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INVESTMENT CLUB
April 4th 2014
OVERVIEW
1. Market Update
2. Portfolio Overview
3. Wealth Management Intro
4. Buy Presentation
MARKET UPDATE
FBI PROBE HIGH FREQUENCY TRADING
Investigating high-speed trading firms and potential insider trading
Potentially cancel trades to create confusion
Manipulating other investors
Tool to cover up insider information
Question if firms use fasterdata streams
YELLEN CALMS MARKETS
Confirmed that interest rates would remain low for foreseeable future
Unsurprising given Yellen’s dovish tendencies
Cited weak job market
• Long-term unemployed• 7 million Americans working part-time • Slow wage growth
U.S. TRADE GAP WIDENS
Exports fell due to weak demand overseas
Largest trade deficit since September
Economists lowered GDP forecasts for 1st Qtr.
Following increase in exports last month
Overseas demand was unsustainable
• Growth continues to slow in China• Europe volatile
U.S. STOCK MARKET
Fell on Thursday for 1st time all week
Investors worried about export data
Looking forward to today’s job report
U.S. economy supposed to add 200,000 jobs
Unemployment estimates = 6.6%
ABROAD
Asia
• Nikkei 225 + 3.10%• Hang Seng + 2.86%
Europe
• FTSE 100 + 1.26%
ASIA
China’s official Purchasing Managers Index rose in March.
1.5% expected inflation in Japan
EUROPEData raises inflationary concerns
Hints for QE
PORTFOLIO UPDATE
GEORGE RAKIC
ERIC TILSON
IRVIN CEDILLO
OTHMAN GUENNOUN
CURRENTLY
Invested: $463,002.42 (93.35%)
Cash: $33,000.00 (6.65%)
Total $496,002.42
37 single name equities
SECTORS
Sector NameDollar
amount Weight Benchmark
Information Technology $85379.87 18% 18.70%
Financials $48725.52 11% 16.40%
Health Care $83065 18% 13.40%
Consumer Discretionary $78589.2 17% 12.20%
Industrials $46750 10% 10.70%
Energy $45263.3 10% 10.10%
Consumer Staples $35944.48 8% 9.60%
Materials $15956.55 3% 3.50%
Utilities 0 0% 3.00%Telecommunication Services $19384 4% 2.40%
FIVE LARGEST POSITIONS
Ticker Name Value Weight
GE GENERAL ELECTRIC COMPANY $23,607.00 4.76%
GILD GILEAD SCIENCES INC $22,200.00 4.48%
UNH UNITEDHEALTH GROUP INC $20,562.50 4.15%
CAT CATERPILLAR INC $20,510.00 4.14%
MFC MANULIFE FINANCIAL CORPF $16,653.00 3.36%
POSITIONS UNDER 2%Ticker Name Value Weight
CVX CHEVRON CORPORATION $9,523.20 1.92%
BIDU BAIDU INC $9,447.00 1.90%
DNR DENBURY RES INC NEW $8,380.00 1.69%
CSCO CISCO SYSTEMS INC $8,266.22 1.67%
EBAY EBAY INC $8,187.00 1.65%
CHKP CHECK PT SOFTWARE TECH F $8,044.80 1.62%
CHL CHINA MOBILE LTD $6,913.50 1.39%
BK BANK OF NY MELLON CP NEW $6,653.32 1.34%
BAC BANK OF AMERICA CORP $3,944.50 0.80%
INTRODUCING PRIVATE BANKING / WEALTH MANAGEMENT MARKET
JASON SHAVEL
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Some Slides Borrowed and/or edited from Phil Molyneux
DEFINITION OF WEALTH MANAGEMENT & PRIVATE BANKINGWealth Management:
• financial services provided to wealthy clients, mainly individuals and their families , typically with $100,000+ investable assets
• deals with managing both the assets & liabilities side of clients’ balance sheets
Private banking:• more exclusive, subset of wealth management, typically with
$1 million + of investable assets. • banking services (deposit taking and payments),• discretionary asset management, • brokerage, • limited tax advisory services
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WEALTH MANAGEMENT - PRODUCTS While asset management is a key feature, wealth management has a greater emphasis on financial advice and is concerned with gathering, maintaining, preserving, enhancing and transferring wealth.
Products include:• Brokerage.• Core banking-type products • Lending products (credit cards, mortgages and private jet
finance)• Insurance and protection products,• Advice in all shapes and forms: asset allocation, wealth
structuring, tax and trusts, various types of planning (financial, inheritance, pensions, philanthropic), family-dispute arbitration – even psychotherapy to children suffering from ‘affluenza’.
• A wide range of concierge-type services, including yacht broking, art storage, real estate location, and hotel, restaurant and theatre booking.
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CLIENT SEGMENTS
Private banking targets only the very wealthiest clients or high net worth individuals (HNWIs): broadly speaking, those with more than around $1 million in investable assets.
Wealth management, by contrast, targets clients with assets as low as $100,000, i.e. affluent as well as high net worth (HNW) clients.
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DEFINING THE WEALTH MANAGEMENT SERVICE PROPOSITION
The following three criteria differentiate a firm as a wealth manager:
• The relationship that wealth managers have with their clients, both in terms of breadth (where providers emphasise terms such as ‘holistic’, ‘comprehensive’ and ‘all-inclusive’) and depth (‘intimate’ and ‘individualised’).
• The products and services provided, with a particular emphasis on estate planning and multigenerational planning services, as well as tax advisory expertise and alternative investments.
• The specific objectives of wealthy clients, such as investment performance, wealth preservation or wealth transfer.
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INVESTMENT MANDATES
Custodian for a client’s assets. That involves, essentially, asset safekeeping, income collection, fund disbursement and associated reporting.
Execution-only mandate, the wealth manager executes, or selects brokers to execute, securities transactions on behalf of the client. Not investment advice, service aimed primarily at self-directed clients.
Advisory mandate
Discretionary mandate
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DISCRETIONARY MANDATESThe wealth manager usually has sole authority to buy and sell assets and execute transactions for the benefit of the client, in addition to providing investment advice.
Starts off with:
Construction of a brief with the client, detailing investment aims, level of risk-aversion and other factors that will influence the portfolio (In some discretionary accounts, the wealth manager is given only limited investment authority). However, in all cases, major investment decisions, such as changing the account’s investment strategy or asset allocation guidelines, may be subject to the client’s approval.
The wealth manager is generally paid on the basis of a flat-fee arrangement linked to the value of the assets under management.
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ONSHORE & OFFSHORE WEALTH MANAGEMENTOnshore wealth management is the provision of products and services within the client’s main country of residence.
Offshore wealth management, by contrast, serves clients wishing to manage their wealth outside their main country of residence for reasons such as:
• financial confidentiality;• legal-system flexibility; • tax considerations; • the lack of appropriate products and services onshore;• a low level of trust in domestic financial markets and
governments; and• the need for safety and geographical diversification in response
to domestic political and macroeconomic risks. Some clients treat their offshore account(s) primarily as a ‘vault’.
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MAIN PLAYERSPure private banks
Trust banks
Retail and universal banks
Family offices
Financial advisors
Stockbrokers and wirehouses (US term for large brokerage houses)
Direct banks
Asset managers
Investment banks
Others – insurance companies, accountants, solicitors, financial planners
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CONCLUSION
Do you have a million dollars?
Do you want to work with people who have millions of dollars?
If not then Wealth Management is not for you
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BUY PRESENTATION
170 SHARES @ $46.80
SOUTHWESTERN ENERGY
BACKGROUND
Independent Energy Company
• Natural Gas and Crude Oil Exploration , Development and Production
• Fayetteville Shale in Arkansas• Marcellus Shale in Pennsylvania• Niobara Formation in Colorado• Owns other land in Canada, Louisiana, Arkansas, and
Colorado
Midstream Services
• Transportation of Natural Gas to Market• Marketing of Gas Production
FUNDAMENTALS/COMPARISON
Market CapRevenueGross MarginEBITDAOperating MarginNet IncomeEPSP/EPEGP/S
SWN16.23B3.37B0.67
2.02B
0.36703.50M2.0023.101.834.77
COG14.54B1.75B0.77
1.18B
0.30279.77M0.6652.920.548.17
CHK17.21B17.51B0.34
5.46B
0.15474M0.7336.430.350.97
Industry454.06M257.94M0.65
186.66M
0.17N/A0.0223.332.303.29
THESIS
Technological advances and new drilling techniques have unlocked vast North American natural gas reserves
Will allow the US to move away from dependence on foreign oil
Natural gas is preferable to coal and other fossil fuels because it is clean burning, easily transportable, and much more affordable
Demand for natural gas is increasing and is expected to be the 2nd largest source of energy worldwide by 2035
Currently natural gas pricing is starting to rise
Resulting in higher income for natural gas companies
COMPETITIVE ADVANTAGE
Strong Management
Large land holdings in the right locations
Diversified Business Model
Multiple Sources of Revenue
FINANCIAL STATEMENTS 2013Revenue:
• 2011: 3.0B• 2013: 3.4B
Net Income:
• 2011: 637.8M• 2013: 703.5M
Income Before Income Tax:
• 2011: 1.0B• 2013: 1.2B
Net Cash Provided by Operating Activities:
• 2011: 1.7B • 2013: 1.9B
Lots of Cash
EXECUTIVE COMPENSATION
Executives all own stock and have stock options
Incentive based contracts
Aligns interests of board members and shareholders
Helps decrease excessive risk
Chairman of the Board owns ~150,000 shares
WORD ON THE STREET
Consensus Buy Rating
Goldman Sachs and Deutsche Bank each lifted target price
Banner Year in 2013
Project to Break Many Earning Records in 2014
RISKS
Volatile Industry
Unknowns of fracking
Efforts largely concentrated in three spots
Supply is greater than demand
Stock is close to 52 week high
CONCLUSION
Industry is starting to heat up
Alternative source of energy for the US
Growth Potential
Land holdings have proven to be quite profitable
New sector for our portfolio to enter
VOTE170 Shares @ $46.80