Friday September 20 th, 2013 LAFAYETTE COLLEGE INVESTMENT CLUB.

Friday September 20th, 2013

LAFAYETTE COLLEGE INVESTMENT CLUB

Meeting Agenda

1) Market News – Chairman, Chris Busuttil2) Portfolio Restructure – Analysts, Peter

Oberender and Angel Stoychev

CHRIS BUSUTTILCHRIS BUSUTTIL

Market NewsMarket News

Big Events Big Events

““Fed Stays the Course on Easy Money”Fed Stays the Course on Easy Money”

Fed officials got cold feet Wednesday and Fed officials got cold feet Wednesday and decided to keep QE program in placedecided to keep QE program in place

““The tightening of financial conditions observed in recent The tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement months, if sustained, could slow the pace of improvement in the economy and labor market.” –Fed Statementin the economy and labor market.” –Fed Statement

““A government shutdown, and perhaps even more so a A government shutdown, and perhaps even more so a failure to raise the debt limit, could have serious failure to raise the debt limit, could have serious consequences for the financial markets and for the consequences for the financial markets and for the economy.” –Bernakeeconomy.” –Bernake

Big EventsBig Events

““Summers Withdraws Name for Fed Summers Withdraws Name for Fed Chairmanship”Chairmanship” Former Treasury secretary who was one of the Former Treasury secretary who was one of the

president’s top advisers, withdrew leaving Janet Yellen president’s top advisers, withdrew leaving Janet Yellen as leading candidate for the jobas leading candidate for the job

““I have reluctantly concluded that any possible confirmation I have reluctantly concluded that any possible confirmation process for me would be acrimonious and would not serve the process for me would be acrimonious and would not serve the interest of the Federal Reserve, the Administration or, interest of the Federal Reserve, the Administration or, ultimately, the interest of the nation’s ongoing economic ultimately, the interest of the nation’s ongoing economic recovery.” -Summersrecovery.” -Summers

Democrats want Yellen, 54 Senate Democrats signed a Democrats want Yellen, 54 Senate Democrats signed a letter to the president urging him to pick Yellenletter to the president urging him to pick Yellen

Market Update Market Update

““Fed’s Surprise Powers Market Surge”Fed’s Surprise Powers Market Surge” Stocks soared to new highs, U.S. Treasury bonds Stocks soared to new highs, U.S. Treasury bonds

prices rose and MBS prices gained significantly prices rose and MBS prices gained significantly Dow Jones went to an all-time high, closing at Dow Jones went to an all-time high, closing at

15676.9415676.94 S&P 500 index rose to a new record of 1725.52S&P 500 index rose to a new record of 1725.52

With Wednesday’s rally, the S&P is up 21% YTDWith Wednesday’s rally, the S&P is up 21% YTD ““Syria, that’s gone. Who’s going to replace Bernake? Syria, that’s gone. Who’s going to replace Bernake?

That’s gone,” he said. “And what’s tapering going to That’s gone,” he said. “And what’s tapering going to look like? We don’t have to worry about that right look like? We don’t have to worry about that right now.” –A.C. Morgan, MD at UBSnow.” –A.C. Morgan, MD at UBS

Market UpdateMarket Update

““Syria Widening WTI-Brent Spread”Syria Widening WTI-Brent Spread” The conflict in Syria has driven a wedge between Domestic The conflict in Syria has driven a wedge between Domestic

and European oil prices.and European oil prices. Domestic oil futures were roughly $3.50 a barrel cheaper than Domestic oil futures were roughly $3.50 a barrel cheaper than

Brent, the European benchmark. Brent, the European benchmark. Money managers have entered into exotic oil-market bets trying to Money managers have entered into exotic oil-market bets trying to

predict the spread.predict the spread.

““Banks Say Capital Ratios Can Weather Economic Banks Say Capital Ratios Can Weather Economic Crisis”Crisis” Company-run reviews show that minimum capital levels Company-run reviews show that minimum capital levels

would remain well above regulatory requirements. would remain well above regulatory requirements. Results are based off of Tier 1 common ratio calculationsResults are based off of Tier 1 common ratio calculations 5% minimum level is required by regulators, most banks 5% minimum level is required by regulators, most banks

reported levels near 10%.reported levels near 10%.

Companies in the NewsCompanies in the News

““Microsoft Boosts Dividend by 22%, Sets $40 Microsoft Boosts Dividend by 22%, Sets $40 Billion Buyback”Billion Buyback”

““Walgreen to Shift Health Plan for 160,000 Walgreen to Shift Health Plan for 160,000 Workers”Workers” Due to pending healthcare regulation, the firm will pay a fixed Due to pending healthcare regulation, the firm will pay a fixed

amount for employees to select coverage options in a private amount for employees to select coverage options in a private insurance exchange run by a third partyinsurance exchange run by a third party

““GM Developing Car to Rival Tesla”GM Developing Car to Rival Tesla” Electric car that can go 200 miles on a charge, price ~$30,000.Electric car that can go 200 miles on a charge, price ~$30,000.

““Priceline’s Share Price Crosses $1,000 Mark”Priceline’s Share Price Crosses $1,000 Mark” First company listed in the S&P 500 to trade at $1,000 in S&P First company listed in the S&P 500 to trade at $1,000 in S&P

56-year history.56-year history.

Talking Points Talking Points

““Home-Sales Frenzy Eases” Home-Sales Frenzy Eases” The inventory of existing homes for sale has The inventory of existing homes for sale has

plungedplunged““Household Incomes Level Off”Household Incomes Level Off”

Income of the typical U.S. family stabilized last Income of the typical U.S. family stabilized last year for the first time since the recessionyear for the first time since the recession

However, incomes remain 8.3% lower than 2007 However, incomes remain 8.3% lower than 2007 levelslevels

““Women’s Wage Gap Stays Stuck in Place”Women’s Wage Gap Stays Stuck in Place” Women earned 76.5 cents for every dollar that Women earned 76.5 cents for every dollar that

men did last year. men did last year.

Analysts

Angel Stoychev – [email protected] Financial, Industrial, and Materials

Peter Oberrender – [email protected] Healthcare, Utilities, and Energy

Sean O’Toole – [email protected] Services, Technology, Consumer

Reasons for Selling

Single Stock Portfolio

You can not learn from ETF’s

Bonds are bad

T Rowe Price Emerging Markets Bond Fund: PREMX

The Fund seeks to invest at least 80% of its assets in bonds and 65% of its assets in high-quality foreign bonds. The Fund may invest up to 20% of its assets in below investment-grade, high-risk bonds, including those in default or with the lowest rating.

Price $12.69YTD Return -7.31

Vanguard High Yield Corporate Fund: VWEHX

The Fund seeks a high level of current income by investing in a diversified portfolio of high-yielding, higher-risk corporate bonds, with medium and lower range credit quality ratings

Price $5.93Most recent Dividend $0.0289YTD Return 1.14

Vanguard Bond Index Longterm Bond Index: VBLTX

The Fund seeks to match the investment performance of the Barclays Capital Mutual Fund Long Government/Corporate Index

Price $12.49Recent dividend $0.0471YTD Return -9.7

ETF’s to dump

iShares MSCI Brazil Capped ETF: EWZiShares iBoxx $ Invt Grade Corp Bond: LQDBarclays IPATH DJ UBS AGRIC: JJAIPATH DJ-AIG TIN: JJT

Equities under 2%

With the size of our portfolio and the new direction we decided to operate we decided it benefits the club if we only have holdings that are worth more than 2% of our Portfolio

We are here to learn and with this new guideline we can gauge our stocks better, whether they do well or not so well, we will be able to see and learn from our pitches

Consumer

The Coca-Cola Company: KOJAKKS Pacific INC.: JAKKBoise Inc.: BZ

Services

Dollar Tree Inc.: DLTRFamily Dollar Stores Inc.: FDO

Energy

Vesta Wind: VWDRY

Technology

Baidu Inc.: BIDUChina Mobile Limited: CHLCisco Systems Inc.: CSCOHewlett Packard Co.: HPQ

Financial

Bank of America: BACThe Bank of New York Mellon Corp:BKCYS Investments: CYS (REIT)Goldman Sachs Group Inc.: GSManulife Financial Corp: MFC

Industrial

The Eastern Company: EMLNuverra Environmental Solutions Inc.

(Recently Heckmann Corp):NES

Materials

Southern Copper Corp.: SCCO