M c I n t i r e I n v e s t m e n t I n s t i t u t e 1

McIntire Investment InstituteAt the University of Virginia

Portfolio Update

Prepared by MII Managers| 3 September 2008

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Changes to Portfolio(Approved, Not Yet Completed)

• Closed long position in Intuitive Surgical

• Opened long position in Phillip Morris International

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MII Portfolio ~ $425,000

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American Express (AXP)

• American Express is a leading global provider of payment and travel services to consumers, small businesses and large corporations

• Reasons for having AXP in MII portfolio:– Greatest growth potential of major credit cards– Highest spending, most valuable customers– Dominates prestige card market with $20.9Bn

brand– Strong business model / management

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• Global investment management firm– Fixed income, cash management, equity, alternatives– Risk management analytics: BlackRock Solutions ($7 trillion)

• Acquisition of Barclays Global Investors– Adds $1.5 trillion to BLK’s $1.3 trillion AUM – Significant access to retail investors with iShares ETF

• BLK shares up 115% in the last 6 months– Up 11% since acquisition of Barclays Global Investors

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• User Focused Design Philosophy• Superior Technology• Large Cash Position• Human Capital• Open-Source Development• Attractive Valuation• Growth of Cloud Computing• Development of White Space

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• Brand Equity• Strong Growth• Effective Management• Product Expansion• High Margins/Operational Efficiency

• 64% Handbags, 28% Accessories• 80% Direct-to-Consumer (58% US, 19%

Japan)

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Diageo

• Successful Growth

• Mobile Marketing Plan

• Well Known and High Grossing Brands

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“The SAT measures nothing but a student’s ability to take it”

• New Management• Strong Brand Name and Effective

Products• International Potential• Highly Favorable Test Preparation

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• Global provider of agricultural products– Seeds, biotechnology traits, herbicides– Increasing top and bottom line growth

• Increases in food demand– Dietary shifts: more protein = more meat =

more seeds

• R&D Spending– 10% of total Revenues– Robust Pipeline

• Management– Aggressive: Cotton and Wheat

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• MII added CVA in 2008• CVA is composed of the National American Insurance Company

of California and an energy subsidiary that focuses on Energy-from-Waste (EfW) solutions

• EfW involves burning trash to generate electricity. Heavy metals are extracted and recycled.

• Its solid waste combustion process generates clean electricity and results in a net greenhouse gas reduction

• Environmental Protection Agency VAR: – CVA is an industry leader and EfW capacity could double in the U.S.– It is cheaper for most municipalities to use landfills– It is unlikely CVA will qualify to sell carbon credits under recent cap-and-

trade legislation– The federal government classifies EfW as a renewable energy source

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– Designer and manufacturer of Global Positioning System (GPS) products for precision farming

– Precision Farming focuses on sound crop production by applying geo-technology to effectively understand and manage the dynamic flows and cycles within a landscape perspective

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Thesis Points:• Strong growth play based on trends towards precision

agriculture in farming across the US and international markets

• Turnaround play – Hemisphere GPS emerged as a niche precision agriculture player from CSI wireless, which was a generic GPS manufacturer

• Winning new contracts with important OEM players like AGCO

• Adoption Rates of precision agriculture are high

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• Strong International growth potential via excellent brand making– China

• Strong Management • Healthy financial status

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• Short position at $64– Significant exposure to retail – High level of debt – Subpar customer services

• Why holding it still?– Do not believe in consumption comeback

• High unemployment

– Declining Commercial Property Value – Overall Equities Correction

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• MII shorted 200 COCO shares on 1/23/09 and 110 additional shares on 4/13/09

• COCO is a private post-secondary education company • VAR shows that:

– Past and current students believe COCO exaggerates its graduate placement rates and starting salaries

– A former student and the California Attorney General have sued the company for misleading students

– Annual faculty and staff turnover is nearly 50%– COCO has assumed the credit risk of subprime students denied

federal loans

• Shares have jumped from ~$16.00 on 8/1/09 to $19.32• Short interest is 17% (as of 8/15/09)

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The Pep Boys—Manny, Moe & Jack• Serial Money Loser

• Imprudent Management• Identity Crisis• Macro Trends

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• Markets nutritional shakes, dietary pills, and creams through a network of individual distributors

• VAR with doctors and biology professors reveals the products are no better than over-the-counter multivitamins and supplements

• Short thesis points include:– Misleading marketing– Expensive fad products– Low quality business in economic downturns– Limited long-term growth potential due to distribution

methods

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