For Financial Professional Use Only Samuel Kunz, CFA, MFTA - Strategy and Research
SELECTION PROCESS
› Macro Filter
› Fundamental
› Quantitative
› Technical/Timing
For Financial Professional Use Only Samuel Kunz, CFA, MFTA - Strategy and Research
APPROACH
Macro Laffer
Fundamental Argus
Technical/Timing DeMark / Oscillators / Paterns / Etc…
Quantitative Q Prime
For Financial Professional Use Only Samuel Kunz, CFA, MFTA - Strategy and Research
APPROACH
Macro Laffer
Fundamental Argus
Technical/Timing DeMark / Oscillators / Paterns / Etc…
Quantitative Q Prime
Strategy
Don Hahn
For Financial Professional Use Only Samuel Kunz, CFA, MFTA - Strategy and Research
LAFFER/MACRO/WHY?
› Father of “Supply Side Economics”
› Founding member of Congressional Policy Advisory Board
› Member of President Reagan’s Economic Policy Advisory Board (1981-1989)
For Financial Professional Use Only Samuel Kunz, CFA, MFTA - Strategy and Research
LAFFER/MACRO/WHY?
› Created the Laffer’s Curve
- “Memorable event in financial history” Institutional Investor July 1992
- “A few of the advances that powered this extraordinary century” Times March 1999
For Financial Professional Use Only Samuel Kunz, CFA, MFTA - Strategy and Research
LAFFER/MACRO/WHY?
7.60%
-12.07%
-19.99%
60%
1.30%
22.42%
-12.69% -11.89%
-22.10%
28.69%
1.47%
-21.75%-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
2000 2001 2002 2003** 2004 YTD ITD**
LAFFER MACRO-100 COMPOSITES&P 500 INDEX
Investment ReturnsLaffer Macro-100 Large Cap. Composite Vs. S&P 500
Index09/2000 -05/2004*
For Financial Professional Use Only Samuel Kunz, CFA, MFTA - Strategy and Research
LAFFER/MACRO/WHY?
34.14%
4.30%
18.56%
7.14%
18.33%
-2.14%-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
1 Year 2 Years 3 Years
LAFFER MACRO-100 COMPOSITE
S&P 500 INDEX
Annualized ReturnsLaffer Macro-100 Large Cap. Composite Vs. S&P 500
Index09/2000 -05/2004*
For Financial Professional Use Only Samuel Kunz, CFA, MFTA - Strategy and Research
Laffer / Methodology / Economic Outlook
› 5 Areas of Information
Incomes Policy
Incomes Policy
Trade Policy
Trade Policy
Monetary Policy
Monetary Policy
Fiscal Policy
Fiscal Policy
Special Situations
Special Situations
RESULT
Economic Outlook
For Financial Professional Use Only Samuel Kunz, CFA, MFTA - Strategy and Research
Laffer / Methodology / Economic Outlook
› 5 Areas of Information
Incomes Policy
Incomes Policy
Trade Policy
Trade Policy
Monetary Policy
Monetary Policy
Fiscal Policy
Fiscal Policy
Special Situations
Special Situations
Impact on Private SectorImpact on Private Sector
Regulations
Restrictions
Requirements
For Financial Professional Use Only Samuel Kunz, CFA, MFTA - Strategy and Research
Laffer / Methodology / Economic Outlook
› 5 Areas of Information
Incomes Policy
Incomes Policy
Trade Policy
Trade Policy
Monetary Policy
Monetary Policy
Fiscal Policy
Fiscal Policy
Special Situations
Special Situations
Affects Terms Of TradeAffects Terms Of Trade
GAAT
NAFTA
Exchange Rates
For Financial Professional Use Only Samuel Kunz, CFA, MFTA - Strategy and Research
Laffer / Methodology / Economic Outlook
› 5 Areas of Information
Incomes Policy
Incomes Policy
Trade Policy
Trade Policy
Monetary Policy
Monetary Policy
Fiscal Policy
Fiscal Policy
Special Situations
Special Situations
Federal Reserve Systems
Monetary Base
Interest Rates
For Financial Professional Use Only Samuel Kunz, CFA, MFTA - Strategy and Research
Laffer / Methodology / Economic Outlook
› 5 Areas of Information
Incomes Policy
Incomes Policy
Trade Policy
Trade Policy
Monetary Policy
Monetary Policy
Fiscal Policy
Fiscal Policy
Special Situations
Special Situations
Taxing
Spending Government
For Financial Professional Use Only Samuel Kunz, CFA, MFTA - Strategy and Research
Laffer / Methodology / Economic Outlook
› 5 Areas of Information
Incomes Policy
Incomes Policy
Trade Policy
Trade Policy
Monetary Policy
Monetary Policy
Fiscal Policy
Fiscal Policy
Special Situations
Special Situations
Monopolies / OPEC
Wars
Weather
Etc…
For Financial Professional Use Only Samuel Kunz, CFA, MFTA - Strategy and Research
Laffer / Methodology / Macro Models
Company Size
Company Size
Domestic Location
Domestic Location
Earnings Forecast
Earnings Forecast
Fiscal Sensitivity
Fiscal Sensitivity
Global Location
Global Location
Laffer Top 100
Interest Rate
Sensitivity
Interest Rate
SensitivityTrade
Sensitivity
Trade Sensitivity
For Financial Professional Use Only Samuel Kunz, CFA, MFTA - Strategy and Research
Laffer / Methodology / Macro Models
Macro Model Biases
Company Size
Company Size
+1
0
-1
LAR
GE
CA
PITA
LISA
TIO
NSM
ALL
C
API
TALI
SATI
ON
Domestic Location
Domestic Location
+1
0
-1
+ FI
SCA
L C
HA
NG
E- F
ISC
AL
CH
AN
GE
Earnings Forecast
Earnings Forecast
+1
0
-1
+ EA
RN
ING
SC
HA
NG
E- E
AR
NIN
GS
CH
AN
GE
Fiscal Sensitivity
Fiscal Sensitivity
+1
0
-1
+ FI
SCA
L C
HA
NG
E- F
ISC
AL
CH
AN
GE
Global Location
Global Location
+1
0
-1
+ FI
SCA
L C
HA
NG
E- F
ISC
AL
CH
AN
GE
Interest Rate
Sensitivity
Interest Rate
Sensitivity
+1
0
-1
RIS
ING
RA
TES
FALL
ING
RA
TES
Trade Sensitivity
Trade Sensitivity
+1
0
-1
+ VA
LUE
AD
DED
- VA
LUE
AD
DED
For Financial Professional Use Only Samuel Kunz, CFA, MFTA - Strategy and Research
LAFFER/MACRO/Performance
391.53 - 1st Quintile
182.09 - 2nd Quintile
132.58 - 3rd Quintile
134.49 - 4th Quintile
81.78 - 5th Quintile
165.47 - S&P-500
0
50
100
150
200
250
300
350
400
450
Mar
-99
Jun-
99
Sep-
99
Dec-9
9
Mar
-00
Jun-
00
Sep-
00
Dec-0
0
Mar
-04
Jun-
04
Sep-
04
Dec-0
4
Mar
-04
Jun-
04
Sep-
04
Dec-0
4
Mar
-04
Jun-
04
Sep-
04
Dec-0
4
Mar
-04
Jun-
04
Sep-
04
Macro PortfolioPerformance By Quintiles vs. The S&P-500
For Financial Professional Use Only Samuel Kunz, CFA, MFTA - Strategy and Research
Argus Fundamental / Why
› Independent Research Firm
› In Business for nearly 70 years
› 6-point system is a blend of:
A. Top Down
B. Bottom Up
For Financial Professional Use Only Samuel Kunz, CFA, MFTA - Strategy and Research
Argus / Methodology / 6-Point System
Industryanalysis
Industryanalysis
GrowthAnalysis
GrowthAnalysis
Financialstrengthanalysis
Financialstrengthanalysis
Quality of Management
Quality of Management
RiskAnalysis
RiskAnalysis
Result
Buy / Hold / Sell Rating
ValuationAnalysis
ValuationAnalysis
For Financial Professional Use Only Samuel Kunz, CFA, MFTA - Strategy and Research
Argus / Methodology / 6-Point System
Industryanalysis
Industryanalysis
GrowthAnalysis
GrowthAnalysis
Financialstrengthanalysis
Financialstrengthanalysis
Quality of Management
Quality of Management
RiskAnalysis
RiskAnalysis
ValuationAnalysis
ValuationAnalysis
Outperforming IndustriesOutperforming Industries
Forecast Economy
Forecast Interest Rates
Collaborate with Industry Analysts
For Financial Professional Use Only Samuel Kunz, CFA, MFTA - Strategy and Research
Argus / Methodology / 6-Point System
Industryanalysis
Industryanalysis
GrowthAnalysis
GrowthAnalysis
Financialstrengthanalysis
Financialstrengthanalysis
Quality of Management
Quality of Management
RiskAnalysis
RiskAnalysis
ValuationAnalysis
ValuationAnalysis
Peer Market ComparisonPeer Market Comparison
Sales
Earnings
Dividends
Cash Flows
For Financial Professional Use Only Samuel Kunz, CFA, MFTA - Strategy and Research
Argus / Methodology / 6 Point System
Industryanalysis
Industryanalysis
GrowthAnalysis
GrowthAnalysis
Financialstrengthanalysis
Financialstrengthanalysis
Quality of Management
Quality of Management
RiskAnalysis
RiskAnalysis
ValuationAnalysis
ValuationAnalysis
Ratio AnalysisRatio Analysis
Financial Statements
Footnotes
For Financial Professional Use Only Samuel Kunz, CFA, MFTA - Strategy and Research
Argus / Methodology / 6 Point System
Industryanalysis
Industryanalysis
GrowthAnalysis
GrowthAnalysis
Financialstrengthanalysis
Financialstrengthanalysis
Quality of Management
Quality of Management
RiskAnalysis
RiskAnalysis
ValuationAnalysis
ValuationAnalysis
Know ManagementKnow Management
Meetings
Road Shows
Conference Calls
For Financial Professional Use Only Samuel Kunz, CFA, MFTA - Strategy and Research
Argus / Methodology / 6 Point System
Industryanalysis
Industryanalysis
GrowthAnalysis
GrowthAnalysis
Financialstrengthanalysis
Financialstrengthanalysis
Quality of Management
Quality of Management
RiskAnalysis
RiskAnalysis
ValuationAnalysis
ValuationAnalysis
QualitativeQualitative
Porter five Forces
QuantitativeQuantitative
Institutional Ownership
Insider Ownership
For Financial Professional Use Only Samuel Kunz, CFA, MFTA - Strategy and Research
Argus / Methodology / 6 Point System
Industryanalysis
Industryanalysis
GrowthAnalysis
GrowthAnalysis
Financialstrengthanalysis
Financialstrengthanalysis
Quality of Management
Quality of Management
RiskAnalysis
RiskAnalysis
ValuationAnalysis
ValuationAnalysis
Establish Target PriceEstablish Target Price
Forecasts
Adjust for Beta
For Financial Professional Use Only Samuel Kunz, CFA, MFTA - Strategy and Research
Q Prime / Quantitative / Why ?
› Flexible Tailor-made
A. Relative factors
B. Historical factors
› Proven track record from Morningstar
For Financial Professional Use Only Samuel Kunz, CFA, MFTA - Strategy and Research
Q Prime / Quantitative / Methodology
6 Categories6 Categories 11 22 33 44 55 66
17 Factors17 Factors11 22 33 44 55 66 77 88 99 1010 1111 1212 1313 1414 1515 1616 1717
Infinite Combinations
For Financial Professional Use Only Samuel Kunz, CFA, MFTA - Strategy and Research
Q Prime / Quantitative / Methodology
ValuationsValuations DividendsDividends MomentumMomentum GrowthGrowth ReliabilityReliability ReturnReturn
A/PE
R/PE
A/PB
R/PB
A/PS
› 6 Categories
For Financial Professional Use Only Samuel Kunz, CFA, MFTA - Strategy and Research
Q Prime / Quantitative / Methodology
ValuationsValuations DividendsDividends MomentumMomentum GrowthGrowth ReliabilityReliability ReturnReturn
Yield
Payout
Reinv. Rate
› 6 Categories
For Financial Professional Use Only Samuel Kunz, CFA, MFTA - Strategy and Research
Q Prime / Quantitative / Methodology
ValuationsValuations DividendsDividends MomentumMomentum GrowthGrowth ReliabilityReliability ReturnReturn
Quarterly EPS
Quarterly Sales
› 6 Categories
For Financial Professional Use Only Samuel Kunz, CFA, MFTA - Strategy and Research
Q Prime / Quantitative / Methodology
ValuationsValuations DividendsDividends MomentumMomentum GrowthGrowth ReliabilityReliability ReturnReturn
Estimated Growth
Estimated Revisions
Time Weighted Revisions
› 6 Categories
For Financial Professional Use Only Samuel Kunz, CFA, MFTA - Strategy and Research
Q Prime / Quantitative / Methodology
ValuationsValuations DividendsDividends MomentumMomentum GrowthGrowth ReliabilityReliability ReturnReturn
Growth
EPS Surprises
Vola. Ajd. EPS Surprises
› 6 Categories
For Financial Professional Use Only Samuel Kunz, CFA, MFTA - Strategy and Research
Q Prime / Quantitative / Methodology
ValuationsValuations DividendsDividends MomentumMomentum GrowthGrowth ReliabilityReliability ReturnReturn
Long Term Price Trend
1-Month Relative Perf.
2- Month Relative Perf.
Etc...
› 6 Categories
For Financial Professional Use Only Samuel Kunz, CFA, MFTA - Strategy and Research
Q Prime / Quantitative / Model
1) Value
2) Growth
3) Rotational (Balanced)
4) Q-Score
For Financial Professional Use Only Samuel Kunz, CFA, MFTA - Strategy and Research
Q Prime / Quantitative / Value Model
1) Deep Value
2) EPS Surprises
3) EPS Revisions
4) 6-month returns
For Financial Professional Use Only Samuel Kunz, CFA, MFTA - Strategy and Research
Q Prime / Quantitative / Value Model
Top Decile S & P Russell Q Prime
500 1000 Universe Value Model
Full Year 1999 19.53% 19.46% 18.90% 22.07%
Full Year 2000 -10.14% -8.84% 11.67% 20.10%
Full Year 2001 -13.04% -13.59% 3.59% 22.78%
Full Year 2002 -23.37% -22.94% -16.16% -22.30%
Full Year 2003 26.38% 27.54% 43.00% 87.52%
2004q1 1.30% 4.74% 6.53%2004q2 1.30% 1.71% 1.34%
Half Year 2.60% 7.96%
Annual Rate Return 13.10% 27.02%
For Financial Professional Use Only Samuel Kunz, CFA, MFTA - Strategy and Research
Technical/Timing
› Don Hahn Long/Intermediate-term
› DeMark Overbought/Oversold
› Oscillators Momentum
› Pattern Recognition Bar charts,
candlesticks, P&F
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