Under Armour

100 Pages·2017·4.14 MB·English

by  Thomas Palmerton

Advisory Board Presentation
AIM XLV | December 4, 2017
Agenda
Course Overview
Economic Outlook
Security Analysis
Portfolio Performance
AIM XLV Review
Concluding Remarks
AIM XLV
Course Overview
Fundamentals
Investment Philosophy and Policies
Analyst Responsibilities
AIM XLV
Course Overview: Fundamentals
Course Objectives Analyst Selection
• Blends traditional academic objectives with the • Undergraduates submit a resume, transcript,
practical experience of hands-on investment and essay detailing their desires and
management qualifications to participate in the course
• Provide students with a thorough grounding in
• Analysts are selected based on academic
the portfolio management process
performance, professional experience, and
• Enhance each student’s ability to effectively other relevant criteria
communicate their approach and analyses
leading to their investment recommendations
Methodology
• The new AIM class inherits the approximately $13mm portfolio handed over by the previous class
• Each analyst conducts and presents investment analyses for an existing portfolio stock
• Analysts then cover a stock of their choice to be considered for addition to the portfolio
• Finally, the class votes on the composition of the new portfolio based on each analyst’s final
recommendation
AIM XLV
Course Overview: Investment Philosophy and Policies
Individual Philosophy Investment Constraints
• Outperform the S&P 500 over the long-term • Liquidity: Investments limited to common
equities
• Other benchmarks include the Russell
2000 & the HBI Index (65% S&P 500,
• Time Horizon: 3-5 year outlook
35% Russell 2000)
• Bottom-up approach, accompanied by top-
• Laws & Regulation: “Prudent Person Rule”
down consideration
• Make well-researched trade decisions that
• Tax Considerations: Not a constraint for the
contribute to the growth of the portfolio’s
fund given its tax-exempt status
value for the use of future classes
Investment Guidelines AIM XLV Portfolio Composition
• Only common equities traded on major U.S.
Mid/Small
exchanges
-cap 27%
• Avoid companies whose ethics are not
consistent with those of the University (i.e.
abortifacients, birth control, tobacco, etc.)
• Target allocation: 35% Small & Mid-Cap, 65%
Large Cap (with a -/+ 10% boundary)
Large-cap
• One stock should not exceed over 10% of the
73%
portfolio
AIM XLV
Course Overview: Analyst Responsibilities
Individual Responsibilities Analyst Reports
• In-depth research and coverage of two stocks • Company Background
• Effective communication of findings to peers
• Fundamental Analysis
• Completion of various analyst reports and
group projects • Earnings Forecast
• Staying up to date on the market and all stocks
• Beta Forecast
in the portfolio
• Each class, a student is assigned as “CIO”; • Technical Analysis
responsibilities include a market update and
• Intrinsic Valuation
organization of the class period
Group Projects Portfolio Management
• Industry / Sector Analysis
• Economic Analysis
Inherited AIM XLV
Portfolio Additions
• Portfolio Performance
50% 50%
• Newsletter & Webpage
AIM XLV
Economic Outlook
Equity Market Bull Run
Rising Rates
Soft Wage Growth
Slow Labor Supply Driving Low Unemployment
Record Consumer Confidence
Rising Personal Consumption
Growing Credit, Low Savings
Commodities
Summary
AIM XLV
Economic Outlook: Equity Market Bull Run
Global Equity Indices What is Happening
400%
 Investors searching for
300% higher yields in global low
rate environment
200%
 Newly wealthy in emerging
100%
markets looking for places
to put money
0%
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015  Recent bull run
-100%
MSCI World Index S&P 500 DJIA
Daily Forward P/E for S&P 500 Implications
20x  High correlations –
Currently at 18.36x
18x everything up and to the
right
16x
 Difficult to generate
14x
abnormal returns
12x
 Heightened importance of
10x Low of 9.45xon focusing on fundamentals
November 20, 2008
8x
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: CapitalIQ
AIM XLV
Economic Outlook: Rising Rates
US and ECB Rates Over Time
7%
6%
5%
4%
3%
2%
1%
0%
1995 1998 2000 2003 2005 2007 2010 2012 2015 2017
US Federal Funds Rate ECB Rates
US Inflation Current Events
5%
• President Trump announces nomination of
4%
Jerome Powell to Federal Reserve Chair
3%
Fed Target: 2%
2%
• Gradual rate hikes and balance sheet reduction
1%
expected
0%
2010 2011 2013 2014 2015 2017
• Tax changes remain in state of uncertainty
US CPI US CPI Less Food & Energy
While rates have been at historical lows since the recession due to low inflation and wage growth,
improvements in these areas along with fiscal policy likely to create rate increases in the near future.
Sources: Bloomberg, Federal Reserve Bank of Atlanta
AIM XLV
Economic Outlook: Soft Wage Growth
Wage Growth (Nominal)
5%
4%
3.4%
3%
2%
1%
0%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Wages have continued to grow, but they have not reached pre-recession growth levels.
Source: Federal Reserve of Atlanta
AIM XLV