SU Student Investment Fund - Fall 2010

LOGOLead Analyst: Frank Balas

Student Investment FundSalisbury University

Fall 2010

Dr. Herman Manakyan

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SUSIF Investment Policy Statement

The investment goal of the portfolio is a strategic core-oriented allocation to the overall domestic equity market.

The investment objective of the portfolio is to achieve long-term capital growth by investing in marketable U.S. equities with a risk profile that is similar to our benchmark, (The S&P 500 Index).

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Investment Strategy

Where is the economy headed?

How does sector fit economic view?

Strength / Valuation of individual stock

Economic Analysis

Sector Analysis

Individual Equity Analysis

Top-Down Approach

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Investment Strategy

1

Dividend Discount

Model

2

Earnings Discount

Model

3

Justified P/E

Model

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Agenda

Economic Analysis1

Sector Allocation2

Individual Company Highlights3

4 Performance Analysis

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Economic Analysis

Frank Balas

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Unemployment

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Consumer Confidence & Volatility

VIX

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Consumer Spending

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Inflation

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Housing & real estate

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Housing & real estate

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Fiscal Policy

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Monetary Policy

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Interest rates vs. Unemployment

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GDP

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S&P 500

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Economic Outlook

GDP growth will be (3-4%)

Unemployment will remain high (8-10%)

Interest rates will stay low (Fed Funds 0 – 0.5%)

Inflation will remain subdued (2% - 3%)

6 -12 month projections

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Sector Allocation

Frank Balas

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Spring 2010 Allocation

Sector: S&P 500 SUSIF Target SUSIF Actual (12/1/2010)

Energy 10.90% 18.25% 20.28%

Materials 3.50% 2.62% 2.48%

Industrials 10.80% 15.55% 15.05%

Consumer Discretionary 10.50% 14.50% 14.79%

Consumer Staples 11.30% 7.70% 7.46%

Health Care 11.60% 9.50% 9.34%

Financials 15.70% 9.21% 5.80%

Information Technology 18.80% 20.65% 21.38%

Telecommunications 3.30% 3.00% 3.12%

Utilities 3.60% 0.00% 0.00%

Over-weighted: Energy, Industrials, Consumer Discretionary, IT,

Under-weighted: Consumer Staples, Health Care, Financials, Telecom., and Utilities

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Spring 2010 Sector Allocation

Energy15%

Materials3%

Industrials13%

Consumer Discre-tionary

9%

Consumer Staples5%Health Care

7%

Financials9%

Information Technology

21%

Cash/SPY20%

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Fall 2010 Sector Allocation

Energy20.28%

Materials2.48%

Industrials15.05%

Consumer Discretionary14.79%

Consumer Staples7.46%

Health Care9.34%

Financials5.80%

Information Technology

21.38%

Telecommunications3.12%

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MaterialsIndustrials

Kevin Ford

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Calgon Carbon (CCC)

Company Background Calgon Carbon is the world's largest manufacturer of

granular activated carbon The company has pioneered cutting-edge

environmental purification systems

Reasons for holding Valuations Environmental regulations Increase in global population

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1-Year & 5-Year Charts

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United Technologies (UTX)

Company Background United Technologies Corporation provides a broad

range of high-technology products and services to the global aerospace and commercial building industries.

Named No. 1 "Most Admired" aerospace and defense company (2010, Fortune)

Reasons for holding Valuations The increasing global defense spending

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1-Year & 5-Year Charts

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Energy

Andrew Kirchner

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Alliance Resources

The company operates the Illinois and Appalachian regions which have the most productive coal mines in the U.S.

Produced 25.8 million tons of coal in 2009 from which 25 million tons were sold

Why we held this stock Offers a dividend of $3.24 per share Has a 5-year growth rate of 10 percent As of December 1, 2010, the stock has achieved a return of 108.9

percent since we purchased it Continues to add and develop new coal mines

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Alliance Resources

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Concho Resources

The company is focused on the drilling and exploration of oil in the Permian Basin which is the largest onshore drilling site in the U.S.

Operated in 361 drill wells with an average production rate of 30.6 million barrels of oil per day

Why we held this stock Has a 5-year growth rate of 41.4 percent As of December 1, 2010, the stock has achieved a return of

66.9 percent since we purchased it Continues to identify new drilling opportunities with undeveloped

reserves

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Concho Resources

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Consumer Discretionary Financials

Chris Bridner

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WMS Industries

Casino Equipment Supplier Supplies electronic slot machines to casinos all over

the world

Why we bought: Casino Industry has shown signs of recovery Supplier of #1 selling slot machine of all time, Lord Of

The Rings. Expansion into Macau leading to higher growth 5 year expected growth rate of close to 30% yet was

only trading at 15 times earnings

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What We Didn’t Invest In

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JP Morgan

Commercial and Investment Bank Second largest bank in the United States in terms of

deposits Purchased/acquired Bear Sterns and Washington

Mutual in 2008.

Why we bought Strongest bank in the industry CEO Jamie Dimon Previous acquisitions are becoming profitable Ability to pay a lucrative dividend when allowed to by

the FED

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Financials vs. S&P500

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HealthcareConsumer Staples

Domenica Prudenti

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Thermo Fisher Sci.World leader in providing analytical instruments,

equipment, reagents & consumables, software, & services for research, manufacture, analysis, discovery, and diagnostics

Two divisions:• Thermo Scientific

– Provides high-end analytical instruments ,laboratory equipment & software

• Fisher Scientific– Provides laboratory equipment, chemicals, supplies and

services used in healthcare, scientific research, safety and education

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TMO

Why we BOUGHT 15% growth this year and 12% over the next

five years aging baby-boomers will fuel growth and

provide an opportunity to increase both margins and market share

expand in emerging markets with the Chinese and Indian markets

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Colgate Palmolive

oral care, personal care, home care, and pet food markets

leading global market share of 45% in the toothpaste market

Why we HELD long history of steady and increasing dividend

payments projected to have steady growth over the next year Low debt

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CL

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TelecommunicationsInformation Technology

Dion Thomidis

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ABOVENET Inc.

Broadband Telecommunications Company Its private optical network delivers key

network and IP services in and among top U.S. metro markets and globally

Pleasant Surprise Special $5 dividend per share to be given on

December 27th

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ABOVENET (1 YEAR)

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Emerging Markets

Google Internet Search Engine

Largest Internet Search Engine in the U.S.

Why Hold Some Reported third quarter

earnings at 70% over previous quarter

Why Sell Some Ability to take advantage of

an emerging market while remaining diversified

Baidu Internet Search Engine

Known as the “Google of China”

Why Buy 2011 expected growth of

60.80% 2010 stock growth of

186.5%

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Google vs. Baidu (1 Yr)

Google Baidu

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Check Point Tech. Sol.

Information Technology Security Firm Provides affordable technology software

solutions to large companies as well as individuals

Among Leaders in Server Security Technology

More Good News UBS has upgraded Checkpoint stock and had

raised its price target from $47 to $50

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CHKP (1 YR)

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Performance Analysis

Frank Balas

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Return vs. Indices

9/15

/200

0

3/15

/200

1

9/15

/200

1

3/15

/200

2

9/15

/200

2

3/15

/200

3

9/15

/200

3

3/15

/200

4

9/15

/200

4

3/15

/200

5

9/15

/200

5

3/15

/200

6

9/15

/200

6

3/15

/200

7

9/15

/200

7

3/15

/200

8

9/15

/200

8

3/15

/200

9

9/15

/200

9

3/15

/201

0

9/15

/201

00.20000

0.30000

0.40000

0.50000

0.60000

0.70000

0.80000

0.90000

1.00000

1.10000

1.20000

1.30000

Portfolio Performance Since Inception

SU Fund

S&P 500

NASDAQ

DJIA

Dates

Wea

lth

Rel

ativ

es

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Return vs. Indices11

/30/

2005

3/2/

2006

6/2/

2006

9/2/

2006

12/2

/200

6

3/2/

2007

6/2/

2007

9/2/

2007

12/2

/200

7

3/2/

2008

6/2/

2008

9/2/

2008

12/2

/200

8

3/2/

2009

6/2/

2009

9/2/

2009

12/2

/200

9

3/2/

2010

6/2/

2010

9/2/

2010

0.55

0.65

0.75

0.85

0.95

1.05

1.15

1.25

1.355-Year Portfolio

Performance

SU Fund

S&P 500

NASDAQ

DJIA

Dates

Wea

lth

Rel

ativ

es

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Return vs. Indices

Nov-0

7

Jan-

08

Mar

-08

May

-08

Jul-0

8

Sep-0

8

Nov-0

8

Jan-

09

Mar

-09

May

-09

Jul-0

9

Sep-0

9

Nov-0

9

Jan-

10

Mar

-10

May

-10

Jul-1

0

Sep-1

0

Nov-1

00.4

0.5

0.6

0.7

0.8

0.9

1

1.1

3-Year Portfolio Performance

SU Fund

S&P 500

NASDAQ

DJIA

Dates

Wea

lth

Rel

ativ

es

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Return vs. Indices

Nov-0

9

Dec-0

9

Jan-

10

Feb-1

0

Mar

-10

Apr-1

0

May

-10

Jun-

10

Jul-1

0

Aug-1

0

Sep-1

0

Oct-1

0

Nov-1

00.9

1

1.1

1.2

1-Year Portfolio Performance

SU Fund

S&P 500

NASDAQ

DJIA

Dates

Wea

lth

Rel

ativ

es

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Return vs. Indices

Jun-

10

Jul-1

0

Aug

-10

Sep

-10

Oct

-10

Nov

-10

0.950000000000001

1

1.05

1.1

1.15

1.2

Fiscal YTD Performance SU Fund S&P 500

NASDAQ DJIA

Date

Wea

lth

Rel

ativ

es

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Return vs. Indices

Dec

-09

Jan-

10

Feb

-10

Mar

-10

Apr

-10

0.9

0.95

1

1.05

1.1

1.15

1.2

YTD Performance 2010SU Fund S&P 500

NASDAQ DJIA

Date

Wea

lth

Rel

ativ

es

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Return vs. Indices7/

31/2

002

12/1

/200

2

4/1/

2003

8/1/

2003

12/1

/200

3

4/1/

2004

8/1/

2004

12/1

/200

4

4/1/

2005

8/1/

2005

12/1

/200

5

4/1/

2006

8/1/

2006

12/1

/200

6

4/1/

2007

8/1/

2007

12/1

/200

7

4/1/

2008

8/1/

2008

12/1

/200

8

4/1/

2009

8/1/

2009

12/1

/200

9

4/1/

2010

0.5

0.7

0.9

1.1

1.3

1.5

Rolling 12-month Returns

SU Fund

S&P 500

NASDAQ

DJIA

Date

Wea

lth

rel

ativ

es

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Return vs. Indices11

/30/

2000

6/2/

2001

12/2

/200

1

6/2/

2002

12/2

/200

2

6/2/

2003

12/2

/200

3

6/2/

2004

12/2

/200

4

6/2/

2005

12/2

/200

5

6/2/

2006

12/2

/200

6

6/2/

2007

12/2

/200

7

6/2/

2008

12/2

/200

8

6/2/

2009

12/2

/200

9

6/2/

2010

0.4

0.5

0.6

0.7

0.8

0.9

1

1.1

1.2

1.3

1.4

10-Year Portfolio Performance

SU Fund

S&P 500

NASDAQ

DJIA

Dates

Wea

lth

Rel

ativ

es

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Return vs. Indices(3 Month)

7.500000

8.000000

8.500000

9.000000

9.500000

10.000000

10.500000

SUSIF

DJIA

S&P 500

NASDAQ

+18.8%

+9.8%

+15.5%

+12.4%

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Risk Adjusted Data

Time Period Beta

Standard Deviation Sharpe Ratio Treynor Ratio

  AlphaR-

SquaredPortfolio S&P500 Portfolio S&P500 Portfolio S&P500

1 year 0.95265 0.05246 0.05319 0.11338 0.09243 0.00624 0.00516 0.00111 0.00126 93.16%

3 year 0.87022 0.05699 0.06293 (0.09540) (0.11214) (0.00625) (0.00811) 0.00105 0.00070 92.26%

5 year 0.88010 0.04702 0.05081 (0.02467) (0.05557) (0.00132) (0.00321) 0.00157 0.00132 90.39%

Inception 1.01178 0.05155 0.04690 (0.04435) (0.08675) (0.00226) (0.00402) 0.00199 0.00183 84.70%

3 Month 0.77860 0.03570 0.04504 1.33875 0.85536 0.06139 0.04948 0.02177 0.01780 96.41%

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1 Year, and 3 Month Returns

1 Year Return S&P 500 = (1180.55/1095.63)-1 = 7.75% SUSIF = (9.743585/8.929894)-1 = 9.11% Difference = + 1.36%

3 Month Return S&P 500 = (1180.55/1049.33)-1 = 12.51% SUSIF = (9.743585/8.427149)-1 = 15.62% Difference = + 3.11%

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Return/Risk(Since Inception)

Re t u r n

0.000000 0.010000 0.020000 0.030000 0.040000 0.050000 0.060000

(0.001000)

(0.000500)

0.000000

0.000500

0.001000

0.001500

SUSIF

S&P 500

Risk

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Return/Risk(5 Year)

Re t u r n

Risk0 0.01 0.02 0.03 0.04 0.05 0.06

0

0.0005

0.001

0.0015

0.002

0.0025

SUSIF

S&P 500

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Return/Risk(3 Year)

Re t u r n

Risk

0 0.01 0.02 0.03 0.04 0.05 0.06 0.07

-0.005

-0.0045

-0.004

-0.0035

-0.003

-0.0025

-0.002

-0.0015

-0.000999999999999999

-0.0005

0

SUSIF

S&P 500

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Return/Risk(1 Year)

Re t u r n

Risk

0 0.01 0.02 0.03 0.04 0.05 0.060.007

0.0072

0.0074

0.0076

0.0078

0.008

0.0082

0.0084

0.0086

0.0088

SUSIF

S&P 500

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Return/Risk(3 Month)

Re t u r n

Risk

0.03 0.04 0.050

0.01

0.02

0.03

0.04

0.05

0.06

SUSIF

S&P 500

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Summer OrdersCompany Ticker Shares Limit Buy Limit Sell Stop Order Executed

Apple Inc. AAPL 50   $ 300.00  

Oracle Corp. ORCL 360   $ 32.00  

Research in Motion RIMM 150     $ 57.75 Yes +6.3%

Skyworks Solutions SWKS 650     $ 13.50

Aon Corp. AON 300     $ 39.75 Yes +9.7%

Bank of America BAC 250     $ 13.75 Yes -15%

First Financial BanK FFBC 250   $ 32.00 $ 13.75

Goldman Sachs GS 60 $ 110.00   $ 124.75

Calgon Carbon Corp. CCC 600     $ 10.00

China Green Agriculture CGA 450     $ 9.75 Yes -13%

Baxter International BAX 220     $ 39.75

Concho Resources CXO 275   $ 72.00 $ 41.00

National Oilwell Varco NOV 320     $ 36.00 Yes +73%

Urban Outfitters URBN 375   $ 45.00 $ 32.75 Yes +16.5%

Trina Solar TSL 500     $ 16.75 Yes +43.8%

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Winter OrdersCompany Ticker Shares Limit Buy Limit Sell Stop Order

Alliance Resources ARLP 250   $ 50.00

Noble Corp. NE 300 $ 27.50

Southwestern Energy SWN 260 $ 30.00

Diageo Plc. DEO 160   $ 104.00

Thermo Fisher Sci. TMO 200   $ 66.00

Republic Services Inc. RSG 400   $ 20.00

United Tech. Corp. UTX 150   $ 100.00

Foster Wheeler AG. FWLT 400   $ 45.00 $ 20.00

Goldman Sachs GS 60   $ 195.00 $ 145.00

Target TGT 235 $ 68.00 $ 49.50

Gamestop GME 500   $ 15.50

WMS Industries WMS 250   $ 65.00

Apple AAPL 50   $ 270.00

Google GOOG 10   $ 520.00

Check Point Solutions CHKP 250   $ 50.00 $ 39.00

Hewlett Packard HPQ 200   $ 38.00

Abovenet Inc. ABVT 180   $ 45.00

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