QF102 StockTrak Portfolio

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Portfolio AnalysisCasey Gambuti – 5/4/11

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Contents

My Strategy and OutlookPortfolio Performance with BenchmarkSignificant WinnersSignificant Losers Analysis of Gains/LossesFuture outlook on portfolio

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Strategy

Stock Picking – “seeking alpha” Trading on NewsTrading on my outlook for specific

companies and industriesLong and Short positions on U.S. EquitiesDiversification with ETFsLeveraging Portfolio through margin as

well as leveraged ETFs

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Economic Outlook

Began with Bullish Outlook ◦Mostly Long positions

Took precautions as turmoil began in Egypt, Libya, and eventually Japan◦Began Taking More Short Positions

Expected High Inflation◦Looked into Commodity ETFs

Currently remain Bullish as turmoil eases and Corporate earnings have been surging.◦Intel, IBM, GE

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Tech Sector/US Cellular Industry

Expected Google to outperform Apple and RIM with Android gaining market share

AT&T acquisition of T-Mobile◦Sprint should outperform after 15% drop◦Possible Acquisition of small US Cellular companies:

Leap Wireless, MetroPCS, Clearwire Corp

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Other Expectations

Banking Industry:◦Long Citigroup

Release from Federal Reserve Reverse Stock Split

◦Short Bank of America High leverage in still sour US housing market Initially thought to be a good hedge due to

pending wiki leaks release – turned out to be nothing very serious

Retail Industry:◦Short Wal-mart: lost focus on having lowest prices◦Long Target: Business expanding, creating

competition for Walmart

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Performance

My Return: 6.66% S&P Return: 5.10%StockTrak Rank: 3/18

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Most Significant Gains and Losses

Silver ETF (SLV): 32%Sprint (S): 17%Short Salesforce.com (CRM): 8%

Google (GOOG): -12.5%Citigroup(C): -5.8%

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iShares Silver Trust (SLV)

Bought at $32.40Sold at $42.5332% Gain

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iShares Silver Trust (SLV)

Protection against inflationIndustrial demand that gold doesn’t havePrecious metals should continue to be

attractiveRetail investors looking to hedge inflation

◦Cheaper than goldHistorical Gold/Silver Ratio says silver is

undervalued

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Gold/Silver Ratio

Silver may continue its run

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Recent fall of silver

Monday, silver prices plunged 13% in 11 minutesPossible causes:

◦CME Group decided to raise margin requirements

◦Gold/Silver Ratio has deteriorated, bubble is bursting Silver up by over 150% since last August

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Sprint

Bought at $4.39Sold at $5.13Gain of 17%

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AT&T Acquisition of T-Mobile

Chance the deal will be rejectedSprint has options:

◦Acquired by Verizon (unlikely but possible)◦Acquire smaller US Cellular Companies

Catching up in smart phone market

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Short salesforce.com (CRM)

Sold short on 4/21 at $140.78, current price: $133.66

Enterprise cloud computing applications 

Very Expensive stock (P/E:277)

Main Competitors: Oracle, SAP, among others

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Cloud Computing Bubble?

Earlier this year a UBS research note suggests there is a cloud computing bubble similar to the dot com bubble◦Overall P/E’s not quite to that level yet, but the

industry is becoming highly priced

Salesforce Oracle SAP IndustryPrice/Earnings 277 22 30 19

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Salesforce.com’s Price

CRM P/E is 14.5 times the industry average If value were to revert to average, earnings would have to

increase by 1450% to $4.50 per share from $.31 per share

Salesforce Oracle SAP

Quarterly Earnings

Growth (yoy):

-46.5% 78% -36.2%

Total Cash $497Million $24 Billion $5 Billion

Current Ratio .84 2.88 1.39

Salesforce seems to have

Less growth potential than

Its competitors.

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M&As in Cloud Computing

Big Tech Companies like to takeover startups/small caps with growth potential

Speculation about a takeover of CRM has faded due to its high price

Oracle boosted position in Cloud Computing by acquisition of Sun Microsystems

Any new M&As will hurt Salesforce

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Google

Purchased $603.98Currently $533.89Loss of 13%

Fell 8% on reports of higher operating costs, specifically cost of employment

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Why they are still a Buy

High operating costs will reach it’s competitors too◦High demand for software engineers increases

employment costs at coveted tech companies Google is investing for growth by paying

for the best engineersAndroidAd RevenueExpanding into new industries

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Android

Consistently stealing market share from competitors, stock price not reflecting it

350K Activations per dayVerizon iPhone sales less than expectedThe OS is still being perfected

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Increased Ad Revenue

Shows Facebook, Yahoo, Microsoft have stopped gaining on Google

Google will remain a strong competitor in its original business

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Google’s P/E History

Google’s much cheaper than it has been in the past

GoogleCurrent

Google Prior to Crisis

Google in 2004

Tech Sector Average

P/E 19 50 150 25

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Citigroup

Trading in the $4.40-4.70 range all semesterNever Broke out after being releasedThere’s still hope:

◦ Reverse Stock split opens C to institutional investors◦UBS on Citi:“one of the few truly global

consumer banks"  More opportunity for growth

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Future Outlook

Economic GrowthEspecially Tech Sector Growth Stocks

◦Hold Google◦Hold short in Salesforce

Hold onto CitiClosed short position in Bank of America

◦Possible buy if/when housing market begins to turn upward

Look for silver sell-off to end and continue runUS Credit Downgrade would hurt portfolio

◦The more likely a downgrade looks the closer to half short/long positions