Undergraduate Student Managed Fund Fall 2016 Portfolio Report

Undergraduate Student Managed Fund Fall 2016 Portfolio Report UConn Student. Managed Fund UConn Student Fund

Introduction Lead Manager: Sean Phelan Portfolio Manager: Taishi Kato Treasurer/Secretary: Joe Cotton Web Manager: Taylor Van. Fleet Joe Cotton Tom Delaney Sean Elliott Steve Gasparini Taishi Kato Jason Mraz Sean Phelan Romaniv Tami Stawicki Tommy Stodolski Rob Tavernier Taylor Van. Fleet Undergraduate Supervisor: Chris Wilkos Fund Director: Chinmoy Ghosh UConn Student Managed Fund

Agenda Portfolio Overview Investment Process Sector Overview & Economic Overview Portfolio Performance & Individual Holdings Future Outlook UConn Student Managed Fund

Portfolio Overview Objective Outperform the S&P over a 10+ year horizon while building value investing and critical thinking frameworks Philosophy Uncover undervalued securities through disciplined research and analysis that fulfills a desired margin of safety of the intrinsic price to prevailing market price Approach Managers will survey their sectors to find companies with key competitive advantages, growth opportunities, and downside protection UConn Student Managed Fund

Investment Process We look for companies that exhibit strong financials, attractive valuations, and many of the following competitive advantages: Brand Leadership Growth-Oriented Business Model Favorable Shareholder Return Policies Consistent Innovation High Barriers for Entry UConn Student Managed Fund

Investment Process Risk Management Strategies Diversification ü Invest across different sectors Hedging ü 20%-25% stop-loss orders on all investments Due Diligence ü In depth presentation required for each investment idea Investing at a discount ü Invest with a margin of safety UConn Student Managed Fund

SECTOR OVERVIEW UConn Student Managed Fund

Information Technology Information Tech ETF vs. S&P 500 $ 110 $ 105 $ 100 $ 95 $ 90 $ 85 6 20 16 6/ 7/ 20 16 7/ 7/ 20 16 8/ 7/ 20 16 9/ 7/ 20 16 10 /7 /2 01 11 6 /7 /2 01 12 6 /7 /2 01 6 7/ 20 1 7/ 4/ 5/ 6 6 20 1 7/ 3/ 6 20 1 7/ 20 1 2/ 7/ 1/ /7 /2 01 5 $ 80 12 • Performance: – Average: 3. 78% above S&P 500 • Competition: – IT Services, Software, Hardware • Future Outlook: – Consumer Facing Tech Companies – Cost Savings or Rev Enhancements • Risks: – Rising Valuations • Current Holdings: IBM VGT US Equity SPX Index December 07, 2015 – December 07, 2016 UConn Student Managed Fund

Energy Crude Oil Futures $ 55 $ 50 $ 45 $ 40 $ 35 $ 30 6 /2 01 6 12 /7 01 6 /2 11 /7 01 6 /2 /7 20 1 10 6 9/ 7/ 6 20 1 8/ 7/ 20 1 6 7/ 20 1 7/ 6/ 7/ 01 6 6 7/ 2 20 1 7/ 4/ 5/ 6 6 20 1 7/ 3/ 6 20 1 7/ 20 1 2/ 7/ 1/ /7 /2 01 5 $ 25 12 • Performance: – Oil Prices • Competition: – High Barriers to entry • Future Outlook: – Short term: Oil price uncertainty – Long term: Natural Gas & Liquid Natural Gas • Risks: – OPEC • Current Holdings: EPD December 07, 2015 – December 07, 2016 UConn Student Managed Fund

Financials Financial Sector ETF vs. S&P 500 $ 125 $ 115 $ 105 $ 95 $ 85 6 20 16 5/ 7/ 20 16 6/ 7/ 20 16 7/ 7/ 20 16 8/ 7/ 20 16 9/ 7/ 20 16 10 /7 /2 01 11 6 /7 /2 01 12 6 /7 /2 01 6 7/ 4/ 6 3/ 7/ 20 1 6 7/ 20 1 2/ 7/ 1/ /7 /2 01 5 $ 75 12 • Performance: – Possibility of December rate hike – Growing strength of financial institutions – Consumer financial health • Future Outlook: – Higher interest rates & yields • Risks: – Deflationary pressures – Volatility – Regulatory changes • Current Holdings: WFC and COF XLF US Equity SPX Index December 07, 2015 – December 07, 2016 UConn Student Managed Fund

Consumer Staples ETF vs. S&P 500 $ 115 $ 105 $ 95 /7 / 20 15 1/ 7/ 20 16 2/ 7/ 20 16 3/ 7/ 20 16 4/ 7/ 20 16 5/ 7/ 20 16 6/ 7/ 20 16 7/ 7/ 20 16 8/ 7/ 20 16 9/ 7/ 20 16 10 /7 /2 01 6 11 /7 /2 01 12 6 /7 /2 01 6 $ 85 12 • Performance: – Cutting costs and adding value – Reduced energy prices • Future outlook: – As economy grows, push to less defensive sectors • Risks: – Possibility of over valuation due to interest rate environment • Current holdings: TSN XLP US Equity SPX Index December 07, 2015 – December 07, 2016 UConn Student Managed Fund

ECONOMIC OVERVIEW UConn Student Managed Fund

Economic Overview - U. S. Economy Unemployment US GDP Growth Rate 12. 0 10. 0 8. 0 10. 0 6. 0 8. 0 4. 0 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1996 4. 0 -2. 0 1997 2. 0 6. 0 0. 0 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 -10. 0 1998 0. 0 -8. 0 1997 -4. 0 2. 0 -6. 0 1996 • Real GDP Growth – 1. 6% annual growth • Low Unemployment – 4. 6% unemployment rate – 235, 000 jobless claims Nov 17 • Lowest level since 1973 • Rising Inflation – 1. 7% core PCE Yo. Y • Fed Rate Hike - December? UConn Student Managed Fund

Economic Overview - Global Economy China • Slowing GDP Growth Rates – 6. 3% Yo. Y • Rebalancing Economy – Industrial production: 6. 1% Yo. Y – Consumer spending: 73. 4% GDP • Impact on Portfolio – Reduced growth opportunities Chinese GDP GBP/USD Growth Rates 16. 00% 1. 6 14. 00% 1. 5 12. 00% 10. 00% 1. 4 8. 00% 6. 00% 1. 3 4. 00% 1 F an - 0. 00% 1 J Europe • Stagnant GDP Growth – 1. 6% Yo. Y • Brexit (June 24, 2016) and uncertainty, GBP plunges below recessionary levels 16 eb 1998 1 - 16 M 1999 a r-1 6 2000 1 Ap 2001 r 16 12002 M a 2003 y-1 6 12004 Ju n 2005 -16 12006 Ju l-1 2007 6 1 Au 2008 g -1 6 12009 Se p 2010 16 12011 O c 2012 t-1 6 1 N 2013 ov 2014 1 - 16 D 2015 ec 2016 16 1. 2 2. 00% UConn Student Managed Fund

PORTFOLIO PERFORMANCE UConn Student Managed Fund

Sector Allocation UConn Student Managed Fund

Portfolio Performance • Total Portfolio Performance: 4. 73% • Equity Performance: 5. 60% • S&P 500 Performance: 3. 48% UConn Student Managed Fund

Total Portfolio Unrealized Gains UConn Student Managed Fund

INDIVIDUAL HOLDINGS UConn Student Managed Fund

Wells Fargo & Co – Basic Metrics WFC Stock Price Basic Metrics 6 01 6 /2 /7 12 /2 01 6 11 /7 01 6 /2 /7 20 1 10 7/ 9/ 20 1 6 6 8/ 7/ 20 1 6 7/ 7/ 6 20 1 6/ 7/ 20 1 6 7/ 20 1 5/ 6 7/ 6 20 1 4/ /7 12 7/ 2. 93% 3/ Dividend Yield $ 20. 00 6 $260. 45 B 20 1 Market Capitalization $ 25. 00 7/ $43. 55 $ 30. 00 /2 52 Week Low $ 35. 00 2/ $56. 24 $ 40. 00 20 1 52 Week High $ 45. 00 5 $55. 55 7/ Current Price $ 50. 00 01 $44. 10 $ 55. 00 1/ Purchase Price December 07, 2015 – December 07, 2016 UConn Student Managed Fund

Wells Fargo & Co. – Thesis & Risks Thesis Wells Fargo has significant cost advantages from their industry leading scale, and is positioned to grow because: • Their ability to benefit from rising interest rates • Strong financial health & low cost of deposits • Commitment to growing smaller business lines by leveraging relationships in legacy businesses Risks • • • Possibility of continued lower interest rate environment Regulatory changes and restrictions Ongoing investigation UConn Student Managed Fund

Enterprise Products Partners, L. P. (NYSE: EPD) Basic Metrics Purchase Price $24. 77 Current Price $25. 38 EPD Stock Price $ 32. 00 $ 30. 00 $ 28. 00 $ 26. 00 6 01 6 /2 12 /7 01 6 /2 /7 /2 01 11 10 /7 20 1 6 6 7/ 9/ 6 20 1 7/ 8/ 20 1 6 7/ 20 1 7/ 6/ 6 20 1 5/ 7/ 20 1 7/ 4/ 20 1 6 6 7/ 6 20 1 3/ /7 12 7/ 6. 29% 2/ Dividend Yield $ 18. 00 20 1 $54. 35 B $ 20. 00 5 Market Capitalization $ 22. 00 7/ $19. 00 01 52 Week Low $ 24. 00 1/ $30. 11 /2 52 Week High December 07, 2015 – December 07, 2016 UConn Student Managed Fund

Enterprise Products Partners – Thesis & Risks Thesis EPD is positioned to maintain and grow its distributable cash flow at current energy prices due to: • Diversified lines of business and valuable assets • Longterm contracts with investment grade companies • Absence of Incentive Distribution Rights (IDRs) and high credit rating Risks • • • Changes in the demand prices of hydrocarbon products Additional regulation, environmental and/or legal approval MLP structure UConn Student Managed Fund

Tyson Foods, Inc. – Basic Metrics Purchase Price $70. 36 Current Price $57. 39 TSN Stock Price $ 80. 00 $ 75. 00 $ 70. 00 $ 65. 00 6 01 6 /2 12 /7 01 6 /2 11 /7 01 6 /2 /7 20 1 10 6 9/ 7/ 20 1 6 7/ 8/ 6 20 1 7/ 7/ 20 1 6 6/ 7/ 20 1 6 7/ 20 1 5/ 6 7/ 4/ 6 20 1 7/ 6 20 1 3/ /7 12 7/ 0. 85% 20 1 Dividend Yield $ 45. 00 2/ $23. 14 B $ 50. 00 5 Market Capitalization $ 55. 00 7/ $42. 89 01 52 Week Low $ 60. 00 1/ $77. 05 /2 52 Week High December 07, 2015 – December 07, 2016 UConn Student Managed Fund

Tyson Foods, Inc. – Thesis & Risks Thesis TSN’s portfolio transformation will expand their market share and create value because: • TSN positioned at the top of key growing segments • They are minimizing volatility by reducing their commoditized product mix • TSN has the financial flexibility to adapt to changing consumer tastes Risks • Price-Fixing Allegations • Rises in corn prices/feed costs, fall in chicken prices • Unexpected shifts in consumer tastes • Missing expectations (11/21) UConn Student Managed Fund

RPM International, Inc. – Basic Metrics RPM Stock Price Basic Metrics Purchase Price $53. 17 $ 60. 00 $ 55. 00 Current Price $53. 37 52 Week High $55. 92 $ 45. 00 52 Week Low $36. 78 $ 40. 00 Market Capitalization $6. 3 B Dividend Yield 2. 57% $ 50. 00 6 01 6 /2 12 /7 01 6 /2 11 /7 01 6 /2 /7 20 1 10 6 7/ 20 1 9/ 6 7/ 8/ 6 20 1 7/ 7/ 20 1 6 7/ 20 1 7/ 5/ 6/ 6 6 20 1 7/ 4/ 6 20 1 7/ 20 1 3/ 6 2/ 7/ 20 1 7/ 1/ 12 /7 /2 01 5 $ 35. 00 December 07, 2015 – December 07, 2016 UConn Student Managed Fund

RPM International – Thesis & Risks Thesis It will deliver long term value due to its: • Strong acquisition and organic growth strategy • Consistent and notable dividend history • Diversified business model and market leadership Risks • Significant amount of indebtedness • Fluctuations in supply and prices of raw materials • Health and Safety Risk • SEC investigations UConn Student Managed Fund

FUTURE OUTLOOK UConn Student Managed Fund

Portfolio Expectations Throughout next semester, we will be monitoring certain catalysts within the market and companies to identify future value drivers, including: • • • Normalization of interest rates Increased infrastructure spending Corporate tax cuts Technological innovations Corporate Social Responsibility Potential Investment Ideas UConn Student Managed Fund

Lessons Learned Financial Skills ü Financial Modeling – DCF, DDM, Comparables ü 10 K Analysis ü Industry expertise and macroeconomic knowledge Life Skills ü The art of thinking ü Teamwork ü Presentation skills UConn Student Managed Fund

Appendix UConn Student Managed Fund

Healthcare • Performance: – Healthy Balance Sheets – Volatility • Competition: – UNH, JNJ, GILD, BIIB • Future Outlook: – Aging Population – Biotech is Undervalued • Risks: – Pending Mergers – Affordable Care Act – Change in Regulation Healthcare ETF (IYH) Annual Performance *Source: Bloomberg Terminal UConn Student Managed Fund

International Business Machines Corp. Thesis: IBM is transforming from a hardware and software services company into a solutions provider. This transformation will be powered by IBM’s development and growth in: Cognitive Solutions Cloud Platform q q Despite recent trends of declining revenue, IBM has maintained profitability. UConn Student Managed Fund

RBC Bearings will provide long run value due to its: – Unique and strong market position in the aerospace OEM market – Aerospace industry and defense spending positioned for growth – Industrial markets are also expected to grow with economic improvement NASDAQ: ROLL Close Price 11/29: $83. 75 Target Price: $95. 74 Margin of Safety: 14. 31% UConn Student Managed Fund

Disney will provide long run value due to its: – Unique media network content that will continue to innovate – Consistent ability to monetize characters and franchises across multiple platforms – Strength and size of its world-renowned parks and resorts The company has seen consistent and strongth growth sinception and is continuing to innovate across all segments. NYSE: DIS Close Price 10/11: $92. 49 Target Price: $115. 16 Margin of Safety: 24. 5% UConn Student Managed Fund

UPS Thesis: UPS, the largest package delivery company in the world and provider of logistics solutions, is best positioned in the industry to succeed from significant growth in the ecommerce industry, as well as through their acquisitions in the health-care logistics space. In addition, UPS’ full rollout of their ORION system in 2017 will increase UPS’ profit margins by reducing operating costs and expenses. United Parcel Service NYSE: UPS Close Price 11/14/16: $112. 91 Target Price: $132. 74 18% Margin of Safety UConn Student Managed Fund

Capital One Thesis: Capital One will deliver long run value due to its: – Growing diversification in business – Experience in managing quality of deposits and loans – Competitive advantage in key areas such as online banking and credit card business The company has been able to withstand financial volatility and has taken on successful organic and inorganic growth opportunities throughout its lifetime. It is currently undervalued and has significant upside potential. NYSE: COF Close Price 10/03/16: 72. 13 Target Price: 92. 19 Margin of Safety: 28% UConn Student Managed Fund

Verizon Thesis: Verizon is a leader in the wireless service industry and is poised to be an emerging player in the digital media and advertising space. Verizon has a high free cash flow yield and a strong dividend which has grown consistently for the past decade, making it both a safe income oriented investment and an undervalued company with high upside potential. NYSE: VZ Close Price 10/17/16: $50. 43 Target Price: $69. 34 Margin of Safety: 37% UConn Student Managed Fund

Gilead Sciences • HIV and Hepatitis C Drugs • Developing drugs – Pancreatic and Cardiovascular Cancer – Respiratory Disease • Regulatory Concerns – Drug and price regulation • Mergers & Acquisitions UConn Student Managed Fund

Nvidia Operates in mature semiconductor industry, only projecting modest sales growth. Opportunities exist in: – Autonomous driving market – contract with Tesla and competitive advantages within technology – Data center industry big data Concerns: – Overvaluation massive outperformance last two quarters – Competition UConn Student Managed Fund