General Body Meeting 09.08.11

1. General Body Meeting 09.08.11

2. Agenda • Announcements • Opportunities • WST Valuation Case Competition • News Updates • Financials Update • Swiss Franc • AT&T – T-Mobile Obstacles • Portfolio Review

3. Opportunities • Junior Analyst Program • Newsletter (David Kim: sk852) • Research Reports • Competitions in the future?

4. WST Valuation Case Competition • Team size: 3 - 4 • Three rounds • Research paper • Presentation • M&A Analysis • Registration by 9:00PM EST on October 6th www.wstcompetition.com

5. News Updates

6. Financials Update

7. Down Again, Up Again Here’s why: • U.S. lawsuit Friday regarding the sale of risky home loans to U.S. housing agencies Fannie Mae and Freddie Mac. • The Federal Housing Finance Agency is accusing the banks of misrepresenting the quality of mortgages packaged to Fannie and Freddie during the booming housing market. • On Wednesday, Bank of America’s decides to shake up management • A positive tone across the broader market and signs that the Republicans in Congress are keeping up a firm opposition to President Obama’s nominee to run a new consumer protection agency also buoyed the sector.

8. AT&T hits hurdles • Both US Board of Justice (BOJ) and Sprint seeks to prevent the $39B T-Mobile deal on the basis of anti-trust. • BOJ has historically won two out of three cases. • AT&T breakup fee to Deutsche Telekom amounts to $3B in cash and spectrum. • Settlements may involve AT&T selling off spectrums.

9. U.S. Spectrum Licenses

10. Swiss Franc • The three sacred grails of safety during market turmoil for investors have always been: • Gold, Treasuries, and the Swiss Franc • Over the past year the Franc has appreciated in value by nearly 40% to the Euro • Such appreciation has significantly hurt the Swiss manufacturing sector, and on Monday… • The Swiss Government and Central Bank decided to impose a floor on the Franc at 1.20 (Eur/Chf)in an effort to alleviate the pressure on its manufacturing sectors.

11. Swiss Franc • Absolutely unprecedented in the modern age since the collapse of the Bank of England • Soros made 2 billion in one day • Raises concerns of currency wars • Think China’s artificially low valuation of the Yuan • Puts further pressure on gold and treasuries as market safe-havens

12. Portfolio Review

13. Energy Sector

14. Energy Sector - OXY Overview: Stock Performance: • Occidental Petroleum (NYSE: OXY) is an oil and gas exploration and production company • Operations: TX, NM, CA, KS, OK, UT, CO, ND, WV • Current Share Price - $84.66 News & Current Earnings: • 2Q 2011 Net Income - $1.8 bn vs. 2Q 2010 Net Income - $1.1 bn: 17% Q-o-Q • 2Q 2011 Domestic Oil & Gas Production Increased 11% Q-o-Q • 2011 6-month ROE – 20% • Oversupply of oil from Canada & the Gulf of Mexico leading to drop in oil prices – Recommendation: Hold (Reevaluate & Present following further due diligence)

15. Energy Sector - BWP Overview: Stock Performance: • Boardwalk Pipeline (NYSE: BWP) owns and operates interstate natural gas pipeline systems • 14,200 miles of pipeline and 11 underground storage fields in 12 states • Current Share Price - $25.49 News & Current Earnings: • 2Q 2011 Net Income - $15.2 m vs. 2Q 2011 Net Income - $54.4 m: -72% Q-o-Q • 2Q 2011 EBITDA - $111.4 m vs. 2Q 2011 EBITDA - $145.7 m: -24% Q-o-Q • Lower storage revenues due to unfavorable market conditions • Marcellus Natural Gas Shale • Higher expenses: $5 m charge related to a fire at a compressor station in TX and $7.4 m loss on the early extinguishment of debt

16. Energy Sector - VWS Overview: Stock Performance: • Vestas Wind Systems (CO: VWS) is a leading turbine manufacturer headquartered in Denmark • Wind project planning, EPC, and operation services • Current Share Price – VWDRY (Pink Sheet) – $6.17 News & Current Earnings: • 2Q 2011 Shipments – 1,417 MW: 141% Q-o-Q vs. 2Q 2010 • 2Q 2011 Deliveries – 1,127 MW: 34% Q-o-Q vs. 2Q 2010 • 2Q 2011 EBITDA Margin – 10.7% vs. 2Q 2011 EBITDA Margin -9.8% • Wind turbine prices have sunk across the board • Vestas potential target for acquisition – Recommendation – Hold (Reevaluate after further diligence pertaining to acquisition contingency)

17. Media Sector

18. Telefonica (TEF) • Play on European recovery and Emerging Markets • Largest landline and mobile phone carrier in Spain, Brazil, Peru, Venezuela, and Chile. Second largest in Mexico. Total Asset $124B • Management committed to maintaining and increasing dividend (10.45% yield, historically 50-60% payout ratio)

19. Telecommunication Systems (TSYS) • P/E of 18, Total Asset 475MM, no dividend • Involvement in government and commercial communications • Management overlook bottom line • Significantly increased R&D

20. Walt Disney Company (DIS) • Wide range of business operations including media networks, parks and resorts, studio entertainment, and consumer products. • Revenue growth 6.70%, Payout ratio 17% and dividend yield 1.3% • P/E of 13.84 is on the lower spectrum compared to peers

21. Consumer Sector

22. Archer Daniels Midland • Extremely safe position on commodities and inflation • Beta: 0.31 • 2.29% Dividend • Strong presence in China, India, Brazil, & Europe • Warren Buffet interested in acquiring company • Has continued CapEx throughout summer

23. Proctor & Gamble • Another safe position • Beta: 0.49 • 3.31% Dividend • $24 Billion brand value • Growth in emerging markets • Warren Buffet-owned

24. Phillip Morris • Emerging markets • Weak U.S. Dollar • Strong dividend (3.72%) • +28.5% Prince increase in last 12 months

25. Healthcare Sector

26. Gilead Sciences Inc. (GILD) • Engages in the discovery, development, and commercialization of therapeutics for the treatment of life threatening diseases worldwide • Primary areas of focus include HIV/AIDS, liver disease and serious cardiovascular/metabolic and respiratory conditions • Strong product line • Established cash cow products; large patient pool • Deep and developed pipeline; PEG of 0.7 • No patent cliff until 2014 • Outperformed the S&P 500 • Low beta of 0.38 • YTD: GILD +9.82%, SPY -4.34% • Analyst target at $48.00 • Hold Recommendation

27. Real Estate Sector

28. Homex Development Corp (NYSE: HXM) • HomexDevelopment Co. engages in the development, construction, and sale of affordable entry-level, middle-income, and tourism housing in Mexico • Minor developments in Brazil as well • Significantly more volatile than overall market • beta of 2.29 • Down 30% since the beginning of May • Heavily invested in Mexico City and the state of Jalisco • 28% revenue derived from these areas CY2010

29. QuanTeam

30. Otter Tail • Entered Long at: $22.42, Current: $20.10 • Thesis: • Tracks S&P very closely • Outperforms with high yielding dividends • All thesis points have held, and as we expect the general market to recover, we expect Otter Tail to rise

31. Industrials Sector

32. Union Pacific (UNP) Railroads operating in23 states in the western two-thirds of the US, connecting to Canada and Mexico Holdings: 36 shares at 71.84 Yesterday’s Close: 89.72 52-week Range: 78.13 – 107.89 Market Cap: 43.79B P/E (ttm): 14.93 Div. Yield: 2.20%

33. Macro Sector

34. Brinks Co. • Original Thesis: A series of unfortunate events, caused in part by Brink’s sale of its home security division, created an undervalued company. • Armored Car (Secure Transportation) • Global Services • Cash Logistics • Weakness of dollar • Strongest balance sheet and highest margins • Weakening macro situations would actually help Brinks • Recommend Hold

35. Brinks Co.

36. Safe Bulkers • Original Thesis: An improving macroeconomy, will improve market conditions for shipping companies. • Current reality: • Uncertain economic recovery • Safe Bulkers is expanding without indefinite commitments from customers • Just went ex-dividend • Still has high dividend (8.8%) • Lower commodity prices will help • Recommend sell half of position

37. Safe Bulkers

38. Financials Sector

39. Visa

40. Visa Original Thesis Market leader in a fast growing industry: Global trend towards using plastic instead of cash  80% of the world's transactions still involve cash or checks Large international exposure, thus might not be hit as hard by impending US regulation Market over-reacting to impending financial regulation Visa’s dominate network size makes it more attractive as it allows customers to use Visa’s services in more locations

41. Suggestion: Hold • The original thesis still holds true: • Despite a slowing global economy, more and more people are using cards for transactions, offsetting decreased spending • Visa’s forecast for growth, management efficiency, and solvency all are huge competitive advantages • Management has shown a history of rewarding long-term shareholders though buybacks and dividends • Stockholders can expect increased dividends as Visa’s financial position improves.

42. Tech Sector Update

43. HP Update • Performance over the summer: • Bought on April 25th for $40.75 a share. • Today $24.14 (a 41% loss) • Old thesis not really accurate. • Key Concerns • Weakness in personal computer and big uncertainty • HP’s Q3 expected EPS falls below analysts’ targets • Netbook decline • Analysts recommendations: hold

44. HP Update • Old investment thesis: • HPQ is cheap, 10.39P/E, beaten up over soft guidance on PC sales, magnified by general unease about CEO and company strategy • Disappointment over netbook sales will fade as tablet sales take over • HP’s method of leveraging WebOS, product diversity, represents a unique strength

45. HP Update • Expected targets below analysts’ targets • HP’s expected Q3 revenue: $31.1B • Analysts’: $31.8B • HP’s expected Q3 EPS: 5.00 • Analysts’: 5.23 • HP’s Visual Collaboration acquired by Polycom • Acquired assets, including Halo products • HP and Polycom have agreed to establish a strategic relationship

46. HP Update • Big uncertainty around HP’s computer business • HP unveiled plans to sell or spin off its PC business, suggesting that computers are no longer the company's growth drivers and the US-based firm is shifting its focus toward software and mobile devices. • Speculation that HP was going to sell or spin off its PC business to Samsung. • Dow Jones reported Samsung had no intention of buying HP’s PC business. • HP’s PC business is the largest in the world.

47. Cisco • Recap: • 32% loss so far. • Steady drop in stock price after announcement of cutting 15% of workforce and factory sale • Stock increase after hitting analysts’ targets • Acquired Versly, which does Microsoft Office software integration • Key Concerns: • Rising competition • Period of company transition

48. Cisco • Main Business Troubles • “Cisco needs to choose between protecting share or preserving margins” • Typically took 70 to 80% margins, compared to competitors (IBM, ORCL, HPQ) which take 40% margins • Beginning to lose market share to smaller competitors, decreasing margins

49. iGo • Business • iGo is a provider of products in the electronics industry. It sells its products through retailers such as RadioShack and through resellers such as Ingram Micro, and wireless carriers such as AT&T. Its power products include a range of green.

50. iGo • Volatility • Over the past one year, iGo has had a lower average daily return 0.009% compared to IBM (0.111%), Apple (0.151%) and S&P500 (0.046%) but also had a significantly higher volatility (2-3 times higher), which implies higher risk but at lower returns. • At a beta of 0.47, iGo has underperformed the market by a lot.