Final CAFE Presentation

Mario J. Gabelli School of Business

Roger Williams

UniversityStudent 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

Under the Supervision of:Michael Melton Ph.D.

Director, Center for Advanced Financial EducationProfessor of Finance

Center for Advanced Financial Education

Associate DirectorMs. Lauren Tierney

FNCE 450 – Portfolio Analysis

Mario J. Gabelli School of BusinessRoger Williams University

Research In Motion Limited, Inc

Friday, September 27, 2012


• Acquired 2 million new subscribers

• Posted $2.2 billion in cash

• Introduced new beta version of BlackBerry 10

Analysts’ Estimates: -$0.46

Actual Earnings: -$0.27

Earnings Surprise

$0.19SFM Prediction: -$0.30

•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

Research In Motion Limited, Inc


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•Do not inherit portfolio from previous semester

– Active Management

•Execute own trades via Ameritrade•Do not seek trade approval from an advisory board•Deal in real-time

– Trades only need approval from Associate Director or Managing Director

•Maximize potential returns– Take advantage of momentum

trading

•Real-World Setting•Real-Dollar Portfolio

Other Schools•May inherit previous semester’s portfolio•Do not execute own trades•Must answer to a advisory board•Do not deal in real-time

– Need extended time to get trades approved

•Limited ability to maximize potential returns

– Cannot take advantage of momentum trading

•Classroom Setting


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


Company

International Economic Analysis

Mario J. Gabelli School of Business

Country OverallMarket

Performance since 1/1/11

GDP "Inflation"CPI

UnemploymentMarket

Performance

China Bullish -26.65% Bearish Bullish Neutral NeutralHong Kong Bullish -6.86% Bearish Bullish Neutral NeutralChile Bullish -16.13% Bullish Bullish Bullish NeutralUnited Kingdom Bullish -0.99% Bullish Bullish Bullish BullishIsrael Bullish 3.23% Bullish Bullish Bullish BullishMalaysia Bullish -1.57% Bullish Bullish Bullish BullishBrazil Bullish -17.55% Bullish Bullish Bullish BullishCanada Bullish -7.90% Bullish Bullish Neutral BullishAustralia Bullish -8.84% Bullish Bullish Bullish BullishSwitzerland Bullish 3.26% Neutral Bullish Bullish BullishIreland Neutral 13.06% Bearish Bullish Bearish NeutralRussia Neutral -21.00% Bullish Bearish Bullish NeutralGermany Neutral 5.29% Bullish Neutral Bearish NeutralAustria Neutral -28.29% Bullish Bearish Neutral BearishColombia Neutral 8.33% Bullish Bearish Neutral BearishCzech Republic Neutral -28.40% Bullish Bullish Bearish BearishSouth Africa Neutral 11.28% Bullish Bullish Neutral BearishNorway Neutral 9.80% Bullish Bullish Bullish NeutralJapan Neutral -13.51% Bearish Bearish Neutral BearishPhilippines Neutral 21.92% Bullish Bearish Neutral BullishSouth Korea Neutral -6.84% Neutral Bullish Bullish BullishLuxembourg Neutral -16.09% Neutral Bullish Bullish BearishUnited Emirates Neutral -5.90% Bullish Bullish Bullish NeutralMexico Bearish 3.81% Bearish Bearish Bullish BullishArgentina Bearish -36.10% Bearish Bearish Neutral BearishEgypt Bearish -2.00% Bearish Bearish Bearish BearishSpain Bearish -20.84% Bearish Neutral Bearish BearishGreece Bearish -98.00% Bearish Bullish Bearish BearishPoland Bearish -11.80% Neutral Bearish Bearish BearishIceland Bearish N/A Bearish Bullish Bearish BearishPortugal Bearish -27.47% Bearish Bullish Bearish BearishFrance Bearish -9.94% Bullish Bullish Bearish BearishItaly Bearish 4.24% Bearish Bearish Bearish BearishDenmark Bearish 9.26% Neutral Bearish Bearish BearishSweden Bearish -7.64% Bullish Bullish Neutral BearishFinland Bearish -23.49% Neutral Bearish Bearish BearishBelgium Bearish -6.28% Bearish Bearish Bearish Bearish

Roger Williams University

Global Economic Analysis


Company Analysis


Economic IndicatorLeadingLagging

CoincidentalTrend

BullishBearishNeutral

Housing Starts Leading Upward Bullish

Industrial Production/ Capacity Utilization Leading Upward Bullish

Retail Sales Leading Upward Moderately Bullish

Business Sales and inventories (Inventory/Sales Ratio)

Leading Upward Neutral

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 Orders and Unfilled Orders

Lagging Upward Bullish

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

Domestic Economic Analysis

Economic Indicator Outlook Reasoning

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

Consumer Price Index (CPI) Bearish Since monetary easing was expected through Bernanke’s QE3, we were bearish on the future outlook for inflation in the United States.

Gross Domestic Product (GDP) Bullish Historically, United States GDP has risen at a stable and consistent rate. We see this growth continuing strong into the coming years.

Interest Rates Bullish Interest rates have continued to drop since the Federal Reserve introduced monetary easing following the 2008 crisis. Bernanke pledged to keep interest rates low until 2015, a bullish indicator for stocks.

Consumer Confidence Index (CCI) Bullish As consumer confidence is correlated to many of the economic 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.

Retail Sales Bullish Going into the fourth quarter, we were bullish in retail sales. 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

Roger Williams University Mario J. Gabelli School of Business

Company Analysis

Sector Analysis

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

Energy

Healthcare

Consumer Staples

Utilities

Financials

Technology

Consumer Discretionary

BasicMaterials

Industrials


Expa

nsio

n

Con

trac

tion

SectorOverweight

MarketweightUnderweight

Bullish NeutralBearish

Technology Overweight Bullish

Conglomerates Marketweight Neutral

Consumer Goods Overweight Bullish

Utilities Underweight Bearish

Services Marketweight Neutral

Basic Materials Marketweight Neutral

Healthcare Underweight Bearish

Financials Underweight Bearish

Industrial Goods Overweight Bullish



Company Analysis

Industry Analysis


Bad Economy/Sector ≠ Bad Industry

Bullish Industries Internationally

•Chemicals Manufacturing•Casinos & Gaming•Education Services•Computer Services

Bullish Industries Domestically

•Gaming •Retail•Consumer Financial Services•Personal and Household Products



Company Analysis

Company Evaluation and Selection Process

AVOID

BUY

WATCH


Fundamental Analysis


ValuationCF Industries Holdings (CF)


P/E Ratio =Price per Share

Earnings per Share

PEG Ratio =Price/Earnings Growth

Earnings Growth

Price to Cash Flow =

Share Price

Cash Flow per Share

Valuation Ratios

CF Industries (CF)

Sociedad Quimica (SQM)

Industry: 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

Lower than Competitor Close to or less than 1.0Lower than Competitor

Ratio AnalysisNu Skin (NUS)


Financial StrengthNU Skin (NUS)

Avon Products (AVP)

Industry: Personal Products

Quick Ratio (MRQ) 1.73 1.02 1.5

Current Ratio (MRQ) 2.01 1.45 1.95LT Debt to Equity (MRQ) 0.33 1.79 0.21Total Debt to Equity (MRQ) 0.33 1.79 20.98Interest Coverage (TTM) 48.24 3.85 91.29

Profitability Ratios

NU Skin Avon ProductsIndustry: Personal Products(NUS) (AVP)

Gross Margin (TTM) 0.84 0.62 0.63EBITD Margin (TTM) 0.16 0.07 -0.02Operating Margin (TTM) 9.95 4.3 2.02Net Profit Margin (TTM) 10.34 2.3 2.08

Management Effectiveness (%)

NU SkinAvon Products

(AVP)

Industry: Personal Products (NUS)

Return on Assets (TTM) 19.43 6.07 8.58Return on Investment (TTM) 28.05 11.64 15.75Return on Equity (TTM) 34.19 28.96 19.91

Earnings Per Share ConsensusHoneywell (HON)


Earnings Report: Honeywell (HON)

Earnings Estimates

This Quarter 12-Dec

Next Quarter 13-Mar This Year Next Year

Number of Estimates 16 6 19 20Average Estimate 1.11 1.14 4.48 4.95Low Estimate 1.08 1.09 4.45 4.79High Estimate 1.16 1.19 4.53 5.05

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

EPS Consensus Perspectives: Honeywell (HON)

Recent PerspectiveThis

QuarterNext

QuarterThis Year Next Year

Long-Term Growth

Growth this year

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

Financial Statement AnalysisDiscover Financial Services (DFS)


Income Statement: Nominal Figures

Common Sized Trend Analysis

11/30/201

1 11/30/2010 11/30/2009 11/30/2008 11/30/2007

Sales $8,550.31 $8,241.21 $7,985.67 $6,957.02 $6,434.28 Cost of Goods $986.77 $1,150.50 $1,187.08 $1,199.43 $1,044.57 Gross profit $7,563.53 $7,090.71 $6,978.59 $5,757.58 $5,389.71 Selling & Administrative & $3,554.51 $5,389.37 $4,613.49 $4,011.41 $4,106.67 Depr. & Amort ExpensesIncome After Depreciation & Ammorization $4,009.02 $1,701.34 $2,185.10 $1,746.17 $1,283.04 Non-Operating Income $0.00 $0.00 $0.00 $0.00 $0.00 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 Income Taxes $1,284.53 $504.07 $844.71 $594.69 $356.56 Minority Interest $0.00 $0.00 $0.00 $0.00 $0.00 Investment Gains/Losses $0.00 $0.00 $0.00 $0.00 $0.00 Other Income/Charges $0.00 $0.00 $0.00 $0.00 $0.00 Income From Cont. Operations $2,226.70 $764.78 $1,276.18 $927.75 $588.63 Extras & Discounted Operations $0.00 $0.00 $0.00 $0.00 $0.00 Net Income $2,226.70 $764.78 $1,276.18 $927.75 $588.63

11/30/2011

11/30/2010 11/30/2009 11/30/2008 11/30/2007 Trend

100.00% 100.00% 100.00% 100.00% 100.00%

11.54% 13.96% 14.87% 17.24% 16.23% Decreasing

88.46% 86.04% 85.13% 82.76% 83.77% Increasing

41.57% 65.40% 57.77% 57.66% 63.82% Variable

46.89% 20.64% 27.36% 25.10% 19.94% Increasing

0.00% 0.00% 0.00% 0.00% 0.00%

5.82% 5.25% 0.80% 1.27% 5.25% Increasing

41.07% 15.40% 26.56% 23.83% 14.69% Increasing

15.02% 6.12% 10.58% 8.55% 5.54% Increasing

0.00% 0.00% 0.00% 0.00% 0.00%

0.00% 0.00% 0.00% 0.00% 0.00%

0.00% 0.00% 0.00% 0.00% 0.00%

26.04% 9.28% 15.98% 13.34% 9.15% Increasing

0.00% 0.00% 0.00% 0.00% 0.00%

26.04% 9.28% 15.98% 13.34% 9.15% Increasing

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.

• Indicators when used alone are not enough, but they are a powerful tool.

• Relative Strength Index• Stochastic Oscillator• MACD Oscillator• Volume• Price Patterns (Head and

Shoulder)


Technical Indicators Used

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: $193.00Current Price: $213.30$ Return: $ 252.36% Return: 10.90%


Purchased on 10/15

Stochastic OscillatorNU 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

Purchase Price: $41.85Current Price:$44.93Combined % Return: 10.087%


MACD OscillatorNew 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

Purchase Price: $16.72Current Price: $20.96$ Return: $ 529.76% Return: 20.57%


Similar Funds’ PerformanceTrend Analysis

S&P 500 (May 2008-Present)


Ceiling: 1465Floor: 1330

Behavioral Analysis


Company Specific NewsEcolab (ECL)

Purchased Champion Technologies


• Acquisition of Champion Technologies

• Growing popularity of unconventional drilling methods

• Became #1 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 SentimentStandard & Poor’s 500 (SPX)


Black Friday & Cyber Monday

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

Market Reaction

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

S&P 500 Black Friday 2012

S&P 500 Black Friday 2011

Institutional & Insider ActivityLyondellBasell (LYB)


When institutions purchase shares it leads to a bullish trend, adverselywhen 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&PTRMB 1GXYEY 0.434568 1CSL 0.235003 0.624076 1DFS 0.1046 0.789343 0.77375 1ECL -0.1913 0.453177 0.733249 0.774419 1CF 0.092154 0.703035 0.535107 0.830389 0.522876 1BRK.B -0.06084 0.70496 0.625304 0.913512 0.696633 0.883213 1RJF 0.601457 0.819605 0.546486 0.609542 0.254599 0.637426 0.606863 1NUS 0.53126 -0.16785 -0.42242 -0.46521 -0.54968 -0.3168 -0.52854 0.037122 1HON 0.541875 0.745514 0.411569 0.547201 0.173933 0.624502 0.558635 0.882824 0.093506 1BIDU 0.554324 -0.20575 -0.47238 -0.51387 -0.67023 -0.36348 -0.58943 -0.04453 0.782616 0.069456 1EDU 0.407324 -0.36951 -0.29126 -0.64863 -0.47966 -0.74601 -0.74372 -0.20343 0.515311 -0.32057 0.551004 1MRK -0.24469 0.644373 0.541393 0.867277 0.720351 0.862327 0.945891 0.483725 -0.549 0.470796 -0.64478 -0.85072 1MAT 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 1BEAV 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 1AWK -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 1CBI 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 1ATVI 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 1UTX 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 1DIS -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 1TEF 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 1LYB 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 1ORLY 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 1S&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

Green: -1 to -0.0001 Strongly CorrelatedYellow: 0 to 0.7499Moderately CorrelatedRed: 0.75 to 1Negatively Correlated

Green: -1 to -0.0001 Strongly CorrelatedYellow: 0 to 0.7499Moderately CorrelatedRed: 0.75 to 1Negatively Correlated

Minimum Variance Portfolio


Exp

ecte

d R

etu

rn

100% fixed income low risk & low return

100% equities high risk & returnSIMF

Expected Risk

MVP

Portfolio Holdings


15 October to 30 November 2012

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.

Top Gainer & Losers

Gainers• Galaxy Entertainment

Group Ltd(GXYEY) 20.81%

• New Oriental Education & Technologies Group (EDU) 20.57%

• Trimble Navigation Ltd (TRMB) 17.83%

Losers• Baidu Inc

(BIDU) -6.71%

• American Eagle Outfitters (AEO) -8.02%

• LyondellBasell Industries NV (LYB) -8.26%


Portfolio Weightings



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

SIMF: 1.938%S&P: -1.996%CGI: .6313%

Treynor Ratio

SIMF: 0.023%S&P: -0.0177%CGI: 0.0055%

Jensen’s Alpha

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

“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

Lessons Learned


Calculating our Own DataDiscover Financial Services (DFS)


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

ANOVAdf SS MS F Significance F

Regression 1 0.02793035 0.02793 186.7807751 4.00566E-31Residual 218 0.03259874 0.00015Total 219 0.06052909

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

Zacks Fundamentals

Yahoo Finance

Reuters CAFE

1.47 .96 1.45 1.28

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.

Purchase Price: $35.70Current Price:$37.51Percent Return: 5.07%



Stop-LossesHillenbrand (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

Purchase Price: $18.68Sell Price:$19.28Percent Return: 3.21%


Hedging

ETF Exchange Traded Funds

• Stocks that represent sectors, commodities, Credit swaps etc.

• Used as a hedge to prevent losses

• Helped regain losses.

Cash

• Balance of 10- 15% at all times

• Gave us room to make momentum trades

Market Close

4 AM Report

Market Open

News is released of probably President Obama re-election

Confirmation of the re-election of President Obama

Purchased SDS in anticipation of the reaction

Purchase Price: $56.10Sell Price:$56.90Percent Return: 1.4%


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, 2012Pros Cons

Industrial and Basic Materials Sectors are expected to outperform.

Bullish on Residential Construction, and Industrial Metals and Materials Industries

Financial Sector expected to underperform.Bearish on Money Center Banks

America’s Infrastructure is expected to improve, as cited by US President Barack Obama

Fiscal Cliff could potentially pull U.S. economy back into recession.

Bullish signals in consumer spending and confidence, housing starts, and existing home sales.

Potential political gridlock following reelection of US President Barack Obama.

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


Economic Behavioral Factors

Pros ConsMultinational Health Care companies will outperform

GDP will decreaseUnemployment will increase

Generic pharmaceutical companies will outperform.

Taxes will rise for nearly everyoneFunding for federal programs cut

Real Estate Investment Trusts specializing in Health Care facilities or hospitals will outperform

Already seeing affects of fiscal cliffHiring rate downFewer large investment decisions

Moderately bullish outlook for 2013 Aerospace and defense will underperform

Conclusion

• CAFÉActive ManagementIndustry

• 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. GabelliCEO, Gabelli Asset Management

• Dr. Jerry DauteriveDean, 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.


http://www.rhodycouture.com/

Questions?


Final CAFE Presentation

Economy & Finance

Transcript of Final CAFE Presentation