Portfolio Manager Cristina Pellegrino Our Investing Philosophy Invest

Portfolio Manager: Cristina Pellegrino

Our Investing Philosophy • Invest in equities in the Russel 2000 Index that we believe are poised to outperform the index • Value Investing: Buying companies that are trading below intrinsic value • Fundamental Analysis • Valuation Strategies • Variant Perception: Having a viewpoint that is different than the market, therefore price is different than what the market has priced in • Different Information • Different Idea

Questions to Ask Yourself When Choosing to Invest 1. Is this a good industry to invest in? 2. Do I have complete understanding of the company’s business model? 3. Does this company have a competitive advantage? 4. Do I have a concrete variant perception? 5. Is the company undervalued?

Competition • Competition plays a crucial role in understanding industry and a company’s strategy when investing. • Porter’s Five Forces • • • Competition in the Industry Potential of New Entrants Power of Suppliers Power of Customers Threat of Substitutes

Variant Perception • To form a variant perception, you first need an understanding of the business • Industry • Unique Business • Past and Future Performance • What has the market already priced in? • Develop your own idea or thesis • Ex. • You think EPS is going to be higher or lower than expectations • You think P/E should be different based on risk and long-term EPS growth rate

Importance of Financial Statements • Each of the financial statements provide for each other • Income Statement: Tells us earnings and the cost of doing business • Balance Sheet: Financial health of the company • Cash Flow Statement: Cash inflow and outflow each year • Most important to investors: How much cash (value) is being generated?

Valuation • The main purpose of valuation is determining the company’s range of potential value • More than finding a number. You need to understand how a company makes revenue, how it finances itself, its supply chain, etc. • Your assumptions are the most important part of valuing a company • How can firm value change: • • Current Cash Flows Future Growth Length of Growth Period Discount Rate (Cost of Capital)

Methods for Valuation • Comparable Company Analysis: Using valuation multiple to determine if a company is overpriced or underpriced compared to its peer group. • Discounted Cash Flow: Determining the value of a company today, based on how much cash it can generate in the future. • Sum of Parts: Determining value by separately assessing each business segment

Choosing Competitors for Analysis • Industry • Financials • Similar size, revenue drivers, etc. • Geography • Business Models

Metrics We Often Use To Compare • Equity Value: • P/E, P/B • Enterprise Value • EV/Sales, EV/EBITDA Industry Unusual Multiples Technology (Internet) EV/Unique Visitors, EV/ Page Views Retail/ Airlines EV/ EBITDAR Energy P/MCFE, P/NAV Real Estate Investment Trusts P/FFO, P/AFFO

Price to Earnings • Demonstrates how much an investor is willing to pay for $1 worth of earnings • Why investors are interested in earnings: • Dividends • Reinvestment • Disadvantages: Dependent on industry, backward looking

What Resources To Use • Fact. Set • Dimenna Nyselius Library (https: //librarybestbets. fairfield. edu/finance) • Morningstar Investment Research Center • Value Line • Mergent Online • Seeking Alpha • FINVIZ • Tradingview • Investor Presentations • 10 K