Friday September 13 th, 2013 2 nd Meeting of Fall Semester

1. Friday September 13th, 2013 2nd Meeting of Fall Semester Lafayette College Investment Club

2. Announcements • Finance Night – October 17th • Opportunity to network with successful Lafayette Alumni • Speaker Friday November 8th 2013 • Scott Littlejohn • Lafayette, AB, Economics, 1984 • NYU Stern, MBA in Finance, 1991 [CPA - NY]

3. Meeting Agenda 1) Market Update by Othman Guennoun and Ryan McCormick 2) Waste to Energy Educational presentation by Stacey-Ann Pearson (Engineering Major) 3) Buy Presentation Expedia (EXPE)

4. MARKET NEWS September 13TH 2013

5. Twitter Files for IPO • Twitter has submitted S-1 form to begin IPO “initial public offering” • IPO = Stock Market Launch • Private company  Public company • Anyone can buy shares of the company

6. FED TAPERING • Investors predict that Fed officials will reduce 85 billion a month bond buying at September 17th-18th meeting. • Prediction based on the fact that Ben Bernanke will be holding a press conference on Sept 19th, after meeting (No press conference scheduled after October meeting). • Bond buying by FED also referred to as quantitative easing (QE) has allowed the long term interest rates to remain low, encouraging investors to invest a lot more. EXAMPLE: The 10 year Treasury note’s yield which fell to 2.936% • Fed official Richard Fisher (Dallas Federal Reserve Bank president): “There is an expectation that we will act in September…” (against program, doesn’t think it does any good.

7. Proposed course of action by several Fed officials: * Reduce monthly bond purchases by a small amount. Maybe by 10 billion (from 85 billion to 75 billion) Watch results after action: Job market improvement Inflation rate improvement • Nonfarm payroll figures not as high as expected (169,000) • Possible reason for Fed not to taper “Today’s data, in combination with Syrian uncertainties are likely to keep the US Fed on the sidelines for now” Douglas Borthwick – Chapdelaine Foreign Exchange NYC

8. APPLE’s new iPhones • Apple (AAPL) reveals two new iPhones • iPhone 5C starting at $99 • iPhone 5S --- fingerprint scanner and better camera • AAPL shares trade down 2% after announcement.

9. Dow Jones Industrial Average Drops 3 Companies. • Alcoa (AA), Hewlett-Packard (HPQ), and Bank of America (BAC) dropped • Replaced by Visa (V), Goldman Sachs (GS), and Nike (NKE) • Replaced because of low stock price of existing companies • Change effective Sept 20th at Market Close.

10. Walt Disney Co. • Walt Disney Co. stock (DIS) rose 2.5% yesterday after announcement of buying back $8 billion worth of shares. • Usually buyback at a higher than market price • Shows they have a lot of cash to pay back investors --- more investors interested as a result.

11. Waste to Energy Technology (WtE) How it may affect the energy sector and our investment portfolio?

12. What is waste-to-energy technology? • A form of clean energy • Conversion of non-recyclable waste materials into electricity, heat or fuel • Turning garbage into electricity!

13. Challenges with waste-to-energy: Advantages of waste-to-energy: • Indefinite supply of waste • Reduces need for ‘dirty coal’ – cleans up the earth • Reduces waste volume of landfill • High initial cost • Negative image (pollutants, emissions), such as dioxins

14. Energy sector is huge, but why? What are some of the uses of energy in USA? • Electricity • Transportation • Industrial • Residential • Commercial

15. Energy market in US compared to some other countries: 1 American consumes as much as: • 2 English • 3 Japanese • 6 Mexicans • 13 Chinese • 31 Indians • 307 Tanzanians Washington State University

16. Related Investment club holdings • ExxonMobil • Chevron • Dominion Resources • Denbury Resources Generated revenue for big players > $175Billion, 2010

17. Projected effects of WtE on sector: • WtE can be expected to cut into the coal share • Pass solar, wind and geothermal energy in renewable sources • Put pressure on crude oil companies with small market share

18. Additional Explanation • Electricity

19. How is it related to LIC portfolio? ExxonMobil Chevron Denbury • The largest sources for these three are oil and natural gas Dominion Resources • Revenue from electricity generation and natural gas sale • Electricity generated primarily from coal (46%) and nuclear (41%) • $12B plan to improve and explore oil & gas

20. How is it related to LIC portfolio? Denbury Resources • Oil and natural gas company • Devoted to oil, gas market – investment in enhanced oil recovery • Focused on increasing value of oil, gas property Dominion Resources • Revenue from electricity generation and natural gas sale • Electricity generated primarily from coal (46%) and nuclear (41%) • $12B plan to improve current infras. to and explore oil & gas

21. What plans would you make about these holdings if you had them in your portfolio?

22. A Value Opportunity (EXPE) – BUY 300 SHARES

23. Expedia Company Overview • Market Cap: 7 Billion Last Sale: 51.18 • Based on gross bookings, Expedia Inc. is the worlds largest online travel agent (OTA), operating a portfolio of websites. • Hotels.com, Hotwire, Trivago (Europe), Elong • The Expedia Brand is one of the most well-known and valuable brands in the travel industry.

24. Stock Got Absolutely Whacked • On July 26th, Expedia reported a poor Q2 missing on both EBITDA and Revenue. • Revised Guidance to mid-single digit EBITDA growth and cited headwinds with competition. • Management failed to mention this to investors resulting in a “hate sale”, reducing the market cap of the company by nearly 3 billion (stock down 30%). • Company toured the street talked up back half of year in June (margin story).

25. Why Now (VALUE) • 1) Managements ability to guide the street going forward is a one time fixable issue, they have set the bar considerably low (single digit EBITDA GROWTH) • 2) The Stock Trades at a steep discount to its competitors, 7.5x EBITDA, and 14x Forward Earnings. • 3) Nothing is fundamentally wrong with the company, they are a brand player in a growing market with investments in MOBILE, ETP PROGRAM, and One time COSTS.

26. Reason #1 • Management is not in the business of losing money, they are compensated based on growth, if they fail to guide they lose money. • JOHN MALONE LIBERTY MEDIA (12% STAKE) • They have set their forward guidance to mid single digit EBITDA growth (historically mid-teens). This is a VERY low bar. • Guiding going forward is fixable and management is credible (spoke with PM, trader, analyst).

27. Reason #2 • On July 26th, EXPE traded 20x earnings and 12x Ebitda. • Currently trades at a steep discount to those levels. • Priceline (main comp), trades 24 times earnings and 14x Ebitda • Orbitz (2nd Main comp), trades 23 times earnings, and 15x Ebitda. • STEEP discount to comps (hence value)

28. Reason #3 • The reason for the miss was considerable investments into international companies ELONG and Trivago. • Elong is a Chinese search company (second largest), a much needed diversification in a growing market. • Trivago is essential as Expedia is only a 22% market share holder in Europe, also a growing market. • These Investment Costs were front half, back half will be revenue drivers.

29. Growth Going Forward • ETP Program – Drives Conversion, option to pay at hotel or online (Merchant Program Revolutionary). • Mobile APP – By far the largest investor in mobile growth (50 M app users globally), industry moving that direction. • International Growth – Acquisition of Trivago will prove to be a one time cost and a great investment.

30. THE RISK STORY • The online travel business and travel demand in general is linked to the economy. The global economy deteriorated rapidly when many of the world’s major economies fell into recession. • High unemployment at 7.5%, limited credit availability and a cautious consumer may hinder economic recovery. • Management Fails to Guide well, and they miss Q3.

31. Conclusion • This is a value opportunity to buy a heavily discounted stock in a volatile market. • 1) Fixable Issue • 2) Discount • 3) Growth Going Forward • We own ZERO travel industry • BUY 300 EXPE (3% allocation), and have a nice Friday knowing you found the gem of the year.