LAFAYETTE COLLEGE INVESTMENT CLUB April 11 th MARKET

LAFAYETTE COLLEGE INVESTMENT CLUB April 11 th

MARKET UPDATE 4/11

Fed Worried About Low Inflation Hoping for an increase in inflation from 1% to 2% Worried about the risk of deflation Deflation could restrain firm’s investment and hiring capabilities Central Bank officials do not expect an increase until late 2015

Markets Down NASDAQ: Dropped 3. 2% to 4052 S&P 500: Economists forecast a decline in the first quarter from last year Dow Jones: Down 252 points to 16, 191

China Exports down 6. 6% on the year Imports dropped 11. 3% Shanghai Composite up 1. 4% Currency has fallen 2% against the Dollar

Europe Stoxx Europe 600 fell 0. 5% Bank of England left Benchmark unchanged as expected Greece wraps up first long term bind sale in four years to strong demand

Economic Data Jobless Benefit Claims down 32, 000 to 300, 000 Winter has kept job creation at a slow pace Continuing Unemployment claims dropped 62, 000 to 2, 776, 000 192, 000 jobs created in March

PORTFOLIO UPDATE (WITH TASTE OF SUMMER HEDGE) George Rakic & Portfolio Co.

Portfolio Update Dollar amount Information Technology Hardware $83108. 9 Sector Name Weight Benchmark 19% 18. 70% Financials $46049. 06 10% 16. 40% Health Care $77709. 3 18% 13. 40% Consumer Discretionary $75897. 3 17% 12. 20% Industrials $44536 10% 10. 70% Energy $44688. 8 10% 10. 10% Consumer Staples $35254. 26 8% 9. 60% Materials Utilities Telecommunication Services $16328. 25 0 $19492 4% 0% 4% 3. 50% 3. 00% 2. 40%

Portfolio Update Dollar amount Information Technology Hardware $83108. 9 Sector Name Weight Benchmark 19% 18. 70% Financials $46049. 06 10% 16. 40% Health Care $77709. 3 18% 13. 40% Consumer Discretionary $75897. 3 17% 12. 20% Industrials $44536 10% 10. 70% Energy $44688. 8 10% 10. 10% Consumer Staples $35254. 26 8% 9. 60% Materials Utilities Telecommunication Services $16328. 25 0 $19492 4% 0% 4% 3. 50% 3. 00% 2. 40%

Plan for upcoming weeks Get more utilities and financials Sell some Consumer Discretionary and Helath Care

Taste of Summer

Taste of Summer …hedge

What is a hedge? Fancy term for CYA strategy

How to do that? Use equities Use other financial instruments

Equities (stocks) Don’t be too invested in any specific stock Bet on stocks that don’t move with the market

Don’t be too invested in any specific stock GE GILD 4. 83% 4. 12%

SELL 100 GILD @ $65. 48 (out of 300) 250 GE @ $25. 58 (out of 900)

Utilities: S&P 500: 3% Investment Club: 0%

Buy 220 Shares at $45. 53 By Kyle Lievre

Company Summary The American Water Works Association is a company based out o New Jersey that provides drinking water and wastewater treatmen to the United States and Canada. AWK owns: -80 surface water treatment plants -500 groundwater treatment plants -1, 000 groundwater wells -100 wastewater treatment facilities -1, 200 treated water storage facilities -1, 300 pumping stations -87 dams -47, 000 miles of mains and collection pipes

Who does AWK Serve? The American Water Works Association generates revenues from -residential customers -shops and businesses -industrial customers -government and public sector facilities -other water utilities -public fire hydrants and private fire customers for use in fire suppression systems -United States military -municipalities -the food and beverage industry

Competitors AWK AWR Market Cap 8. 12 B 1. 21 B Revenue 2. 90 B 472. 08 M EBITDA 1. 35 B 160. 04 M Profit Margin 12. 73% 13. 28% EPS 2. 06 1. 61 P/E 22. 08 19. 34 VE 10. 65 B 28. 89 B 2. 52 B -0. 61% 0. 07 292. 94

Five Year Performance Against Competitors

YTD Performance Against Competitors

Why Buy American Water Works? - - American Water Works is a good value compared to its competitors Pays Quarterly Dividends The Investment Club’s portfolio currently has NO utilities Increased Demand for water over the summer People will always need water – A good hedge

Risks -CEO is being replaced by CFO, new CFO is coming in -CEO and CFO do not personally own stock in the company -Government Regulation

The Benefits Offset the Risks, making AWK a good stock to buy.

Buy 220 Shares at Market Price of $45. 53

SALES AND TRADING THE GUTS & GLORY By: Timothy C. Simon

“The Investment Bank” Sell-Side Review

What the floor typically looks like….

Typical View of S&T Screen Multiple Programs Multiple Screens

What is Sales and Trading? Sales and trading is one of the key functions of an investment bank. The term refers to the various activities relating to the buying and selling of securities or other financial instruments. Typically an Investment Bank will perform these tasks on behalf of itself and its clients. In “Market Making” - traders will buy and sell financial products primarily to facilitate the investment and trading activities of its clients with the goal of making an incremental amount of money on each trade.

Sales The Sales component refers to the investment bank's sales force, whose primary job is to call on institutional and high-net-worth investors to suggest trading ideas and take orders. Sales desks then communicate their clients' orders to the appropriate trading desks, who can price and execute trades, or structure new products that fit a specific need. Sales is a core area of any investment bank, comprising the vast majority of people and the relationships that account for a substantial portion of any investment banks revenues. The institutional salesperson manages the bank's relationships with institutional money managers such as mutual funds or pension funds. Institutional sales is often called research sales, as salespeople focus on selling the firm's research to institutions.

Trading - “Trading” is a nebulous term, so let’s fix that by discussing the two basic types first: agency trading and prop (proprietary) trading. Agency Trading: You simply execute orders for the client – you’re merely an “agent” doing what he/she wants and do not have (much) freedom. Prop Trading: You are the principal and can make whatever trades you want, using your own money – within your trading mandate and risk limits. Types of Traders Block Trader Sales-Trader Structured Product Trader

Research Analysts Research – Analysts are commonly divided between the two basic kinds of securities: equity analysts (researching stocks and their issuers) and fixed income analysts (researching bond issuers). Security analysts are usually further subdivided by industry specialization (or sectors) -- among the industries with the most analyst coverage are biotech, financial services, energy, and software services, etc. Traditionally, analysts use fundamental analysis principles but technical chart analysis and tactical evaluation of the market environment are also routine. Often at the end of the assessment of analyzed securities, an analyst would provide a rating recommending an investment action, e. g. to buy, sell, or hold the security. Debate still exists about the way sell-side analysts are paid. Usually brokerage fees pay for their research. But this creates a temptation for analysts to act as stock sellers and to lure investors into "overtrading. "

Equity Research

The Breakdown FICC, Equities, and Securitized Products FICC Fixed Income Treasury Notes/Bonds Muni’s Corporate High Yield/Junk Currencies Commodities Equities Cash Trading Program Trading Electronic Trading Flow Derivatives Convertibles Securitized Products MBS CMBS RMBS ABS Rates

Trivia Question First person to answer the question will receive an official Lafayette Investment Club Fleece.