General Meeting 1 9.9.2014 Opening Remarks Information about USIT –Who we are –What we are about Criticize me –Help me do a good job General Meeting.

General Meeting 19.9.2014

General Meeting 1

Opening Remarks

• Information about USIT – Who we are – What we are about

• Criticize me – Help me do a good job

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Meeting Agenda

Announcements Portfolio Update Market Overview Lecture: Introduction to the World (Finance) Pitch: YNDX Important Dates

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2014-2015 Campaign

• USIT will be giving away $1,000 this year – Funded by last year’s portfolio gains

• You decide where the money goes

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Important Dates

• Thursday, Sept. 11, 7PM; CBA 4.328- SCG Workshop

• Thursday, Sept. 11, 11:59PM- Officer and SCG Apps Due• Sat., Sept. 13- Officer Interviews and SCG Lunch • Sun, Sept. 14- SCG Interviews

• Remember to pay your dues to apply for an officer position!

• 2 Free meetings • Get free T-shirt if you pay by midnight tonight

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Leadership

Opportunities for leadership:

Operations & FinanceMarketing & Advertising

Investing

Logistics ChairAdvertising Chair SCG Junior Analyst

New USIT members are granted the title of Fund Analyst

Technology Chair

Treasurer

Membership Chair

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Strategic Capital Group

Director of Investment

Director Director Director

Senior Analyst

Senior Analyst

Senior Analyst

Senior Analyst

Senior Analyst

Senior Analyst

Senior Analyst

Junior Analyst

Junior Analyst

Junior Analyst

Junior Analyst

Junior Analyst

Junior Analyst

Junior Analyst

Director Director

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Opening Remarks cont.

• Applying to SCG• Applying for Officer positions • What happens if I don’t get

in? !?!??!!??!!??!!??!?!?!?!?!?!?!?!?!?!?!?

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Announcements

•Build and manage your own virtual portfolio• Compete with other McCombs students

• Top three winners receive prizes in January

Register at usiteam.org/even

ts

Fall Portfolio Challenge

$5entry fee

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Announcements

• Pitch a stock to a panel of industry professionals• Network with investors across the country

• Prize pool TBD

Saturday November 1SP

www.usiteam.org/events

THE TEXAS STOCK PITCH COMPETITION2014TX

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Announcements

Free Wall Street Journal digital access for paid members

Contact [email protected] to receive login information

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Workshop

WorkshopsEvery Thursday 7-8PMCBA 4.328

Topic this week:• Basic Terminology

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VIP Speaker

WorkshopsEvery Thursday 7-8PMCBA 4.328

Topic this week:• Basic Terminology

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Student Consulting Initiative

WorkshopsEvery Thursday 7-8PMCBA 4.328

Topic this week:• Basic Terminology

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Portfolio Update

Stock Shares Cost per Share Total Cost Basis Price per Share Market Value Gain/Loss Gain/Loss %AAPL 21 $69.48 $1,459.08 $98.64 $2,071.44 $612.36 42.0%ADNC 50 $10.51 $525.50 $8.56 $428.00 ($97.50) -18.6%CBRX 125 $6.82 $852.13 $5.91 $739.21 ($112.91) -13.3%

IDT 75 $18.00 $1,349.65 $15.54 $1,165.50 ($184.15) -13.6%SWKH 400 $1.13 $450.00 $1.46 $584.00 $134.00 29.8%

U 125 $4.64 $579.68 $4.76 $594.86 $15.18 2.6%

AGX 25 $21.67 $541.75 $38.22 $955.50 $413.75 76.4%AIG 15 $49.37 $740.55 $55.18 $827.70 $87.15 11.8%

ACC 10 $35.73 $357.30 $39.85 $398.50 $41.20 11.5%

GY 50 $17.02 $851.00 $17.92 $896.00 $44.99 5.3%

LF 100 $8.21 $821.00 $6.32 $632.00 ($189.00) -23.0%

BBRY 100 $10.37 $1,037.00 $10.26 $1,025.50 ($11.50) -1.1%MUSA 15 $39.29 $589.35 $54.13 $811.95 $222.60 37.8%FNMA 100 3.21 321 3.44 $344.00 $23.00 7.2%

GENC 47 10.62 499.14 10.07 473.29 -25.85 -5.2%

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Portfolio UpdateSector Exposures Dollar Amount % AllocationInformation Technology $3,524.94 34%Energy $0.00 0%Consumer Services $0.00 0%Consumer Goods $0.00 0%Financials $2,154.20 21%Industrials $2,324.79 22%Health Care $739.21 7%Utilities $0.00 0%Telecommunication Services $1,165.50 11%Basic Materials $594.86 6%

Sector Exposures + CashInformation Technology $3,524.9 26%Energy $0.0 0%Consumer Services $0.0 0%Consumer Goods $0.0 0%Financials $2,154.2 16%Industrials $2,324.8 17%Health Care $739.2 5%Utilities $0.0 0%Telecommunication Services $1,165.5 9%Basic Materials $594.9 4%Cash $3,049.3 22%

26%

0%

0%

0%

16%

17%

5% 0%

9%

4%

22% Information Technology

Energy

Consumer Services

Consumer Goods

Financials

Industrials

Health Care

Utilities

Telecommunication Services

Basic Materials

Cash

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Portfolio Update

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Portfolio Update

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Portfolio Update

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Investment Thesis - Gencor

Due to Gencor’s strong product differentiation and vertical

offerings coupled with strong highway industry growth and a consolidation of asphalt plants,

Gencor is well positioned with strong financial backing to seize substantial profits in the industry

and appreciate to $13.69 its value.GENC

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Cash is near equal to Market Cap, perfect for capitalizing on future cash flows

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Market Overview: Major Indices

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Market Overview: Unemployment

142,000 Job created Unemployment rate drops to 6.1%

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Market Overview: General News

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Market Overview: General News

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Alibaba IPO

What is Alibaba? Is it larger than Ebay and Amazon?

2013 transactions totaled $248 bn More than Ebay + Amazon

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Alibaba IPO

Why am I talking about Alibaba? IPO

Midpoint price range of $155 bn

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Alibaba IPO

2. By buying stock in Alibaba you get stock in? A. The Dallas Cowboys B. Chinese equivalent of social security C. Alibaba D. An agency in the Cayman Islands

1. By buying stock in Samsung you get stock in? A. The Bundesbank B. A off shore account in Jamaica C. Samsung D. A South Korean Pension fund

3. The largest IPO in U.S. history was? A. AT&T B. Visa C. General Motors D. Facebook

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Lecture: Introduction

• Industry• Monetary Policy• Fiscal Policy• Econ• Relative Valuation

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American Peak Oil

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World Peak Oil

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Crude Oil Production

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Natural Gas Production

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R/P Ratio

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QE

• What is it – What were the stages?– Why was it implemented – Was it a good idea?

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Quantitative Easing Stages

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Zero Low Bound

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US Debt

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US Debt

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US Debt

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Econ

-3%

-1%

1%

3%

5%

0

40

80

120

160

2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 2013 Q4 2014 Q1 2014 Q2

GD

P G

row

th %

Inv

ento

ry C

han

ge

($ B

illio

ns)

Inventories v. GDP

Change in Inventories Quaterly GDP Growth

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Cost of Capital

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Stock Price

AAPL

$97.99 per share

FB

$76.67 per share

If we want to invest in cheap stocks (buy-low-sell-high), which would you invest in?

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Stock price is arbitrary!

A company wants to sell a bunch of stock onto a stock exchange to raise money (IPO)

The company needs to raise $100 million

The company gets to choose the stock price it wants to issue the stock at

1 million shares @ $100 each10 million shares @ $10 each100 million shares @ $1 each1 billion shares @ $0.10 each

Price is only used to gauge how much you make off a buy-and-sell trade. It is NOT a determinant of value

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Back to multiples

• We want to figure out if an investment is cheap

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Relative Valuation

• Much in the way price is arbitrary for fruit until you standardize it per unit of weight, stock price can be standardized per unit of earnings

Price per share

Earnings per share

Total earnings / total shares

=Tells you how much you pay per dollar of earnings

Investors tend to want to pay less for a dollar of earnings like paying less per pound of fruit

=

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Price to Earnings Example

AAPL

=15.82x

FB

$76.67$97.99

$6.19 $.92

=83.28x

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Interpreting a P/E Multiple

• Lower isn’t always better– For better, safer, growing companies,

investors are willing to “pay a higher multiple”– Sometimes a higher multiple indicates

expectation the company will “grow into it”

• Cheap has two meanings– You can get a good price– But that also means you could be getting bad

quality