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General Body Meeting 9/1/2010. Mutual Investment Club of Cornell Agenda  Welcome back  Introduction to the team  Club operations  Previous investment.

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Presentation on theme: "General Body Meeting 9/1/2010. Mutual Investment Club of Cornell Agenda  Welcome back  Introduction to the team  Club operations  Previous investment."— Presentation transcript:

1 General Body Meeting 9/1/2010

2 Mutual Investment Club of Cornell Agenda  Welcome back  Introduction to the team  Club operations  Previous investment pitches  Opportunities to get involved  Conclusion 2

3 Mutual Investment Club of Cornell The executive board  Jeffrey Hau  Daniel Sherry  Akshay Nagia  Chirag Shah  Melody Chu  John Yoshida  Jai Reddy 3  Samantha Dong  Terence Hu  Derek Creadore  Andrew Verri  David Wong  David Shim  Scott Deuschle

4 Mutual Investment Club of Cornell What does our club do?  Manage money  ~$50,000 portfolio  Value orientation  Long/short equity 4  Educate  Semester-long training program designed by Dan Sherry  Great for new members  Teaches fundamental principles

5 Mutual Investment Club of Cornell Analyst teams 5 Senior Analyst Junior Analyst  Senior Analyst  Have strong knowledge of industry  Generate investment ideas  Approve additions to conviction list  Manage pitch process  Junior Analyst  Compile weekly industry news  Propose new companies to add to conviction list  Do fundamental research to put investment pitches together  Help monitor current holdings

6 Mutual Investment Club of Cornell Other ways to get involved  Newsletter  Monthly editions  Three types of articles: investment pitches, new club initiatives, opinions on the economy  Writing for the website (blogging)  More flexibility than newsletter  More opinionated  Research reports  Opportunity to produce investment theses 6

7 Mutual Investment Club of Cornell So how do we choose our investments? 7

8 Mutual Investment Club of Cornell TBF Short 20+ Year Treasury Daniel Sherry 8

9 Mutual Investment Club of Cornell Original Thesis FactorWe think it will go:Causing interest rates to: Monetary PolicyTighterIncrease Fiscal PolicyStay looseIncrease SavingLower as recession easesIncrease Capital InvestmentHigher as recession easesIncrease InflationMaybe up?Increase XX-XXXX-XX 10 year treasury rate at purchase: 3.42% 10 year rate now: 2.47% 9

10 Mutual Investment Club of Cornell Monetary & Fiscal Policy  Monetary Policy: Never really as loose as we thought it was.  Interest on reserves – 0.25%  Monetary aggregates  No tightening anytime soon – possible loosening  Fiscal Policy: you don’t have to outrun the bear…  Euro trouble 10

11 Mutual Investment Club of Cornell M0 Money Supply 11

12 Mutual Investment Club of Cornell M1 Money Supply 12

13 Mutual Investment Club of Cornell M2 Money Supply 13

14 Mutual Investment Club of Cornell Saving, Capex, and Inflation  Personal saving: not exciting.  Capital investment: not picking up like we thought.  Inflation expectations: subdued, to say the least. 5-year market inflation expectations 14

15 Mutual Investment Club of Cornell Looking Forward  Fed’s options  Explicit medium-term inflation target  Lower the interest on reserves  Additional quantitative easing  Do nothing – continue promising to keep rates low “for an extended period”  None of these will increase rates, at least in the short term. 15

16 Mutual Investment Club of Cornell HXM Homex Jai Reddy 16

17 Mutual Investment Club of Cornell Original Pitch  Thesis: Improvement in macroeconomic variables coupled with Homex’s competitive position makes for a substantial growth opportunity  Macro variables:  GDP, employment, wages Important for earnings acceleration and mortgage origination  Competitive position  Leader in low income/entry level housing  Geographically diverse  Efficient building processes 17

18 Mutual Investment Club of Cornell 2010 Market Expectations and Implications  Economic growth to swing from -7% to 3% in 2010  Employment to expand 2.3% after drop of 3.9% in 2009  Demand side  Growing salaries improve mortgage affordability  Employment growth increases potential size of homebuyers market  Supply side  Infonavit’s funding comes from taxes on salaries 18

19 Mutual Investment Club of Cornell What changed?  Q4: Weak quarterly sales  Change to a more conservative strategy  No geographic expansion during Q4  Downgrades by analysts  Though these may sound like too many negatives, they are all effects of a strategy to improve working capital management and free cash flow generation 19

20 Mutual Investment Club of Cornell Recent events & looking forward  Strong revenues and margins in Q210  Due to strategically focusing in more profitable areas/demographics  Increases in FCF as planned part of their strategy  Increase in EBITDA  Potential Catalysts  Surprises in economic growth expectations  Problems with technologies and leadership control  Changes in targets for mortgage origination 20

21 Mutual Investment Club of Cornell CSCO Cisco John Yoshida 21

22 Mutual Investment Club of Cornell Cisco Systems, Inc.  Designs and sells technology and service for electronics, networking and communications  Founded in 1984 developing and selling routers 22

23 Mutual Investment Club of Cornell Original Thesis (February 2010)  Next-generation technologies are poised to take advantage of both existing and new markets  Strong cash equivalents will lead to key strategic acquisitions 23

24 Mutual Investment Club of Cornell Performance 24

25 Mutual Investment Club of Cornell Earnings Update  EPS slightly beats expectations but…  Sales forecast miss expectations  “Unusual uncertainty” and “Mixed Signals”  Company hiring employees NO CHANGE IN THESIS 25

26 Mutual Investment Club of Cornell TEVA Teva Pharmaceuticals Samantha Dong 26

27 Mutual Investment Club of Cornell TEVA- Overview  Originally pitched Nov 3, 2008  World’s largest generic drug maker  Market Cap: $47.37 BN  Generic and branded pharmaceuticals, active pharmaceutical ingredients (APIs)  Principal Products: Copaxone  Original thesis:  Upside: Recession proof, industry leader, diversified pipeline, political environment, patent expiration  Downside: Growing competition 27

28 Mutual Investment Club of Cornell TEVA- Performance  Purchased: $43.02; sold half ~$60  Current price: $ As of market close on 8/31/2010  Since pitched:  Since summer:

29 Mutual Investment Club of Cornell TEVA- Recent News  Growth  Licensed branded cancer drugs  Acquisition with Ratiopharm: Europe footprint  Q2 Earning  up 53%, boosted by Copaxone sales  FDA approved the first generic version of Lovenox  Sanofi-Aventis’ blood clot treatment  Concern about generic version of Copaxone 29

30 Mutual Investment Club of Cornell Applications  Junior analyst applications will be accepted until September 10 th  Apply online at  Please speak with me if you’d like to get involved in other ways 30

31 Mutual Investment Club of Cornell Brain teaser  Three players enter a room and a red or blue hat is placed on each person’s head. The color of each hat is determined by a coin toss, with the outcome of one coin toss having no effect on the others. Each person can see the other players’ hats but not his own.  No communication of any sort is allowed, except for an initial strategy session before the game begins. Once they have had a chance to look at the other hats, the players must simultaneously guess the color of their own hats or pass. The group shares a hypothetical $3 million prize if at least one player guesses correctly and no players guess incorrectly.  The general problem is to find a strategy for the group that maximizes its chances of winning the prize. 31

32 Mutual Investment Club of Cornell Answer  Come to the next meeting to find out… 32

33 Mutual Investment Club of Cornell Conclusion  Next general body meeting will be Sept 15 th where we will announce our junior analysts  First training session will be Sept 8 th  Thanks for stopping by! 33


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