On Tuesday, April 10th, Peter Snow pitched Las Vegas Sands (NYSE: LVS) to add to the Consumer Discretionary Sector holdings. Las Vegas Sands Corp. is a global operator of integrated resorts that specializes in developing premium accommodations that feature gaming, high-end shopping, unique entertainment, fine dining and a variety of other amenities. The Company operates integrated resorts in both Asia and the United States. Peter believes Las Vegas Sands is well positioned to capitalize on the first period of strong synchronized global economic growth in a decade. In Macao, the company will benefit from increased visitation and spending from the premium mass segment, as well as new transportation options for visitors to the peninsula. In Singapore, higher VIP spending coupled with exceptional operating margins will lead to further increases in free cash flow; while in Las Vegas, a healthy U.S. consumer in tandem with growth in convention related bookings will increase revenues. The legalization of casino gaming in Japan will serve as an additional catalyst for LVS’ stock. Peter recommended purchasing 150 shares of LVS, while selling 160 shares of CMCSA, 50 shares of NKE, and 20 shares of XLY. The motion passed unanimously.
On February 27th, Alden Stone,pitched Constellation Brands, Inc. (NYSE:STZ). Constellation is the largest producer of wine in the world and has exclusive rights to sell Modelo’s Mexican beer portfolio in the U.S. Alden’s investment thesis was based on an industry leading premium product mix, increasing company margins, diversification within the alcohol beverage industry, the company’s first mover advantage, and the company’s history of returning value to shareholders. In the U.S. market, consumers are buying less volumes of alcohol, but spending more dollars, illustrating how consumer preferences are changing to higher-end wines, beers, and spirits. The company is able to capitalize on this trend as it focuses on producing and marketing premium wines, spirits, and high-end beers, with a majority of revenues coming from the U.S. Alden proposed a purchase of 45 shares of Constellation. This transaction was financed through the sale of 180 shares of the Consumer Staples Select Sector SPDR (XLP). The proposal passed unanimously.
On Tuesday, March 6, Austin Mendez successfully pitched CME Group (NYSE: CME) to be added into the SMIF portfolio. CME Group, the largest derivatives exchange by trade volume, operates within an industry with very high barriers to entry. Austin is confident that CME has positioned itself to see strong growth in the coming years. Through its strategic partnerships with exchanges across the globe, CME is poised for consistent trade volume growth as the economies and derivatives markets in developing countries continue to expand. The exchange has seen various successes in releasing new products, targeting these developing markets, and has plans to continue this initiative in 2018. In addition to the exchange increasing its global presence, Austin’s investment thesis encompassed expanding new and existing product lines, the reemergence of market volatility, and a strong commitment to shareholders. Securities exchanges was a subsector of financials that the portfolio did not hold. Investing in CME Group would expand the breadth of the portfolio’s financial sector holdings and add a security with less correlation to XLF and the large banks already in the portfolio. The class unanimously approved Austin’s motion to purchase 40 shares of CME Group, to be funded through the sale of 230 shares of XLF.
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.