RCMP Spring 2006 – Gaurav Ghoge SUNRISE SENIOR LIVING, Inc. April 27, 2006.
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Transcript of RCMP Spring 2006 – Gaurav Ghoge SUNRISE SENIOR LIVING, Inc. April 27, 2006.
RCMP Spring 2006 – Gaurav Ghoge
SUNRISE SENIOR LIVING, Inc.SUNRISE SENIOR LIVING, Inc.
April 27, 2006April 27, 2006
RCMP Spring 2006 – Gaurav Ghoge
AGENDAAGENDA
• Introduction
• Stock Market Review
• Industry Review
• Company Review
• Investment Thesis
• Recommendation
RCMP Spring 2006 – Gaurav Ghoge
INTRODUCTIONINTRODUCTION
• Sunrise Senior Living, Inc is a provider of senior living services
• Business Model
─ Provide range of Senior Living Services
─ Develop Senior Living communities for third parties
• Geographies covered
─ US, Canada, UK & Germany
• Stock Ticker : SRZ
RCMP Spring 2006 – Gaurav Ghoge
COMPANY BACKGROUNDCOMPANY BACKGROUND
• Approximately 3/4th of the company held by Institutionals
• Component of
─ S&P Small Cap 600 Index,
─ NYSE Healthcare Index,
─ S&P 1500 Composite Index
Stock Ownership
Insiders13%
Others14%
Institutional & MFs73%
• Founded in 1981 by current CEO Paul J Klaassen
• Listed in 1996
RCMP Spring 2006 – Gaurav Ghoge
AGENDAAGENDA
• Introduction
• Stock Market Review
• Industry Review
• Company Review
• Investment Thesis
• Recommendation
RCMP Spring 2006 – Gaurav Ghoge
STOCK MARKET REVIEWSTOCK MARKET REVIEW
• US markets have returned < 10% in last 5 years
• US Stock Markets lagging behind world markets
• YTD MSCI US Index is the second worst performer
RCMP Spring 2006 – Gaurav Ghoge
AGENDAAGENDA
• Introduction
• Stock Market Review
• Industry Review
• Company Review
• Investment Thesis
• Recommendation
RCMP Spring 2006 – Gaurav Ghoge
INDUSTRY REVIEWINDUSTRY REVIEW
• Sunrise Senior Living (SRZ) is classified under :
– Long Term Care Facilities (Yahoo Finance)
– Health Care Facilities (GICS)
CCRC – Continued Care Retirement Centers, Source: American Senior Housing Association, Citigroup
CCRC, 16%
Assisted Living, 13%
Independent Living, 13%
Skilled Nursing, 58%
Industry Revenues - $145 billion
SRZ presence in Non - Nursing areas ($60 bn Industry)
RCMP Spring 2006 – Gaurav Ghoge
INDUSTRY REVIEWINDUSTRY REVIEW
• Fragmented Industry with 2.8% market share for SRZ
─ Top 10 companies control only 12.5% of the market
• Recent consolidation in the Industry
─ Average price paid for Assisted Living Facility in M&A transactions increased 54% in 2005 to $115,600 per bed
• Over last 2 years the industry has seen a rebound
─ Beds have grown by 0.7% CAGR
─ Revenues have grown by 3% CAGR
(Source: American Senior Housing Association, Citigroup)
RCMP Spring 2006 – Gaurav Ghoge
AGENDAAGENDA
• Introduction
• Stock Market Review
• Industry Review
• Company Review
• Investment Thesis
• Recommendation
RCMP Spring 2006 – Gaurav Ghoge
COMPANY REVIEWCOMPANY REVIEW
• Largest Operator of Senior Living Communities
• 415 ‘communities’ across the globe
– Canada – 11 UK – 5 Germany – 2
(Source: American Senior Housing Association, Citigroup)
• 11 new communities added in Q1 of 2006
• Upscale metropolitan presence
• Only company in the industry focusing on ‘Management Model’
RCMP Spring 2006 – Gaurav Ghoge
SERVICES & COMMUNITIESSERVICES & COMMUNITIES
• Managed communities share increased from 10% in 2000 to 47% in 2005
• Presence in Skilled Nursing limited
Sunrise - Types of Services
Assisted Living67%
Independent Living24%
Skilled Nursing
9%
Bed (Dec'05) - 52,925
Sunrise - Ownership Pattern
Managed , 198 , 47%
Joint Ventures, 156 , 38%
Consolidated, 61 , 15%
Communities (Dec'05) - 415Communities (Dec'05) - 415
Source: 10k, Citigroup
RCMP Spring 2006 – Gaurav Ghoge
OWNERSHIP PATTERNOWNERSHIP PATTERN
• Consolidated Communities
– Owned & Leased by SRZ
• Joint Ventures Communities
– 5 – 8% Management Fees + 20 – 25% equity income
• Managed Communities
– No ownership
– 5 – 8% Management Fees
RCMP Spring 2006 – Gaurav Ghoge
$ mn
Mgmt & professional services - operating communities 188.01
Community contract services reimbursement 1,235.61
Mgmt & professional services - pre-opened communities 40.72
Resident fees 355.15
Total operating revenue 1,819.48
Other income:
Operating communities 0.41
Pre-opened communities 8.82
Total Other Income 9.23
Total Income 1,828.71
Operating expenses:
Reimbursable community contract services 1,235.61
Mgmt & professional services - pre-opened communities 31.54
Community operating 272.62
Community lease 48.40
General and administrative 90.72
Total operating expenses 1,678.88
EBITDA 149.83
EBITDA Margin 8.19%
Adjusted EBITDA Margin 25.26%
INCOME STATEMENT SNAPSHOTINCOME STATEMENT SNAPSHOTReimbursable expenses for Managed communities – pass through
Services (site selection, zoning & design) prior to transferring of land to JV
Services (construction supervision, training, marketing) after transferring of property to JV
Delivery of senior living services to the residents
Income statement for year ended Dec 2005
Removing the effect of the reimbursements
RCMP Spring 2006 – Gaurav Ghoge
GROWING PHASE FOR SUNRISEGROWING PHASE FOR SUNRISE
• Revenue CAGR of 49% over last 4 years
• Acquisitions propelled managed communities in 2003
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2001 2002 2003 2004 2005
Rev
enu
es (
$mn
)
Acquistions helped revenue jump in 2003
106 106 81 66 60 61
41 55 100 120 125 156
187 195212
1723
28
0
50
100
150
200
250
300
350
400
450
500
2,000 2,001 2,002 2,003 2,004 2,005
No
of
Co
mm
un
itie
s
Owned Joint Ventures Managed
RCMP Spring 2006 – Gaurav Ghoge
GROWTH THROUGH ACQUISITIONSGROWTH THROUGH ACQUISITIONS
Target Period Price ($ million)
Details
The Fountains Jul-05 67 18 properties (16 JV , 1 wholly-owned, and 1
managed with no ownership)
Greystone Communities
May-05 45 14 management service properties
Eden Care Nov-03 n/a 22 management services properties
Marriott Senior Living
Mar-03 120 129 properties (including 108 management services
and 21 leased properties)
RCMP Spring 2006 – Gaurav Ghoge
RETURNS ON AN UPSCALERETURNS ON AN UPSCALE
• Net Income increasing as margin bounced back in 2005
• Decline in margins because of shift to Managed Communities
• ROE & ROIC showing an uptrend
10.00%11.73%
13.01%13.79%
4.90%
6.55%
4.79%
5.85%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
2002 2003 2004 2005
Return on Equity Return on Invested Capital
491547
622
507
797
0
100
200
300
400
500
600
700
800
900
2001 2002 2003 2004 2005
Net
In
com
e ($
mn
)
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
Net Income Adjusted EBITDA Margin (RHS)
RCMP Spring 2006 – Gaurav Ghoge
STRONG BALANCE SHEETSTRONG BALANCE SHEET
• Net Debt in 2005 is in negative territory
• Cash locked in Net Working Capital reducing
• Falling Free Cash Flow suggests expansion mode
284
120
50
(22)
140
71 78 75
-50
0
50
100
150
200
250
300
2002 2003 2004 2005
($ m
n)
Net Debt Net Working Capital
311
264
185
49
0
50
100
150
200
250
300
350
2002 2003 2004 2005
Fre
e C
ash
Flo
w (
$ m
n)
Free Cash Flow
RCMP Spring 2006 – Gaurav Ghoge
STOCK PERFORMANCESTOCK PERFORMANCE
• Outperformed the
S&P 500 by 9% in the
past 6 months
• Outperformed the
S&P Healthcare Index
by approx 130% in
the past 5 years
RCMP Spring 2006 – Gaurav Ghoge
AGENDAAGENDA
• Introduction
• Stock Market Review
• Industry Review
• Company Review
• Competitors Analysis
• Investment Thesis
• Recommendation
RCMP Spring 2006 – Gaurav Ghoge
OUTPERFORMED COMPETITION CONSISTENTLYOUTPERFORMED COMPETITION CONSISTENTLY
0
50
100
150
200
250
Nov
-03
Jan-
04
Mar
-04
May
-04
Jul-0
4
Sep
-04
Nov
-04
Jan-
05
Mar
-05
May
-05
Jul-0
5
Sep
-05
Nov
-05
Jan-
06
Mar
-06
Sto
ck P
rice
(in
dex
ed t
o N
ov
18 2
003)
Genesis SRZ Kindred
Extendicare Manor Care
• No dividends paid by SRZ
• Stock Split of 2:1 on Oct 4, 2005
RCMP Spring 2006 – Gaurav Ghoge
COMPETITORS ANALYSISCOMPETITORS ANALYSIS
• Third largest player in terms of Market Capitalization
• One of the highest Return on Assets
• Trading at highest 5 yr PEG ratio (estimates by Yahoo Finance)
SRZ Manor Care Brookdale Senior
Extendicare Kindred Healthcare
Genesis Healthcare
Market Cap (billion) 1.95 3.43 2.42 1.51 0.92 0.84Employees 22,366 58,000 9,860 37,600 38,900 35,000Revenue (billion) 1.82 3.42 0.8 1.71 3.92 1.71Gross Margin (%) 12.71% 17.47% 13.58% 13.56% 78.35% 99.02%EBITDA (million) 194.66 438.16 24.82 236.76 313.33 168.69Operating Margins (%) 7.58% 8.59% -3.07% 10.17% 5.36% 6.30%Net Income (million) 79.74 160.96 -24.33 86.39 128.63 43.76EPS 1.67 1.89 -0.41 1.01 3.2 2.16Return on Assets (%) 7.77% 7.97% -1.28% 8.18% 7.83% 5.33%Return on Equity (%) 13.79% 18.31% -15.17% 21.00% 16.18% 7.02%P/E (x) 23.15 22.9 N/A 21.89 7.66 20.08PEG (5 yr expected): 1.9 1.33 N/A N/A 1.15 1.49
Source: Yahoo Finance
RCMP Spring 2006 – Gaurav Ghoge
AGENDAAGENDA
• Introduction
• Stock Market Review
• Industry Review
• Company Review
• Investment Thesis
• Recommendation
RCMP Spring 2006 – Gaurav Ghoge
STRONG INDUSTRY GROWTH OVER 15 YRSSTRONG INDUSTRY GROWTH OVER 15 YRS
0
1000
2000
3000
4000
5000
6000
2005 2010E 2015E 2020E
No
of
bed
s ('
000)
Independent Living Assisted Living Skilled Nursing CCRC
1.6% CAGR
2005 2010E 2015E 2020E
US Population 286 298 310 323
75+ 17.9 18.5 19.6 22.3
85+ 4.9 5.8 6.4 6.7
75+ (as % of total) 8.0% 8.2% 8.4% 9.0%
Elderly population expected
to grow at CAGR of 1.3%
No of beds expected to grow
at 1.6% CAGR
(Source: American Senior Housing Association, American Healthcare Association, National Investment Center, Citigroup)
RCMP Spring 2006 – Gaurav Ghoge
STRONG BUSINESS MODELSTRONG BUSINESS MODEL
• 415 communities with 53000 beds in 35 states
• Future expansion into International locations
• Insulated from reimbursement risks
• About 91% of revenues of 2005 derived from private pay
• Growth through acquisitions could continue
• Management Model
• Sale and long-term management contracts
RCMP Spring 2006 – Gaurav Ghoge
CONSERVATIVE REVENUE GROWTHCONSERVATIVE REVENUE GROWTH
61 61 61 61 61
156 172 189 208 228
198218
240264
290
0
100
200
300
400
500
600
700
2005 2006E 2007E 2008E 2009E
Owned Joint Ventures Managed
1,200
1,600
2,000
2,400
2,800
3,200
2005 2006E 2007E 2008E 2009E
Rev
enu
es (
$mn
)
4%
8%
12%
16%
20%
24%
28%
Gro
wth
in
Rev
enu
es (
%)
Cost Assumptions 2006 - 2009% of SalesMgmt & professional services 77%Community operating 77%General and administrative 5%
Lease rent per community 793,459 (growing at 10% p.a.)
Revenue Assumptions 2006 - 2009Management & Professional Services 5%Community Contract services reimb 5%Resident Fees 5%
Consolidated 0%Unconsolidated ventures 10%Managed 10%
RCMP Spring 2006 – Gaurav Ghoge
MARGINS EXPANDINGMARGINS EXPANDING
• EBITDA Margin expansion -
• Moving to management model
• Increasing expertise in operating communities
• EBIT Margin expansion because of minimal capex
5.85%
7.23%7.15%
7.02%6.85%
5.00%
5.50%
6.00%
6.50%
7.00%
7.50%
2005 2006E 2007E 2008E 2009E
EB
IT M
arg
in (
%)
797
972
1,150
1,322
1,511
0
200
400
600
800
1,000
1,200
1,400
1,600
2005 2006E 2007E 2008E 2009E
Net
Inco
me
($ m
n)
23%
24%
25%
26%
27%
28%
29%
Net Income Adjusted EBITDA Margin (RHS)
RCMP Spring 2006 – Gaurav Ghoge
CONSERVATIVE CAPITAL STRUCTURECONSERVATIVE CAPITAL STRUCTURE
• Increasing ROA due to decreasing debt & limited capex
• Net Income growth higher than EBIT
• Income from excess cash
7.87%
7.54%
7.22%
6.82%6.55%
5.0%
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
2005 2006E 2007E 2008E 2009E
Ret
urn
on A
sset
s (%
) 18.4%
21.9%
14.9%14.3%
40
60
80
100
120
140
160
2005 2006E 2007E 2008E 2009E
Net
In
com
e ($
mn
)
0%
5%
10%
15%
20%
25%
Gro
wth
in
Net
In
com
e (%
)
Net Income Net Income Growth (RHS)
RCMP Spring 2006 – Gaurav Ghoge
AGENDAAGENDA
• Introduction
• Stock Market Review
• Industry Review
• Company Review
• Investment Thesis
• Valuation
• Recommendation
RCMP Spring 2006 – Gaurav Ghoge
VALUATIONVALUATION
Beta 0.77 Debt 11.1%
Rf 4.75% Equity 88.9%
Rm – Rf 5.00% g 4.0%
Re 8.60% Tax Rate 33%
Rd 6.40%
• Rf – 6 month Treasury rate
• Rm - Rf – Historical Risk Premium
WACC = 8.12%
RCMP Spring 2006 – Gaurav Ghoge
DISCOUNTED CASH FLOWDISCOUNTED CASH FLOW
• Terminal Value assumptions
• EBIT – growing at sustained growth rate
• Working Capital – assumed to be 20% of 2009
• Capex – Maintenance caped because of move to management model
2006E 2007E 2008E 2009E TVEBIT 140,937 161,181 183,498 208,063 EBIT (1-t) 94,428 107,991 122,944 139,402 144,978
Chg in WC 84,076 49,345 8,867 73,103 14,621 Chg in Capex 10,000 10,000 10,000 10,000 5,000
FCF 352 48,646 104,077 56,299 3,040,253 DCF 314 38,755 74,007 35,732 1,929,600
Value 2,078,408 Debt 63,994 Equity Value 2,014,414 Per Share Value 39.93
RCMP Spring 2006 – Gaurav Ghoge
DCF SENSITIVE TO WACC & GROWTH RATEDCF SENSITIVE TO WACC & GROWTH RATE
• DCF value sensitive to WACC & growth rate
• Sustained growth rate of 4%
7.75% 8.00% 8.12% 8.25% 8.50% 8.75% 9.00% 9.25%
3.00% 34.52 32.88 32.12 31.39 30.04 28.81 27.68 26.64
3.25% 36.44 34.61 33.78 32.96 31.47 30.12 28.88 27.75
3.50% 38.59 36.54 35.61 34.70 33.05 31.56 30.20 28.96
3.75% 41.00 38.69 37.65 36.63 34.79 33.14 31.64 30.28
4.00% 43.74 41.11 39.93 38.79 36.73 34.89 33.23 31.72
4.25% 46.87 43.86 42.52 41.22 38.90 36.83 34.98 33.31
4.50% 50.48 47.00 45.45 43.98 41.33 39.00 36.93 35.07
4.75% 54.69 50.62 48.83 47.12 44.09 41.44 39.10 37.02
5.00% 59.67 54.84 52.74 50.75 47.25 44.21 41.55 39.21
Growth rate
WACC
RCMP Spring 2006 – Gaurav Ghoge
AGENDAAGENDA
• Introduction
• Stock Market Review
• Industry Review
• Company Review
• Investment Thesis
• Portfolio Diversification
• Recommendation
RCMP Spring 2006 – Gaurav Ghoge
PORTFOLIO DIVERSIFICATIONPORTFOLIO DIVERSIFICATION
AEOS CPRT FR JKHY JPM KMB MS MVSN SRCL WAG
CPRT 0.1290
FR 0.1533 0.1678
JKHY 0.1216 0.0943 0.1241
JPM 0.1764 0.1360 0.1507 0.1819
KMB 0.0225 0.0842 0.1165 0.1100 0.1013
MS 0.0980 0.1141 0.0931 0.1475 0.2324 0.1095
MVSN 0.1400 0.1333 0.1037 0.2541 0.1834 0.0476 0.1256
SRCL 0.0815 0.0826 0.0875 0.1596 0.1438 0.0803 0.0554 0.1153
WAG 0.0697 0.0483 0.0504 0.0617 0.1137 0.0427 0.2867 0.0611 0.0533
SRZ 0.0549 0.0824 0.0969 0.1119 0.1350 0.0788 0.0421 0.1535 0.0912 0.0078
• Low correlation with all the stocks
• Highest correlation with MVSN of 0.1535
RCMP Spring 2006 – Gaurav Ghoge
AGENDAAGENDA
• Introduction
• Stock Market Review
• Industry Review
• Company Review
• Investment Thesis
• Recommendation
RCMP Spring 2006 – Gaurav Ghoge
BUY 600 SHARESBUY 600 SHARES
• At $37.53 – represents 7.13% of portfolio (as on April 26, 2006)
• Portfolio standard deviation drops from 1.38 to 1.27
INVESTMENT THESIS
1. Largest Operator of Senior Living
2. Strong Industry growth
3. Move to Management Model
4. Conservative Capital Structure
5. Net Income growth ~ 14% for next couple of years
6. Stock price includes $6.61 cash as of Dec 2005
RCMP Spring 2006 – Gaurav Ghoge
RCMP Spring 2006 – Gaurav Ghoge
AGENDAAGENDA
• Introduction
• Stock Market Review
• Industry Review
• Company Review
• Investment Thesis
• Recommendation
• Appendix
RCMP Spring 2006 – Gaurav Ghoge
RECOMMENDATION ANALYSISRECOMMENDATION ANALYSIS
No of Shares % of Portfolio Portfolio
100 1.26% 1.3085
200 2.49% 1.3002
300 3.70% 1.2931
400 4.87% 1.2874
500 6.01% 1.2829
600 7.13% 1.2795
RCMP Spring 2006 – Gaurav Ghoge
STANDARD DEVIATION STANDARD DEVIATION (WITHOUT SRZ)(WITHOUT SRZ)
Weights W2 Variance W2 * Variance
AEOS 0.1808 0.0327 14.9589 0.4890 CPRT 0.0900 0.0081 12.6777 0.1027
FR 0.1352 0.0183 1.7199 0.0315 JKHY 0.0630 0.0040 8.4676 0.0336 JPM 0.1344 0.0181 5.7489 0.1038 KMB 0.0601 0.0036 2.9919 0.0108 MS 0.0878 0.0077 7.8467 0.0605
MVSN 0.0150 0.0002 24.6173 0.0055 SRCL 0.0899 0.0081 10.1861 0.0823 WAG 0.1440 0.02072 3.9430 0.0817
without SRZ 1.0013
Portfolio standard deviation = SQRT (1.0013 + 0.7368)
Portfolio standard deviation = 1.3183
RCMP Spring 2006 – Gaurav Ghoge
STANDARD DEVIATION STANDARD DEVIATION (WITHOUT SRZ)(WITHOUT SRZ)Co-Variance W1 W2 2*W1*W2*Cov Co-Variance W1 W2 2*W1*W2*Cov
AEOS CPRT 1.7764 0.1808 0.0900 0.0578 JKHY KMB 0.5537 0.0630 0.0601 0.0042
AEOS FR 0.7774 0.1808 0.1352 0.0380 JKHY MS 1.2022 0.0630 0.0878 0.0133
AEOS JKHY 1.3682 0.1808 0.0630 0.0312 JKHY MVSN 3.6682 0.0630 0.0150 0.0069
AEOS JPM 1.6362 0.1808 0.1344 0.0795 JKHY SRCL 1.4818 0.0630 0.0899 0.0168
AEOS KMB 0.1504 0.1808 0.0601 0.0033 JKHY WAG 0.3567 0.0630 0.1440 0.0065
AEOS MS 1.0617 0.1808 0.0878 0.0337 JKHY SRZ 1.0387 0.0630 - -
AEOS MVSN 2.6872 0.1808 0.0150 0.0145 JPM KMB 0.4201 0.1344 0.0601 0.0068
AEOS SRCL 1.0056 0.1808 0.0899 0.0327 JPM MS 1.5609 0.1344 0.0878 0.0368
AEOS WAG 0.5355 0.1808 0.1440 0.0279 JPM MVSN 2.1818 0.1344 0.0150 0.0088
AEOS SRZ 0.6771 0.1808 - - JPM SRCL 1.1006 0.1344 0.0899 0.0266
CPRT FR 0.7834 0.0900 0.1352 0.0191 JPM WAG 0.5412 0.1344 0.1440 0.0209
CPRT JKHY 0.9771 0.0900 0.0630 0.0111 JPM SRZ 1.0332 0.1344 - -
CPRT JPM 1.1611 0.0900 0.1344 0.0281 KMB MS 0.5305 0.0601 0.0878 0.0056
CPRT KMB 0.5187 0.0900 0.0601 0.0056 KMB MVSN 0.4082 0.0601 0.0150 0.0007
CPRT MS 1.1381 0.0900 0.0878 0.0180 KMB SRCL 0.4431 0.0601 0.0899 0.0048
CPRT MVSN 2.3553 0.0900 0.0150 0.0063 KMB WAG 0.1466 0.0601 0.1440 0.0025
CPRT SRCL 0.9385 0.0900 0.0899 0.0152 KMB SRZ 0.4351 0.0601 - -
CPRT WAG 0.3413 0.0900 0.1440 0.0088 MS MVSN 1.7461 0.0878 0.0150 0.0046
CPRT SRZ 0.9357 0.0900 - - MS SRCL 0.4955 0.0878 0.0899 0.0078
FR JKHY 0.4736 0.1352 0.0630 0.0081 MS WAG 1.5945 0.0878 0.1440 0.0403
FR JPM 0.4738 0.1352 0.1344 0.0172 MS SRZ 0.3761 0.0878 - -
FR KMB 0.2644 0.1352 0.0601 0.0043 MVSN SRCL 1.8257 0.0150 0.0899 0.0049
FR MS 0.3421 0.1352 0.0878 0.0081 MVSN WAG 0.6024 0.0150 0.1440 0.0026
FR MVSN 0.6747 0.1352 0.0150 0.0027 MVSN SRZ 2.4303 0.0150 - -
FR SRCL 0.3660 0.1352 0.0899 0.0089 SRCL WAG 0.3378 0.0899 0.1440 0.0087
FR WAG 0.1312 0.1352 0.1440 0.0051 SRCL SRZ 0.9289 0.0899 - -
FR SRZ 0.4056 0.1352 - - WAG SRZ 0.0497 0.1440 - -
JKHY JPM 1.2694 0.0630 0.1344 0.0215 0.7368
RCMP Spring 2006 – Gaurav Ghoge
STANDARD DEVIATION STANDARD DEVIATION (WITH SRZ)(WITH SRZ)
Portfolio standard deviation = SQRT (0.9153 + 0.7218)
Portfolio standard deviation = 1.2795
Weights W2 Variance W2 * Variance
AEOS 0.1679 0.0282 14.9589 0.4218 CPRT 0.0836 0.0070 12.6777 0.0886
FR 0.1256 0.0158 1.7199 0.0271 JKHY 0.0585 0.0034 8.4676 0.0290 JPM 0.1248 0.0156 5.7489 0.0895 KMB 0.0558 0.0031 2.9919 0.0093 MS 0.0816 0.0067 7.8467 0.0522
MVSN 0.0139 0.0002 24.6173 0.0047 SRCL 0.0835 0.0070 10.1861 0.0710 WAG 0.1337 0.0179 3.9430 0.0705 SRZ 0.0713 0.00508 10.1831 0.0517
with SRZ 0.9153
RCMP Spring 2006 – Gaurav Ghoge
STANDARD DEVIATION STANDARD DEVIATION (WITH SRZ)(WITH SRZ)Co-Variance W1 W2 2*W1*W2*Cov Co-Variance W1 W2 2*W1*W2*Cov
AEOS CPRT 1.7764 0.1679 0.0836 0.0499 JKHY KMB 0.5537 0.0585 0.0558 0.0036
AEOS FR 0.7774 0.1679 0.1256 0.0328 JKHY MS 1.2022 0.0585 0.0816 0.0115
AEOS JKHY 1.3682 0.1679 0.0585 0.0269 JKHY MVSN 3.6682 0.0585 0.0139 0.0060
AEOS JPM 1.6362 0.1679 0.1248 0.0686 JKHY SRCL 1.4818 0.0585 0.0835 0.0145
AEOS KMB 0.1504 0.1679 0.0558 0.0028 JKHY WAG 0.3567 0.0585 0.1337 0.0056
AEOS MS 1.0617 0.1679 0.0816 0.0291 JKHY SRZ 1.0387 0.0585 0.0713 0.0087
AEOS MVSN 2.6872 0.1679 0.0139 0.0125 JPM KMB 0.4201 0.1248 0.0558 0.0058
AEOS SRCL 1.0056 0.1679 0.0835 0.0282 JPM MS 1.5609 0.1248 0.0816 0.0318
AEOS WAG 0.5355 0.1679 0.1337 0.0240 JPM MVSN 2.1818 0.1248 0.0139 0.0076
AEOS SRZ 0.6771 0.1679 0.0713 0.0162 JPM SRCL 1.1006 0.1248 0.0835 0.0229
CPRT FR 0.7834 0.0836 0.1256 0.0164 JPM WAG 0.5412 0.1248 0.1337 0.0181
CPRT JKHY 0.9771 0.0836 0.0585 0.0096 JPM SRZ 1.0332 0.1248 0.0713 0.0184
CPRT JPM 1.1611 0.0836 0.1248 0.0242 KMB MS 0.5305 0.0558 0.0816 0.0048
CPRT KMB 0.5187 0.0836 0.0558 0.0048 KMB MVSN 0.4082 0.0558 0.0139 0.0006
CPRT MS 1.1381 0.0836 0.0816 0.0155 KMB SRCL 0.4431 0.0558 0.0835 0.0041
CPRT MVSN 2.3553 0.0836 0.0139 0.0055 KMB WAG 0.1466 0.0558 0.1337 0.0022
CPRT SRCL 0.9385 0.0836 0.0835 0.0131 KMB SRZ 0.4351 0.0558 0.0713 0.0035
CPRT WAG 0.3413 0.0836 0.1337 0.0076 MS MVSN 1.7461 0.0816 0.0139 0.0040
CPRT SRZ 0.9357 0.0836 0.0713 0.0111 MS SRCL 0.4955 0.0816 0.0835 0.0067
FR JKHY 0.4736 0.1256 0.0585 0.0070 MS WAG 1.5945 0.0816 0.1337 0.0348
FR JPM 0.4738 0.1256 0.1248 0.0148 MS SRZ 0.3761 0.0816 0.0713 0.0044
FR KMB 0.2644 0.1256 0.0558 0.0037 MVSN SRCL 1.8257 0.0139 0.0835 0.0042
FR MS 0.3421 0.1256 0.0816 0.0070 MVSN WAG 0.6024 0.0139 0.1337 0.0022
FR MVSN 0.6747 0.1256 0.0139 0.0024 MVSN SRZ 2.4303 0.0139 0.0713 0.0048
FR SRCL 0.3660 0.1256 0.0835 0.0077 SRCL WAG 0.3378 0.0835 0.1337 0.0075
FR WAG 0.1312 0.1256 0.1337 0.0044 SRCL SRZ 0.9289 0.0835 0.0713 0.0111
FR SRZ 0.4056 0.1256 0.0713 0.0073 WAG SRZ 0.0497 0.1337 0.0713 0.0009
JKHY JPM 1.2694 0.0585 0.1248 0.0185 0.7218