General Meeting #6

October 11, 2011

Agenda

• Question of the Day• Market Overview• Dissecting GDP• Team Stock Pitch• Membership Voting• Announcements

Question of the Day

Market Overview

World Market Overview

U.S. Market Overview

S&P 500 Snapshot

Market Overview

U.S. Markets

• EU Bailout Fund Saga– Slovakia lawmakers reject plan

• One of Europe’s poorest nations– 17 countries in Eurozone

• 16 have passed• Slovakia is the last holdout• Need unanimous vote• Slovakia Prime Minister Iveta

Radicova urged Parliament to pass measures

• Senate GOP fillabusters Obama’s jobs bill– Absolutely no surprise here

Market News

Earnings Front

• Alcoa kicks off earnings season by disappointing Wall Street

• Important Upcoming Earnings Reports:

– October 13: JPMorgan Chase

• Concensus EPS Est. $0.96

– October 17: Citigroup

• Concensus Est. $0.33

– October 17: Wells Fargo

• Concensus Est. $0.72

Earnings Season

Investment Philosophies

Philosophical Importance

• Know what you’re looking for

• How to look for investments

• Consistency of strategy

– Continuous improvement

– Understanding of risks/rewards

Framework for Investing

Broad Views

• Technical Philosophies– Price movement

• Understanding pricing trends, finding when history “repeats”– Supply and Demand Reactions

• Market actions tend to discount everything (at some point)

• Fundamental Philosophies– Financial analysis

• Margins, ratios, earnings, leverage, etc.– Strategic understanding

• Industry, competitive advantage, growth opportunities

Technical Philosophies

• Price Movements– Strength, direction, momentum and duration of trends in a

stock’s price– Primarily a mathematical/statistical analysis– Examples: MACD, Bollinger Bands, etc.

• Supply and Demand Reactions– Finding when the market is acting irrationally based on recent

price level changes– Example: point and figure charting

Fundamental Philosophies

• Value– Purchasing fundamentally underprice companies– Typical signs of value stocks include:

• Below Book Value• Low P/E, P/B, P/S ratios• Stable earnings, consistent earnings yield

• Growth– Purchasing rapidly ascending companies– Typical signs of growth stocks include:

• High sales growth rates• Possibly low/no-profit (with expectations for a rapid flip)• High overhead for growth (expected to diminish)

Two Primary Groups

Fundamental Philosophies

• Benjamin Graham and David Dodd– Securities Analysis and the Intelligent Investor– “Mr. Market”– Price level vs. Intrinsic Value

• Walter Schloss– 15.3% annualized returns for 50 years (vs. 10% w/ S&P 500)– Identify securities that sell for considerably less than their value

to a private owner• Less interested in underlying operations• Variation of Price level vs. Intrinsic Value

Value Investors

Fundamental Philosophies

• Phillip Fisher– Common Stocks and Uncommon Profits– Stock’s worth considered in terms of potential growth rather than

price trends and absolute value

Growth Investors

Fundamental Philosophies

• David Einhorn– 1996 to present: 21% annual returns– Fundamental tenants:

• How competitive is the business• How does the company perform relative to competitors• Are management’s interests aligned with shareholders?• Concentrated Portfolio

Other Successes

Fundamental Philosophies

• Warren Buffet– “I’m 15% Fisher and 85% Graham”– 20.5% annualized returns since 1965– Keys:

• Margin of Safety• High quality, still growing businesses• Management quality• Competitive advantage

Other Successes

Fundamental Philosophies

The key to investing is not assessing how much an industry is going to affect society, or how much it will

grow, but rather determining the competitive advantage of any given company and, above all, the

durability of that advantage. The products or services that have wide, sustainable moats around them are

the ones that deliver rewards to investors.-Warren Buffet

Other Successes

Stock Pitch

Membership Voting

Is this stock investment grade?

Membership Dues

• Active Members must pay dues– $40 per semester or $60 per academic year

• Payment Methods:– Online via website: http://usiteam.org/• Navigate to Membership and select “Pay Dues”

– In person by cash, check, or credit card (see Mark)

Stock Pitch Competition

• CORRECTED DATE: Saturday, October 22nd

• 10:30a-6:00p, SAC Legislative Assembly• Awards:– 1st Place Overall– 2nd Place Overall– Best Underclassmen Team

• Registration commences online Tonight!