VIEWS: 12 PAGES: 30 POSTED ON: 5/18/2012
TtinityUniversityStudentManage dFundTrusteeReportTtinityUniv ersityStudentManagedFundTrust eeReportTtinityUniversityStude ntManagedFundTrusteeReportTt inityUniversityStudentManagedF undTrusteeReportTtinityUnivers ityStudentManagedFundTrustee ReportTtinityUniversityStudent SMF Annual Investment Report ManagedFundTrusteeReportTtin 2nd & 3rd Quarters – 2011 ityUniversityStudentManagedFu 11/7/2011 ndTrusteeReportTtinityUniversi tyStudentManagedFundTrusteeR eportTtinityUniversityStudentM anagedFundTrusteeReportTtinit yUniversityStudentManagedFun SMF Investment Report Q2 &Q3 2011 Page 1 Table of Contents Introduction Foreword ....................................................................................................................................... 3 Fall 2011 Portfolio Managers .................................................................................................. 4-12 SMF Historical Cash Flows ........................................................................................................ 13 Portfolio Performance Transaction History – Purchases: Q2 & Q3 2011 ...................................................................... 14 Transaction History – Sales: Q2 & Q3 2011 .............................................................................. 15 Portfolio Performance: Q4 2008-Q3 2011 ................................................................................. 16 Portfolio Performance Since Inception ...................................................................................... 17 Unrealized Gains and Losses: Q2 & Q3 2011............................................................................ 18 Fund Allocation SMF vs. S&P Sector Holdings: 9/30/2011 ................................................................................. 19 SMF vs. S&P Sector Holdings Variation ................................................................................... 20 Portfolio Allocation: 9/30/2011 .................................................................................................. 21 Portfolio Allocation by Market Cap: 9/30/2011 ......................................................................... 22 Risk Analysis .............................................................................................................................. 23 Appendix SMF Investment Policy ......................................................................................................... 24-26 SMF Code of Ethics .............................................................................................................. 27-28 The Bottom Line .................................................................................................................... 29-30 SMF Investment Report Q2 &Q3 2011 Page 2 Foreword Upon entering the first class period of the Student Managed Fund 2011, students were universally aware of the volatility and uneasiness that have been reflected in the market over the last several years. As new investors, our class has been given the means and the direction to excel in the environment of depressed prices and significant opportunities. Dr. Philip Cooley, the professor and co-founder of the Student Managed Fund, continues to stress the active approach to investing, as well as the level of determination necessary to meet various responsibilities aligned with the purpose of implementing a successful portfolio management strategy. Throughout the Fund’s existence, managers have fulfilled their fiduciary responsibilities and through discipline and sound investing techniques have earned steady returns on behalf of Trinity University. It is the duty of our class to enhance what has already been done and contribute to the Student Managed Fund’s already stellar reputation. After reading Peter Lynch’s One Up on Wall Street, managers were exposed to the fundamentals of bottom-up analysis as well as the mindset of a value investor, forever attempting to beat the benchmark of the S&P 500 index. Most importantly, as investors, we have studied what it means to have a contrarian approach to stock picking. Our 14th Student Managed Fund class is faced with a plethora of unique opportunities. As of March 1, 2011, the Fund’s value has been dramatically increased resulting in both, higher expectations and expanded potential for this year’s managers. Furthermore, a global orientation is now prevalent within discussions and stock reports since a large percentage of the managers this year are international students. Current SMF managers are especially enthusiastic as they strive to develop an active management strategy for the fund. At the beginning of each meeting, managers are briefed on current issues that affect the entire market as well as our specific portfolio. Each student has been assigned an existing stock in the portfolio that he or she monitors, thus, keeping up with any necessary information pertaining to company news and operations. Managers continue to undertake numerous projects every quarter in order to improve efficiency in decision making and enhance classroom procedures. Projects may vary from simple sell reports to more detailed analyses of current issues or opportunities that inform the work of the entire class. It is the goal of each student manager to combine strict adherence to the SMF Investment Policy with diligent research and clarity of thought, to provide superior returns relative to the S&P 500 index. We passionately pursue the Fund’s mission and strive to preserve and enhance the monetary value of the assets allocated by the Trustees of Trinity University. Finally, as the managers of the Trinity University Student Managed Fund we would like to express our sincere gratitude to the Board of Trustees and Dr. Philip Cooley for providing the managers with this unique opportunity to extend the learning experience beyond the classroom, as well as for offering students a chance to develop a real world understanding of money management that distinguishes this group from those in all other undergraduate programs. On behalf of the Student Managed Fund Class of 2011-2012, Nino Naridze Brian Pabian Ben Smith SMF Investment Report Q2 &Q3 2011 Page 3 Fall 2011 Portfolio Managers Lloyd Bolton Hometown: Houston, TX Major(s): Finance, History Dream Job: Intelligence Officer, USMC Career plans: USMC, finished OCS, commission as a 2nd lieutenant after graduation this year. Favorite Investment Quote: "I never let my schooling interfere with my education." - Mark Twain Daniel Kim Hometown: Sao Paulo, Brazil Major(s): Business Administration – Finance Dream Job: Sports Team Owner (preferably basketball or soccer) Plans after Trinity: Return to Brazil and hopefully work with public infrastructure development or the import-export business. Favorite Investment Quote: "Risk comes from not knowing what you're doing." - Warren Buffett Peter Philpott Hometown: London, England Major(s): Business Administration – Finance Dream Job: Fund Manager Plans after Trinity: Plan to return to London after graduation to work. Favorite Investment Quote: "October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August, and February." SMF Investment Report Q2 &Q3 2011 Page 4 Fall 2011 Portfolio Managers Kyle Porter Hometown: Albuquerque, NM Major(s): Finance and Accounting Dream Job: Own and operate a chain of sports specific gyms. Plans after Trinity: I plan to have an internship this upcoming summer in an area of finance, preferably something that is involved in buying and selling stocks. Favorite Investment Quote: "Buy low, sell high." Dustin Nelson Hometown: Houston, TX Major(s): Accounting and Finance (major) Sports Mgmt (minor) Dream Job: Venture capitalist or CEO of a video gaming league/enterprise Plans after Trinity: Receive a Master's in Accounting or Finance after I determine my path of interest. Favorite Investment Quote: "The three most important things when evaluating a company is Earnings, Earnings, Earnings." Lukas Sheridan Hometown: San Antonio, TX Major(s): Finance Dream Job: Apache pilot in the army Plans after Trinity: Becoming a 2nd lieutenant in the US Army. Favorite Investment Quote: "If you can't convince yourself 'when I'm down 25%, I'm a 'buyer', and banish forever the fatal thought 'when I'm down 25%, I'm a seller', then you’ll never make a decent profit in stocks." SMF Investment Report Q2 &Q3 2011 Page 5 Fall 2011 Portfolio Managers Ruth Easterling Hometown: Chicago, IL Major(s): Business Finance, Urban Mgmt, Minor - Spanish Dream Job: City Manager Plans after Trinity: Intern at San Antonio Chamber of Commerce. I hope to meet and work with the microfinance team at ACCION for a future position. Favorite Investment Quote: "Show me a day when the world wasn't new." - Sister Barbara Harce Rachel Garrett Hometown: Round Rock, TX Major(s): Econ and Finance Dream Job: Economic consultant for a UN agency Plans after Trinity: Find an international finance position abroad and after a couple years in the work force, attend grad school for an advanced degree international finance. Favorite Investment Quote: "A lousy cheap stock is just as risky as a lousy expensive stock." – Peter Lynch Vikram Singh Hometown: Houston, TX Major(s): Finance and Marketing Dream Job: CEO of hospitality/resort/casino Company Plans after Trinity: Looking for an internship in wealth management or mutual funds. Favorite Investment Quote: “Leave no stone unturned to help your clients realize maximum profits from their investment.” - Arthur Nielsen SMF Investment Report Q2 &Q3 2011 Page 6 Fall 2011 Portfolio Managers Michael Micheletti Hometown: Kingwood, TX Major(s): Accounting, Finance Plans after Trinity: Internship with Insperity Inc. Favorite Investment Quote: "How low can that stock price go? Zero!" – Dr. Cooley Ben Smith Hometown: Galveston, TX Major(s): Business Administration – Finance Dream Job: Manager of an investment firm Plans after Trinity: Looking for a job as a financial analyst and become CFA certified Favorite Investment Quote: “The time to buy is when there’s blood in the streets.”- Baron Rothschild Juan Pablo Villamarin Hometown: Bogota, Colombia Major(s): Econ, minor - history Dream Job: Soccer agent Plans after Trinity: Economic analyst at an investment banking institution Favorite Investment Quote: "Have the guts, the information, and sufficient time and it will be easier than chess." - Corporation Nule SMF Investment Report Q2 &Q3 2011 Page 7 Fall 2011 Portfolio Managers Kirk Craig Hometown: Syracuse, NY Major(s): Finance Dream Job: Venture capitalist Plans after Trinity: Intern at Sendero Wealth Management, I hope to find an internship this summer in NYC with a bulge bracket firm Favorite Investment Quote: "The market can stay irrational longer than you can stay solvent." Andrew Webb Hometown: Littleton, CO Major(s): Accounting, Finance, Russian Dream Job: FBI special agent Plans after Trinity: Accounting internship my senior year Favorite Investment Quote: "Invest in the company, not in the market." – Peter Lynch Daniel Ortega Hometown: Veracruz, Mexico Major(s): Finance and Math Dream Job: Investment banker or equity fund manager Plans after Trinity: Currently work with Guerrero Financial Corp Favorite Investment Quote: "Only buy something that you'd be perfectly happy to hold if the market shut down for ten years." –Warren Buffett SMF Investment Report Q2 &Q3 2011 Page 8 Fall 2011 Portfolio Managers Miroslav Getov Hometown: Pazardjik, Bulgaria Major(s): Finance and Accounting, Minor in Economics. Dream Job: Small shop owner with a substantial stock portfolio. Plans after Trinity: Looking for a summer finance internship. Favorite Investment Quote: "Just because the price goes up doesn't mean you're right. Just because the price goes down doesn't mean you're wrong." Thavindra Ekanayake Hometown: Colombo, Sri Lanka Major(s): Accounting and Finance; Minor- Economics. Dream Job: Work with the world bank, ADB (Asian Development Bank) or CFO with a major firm. Plans after Trinity: I worked with a stockbroker firm this summer back home and loved it! I am looking to get an internship this summer focusing on accounting. Favorite Investment Quote: "The best time to sell stocks is never." – Warren Buffet Juan Leon Hometown: Bogota, Colombia Major(s): Economics and Political Science. Dream Job: Head my own investment firm. Plans after Trinity: CFA candidate, investment banking. Favorite Investment Quote: “I don’t think there is any other quality so essential to success of any kind as the quality of perseverance. It overcomes almost everything, even nature.” – John D. Rockefeller SMF Investment Report Q2 &Q3 2011 Page 9 Fall 2011 Portfolio Managers Ashley Snow Hometown: Broomfield, Colorado Major(s): Business (Accounting) and French. Dream Job: Be financially independent Plans after Trinity: Auditing and Deloitte Favorite Investment Quote: “In investing money, the amount of interest you want should depend on whether you want to eat well or sleep well.” – J. Kenfield Morley Nino Naridze Hometown: Tbilisi, Georgia Major(s): B.S. in Finance and Management; B.A. in Russian; Minor: Speech/Communication. Dream job: Medical Malpractice Law Plans after Trinity: Law School Favorite Investment Quote: “Choosing a stock is like choosing a wife…so many things to consider.” – Dr. Hubbard Brian Pabian Hometown: Bedford, Massachusetts Major(s): B.S. in Business (Finance) Dream job: Boston Red Sox 2nd Baseman Plans after Trinity: Career in investments/corporate finance. Favorite Quote: “We simply attempt to be fearful when others are greedy and to be greed only when others are fearful.” – Warren Buffett SMF Investment Report Q2 &Q3 2011 Page 10 Fall 2011 Portfolio Managers Neha Panjwani Hometown: Sugar Land, TX Major(s): Business (Accounting and Finance) Dream Job: Investment banking Plans after Trinity: Auditing at PWC Favorite Investment Quote: “Logic is the subject that’s helped me the most in picking stocks, if only because it taught me to identify the peculiar illogic of Wall Street.” – Peter Lynch Jake Reynolds Hometown: Austin, TX Major(s): Biochemistry and Molecular Biology; minor in Business Dream Job: Own a private medical practice Plans after Trinity: Med school Favorite Investment Quote: “You only have to win 60% of the time to win big overall.” – Peter Lynch Steven Mickey Hometown: Dallas, TX Major(s): Business (Finance and Marketing); minors in Economics and Spanish Dream Job: Investment banker Plans after Trinity: Investment banking Favorite Investment Quote: “Beware of geeks bearing formulas.” – Warren Buffett SMF Investment Report Q2 &Q3 2011 Page 11 Fall 2011 Portfolio Managers 2011 - 2012 Student Managed Fund SMF Investment Report Q2 &Q3 2011 Page 12 SMF Historical Cash Flows Date Cash Flow I. July 1, 1998 $500,000 II. September 15, 1999 (2,000) December 1, 1999 (2,000) March 1, 2000 (2,000) III. March 4, 2005 100,000 April 18, 2005 100,000 April 25, 2005 157,650 June15, 2005 7,602 IV. March 1, 2011 1,533,445 V. Principal Value of Cash Flows $2,359,252 Portfolio Value as of September 30, 2011 2,614,5251 Dollar Gain $255,273 Percentage Gain 10.82% The table above illustrates the cash inflows and outflows of the Student Managed Fund since its inauguration in July of 1998. Each of the five sections in the cash flow chart is described as follows: Section I represents the initial investment of $500,000 by the Trinity University Board of Trustees. Section II shows the quarterly payments of $2,000 paid to Trinity University as a fee for maintaining operation of the fund, set forth by the Trinity University Administration. After the third payment, it was deemed unnecessary to continue such transactions, and thus the quarterly payments of $2,000 ceased. Section III depicts periodic injections, totaling $365,252 into the fund following the acceptance of the proposal to bring the total value of the Student Managed Fund to $1,000,000. Section IV represents a lump sum cash injection of $1,533,445 after a proposal by the Student Managed Fund to bring the fund’s total to $3,000,000 that was accepted by the Trinity University Board of Trustees. Section V sums the cash flows, compares them to the current portfolio value at the end of Q3 for 2011, and calculates the percentage gain over the 13 years since the fund’s inception. 1 The value includes $17,387.28 in cash SMF Investment Report Q2 &Q3 2011 Page 13 Transaction History – Purchases: Q2 & Q3 2011 April 6, 2011 o Caribou Coffee Inc. (COM) April 20, 2011 Purchased 12,500 shares at $10.09 per share o McCormick & Co Inc. (MKC) Purchased 3,000 shares at $47.82 Principal: $126,125 Reasons for purchase: Principal: $143,460 Reasons for purchase: Second largest retail coffee house in the nation Excellent return on equity Strong brand equity Superior dividend growth Large growth potential Strong international presence April 6, 2011 o DIRECTV (DTV) Purchased 3,000 shares at $47.33 per share April 20, 2011 Principal: $141,990 o Nike Inc. (NKE) Reasons for purchase: Purchased 1,800 shares at $79.33 Strong growth and market share in Principal: $142,794 Latin America Reasons for purchase: Economies of scale and limited Overreaction to recent infrastructure development needs earnings report creates good Aggressive share repurchase buy opportunity program Opportunities for growth in apparel April 11, 2011 Strong management team o VF Corp (VFC) Purchased 1,500 shares at $98.63 per share Ticker # of Price $ Paid Date Principal: $147,945 Shares Reasons for purchase: COM 12,500 $10.09 $126,125 4/6/11 Leading Brands DTV 3,000 47.33 141,990 4/6/11 Strong international VFC 1,500 98.63 147,945 4/11/11 opportunities MKC 3,000 47.82 143,460 4/20/11 Good cash flow as well as steady dividend growth NKE 1,800 79.33 142,794 4/20/11 SMF Investment Report Q2 &Q3 2011 Page 14 Transaction History – Sales: Q2 & Q3 2011 April 20, 2011 May 20, 2011 o Sold 2600 shares of SPDR S@P 500 ETF o Sold 4700 shares of Xerox Corp. (XRX) at (SPY) at $131.85 $10.04 per share Realized Gain: $17,456 Realized Loss: ($5,380) April 28, 2011 May 23, 2011 o Sold 1500 shares of NASDAQ OMX Group o Sold 2300 shares of Diana Shipping Inc. (DSX) Inc. (NDAQ) at $27.12 per share at $11.31 per share Realized Loss: ($21,411) Realized Loss: ($10,476) May 19, 2011 May 23, 2011 o Sold 12,500 shares of Caribou Coffee Inc. o Sold 800 shares of TEVA Pharmaceutical (COM) at $10.27 per share (TEVA) at $49.73 per share Realized Gain: $2,278 Realized Loss: ($9,181) May 20, 2011 May 23, 2011 o Sold 900 shares of Research in Motion o Sold 300 shares of VISA Inc. (V) at $80.00 per (RIMM) at $43.73 per share share Realized Loss: ($15,498) Realized Loss: ($82) May 20, 2011 May 27, 2011 o Sold 650 shares of Toyota Motor Corp. o Sold 900 shares of Stericycle Inc. (SRCL) at (SPON) at $81.36 per share $87.72 per share Realized Gain: $1,924 Realized Gain: $32,827 Company Ticker Date # of Shares $Price Gain/Loss SPDR S@P 500 April 20, 2011 2600 NASDAQ OMX Group Inc. April 28, 2011 1500 Caribou Coffee Inc. May 19, 2011 12500 Research in Motion May 20, 2011 900 Toyota Motor Corp. May 20, 2011 650 Xerox Corp. May 20, 2011 4700 Diana Shipping Inc. May 23, 2011 2300 TEVA Pharmaceutical May 23, 2011 800 VISA Inc. 300 - Stericycle Inc. 900 Total Realized Loss - TOTAL REALIZED LOSS FROM SALES OF STOCK: $7,543 SMF Investment Report Q2 &Q3 2011 Page 15 Portfolio Performance: Q4 2008 - Q3 2011 SMF Performance vs. S&P 500 20 15 10 5 0 -5 -10 -15 -20 -25 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 SMF % Return S&P 500 % Return SMF Percentage Return vs. S&P 500 SMF% Return S&P 500 % Return Relative Performance Q4 2008 -20.05 -21.95 1.9 Q1 2009 -2.09 -11.01 8.92 Q2 2009 15.58 15.93 -0.35 Q3 2009 13.36 15.6 -2.24 Q4 2009 6.26 6.04 0.22 Q1 2010 4.75 5.39 -0.64 Q2 2010 -12.24 -11.43 -0.57 Q3 2010 10.64 11.29 -0.65 Q4 2010 11.38 10.76 0.62 Q1 2011 5.01 5.96 -0.95 Q2 2011 0.31 0.10 0.21 Q3 2011 -12.92 -13.87 0.95 SMF Investment Report Q2 &Q3 2011 Page 16 Portfolio Performance Since Inception SMF Performance vs. S&P 500 40.00 30.00 20.00 10.00 0.00 -10.00 -20.00 -30.00 -40.00 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 SMF % Return S&P 500 % Return SMF Percentage Return vs. S&P 500 SMF % Return S&P 500 % Return Relative Performance 1998* 5.64 9.23 -3.59 1999 24.01 19.40 4.61 2000 -13.16 -11.69 -1.47 2001 -8.25 -10.31 2.06 2002 -12.82 -23.37 10.55 2003 20.37 28.31 -7.94 2004 15.50 10.88 4.62 2005 4.70 4.90 -0.2 2006 14.65 15.43 -0.78 2007 10.02 5.69 4.33 2008 -32.35 -37.01 4.66 2009 36.31 26.46 9.85 2010 13.29 15.06 -1.77 * SMF returns in 1998 only include Q3 and Q4 results. SMF Investment Report Q2 &Q3 2011 Page 17 Unrealized Gains and Losses: Q2 & Q3 2011 Company Ticker Shares ($) Price 3/31/11 Value ($) 3/31/11 * 9/30/11 Price ($) 9/30/11 Value ($) Gain/Loss ($) % Gain/Loss Alcoa Inc AA 3,000 17.66 $ 52,980 9.57 $ 28,710 $ -24,270 -45.81% Ball Corp BLL 2,000 35.85 71,700 31.02 62,040 -9,660 -13.47 Cerner Corp CERN 2,000 111.20 111,200 68.52 137,040 25,840 23.24 Corn Prods Intl Inc CPO 1,400 51.82 72,548 39.24 54,936 -17,612 -24.28 Curtiss-Wright Corp CW 500 35.14 17,570 28.83 14,415 -3,155 -17.96 DIRECTV Com ** DTV 3,000 NA NA 42.27 126,810 -15,180 -10.69 FactSet Research Sys Inc FDS 800 104.73 83,784 88.97 71,176 -12,608 -15.05 Goldman Sachs Group Inc GS 800 158.60 126,880 94.55 75,640 -51,240 -40.38 Google Inc GOOG 200 586.76 117,352 515.04 103,008 -14,344 -12.22 McCormick & Co Inc ** MKC 3,000 NA NA 46.16 138,480 -4,980 -3.47 Mosaic Co MOS 1,000 78.75 78,750 48.97 48,970 -29,780 -37.82 Nike Inc ** NKE 1,800 NA NA 85.51 153,918 11,124 7.79 Occidental Petroleum Corp OXY 1,400 104.49 146,286 71.50 100,100 -46,186 -31.57 Oracle Corp ORCL 2,000 33.43 66,866 28.74 57,480 -9,386 -14.04 Quest Diagnostic Inc DGX 600 57.72 34,632 49.36 29,616 -5,016 -14.48 Rio Tinto RIO 900 71.12 64,008 44.08 39,672 -24,336 -38.02 VF Corp ** VFC 1,500 NA NA 121.52 182,280 34,335 23.21 Wells Fargo & Co WFC 400 88.67 12,684 24.12 9,648 -3,036 -23.94 Yum Brands Inc YUM 1,100 51.38 56,518 49.39 54,329 -2,189 -3.87 S&P Depositary Receipts SPY 9,800 132.59 1,113,756 113.15 1,108,870 -4,886 -0.44 Cash NA 404,417 NA 17,387 NA NA Totals Q2 & Q3 * $ 3,208,120 $ 2,614,525 $ -206,565 -6.44% * The total portfolio value on 3/31/2011 accounts for the later acquisitions of DTV, MKC, NKE, and VFC, giving the portfolio a higher value at 3/31/11. **Later acquisitions are shown in the table below: Company Ticker Acquisition Price ($) Shares Acquired Amount Paid Acquisition Date DIRECTV Com 3,000 April 6, 2011 McCormick & Co Inc. 3,000 April 20, 2011 Nike 1,800 April 20, 2011 VF Corp 1,500 April 11, 2011 SMF Investment Report Q2 &Q3 2011 Page 18 SMF vs. S&P Sector Holdings*: 9/30/2011 Industrials, 4.88% % of Portfolio Sector % of Port. Information Healthcare, Technology Consumer Discretionary 24.37% 11.17% Financials, 8.86% Consumer Staples 12.36% 9.16% Materials, Energy 8.92% 8.39% Financials 9.16% Health Care 11.17% Consumer Industrials 4.88% Discretionary, Utilites, Energy, 1.53% Information Technology 17.30% 24.37% 8.92%, Materials 8.39% Telecom. Services 2.79% Utilities 1.53% Consumer Telecom. Cash 0.67% Staples, 12.36% Services, 1.23% % of S&P Holdings Industrials Sector %of S&P Financials Health Care 11.3% 10.2% Consumer Discretionary 10.8% 13.9% Information Consumer Staples 11.7% Technology Energy 12.0% 19.9% Financials 13.9% Health Care 11.3% Industrials 10.2% Energy 12.0% Materials 3.6% Information Technology 19.9% Materials 3.6% Telecom. Telecommunication Services 2.9% Services 2.9% Utilities 3.6% Utilities 3.6% Consumer Consumer Discretiona Staples 10.8% 11.7% * The SMF portfolio has 42.41% invested in SPYDERs; the portfolio pie chart accounts for the SPYDER’s weighted sector holdings in the S&P 500. SMF Investment Report Q2 &Q3 2011 Page 19 SMF vs. S&P Sector Holdings Variation Sector % of Portfolio % of S&P Holdings Variation Consumer Discretionary 24.37 10.80 13.57 Consumer Staples 0.33 11.70 -11.37 Energy 8.92 12.00 -3.08 Financials 9.16 13.90 -4.74 Health Care 11.17 11.30 -0.13 Industrials 4.88 10.20 -5.32 Information Technology 17.30 19.90 -2.60 Materials 8.39 3.60 4.79 Telecommunication Services 1.23 2.90 -1.67 Utilities 1.53 3.60 -2.07 25.00 20.00 15.00 10.00 5.00 0.00 % of Portfolio % of S&P Holdings % Difference Variation Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary -15.00 -10.00 -5.00 0.00 5.00 10.00 15.00 SMF Investment Report Q2 &Q3 2011 Page 20 Portfolio Allocation: 9/30/2011 Company Ticker Sector Industry Value ($) % of Portfolio DIRECTV DTV Consumer Discretionary Cable & Satellite $126,810 4.85% Nike Inc. NKE Consumer Discretionary Footwear 153,918 5.89 VF Corp. VFC Consumer Discretionary Apparel, Accessories & Luxury Goods 182,280 6.97 Yum Brands Inc. YUM Consumer Discretionary Restaurants 54,329 2.08 Corn Prods Intl Inc. CPO Consumer Staples Agricultural Products 54,936 2.10 McCormick & Co Inc. MKC Consumer Staples Packaged Foods & Meats 138,480 5.30 Occidental Petroleum Corp. OXY Energy Integrated Oil & Gas 100,100 3.83 Goldman Sachs Group Inc. GS Financials Investment Banking & Brokerage 75,260 2.88 Wells Fargo & Co. WFC Financials Diversified Banks 9,648 0.37 Cerner Corp. CERN Health Care Health Care Technology 137,040 5.24 Quest Diagnostic Inc. DGX Health Care Health Care Services 29,616 1.13 Curtiss-Wright Corp. CW Industrials Aerospace & Defense 14,415 0.55 FactSet Research Sys Inc. FDS Information Technology Application Software 71,176 2.72 Google Inc. GOOG Information Technology Internet Software & Services 103,008 3.94 Oracle Corp. ORCL Information Technology Systems Software 57,480 2.20 Alcoa Inc. AA Materials Aluminum 28,710 1.10 Ball Corp. BLL Materials Metal & Glass Containers 62,040 2.37 Mosaic Co. MOS Materials Fertilizers & Agricultural Chemicals 48,970 1.87 Rio Tinto RIO Materials Diversified Metals & Mining 39,672 1.52 S&P Depositary Receipts SPY 1,108,870 42.41 Cash 17,387 0.67 Total Assets $ 2,614,525 100.00% SMF Investment Report Q2 &Q3 2011 Page 21 Portfolio Allocation by Market Cap*: 9/30/2011 Company Ticke r Type ** Sector Value ($) % of Portfolio Curtiss-Wright Corp CW Small Cap Industrials $ 14,415 0.55% Ball Corp BLL Middle Cap Materials 62,040 2.37 Corn Prods Intl Inc CPO Middle Cap Consumer Staples 54,936 2.10 FactSet Research Sys Inc FDS Middle Cap Information Technology 71,176 2.72 McCormick & Co Inc MKC Middle Cap Consumer Staples 138,480 5.30 Quest Diagnostic Inc DGX Middle Cap Health Care 29,616 1.13 Alcoa Inc AA Large Cap Materials 28,710 1.10 Cerner Corp CERN Large Cap Health Care 137,040 5.24 DIRECTV Com DTV Large Cap Consumer Discretionary 126,810 4.85 Goldman Sachs Group Inc GS Large Cap Financials 75,260 2.88 Mosaic Co MOS Large Cap Materials 48,970 1.87 Nike Inc NKE Large Cap Consumer Discretionary 153,918 5.89 Occidental Petroleum Corp OXY Large Cap Energy 100,100 3.83 VF Corp VFC Large Cap Consumer Discretionary 182,280 6.97 Yum Brands Inc YUM Large Cap Consumer Discretionary 54,329 2.08 S&P Depositary Receipts SPY Large Cap N/A 1,108,870 42.41 Google Inc GOOG Mega Cap Information Technology 103,008 3.94 Oracle Corp ORCL Mega Cap Information Technology 57,480 2.20 Rio Tinto RIO Mega Cap Materials 39,672 1.52 Wells Fargo & Co WFC Mega Cap Financials 9,648 0.37 Cash N/A N/A N/A 17,387 0.67 Total Assests $ 2,614,525 100% Portfolio by Market Cap Market Cap % of Portf. Small Cap Middle Cap Large Cap Mega Cap Cash Small Cap 0.55% Middle Cap 13.62% 77.12% Large Cap 77.12% Mega Cap 8.03% Cash 0.67% 13.62% 8.03% **Type Definition Small Cap $ Under 2 Bil Middle Cap $ 2 to 10 Bil 0.55% Large Cap $10 to 100 Bil 0.67% Mega Cap $Over 100 Bil * Market Capitalization – Reflects the size of the company through the market dollar value of its total outstanding shares. SMF Investment Report Q2 &Q3 2011 Page 22 Risk Analysis Company Ticker Market Value % of Portfolio Beta2 Alcoa AA $ 28,710 1.10% 1.98 Ball Corp. BLL 62,040 2.37 0.68 Cerner Corp. CERN 137,040 5.24 0.90 Corn Products International Inc. CPO 54,936 2.10 1.17 Curtiss-Wright Corp. CW 14,415 0.55 1.18 Quest Diagnostic Inc. DGX 29,616 1.13 0.59 DIRECTV Com. DTV 126,810 4.85 0.88 FactSet Research Systems Inc. FDS 71,176 2.72 1.22 Google GOOG 103,008 3.94 1.01 Goldman Sachs Group Inc. GS 75,640 2.89 1.32 McCormick & Co Inc. MKC 138,480 5.30 0.46 Mosaic Co. MOS 48,970 1.87 1.35 Nike Inc. NKE 153,918 5.89 0.92 Oracle Corp. ORCL 57,480 2.20 1.05 Occidental Petroleum Corp. OXY 100,100 3.83 1.07 Rio Tinto RIO 39,672 1.52 1.63 VF Corp. VFC 182,280 6.97 0.96 Wells Fargo & Co. WFC 9,648 0.37 1.47 Yum Brands Inc. YUM 54,329 2.08 0.94 S&P Depositary Receipts SPY 1,108,870 42.41 1.00 Cash 17,387 0.67 0.00 Totals $ 26,14,525 100.00% Market Weighted Beta 0.986 Beta is a measure of the sensitivity of a security’s returns in relation to the stock market as a whole, with the market beta by definition equaling 1.00. The market weighted beta of the SMF portfolio is 0.986, indicating that SMF portfolio is slightly less volatile than the market as a whole. 2 The beta was obtained by averaging the beta given by Google Finance, Yahoo Finance, Value line, and Standard & Poor’s SMF Investment Report Q2 &Q3 2011 Page 23 SMF Investment Policy I. Objectives To earn a rate of return, calculated on the entirety of the fund, that is superior to the market benchmark, defined as the S&P 500 Index, in each one-year, three-year, and five-year period. To preserve and enhance the monetary value of those assets allocated by the trustees of Trinity University for future classes to manage. To Manage the Fund in the context of portfolio management rather than as a collection of individual stocks. II. Securities The portfolio shall be invested exclusively in U.S. listed equity securities, with the exception of a fractional amount of cash invested in money market mutual fund. The portfolio shall be diversified with respect to exposure to different economic sectors, industry segments, and individual stocks. Managers will be encouraged not to diversify beyond their own areas of expertise. The portfolio will not be governed by specific diversification guidelines; however, the majority of the portfolio will be invested in well-established, large and mid-capitalization corporations. Puts, calls, and future contracts, as well as short selling, and margin buying will not be allowed. Tax-exempt securities will not be acceptable investments, because the fund is not subject to taxation. Decisions concerning individual security selection, size and number of industries or holdings will be left to managers’ discretion subject to normal standards of fiduciary prudence. SMF will consider the relationship between governments and potential investments. SMF will screen investments in order to avoid investment relationships with governments that engage in immoral practices, such as human rights violations or genocide. Managers shall maintain a long-term perspective when selecting securities to be consistent with the long-term investment horizon of the Trinity University endowment fund. At the time of purchase, no more than five percent of the fair market value of the fund shall be invested in any one security. The fund may continue to hold securities that appreciate above this percentage; however, once a security comprises more than fifteen percent of the fair market value of the fund, the equity position will be reevaluated. Security sell recommendations shall be based on a fundamental analysis that suggests that the continued holdings of the security presents unacceptable risk, that anticipated returns have been achieved, that a continued position in the security is no longer in conformance with overall portfolio risk and return objectives, or that liquidation of the position presents a unique profit-taking opportunity. SMF Investment Report Q2 &Q3 2011 Page 24 SMF Code of Ethics - Continued III. Reports and Responsibilities New investment consistent with the portfolio strategy will be identified, analyzed, discussed and voted upon by the student managers. Each semester managers will be broken into teams. Each team will be required to prepare and present two security reports per semester. Security reports shall consist of an oral proposal and written summary of key decision points supported by appropriate research. A copy of the written report will be handed out one or two class sessions before the oral presentation. Managers shall digest the content of the report and obtain any relevant information to contribute to the oral presentation in order for the managers to make an informed investment decision. Upon completion of the presentation, teams shall make an objective purchase recommendation consisting of the following: number of shares and target price. If upon any reasonable circumstances a team finds their suggested stock unfit for purchase before the presentation, the team may make a “Do Not Buy” recommendation after the oral report. Unless timing is urgent, a vote to add a new security to the portfolio will not be made on the same day as the presentation to ensure that the vote reflects the quality of the stock rather than the quality of the presentation. A select group of mangers will make a written quarterly formal report to the Trinity University Board of Trustees in November, February, and May of each year, as well as an oral report in February. During summer and winter breaks, management of the fund will be the responsibility of a team of managers and/or the professor. SMF Investment Report Q2 &Q3 2011 Page 25 SMF Investment Policy- Continued IV. Voting The managers may vote on a “Do NOT Buy” recommendation: 1) if any of the managers makes a suggestion to vote AND 2) if at least one other manager subsequently seconds the proposal. If the voting suggestion for a “Do Not Buy” recommendation passes, the number of shares, the target price, as well as a brief list of reasons to buy shall be presented by the joint efforts of the proposing parties on the voting day. Any investment decision (buy or sell) will be decided by secret ballot with the managers and professor each receiving one vote. All investment decisions must be approved by a two-thirds majority of a quorum of class members present during a class session. A quorum is seventy-five percent of the class members. The professor will retain veto power over all investment decisions; this veto is to be used sparingly. Any member may cast a vote of indifference; the number of votes of abstention will reduce the number of votes taken into account. Absentee voting will be allowed in those circumstances approved by the professor and managers. Once the managers reach an investment decision, the professor will make the necessary arrangements to execute the transaction. Class members may, at any time, propose amendment to this investment policy. Last Revision: November 1, 2011 SMF Investment Report Q2 &Q3 2011 Page 26 SMF Code of Ethics I. Vision The primary vision of the Trinity University Student Managed Fund will be to provide students with a comprehensive learning experience to develop and practice portfolio management styles and valuation techniques. The course will emphasize a thorough analysis of securities based on fundamentals and prudent management of the equity portfolio. II. Managers of the fund shall: Act with integrity, competence, dignity, and ethics when dealing with Trinity University, the public, and fellow members. Practice and encourage others to practice in an ethical manner that will reflect favorably on other members and the group. Strive to maintain and improve their competence and the competence of others in the group. Use reasonable care and exercise independent and unbiased judgment. Make every attempt to remain well informed and up to date on relevant information. Hold themselves and others accountable for maximum efforts when completing assignments. III. Standards of Conduct Knowledge of Policy o Members shall maintain knowledge of and comply with the Investment Policy as established by this fund. Ethical Conduct o Members shall not engage in any conduct involving dishonesty, fraud, deceit, or misrepresentation or commit any act that reflects adversely on their honesty, trustworthiness, or competence. Prohibition Against Plagiarism o Members shall not copy, or use in substantially the same form as the original, material prepared by another without acknowledging and identifying the name of the author, publisher, or source of such material. o Members may use without acknowledgement factual information published by recognized financial and statistical reporting services or similar sources. SMF Investment Report Q2 &Q3 2011 Page 27 SMF Code of Ethics - Continued III. Standards of Conduct - Continued Reasonable Basis and Representation o Members shall exercise diligence and thoroughness in making investment recommendations or in taking investment actions. o Members shall have a reasonable and adequate basis, supported by appropriate research and investigation, for such recommendations or actions. o Members shall make reasonable and diligent efforts to avoid any material misrepresentation in any security report or investment recommendation. Security Reports o Members shall use reasonable judgment regarding the inclusion or exclusion of relevant factors in security reports. o Members shall distinguish between facts and opinions in security reports. Independence and Objectivity o Members shall use reasonable care and judgment to achieve and maintain independence and objectivity in making investment recommendations. Fiduciary Duties o Members must act for the benefit of Trinity University and place Trinity University’s interest before their own. Abiding by a code of ethics will be essential to the success of this endeavor. The professor will be the primary administrator of the fund through guidance and supervision of student activities. Since the Student Managed Fund will be controlled in a class setting, class members will be graded by the professor and scrutinized by their peers. It will be important to follow this Code of Ethics as closely as possible to ensure objective analysis and maximum learning. SMF Investment Report Q2 &Q3 2011 Page 28 The Bottom Line SMF Investment Report Q2 &Q3 2011 Page 29 The Bottom Line - Continued SMF Investment Report Q2 &Q3 2011 Page 30
"SMF Annual Investment Report"