On Monday, February 19, Connor Zierden pitched Applied Materials Inc. (NASDAQ: AMAT) as an addition to the Information Technology sector holdings. Applied is a semiconductor equipment manufacturing company with three main business segments: Semiconductor Systems, Applied Global Services, and Display. Connor anticipates strong double-digit revenue growth in all three segments through the end of the decade, with the Display Segment experiencing the most drastic market expansion. The most explosive drivers over the next five years are expected to be Artificial Intelligence and hyperscale data centers. Applied saw record operating margins and quarterly revenues in the first quarter of 2018, with sales growing 28% year over year to $4.20 Billion. Applied leads the industry in research, development, and engineering (RD&E) investment, enabling them to take the largest market share. Alongside the commitment to RD&E, Applied has a venture arm that invests over $50 Million annually to extend its reach and supplement its businesses. Connor believes that a revitalized capital allocation framework that includes doubling the quarterly dividend payment, increasing capital expenditures, and authorizing an additional $6 Billion in share buybacks confirms the bullish executive outlook and the company’s commitment to return value to its shareholders. He envisions the semiconductor industry to be prominent over the next decade, which demonstrates the long-term value Applied has to offer. Connor motioned to purchase 160 shares of AMAT; the motion passed unanimously.
On Monday, February 19th, Michael McHale pitched Booking Holdings (at the time of the pitch known as The Priceline Group) to be added to the Consumer Discretionary sector holdings. Booking Holdings (NASDAQ: BKNG) is the world’s leading provider of online travel and related accommodation services. The company is made up primarily of six independently operated brands: booking.com, KAYAK, priceline.com, agoda.com, rentalcars.com, and OpenTable. Michael predicts strong growth in the company’s agency and advertising sectors, along with stable growth in their merchant sector. The travel industry has been growing globally at consistently high rates for the past two decades, and experts believe that this growth will continue into the future. Michael believes that Booking Holdings is the best-positioned company to capitalize on this growth. He also cites that a growing consumer trend of spending more on experiences such as travel and less on material goods would be a positive driver for Booking’s growth. Michael proposed to buy 6 shares of BKNG, financed by selling 108 shares of XLY, the Consumer Discretionary sector ETF. The motion passed unanimously.
On March 26th and 27th, the SMIF class was honored to welcome SMIF alumnus and 2003 Bucknell University graduate, Mr. Joe Quintilian. Mr. Quintilian graduated from Bucknell with a degree in management and went on to co-found Axiom Markets, a proprietary energy trading firm, where he serves as a partner. He serves as a board member of Concord 51, a political action committee that targets young professionals. Joe is the co-founder of Ether ETF, a crypto currency ETF, and last year became a partner at Distributed Capital, which is a block chain focused venture capital fund.
Mr. Quintilian shared his outlook on the future of crypto currency, with selected focus on Bitcoin and Ethereum. He has confidence that crypto currency will become the leading method of transaction in the near future, and relayed to our class what factors he believes will make certain crypto currencies successful or unsuccessful. Mr. Quintilian also shared many personal anecdotes about his career journey, including advice on the skills and mindset necessary to achieve success. The SMIF class greatly enjoyed Mr. Quintilian’s visit, and would like to thank him for taking time out of his busy schedule to speak with us.
On Tuesday, February 6, Brian LeBlanc successfully pitched Humana (HUM) to be added into the SMIF portfolio. He is confident that Humana has strategically positioned itself to generate strong growth in the Medicare Advantage (MA) segment going forward. With Medicare Advantage projected to increase 30% in the next 12 months, Humana is likely to see positive figures as more than 70 percent of their revenue is generated from their MA segment. With nearly all of their revenue generated in the United States, they stand to capitalize on the lower corporate tax rate. This investment diversifies the SMIF portfolio by selling out of Cigna (CI), which is far more correlated to United Healthcare (UNH) than Humana. The class unanimously approved the motion to purchase 30 shares of HUM at market price, funded through the sale of Cigna and XLV. This purchase rebalanced the healthcare sector of the SMIF portfolio to the class target.
On February 20th, Jake Frankel, a materials sector analyst, pitched Southwest Airlines Co. (NYSE:LUV). As of September 30th, 2017, Southwest Airlines Co. (Southwest) is the largest domestic air carrier in the United States per the Department of Transportation. Jake’s investment thesis was predicated on a strong corporate strategy, competitive industry position, consistent operational excellence, a strong balance sheet, and a Company responsibility to return value to shareholders. Southwest has demonstrated a commitment to growth through robust capital expenditures. This investment will allow Southwest to add more aircraft to its fleet and maintain operational efficiency as it grows. A robust United States economy and changing consumer trends that favor experiential spending will further support Southwest. Southwest has a strong balance sheet and is well equipped to access the debt capital markets to finance future growth. Jake proposed a purchase of 100 shares of Southwest. This transaction was financed through the sale of 20 shares of Honeywell International Inc. (HON) and 50 shares of Delta Air Line, Inc. (DAL). The proposal passed unanimously.
On Tuesday, February 20, Aaron McIntyre pitched Simon Property Group (NYSE: SPG) to be added to the SMIF portfolio. Simon Property Group is a retail real estate investment trust (REIT) and the second largest publicly traded equity REIT. The company invests in large malls as well as premium outlets. Aaron emphasized continued growth in NOI, revenue, and same-store sales, which presents strong performance in SPG’s assets. The retail industry is in the middle of a large transformation with the emergence of e-commerce and the shift in consumer interest to more enjoyable shopping experiences. As the largest mall owner in America, Simon has the advantage over its competitors of being able to focus on evolving its current assets as opposed to seeking other investment opportunities. The addition of SPG supports the fund’s consensus that the U.S. economy will see great growth in the coming year and therefore, an increase in consumer spending. Aaron proposed to purchase 40 shares of SPG through the sale of 38 shares of the XLU, 11 shares of NextEra Energy (NEE), and 10 shares of SPY. The motion passed unanimously.
On Monday, February 12, Will Harpin pitched Caterpillar Inc. to add to the Industrial Sector holdings of the class’s portfolio. Caterpillar recently underwent large internal restructuring and has seen growth in construction and resource industries, both internationally and in the US. Caterpillar is the world’s largest manufacturer of construction equipment and produce industrial equipment for a wide range of purposes. Will’s pitch focused on the possibility of the US Infrastructure bill (which President Trump announced the same day as Will’s pitch), the recent restructuring of Caterpillar, and the belief that the industrial machinery industry was in an upswing. Caterpillar has focused on environmental initiatives and the use of more efficient manufacturing methods, therefore raising profit margins. Will proposed the purchase of 40 shares of Caterpillar stock to be paid with through the sale of stock in the industrial ETF, XLI, and use of cash within the portfolio. The proposal passed unanimously.
On Monday, February 12, Christian Daugherty pitched Corning Inc. (NYSE: GLW) as an addition to our Information Technology holdings. Corning is a highly diversified technology company with five main business segments: Display Technologies, Optical Communications, Specialty Materials, Life Sciences, and Environmental Technologies. Christian expects explosive revenue growth over the next few years in the majority of their segments with their largest segment, Optical Communications, expected to grow from $3.5 to $5 billion in revenue by 2020 on the back of their recent expansion and M&A activities. Corning’s continued focus on innovation, evidenced by their large investment in research, development and engineering, has allowed the company to continue to grow and adapt. He also believes that their Strategy and Capital Allocation Framework, which promises to deploy $26 to $30 billion for increased M&A, capital expenditures, share repurchases, and increased dividends, has revitalized Corning from a business and shareholder perspective. Christian is confident that Corning will be an exceptional long-term position in the portfolio. He motioned to purchase 200 shares of GLW; the motion passed unanimously.