Student Managed Investment Portfolio Organization (SMIPO)

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Radford University

After attending RISE II in 2002, SMIPO was formed with an initial $100,000 endowment. In 2004 SMIPO received an additional $150,000. Again, in 2006 we received another $100,000 endowment.

SMIPO is a fully student-managed organization. None of our 29 members receive credit for participation in the organization.

Since SMIPO’s creation in 2002, the organization has been selected to present as finalists at RISE five out of six years.

Board of DirectorsBoard of Directors

Info TechInfo Tech

Jr. Investme

Sr. Investment

VP of Investme

VP of Operations

VP of Finance VP of

Finance

PresidentPresident

Chief Accountant

Chief Economist

Human Resources

EconomistEconomist AccountantAccountant ArchivistArchivist MarketingMarketing

To allow Radford University students the opportunity to gain practical experience in the management and decision-making activities of a corporate structured organization by participating in hands-on management of the funds of Radford University Foundation's endowment to a Student Managed Investment Portfolio Organization.

• Top Down Portfolio Management• Economic Analysis• 2008 strategy• Sector Allocation• Stock Selection Process • Exit Strategy• Benchmarking Our Performance • SMIPO’s Performance in 2008• Basic Portfolio Stats• SMIPO’s Direction in 2008-2009

• Develop economic forecasts.• Asset allocations between equities and

cash.• Apply economic forecasts to the sector

allocation decision.• Choose beta exposure, style exposure• Stock selection consistent with our

economic views.• Constant monitoring of sectors and

holdings.• Realization of Gains/Losses.

• Identify Investment Opportunities • Quarterly Sector Outlook

•Broad macro-economic indicators• Industry Trends•Sector Specific Indicators•Sector Growth•Analyst Coverage

• Convey data contained in these reports to investment analysts in a relevant and actionable manner.

• Favorite Economic Indicators• CPI & Core CPI• Crude Oil• Case-Shiller Housing Price Index• Initial Job Claims and Unemployment

rate• Exchange Rates

• Current account balance• Fiscal Policy• Monetary Policy

• Presidential Election• Policies and regulations• Fiscal Policy: Spending / Taxation

Large Cap, low risk companiesHigh Dividend yieldDecrease portfolio beta

The economy will remain in a recession for the remainder of 2009.

GDP growth will continue to be sluggish.

Factors driving economic outlook Bailout concerns Stimulus package Financial sector Housing Market

Requirements: Sector allocations are set relative to our

benchmark (S&P 500) Each sector’s analysts are responsible for a

sector allocation strategy. Deviations from benchmark weights are

explained in a written sector allocation report. Sector allocations must be re-evaluated each

quarter. ETF’s may be used as temporary holdings and

provide quick execution of sector reallocation.

Financials: Underweight Uncertainty in Sub-prime lending

▪ Goldman Sachs Group Inc.▪ Charles Schwab Corp.

Energy: Underweight Good growth, but high volatility

▪ Transocean Utilities: Market weight

Defensive, above average dividend yields▪ Exelon

Health Care: Overweight Defensive and strong growth

▪ Johnson & Johnson▪ Gilead Sciences

Technology: Underweight Weakened consumer demand

▪ IBM Telecom: Underweight

Below average growth and hypercompetitive environment▪ Comtech Telecommunications

Basic Materials: Slight overweight Low volatility and good performance excluding home

materials▪ Sigma Aldrich

Industrials: Underweight Weak global economic conditions

▪ Ametek Consumer Discretionary: Underweight

Economic Concerns on Consumer Spending▪ McDonald’s

Consumer Staples: Overweight Defensive balance and strong dividends

▪ Colgate Palmolive▪ Phillip Morris

Investment Process Screening & Research Spreadsheets and Workbook Presentation with Q&A

Voting Process Majority is needed for BUY or SELL

After BUY Constant monitoring to Identify

fundamental changes

Sources of Information: Thomson One Student Research Edition ValueLine Zacks.com Yahoo! Finance StandardandPoors.com

10-K10-QPositives/NegativesRisks/ExposuresCompetitor Comparison Analyst Estimates/Price TargetsValuations

Dividend Current = $2.00 Value Line Estimated Growth Rate =

8.87% CAPM = 10.53% DDM: ($2.00*(1+.0887))/(.1053-.0887) = $131.00 Highly undervalued (Optimistic?) Bargain Purchase Strong earnings and dividends.

• Investment Analysts Constantly Monitor Sectors for unexpected variations in stock value

• Weekly Updates on Stock Positions• Changes to sector allocations

• Reassess holdings

• Automatic Reevaluation Trigger• If a security drops or gains in market

value by 10% within a rolling five trading day period or 20% within a rolling twenty trading day period

• Does Not Mean SELL• Examples:

• MEMC• Aflac

• S&P 500 is benchmark for SMIPO• Investment Analyst performance is

compared to sector returns from S&P• Analysts expected to meet or exceed

returns for given sector

SMIPO S&P 500

2008 Return: (34.99) (39.84)

Dividend Yield: 2.16% 3.66%

PE (TTM): 10.54 10.75

Beta :(Historical)

0.913 1.0

EPS Growth:(5 Year)

11.98% 10.32%

ROE: 30.44% 22.05%

SMIPO S&P 500

Alpha: 5.20%Annualized

Treynor: (0.153) (0.177)

Sharpe: (0.033) (0.037)

Beta (2008): 1.04 1.00

Standard Deviation: 0.226 0.210

• Organization• Continuous Improvement of

Investment Techniques• Develop valuation methods for

each sector• Portfolio

• Sector Allocations• Beta Timing • Style Timing

Student Managed Investment Portfolio Organization (SMIPO)

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