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Performance Report

Performance Report. Student Managed Fund MBA class of 2005 March 3, 2005. Christophe Pane Luis Prandini Stephen Petretto Igor Lemagic Rajiv Iyer. MBA Fund Managers. Jie Wan Ashley Martella Yun Cai Amit Kumar Sampita Ray Gabriel Joanes.

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Performance Report

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  1. Performance Report Student Managed FundMBA class of 2005March 3, 2005

  2. Christophe Pane Luis Prandini Stephen Petretto Igor Lemagic Rajiv Iyer MBA Fund Managers • Jie Wan • Ashley Martella • Yun Cai • Amit Kumar • Sampita Ray • Gabriel Joanes

  3. Performance Highlights (Sept 24,2004 thru February 11,2005) *An additional $500,000 was added to the portfolio as of Jan,19 2005. **Based on risk-free rate of 4.2%.

  4. Agenda • Investment Methodology • Portfolio Performance & Attribution Analysis • Economic Outlook and Allocation

  5. Investment Strategy and Style • Blend Strategy • Combination of value and growth • Multi-Cap Fund Market Capitalization Small Caps 1 stock Large Caps 23 stocks Mid Caps 5 stocks Number of holdings as of 02/25/05: 29 • Primarily investments in large-cap stocks

  6. Investment Philosophy • Fundamental analysis • Historical performance • Valuation models • Business models • Future Prospects • Economic outlook for the industry • Long-term (3-5 year) investment horizon • Benchmark: S&P500 Index • Selecting stocks with potential • Close monitoring of the portfolio

  7. Investment Approach Top Down Approach Sector Allocation Stock Selection • Valuation Models • PEG and P/E Models • Dividend Discount Model • Free Cash Flow Model • Fundamental Analysis • Business Model Analysis • Ratio Analysis • Future Prospects

  8. Stock Selection Criteria • We look for: • Solid financials • Strong management • Earnings growth • Attractive valuation relative to peers • Higher return/risk relative to industry “If the choice is between a questionable business at a comfortable price or a comfortable business at a questionable price, we much prefer the latter.”

  9. Buy Criteria • Steady growth rates • Intrinsic value > market value • Above average expected returns • Sell Review Criteria • Stock reaches our target return • Predetermined stop loss prices • Risk/reward profile deteriorates • Actual earnings figures lower than estimates Buy & Sell Discipline

  10. Management Style • Active Management • Report presentation and voting • Performance Monitoring • Stop Loss Measures (15%) • Appreciation Reevaluation (20%) • Continuous Monitoring & Dynamic Response

  11. Sector Allocation (as of 02/11/2005) Top 5 sectors: Financials Industrials Consumer Disc. IT Health Care

  12. Detailed Sector Allocation (as of 02/11/2005) * Best Performer until 02/11

  13. Detailed Sector Allocation (as of 02/11/2005)

  14. Performance Highlights (Sept 24,2004 thru February 11,2005) *An additional $500,000 was added to the portfolio as of Jan,19 2005. **Based on risk-free rate of 4.2%.

  15. Portfolio Performance Attribution Period: September 24, 2004 to February 11, 2005 Excess Return = Stock Selection + Sector Allocation + Cash Position

  16. Current State of the SMF Portfolio (since Feb. 11) • Positions Added: • Apache Corporation, PetroChina (Energy) • Ameritrade, E*Trade, MBNA (Financials) • Invitrogen (Health Care) • Sysco Foods (Consumer Staples) • Dunn & Bradstreet, Tyco International (Industrials) • Florida Power & Light Group, Inc. (Utilities) • Positions Increased: • Comcast and Starwood Hotels (Consumer Discretionary) • Hartford Financial Services (Financials)

  17. Portfolio Summary • Market Value at Feb. 25, 2005: $967,397 • Current number of stocks: 29 • Total amount yet to be allocated: $160,653 • Top 10 holdings: • Apache Corporation – 4.43% • Dun & Bradstreet – 4.45% • Tyco International – 4.24% • Hartford Financial Services – 4.12% • E*Trade - 4.07% • FPL Group - 4.06% • MBNA Corporation - 4.04% • Invitrogen Corp. – 3.97%

  18. Portfolio Summary • Top 10 holdings: • Commerce Bancorp – 3.72% • Sysco Foods – 3.63%

  19. Economic Outlook • Expected GDP growth of over 3% for 2005, albeit lower than 2004. • Core Inflation expected to rise; prices rose 2.3% from a year earlier. • Long-term interest rates are still low; flattening yield curve. • Federal Reserve is expected to continue increasing the federal-funds rate at “measured” pace. • Mergers-and-acquisitions market is picking up steam – favorable development for equities. • Situation in Iraq puts pressure on oil price and maintain high level of uncertainty. • Energy,industrials,materials, utilities expected to lead market.

  20. Industry Outlook

  21. WRAP UP • Fulfilled Portfolio Objectives • Performance surpassed S&P 500 • Lower Risk Level • Invested primarily in Large Cap U.S. Equities • Chose only fundamentally strong companies Top Performers Aetna (AET)-49.31% Valero (VLO)-39.61% Hartford (HIG)-18.97% Worst Performers Cisco (CSCO)- (9.23%) Pfizer (PFE)- (16.83%) CACI (CAI)- (16.98%)

  22. Takeaways • Valuation Highly Dependent on Analyst’s Assumptions • Stop Losses can sometimes work against you • Have patience • Stick to your strategy and convictions • Enjoy the extraordinary learning opportunity

  23. Thank you. • University of Connecticut Foundation Inc. • Investment Advisory Board • Dr. Chinmoy Ghosh

  24. Q & A ?

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