Student Managed Investment Portfolio Organization SMIPO

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Student Managed Investment Portfolio Organization SMIPO

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Title: Student Managed Investment Portfolio Organization SMIPO

1
Student Managed Investment Portfolio Organization
(SMIPO)

Radford University

2
Background

After attending RISE II in 2002, SMIPO was formed
with an initial 100,000 endowment. In 2004
SMIPO received an additional 150,000. Again, in
2006 we received another 100,000 endowment.
SMIPO is a fully student-managed organization.
None of our 29 members receive credit for
participation in the organization.
Since SMIPOs creation in 2002, the organization
has been selected to present as finalists at RISE
five out of six years.

3
Board of Directors
President
VP of Investments
VP of Operations
VP of Finance
Info Tech
Chief Accountant
Human Resources
Chief Economist
Sr. Investment
Jr. Investment
Economist
Accountant
Archivist
Marketing
4
Mission Statement

To allow Radford University students the
opportunity to gain practical experience in the
management and decision-making activities of a
corporate structured organization by
participating in hands-on management of the funds
of Radford University Foundation's endowment to a
Student Managed Investment Portfolio
Organization.

5
Portfolio Management

Top Down Portfolio Management
Economic Analysis
2008 strategy
Sector Allocation
Stock Selection Process
Exit Strategy
Benchmarking Our Performance
SMIPOs Performance in 2008
Basic Portfolio Stats
SMIPOs Direction in 2008-2009

6
Top Down Portfolio Management

Develop economic forecasts.
Asset allocations between equities and cash.
Apply economic forecasts to the sector allocation
decision.
Choose beta exposure, style exposure
Stock selection consistent with our economic
views.
Constant monitoring of sectors and holdings.
Realization of Gains/Losses.

7
Economic Analysis

Identify Investment Opportunities
Quarterly Sector Outlook
Broad macro-economic indicators
Industry Trends
Sector Specific Indicators
Sector Growth
Analyst Coverage
Convey data contained in these reports to
investment analysts in a relevant and actionable
manner.

8
Economic Analysis Contd

Favorite Economic Indicators
CPI Core CPI
Crude Oil
Case-Shiller Housing Price Index
Initial Job Claims and Unemployment rate
Exchange Rates
Current account balance
Fiscal Policy
Monetary Policy

9
Economic Analysis Contd

Presidential Election
Policies and regulations
Fiscal Policy Spending / Taxation

10
2008 Strategy

Large Cap, low risk companies
High Dividend yield
Decrease portfolio beta

11
Economic Outlook for 2009

The economy will remain in a recession for the
remainder of 2009.
GDP growth will continue to be sluggish.
Factors driving economic outlook
Bailout concerns
Stimulus package
Financial sector
Housing Market

12
Sector Allocations

Requirements
Sector allocations are set relative to our
benchmark (SP 500)
Each sectors analysts are responsible for a
sector allocation strategy.
Deviations from benchmark weights are explained
in a written sector allocation report.
Sector allocations must be re-evaluated each
quarter.
ETFs may be used as temporary holdings and
provide quick execution of sector reallocation.

13
Sector Allocations 2008

Financials Underweight
Uncertainty in Sub-prime lending
Goldman Sachs Group Inc.
Charles Schwab Corp.
Energy Underweight
Good growth, but high volatility
Transocean
Utilities Market weight
Defensive, above average dividend yields
Exelon

14
Sector Allocations 2008

Health Care Overweight
Defensive and strong growth
Johnson Johnson
Gilead Sciences
Technology Underweight
Weakened consumer demand
IBM
Telecom Underweight
Below average growth and hypercompetitive
environment
Comtech Telecommunications

15
Sector Allocations 2008

Basic Materials Slight overweight
Low volatility and good performance excluding
home materials
Sigma Aldrich
Industrials Underweight
Weak global economic conditions
Ametek
Consumer Discretionary Underweight
Economic Concerns on Consumer Spending
McDonalds
Consumer Staples Overweight
Defensive balance and strong dividends
Colgate Palmolive
Phillip Morris

16
Sector Allocations 12/31/2008
17
Stock Selection

Investment Process
Screening Research
Spreadsheets and Workbook
Presentation with QA
Voting Process
Majority is needed for BUY or SELL
After BUY
Constant monitoring to Identify fundamental
changes

18
Stock Selection

Sources of Information
Thomson One Student Research Edition
ValueLine
Zacks.com
Yahoo! Finance
StandardandPoors.com

19
Stock Selection

10-K
10-Q
Positives/Negatives
Risks/Exposures
Competitor Comparison
Analyst Estimates/Price Targets
Valuations

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23
MCD Evaluation DDM Model

Dividend Current 2.00
Value Line Estimated Growth Rate 8.87
CAPM 10.53
DDM (2.00(1.0887))/(.1053-.0887)
131.00
Highly undervalued (Optimistic?)
Bargain Purchase
Strong earnings and dividends.

24
Exit Strategy

Investment Analysts Constantly Monitor Sectors
for unexpected variations in stock value
Weekly Updates on Stock Positions
Changes to sector allocations
Reassess holdings

25
Exit Strategy

Automatic Reevaluation Trigger
If a security drops or gains in market value by
10 within a rolling five trading day period or
20 within a rolling twenty trading day period
Does Not Mean SELL
Examples
MEMC
Aflac

26
Benchmarking Our Performance