TECHNOLOGY SECTOR GROWTH PORTFOLIO

By: Irina Samoila and Robert SchaeferDate: May 9, 2014Class: Securities and Investments

CONTENTS� Industry Summary

� Portfolio Selections and Selection Criteria

� Company Profile

� Fundamental Analysis

� Technical Analysis

� Performance

INDUSTRY SUMMARY� Technology sector gained

+113.11% return� At the end of 2013, XLK

outperformed S&P 500� XLK represents 20.77% of S&P

500 index� Market value of 12.41 billion

dollars, dividend of $0.16, and D/Y of 1.77%

PORTFOLIO SELECTIONS� Microsoft Corporation – 8.59%� Google Inc A – 4.35% & Google Inc C – 4.26%� Qualcomm Inc – 3.93% � SanDisk - 0.60%

SELECTION CRITERIA� Stocks yield long-term capital gains

� Momentum

� Integration of technology into daily lives

� Fundamentally – strong revenues, earnings, FCF streams, dividend growth

� Technically – Strong price chart, upward trends, price momentum

COMPANY PROFILE: MICROSOFT

� Develops, manufactures, supports, and sells computer software, electronics, and services

� The world’s largest software maker measured by revenue� One of the world’s most valuable companies� The Microsoft Cortana – new artificial intelligence software� Revenue: +8%, gross margin: 3%, operating income: +4%, EPS: +5%,

unearned revenue: +14%, and cash returned to shareholders reached 4.1 billion dollars

COMPANY PROFILE: QUALCOMM

� Global semiconductor company that designs and markets wireless telecommunications products and services

� Pioneered first cellular standard� Leading patent holder in 3G technology� Multi-mode 3G and LTE chips resulted in +4% revenue and +8% EPS� Extra cash used to reward shareholders by increasing dividend 20%� Triple Wi-Fi speeds in the near future

COMPANY PROFILE: GOOGLE� Specializes in Internet-related services and products� Offers online ads, search, cloud computing, and software� World’s most successful and recognizable search engine� Underwent stock split to give back control to founders� Project ‘loon – Wi-Fi balloons to avoid underground internet cables� Project Ara – Ultimate smartphone� Driverless car� Google Fiber – 100 times faster than national broadband

COMPANY PROFILE: SANDISK

� Designs, develops, and manufactures flash memory storage software and devices

� Products include SSD cards, caching software, memory cards for smartphones, USB flash drives

� Samsung is slow in 3G technology� Less pressure on new product pricing� Enterprise SSD market is expected to grow rapidly� Supplier of Apple� Increased data storage devices iNAND

FUNDAMENTAL ANALYSIS

� High revenue: As technology advances, costs drop, increasing profit margins

� Earnings: Higher after-tax profits� Dividend Growth: Higher dividends to shareholders every year� Beta: Slightly higher beta than market to capture momentum� Portfolio beta = 1.12� FCF: Higher returns to investors and more money for future projects� ROE for SanDisk: 1.83 to 14.88

TECHNICAL ANALYSIS

� Price and Volume Growth� Moving averages, Golden crosses, Volume

� Bullish trend lines and patterns� Support, Resistance, Ascending triangle pattern

� Favorable indicator and oscillator signals� MACD, Stochastics, CMF

MICROSOFT

QUALCOMM

GOOGLE

SANDISK

PERFORMANCE

PERFORMANCE

PERFORMANCE

� Over past five years our portfolio outperformed Technology Sector by:� 135.90% � Ratio: 2.06� Annualized rate of return: 28.60%

� Over the course of the semester our portfolio underperformed Technology Sector by -1.56%:

� Decline of momentum stocks� Steep decline in April

QUESTIONS?

Irina Samoila & Robert Schaefer 2014