Student Managed Investment Fund

Bucknell University College of Management

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October 4, 2011

Today in Class:

The layout of the Fall 2011 Newsletter was discussed and the publish date was set for November 1, 2011.

Sector Reports

  • Healthcare (Holdings: CELG, TEVA, BMY) – BMY and CELG are both out-performing the S&P 500, yet TEVA is struggling.  Healthcare consumption has been rising every quarter in the past few years, however we see possible political risk present in several lawsuits that are challenging President Obama’s Healthcare bill.  Overall, we judge this sector to be risk averse, not volatile, and presents opportunities for high dividend yields.  The class has decided to overweight this sector.  See full sector report here.
  • Industrial (Holdings: GE, FSTR, UPS) – Industrials has been under-performing the S&P 500 but due to a 1.4% increase in construction spending in August and a full point increase in the PMI, we feel that it is best to stay neutral with the S&P 500 sector weighting.  See full sector report here.
  • Information Technology (Holdings: EBAY, IBM) – IT is a sector SMIF is very interested in, but we are wary of negative returns in the short run.  As spending is tied to global demand, we feel increasing our weighting and holdings would be ill-advised.  As such, we feel it is best to stay neutral.  See full sector report here.
  • Telecoms (Holdings: VZ) – Telecoms have high dividend yields and we will investigate diversifying our holdings, but will remain neutral with S&P sector weighting.  See full sector report here.
  • Utilities (Holdings: ED) – While the sector’s performance has been exemplary, we feel that prices are inflated and increasing in our position in utilities would result in future losses.  We will remain neutral with the S&P 500 sector weighting.  See full sector report here.

 

Read the entire class minutes: 10-04-11 Minutes

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Fall Utilities Sector Update

Holdings: ED

The utilities sector is more immune to market conditions than other sectors.  These companies are mostly government regulated and only susceptible to changing energy prices, but will always be in need.  They present high dividend yields and investors flock to these companies during downturns due to their safety.  Utilities are currently out-performing the S&P 500 by a significant amount, and U.S. utilities are out-performing global utilities as well.  Low interest rates will continue to drive the performance of the utilities sector.

However, there is a large concern that SMIF missed the boat over the summer and utilities prices are already inflated.  Thus, we will remain neutral with the S&P 500 sector weightings for the current period.

 

Access the full report here: Fall 2011 Utilities Sector Report

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September 22, 2011

Today in Class:

Michael Sena briefed the classroom on a new technology the class could use to speed up votes, rather than using pens and paper.  Clickers are provided by the Bucknell University Library and display voting results instantly on the in-class projector.

The econ committee reported on the current US consumption, investment, governmental spending, net exports, and GDP numbers.  We expect consumption to rise by 2%; residential investment to remain stagnant and non-residential to improve modestly; government spending to contract this year and then increase at a slower rate over the next five years; net exports to increase by around 4% due to a weak American Dollar, and for GDP to grow by around 1.3% over the next year.  We are bearish overall.

Sector Updates:

  • Energy – Oil is down and energy as a whole is not forcasted to grow.
  • Financials – These should continue to remain depressed for the foreseeable future, and special attention should be payed to Europe.
  • Utilities and Consumer Staples – These will ride out the market, the class plans to overweight.
  • Materials – Investment decisions will depend on the strength of the U.S. Dollar.
  • Consumer Discretionary – As the economy grows slowly or not at all, we should expect to underweight consumer discretionary stocks.

The class discussed the possibility of a double dip recession and decided that over 2% GDP growth is necessary for sustainable job growth.  Housing should be monitored as it will most likely lead us out of the current period of depressed growth.

Buy/Hold/Sell

  • TEVA (Monica Wu): Recommendation is to hold.  The class noted that margins are down so growth will be hard, there have been no recent brand-name drug approvals, and that sales are down.  However, market data showed that out of 28 analysts, 22 said TEVA was a strong buy, so despite general consensus to sell, the class ultimately decided to hold in hopes of being able to sell TEVA at a higher price.

The PG limit order buy 100 shares at $61.16 and KO limit order buy 100 shares at $69.51 both have executed.

Access the complete minutes here: 09-22