On Monday, April 30th, Kyle Kinner pitched Keurig-Dr Pepper (NYSE: DPS) to add to the Consumer Staples Sector holdings. Keurig-Dr Pepper is a leading integrated brand owner, manufacturer, and distributor of non-alcoholic beverages. Bob Gamgort, new CEO, is coming into the company with over 30 years of experience in the consumer packaged goods industry with two previous leadership experiences managing big corporations. Kyle believes that KDP has a strong business with highly respected margin profile positioned to grow both top line as well as the bottom line perspective. After Keurig Green Mountain’s acquisition in March of 2018, the company now owns its Direct Store Delivery system combined with independent distributor partners, which will allow them to reach 100% of the population. DPS shows differentiation in the beverage industry with the inclusion of coffee after this acquisition, which will lead to increased penetration in households with their wealth of successful products. Additionally, there is an extreme likelihood for e-commerce integration coming in the near future. Kyle proposed to purchase 70 shares of DPS and sell 50 shares of KHC and 100 shares of XLP. The motion passed unanimously.
Guest Speaker Dmitri Drone joined SMIF on April 23rd, 2018. Mr. Drone graduated from Bucknell with a degree in Accounting and holds a MBA from the University of Chicago Booth School of Business. He is currently head of PwC’s Deals business for Pharmaceutical and Life Sciences, which assists in M&A transactions within the sector. Prior to that, Mr. Drone worked in audit services at PwC.
Mr. Drone spent his time explaining the process behind creating valuations for biotech companies. He started his talk by explaining the biotech presence, walked the class through the drug approval & regulatory process, and steps to creating valuations for biotech companies. Mr. Drone ended his presentation by sharing his criteria for identifying valuable biotech companies. The SMIF class enjoyed the interactive and engaging discussion and we thank Mr. Drone for taking time to speak with us.
On Monday, April 16th , Allie Lane pitched The TJX Companies (NYSE:TJX) to add to the Consumer Discretionary Sector holdings. TJX is an off-price apparel and home fashion retailer with locations worldwide. The company operates more than 4,000 off-price retail stores that offer a wide range of brand name and designer merchandise in the United States, Canada, Europe and Australia. Its main revenue producing segment is Marmaxx, which includes T.J. Maxx and Marshalls. In addition TJX consists of three other segments – HomeGoods, TJX Canada, and TJX International. Its stores offer a rapidly changing assortment of high-quality merchandise at prices generally 20% to 60% below typical retail prices. Its business model targets deal-seeking customers looking for an exciting treasure-hunt shopping experience. Allie concluded her investment thesis stating that TJX is a global company with strong, dependable revenue and growth potential due to three main reasons. First, TJX is well positioned in the retail industry, as well as the consumer discretionary sector, due to the differentiation of its business model. Second, the company continues to invest in growth opportunities, which it has excelled at throughout its 40-year history. Last, TJX is resilient through various economic conditions and has consistently returned value to its shareholders. Allie proposed to buy 50 shares of TJX, sell 15 shares of DIS and execute cash for the remaining necessary to fund the transaction. The motion passed unanimously.
On Monday, April 9th, Monica Driscoll pitched Packaging Corporation of America (NYSE: PKG) to add to the Materials Sector holdings. Packaging Corporation of America (PCA) is a manufacturer and distributor of container and packaging products used in shipping, packaging, and in-store advertising. PCA is the fourth largest producer of containerboard products in North America, and the nation’s third largest producer of uncoated freesheet paper. They sell to a diverse group of industries, including food, beverage, agricultural, retail, and wholesale. Monica believes that PCA is at the forefront of the packaging and paper industries. PCA has cornered its market share in both the North American containerboard and uncoated freesheet businesses, and will continue to grow by acquiring plants across the U.S. and expanding into Hong Kong and Ontario. Additionally, PCA has set strong sustainability practices and codes with focuses on sustainable forestry, continuous recycling, and renewable resources. Monica envisions that the demand for PCA’s container products will steadily increase given the rise of e-commerce and global shipping. Monica proposed to purchase 30 shares of PKG and sell 60 shares of XLB, the Materials Sector ETF. The motion passed.
On Monday, April 9th, Keifer Rawlings pitched Bank of America (NYSE: BAC) to add to the Financials Sector holdings. Bank of America is one of the United States’ largest banks by assets. It operates one of the country’s most extensive branch networks with around 4,600 locations and 16,000 ATMs. Keifer believes that with increasing interest rates and tax cut benefits, BAC will see a solid increase in revenue and earnings growth. The corporation’s management will also be looking to move towards a higher dividend payout ratio. Keifer ended his investment thesis by stating that BAC’s management is moving the firm in the right direction and staying ahead of industry trends, such as a move towards electronic banking, moderate loan growth, and further fee-income expansion. Keifer proposed to purchase 525 shares of BAC and sell 575 shares of XLF; the motion passed unanimously.
On Monday, April 2nd, Luke Liprando pitched World Wrestling Entertainment, Inc. (NYSE: WWE) to add to the Consumer Discretionary Sector holdings. WWE is an integrated media and entertainment company and wrestling promotion. WWE’s success is driven by in-ring talent and the company’s ability to develop compelling storylines. Luke believes that WWE has established itself as a leader in the wrestling industry with operations that will allow it to grow in the future. WWE is in the process of negotiating a TV deal, which is likely to significantly boost revenues. The growth of the Women’s division, specifically the addition of Ronda Rousey, will transform the company and attract more female viewership. Luke believes that WWE is an established company with a strong leadership team that has shown the ability to take risks, adapt, and enhance the brand. The motion to purchase 100 shares of WWE and sell 15 shares of HD and 20 shares of XLY was ultimately approved by the class, with 18 in favor and 3 against.
On Monday, April 2nd, Emily Gagis pitched The 3M Company (NYSE:MMM) to add to the Industrials Sector holdings. 3M is a Global Science company that manufactures over 55,000 products across five business segments. 3M has experienced immense growth in the past years through three key growth levers: Portfolio Management, Investing in Innovation, and Business Transformation, which continue to grow. Emily outlined that 3M’s diversified public offering will benefit immensely from an expanding manufacturing economy. In addition, the company has strategically repositioned itself for growth through acquisitions, divestitures, and restructuring. Emily concluded her investment thesis by detailing the company’s potential for success in growing industries such as autonomous vehicle technology, which 3M is a first mover in due to its development of Smart Signs and LiDAR Sensors. Emily proposed to buy 30 shares of MMM and sell 40 shares of XLI and 100 shares of ALSN to fund the transaction. The motion passed unanimously.
On Monday, March 5th, Jake Dunlop pitched Royal Dutch Shell (NYSE: RSDA) as an addition to the Energy sector holdings. Shell is an integrated energy company with three main business segments: Downstream, Upstream, and Integrated Gas. Jake expects modest revenue growth over the next few years due to population expansion, larger demand for electricity, a decrease in oil discoveries, and international supply cuts. He also believes Shell is the most attractive energy investment due to its ability to maintain high operating margins regardless of macroeconomic factors, as well as its expansion into the liquefied gas segment (LNG) after its acquisition of the BG Group in 2016. Jake believes Shell’s expansion into LNG will serve Shell strongly in future, especially with increasing demand for clean energy. Jake also believes that Shell’s Strategy and Capital Allocation Framework provides an optimal return to the portfolio through a reduction of its gearing ratio to 20% by 2018, a continued strong dividend policy without the Scrip Dividend program, and an increase in shareholder value through an accelerated share buyback program. Jake is confident that Shell will be an exceptional long-term position in the portfolio. He motioned to purchase 50 shares of RSDA; the motion passed, with 17 in favor and 4 against.