Final CAFE Presentation

Roger Williams Mario J. Gabelli
School of Business
University
Student Investment Fund Performance – Fall 2012
Student Fund Managers

Mr. David Aldo, Mr. Thomas Custance, Mr. Michael Densmore, Mr. Matthew DiPlacido,
Mr. Matthew Hoff, Mr. Matthew T. Paige, Mr. Maximilian Recker, Mr. Sean Reilly,
Mr. Daniel Walser, Mr. Charles Weidmuller
Associate Director
Ms. Lauren Tierney

Under the Supervision of:
Michael Melton Ph.D.
Director, Center for Advanced Financial Education
Professor of Finance

Center for Advanced Financial Education

FNCE 450 – Portfolio Analysis

Roger Williams University Mario J. Gabelli School of Business

Research In Motion Limited, Inc
Friday, September 27, 2012

• Acquired 2 million Analysts’ Estimates: Actual Earnings:
new subscribers -$0.46 -$0.27
• Posted $2.2 billion
in cash
Earnings
• Introduced new Surprise
beta version of
BlackBerry 10
SFM Prediction:
-$0.30
$0.19


Research In Motion Limited, Inc

•The top arrow indicates the
purchase price of $6.96 on
September 27, 2012

•RIMM was sold at $8.17
for a gain of $516 or 16.7%
on September 28, 2012


Center for Advanced Financial
Education
• “State-of-the-art”
• “Global” markets never sleep - 24 hours a day
• 16 computer screens + a “Big Board”
• Driven by Real-time Financial Platforms
• Perform every aspect of fund management throughout
the day


How Our Program Is Unique

CAFÉ Program Other Schools
• Do not inherit portfolio from previous • May inherit previous semester’s portfolio
semester • Do not execute own trades
– Active Management • Must answer to a advisory board
• Execute own trades via Ameritrade • Do not deal in real-time
• Do not seek trade approval from an – Need extended time to get trades
advisory board approved
• Deal in real-time • Limited ability to maximize potential
– Trades only need approval from returns
Associate Director or Managing Director – Cannot take advantage of momentum
• Maximize potential returns trading
– Take advantage of momentum trading • Classroom Setting
• Real-World Setting
• Real-Dollar Portfolio


Portfolio Objective
• Utilizing Top-Down Analysis Approach
• Global Mid-Large Cap Blend
– Over $2B market capitalization
– Provides hedge against market risk
– Allows opportunity for growth
• Markowitz Portfolio Theory
– 8-9 Sectors
– 17 Industries
– 20-25 Companies


Global Economic Analysis

Economic

Sector

Industry
Company


International Economic Analysis
Market
Market
Country Overall Performance GDP "Inflation" Unemployment
since 1/1/11
Performance
CPI
China Bullish -26.65% Bearish Bullish Neutral Neutral
Hong Kong Bullish -6.86% Bearish Bullish Neutral Neutral
Chile Bullish -16.13% Bullish Bullish Bullish Neutral
United Kingdom Bullish -0.99% Bullish Bullish Bullish Bullish
Israel Bullish 3.23% Bullish Bullish Bullish Bullish
Malaysia Bullish -1.57% Bullish Bullish Bullish Bullish
Brazil Bullish -17.55% Bullish Bullish Bullish Bullish
Canada Bullish -7.90% Bullish Bullish Neutral Bullish
Australia Bullish -8.84% Bullish Bullish Bullish Bullish
Switzerland Bullish 3.26% Neutral Bullish Bullish Bullish
Ireland Neutral 13.06% Bearish Bullish Bearish Neutral
Russia Neutral -21.00% Bullish Bearish Bullish Neutral
Germany Neutral 5.29% Bullish Neutral Bearish Neutral
Austria Neutral -28.29% Bullish Bearish Neutral Bearish
Colombia Neutral 8.33% Bullish Bearish Neutral Bearish
Czech Republic Neutral -28.40% Bullish Bullish Bearish Bearish
South Africa Neutral 11.28% Bullish Bullish Neutral Bearish
Norway Neutral 9.80% Bullish Bullish Bullish Neutral
Japan Neutral -13.51% Bearish Bearish Neutral Bearish
Philippines Neutral 21.92% Bullish Bearish Neutral Bullish
South Korea Neutral -6.84% Neutral Bullish Bullish Bullish
Luxembourg Neutral -16.09% Neutral Bullish Bullish Bearish
United Emirates Neutral -5.90% Bullish Bullish Bullish Neutral
Mexico Bearish 3.81% Bearish Bearish Bullish Bullish
Argentina Bearish -36.10% Bearish Bearish Neutral Bearish
Egypt Bearish -2.00% Bearish Bearish Bearish Bearish
Spain Bearish -20.84% Bearish Neutral Bearish Bearish
Greece Bearish -98.00% Bearish Bullish Bearish Bearish
Poland Bearish -11.80% Neutral Bearish Bearish Bearish
Iceland Bearish N/A Bearish Bullish Bearish Bearish
Portugal Bearish -27.47% Bearish Bullish Bearish Bearish
France Bearish -9.94% Bullish Bullish Bearish Bearish
Italy Bearish 4.24% Bearish Bearish Bearish Bearish
Denmark Bearish 9.26% Neutral Bearish Bearish Bearish
Sweden Bearish -7.64% Bullish Bullish Neutral Bearish
Finland Bearish -23.49% Neutral Bearish Bearish Bearish
Belgium Bearish -6.28% Bearish Bearish Bearish Bearish


Global Economic Analysis

Economic
Analysis
Sector
Analysis
Industry
Analysis
Company
Analysis


Domestic Economic Analysis
Leading Bullish
Economic Indicator Lagging Trend Bearish
Coincidental Neutral
Housing Starts Leading Upward Bullish

Industrial Production/ Capacity Utilization Leading Upward Bullish

Retail Sales Leading Upward Moderately Bullish

Business Sales and inventories Leading Upward Neutral
(Inventory/Sales Ratio)
Yield on 10-year Treasury Bonds Leading Downward Bullish

S&P 500 Stock Index Leading Upward Moderately Bullish

CCI Leading Upward Neutral

Nonfarm Payroll Employment Lagging Downward Neutral

Advance Durable Goods Shipments, New Lagging Upward Bullish
Orders and Unfilled Orders
Lightweight Vehicle Sales Lagging Upward Neutral

Unemployment Lagging Downward Bullish

M2 Coincidental Upward Bullish

MCSI Coincidental Upward Bullish

Real Gross Domestic Product (GDP) Coincidental Upward Bullish

Consumer Price Index (CPI) Coincidental Upward Bullish


Domestic Economic Analysis

Economic Indicator Outlook Reasoning
Over the past few months, unemployment rates have declined
Unemployment Rate Bullish to numbers unseen since early 2009. We see this strong trend
continuing into the near future, as jobless rates decline.

Since monetary easing was expected through Bernanke’s QE3,
Consumer Price Index (CPI) Bearish we were bearish on the future outlook for inflation in the
United States.
Historically, United States GDP has risen at a stable and
Gross Domestic Product (GDP) Bullish consistent rate. We see this growth continuing strong into the
coming years.
Interest rates have continued to drop since the Federal Reserve
Interest Rates Bullish introduced monetary easing following the 2008 crisis.
Bernanke pledged to keep interest rates low until 2015, a
bullish indicator for stocks.

As consumer confidence is correlated to many of the economic
Consumer Confidence Index (CCI) Bullish indicators, such as unemployment and housing starts, we are
confident in increased consumer confidence going into Q4.
This is reiterated by a decrease in unemployment and an
increase in housing starts.

Going into the fourth quarter, we were bullish in retail sales.
Retail Sales Bullish This is affirmed as retail sales tend to have a cyclical upward
trend in the later months of the year.


Portfolio Construction: Top Down
Approach
Economic
Analysis
Sector
Analysis
Industry
Analysis
Company
Analysis


Sector Analysis

Overweight Bullish
Energy Sector Marketweight Neutral
Underweight Bearish
Industrials Technology Overweight Bullish
Healthcare Conglomerates Marketweight Neutral

Basic Consumer Goods Overweight Bullish
Materials Utilities Underweight Bearish
Consumer Staples Services Marketweight Neutral
Basic Materials Marketweight Neutral

Consumer Utilities Healthcare Underweight Bearish
Discretionary Financials Underweight Bearish
Industrial Goods Overweight Bullish
Financials
Technology

Source: Sam Stovall, BusinessWeek Online, “A Cyclical Take on Performance.”


Industry Analysis

Bad Economy/Sector ≠ Bad Industry

Bullish Industries Bullish Industries
Internationally Domestically

• Chemicals • Gaming
Manufacturing • Retail
• Casinos & Gaming • Consumer Financial
• Education Services Services
• Computer Services • Personal and Household
Products


Company Evaluation and Selection
Process

Fundamental

Behavioral

Technical

AVOID SFM Consensus WATCH

BUY


Fundamental Analysis
• Price/Earnings • Liquidity
• Price/Earnings • Management
Growth Effectiveness
• Price/Cash Flow • Profitability

Key
Ratio
Financial
Analysis
Ratios

Financial
EPS
Statement
Analysis
Analysis
• Historical • Common Sizing
Surprise • Trend Analysis
• EPS Growth


Valuation
CF Industries Holdings (CF)

Sociedad Quimica Industry:
Valuation Ratios CF Industries (CF) (SQM) Chemicals
Trailing P/E Ratio 8.2 24.44 14.44
Forward P/E Ratio 7.1 21.36 -
PEG Ratio 0.99 1.31 -
Price to Sales 2.03 6.76 2.45
Price to Book 2.6 7.31 1.86
Price to Cash Flow 7.07 21.05 8.67
Price per Share
P/E Ratio = Lower than Competitor
Earnings per Share
Price/Earnings Growth
PEG Ratio = Close to or less than 1.0
Earnings Growth
Share Price
Price to Cash Flow = Lower than Competitor
Cash Flow per Share


Ratio Analysis
Nu Skin (NUS)
NU Skin Avon Products Industry:
Profitability Ratios (NUS) (AVP) Personal Products
Gross Margin (TTM) 0.84 0.62 0.63
EBITD Margin (TTM) 0.16 0.07 -0.02
Operating Margin (TTM) 9.95 4.3 2.02

Net Profit Margin (TTM) 10.34 2.3 2.08
Management NU Skin Avon Products Industry:
Effectiveness (%) (NUS) (AVP) Personal Products
Return on Assets (TTM) 19.43 6.07 8.58
Return on Investment (TTM) 28.05 11.64 15.75

Return on Equity (TTM) 34.19 28.96 19.91

NU Skin Avon Products Industry: Personal
Financial Strength (NUS) (AVP) Products
Quick Ratio (MRQ) 1.73 1.02 1.5
Current Ratio (MRQ) 2.01 1.45 1.95
LT Debt to Equity (MRQ) 0.33 1.79 0.21
Total Debt to Equity
(MRQ) 0.33 1.79 20.98
Interest Coverage (TTM) 48.24 3.85 91.29


Earnings Per Share Consensus
Honeywell (HON)
EPS Consensus Perspectives: Honeywell (HON)

This Next Long-Term
Recent Perspective This Year Next Year Growth this year
Quarter Quarter Growth
Current Consensus EPS Estimate 1.11 1.14 4.48 4.95 10.43% 10.49%
Mean of 3 most recent estimates 1.1 1.11 4.49 4.95 10.67% 10.24%
Age of the oldest from the three most recent estimate
changes 10 days 11 days 10 days 9 days 11 days

Earnings Report: Honeywell (HON)
This Quarter Next Quarter
Earnings Estimates 12-Dec 13-Mar This Year Next Year
Number of Estimates 16 6 19 20
Average Estimate 1.11 1.14 4.48 4.95
Low Estimate 1.08 1.09 4.45 4.79
High Estimate 1.16 1.19 4.53 5.05

Historical EPS Surprises: Honeywell (HON)
13-Sep 13-Jun 12-Mar 11-Dec 11-Sep
Estimate 1.13 1.11 0.99 1.04 0.99
Actual 1.2 1.14 1.04 1.05 1.1
Difference 0.07 0.03 0.05 0.01 0.11
Surprise 6.19% 2.70% 5.05% 0.96% 11.11%


Financial Statement Analysis
Discover Financial Services (DFS)
Income Statement: Nominal Figures Common Sized Trend Analysis
11/30/2011 11/30/2010 11/30/2009 11/30/2008 11/30/2007 11/30/2011 11/30/2010 11/30/2009 11/30/2008 11/30/2007 Trend
Sales $8,550.31 $8,241.21 $7,985.67 $6,957.02 $6,434.28 100.00% 100.00% 100.00% 100.00% 100.00%
Cost of Goods $986.77 $1,150.50 $1,187.08 $1,199.43 $1,044.57 11.54% 13.96% 14.87% 17.24% 16.23% Decreasing
Gross profit $7,563.53 $7,090.71 $6,978.59 $5,757.58 $5,389.71 88.46% 86.04% 85.13% 82.76% 83.77% Increasing
Selling & Administrative &
$3,554.51 $5,389.37 $4,613.49 $4,011.41 $4,106.67 41.57% 65.40% 57.77% 57.66% 63.82% Variable
Depr. & Amort Expenses
Income After
Depreciation & 46.89% 20.64% 27.36% 25.10% 19.94% Increasing
Ammorization $4,009.02 $1,701.34 $2,185.10 $1,746.17 $1,283.04
0.00% 0.00% 0.00% 0.00% 0.00%
Non-Operating Income $0.00 $0.00 $0.00 $0.00 $0.00
5.82% 5.25% 0.80% 1.27% 5.25% Increasing
Interest Expense $497.77 $432.48 $64.20 $88.56 $337.84
Pretax Income $3,511.24 $1,268.85 $2,120.89 $1,657.60 $945.19 41.07% 15.40% 26.56% 23.83% 14.69% Increasing

Income Taxes $1,284.53 $504.07 $844.71 $594.69 $356.56 15.02% 6.12% 10.58% 8.55% 5.54% Increasing
Minority Interest $0.00 $0.00 $0.00 $0.00 $0.00 0.00% 0.00% 0.00% 0.00% 0.00%
Investment Gains/Losses $0.00 $0.00 $0.00 $0.00 $0.00 0.00% 0.00% 0.00% 0.00% 0.00%
Other Income/Charges $0.00 $0.00 $0.00 $0.00 $0.00 0.00% 0.00% 0.00% 0.00% 0.00%
Income From Cont. 26.04% 9.28% 15.98% 13.34% 9.15% Increasing
Operations $2,226.70 $764.78 $1,276.18 $927.75 $588.63
Extras & Discounted 0.00% 0.00% 0.00% 0.00% 0.00%
Operations $0.00 $0.00 $0.00 $0.00 $0.00
26.04% 9.28% 15.98% 13.34% 9.15% Increasing
Net Income $2,226.70 $764.78 $1,276.18 $927.75 $588.63


Technical Analysis

• A method of assessing
securities based on charts
and past price history.

• Identify trends using
indicators and patterns.

• Useful for timing buy and
sell decisions.
Technical Indicators Used
• Indicators when used alone • Relative Strength Index
• Stochastic Oscillator
are not enough, but they are
• MACD Oscillator
a powerful tool.
• Volume
• Price Patterns (Head and Shoulder)


Relative Strength Index (RSI)
CF Industries Holdings (CF)
The RSI on a scale from 1-100

Quantifies price momentum

Oversold Scenario
• Below 30
• Buy opportunity

Overbought Scenario
• Above 70
• Sell opportunity

Purchase Price: $193.00
Current Price: $213.30 Purchased on 10/15

$ Return: $ 252.36
% Return: 10.90%


Stochastic Oscillator
NU Skin Enterprises Inc. (NUS)
Used to judge a stock’s
momentum

Short-term moving average

Long-term moving average

Overbought above 80

Oversold below 20

Sold for 8.847% gain on 11/2

Current Price:$44.93
Combined % Return: 10.087%


MACD Oscillator
New Oriental Education & Technology Group Inc. (EDU)
MACD: Moving Average
Convergence Divergence

12-day moving average
•Red Line
26-day moving average
•Blue Line
Strong indicator

Purchased on 11/9

Whipsaw on 11/29

Current Price: $20.96
$ Return: $ 529.76
% Return: 20.57%


Trend Analysis
Similar500 (May 2008-Present)
S&P Funds’ Performance

Ceiling: 1465
Floor: 1330


Behavioral Analysis


Company Specific News
Ecolab (ECL)

• Acquisition of
Champion
Technologies

• Growing
popularity of
unconventional
drilling methods
Purchased Champion
• Became #1 Technologies
manufacturer of
energy field
chemicals in
North America


Sector Cyclicality
• Certain Sectors Perform
well in Different time
periods

Consumer Goods/Services
• Holiday shopping
• 75% of annual revenue
• Correlation with
consumer spending

Activision Blizzard Inc (ATVI)
• Released Call of Duty
Black Ops 2
• Since the release the stock
has seen an steady
increase in stock price
• ATVI overall has been
trending up


Investor Sentiment
Standard & Poor’s 500 (SPX)
S&P 500 Black Friday 2011
Black Friday & Cyber
Monday

• Start of the holiday
shopping season
• Projection of quarterly sales

S&P 500 Black Friday 2012

Market Reaction

•This year sales fell 1.8% store
visits climbed 3.5%
•Comparison to a weak Black
Friday


Institutional & Insider Activity
LyondellBasell (LYB)

When institutions purchase shares it leads to a bullish trend, adversely
when institutions sell shares it leads to a bearish trend. In terms of insider
transactions, this rule does not always remain true.
LyondellBasell Industries CEO sold
$4.7 million in shares causing a
12.5% decrease in stock price


Portfolio Construction

SIMF


Correlation Matrix

TRMB GXYEY CSL DFS ECL CF BRK.B RJF NUS HON BIDU EDU MRK MAT BEAV AWK CBI ATVI UTX DIS TEF LYB ORLY S&P
TRMB 1
GXYEY 0.434568 1
CSL 0.235003 0.624076 1 Green: -1 to -0.0001
DFS 0.1046 0.789343 0.77375 1 Strongly Correlated
ECL -0.1913 0.453177 0.733249 0.774419 1 Yellow: 0 to 0.7499
CF 0.092154 0.703035 0.535107 0.830389 0.522876 1 Moderately Correlated
BRK.B -0.06084 0.70496 0.625304 0.913512 0.696633 0.883213 1
Red: 0.75 to 1
RJF 0.601457 0.819605 0.546486 0.609542 0.254599 0.637426 0.606863 1
NUS 0.53126 -0.16785 -0.42242 -0.46521 -0.54968 -0.3168 -0.52854 0.037122 1
Negatively Correlated
HON 0.541875 0.745514 0.411569 0.547201 0.173933 0.624502 0.558635 0.882824 0.093506 1
BIDU 0.554324 -0.20575 -0.47238 -0.51387 -0.67023 -0.36348 -0.58943 -0.04453 0.782616 0.069456 1
EDU 0.407324 -0.36951 -0.29126 -0.64863 -0.47966 -0.74601 -0.74372 -0.20343 0.515311 -0.32057 0.551004 1
MRK -0.24469 0.644373 0.541393 0.867277 0.720351 0.862327 0.945891 0.483725 -0.549 0.470796 -0.64478 -0.85072 1
MAT 0.218142 0.779836 0.631806 0.923549 0.630722 0.846091 0.865521 0.686575 -0.2785 0.697137 -0.30952 -0.6554 0.816427 1
BEAV 0.707716 0.13838 0.06154 -0.18805 -0.21689 -0.19918 -0.27716 0.410275 0.628395 0.361291 0.518577 0.658834 -0.41239 -0.05764 1
AWK -0.07745 0.602278 0.58869 0.887439 0.67237 0.864016 0.877219 0.455473 -0.51057 0.491245 -0.5004 -0.83358 0.883692 0.878976 -0.38303 1
CBI 0.64567 -0.0429 -0.28579 -0.42817 -0.62396 -0.15043 -0.3974 0.304959 0.771338 0.372871 0.715847 0.4787 -0.4907 -0.22258 0.715081 -0.44038 1
ATVI 0.423668 -0.31481 -0.1147 -0.46075 -0.46658 -0.38001 -0.51456 -0.12965 0.48018 -0.15336 0.593635 0.492899 -0.60939 -0.40957 0.348094 -0.50205 0.491463 1
UTX 0.758647 0.35598 -0.01637 0.064812 -0.32416 0.291986 0.050056 0.620221 0.520541 0.678218 0.54064 0.112698 -0.07666 0.299171 0.575063 0.06333 0.753865 0.204123 1
DIS -0.13092 0.606179 0.667538 0.931126 0.776734 0.801144 0.931651 0.427882 -0.61886 0.36577 -0.65709 -0.74067 0.896236 0.850942 -0.38614 0.901265 -0.58639 -0.5289 -0.09641 1
TEF 0.348566 -0.12449 -0.50213 -0.52968 -0.68379 -0.18584 -0.35194 0.241079 0.527669 0.25668 0.499561 0.366665 -0.39879 -0.34735 0.447591 -0.47816 0.781397 0.29067 0.614479 -0.58105 1
LYB 0.235732 0.844726 0.524308 0.818681 0.499681 0.874139 0.846921 0.798657 -0.27215 0.813037 -0.31595 -0.62859 0.816844 0.865445 -0.02943 0.793523 -0.07854 -0.4836 0.396534 0.723299 -0.04846 1
ORLY 0.346109 -0.0387 0.314292 -0.05853 0.057683 -0.37082 -0.30646 -0.13012 0.110597 -0.18644 0.230877 0.515991 -0.41993 -0.14584 0.356615 -0.25427 0.034748 0.409602 -0.10934 -0.17094 -0.36441 -0.38864 1
S&P 0.440764 0.813493 0.555622 0.803667 0.373871 0.876946 0.813823 0.84083 -0.08065 0.820512 -0.09921 -0.50628 0.701222 0.880858 0.114086 0.733205 0.101743 -0.19677 0.561041 0.695619 -0.01585 0.878321 -0.19058 1


Expected Return
Minimum Variance Portfolio

100% equities high
SIMF risk & return

MVP

100% fixed income low
risk & low return

Expected Risk


Portfolio Holdings
Company Ticker Purchase Price Current Price # of Shares Cost Value Beta Weight Weighted Beta Yield Sector Country
Accenture Plc ACN $66.27 $67.92 33 $2,186.91 $2,241.36 0.87 0.0298 0.0259 2.49% Technology Ireland
Activision Blizzard ATVI $10.96 $11.46 203 $2,224.88 $2,325.37 0.54 0.0309 0.0167 4.52% Technology U.S.
American Water Works AWK $36.29 $38.17 72 $2,612.88 $2,748.24 0.65 0.0365 0.0237 5.18% Utilities U.S.
B/E Aerospace BEAV $44.09 $47.36 102 $4,497.18 $4,830.72 1.22 0.0642 0.0783 7.42% Industrial Goods U.S.
Baidu BIDU $103.28 $96.31 21 $2,168.88 $2,022.51 1.79 0.0269 0.0481 -6.75% Technology China

Berkshire Hathaway BRK.B $83.46 $88.08 48 $4,006.08 $4,227.84 0.82 0.0562 0.0461 5.54% Conglomerate U.S.
Chicago Bridge Inc. CBI $37.40 $40.63 60 $2,244.00 $2,437.80 1.43 0.0324 0.0463 8.64% Industrial Goods Netherlands
CF Holdings CF $193.00 $214.03 12 $2,316.00 $2,568.36 1.15 0.0341 0.0393 10.90% Basic Materials U.S.
Carlisle Companies CSL $55.53 $56.67 58 $3,220.74 $3,286.86 1.45 0.0437 0.0633 2.05% Consumer Goods U.S.
Discover Financial DFS $39.00 $41.61 77 $3,003.00 $3,203.97 1.28 0.0426 0.0545 6.69% Services U.S.
Walt Disney DIS $47.33 $49.66 50 $2,366.50 $2,483.00 1.12 0.0330 0.0370 4.92% Services U.S.
EcoLab ECL $67.09 $72.08 57 $3,824.13 $4,108.56 0.82 0.0546 0.0448 7.44% Consumer Goods U.S.
New Oriental EDU $16.72 $20.16 154 $2,574.88 $3,104.64 1.08 0.0413 0.0446 20.57% Services China
Galaxy Entertainment GXYEY $31.53 $38.09 100 $3,153.00 $3,809.00 1.44 0.0506 0.0729 20.81% Services China
Honeywell HON $60.42 $61.33 37 $2,235.54 $2,269.21 1.31 0.0302 0.0395 1.51% Industrial Goods U.S.
LyondellBasell LYB $54.22 $49.73 61 $3,307.42 $3,033.53 0.53 0.0403 0.0214 -8.28% Basic Materials Netherlands
Mattel MAT $35.70 $37.51 104 $3,712.80 $3,901.04 0.92 0.0519 0.0477 5.07% Consumer Goods U.S.
Merck MRK $43.74 $44.30 96 $4,199.04 $4,252.80 0.65 0.0565 0.0367 1.28% Healthcare U.S.
NuSkin NUS $45.30 $45.40 89 $4,031.70 $4,040.60 1.19 0.0537 0.0639 0.22% Consumer Goods U.S.
O'Reilly Auto Parts ORLY $89.96 $94.08 39 $3,508.44 $3,669.12 0.99 0.0488 0.0483 4.58% Services U.S.
Raymond James RJF $37.08 $37.75 62 $2,298.96 $2,340.50 1.35 0.0311 0.0420 1.81% Financial U.S.
Telefonica TEF $13.20 $13.03 157 $2,072.40 $2,045.71 1.67 0.0272 0.0454 -1.29% Technology Spain
Trimble TRMB $47.22 $55.64 64 $3,022.08 $3,560.96 1.71 0.0473 0.0809 17.83% Technology U.S.

United Technologies UTX $76.29 $80.11 34 $2,593.86 $2,723.74 1.19 0.0362 0.0431 5.01% Conglomerate U.S.

15 October to 30 November 2012


Top Gainer & Losers
Gainers Losers
• Galaxy Entertainment • Baidu Inc
Group Ltd (BIDU) -6.71%
(GXYEY) 20.81%

• American Eagle Outfitters
• New Oriental Education
& Technologies Group (AEO) -8.02%
(EDU) 20.57%
• LyondellBasell Industries
• Trimble Navigation Ltd NV
(TRMB) 17.83% (LYB) -8.26%


Portfolio Weightings



Portfolio Weightings
Sector Weightings

5.81% 3.24%
16.38%
Technology
21.08% 3.61%
Utilities
Industrial Goods
Conglomerate
12.45% Basic Materials
Consumer Goods
Services
9.22% Healthcare
20.72%
Financial
7.50%


Portfolio Statistics
Beta Trailing P/E Forward P/E PEG Dividend Yield
.94 15.49 14.89 1.12 1.33%



Similar Funds Performance



SIMF vs. S&P 500



Risk-Adjusted Performance
Sharpe Ratio Treynor Ratio
( Rp - rf ) ( Rp - rf )
sp bp
SIMF: 1.938% SIMF: 0.023%
S&P: -1.996% S&P: -0.0177%
CGI: .6313% CGI: 0.0055%

Jensen’s Alpha
a = Rp - é Rp - b p ( Rm - Rp)ù
ë û

vs S&P: 3.8%
vs CGI: 1.48%


Lessons Learned

“Valuable knowledge gained through a hands-on learning approach”

• Calculating our own data
• Regression Analysis

• Earnings Announcements
• EPS isn’t the only factor

• Stop-Losses
• Understanding a stock’s volatility

• Hedging
• Use of various- ETF’s


Calculating our Own Data
Discover Financial Services (DFS)

Zacks Fundamentals Yahoo Finance Reuters CAFE
1.47 .96 1.45 1.28

Regression Statistics
Multiple R 0.679291
R Square 0.461437
Adjusted R Square 0.458966
Standard Error 0.012228
Observations 220

ANOVA
df SS MS F Significance F
Regression 1 0.02793035 0.02793 186.7807751 4.00566E-31
Residual 218 0.03259874 0.00015
Total 219 0.06052909

Coefficients Standard Error t Stat P-value Lower 95% Upper 95%
Intercept 0.001536 0.00082828 1.853846 0.065112168 -9.69585E-05 0.003168
DFS vs S&P 500 1.280846 0.09371966 13.66678 4.00566E-31 1.096132981 1.465558


Earnings Announcements

Mattel (MAT)

• Stock price was lower than
the day before

• Earnings surprised analysts
estimates

• They beat EPS from the
previous year by 22%

• Stock Price Surged after
Opening bell.

Current Price:$37.51
Percent Return: 5.07%


Stop-Losses
Hillenbrand (HI)

Hillenbrand (HI)
• A trailing stop loss was
triggered during pre-market
trading on October 17th
• Missed a 20% price increase
• Misjudged the stock’s
Volatility

Sell Price:$19.28


Hedging

ETF Exchange Traded Market Close
Funds News is released of probably
President Obama re-election
• Stocks that represent
sectors, commodities, Credit swaps 4 AM Report
etc.
Confirmation of the re-election of
• Used as a hedge to prevent losses President Obama
• Helped regain losses.
Market Open
Cash Purchased SDS in anticipation of the
reaction
• Balance of 10- 15% at all times

• Gave us room to make momentum
trades
Sell Price:$56.90


Future Global Economic Outlook

Bullish Countries Reasoning

Germany Strongest economy in
Europe.

United Kingdom Highly correlated to the U.S.
economy
Switzerland Limited risk associated with
other European markets

China Large GDP growth rate

Brazil Leading emerging market


Future Domestic Economic Outlook
Post November 30, 2012

Pros Cons
Industrial and Basic Materials Sectors are expected to Financial Sector expected to underperform.
outperform. Bearish on Money Center Banks
Bullish on Residential Construction, and Industrial
Metals and Materials Industries

America’s Infrastructure is expected to improve, as cited by US Fiscal Cliff could potentially pull U.S. economy back into
President Barack Obama recession.

Bullish signals in consumer spending and confidence, housing Potential political gridlock following reelection of US President
starts, and existing home sales. Barack Obama.

Increased government regulation and implementation of new
tax policies could pull down the Financial Sector.


Economic Behavioral Factors
Pros Cons
Multinational Health Care companies will GDP will decrease
outperform Unemployment will increase

Generic pharmaceutical companies will outperform. Taxes will rise for nearly everyone
Funding for federal programs cut

Real Estate Investment Trusts specializing in Health Already seeing affects of fiscal cliff
Care facilities or hospitals will outperform Hiring rate down
Fewer large investment decisions

Moderately bullish outlook for 2013 Aerospace and defense will underperform


Conclusion
• CAFÉActive ManagementIndustry
• Fiduciary Responsibility
• Qualitative Skills
• Quantitative Skills
• Team


Gabelli Funds Sponsored Trip to
Mainland China


Beijing Foreign Studies University


Shanghai Stock Exchange


Shanghai Futures Exchange


Gabelli Asset Management Company
Shanghai Office


Shanghai International Studies
University


Beijing


Shanghai World Financial Center


Special Thanks
• Mr. Mario J. Gabelli
CEO, Gabelli Asset Management
• Dr. Jerry Dauterive
Dean, Mario J. Gabelli School of Business
• Dr. Michael Melton, (Doc)
Director, Center for Advanced Financial
Education

The CAFÉ Program would like to thank Rhody Couture
(www.rhodycouture.com) for providing neckwear for the
Student Fund Managers.


Questions?


Final CAFE Presentation

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