On Tuesday, November 14, Jackie Ham pitched Waste Management to be added to the SMIF portfolio for our first stock pitch of the academic year. She is confident the company will be an excellent long-term position. Waste Management is the largest provider of waste management services in North America, partnering with residential, commercial, industrial and municipal customers to manage and reduce waste around the country. Waste Management will continue to grow with an expanding economy and increasing population, both of which will drive industry growth in the coming years. She emphasized decreasing costs and improving margins as a catalyst for earnings growth and stock appreciation. Jackie believes that Waste Management is best positioned in the industry to capitalize on the shifting trends towards environmentally sustainable waste disposal, such as recycling. Finally, she cited that the addition of WM will diversify the Industrials sector of the portfolio, as we currently only have exposure to two subsectors: aerospace and defense and transportation and logistics. Jackie motioned to purchase 75 shares of WM, funded by the sale of 75 shares of XLI and cash. The motion passed unanimously.
On Tuesday, October 24th, SMIF was pleased to welcome alumnus Blair Boyer to speak to the class. Mr. Boyer graduated from Bucknell in 1983 with a BA in economics. He is currently a managing director and a large cap growth equity portfolio manager at Jennison Associates, which he joined in 1993. He also has experience in international equity portfolio management and research analysis.
Mr. Boyer spoke with the class about the importance and implications of a long-term time horizon for our portfolio. He advised the class that while short-term news can be impactful, as long-term investors, we should not let short-term thinking affect our investment thesis. Rather, the fundamentals of a company and its growth strategy are more important in the long-term. He emphasized the importance of free cash flows and a high return on invested capital when looking into potential investments. We thank Mr. Boyer for his time, and appreciate his advice as we continue to manage our own portfolio!
On September 19th and 20th, SMIF had the pleasure of welcoming David Silver, a longtime friend of the Student Managed Investment Fund, to campus. A 1987 Bucknell graduate, Mr. Silver was an active member on campus competing with the Men’s Crew Team and performing with the Orchestra. He received his BSBA in Accounting, and has spent a long career working in tax. He is currently a tax partner at RSM, and has held positions at Ernst & Young and Arthur Andersen.
SMIF was eager to ask Mr. Silver about his thoughts about taxation in regard to SMIF’s holdings and implications of possible tax reform. Mr. Silver took the class through 10k reports and offered insight as to which tax items within the financial statements and footnotes would be of importance to investors. We thank Mr. Silver for taking the time to speak with SMIF.
In addition to being an experiential and peer learning opportunity for Bucknell students, SMIF also incorporates traditional lecture and literature mediated learning. All of these elements of the SMIF experience were present during the summer for the incoming SMIF analysts.
Over the summer, the five returning SMIF students and this fall’s new SMIF analysts were given sector and committee assignments and assigned readings. Students, either individually or in pairs, were assigned to follow the fund’s holdings in one of the eleven S&P sectors, as well as the sector at large. In addition, a few students in each class were assigned to serve on the Portfolio Analytics and Reporting (PAR) Committee. The PAR Committee tracks the performance of the fund’s holdings and reports their findings to the rest of the SMIF class. Over the summer, they performed this function on a monthly basis, but during the semester they do so weekly.
While this year’s SMIF class may not have gotten a seat at the table of a market event like Brexit as the last SMIF class had, there were still a number of learning moments presented by the markets over the summer. For instance, following a poor earnings release, lowered full-year guidance, and the announcement of Amazon’s acquisition of Whole Foods, Kroger’s share price fell nearly 30% within 24 hours. Consumer Staples analysts, Michael McHale, Meghan Holtz, and Allie Lane, were faced to consider selling out of our positions or other alternatives like a limit sell order. Similarly, Cardinal Health released quarterly earnings and revised down their guidance as well, sending their stock price down by 8.2% in a single day of trading and over 20% in the month of August. In this case the Healthcare analysts, myself and Emily Gagis, considered exiting the position or selling out-of-the-money call options to hedge against further losses. In both cases immediate actions were not taken, but these events served as valuable learning experiences for the SMIF analysts.
Alongside their sector and committee assignments, students also read three books related to investing and risk management. The books were Against the Gods: The Remarkable Story of Risk by Peter L. Bernstein, The Intelligent Investor by Benjamin Graham, and Winning the Loser’s Game: Timeless Strategies for Successful Investing by Charles Ellis. These titles gave students a history of risk analytics and management, a background in basic securities analysis and value investing, and practical advice on investment strategies and asset allocation. Students were tasked with writing responses for each book and an additional essay tying together the lessons they drew from all three books.
Not only were students completing their assigned SMIF tasks during the summer, but also, they were engaged in numerous and diverse professional internship opportunities. For instance, I served as a summer analyst at Sandler O’Neill + Partners within their Asset Management and Insurance Investment Banking Groups. This year’s incoming SMIF analysts spent their summers working in industries including private wealth management, consulting, credit research, audit and risk advisory, and accounting at companies like PwC, Deloitte, BlackRock, BofA Merrill Lynch, and JPMorgan Chase, among others.
Written by Nick Abbott
Hello, SMIF Alumni and Friends! We are excited to announce that for the first time in the history of the program, SMIF has split into two separate classes, each with their own independent benchmarks and asset allocations. After the conclusion of last year’s class, Professors Nicholls and Schreiner split the total portfolio evenly, leaving each class with approximately the same holdings. In the first few weeks, our classes decided on tactical allocation benchmarks to base our portfolio performance on. Tuesday’s class chose a 90% equity, 10% fixed income tactical benchmark, while Wednesday’s class chose a 86% equity, 14% fixed income benchmark. Both classes are excited to see how their portfolios perform throughout the year. Please visit the “Meet the Analysts” tab to learn a little more about this year’s SMIF students! We are looking forward to an exciting year and will update the blog with major events and decisions made by the class. If you have any questions or comments, please do not hesitate to reach out to Emily Gagis (firstname.lastname@example.org), Jackie Ham (email@example.com), or Michael McHale (firstname.lastname@example.org).
On the second day of SMIF’s travels to New York, the group woke early to meet with Ron Baron at Baron Capital. Ron graduated from Bucknell in 1965 with a degree in chemistry. He later attended Georgetown Law School in the evenings while working as an examiner at the U.S. Patent Office. Ron got his start in the investment world in 1970, when he began conducting his own stock research and selling this research to large investment houses. From there he began Baron Capital in 1982. Baron Capital is a long term investment company, often holding securities for more than 10 years. As was reiterated time and time again to the SMIF class, Baron “Invests in People.” The company has seen many successes – they now manage over $28 billion. We thank Ron and his company for taking the time to host us that morning.
From Baron Capital, SMIF traveled to Blackrock, where we had lunch with several employees, many of which were Bucknell alums. We first heard from Maria Heyeca, who discussed a broad market outlook with SMIF, particularly discussing the turbulence regarding the upcoming French election. Next we heard from Dan Greenberg, a former SMIF student in charge of Blackrock’s high net worth Separately Managed Accounts business. Dan touched on the soft skills required in the Private Wealth industry, particularly when discussing personal finances with those who are less literate in investments. Later we heard from Morgan Beeson, who works with Blackrock’s Aladdin computer program. Aladdin is Blackrock’s proprietary research, trading, and investment optimization platform. It was fascinating to hear how Blackrock has both harnessed Aladdin for its own use, as well as monetized it through sales to other firms. Lastly we heard from Katrina Schmaltz, a former SMIF student, who worked with Blackrock’s Portfolio Consulting Group. Katrina discussed her role in optimizing many financial planners’ portfolios.
After visiting Blackrock, SMIF ended our lengthy day by visiting SMIF Advisory Board Member Joe Quintilian at the New York Stock Exchange. SMIF members were fascinated to see how the stock exchanged has changed in the past two decades; now very few people are on the once-crowded floor. SMIF students were able to have private meetings with market makers from Global Trading Systems (GTS) and Citadel; they were also able to witness the ringing of the bell to close the trading day.
All in all, though it was a busy day, these hands-on experiences in New York proved to ones that could only be provided through a program like SMIF. It was an incredible way to end the year.
On Wednesday April 19th, SMIF presented to Bucknell Alumni at the Harvard Club in NYC. The presentation started with a history and overview of SMIF and then we proceeded to share some memorable learning experiences throughout the year. In addition, SMIF explained its investment process which consists of a top down approach, first determining an asset allocation, next sector weighting and last but not least, equity selection. SMIF then proudly announced our total portfolio performance, which was a HUGE two basis point above our benchmark. Therefore, we outperformed our benchmark while taking on less risk. Our class also informed alumni of two exciting developments this year. First, the SMIF class increased the use of derivatives, focusing on reducing active risk, income generation and put on boarding strategies. Secondly, this was the first year that juniors were added to SMIF, allowing for a smoother transition between classes.
Overall, we really enjoyed speaking with alumni before and after the presentation and want to thank so many alumni for their attendance and support.
After many months, today SMIF heard its last pitch of the year! Zach Alerhand ended on a strong note, pitching Iron Mountain to the class. Iron Mountain is a global business dedicated to storing, protecting, and managing information and assets. The company, although not a traditional Real Estate company, is in the REIT sector. Being a REIT, Iron Mountain is required to pay 90% of its taxable income annually in the form of shareholder dividends. Zach made a point to note that the company is remarkably stable. He believes that though there may be little price appreciation when holding Iron Mountain, there will be a stable and ever-increasing dividend. He believes the company will find growth opportunities in the coming years as it expands its operations overseas, namely in Europe and Australia. All in all, Iron Mountain is a stable company with trusted clients that will provide dividend income for years to come. Zach proposed to purchase 400 shares of Iron Mountain – the motion passed 28:2.