FridaySeptember27thMeeting - Sites at Lafayette

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					Investment Club
September 27th, 2013
Agenda
   Market News
       Ryan McCormick
   Portfolio Restructure (Part 1)
       Peter Oberrender, Sean O’Toole and Angel Stoychev
   Buy Presentaion
       Chris Busuttil
MARKET UPDATE
 September 27th, 2013
Debt Ceiling
   The debt ceiling is a spending limit set by Congress
   U.S. spends more than it takes in forcing the
    government to issue debt
   That debt limit is currently $16.7 trillion
Debt Ceiling Pressures
   Expected to reach $16.7 trillion limit by the end of
    October
   Without raising borrowing ceiling, it will impossible
    to pay $55 billion in Social Security, Medicare,
    military payments on Nov. 1
   Stand off between Rep. and Dem.
Consequences
   Debt Ceiling not prominent due to Fed/economic
    concerns
   If U.S. does not pay debt obligations, government
    programs will be unfunded
   Expect credit downgrades on government debt
   Creates uncertainty in equity markets
Graphical Representation
J.P. Morgan Chase Lawsuit
   Justice Department officials are preparing civil
    lawsuit against J.P. Morgan Chase
   Suit is in relation to the sale of MBS from 2005-
    2007
   Latest setback for bank: fined $920 million by
    regulators for the “London Whale” trading blunder
    that cost $6 billion in losses
Settlement Potential
   CEO Jamie Dimon met with Justice Department to
    discuss potential $11 billion settlement
   Potentially pay $7 billion in penalties and another
    $4 billion to consumers
   J.P. Morgan wants to end probes
Investment Club
   Currently we have a 2% allocation in bank
Housing Market
   Buoyed by extremely low mortgage rates housing
    prices have been increasing
   Lower than pre-crises, but prices are increasing at
    the same price (slope)
   Besides Home Depot, do not own much
   Worth discussing our options
   Drawback: market appears a bit “bubbly”
PORTFOLIO RESTRUCTURE
     Pete, Sean and Angel
  Coca Cola (KO)
        Buy:
150 Shares @ $39.00
Buy Hypothesis
   Undervalued at the time
     P/E – around 15 times earnings
     Trades at a ev/ebitda multiple of 13

   Dividend yields about 3%.
   Most ratios in line with the industry average
   60% gross margins, better then the industry by
    nearly 20%.
   Need to Diversify into the Consumer Goods Market
What has happened
   Disappointed on volume growth
   Unusual seasonal weather and economic conditions hit
    European market
   Analysts are calling this an anomaly
   All other aspects of the company intact
       Operating margin slightly below forecast w/ increased marketing
        investments
       Gained share in global non-alcohol beverage market
       Strong Cash flow
       Valuation ratios are in line with competitors
   UBS High Conviction Call
   Value investment - long term
Risks
   Increased competition from Pepsi
   A trend toward health and wellness
   Downturn in Global Markets
Goldman Sachs Group Inc. (GS)
            Buy:
    50 Shares @$162.29
Solid Company With Many Services

   One of the world’s leading investment banking and
    securities firms
   Strong client relations to offset industry flux
   Clients consist of:
     Corporations
     Financial institutions

     Governments

     High net worth individuals
Fundamentals
   Industry leader with market cap of 73 Billion
   Yields a 1.23% dividend
   P/E: 10.4x
   EBITDA GS:18.73 Industry Avg. 3.07
   Profit margin beats industry avg.
       18% compared to 12%
Risks
   Capital Markets experiencing weaker recovery
   Regulations are always looming
   Actions by government greatly effect
   PWM taking less compensation
   Could be too big for its own good
JAKK’S Pacific Inc. (JAKK)
          Sell:
       165 Shares
Company
   Produces, markets and distributes toys and related
    products, pet toys, consumables and related
    products, electronics and related products, kids
    indoor and outdoor furniture, and other consumer
    products
   Trades @ $5.07 on NASDAQ
   Beta .96
   Negative margins
Struggles Hit Toys
   Negative earnings from last 3 quarters

   JAKK’s has to go out of its comfort zone to make
    ends meet

   Traditional toys are suffering

   Future is electronics
       Jakks struggles with electronics
Vestas Wind Systems (VWDRY)
       Sell 500 Shares
We Cannot Own This
   Trades on pink sheets
       One of our rules is that we are not suppose to own
        companies that trade on pink sheets
Buy 215 Shares
  Chris Busuttil
The Brands
Business Overview
   Focus on developing consumer products to provide
    market leading brands
   Company includes over 100 brand names
   Growth through:
     Geographic   Expansion
     Brand Expansion

     Acquisitions
Business Segments
 Manufacturing in ~70 factories in 16 countries
 Operations in ~40 countries
 Over 25,000 employees
 Net Sales totaled $6.7bn consisting of:
     Outdoor     Solutions- $2.7bn (40%)
         7 products with top market position
     Branded     Consumables- $1.8bn (26%)
         10 products with top market position
     Consumer      Solutions- $1.9bn (29%)
         6 products with top market position
     Process    Solutions (5%)
Organic Growth and Investment
   Target 3-5% long-term average annual organic
    growth
     Accomplish   this goal through pricing and volume:
       Brand  Leverage
       Product Innovation
       Geographic Expansion
       Retail dispersion

   $384 MM brand equity investment
     “Reinvestment”leads to innovation and product
     recognition as well as higher prices
Marmot
 Relevant market: Lifestyle apparel and equipment
  ($10 billion estimate)
 Brand development of equipment and multi-
  season apparel (non-winter)
 Retail Store expansion

 Serve broader casual lifestyle while maintaining

  technical apparel
Rawlings and Tailgating
 Expand the brand to other sports, specifically
  football
 Expand on “tailgating” experience

     Through license and marketing rights
     NFL, MLB and NCAA

 Geographic Expansion (Asia markets).
 New products = New Revenue growth

 $3.4 billion market estimate
Pet Supplies
   Expand beyond the grooming business:
     Indoor/Outdoor  bark control
     Flea & Tick products

     Remote Training & Fencing

 Improve groomer products
 Estimated market of $6 billion
Risks
   Significant debt risk ($3.8 Bn)
     Limit’smanagements ability to be flexible in
      turbulent capital markets
     Maturity:~$2 Bn of total (2013-2017)
   Macro level consumer confidence and brand
    recognition
     Lackof spending in consumer consumption directly
      impacts the bottom line
   Third party failure
          are dependent on a few key customers
     Sales
     Wal-Mart makes up 20% of revenues
Mitigates
   Dealing with debt:
     Cash   Ratio = .77
       Measures company liquidity, specifically how quickly can a
        company repay its short-term debt
       A more conservative look at liquidity, very few companies
        have a ratio above one
     Solvency   Ratio = .29
       Compares   Net Income excluding depreciation to total debt
        obligations
       Anything above 20% indicates a financially healthy
        company
Mitigates
   Macro Level consumer confidence and Revenue
    Stream:
     Brand   Equity investment ($348 MM)
       30%   of sales comes from products launched in previous
        three years
       “Go-To-Market” Initiatives
            Multi-media approach
            Point of Purchase programs (strategic locations)
Rational
   Product
     23 top market position brands and growing
     Niche products with high profit margins

   Management
                 (Yankee Candle)
     Acquisitions

     Preparing for risks

   Fundamentals
     Value   with growth potential
   Portfolio implications

				
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