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1
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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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