • Inventories are sold off. Stocks ready for recovery.

  19. 19 • Barring a catastrophe, China’s ability to power world economic growth should continue for many years, as the Chinese service sector is still in its infancy and has enormous potential for growth • China’s & Asia’s rise shall continue – recent events were merely a temporary inconvenience.

  20. Questions 20 • Why Stocks instead of ETF? ✓ • Why is Asia still a good place to invest? ✓ • Guarantees of future growth • Why should we move into these specific stocks? • Pricing • Performance

  21. 21 • Current EPS: 878 KRW • Est. EPS: 1,596 KRW • Current P/E: 22.44 • Estimated P/E: 12.55 • Est. Peg Ratio: .46 • Considering alliance with Michelin & Cie. • 10% of plants have been closed, so oversupply will disappear. Substantial earnings increase.

  22. 22 Mutual Investment Club of Cornell

  23. Samsung 23 • Current EPS: 113,775 KRW • Est. EPS: 143,554 KRW • Current P/E: 11.31 • Est. P/E: 8.97 • Est. PEG Ratio: .62 • Patent infringement only $1 billion, Samsung has $18 billion in cash on hand. • Appeal, and will likely get reduced • Both found guilty in South Korea • Mixed results • Fast reaction to German ban.

  24. Samsung 24

  25. 25 • Current EPS: 8,573KRW • Est. EPS: 11,057 KRW • Current P/E: 8.49 • Est. P/E: 6.58 • Est. PEG Ratio: .64 • Sales will be driven by new vehicles (strong pipeline) • Europe in some places (+30% yoy) (France) • US: In line with expectation • Further increases are entierly viable • Quality:"The lever for the steering wheel release makes no sound while moving. BMW can't do it, we can't do it, why can they?!?!" - Martin Winterkorn, CEO, Volkswagen. Mutual Investment Club of Cornell

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  27. 27 • Current EPS: 8,573KRW • Est. EPS: 11,057 KRW • Current P/E: 8.49 • Est. P/E: 6.58 • Est. PEG Ratio: .64 • Sales will be driven by new vehicles (strong pipeline) • Europe in some places (+30% yoy) (France) • US: In line with expectation • Further increases are entierly viable • Quality:"The lever for the steering wheel release makes no sound while moving. BMW can't do it, we can't do it, why can they?!?!" - Martin Winterkorn, CEO, Volkswagen.

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  29. 29 • Current EPS: 47,224KRW • Est. EPS: 38,586 KRW • Current P/E: 7.79 • Est. P/E: 6.9.79 • Est. PEG Ratio: 1.27 • The company produces steel and steel products. • Auto, Shipbuilding, Construction • Same thesis as Chinese construction industries.

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  31. Questions 31 • Why Stocks instead of ETF? ✓ • Why is Asia still a good place to invest? ✓ • Guarantees of future growth • Why should we move into these specific stocks? ✓ • Pricing • Performance

  32. Proposal 32 • Liquidate ETF Holdings and move into proposed stocks (Samsung 25%, KIA 25%, Hyundai 25% Nexen 20%, POSCO 5%). • Increase exposure to POSCO at later date. Mutual Investment Club of Cornell

  33. Hewlett Packard - Sell Technology Sector: IhsanKabir Russell Braun; Moseh Cho; Andrew Herring; Steven Lau; VinayRamprasad; Michael Walcott

  34. Agenda • Thesis • Hewlett Packard Overview • HP’s Performance • Recent News • HP Moving Forward • Fundamentals • Technicals • Recommendation

  35. HP Business Model Overview • HP provides its subsidiaries products, technologies, software, solutions, and services to small- and medium-sized businesses (SMBs) • They make their money by selling: • PCs • Printers • Services • Enterprise Servers, Storage, Networking • Software • Financial services

  36. Business Model Personal Systems Group: offers commercial personal computers (PCs), consumer PCs, related accessories, and software/services for the commercial and consumer markets Imaging and Printing Group: consumer and commercial printer hardware, supplies, media, and scanning devices.

  37. Business Model Services segment: Provides consulting, outsourcing, other tech services to infrastructure, applications, and business process domains. Enterprise servers, Storage, and Networking Segment: industry standard servers, business critical systems, storage platforms, networking products

  38. Business Model Software segment: management software, information management solutions, and security intelligence/risk management solutions. Financial services segment: leasing, financing, utility programs, asset recovery services for SMBs

  39. Thesis Since HPQ has been on our portfolio, it has consistently underperformed … there is NO promising news, a WEAK balance sheet, and uncertainty over their management and business model It is time to sell!

  40. Performance Over Past 12 Months

  41. Severe Underperformance • Down 32% Year To Date • Down 40% from 52 Week High • $30.00 on Februrary 17th • Down 58% from Purchase Price of $42.83

  42. Key Events • Underperformed Analyst Estimates for Past 3 Quarterly Reports • New CEO, Meg Whitman (Formerly of Ebay) Came in Last September • Announced that 27,000 Employees will be laid off in May after 30% decline in profits • Recently announced 2,000 Additional Lay Offs

  43. Key Events • Ending All Business in Smartphone and Tablet Market • Shifting Business Model Away from Consumer Electronics and PCs and More Into Software and Servers for the Commercial and Government Markets • Rejected idea to completely do away with their PC Business, but this has seriously hurt their image among consumers

  44. Hewlett Packard In the News • July Headlines • Printing company Lexmark cut its outlook, which doesn’t bode well for HP, which fell 2.5% on the news. • HP’s credit default swaps have greatly increased in price • Layoffs confirmed at Rio Rancho facility • Baird cuts outlook for HPQ

  45. Hewlett Packard In the News • August Headlines • HP announced Q3 loss of $8.9B, largely attributed to $8B charge for its acquisition of Electronic Data Systems, and the general slow down of the PC market. • The Street downgraded HPQ from “Hold” to “Sell” • Credit Suisse cut HPQ’s price target nearly 20% • Forbes: PC growth for 2012 has slowed to just 0.9%, leaving growth under 2% for the second straight year.

  46. Hewlett Packard In the News • August Headlines (continued) • NY Times: • HP claims that its mobile operating system, WebOS is alive and well, but in reality HP has moved hundreds of employees away from developing WebOS, many of which have gone to work for other companies. • This isn’t really a surprising move since it was primarily meant for HP’s would-be iPad competitor, the TouchPad, which lasted only seven weeks on the market, which HP killed after very poor sales. WebOS also continues to struggle in mobile phone market share.

  47. Hewlett Packard In the News • September Headlines • HPQ announced that they are going to cut an additional 2,000 workers, bring the total to 29,000 workers slated to be laid off by 2014. • CEO Whitman sees this as just the beginning of restructuring efforts. • Associated Press: Report detailing HP’s failures since the iPhone’s launch in 2007. Since then HP has spent over $40B on acquisitions, most of have been duds, and are still losing money today.

  48. Recent Products • HP Pavilion HPE Phoenix h9z • Mass Market Gaming PC • Bold design: sharp edges, red LED lights • AMD Radeon GPU • Competitive market segment • Poor performance for price • Underperforms vs. cheaper competitors and HP’s own similarly priced systems

  49. Recent Products • HP LaserJet Pro 400 M401dw • Fully featured laser printer • Disk-free driver install • Cloud printing • Walk-up USB printing • 3.5 in. color touch screen • Feature set falls short of $400 price • Touch screen value • Budget options

  50. Recent Products • HP 2311gt • 23 in 3D LCD display • Passive 3D • Color Issues • Color Scaling • Green Tint • Demand for passive 3D PC monitors • Requirements • Non-3D competition

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