On Tuesday, December 5th, Jeff Hagen, one of our Consumer Discretionary analysts, pitched McDonald’s Corporation. Jeff pointed to McDonald’s three recent growth initiatives as catalysts for future growth, including improvements in technology, a new delivery platform and menu expansions. He believes that McDonald’s is a valuable addition to the SMIF portfolio due to its commitment to provide shareholder value. McDonald’s has outperformed our benchmark during economic downturns while having a lower beta. Jeff proposed buying 75 shares of McDonald’s by selling 100 shares of Starbucks, 35 shares of Nike, 5 shares of the SPY and funded the rest with cash. The proposal passed unanimously.
On Tuesday, November 28th, Kortney Klingert pitched CarMax to the Student Managed Investment Fund. Kortney is confident that CarMax is well positioned to deliver long-term growth. CarMax is the largest retailer of used cars in the United States, selling more used cars each year than their three closest competitors combined. They revolutionized the auto industry by simplifying the process of selling, purchasing and financing used cars with no-haggle, honest pricing. The used car market is highly fragmented, consisting of over 18,000 franchised dealers, 120,000+ local used car lots and individual sellers. CarMax’s national footprint, sizable data advantage, great associates and proprietary systems uniquely position them to service customers and navigate between an ever important digital and store experience. CarMax has the established footprint to scale up and expand its market share and to best service changing consumer demands. Their innovative and digitally focused business model will continue to benefit them in the future. This investment diversifies our portfolio and gives SMIF exposure to a company that is strongly positioned for growth and success. The class approved the motion 17:18 to purchase 100 shares of CarMax and fund this purchase through the sale of the consumer discretionary ETF, XLY.
On Tuesday, November 28th, one of the SMIF Technology sector analysts, Charlie Niehaus, pitched Square Inc., a payment processing solutions business. Charlie highlighted Square’s recent diversification of revenue sources with the addition of their Square Capital and Square Cash business segments in his stock pitch. He believes Square is a beneficial addition to the SMIF portfolio as a Fintech growth stock. From the time Charlie started covering Square to when he pitched it, the stock price had nearly doubled. Taking this possible over valuation into account and the recent volatility in the stock price due to earnings and cryptocurrency news, Charlie proposed to utilize a put onboarding strategy. He believed this was the best option in anticipation that in the short term, the price could slide even more. The motion passed 17:18.
On Wednesday, November 15, Matt Linden pitched Penske Automotive Group as an addition to our Consumer Discretionary holdings. Penske is a highly diversified transportation services company, boasting the second largest auto dealership in the United States. The firm’s business units are comprised of automotive retail, commercial truck retail and commercial vehicle distribution. Catalysts include an industry-wide shift towards higher-margin SUVs, rising nationwide vehicle age that will bolster parts and service operations, strategic acquisitions of standalone used vehicle dealerships and an uptick in the global commercial truck market. Due to its geographic and business unit diversification, Matt believes that Penske is well positioned to outperform its peers in the auto retail industry. Matt motioned to purchase 100 shares of PAG, funded by the sale of 50 shares of XLY. The motion passed unanimously.
On Tuesday, November 28, the Student Managed Investment Fund surpassed $2,000,000 for the first time in fund history. Each class’ portfolio reached above $1,000,000, driven by strong advances in the technology and industrials sectors over the first half of the academic year. SMIF began in 2000 with an original investment of $200,000. Over the past 17 years, investments infused into the portfolio have amounted to just over $1,000,000, and today, the portfolio reached an important milestone of $2,000,000 that the class is proud to have achieved.
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.