On Tuesday, March 28, alumnus Douglas Jamieson lectured to the SMIF class about his career with Gabelli Funds, LLC. Gabelli Funds oversees a variety of actively managed funds, all with a focus on value investing. Jamieson took time to explain the history of value investing, beginning with the seminal works of Ben Graham, through his protege Warren Buffett, to today. Gabelli Funds, through their value investing strategy, has remarkably low investment turnover – just 5% in any given year. Jamieson emphasized that Gabelli’s investment strategy is bottom up, based upon fundamentals, and done in a tax sensitive manner. Gabelli’s 40-50 analysts all have intense knowledge of one specific sector, giving them the required expertise to sift through investment options.
In the Q&A portion, Jamieson spent much of the time discussing the value-added from active management. In the ever-increasing debate between active and passive management, Gabelli Funds firmly believes that active management better shields against downside risk, and is able to identify strategic investment opportunities that passive management cannot.
SMIF thoroughly enjoyed hearing Mr. Jamieson speak, and we thank him for coming into class!
On March 22, after hearing Mr. Luthi speak SMIF listened to Nick’s proposal to add Delta Airlines to the portfolio. Delta is the second largest US airline, after merging with North West Air in 2008. Delta has done remarkably well after their 2006 bankruptcy filing. Nick cited that their bankruptcy taught them tough lessons about inefficient logistics, poor capital structure, and poor cost management. Today, the company is very healthy, with an entirely different capital structure. In most metrics, Delta bests its competitors. They have the lowest missed bag ratio, highest on on time arrivals, and lowest maintenance costs. The company also mitigates labor risks through lack of a unionized workforce. Delta also owns stake in at least one airline on every continent – something Nick believes will benefit the company heavily as emerging markets develop a middle class. Nick motioned to purchase 300 shares of Delta; the motion passed unanimously.
On Wednesday March 22, SMIF had the pleasure of hearing from John Luthi ’04, the current Director of Investments for the Bucknell Endowment. Before joining Bucknell in 2006, John worked as an analyst at JPMorgan Chase in New York. In class, John took the time to explain the considerations required when investing on behalf of the University. He noted that the endowment has more exposure to equity than a traditional fund in order to generate income in perpetuity. He also took the time to discuss, at length, the Investment Office’s approach towards choosing investment managers. As John said, generating alpha is no easy task. Hearing how the Investment Office sifts through numerous asset managers to find the best was a fascinating topic. We thank John for taking the time to join us in class!
On Tuesday March 21 the class heard from Sean, pitching to add Kraft Heinz to the Consumer Staples sector. Kraft Heinz is the third largest food and beverage provider in North America, formed after the 2015 merger of Kraft and Heinz foods. The company has over 200 brands in 190 countries. Currently, the company is looking to streamline their offerings, focusing more on their largest and most profitable lines. With currently stagnant topline growth, the company has recently been engaging in M&A activity to generate new business. Sean’s major investment thesis came from our lack of diversification in the Consumer Staples sector; SMIF has no exposure to food products. He proposed to add 100 shares of KHC to the portfolio; the motion passed 28:1.
For our second pitch on Wednesday, March 8, the class heard from DJ Magee, who proposed adding Exxon Mobil to the portfolio. DJ believes Exxon Mobil to be a strong addition to the energy sector due to its industry leading cost management. The company is diversified and highly stable. DJ cited a recent selloff in July of 2016 as a strategic justification for buying. He believes the fundamentals of the company are still strong, and that the selloff was not justified. DJ also noted that SMIF has active risk in the portfolio by not holding Exxon Mobil. He motioned to purchase 300 shares of XOM; unfortunately the motion did not pass.
On Wednesday, March 8, Reagan Cerney discussed adding FedEx to the Industrial Sector of the SMIF Portfolio. Reagan believes that SMIF currently lacks diversification within Industrials – adding a logistics company such as FedEx or UPS would help round out our holdings. When comparing FedEx Vs. UPS, Reagan cited that FedEx has faster shipping times, and more European exposure through the acquisition of TNT. Furthermore, much of UPS’ revenue comes from Amazon; FedEx has no such dependence on a single customer. Reagan also believes that FedEx is currently undervalued – their efforts to improve margins should drive heightened profits in the future. She motioned to purchase FedEx; the motion passed unanimously.
