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Interim Report. Student Managed Fund MBA class of 2004 March 11, 2004. Anjana Radhakrishnan Christopher Bodnar Ganesh Padmanabhan Geoffrey Munger Heather Utter. MBA Fund Managers. Jessie LeBlanc Michael Appell Saipriya Menon Tanzhuo Liu Wiebke Wanner- Borchardt. Agenda.

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Interim report

Interim Report

Student Managed FundMBA class of 2004March 11, 2004


Mba fund managers

Anjana Radhakrishnan

Christopher Bodnar

Ganesh Padmanabhan

Geoffrey Munger

Heather Utter

MBA Fund Managers

  • Jessie LeBlanc

  • Michael Appell

  • Saipriya Menon

  • Tanzhuo Liu

  • Wiebke Wanner- Borchardt


Agenda
Agenda

  • Investment Philosophy & Approach

  • Investment Criteria

  • Portfolio Performance

  • Attribution Analysis

  • Retrospection and Self-Analysis

  • Economic Outlook


Investment philosophy
Investment Philosophy

  • Outperform the S&P500

    • Strategic sector allocation

    • Selection of stocks with strong growth potential

    • Close monitoring of the portfolio

  • Fundamental analysis

    • Historical performance

    • Business models

    • Economic outlook for the industry

  • Valuation

    • Undervalued stocks

  • Long-term (3-5 year) investment horizon


  • Investment approach
    Investment Approach

    Sector Allocation

    Investment Criteria

    • Valuation

    • PEG and P/E Models

    • Discounted Cash Flow

    • Economic Profit

    • Fundamental Analysis

    • Historical Growth

    • Free Cash Flow

    • Profit Margin

    Constant Portfolio Performance Monitoring


    Investment Criteria

    Quantitative & qualitative factors checked across industries




    Portfolio monitoring sell criteria
    Portfolio Monitoring - Sell Criteria

    • Stock reaches its price objective

    • Industry-sector weighting exceeds predetermined limits

    • Risk/reward profile deteriorates

    • Earnings figures lower than estimates

    • Stop loss on all positions


    Smf holdings 12 26 03
    SMF Holdings – 12/26/03

    Our sector allocation closely tracks the S&P500 with exceptions based on economic outlook


    Smf holdings 12 26 031
    SMF Holdings – 12/26/03

    Our sector allocation closely tracks the S&P500 with exceptions based on economic outlook


    Smf holdings adjustments
    SMF Holdings - Adjustments

    • Sold COGN and ALV

    • Initiated positions in:

      • Materials: Newmont Mining (NEM)

      • IT: Intel (INTC)

    • Reviewing positions in: JEC, INTU, WSM, EBAY, and OCR

    • Seeking positions in Energy and Telecom Sectors




    Smf holdings performance
    SMF Holdings – Performance

    Period: Sep 4, 2003 – Feb 17, 2004


    Attribution analysis
    Attribution Analysis

    • Analyze determinants of portfolio performance

      • Sector allocation decisions

      • Equity selection decisions

    • Sector Allocation and Equity Selection Effect Determinants

      • Sector-wise weights and returns of the Portfolio

      • Sector-wise weights and returns of the S&P 500 index

      • Overall holding period returns of the S&P500

    • Analysis Period: Dec 26, 2003 – Feb 17, 2004

      • S&P 500 holding period return: 5.58%

      • Portfolio holding period return: 3.27%

      • Total value added: -2.31%


    Sector allocation effect
    Sector Allocation Effect

    LEGEND

    Wai -- MBA Wts As of

    Dec 26 2003

    Wpi -- S&P Wts as of Dec 26 2003

    Rpi -- S&P Sector returns {12/26 to 2/17}

    Rp -- S&P Overall Return {12/26 to 2/17}

    {(Wai - Wpi)* (Rpi - Rp)} -- Sector Allocation Effect


    Equity selection effect
    Equity Selection Effect

    LEGEND

    Wai -- MBA Wts As of

    Dec 26 2003

    Rai -- MBA SMF Sector Returns {12/26 to 2/17}

    Rpi -- S&P Sector returns {12/26 to 2/17}

    Rp -- S&P Overall Return {12/26 to 2/17}

    {(Wai - Wpi)* (Rpi - Rp)} -- Sector Allocation Effect

    Total Value Added = Sector Allocation Effect + Equity Selection Effect = - 2.48%


    Attribution analysis1
    Attribution Analysis

    • Observations from Analysis

      • Impact of allocation effect more favorable than that of the selection effect

      • Review both allocation & selection strategies

      • Benefit from future investments in un-invested sectors

    • Over-weighted Sectors

      • Consumer Discretionary, Health Care, IT

    • Under-weighted Sectors

      • Consumer Staples, Financials, Industrials, Materials

    • Un-invested Sectors

      • Utilities, Energy, Telecom


    Retrospection and self analysis
    Retrospection and Self-Analysis

    • Sector Allocation

      • Use S&P 500 Sector Allocation as a guide

      • Make adjustments based on Industry Research

    • Stock Selection

      • Growth vs. Value Stocks

      • Cyclical vs. Non-Cyclical Stocks

      • Benchmark Risk

    • Underperforming Stocks

      • Sound Fundamentals vs. Poor Price Momentum

      • Hold, Add, or Sell


    Outlook
    Outlook

    • Continued economic strength

    • Growth at a more moderate pace

    • Continued stock market strength

    • Modest interest rate increase


    Impact
    Impact

    • Overweight IT and Healthcare

    • Be aware of interest rate sensitivity of holdings

    • Select stocks leveraged to the current economic environment


    Activity update as of mar 05 2004
    Activity UpdateAs of Mar 05, 2004

    • Received additional $150,000 from the Foundation

    • Initiated positions in: WAG, NXTL, CTSH

    • Stock selection process underway


    Thank you
    Thank you

    • University of Connecticut Foundation Inc.

    • Investment Advisory Board

    • Dr. Chinmoy Ghosh



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