John L. Grove College of Business Financial Advisory
Council 2020-2021
Jonathan C. Moats, '10, Chair
Capital One Financial, LLC
Michelle R. Chopper, '02, CPA
Cohen & Company
Justin J. Ellsesser, '11, CFA, CAIA
AndCo Consulting
Chris J. Jackson, '97, AFIM
truNorth Financial Services
Joshua L. Jenkins, '12, CFP, ChFC
Jenkins Financial
Timothy G. Long, CFP, IAR
The Advisors at Cornerstone Financial, LLC
Louise Wisman Lovell
US Nuclear Regulatory Commission - Retired
David J. Morgan ‘80
Farmers Insurance - Retired
Joseph T. Nicholas, III, CFP ‘99
Wilmington Trust
Zach T. Paul, ‘09
Berkshire Hathaway Home Services
Lisa H. Percetti, ’15, CPA
Ernst & Young
Richard Powers, ‘98
Vanguard Group
Christopher S. Weber, '03
DeRock Electric Company, Inc.
Letter to Friends and Affiliates
John L. Grove College of Business
Shippensburg University
1871 Old Main Drive
Shippensburg, PA 17257-2299
www.ship.edu/business
Office: 717-477-1435
Fax: 717-477-4003
Dear Stakeholders,
As the Spring 2021 Investment Management Program (IMP) portfolio managers, it is our privilege to report the
Wisman Fund’s (‘Fund”) performance in 2020 and provide an update of our progress.
The IMP class is an invaluable program that allows students to put theory to practical applications. The IMP class
has provided us an opportunity to apply the knowledge and skills that we have learned in the classroom to a real-
world investing case that has set us apart from our peers. Managing the Fund has been an invaluable experience
that we will carry with us throughout the rest of our careers. Not only have we had the opportunity to manage a
real-dollar portfolio and gain portfolio management skills, but we have been able to enhance our leadership and
teamwork skills.
This past year, we emphasize working as a team and incorporating research into our investment decisions. During
the semester, we conduct analysis on sectors, industries, and the portfolio’s security holdings and formulate
strategies to outperform the portfolio’s benchmark, which consists of 80% the S&P 500 Index and 20% the
Bloomberg Barclays US Aggregate Bond Index. We overweight assets and equity sectors that we believe will
outperform the benchmark and underweight assets and sectors that likely will underperform the benchmark. We
continue to emphasize the long-term commitment of the Fund and invest in securities that will withstand boom
and bust cycles of the markets.
We are pleased to report that despite the unprecedented effects of COVID-19, the portfolio yields a return of
19.96% in 2020, outperforming the benchmark’s 16.22%. The portfolio has a risk-adjusted return of 19.09%,
beating the benchmark by 2.87%. The value of the portfolio increases from $225,950.07 at the end of 2019 to
$265,048.43 at the end of 2020.
In the following report, you will find the IMP portfolio’s investment objective, investment strategy, performance,
and security holdings. Please let us know of any comments, questions, or suggestions that you may have, as they
are always welcomed and appreciated.
We are truly grateful for your continued generosity and support of the Investment Management Program.
Sincerely,
The Spring 2021 IMP Portfolio Managers
.
Fall 2020 IMP Class (Back row, from left) Christopher Harootunian, Zachary Gibson, Steven Belmonte, Ryan Gandy, Christian Hennel, and
Matthew McGrath. (Front row, from left) Alejandro Morales, Joachim Theophile, Valentina Alonso, Mari Reott, and
Bethany Hey.
Ryan Gandy, Christian Hennel, Matthew McGrath.
Front, left to right: Alejandro Morales, Joachim Theophile, Valentina Alonso, Mari Reott, Bethany Hey
Spring 2021 IMP Class
(Back row, from left) Steven Belmonte, Ryan Crook, Matthew McGrath, Ryan Gandy, and Zack Whalen. (Front
row, from left) Benjamin Bridges, Valentina Alonso, Jody Boyer, and Philip Noss
Mission Statement
The Investment Management Program (IMP) aims to provide students with the skills, theory,
and concepts needed to become portfolio managers through a proactive educational
environment. The intent of the IMP is to provide academic scholarships for the finance program
in the future.
Table of Contents EXECUTIVE SUMMARY ........................................................................................................................................................... 1
INVESTMENT OBJECTIVE AND STRATEGY ............................................................................................................................ 2
PORTFOLIO CHARACTERISTICS ............................................................................................................................................. 3
EQUITY SECTOR WEIGHTS ..................................................................................................................................................... 4
PORTFOLIO PERFORMANCE .................................................................................................................................................. 5
PERFORMANCE ATTRIBUTION ............................................................................................................................................... 7
CONTRIBUTORS ...................................................................................................................................................................... 9
DETRACTORS ........................................................................................................................................................................ 10
TRANSACTIONS .................................................................................................................................................................... 11
DIVIDENDS............................................................................................................................................................................ 12
MOVING FORWARD .............................................................................................................................................................. 13
PORTFOLIO HOLDINGS ........................................................................................................................................................ 14
COMMUNICATIONS SERVICES ....................................................................................................................................... 14
CONSUMER DISCRETIONARY ......................................................................................................................................... 18
CONSUMER STAPLES ..................................................................................................................................................... 23
ENERGY ........................................................................................................................................................................... 27
FINANCIALS ..................................................................................................................................................................... 30
HEALTH CARE .................................................................................................................................................................. 35
INDUSTRIALS .................................................................................................................................................................. 41
REAL ESTATE ................................................................................................................................................................... 46
INFORMATION TECHNOLOGY ......................................................................................................................................... 48
MATERIALS ...................................................................................................................................................................... 53
UTILITIES ......................................................................................................................................................................... 56
EXCHANGE TRADED FUNDS ......................................................................................................................................... 60
THE PORTFOLIO .................................................................................................................................................................... 65
2020 Annual Report 1
EXECUTIVE SUMMARY
Investment Objective
To achieve a risk-adjusted return exceeding the
benchmark, which consists of 80% of the S&P 500 Index
and 20% of the Bloomberg Barclays U.S. Aggregate Bond
Index.
Investment Strategy
The IMP class invests in both fixed-income and
equity securities. We analyze securities using a top-
down approach and select stocks based on the
following characteristics:
• Companies have a proper business plan
and strategy.
• Companies have sound financial
fundamentals.
• Stock trades at a significant discount to
our estimate of fair value.
For fixed-income securities, our selection criteria
include:
• Credit rating is BBB or higher.
• Bonds with a longer duration than our
bond benchmark.
Asset Allocation
As of December 31, 2020, the fund’s value is
$265,048.43, with $228,627.81 (86%) in stocks and
equity ETFs, $26,088.49 (10%) in fixed-income ETFs,
and $10,332.13 (4%) in cash.
The portfolio consists of 35 stocks, one equity ETF, and
four fixed-income ETFs.
Portfolio Performance
The return of the portfolio in 2020 is 19.96%,
outperforming the benchmark’s 16.22%.
For risk-adjusted performance, the IMP portfolio’s
Sharpe ratio is 0.90, which is greater than the
benchmark’s 0.77. The portfolio has a Treynor ratio of
19.09%, which outperforms the benchmark by 2.87%.
Portfolio Characteristics
Price/Earnings (P/E) 38.89
Price/Book (P/B) 8.14
Return on Equity (%) 26.29
Dividend Yield (%) 1.83
Market Cap (Billion) 307.68
Beta 1.05
Asset Allocation
Equity 86%
Fixed Income 10%
Cash 4%
2 Investment Management Program
Investment Objective
To achieve a risk-adjusted return exceeding the benchmark, which consists of 80% of the S&P 500 Index and 20% of
the Bloomberg Barclays U.S. Aggregate Bond Index.
Investment Strategy
The 2020 IMP class utilizes a top-down analysis
beginning with an in-depth analysis of the economy,
sectors and industries, and companies to select ‘good’
investments. For equity, the IMP class follows a value
investing style, focusing on undervalued equities.
Investment Strategy for Equities
The portfolio managers choose to invest in stocks of
companies that meet the following investment criteria:
• Firm Fundamentals: Companies that have proper
business plans and strategies, unique
products/services, and competitive advantages are
deemed ‘good’ by our portfolio
managers. Additionally, companies must
demonstrate sound financial fundamentals, which
are essential to generate a positive cash flow.
• Undervaluation: The IMP class invests in stocks that
are traded at a discount to the class’ estimate of
intrinsic value.
Valuation Analysis
The IMP class considers a stock ‘undervalued’ if
intrinsic value estimate is significantly higher than the
market price. The following methods are utilized to
estimate intrinsic value of a stock.
• Discounted cash flow (DCF) models such as free
cash flow to equity discount models or dividend
discount models are used to estimate intrinsic
value. It is at the discretion of the analyst to decide
which DCF model is appropriate.
• The input parameters of the models (e.g. future EPS
growth rate), are derived from multiple financial
resources including Bloomberg, Morningstar,
Fidelity, Value line, and Yahoo! Finance.
• The IMP class also conducts a relative valuation
analysis to determine if a stock is undervalued. The
valuation ratios used include P/E, P/B, P/S, and
P/FCF.
Financial Ratio Analysis
A firm’s key financial ratios over the past several
years are compared to their competitors to determine
whether the company has sound financial
fundamentals. The financial ratio analysis is based
on, but not limited to, the following financial ratios:
• Financial Health Ratios
o Current Ratio
o Long-term Debt to Equity
o Debt to Equity
• Efficiency Ratios
o Receivable Turnover
o Inventory Turnover
o Asset Turnover
• Profitability Ratios
o Net Profit Margin
o Return on Assets
o Return on Equity
• Growth Rates
o EPS Growth Rate
o Sales Growth Rate
Investment Strategy for Fixed-Income Securities
Fixed-income securities are selected based on:
• Credit Risk: The class only invests in bonds with
an investment grade rating (e.g., BBB or higher)
by both Moody’s and Standard & Poor’s.
• Duration: The class focuses on bonds with a
longer duration than our bond benchmark.
2020 Annual Report 3
Portfolio Characteristics
As of December 31, 2020, the value of the IMP portfolio is $265,048.43, consisting of $228,627.81 (86%) in equities,
$26,088.49 (10%) in fixed-income securities, and $10,332.13 (4%) in cash. The portfolio value has increased by
19.96% in 2020. The portfolio consists of 35 stocks, one equity ETF, and four fixed-income ETFs.
Some key portfolio characteristics are shown in the table below. All characteristics are the simple averages of the
equity holdings. The IMP portfolio has a P/E ratio of 38.89, which is higher than 28.30 of the S&P 500 Index. The IMP
portfolio also has a much higher P/B ratio than the S&P 500 Index’s 4.00, at 8.14. The portfolio’s relatively high P/E
and P/B ratios are due to several of our holdings, such as Brookfield Renewable Partners, The TJX Companies, Inc,
and Amazon. The average return on equity of the portfolio’s equity holdings is 26.29%, which is higher than the S&P
500 Index by approximately 14.45%. The average market capitalization of the portfolio’s equity holdings is $307.68
billion, which is significantly higher than the S&P 500 Index’s $66.12 billion. The larger market cap is mainly due to
several mega-cap stocks, such as Apple and Amazon. The portfolio has a beta of 1.05 and is slightly higher than that
of the S&P 500 Index, indicating that the portfolio is slightly riskier than the S&P 500 Index.
Top Ten Holdings
The portfolio’s top ten holdings based on investment weights count for 52.81% of the portfolio’s value (see the table
below). Amazon holds the most weight in our portfolio, at almost 10%. The following nine holdings and their weights
are available in the table below. It is worth noting that the top five holdings are also the top five performing securities
in terms of return contribution, albeit in a different order. This will be discussed later in the report.
Portfolio Value
Asset Class 2019 2020
Equity $192,884.64 (85%) $228,627.81 (86%)
Fixed-Income Security $20,364.66 (9%) $26,088.49 (10%)
Cash $12,700.77 (6%) $10,332.13 (4%)
Total $225,950.07 (100%) $265,048.43 (100%)
Portfolio Characteristics IMP S&P 500
Price/Earnings (P/E) 38.89 28.3
Price/Book (P/B) 8.14 4.00
Return on Equity (%) 26.29 11.84
Market Cap (Billions) $307.68 $66.12
Beta 1.05 1.00
Top 10 Holdings as of December 31, 2020
Market Value Weight
Amazon $26,055.44 9.83%
Apple $22,291.92 8.41%
Microsoft $16,681.50 6.29%
UnitedHealth Group Inc. $14,027.20 5.29%
NVIDIA Corporation $13,055.00 4.93%
The Walt Disney Company $10,870.80 4.10%
Accenture PLC Class A $10,448.40 3.94%
iShares Core U.S. Aggregate Bond Index $9,455.20 3.57%
Visa Inc. $8,749.20 3.30%
Procter & Gamble Co. $8,348.40 3.15%
Total $139,983.06 52.81%
4 Investment Management Program
Equity Sector Weights
The graph below shows the investment weights in the eleven equity sectors for the equity portion of the IMP portfolio
as of December 31, 2020. Information technology has the highest weight at 28.24%. This is followed by consumer
discretionary (16.10%) and health care (12.92%). The sectors with relatively low weights are real estate (2.03%),
energy (2.27%), and utilities (3.19%). Five equity sectors are overweight relative to the S&P 500 Index. These five
sectors include utilities, materials, information technology, consumer staples, and consumer discretionary. The
portfolio is 3.40% overweight in consumer discretionary, the most out of any sector. Six sectors are underweight
relative to the S&P 500 Index, including industrials, real estate, health care, financials, energy, and consumer services.
The portfolio is 2.49% underweight in communication services, the most out of any sector.
8.31%
16.10%
6.89%
2.27%
9.41%
12.92%
2.03%
6.51%
28.24%
4.13%
3.19%
10.80%
12.70%
6.50%
2.30%
10.40%
13.50%
2.40%
8.40%
27.60%
2.60%
2.80%
Communication Services
Consumer Discretionary
Consumer Staples
Energy
Financials
Health Care
Real Estate
Industrials
Information Technology
Materials
Utilities
Equity Sector Weights
S&P 500 IMP
2020 Annual Report 5
Portfolio Performance
The chart below shows the average annual returns for the IMP portfolio and the benchmark in the 1-year, 3-year, and
5-year periods. As the chart shows, the IMP portfolio outperforms the benchmark in the 1-year, 3-year, and 5-year
periods. The 1-year return for the portfolio is 19.96%, which is higher than 16.22% of the benchmark. The
overperformance extends into the 3-year period, with a 14.96% return for the portfolio and a 12.53% return for the
benchmark. The portfolio’s 5-year average annual return is 13.65%, which is slightly higher than the benchmark’s
13.12 %.
Risk-Adjusted Return
We also evaluate the IMP portfolio’s performance by adjusting for risk. Risk-adjusted performance measures help
explain whether a portfolio's excess return is due to smart investment decisions or a result of the portfolio’s excess
risk. We use the Sharpe and the Treynor ratios to measure risk-adjusted return. The Sharpe ratio is a portfolio’s return
divided by the standard deviation of the portfolio’s returns. The Treynor ratio is a portfolio’s return divided by the beta
value of the portfolio. The higher the ratio, the greater the investment return relative to the amount of risk taken, and
hence the better the investment.
Risk of an investment is based on return variation. Return standard deviation is a measure of return volatility of an
investment. On the other hand, beta measures a security’s volatility relative to the market, which has a beta of 1.00.
A higher return standard deviation or beta indicates a riskier investment. The charts below report the return standard
deviations and beta values for the IMP portfolio and the benchmark in 1-year, 3-year, and 5-year. For both standard
deviation and beta, the IMP portfolio’s risk measures are slightly greater than those of the benchmark across all three
periods.
19.96%
14.96%13.65%
16.22%12.53% 13.12%
0%
5%
10%
15%
20%
25%
1-Year 3-Year 5-Year
Average Annual Return (%)
IMP Benchmark
22.17%
16.23%
13.25%
20.95%
15.08%
12.22%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
1-Year 3-Year 5-Year
Standard Deviation
IMP Benchmark
1.045
1.062 1.065
1.00 1.00 1.00
0.960
0.980
1.000
1.020
1.040
1.060
1.080
1-Year 3-Year 5-Year
Beta
IMP Benchmark
6 Investment Management Program
The Sharpe and Treynor ratios for the IMP portfolio and the benchmark are reported in the charts below. The IMP
portfolio’s 1-year, 3-year, and 5-year Sharpe ratios are 0.90, 0.92, 1.03, respectively, while the benchmark’s Sharpe
ratios are 0.77, 0.83, 1.07, respectively. The Sharpe ratios indicate that the IMP portfolio outperforms the benchmark
in risk-adjusted return in the 1- and 3-year periods but not in the 5-year period. The Treynor ratios for the IMP portfolio
are 19.09%, 14.09%, and 12.82% for the 1-year, 3-year, and 5-year periods, respectively, compared to the
benchmark’s 16.22%, 12.53%, 13.12%. Similarly, the Treynor ratios indicate that the IMP portfolio outperforms the
benchmark in the 1-year and 3-year periods, but not over the past 5 years. The risk-adjusted return results indicate
that the IMP portfolio managers have greatly improved the portfolio’s performance over the past 3 years.
0.90 0.921.03
0.77 0.83
1.07
0.00
0.50
1.00
1.50
1-Year 3-Year 5-Year
Sharpe Ratio
IMP Benchmark
19.09%
14.09% 12.82%16.22%
12.53% 13.12%
0%
5%
10%
15%
20%
25%
1-Year 3-Year 5-Year
Treynor Ratio
IMP Benchmark
2020 Annual Report 7
Performance Attribution
Performance attribution analysis is a breakdown of how a portfolio performs against the portfolio’s benchmark. The
analysis enables us to reveal insight on how the portfolio’s performance is attributed to the asset allocation and
security selection decisions. The IMP portfolio’s return in 2020 is 19.95%, which outperforms the benchmark’s
16.22% by 3.73% (see the table below). The performance attribution analysis indicates that this outperformance is
mainly due to the equity security selection decision, which provides a return contribution of 3.73%. Asset allocation
into cash and fixed-income security selection detract the overall portfolio performance. Overall, the IMP portfolio
managers did a better job in security selection than in asset allocation.
IMP Benchmark Performance Attribution
Weight Return Weight Return Allocation Selection Total
Equity 86.26% 22.72% 80.00% 18.40% 0.14% 3.73% 3.86%
Fixed-Income Security 9.84% 3.52% 20.00% 7.51% 0.88% -0.39% 0.49%
Cash 3.90% 0.05% 0.00% 0.05% -0.63% 0.00% -0.63%
Total 100% 19.95% 100% 16.22% 0.39% 3.33% 3.73%
Equity Performance Attribution
We also conduct a performance attribution analysis for the equity portion of the portfolio. In 2020, the equity portion
of the portfolio, which excludes equity ETFs, has a return of 25.96%, while the S&P 500 Index’s return is 18.40%. The
equity performance attribution analysis shows that the outperformance of 7.56% is slightly due to the 0.29% return
contribution from sector allocation. Allocating investment funds into the communication services, consumer staples,
information technology, and utilities sectors results in a negative return contribution. Allocating funds into the other
seven sectors contributes positively to the performance, especially the consumer discretionary and financials sectors.
*The equity performance attribution analysis does not include equity ETFs.
0
-0.12%
0.41%
-0.08%
0.02%
0.24%
0.03%
0.06%
0.08%-0.25%
0.04%
-0.14%
0.29%
Communication Services
Consumer Discretionary
Consumer Staples
Energy
Financials
Health Care
Real Estate
Industrials
Information Technology
Materials
Utilities
Total
Sector Allocation
8 Investment Management Program
The table below shows a summary of the return contributions from the equity sector allocation. The communication
services and information technology sectors both outperform the S&P 500 Index in 2020. The underweight in these
two sectors relative to the S&P 500 Index contributes a negative return. The consumer staples and utilities sectors
both underperform the S&P 500 Index. The overweight in these two sectors lead to a negative return contribution. The
energy, health care, financials, real estate, and industrials sectors all underperform the S&P 500 Index. An
underweight in these five sectors leads to a positive return contribution. The consumer discretionary and materials
sectors both outperform the S&P 500 Index. An overweight in these two sectors leads to a positive return contribution.
The chart below provides performance attribution results from stock selection. The results show that stock selection
provides a return contribution of 7.29%. The 7.29% return contribution from stock selection is mainly due to stock
holdings from the information technology and consumer discretionary sectors. The stocks from these two sectors
together contribute 8.05% return. For the stock holdings in the consumer discretionary sector, Amazon is a staple of
the sector holdings and has strong performance. Amazon’s 2020 return is extremely high at 76.3%, only getting
outperformed by Apple and NVIDIA. Amazon has been one of the best performers in the Wisman Fund and has an
overall holding return of 438.8% since November 17, 2016. Apple and NVIDIA have a return of 80.7% and 121.9%,
respectively, in 2020. These two stocks’ excellent returns make the information technology sector the best security
selection sector with a return contribution of 4.12%. Stock selections in the communication services, consumer
staples, industrials, and materials sectors are detractors.
0
-0.88%
3.93%
-0.35%
0.74%
0.46%
0.06%
0.00%
-0.54%
4.12%
-0.20%
-0.05% 7.29%
Communication Services
Consumer Discretionary
Consumer Staples
Energy
Financials
Health Care
Real Estate
Industrials
Information Technology
Materials
Utilities
Total
Security Selection
Underperform Overperform
Underweight
Energy
Financials
Health Care
Real Estate
Industrials
Communication Services
Information Technology
Overweight Consumer Staples
Utilities Consumer Discretionary
Materials
2020 Annual Report 9
Contributors
As the portfolio performance attribution analysis above shows, strong security selection in the consumer discretionary
and information technology sectors mainly contributes to the IMP portfolio’s return outperformance than the
benchmark. Three out of the five top-performing stocks are in the information technology sector, including Apple,
NVIDIA, and Microsoft (see the table below). These top five performers have rebounded exceptionally well from the
COVID-19 pandemic that sent the stock market into a downward spiral during early March.
Top Five Performing Securities
Security Weight % 2020 Return % Return Contribution %
Amazon.com Inc (AMZN) 6.56 76.26 5.00
Apple Inc. (AAPL) 5.47 80.75 4.42
NVIDIA Corporation (NVDA) 2.61 121.93 3.18
Microsoft Corp. (MSFT) 5.25 41.04 2.15
UnitedHealth Group Inc. (UNH) 5.22 25.27 1.32
• The portfolio’s best performing holding is Amazon.com Inc. (AMZN), which provides a return contribution of
5.00%. Amazon is in the consumer discretionary sector and is in the internet and direct marketing retail
industry. Amazon’s success can be directly attributed to the outbreak of COVID-19, which caused an increased
demand in online shopping and delivery. Amazon initially projected a $1.5 billion loss for the second quarter
of 2020 due to high pandemic operating costs. Despite these initial projections, Amazon reported an EPS of
$10.30 and a revenue of $88.91 billion for the second quarter. These two metrics beat analysts’ expectations
by 605% and 9%, respectively. Its net income nearly doubles year-over-year from $2.63 billion in 2019 to
$5.24 billion in 2020. A core driver of Amazon’s financial success is a tripling in online grocery sales. The
outlook for Amazon remains positive as the company continues to invest in new employees, and demand is
expected to continue to growth as people remain online shopping.
• Apple Inc. (AAPL) belongs to the information technology sector and is in the technology hardware, storage, and
peripherals industry. Apple provides the portfolio with a return contribution of 4.42%. Apple, in its most recent
fiscal quarter of 2020, reports a revenue growth of 5.51% and a profit growth of 3.9% year-over-year. Apple’s
EPS is $1.68 in 2020, beating the consensus estimate of $1.41. Apple closes several retail locations in 2020
but derives its financial success from increased demand for electronic devices. Quarantine restrictions drive
demand for electronic devices used for working from home and entertainment use. Apple’s products like the
iPhone, MacBook, iPad, and miscellaneous accessories all contributed to a revenue growth of 5.51% in 2020.
• The third highest return contributor is NVIDIA Corporation (NVDA), which provides a return contribution of
3.18%. NVIDIA is in the information technology sector and is in the semiconductors industry. NVIDIA reports a
record revenue of $16.68 billion in 2020. This record setting revenue figure is a 52.7% increase from 2019.
NVIDIA also reports an adjusted EPS of $6.90 in 2020, which is an increase of 52.7% from the previous year
and beats analyst estimates. NVIDIA’s immense earnings and revenue growth over the past year can be
attributed to the effects of COVID-19. COVID-19 has propelled demand for NVIDIA’s computer chips as people
choose to stay inside and remote computing environments become more prevalent. The acquisition of
Mellanox Technologies Ltd. in April 2020 also boosted NVIDIA’s data center computing division revenue.
• Microsoft Corp. (MSFT) provides a return contribution of 2.15% and is the fourth highest performing security
for the fund. Microsoft is in the information technology sector and in the software industry. Microsoft has
outperformed analysts’ expectations in 2020 due to the pandemic increasing demand for personal and
professional computing. The COVID-19 quarantine restrictions have increased the use of Windows operating
systems and gaming services. Microsoft’s financials have reflected the increased demand, as the data for
2020 shows growth in revenue, net income, and diluted earnings per share. Revenue, net income, and EPS
grew by 16.72%, 12.85%, and 34.44%, respectively, year-over-year.
• UnitedHealth Group, Inc. (UNH) provides a return contribution of 1.32% and is the fifth highest performing
security in the fund. UnitedHealth is in the healthcare sector and the healthcare plans industry. UnitedHealth
has outperformed analysts’ expectations in 2020 due to the pandemic increasing demand for healthcare
services and therefore making healthcare companies more profitable. UnitedHealth’s financials have reflected
this uptick in demand for healthcare during the COVID-19 pandemic.
10 Investment Management Program
Detractors
On the other side of our portfolio, there are holdings that fell short in 2020. The bottom five performing securities are
from a wide range of sectors, including financials, consumer staples, communication services, and energy.
Bottom Five Performing Securities
Security Weight % 2020 Return % Return Contribution %
TC Energy Corporation (TRP) 2.22 -23.6 -0.53
AT&T Inc. (T) 1.73 -26.41 -0.46
Bank of America (BAC) 2.31 -13.94 -0.32
Lockheed Martin Co. (LMT) 1.56 -8.83 -0.14
iShares 20+ Year Treasury Bond ETF (TLT) 2.22 -5.70 -0.13
• The worst performing security is TC Energy Corporation (TRP), which has produced a -0.53% return
contribution. TC Energy corporation is in the energy sector and operates in the oil, gas & consumable fuels
industry. They are a major North American energy company that operates in three core businesses: natural
gas pipelines, liquid pipelines, and energy. The poor performance of TRP is partially due to the drastic drop in
oil prices in 2020, coupled with the pandemic restrictions.
• The second worst detractor is AT&T Inc. (T), which has produced a -0.46% return contribution. AT&T is in the
communication services sector and operates in the diversified telecommunication services industry. They are
the world's largest telecommunications company, the largest provider of mobile telephone services, and the
largest provider of fixed telephone services in the United States. AT&T Inc.’s return is down 26% in 2020, and
its revenue dropped by 5.21% in 2020 to $171.76 billion. In the last quarter, AT&T’s EPS dropped by 690.91%.
• Bank of America (BAC) is another detractor, which has produced a -0.32% return contribution. Bank of America
is in the financial sector and operates within the banks industries. They are an American multinational
investment bank and financial services holding company. One reason for this underperformance is due to the
Fed lowering the interest rates in 2020, which put pressure on banks.
• Lockheed Martin Co. (LMT) is also a relative laggard, which has produced a -0.14% return contribution.
Lockheed Martin Co. is in the industrials sector and operates within the aerospace & defense industry. They
are an American aerospace, arms, defense, security, and advanced technologies company with global
interests. Defense stocks are considered “safe/non-cyclicals”, less harmed by the COVID-19 economic
downturn and less buoyed by an economic reopening. As a result, Lockheed Martin did not take as great of a
hit due to the COVID-19 recession in Q1 and Q2 of 2020; however, as the market has improved since then,
Lockheed’s growth has become stagnant. This is in part due to the pandemic’s disruption to the global supply
chain.
• Our last detractor is iShares 20+ Year Treasury Bond ETF (TLT), which has produced a -0.13% return
contribution. iShares 20+ Year Treasury Bond ETF is a long-term government bond ETF. The iShares 20+ Year
Treasury Bond ETF seeks to track the investment results of an index composed of U.S. Treasury bonds with
remaining maturities greater than twenty years. The primary reason why this security is one of our top 5
detractors is due to the timing of our purchase. The transaction went through in March of 2020, right after the
pandemic hit. This was the relative peak of this security’s price in 2020. Since then, long-term interest rates
have been increasing, resulting in a decrease in the price of this long-term bond ETF.
2020 Annual Report 11
Transactions
The Spring and Fall 2020 IMP classes made ten buying transactions with a total value of $21,668.61. The classes
also sold seven securities with a total value of $20,207.90. The transaction details are reported in the tables below.
Buy
Security Ticker Date Shares Price Value
PENN National Gaming PENN 2/18/2020 50 $36.84 $1,842.17
Vanguard Tax-Exempt Bond ETF VTEB 2/25/2020 50 $54.95 $2,747.25
iShares 20+ Year Treasury Bond ETF TLT 3/6/2020 30 $167.34 $5,020.20
Horizon Technology Finance Corp. HRZN 3/6/2020 200 $12.50 $2,500.00
Bristol-Myers Squibb Co. BMY 3/31/2020 14 $55.77 $780.71
The Walt Disney Co. DIS 4/14/2020 15 $106.35 $1,595.30
Johnson & Johnson JNJ 6/26/2020 10 $138.99 $1,389.90
Domino's Pizza Inc DPZ 10/23/2020 6 $393.08 $2,358.48
Brookfield Renewable Partners BEP 10/27/2020 20 $53.74 $1,074.80
Roper Technologies, Inc. ROP 11/12/2020 6 $393.30 $2,359.80
Sell
Security Ticker Date Shares Price Value
HealthPeak Properties PEAK 2/27/2020 35 $33.32 $1,166.10
Cisco Systems CSCO 3/6/2020 120 $38.00 $4,560.00
Cheniere Energy LGN 3/31/2020 20 $32.39 $647.80
Anheuser-Busch BUD 3/31/2020 25 $44.44 $1,111.00
Vanguard Tax-Exempt Bond ETF VTEB 8/28/2020 50 $54.53 $2,726.25
Anheuser-Busch BUD 10/5/2020 25 $55.29 $1,382.34
PowerShares S&P 500 High Dividend ETF SPHD 11/3/2020 254 $33.92 $8,614.41
12 Investment Management Program
Dividends
Total dividends received in 2020 is $4,140.86. The dividend income supports a large portion of the $5,000 annual
IMP scholarship. $2,942.76 (71%) of the total dividends is derived from the equity holdings. $624.52 (15%) is from
the equity ETF holdings. The remaining $573.58 (14%) is from the fixed-income ETFs. The table below shows the
monthly breakdown of the portfolio’s dividends.
Month Equity Equity ETF Fixed-Income ETF Total
January $164.06 $39.51 $0.00 $203.57
February $201.24 $40.08 $45.22 $286.54
March $349.34 $84.85 $48.33 $482.52
April $143.96 $39.67 $58.01 $241.64
May $219.38 $39.46 $54.15 $312.99
June $367.72 $106.58 $51.79 $526.09
July $150.63 $38.07 $51.15 $239.85
August $204.38 $38.03 $49.56 $291.97
September $378.58 $95.14 $43.42 $517.14
October $137.60 $37.45 $42.85 $217.90
November $207.58 $0.00 $41.76 $249.34
December $418.29 $65.68 $87.34 $571.31
Total $2,942.76 $624.52 $573.58 $4,140.86
$2,942.76
$624.52 $573.58
$4,140.86
$0.00
$500.00
$1,000.00
$1,500.00
$2,000.00
$2,500.00
$3,000.00
$3,500.00
$4,000.00
$4,500.00
Equity Equity ETF Fixed-Income ETF Total
Dividends 2020
2020 Annual Report 13
Moving Forward
Looking into the future, the Spring 2021 IMP class will continue to follow the value investment style from the previous
IMP class. The portfolio managers will look for companies with ‘good’ stocks, which include stocks that are
undervalued. One method that the class will be utilizing moving forward is the implementation of the environmental,
social, and governance (ESG) rating. The ESG rating allows us to incorporate certain non-financial factors into the
evaluation of companies and could contribute to the success of a long-term holding. Environmentally, we expect
renewable energy and reducing carbon footprint to be a focus of the Biden administration; therefore, taking that into
account in our investing strategy is important. We believe that this factor makes it worthwhile to include ESG investing
as a part of our strategy. Along with our investment style revisions, the class considers COVID-19 to be an immense
focal point of the portfolio’s future. The United States continues to struggle with the rebound of the economy, and a
full reopening plan is unclear. The class discussed the economic outlook and how it would affect our asset and sector
allocation decisions. Our economic analysis suggests that we are currently at the midpoint of the recovery stage of the
business cycle. As vaccines become more accessible and the restrictions are lifted, we expect that the economy will
transit into the mid phase expansion stage of the business cycle by the end of the year.
Target Asset Allocation
The Spring 2021 IMP class has decided to follow the target asset allocation as determined by the Fall 2020 class.
Specifically, our target asset allocation is 90% in equity, 10% in fixed-income, and 0% in cash. The reasoning for
this target asset allocation is based on our expectation that stocks will continue to outperform fixed-income
securities in 2021. So far this year, long-term interest rates have been rising, resulting in a decline in bond prices.
We expect that interest rates will continue to rise. Therefore, the class has decided to overweight equity and
underweight fixed-income security relative to the benchmark.
Target Equity Sector Weights
We have also determined a target investment weight for each of the eleven equity sectors. The class determines
whether to under- or overweight a sector based on four factors, including a sector’s performance relative to the stage
of business cycle, return momentum, financial fundamentals, and valuation. For each sector, the portfolio managers
recommended to underweight, overweight, or market weight the sector relative to the S&P 500 Index. Each analyst
also recommended a target weight. The class has decided to overweight the communication services, consumer
discretionary, energy, financials, information technology, and materials sectors based on their financial fundamentals,
valuations, and historical performance in economic cycles. For the consumer staples, health care, real estate,
industrials, and utilities sectors, the class has chosen a target weight less than that of the S&P 500 Index.
14 Investment Management Program
COMMUNICATIONS SERVICES - UNDERWEIGHT
Sector Overview
Entertainment: This industry contains movies and entertainment
along with interactive home entertainment. The most notable
items of interest in this industry are gaming and movie producing
companies.
Interactive Media and Services: This industry includes companies
engaged in content and information creation or distribution. These
are companies where revenues are derived in pay-per-click
advertising, which is common among search engines, social
media platforms, online classifieds, and online review companies.
Media: This industry is made up of four sub-categories which are
advertising, broadcasting, cable & satellite, and publishing. Major
companies within media are commonly found as major networks,
news outlets, and agents of advertising mediums.
Wireless Telecommunication Services: This industry includes
providers of cellular and wireless telecommunication services.
Mobile service carriers and providers make up this industry.
Communication Services is the newest Global
Industry Classification Standard Sector recognized
by our benchmark, the S&P 500 Index. This sector
takes the place of the former telecommunications
sector and has captured pieces of the information
technology and consumer discretionary sectors. This
sector is comprised of companies that provide
communication services through fixed line, cellular,
wireless, high bandwidth and/or fiber optic cable
network. Additionally, companies within this sector
provide internet services such as access, navigation,
and internet related software and services. The
reason for this adjustment in the GICS stems from
the mergers and acquisitions of telecom companies
by media and internet companies given the massive
shifts in the consumer markets. The way consumers
define the capabilities of their smartphone has
expanded over the last decade and therefore, the
sector must adjust to accommodate.
Diversified Telecommunication Services: This
industry consists of alternative carriers, providers of
communications, and high-density data
transmission services. It also includes Integrated
communication Services, operators of primarily fixed
line telecommunications networks, and companies
providing both wireless and fixed line
communications services not classified elsewhere.
Performance* 1-Year 3-Year 5-Year
Sector 26.82% - -
S&P 500 18.40% 14.18% 15.22%
*Annualized Returns
2020 Annual Report 15
AT&T, Inc. (NYSE: T)
Market Cap:
$200B
Sector:
Communication
Services
Industry:
Diversified Telecom
Services
Stock Type:
Large
Value
Price (12/31/2020):
$28.76
52-Week Range:
$27.90 - $38.57
Holding Return:
-15.7%
Business Summary
AT&T, Inc. is a company in the communication services sector that
provides communication, media, and technology services across the
globe. AT&T is broken up into four segments: communications,
WarnerMedia, Latin America, and Xandr. The first segment,
communications, provides wireless and wireline services, as well as
video, broadband, internet, and video entertainment services all
conducted by either satellite, IP-based, or streaming operations.
Communications also sells headsets, wireless computers, data cards and
various accessories (carrying cases and hands-free devices) through
company owned stores, agents, or third-party retailers. The second
segment, WarnerMedia, produces, distributes, and licenses television
programs and feature films. This segment distributes physical and digital
home entertainment products, as well as produces and distributes mobile
and console games. The Latin America segment offers services under
DIRECTV and sky brands such as video entertainment and audio
programming. The final segment, Xandr, conducts digital advertising.
Investment Rationale/Risk
▪ AT&T has acquired many assets in
its life, reaching a customer base of
over 170 million for products and
services to cultivate deeper
customer loyalty. The scale of the
company allows it to stay as a top
tier competitor shown in the 2020
revenue growth, which is larger than
the industry average.
▪ The company is one of the front
runners for 5G, a new technology
that could push mobile phone
companies into some of the biggest
gains they have seen in years.
▪ AT&T had purchased DirecTV with
the idea of creating their own
streaming and television services,
pushing them into a new business
segment that could grow with the
new age of streaming services in the
future.
Key Statistics 2016 2017 2018 2019 2020
Total Stock Return % 29.18 -3.97 -21.43 45.62 -21.08
Return on Assets % 3.22 6.95 3.97 2.57 -1.00
Return on Equity % 10.56 22.31 11.92 7.55 -3.10
Net Profit Margin % 7.92 18.34 11.34 7.67 -3.13
Total Asset Turnover 0.41 0.38 0.35 0.33 0.32
Financial Leverage 3.28 3.15 2.89 2.99 3.25
Operating Profit Margin % 15.1 14.9 15.3 16.23 14.72
Revenue Growth % 11.57 -1.98 6.36 3.42 -5.21
Operating Income Growth % -0.31 -3.42 9.55 7.16 -14.03
EPS Growth % -11.39 126.67 -40.13 -3.45 -33.68
Earnings Growth Estimates
Earnings Growth Estimate % Company Industry
2021 -0.94 2.00
2022 3.49 12.50
Past 5 Years 3.50 19.80
Next 5 Years 2.50 8.40
Stock Valuation Ratios Industry Peers
Ratio 2016 2017 2018 2019 2020
P/E 18.0 18.6 5.4 17.5 19.0 Return % ROE % P/B 2.1 1.9 1.1 1.6 1.2 Charters Co. Inc. 36.38 11.66
P/S 1.6 1.5 1.1 1.6 1.2 Comcast Corp CA 18.52 12.17
P/FCF 6.9 6.1 4.4 5.9 4.6 Verizon Comm. -0.29 27.55
16 Investment Management Program
Facebook (NASDAQ: FB)
Market Cap:
$792B
Sector:
Communication
Services
Industry:
Interactive
Media &
Services
Stock Type:
Large
Growth
Price (12/31/2020):
$181.18
52-Week Range:
$137.10 - $304.70
Holding Return:
51.1%
Business Summary
Facebook is the world’s largest social media company with platforms that
extend beyond the Facebook name such as Instagram, Messenger, and
WhatsApp. Facebook has over 2 billion active monthly users, which it
draws back consistently through the platform’s proprietary algorithm of
distributing user content. This algorithm understands and distributes
content based on search history, liked content, connections with other
users and more. The platform’s purpose is to connect people through
written posts, pictures, videos, and messages. In achieving this purpose,
companies pay for advertising placements in coordination with
Facebook’s algorithms to strategically place advertisements in front of
targeted consumers. 90% of Facebooks revenues come from their
advertising business segment.
Investment Rationale/Risk
▪ Facebook is the largest social media
platform, owning many different
popular apps such as Instagram,
Messenger, and WhatsApp.
▪ Facebook’s complex proprietary
algorithms of distribution of user
content promotes daily usage of the
platform, which generates more value
in advertising on the platform.
▪ Facebook’s reach across many
different platforms allows for ad
revenue from multiple different apps
and creates a significant amount of
advertisement sales for the company.
Key Statistics 2016 2017 2018 2019 2020
Total Stock Return % 9.9 53.4 -25.7 51.66 33.09
Return on Assets % 17.8 21.3 24.3 16.02 19.92
Return on Equity % 19.7 23.8 27.9 19.96 25.42
Net Profit Margin % 36.9 39.2 39.6 26.15 33.90
Total Asset Turnover 0.48 0.54 0.61 0.61 0.59
Financial Leverage 1.1 1.1 1.2 1.32 1.24
Operating Profit Margin % 45.0 49.7 44.6 33.93 38.0
Revenue Growth % 54.16 47.09 37.35 36.76 21.60
Operating Income Growth % 99.63 62.57 23.31 24.51 36.21
EPS Growth % 170.54 54.44 40.45 22.59 56.92
Earnings Growth Estimates
Earnings Growth Estimate % Company Industry
2021 11.70 4.90
2020 20.30 24.60
Past 5 Years 35.40 16.50
Next 5 Years 19.20 22.20
Stock Valuation Ratios Industry Peers
Ratio 2016 2017 2018 2019 2020
P/E 44.4 34.2 19.7 32.9 31.2 Return % ROE % P/B 6.2 7.2 4.7 6.2 6.6 Alphabet, Inc. 31.03 19.0
P/S 13.5 14.3 7.4 8.9 10.0 Twitter, Inc. 68.95 -13.62
P/FCF 26.5 24.3 13.1 16.9 23.3 Tencent Holdings 63.88 9.79
2020 Annual Report 17
The Walt Disney Co. (NYSE: DIS)
Market Cap:
$257.59B
Sector:
Communication
Services
Industry:
Media
Stock Type:
Large
Core
Price (12/31/2020):
$144.63
52-Week Range:
$85.98 - $181.18
Holding Return:
16.69%
Business Summary
The Walt Disney Company, together with its subsidiaries, operates as a
global entertainment company. The company’s media networks segment
operates cable programming businesses under ESPN, Disney, and
Freeform brands; broadcast businesses, including ABC TV Network, and
subscription video-on-demand services and in-home entertainment
formats. It’s Parks and Resorts segment owns and operates the Walt
Disney World Resorts in Florida and California. The company also
operates in the Studio Entertainment segment which produces and
acquires live-action and animated motion pictures to be distributed in
theatrical, home entertainment, and television markets. The company
was founded in 1923 and is based in Burbank, California.
Investment Rationale/Risk
▪ Disney’s Park and Resorts segments
have rebounded since the recession,
and they are continuing to look into
international markets for new parks
shown by the Disneyland Shanghai.
▪ Disney has ownership in many
different companies across many
different genres, including Hulu,
ESPN, and Marvel. This allows for the
reach of the company to be
extremely wide and diverse.
▪ Disney+ features a great opportunity
for the company to reach customers
of all ages and expand their share in
the streaming segment.
Key Statistics 2016 2017 2018 2019 2020
Total Stock Return % 0.60 4.71 3.59 32.92 25.27
Return on Assets % 10.42 9.56 11.09 6.89 -1.45
Return on Equity % 21.39 21.23 23.42 14.81 -3.32
Net Profit Margin % 16.88 16.29 18.46 13.81 -4.38
Total Asset Turnover 0.62 0.59 0.60 0.48 0.33
Financial Leverage 2.13 2.32 1.99 2.18 2.41
Operating Profit Margin % 25.80 25.20 24.40 17.03 5.8
Revenue Growth % 6.04 -0.89 7.79 7.74 -6.01
Operating Income Growth % 8.58 -3.38 6.95 -6.20 -67.99
EPS Growth % 16.94 -0.70 46.92 5.04 -1.58
Earnings Growth Estimates
Earnings Growth Estimate % Company Industry
Current Year -28.80 8.10
Next Year 32.10 37.20
Past 5 Years 5.22 1.50
Next 5 Years 3.20 6.60
Stock Valuation Ratios Industry Peers
Ratio 2016 2017 2018 2019 2020
P/E 18.23 15.10 15.00 23.07 19.2 Return % ROE % P/B 3.43 3.37 3.02 2.90 3.90 Comcast Corp. 18.52 12.17
P/S 2.98 2.97 2.78 3.46 5.0 Viacom Inc. -8.93 16.95
P/FCF 9.12 8.87 7.29 40.27 42.9 21st Century FOX -20.21 9.97
18 Investment Management Program
CONSUMER DISCRETIONARY - OVERWEIGHT
Sector Overview
Household Durables: The household durables industry manufactures
products that cannot be consumed immediately and are purchased
infrequently. Some examples would be appliances, and home and
office furnishings.
Hotels, Restaurants and Leisure: This industry contains hotels, fast
food restaurants, resorts, casinos, cruises, and other leisure
activities. Furthermore, hotels and restaurants tend to pursue
franchise business models.
Internet and Catalog Retail: The internet and catalog retail industry
consists of companies who operate through online marketplaces.
This industry has been experiencing rapid growth and has been a
strong point of our portfolio over the past few years as Amazon.com,
Inc. (AMZN) has seen significant growth.
Leisure Products: The leisure products industry contains companies
that focus on leisure activities and goods such as outdoor activities,
sporting goods, and toys. This industry is tightly tied to consumers’
discretionary income and confidence. An example of a company
within this industry is Callaway Golf Company (ELY).
Multiline Retail: The multiline retail industry includes operators of
department stores and other general merchandise retailers such as
large-scale supercenters that exclude food and staples retailing.
These companies are typically well-known with an example being
Macy’s Inc. (M).
Specialty Retail: The specialty retail industry includes retail
companies that specialize in selling specific categories of goods to
consumers. For example, The Home Depot Inc. (HD) sells home
improvement products to consumers.
Textiles, Apparel and Luxury Goods: Companies within this industry,
such as Under Armour, Inc. (UA), manufactures apparel, footwear,
and a variety of accessories
The consumer discretionary sector contains eleven
industries of businesses that sell nonessential
products and services where the demand is typically
more elastic. The performance of the sector is
heavily tied to the economic cycle, more specifically,
consumer confidence and discretionary income. As
of recent, the sector is seeing a shift to online
shopping. This, along with COVID-19 increasing the
demand for online shopping, explains our holding’s
positive returns in the sector.
Auto Components: The auto components industry
consists of companies that supply various auto
parts. The industry is highly competitive and cyclical,
causing demand to fluctuate and high volatility in the
industry’s profitability. The industry is also very
reliant on the ever-changing cost of raw materials
such as copper and steel.
Automobile: The automobile industry designs,
produces and markets cars, trucks, and other types
of land vehicles. The automobile industry’s demand
is highly sensitive to the economic cycle and is one
of the most capital-intensive industries with high
fixed costs. Because of this, the profit margins within
the industry can be highly volatile.
Diversified Consumer Services: The diversified
consumer services industry consists of companies
that provide specialized services that are not
classified elsewhere. One example of a diversified
consumer service would be H&R Block, Inc. (HRB),
who offers tax services to consumers and
businesses.
Distributors: The distributor industry includes
distributors and wholesalers of general merchandise
not classified elsewhere, including apparel,
replacement parts, and wholesale electronics.
Performance* 1-Year 3-Year 5-Year
Sector 29.58% 19.15% 17.07%
S&P 500 18.40% 14.18% 15.22%
*Annualized Returns
2020 Annual Report 19
Amazon.com, Inc. (NASDAQ: AMZN)
Market Cap:
$1.631T
Sector:
Consumer
Discretionary
Industry:
Internet and
Catalog Retail
Stock Type:
Large
Growth
Price (12/31/2020):
$3,256.93
52-Week Range:
$1,626.00 - $3,552.00
Holding Return:
438.8%
Business Summary
Amazon.com, Inc. was founded in 1994 and is headquartered in
Seattle, Washington. Since then, Amazon has become one of the
world’s highest-grossing online retailers, with $125.56 billion in net
sales in the fourth quarter of 2020. They operate through the following
segments: North America, International, and Amazon Web Services
(AWS). It sells general merchandise and digital media content from
third-party sellers through its online storefront. The company also
manufactures and sells electronic devices such as the Fire Tablet, Fire
TV, and Echo devices. The sale of their general merchandise, digital
media content, and fees collected from third-party sales accounted for
50.6% of Amazon’s net revenue in 2020. Additionally, the AWS
segment offers cloud space and cloud computing, and allows for other
companies to sell their merchandise through Amazon. In 2020, AWS
constituted the second largest business operation of Amazon in terms
of revenue, accounting for 12.4% of their total revenue. The company
also offers Amazon Prime, a membership program, which provides free
shipping, access to streaming of movies and TV episodes, and other
services.
Investment Rationale/Risk
▪ Amazon dominates North American
online retail, and much of the regions’
youth consider it their one-stop-shop
for online retailers.
▪ With more than half of the world’s
Internet users coming from developing
markets, Amazon has sizeable
international growth opportunities for
its marketplaces, advertising, and
hardware assortment in regions like
Europe, Japan, and Southeast Asia.
▪ Amazon’s device portfolio are
intriguing customer acquisition and
retention tools while promoting the
other business segments Amazon
operates through such as the Amazon
Web Services.
Key Statistics 2016 2017 2018 2019 2020
Total Stock Return % 10.95 55.96 28.40 23.03 76.26
Return on Assets % 3.19 2.83 6.85 5.97 7.81
Return on Equity % 14.52 12.91 28.27 21.95 27.44
Net Profit Margin % 1.74 1.71 4.33 4.13 5.53
Total Asset Turnover 1.83 1.66 1.58 1.45 1.41
Financial Leverage 4.32 4.74 3.73 3.63 3.44
Operating Profit Margin % 3.10 2.30 5.30 5.18 5.90
Revenue Growth % 27.08 30.80 30.93 20.45 37.62
Operating Income Growth % 87.46 -1.91 202.51 17.07 57.48
EPS Growth % 292.00 25.51 227.48 14.25 81.79
Earnings Growth Estimates
Earnings Growth Estimate % Company Industry
2021 18.34 15.20
2022 37.86 26.90
Past 5 Years 81.80 6.90
Next 5 Years 26.90 19.30
Stock Valuation Ratios Industry Peers
Ratio 2016 2017 2018 2019 2020
P/E 171.60 297.58 84.10 81.87 95.23 Return % ROE %
P/B 25.61 20.12 22.96 18.85 19.79 eBay Inc. 40.93 176.24
P/S 2.83 3.56 3.39 3.50 4.76 Alibaba Group Holding 9.73 23.93
P/FCF 24.76 35.52 28.10 26.27 29.95 Etsy Inc. 301.6 63.90
20 Investment Management Program
The TJX Companies, Inc. (NYSE: TJX)
Market Cap:
$81.897B
Sector:
Consumer
Discretionary
Industry:
Multiline Retail
Stock Type:
Large Core
Price (12/31/2020):
$68.29
52-Week Range:
$32.70 - $68.90
Holding Return:
25.2%
Business Summary
The TJX Companies, Inc. was founded in 1956 and is headquartered in
Framingham, Massachusetts. The company is broken into four segments:
Marmaxx, HomeGoods, TJX Canada, and TJX International. Through these
segments, TJX Companies offers a variety of apparel for the entire family,
including footwear and accessories; home fashions, including home
basics, furniture, decorative accessories, and cookware; jewelry and other
merchandise. The company operates 4,557 stores under the names TJ
Maxx, Marshalls, HomeGoods, Winners, HomeSense, T.K. Maxx and
Sierra Trading Post. Furthermore, TJK Companies also operates various e-
commerce sites including tjmaxx.com, tkmaxx.com, and
sierratradingpost.com.
Investment Rationale/Risk
▪ TJX Companies’ ability to offer brand
name apparel items at lower costs
than its competitors allows
consumers to continue to buy TJX’s
merchandise even if discretionary
income decreases, while remaining
competitive when discretionary
income increases.
▪ The international and e-commerce
presence that TJX has established
allows for diversification of the
revenue the company receives,
enabling it to be more competitive
and defensive in the retail industry.
▪ TJX’s diversified product range,
affordable pricing, and the various
store brands it operates allows for a
wide range of customers to
continually return to one or more of
the six store brands.
Key Statistics 2016 2017 2018 2019 2020
Total Stock Return % 7.35 3.36 19.97 38.46 12.22
Return on Assets % 20.13 18.85 19.36 21.56 17.01
Return on Equity % 53.15 52.13 54.00 60.01 59.51
Net Profit Margin % 7.36 6.93 7.27 7.85 7.84
Total Asset Turnover 2.74 2.72 2.66 2.75 2.17
Financial Leverage 2.67 2.86 2.73 2.84 4.06
Operating Profit Margin % 11.97 11.60 11.12 10.82 10.59
Revenue Growth % 6.42 7.23 8.08 8.67 7.04
Operating Income Growth % 2.72 3.91 3.58 5.79 4.69
EPS Growth % 6.34 2.90 16.95 18.36 9.88
Earnings Growth Estimates
Earnings Growth Estimate % Company Industry
2021 651.61 0.60
2022 26.61 18.20
Past 5 Years -29.20 6.20
Next 5 Years 10.50 10.70
Stock Valuation Ratios Industry Peers
Ratio 2016 2017 2018 2019 2020
P/E 22.03 20.66 18.34 24.04 111.95 Return % ROE %
P/B 11.31 10.41 10.50 13.26 14.73 Macy’s, Inc. -31.60 8.80
P/S 1.54 1.45 1.46 1.85 2.46 Ross Stores, Inc. 5.73 49.84
P/FCF 14.92 14.56 15.86 21.61 12.71 Burlington Stores, Inc. 14.70 109.3
2020 Annual Report 21
Domino’s Pizza, Inc. (NYSE: DPZ)
Market Cap:
$14.691B
Sector:
Consumer
Discretionary
Industry:
Restaurants
Stock Type:
Mid Growth
Price (12/31/2020):
$383.46
52-Week Range:
$270.10 - $435.60
Holding Return:
-2.4%
Business Summary
Domino's Pizza, Inc., through its subsidiaries, operates as a pizza delivery
company in the United States and internationally. It operates through
three segments: U.S. stores, international franchise, and supply chain.
The company offers pizzas under the Domino's brand name through
company-owned and franchised stores. As of August 17, 2020, it
operated approximately 17,100 stores in 90 markets. The company was
founded in 1960 and is headquartered in Ann Arbor, Michigan. Domino’s
has the largest international presence out of all its competitors, including
Papa John’s, Pizza Hut, and Little Caesar’s. In 2019, Domino’s
international franchises generated $241 million in revenue, and in 2020,
they were able to grow that by 4.4%. Global retail sales growth grew by
10.4% for Domino’s in 2020 as well.
Investment Rationale/Risk
▪ Consumer discretionary is a cyclical
sector that provides additional
returns to the portfolio during
economic upturn.
▪ Domino’s Pizza, Inc. operates in four
major business segments, with the
majority being their supply chain.
Their international franchises have
been increasingly profitable in the
last five years.
▪ While Domino’s large reliance on
debt is alarming, they have made
strides to minimize the risk
associated with it, including cash-on-
hand, interest coverage, and a very
high ROA.
Key Statistics 2016 2017 2018 2019 2020
Total Stock Return % 44.50 19.82 -32.40 19.51 31.59
Return on Assets % 28.32 35.79 41.51 35.00 33.32
Return on Equity % - - - - -
Net Profit Margin % 8.68 9.97 10.54 11.07 11.93
Total Asset Turnover 3.26 3.59 3.94 3.16 2.79
Financial Leverage - - - - -
Operating Profit Margin % 18.36 18.70 16.65 17.39 17.62
Revenue Growth % 11.55 12.75 23.13 5.42 13.78
Operating Income Growth % 11.99 14.80 9.68 10.10 15.29
EPS Growth % 23.92 35.58 43.22 14.49 29.60
Earnings Growth Estimates
Earnings Growth Estimate % Company Industry
2021 6.16 29.90
2022 14.82 27.40
Past 5 Years 27.10 3.40
Next 5 Years 12.00 12.40
Stock Valuation Ratios Industry Peers
Ratio 2016 2017 2018 2019 2020
P/E 39.91 36.06 31.79 32.82 32.89 Return % ROE %
P/B - - - - - Papa John’s 35.79 -
P/S 3.38 3.41 3.34 3.55 3.93 Yum! Brands 9.64 -
P/FCF 28.19 26.69 28.98 28.28 28.33 Chipotle 65.65 19.21
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22 Investment Management Program
Penn National Gaming, Inc. (NASDAQ: PENN)
Market Cap:
$16.221B
Sector:
Consumer
Discretionary
Industry:
Restaurants &
Casinos
Stock Type:
Mid Growth
Price (12/31/2020):
$86.37
52-Week Range:
$3.80 - $99.20
Holding Return:
134.4%
Business Summary
Penn National Gaming, Inc., together with its subsidiaries, owns and
manages gaming and racing properties, and operates video gaming
terminals. It operates through four segments: Northeast, South, West,
and Midwest. The company operates live sports betting properties in
Colorado, Illinois, Indiana, Iowa, Michigan, Mississippi, Nevada,
Pennsylvania, and West Virginia; Barstool Sports, an online sports betting
app in Pennsylvania; and online social casino, bingo, and online casinos
under the iGaming name in Pennsylvania and Michigan. It also owns and
operates horse racetracks in West Virginia, Pennsylvania, New Mexico,
and Ohio; and harness racetracks in Maine, Ohio, Pennsylvania, and
Massachusetts. As of December 31, 2020, the company owned,
managed, or had ownership interests in 41 gaming and racing properties
in 19 states. It owns various trademarks and service marks, including,
Ameristar, Argosy, Boomtown, Greektown, Hollywood Casino, Hollywood
Gaming, Hollywood Poker, L'Auberge, M Resort, and MYCHOICE. The
company was formerly known as PNRC Corp. and changed its name to
Penn National Gaming, Inc. in 1994. Penn National Gaming, Inc. was
founded in 1972 and is based in Wyomissing, Pennsylvania.
Investment Rationale/Risk
▪ Penn has proven its success over its
peers in the industry, with a 2020
return of five times its closest
competitor.
▪ Penn National Gaming is by far the
nation’s largest and most diversified
regional gaming company. It includes
both brick-and-mortar casinos, as
well as online gambling sectors.
▪ One risk associated with investing in
a gambling company is that it relies
on the gambling laws in each state. If
a state bans sports betting, then
Penn will suffer in that state.
Key Statistics 2016 2017 2018 2019 2020
Total Stock Return % -13.92 127.19 -39.90 35.74 237.91
Return on Assets % 1.99 9.28 1.15 0.35 -4.64
Return on Equity % - - 28.42 3.40 -29.85
Net Profit Margin % 3.32 15.04 2.61 0.83 -18.71
Total Asset Turnover 0.60 0.62 0.44 0.42 0.24
Financial Leverage - - 14.99 7.66 5.57
Operating Profit Margin % 17.87 17.57 17.67 14.05 5.96
Revenue Growth % 6.91 3.74 13.98 47.76 -32.50
Operating Income Growth % 6.77 2.02 14.62 17.49 -71.38
EPS Growth % - 326.05 -81.66 -60.22 -
Earnings Growth Estimates
Earnings Growth Estimate % Company Industry
2021 133.40 22.00
2022 35.93 34.00
Past 5 Years 36.33 -2.80
Next 5 Years 141.92 19.70
Stock Valuation Ratios Industry Peers
Ratio 2016 2017 2018 2019 2020
P/E 13.26 3.56 - 38.73 - Return % ROE %
P/B - 10.99 31.19 1.53 5.15 DraftKings Inc. 31.72 -70.68
P/S 0.42 0.99 0.56 0.59 2.77 MGM Resorts -4.82 -14.01
P/FCF 3.11 7.32 4.42 5.25 26.56 Boyd Gaming 43.35 -11.28
2020 Annual Report 23
CONSUMER STAPLES - OVERWEIGHT
Sector Overview
Food & Staples Retailing: The food and staples retailing industry in
the consumer staples sector includes drug retail, food distributors,
food retail, and hypermarkets & super centers.
Food Products: The food products industry in the consumer staples
sector includes agricultural products and packaged foods & meats.
Household Products: The household products industry in the
consume staples sector includes producers of non-durable
household products (including detergents, soaps, diapers, and
other tissue and household paper products not classified in the
paper products Industry).
Personal Products: The personal products industry in the
consumer staples sector includes manufacturers of personal and
beauty care products (including cosmetics and perfumes).
Tobacco: The tobacco industry in the consumer staples sector
includes manufacturers of cigarettes and other tobacco products.
The consumer staples sector tends to perform
relatively well during the late and recessionary
stages of the business cycle. The consumer staples
sector accounts for about 6.4% of the S&P 500
index as of 12/31/2020 (6.74% of the IMP equity
sector). Companies in this sector provide those
goods and services considered essential for typical,
day-to day functions. Given this, competition is
extremely fierce in this sector and companies
compete under cost-leadership and product
differentiation strategies. This sector comprises
many low-price elasticity, red ocean products,
allowing for a very stable (but not remarkable)
growth year-over-year. The following sectors
comprise the consumer staples sector: beverages,
food & staples retailing, food products, household
products, personal products, and tobacco.
Beverages: The beverages Industry in the consumer
staples sector includes brewers, distillers &
vintners, and soft drinks.
Performance* 1-Year 3-Year 5-Year
Sector 10.13% 8.90% 8.89% S&P 500 18.40% 14.18% 15.22%
*Annualized Returns
24 Investment Management Program
Coca-Cola (NYSE: KO)
Market Cap:
$235.92B
Sector:
Consumer
Staples
Industry:
Beverages –
Soft Drinks
Stock Type:
Large
Core
Price (12/31/2020):
$54.84
52-Week Range:
$36.30 - $60.10
Holding Return:
106.03%
Business Summary
The Coca-Cola Company is the largest nonalcoholic beverage company in
the world, with over $33 billion in annual revenue in 2020. Its portfolio
includes a variety of carbonated and noncarbonated brands, including
Coca-Cola, Diet Coke, Fanta, Sprite, Minute Maid, PowerAde, and Dasani.
The firm has both concentrate and finished product operations, with
concentrate sales contributing roughly half of its revenues. Trademark
Coca-Cola contributes 45% of unit case volumes worldwide and
generates the majority of its revenue outside of the United States. The
company is a defensive stock during times of downturn. Their brand is
highly recognized, and their product is sold in more than 200 countries
worldwide (58 billion servings consumed per day).
Investment Rationale/Risk
▪ Coca-Cola’s investments in
distribution agreements, including its
relationship with Monster Beverage,
is evidence of the value of its strong
retail relationships; suggesting that
its growth and sales will be stable
into the future and resistant to
downturns in the market.
▪ Sparkling soft drinks account for
more than 60% of the firm's volume
in the U.S., (where per capita soda
consumption has been falling for the
last decade). This represents a
threat to the soft-drink industry.
▪ A large portion of sales stem from
restaurants, bars, and similar
venues. This could pose a risk if
these businesses were shut down for
an extended period of time.
▪ Also, with the acquisition of Costa,
there is potential for Coca-Cola to
expand Costa's coffee brands into
the ready-to-drink market and across
a wider range of geographies.
Key Statistics 2016 2017 2018 2019 2020
Total Stock Return % -0.23 14.23 6.60 20.27 2.04
Return on Assets % 7.36 1.42 7.52 10.52 8.92
Return on Equity % 26.85 6.22 37.79 49.61 40.48
Net Profit Margin % 15.59 3.52 20.20 23.94 23.47
Total Asset Turnover 0.47 0.40 0.37 0.44 0.38
Financial Leverage 3.78 5.15 4.9 4.55 4.52
Operating Profit Margin % 24.21 27.26 30.7 28.26 29.76
Revenue Growth % -5.49 -15.41 -10.04 16.98 -11.41
Operating Income Growth % -2.4 -4.78 1.34 7.69 -6.73
EPS Growth % -10.78 -80.54 417.24 38.00 -13.53
Earnings Growth Estimates
Earnings Growth Estimate % Company Industry
2021 8.72 21.40
2022 8.02 15.80
Past 5 Years -0.30 -3.80
Next 5 Years 5.40 9.60
Stock Valuation Ratios Industry Peers
Ratio 2016 2017 2018 2019 2020
P/E 25.13 44.12 64.89 29.44 28.41 Return % ROE %
P/B 6.82 8.83 11.07 12.66 12.68 PepsiCo Inc 11.45 50.42
P/S 4.28 5.33 6.30 7.11 7.08 Keurig Dr Pepper Inc 12.61 5.63
P/FCF 20.48 24.87 29.37 24.57 26.57 Monster Beverage Co 45.42 30.21
2020 Annual Report 25
Procter & Gamble (NYSE: PG)
Market Cap:
$342.63B
Sector:
Consumer
Staples
Industry:
Household &
Personal
Products
Stock Type:
Large
Value
Price (12/31/2020):
$139.14
52-Week Range:
$94.30 - $146.90
Holding Return:
173.15%
Business Summary
Procter & Gamble is the world's largest consumer product manufacturer.
In essence, when talking about consumer staples, or consumer non-
cyclical, Procter and Gamble is one of those companies you cannot
neglect to mention. With a lineup of brands including Tide laundry
detergent, Charmin toilet paper, Pantene shampoo, and Pampers
diapers, it is easy to see why this company is firmly entrenched in the
consumer staples sector. Their products are those you simply cannot go
without, and their sales reflect this. Procter & Gamble in recent years
made the decision to shed 105 of its lesser brands to focus on the 65
most profitable, and those brands are no slouches: 22 of them bring in
more than $1 billion each in annual sales.
Investment Rationale/Risk
▪ P&G, given its status, remains
competitive due to its ability to cuts
costs year-over-year (mostly due to
its experience and economies of
scale). This helps to form an
economic moat that helps solidify
P&G’s success in the industry.
▪ Core earnings per share were up
13%, and up 17% excluding the
impact of foreign exchange. They
increased their dividends by 6% and
returned $15.2 billion dollars of
value to shareowners – $7.8 billion
in dividends, and $7.4 billion in
share repurchase.
▪ Foreign exchange volatility and
threat of local peers (in emerging
markets) hampers P&G's profits,
given its distribution channels and
prevalence in the world market.
While significant, this threat can be
remedied by furthering cost-cutting
efforts.
Key Statistics 2016 2017 2018 2019 2020
Total Stock Return % 9.24 12.53 3.14 39.90 13.90
Return on Assets % 7.99 12.18 7.95 3.11 10.83
Return on Equity % 17.43 27.30 17.98 7.45 27.78
Net Profit Margin % 15.70 23.18 14.19 5.37 17.99
Total Asset Turnover 0.51 0.53 0.56 0.58 0.60
Financial Leverage 2.26 2.22 2.31 2.49 2.65
Operating Profit Margin % 20.58 21.45 20.52 20.44 22.14
Revenue Growth % -14.39 -0.37 2.73 1.27 4.83
Operating Income Growth % -2.73 3.82 -1.75 0.88 13.55
EPS Growth % 51.23 51.49 -34.35 -61.04 246.85
Earnings Growth Estimates
Earnings Growth Estimate % Company Industry
Current Year 10.55 8.30
Next Year 6.89 6.00
Past 5 Years 5.20 4.90
Next 5 Years 7.00 6.20
Stock Valuation Ratios Industry Peers
Ratio 2016 2017 2018 2019 2020
P/E 23.82 24.5 24.0 79.55 26.60 Return % ROE % P/B 3.76 4.18 4.48 6.75 7.24 Unilever PLC ADR 10.96 45.43
P/S 3.65 3.82 3.63 4.63 5.03 Colgate-Palmolive 26.76 626.74
P/FCF 15.96 18.62 16.38 20.09 20.29 Church & Dwight 25.38 27.63
26 Investment Management Program
The Hershey Co. (NYSE: HSY)
Market Cap:
$31.72B
Sector:
Consumer
Staples
Industry:
Food
Products
Stock Type:
Large
Value
Price (12/31/2020):
$152.33
52-Week Range:
$109.90 - $161.80
Holding Return:
4.04%
Business Summary
The Hershey Company is a leading confectionary manufacturer that was
founded in 1894 in Derry Township, PA. They control over 45% of the $25
billion domestic chocolate market. Furthermore, they own 80 brands in
80 countries. Their unique taste and products create a loyal consumer
base. Net sales increased 2% in 2020. Revenue continues to grow by
about 3% over the past two years as they expand into different countries.
Hershey’s current executive team has shown the ability to cut cost by
moving factories to areas that have reduced labor cost and expand into
markets the company hasn’t had presence in.
Investment Rationale/Risk
▪ Hershey is a defensive stock in times
of economic downturn. They can be
negatively impacted by such events;
however, the impact tends to be less
significant than other industries and
companies experience.
▪ As the company grows and begins to
expand into foreign nations, taste
and packaging will need to adhere to
cultural differences to remain
competitive.
▪ The implementation of Project Next
Century program (340,000 square
feet addition to their west chocolate
factory) could experience delays and
have more cost than anticipated.
because of this, annual savings
could be less than expected.
▪ Availability of raw materials could
have a negative effect of supply
chain when disrupted, leading to less
than desirable future financial
results.
Key Statistics 2016 2017 2018 2019 2020
Total Stock Return % 18.55 12.21 -3.15 39.92 5.79
Return on Assets % 13.25 14.14 17.77 14.51 14.81
Return on Equity % 80.73 92.05 101.77 73.28 64.36
Net Profit Margin % 9.68 10.42 15.11 14.40 15.69
Total Asset Turnover 1.37 1.36 1.18 1.01 0.94
Financial Leverage 7.03 6.07 5.51 4.68 4.08
Operating Profit Margin % 16.70 20.37 21.83 21.49 22.21
Revenue Growth % 0.73 1.01 3.67 2.51 2.05
Operating Income Growth % -12.09 23.23 11.06 0.94 5.46
EPS Growth % 43.97 9.58 52.46 -2.15 11.90
Earnings Growth Estimates
Earnings Growth Estimate % Company Industry
Current Year 6.84 10.10
Next Year 5.80 10.30
Past 5 Years 8.50 8.50
Next 5 Years 7.70 7.70
Stock Valuation Ratios Industry Peers
Ratio 2016 2017 2018 2019 2020
P/E 27.44 33.88 22.14 24.25 26.72 Return % ROE %
P/B 24.52 29.07 18.20 17.51 15.35 Tootsie Roll Industries -9.32 7.75
P/S 3.03 3.22 2.93 3.92 3.98 Simply Good Foods 9.88 3.35
P/FCF 21.49 20.97 14.94 18.23 17.12 HOSTESS BRANDS 0.69 4.17
2020 Annual Report 27
ENERGY - UNDERWEIGHT
Sector Overview
Oil, Gas & Consumables: This industry consists of five sub-
industries; integrated oil and gas, oil and gas exploration and
production, oil and gas refining and marketing, oil and gas
storage and transportation, and coal and consumable fuels. The
first sub-industry, integrated oil and gas, consists of companies
that conduct exploration and production of oil and gas and
participate in one or more of the following activities; refining,
marketing, transportation, or chemical manufacturing. The
second sub-industry, oil and gas exploration and production,
include the companies that operate by exploring for and
producing oil and gas and do not fall into any of the other sub-
industries. The third sub-industry, oil and gas refining and
marketing, consists of those companies that refine and market
oil and gas for sale. However, these companies do not
necessarily conduct exploration of oil and gas operations as well
as production of oil and gas. The fourth sub-industry, oil and gas
storage and transportation, is made up of companies that
transport/store oil and gas but do not necessarily produce oil
and gas. Pipelines and shipping services fall into this sub-
industry. The fifth sub-industry, coal and consumable fuels,
includes companies that produce and mine coal, coal related
products, as well as other consumable fuels. This sub-industry
does not have companies that produce industrial gases or mine
for coking coal fall within its scope.
The energy sector is comprised of companies that
produce and refine oil and gas-based products.
Energy companies do not distribute gas as a utility,
rather they conduct drilling, exploration, refinement,
production transportation and storage operations of
gas, oil, and similar consumable fuels. This sector
also includes the manufacturing companies that
produce the drilling equipment for the various
operations conducted in the sector. Energy
securities have historically outperformed the market
in mature stages of the business cycle.
Energy Equipment & Services: This industry consists
of two sub-industries. The first is oil and gas drilling.
This sub-industry includes companies that own the
drills and the contracts for the various drilling
services such as drilling wells. The second sub-
industry is oil and gas equipment and services. This
second sub-industry includes companies that
produce the equipment for the sector. This industry
produces the equipment and services for the
exploration, drilling and production of oil and gas in
the industry. The equipment includes the drills and
rigs for operations of the sector.
Performance* 1-Year 3-Year 5-Year
Sector -32.81% -14.96% -4.88% S&P 500 18.40% 14.18% 15.22%
*Annualized Returns
28 Investment Management Program
TransCanada Corp. (NYSE: TRP)
Market Cap:
$38.15B
Sector:
Energy
Industry:
Oil & Gas
Stock Type:
Large
Growth
Price (12/31/2020):
$40.72
52-Week Range:
$32.40 - $57.90
Holding Return:
-4.9%
Business Summary
TransCanada Corp is an energy infrastructure company operating out of
North America. The company conducts operations by utilizing liquids
pipelines, energy segments, U.S. natural gas pipelines, as well as
Canadian and Mexican natural gas pipelines. TransCanada transports
natural gas to power plants, distribution companies, industrial facilities,
interconnecting pipelines, and various other businesses. It owns two
pipelines; one private owned 81,500 kilometers and one partially owned
11,100 kilometers. They also own and manage midstream assets that
provide natural gas producer services. TransCanada operates 10 power
generation facilities powered by natural gas and nuclear fuel. Lastly,
TransCanada Corp owns and operates 118 billion cubic feet of
unregulated natural gas storage, as well as liquid pipelines infrastructure
for the transportation of Alberta crude oil supplies.
Investment Rationale/Risk
▪ TC Energy is pushing forward with
plans to build the Keystone XL
Pipeline, a project to move heavy
crude oil from the tar sands region of
Canada to Nebraska, where it will
then move on to refineries in Illinois
and along the Gulf Coast.
▪ Increasing environmental regulations
could hinder new crude pipeline
production. As these regulations
continue to be created and enacted,
TransCanada Corp could experience
setbacks with their designs of
pipelines, requiring a re-work on
designs for more environmentally
friendly designs in the future.
▪ TC Energy approximately has 95% of
EBITDA being derived from regulated
assets or long-term contracts,
ensuring stable revenue.
▪ Limited Canadian Western natural
gas takeaway capacity could cause
future production growth, as well as
the need for more infrastructure, to
be in jeopardy.
Key Statistics 2016 2017 2018 2019 2020
Total Stock Return % 43.77 12.07 -22.31 55.69 -19.11
Return on Assets % 0.16 3.44 3.83 4.01 4.47
Return on Equity % 0.72 14.50 15.25 15.25 16.45
Net Profit Margin % 0.99 22.28 25.87 30.00 34.29
Total Asset Turnover 0.16 0.15 0.15 0.13 0.13
Financial Leverage 4.34 4.09 3.90 3.71 3.66
Operating Profit Margin % 32.15 33.73 41.53 43.65 44.65
Revenue Growth % 10.66 7.55 1.71 -3.10 -1.93
Operating Income Growth % 13.85 12.86 25.21 1.85 0.31
EPS Growth % - - 14.29 8.93 11.01
Earnings Growth Estimates
Earnings Growth Estimate % Company Industry
2021 3.18 5.40
2022 7.41 15.40
Past 5 Years 9.50 17.30
Next 5 Years 6.00 19.10
Stock Valuation Ratios Industry Peers
Ratio 2016 2017 2018 2019 2020
P/E - 31.3 13.1 16.2 11.0 Return% ROE % P/B 2.6 2.6 1.9 2.5 1.7 Enbridge Inc. -13.49 5.33
P/S 4.3 3.9 3.2 4.6 3.8 Pembina Pipeline -31.09 -3.70
P/FCF 11.1 9.7 7.4 8.8 7.0 Williams Companies Inc. -8.73 1.66
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2020 Annual Report 29
Cheniere Energy, Inc. (NYSE: LNG)
Market Cap:
$15.15B
Sector:
Energy
Industry:
Oil & Gas
Stock Type:
Mid
Growth
Price (12/31/2020):
$60.03
52-Week Range:
$27.10 - $67.10
Holding Return:
-6.20%
Business Summary
Cheniere Energy, Inc. is an international energy company headquartered
in Houston, Texas and is the leading producer of liquified natural gas
(LNG) in the United States. They provide clean, secure, and affordable
energy to the world, while responsibly delivering a reliable, competitive,
and integrated source of LNG, in a safe and rewarding work environment.
Cheniere’s operations, construction and development also support
energy and economic development across the United States. Cheniere is
the second largest LNG operator in the world. In February 2016, Cheniere
became the first company to ship LNG from a commercial facility in the
contiguous United States and now delivers to 3 markets worldwide.
Liquified natural gas is produced through a refrigeration process that
drops the temperature of natural gas down to -260 degrees Fahrenheit,
at which point it converts to liquid and its volume shrinks by 600 times,
enabling global transport in LNG carriers. LNG is non-toxic and non-
flammable. When burned, natural gas emits less carbon than coal and oil,
with significantly less traditional air pollutants. Additionally, all mercury is
removed during the LNG process.
Investment Rationale/Risk
▪ Total U.S. LNG export capacity is
expected to rise to 10.0 billion cubic
feet per day by the end of 2020 and
10.7 billion cubic feet per day (bcfd)
by the end of 2021 from the current
8.5 (bcfd).
▪ Cheniere, the nation's biggest
liquified natural gas (LNG) exporter
and biggest consumer of gas,
completed a project, Midship, which
includes nearly 200 miles (322
kilometers) of 36-inch (91-
centimeter) pipe to be put in service
no later than April 2020.
▪ Cheniere serves as a “middleman”
which purchases natural gas and
then sells it in the liquified form.
Cheniere holds long-term contracts
which removes a lot of risk.
▪ The greatest risk facing Cheniere is
the large capacity for expansion. The
expansion has caused the company
to report losses as they continue to
expand, with fear of loss of cost
controls.
Key Statistics 2016 2017 2018 2019 2020
Total Stock Return % 11.22 29.95 9.94 3.18 -1.70
Return on Assets % -2.86 -1.52 1.57 1.92 -0.24
Return on Equity % - - - -
Net Profit Margin % -47.54 -7.02 5.90 6.66 -0.91
Asset Turnover 0.06 0.22 0.27 0.29 0.26
Financial Leverage - - - -
Operating Profit Margin % 3.32 25.23 25.44 24.50 28.18
Revenue Growth % 373.69 336.50 42.60 21.82 -3.82
Operating Income Growth % - 3215.81 43.81 17.32 10.61
EPS Growth % - - - -32.11 -
Earnings Growth Estimates
Earnings Growth Estimate % Company Industry
2021 -1,111.76 14.90
2022 49.42 9.40
Past 5 Years - 6.50
Next 5 Years 23.30 18.10
Stock Valuation Ratios Industry Peers
Ratio 2016 2017 2018 2019 2020
P/E - - 26.8 - 14.7 Return % ROE %
P/B -6.2 -6.8 -25.0 -17.2 -625.0 Southwest Gas Holdings -17.07 8.97
P/S 12.1 2.8 2.0 1.7 1.6 New Jersey Resources -17.34 11.42
P/FCF -49.8 15.4 7.8 10.0 10.2 Chesapeake Utilities 14.72 11.36
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30 Investment Management Program
FINANCIALS - UNDERWEIGHT
Sector Overview
Consumer Finance: The division of retail banking that deals with
lending money to consumers. This includes a wide selection of
lines of credit, such as credit cards, mortgage loans and auto
loans. Generally, this type of bank charges a prime or subprime
rate.
Diversified Financial Services: This sector consists of companies
that offer many different products and services to meet
consumer needs. A few services include investment banking,
credit card issuing, and wealth management.
Insurance: An agreement in which an individual or entity acquires
a payment plan which gives them financial protection from
unfortunate events such as financial losses, property and
casualty, and liability. The type of insurance is tied to specific
risks which can be costly to the policy holder. Clients pay a
premium for the service and the amount someone pays depends
on the risk level. Interest rates are positively correlated with
insurance company products, meaning that lower rates accounts
for lower sales.
Mortgage REITs: A security vehicle which loans money to owners
of real estate, or individuals who have either acquired an existing
mortgage or mortgage-backed securities. Revenues are produced
primarily through the interest they earn from mortgage loans.
Thrift & Mortgage Finance: These types of financial institutions
refer to credit unions and mutual savings banks who offer saving
and loaning services. The sector differs in the manner that
institutions can borrow funds from the Federal Home Loan Bank
System.
In 2020, the financial sector has a -1.83% return,
heavily underperforming the S&P 500 Index. The
financial sector does not typically have a clear
pattern when the economy is in the late stage of its
life cycle. Declining interest rates and reduced
consumer spending cut into financial companies
profit margins in 2020.
Banks: The banking sector is the sector of the
economy devoted to holding financial assets for
others and investing those financial assets as
leverage to create more wealth. It is also regulated
by government agencies. After the housing market
crash in 2008, we saw tighter restrictions on large
banks with the passing of the Dodd-Frank Act in
2010. Historically, as the economy enters the late
stage of the business cycle, the banking sector
generally performs somewhat poorly.
Capital Markets: This method of operation pertains
to the activities of gathering funds from parties, then
lending the capital earned to other parties who need
the additional cash flow. The main function is to
optimize the efficiency of transactions and to avoid
needing legal involvement.
Performance* 1-Year 3-Year 5-Year
Sector -1.83% 4.01% 11.00% S&P 500 18.40% 14.18% 15.22%
*Annualized Returns
2020 Annual Report 31
Bank of America (NYSE: BAC)
Market Cap:
$262.206B
Sector:
Financial
Services
Industry:
Banks -
Diversified
Stock Type:
Large Value
Price (12/31/2020):
$30.31
52-Week Range:
$18.00 - $35.70
Holding Return:
48.50%
Business Summary
Bank of America ranks as one of the top four financial institutions in the
United States, with more than $2.5 trillion in assets. The firm is
segmented into four categories: consumer banking, global banking,
global wealth and investment management, and global markets. Bank of
America's business-to-consumer transactions include deposits,
residential mortgages, credit and debit cards, and small-business
services. Its subsidiaries, Merrill Lynch and U.S. Trust private bank, offer
different brokerage and wealth management services to clients. Looking
at their commercial ties, Bank of America incorporates investment
banking, corporate real estate lending, and capital markets operations.
Investment Rationale/Risk
▪ Bank of America has emphasized
their preparedness for another
economic downturn. The firm has
been updating their risk
management systems and improving
their capital ratios in recent years.
▪ The financial institution has
maintained among the top four
credit card issuers in the United
States and has boosted their
commercial banking services
through their beneficial acquisition
of Merrill Lynch.
▪ Online banking is identified as the
next step for the industry. Digital
competitors are beginning to lure
customers away from the traditional
sense of operations (physical
branches). Bank of America
retention of customers should drop
along with its peers (Wells Fargo,
Chase, BB&T)
Key Statistics 2016 2017 2018 2019 2020
Total Stock Return % 32.80 35.34 -14.70 45.62 -11.90
Return on Assets % 0.75 0.74 1.15 1.09 0.63
Return on Equity % 6.82 6.83 10.95 10.73 6.73
Net Profit Margin % 19.38 19.02 29.26 28.49 19.10
Total Asset Turnover 0.04 0.04 0.04 0.04 0.03
Financial Leverage 9.05 9.32 9.69 10.08 11.35
Operating Profit Margin % 31.52 34.63 38.75 36.80 23.29
Revenue Growth % 1.77 4.36 4.46 -0.01 -5.46
Operating Income Growth % 10.43 14.87 16.49 -4.94 -40.72
EPS Growth % 14.50 4.00 67.31 5.36 -32.00
Earnings Growth Estimates
Earnings Growth Estimate % Company Industry
2021 33.16 31.00
2022 16.47 10.80
Past 5 Years 11.50 1.90
Next 5 Years 7.00 8.70
Stock Valuation Ratios Industry Peers
Ratio 2016 2017 2018 2019 2020
P/E 16.00 16.90 11.70 13.00 15.00 Return% ROE % P/B 0.90 1.20 1.00 1.27 1.10 Citigroup Inc. -20.27 5.56
P/S 3.00 3.70 2.90 3.71 3.10 Toronto-Dominion Bank 4.63 13.54
P/FCF 7.70 35.50 5.50 -30.30 6.30 Wells Fargo & Co. -41.64 1.04
32 Investment Management Program
Capital One Financial Corp. (NYSE: COF)
Market Cap:
$45.369B
Sector:
Financial
Services
Industry:
Credit Services
Stock Type:
Large Core
Price (12/31/2020:
$98.85
52-Week Range:
$38.00 - $107.60
Holding Return:
4.90%
Business Summary
Capital One Financial Corporation is a diversified banking company that
treats their consumers as their top priority. They typically operate in
consumer finance, with a focus in local banking and national lending.
Capital One is known for offering personal credit cards, investment
products, loans and online banking services. Located in Virginia, Capital
One’s client based, creative financial solutions have allowed them to
accumulate the eleventh most assets of any bank in the United States.
Investment Rationale/Risk
• Upon our purchase of Capital One
Financial Corporation, the company
declared a $0.40/share dividend
payout (quarterly). Capital One has
maintained this dividend.
• A focus on online bank accounts has
allowed Capital One to have a larger
national presence than its branch
network would allow. This enables
them to enjoy the benefits of being a
large bank without the expense.
• Amid the recent coronavirus
pandemic, Capital One offered relief
to their credit card holders who were
facing financial hardship. This has
improved their brand image while
also helping with customer
retention.
• Capital One continues to earn
returns on tangible equity that
exceed its cost of capital.
Key Statistics 2016 2017 2018 2019 2020
Total Stock Return % 23.08 15.98 -22.48 38.26 -2.97
Return on Assets % 1.02 0.47 1.55 1.36 0.59
Return on Equity % 7.41 3.54 11.37 9.47 4.02
Net Profit Margin % 14.25 6.49 21.01 18.66 8.50
Total Asset Turnover 0.07 0.07 0.07 0.07 0.07
Financial Leverage 7.51 7.50 7.21 6.73 7.00
Operating Profit Margin % 21.41 21.75 23.34 26.04 12.30
Revenue Growth % 8.84 6.49 3.53 2.42 0.37
Operating Income Growth % -9.77 8.48 10.62 13.66 -52.91
EPS Growth % -2.55 -49.35 238.68 -6.51 -53.12
Earnings Growth Estimate %
Earnings Growth Estimate % Company Industry
2021 144.12 5.50
2022 12.55 13.00
Past 5 Years -4.60 9.60
Next 5 Years 14.70 12.20
. Stock Valuation Ratios Industry Peers
Ratio 2016 2017 2018 2019 2020
P/E 12.43 13.91 10.20 9.13 48.10 Return % ROE % P/B 0.87 0.96 0.70 0.81 0.80 JPMorgan Chase -6.26 11.34
P/S 1.80 1.87 1.88 1.36 1.60 Discover Financial 8.81 10.45
P/FCF 1.40 1.49 1.34 1.18 2.80 American Express -1.49 13.18
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2020 Annual Report 33
Visa, Inc. (NYSE: V)
Market Cap:
$482.335B
Sector:
Financial
Services
Industry:
Credit Services
Stock Type:
Large Growth
Price (12/31/2020):
$218.73
52-Week Range:
$133.90 - $220.40
Holding Return:
231.90%
Business Summary
Visa incorporates a global payment network that links financial
institutions in over 200 countries. Visa’s credit technology can notify
banks of an electronic payment, then provides an instant
approval/decline decision for the transaction. The firm’s clients include
card-issuing banks, businesses, and consumers, which creates a
network. Visa’s main source of revenue is earned by charging fees to
customers based on both the dollar volume of card activity and the
number of transactions processed. In addition, the company provides
products such as digital wallets, risk management services, and
tokenization.
Investment Rationale/Risk
▪ Visa has shown strength as it
continues to hold one of the highest
operating margins in the industry.
▪ Historically, net margins tighten in
the late stage of the business cycle
due to lowered consumer activity.
However, as e-commerce continues
to grow, consumer card usage in
those transactions is likely to ease
the traditional expectation of
tightening margins.
▪ The Justice Dept. is investigating
Visa for potential anticompetitive
behavior in the debit card space.
▪ Recently, Visa started piloting
settlement of transactions on its
network with digital currency. Its
investment in crypto platform
Anchorage will aid in facilitating
these transactions. Visa is
positioning itself to maintain
dominance in the payment systems
of the future.
Key Statistics 2016 2017 2018 2019 2020
Total Stock Return % 1.36 47.03 16.49 43.21 17.06
Return on Assets % 11.37 9.80 14.49 17.04 14.16
Return on Equity % 20.79 23.76 35.65 41.83 36.01
Net Profit Margin % 39.31 35.23 48.24 52.57 49.74
Total Asset Turnover 0.29 0.28 0.30 0.32 0.28
Financial Leverage 2.35 2.49 2.43 2.48 2.60
Operating Profit Margin % 64.73 66.25 65.80 67.03 64.51
Revenue Growth % 8.66 21.72 12.26 11.49 -4.92
Operating Income Growth % 7.53 24.60 11.49 13.57 -8.50
EPS Growth % -3.88 12.90 57.86 20.36 -8.08
Earnings Growth Estimate %
Earnings Growth Estimate % Company Industry
2021 8.93 7.90
2022 24.04 23.90
Past 5 Years 14.20 6.20
Next 5 Years 17.00 13.30
Stock Valuation Ratios Industry Peers
Ratio 2016 2017 2018 2019 2020
P/E 31.46 40.72 29.85 35.32 44.60 Return % ROE % P/B 6.84 9.71 10.48 14.26 15.50 eBay Inc. 40.93 176.24
P/S 12.49 14.88 14.91 18.58 22.30 Mastercard Inc. 20.08 104.38
P/FCF 33.79 29.66 24.17 33.39 46.50 PayPal Holdings Inc. 116.51 22.77
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34 Investment Management Program
Horizon Technology Finance Corp. (NYSE: HRZN)
Market Cap:
$243M
Sector:
Financial
Services
Industry:
Asset
Management
Stock Type:
Small Value
Price (12/31/2020):
$13.24
52-Week Range:
$7.02 - $13.69
Holding Return:
5.9%
Business Summary
Horizon Technology Finance Corp. is a specialty finance company that
lends to and invests in development-stage companies in the technology,
finance, healthcare information and services, and sustainability
industries. It seeks investments in the United States. Its investment
objective is to maximize its portfolios total return by generating current
income from debt investments and capital appreciation on investments.
Investment Rationale/Risk
▪ Horizon recently entered into an
agreement with Waterfall Asset
Management, LLC to manage $100
million in assets, and this amount
could be increased to $300 million.
This will give horizon access to larger
investment opportunities in
emerging companies.
▪ Horizon currently pays a quarterly
dividend of $0.30/share.
▪ EPS growth is expected to improve in
the coming quarters.
▪ Return on assets was 1.69% in
2020, down from 6.38% in 2019.
Return on equity in 2020 was
3.21%, down from 12.25% in 2019.
In 2020, Horizon’s total return
lagged the index by 8.84%.
Key Statistics 2016 2017 2018 2019 2020
Total Stock Return % 1.41 17.95 10.96 25.60 12.06
Return on Assets % -1.89 4.05 5.19 6.38 1.69
Return on Equity % -3.29 6.99 9.66 12.25 3.21
Net Profit Margin % - 77.32 87.32 91.54 61.60
Total Asset Turnover - 0.05 0.06 0.07 0.03
Financial Leverage 1.72 1.73 1.99 1.86 1.92
Operating Profit Margin % 62.8 59.8 56.2 59.5 57.7
Revenue Growth % - - 20.12 42.96 -51.50
Operating Income Growth % 24.62 -27.57 12.82 49.00 1.26
EPS Growth % - - 36.14 28.32 -75.17
Earnings Growth Estimate %
Earnings Growth Estimate % Company Industry
2021 0.00 -5.00
2022 8.47 4.40
Past 5 Years -1.60 -6.30
Next 5 Years N/A N/A
Stock Valuation Ratios Industry Peers
Ratio 2016 2017 2018 2019 2020
P/E - 20.0 10.6 10.3 18.9 Return % ROE % P/B 0.8 1.0 1.0 1.2 1.2 BlackRock 46.42 14.33
P/S 79.4 13.6 9.0 11.1 16.6 Stellus Capital -15.46 7.42
P/FCF 3.1 3.0 -2.6 -4.2 -13.1 WhiteHorse Finance 10.62 10.13
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2020 Annual Report 35
HEALTH CARE - UNDERWEIGHT
Sector Overview
Health Care Equipment and Supplies: The health care equipment
and supplies industry in the health care sector includes
manufacturers of health care equipment, devices, supplies, and
medical products not classified elsewhere.
Health Care Providers and Services: The health care provider and
Services industry includes distributors and wholesalers of
healthcare products not classified within any other industry.
Life Sciences Tools and Services: The life sciences tools and
Services industry includes companies involved in drug discovery,
development, and production continuum by providing analytical
tools, instruments, consumables and supplies, clinical trial
services, and contract research services.
Health Care Technology: The health care technology industry in
the health care sector, includes companies providing information
technology services primarily to health care providers. It includes
companies providing application, systems and/or data processing
software, internet-based tools, and IT consulting services to
doctors, hospitals or businesses operating primarily in the health
care sector.
During an extremely volatile market, health care is
one of the top and most consistent performers.
According to the business cycle, health care has
consistently outperformed the S&P 500 Index in the
late and the recessionary stages. However, the
recession caused by Covid-19 was different than
other recent recessions. The health care sector
consists of six industries: biotechnology, health care
equipment & supplies, health care providers &
services, health care technology, life sciences tools
and services, and pharmaceuticals.
Pharmaceutical: The pharmaceutical industry
focuses on companies that take part in the research,
development, and manufacturing of
pharmaceuticals. Current political climates may
create deregulation, allowing pharmaceutical
companies the ability and the chance to have
increased margins and higher revenue streams. The
economy is heading into the late stage within the
business cycle, in which the industry historically
outperforms the S&P 500 Index.
Biotechnology: The biotechnology Industry in the
health care sector includes companies that are
engaged in research, development, manufacturing,
and/or marketing of products based on genetic
analysis and genetic engineering. The biotech
Industry is a fast-growing industry with increasing
demand for research and development. Most
biotech companies are forced on partnering with
larger firms to complete product development, due
to high costs and little revenues, in order to remain
competitive.
Performance* 1-Year 3-Year 5-Year
Sector 13.27% 13.25% 11.43%
S&P 500 18.40% 14.18% 15.22%
*Annualized Returns
36 Investment Management Program
Amgen, Inc. (NYSE: AMGN)
Market Cap:
$132.96B
Sector:
Health Care
Industry:
Biotechnology
Stock Type:
Large
Value
Price (12/31/2020):
$229.92
52-Week Range:
$177.05 - $264.97
Holding Return:
42.3%
Business Summary
Amgen Inc. is a biotechnology medicine company, which discovers,
develops, manufactures, and markets medicine for grievous illnesses
that has presence in approximately 130 countries worldwide. The
company focuses on human therapeutics and concentrates on
innovating novel medicines, based on advances in cellular and
molecular biology. It offers products for the treatment of
oncology/hematology, cardiovascular disease, inflammation, bone
health, nephrology, and neuroscience. Most of Amgen’s opportunity
lays in bottom-line growth and operating efficiency; however, several
early-stage oncology trials have the potential to boost Amgen’s long-
term pipeline growth.
Investment Rationale/Risk
▪ Amgen’s pipeline expects future
phase 3 productivity with drugs
such as the cholesterol drug
Repatha and migraine drug
Aimovig.
▪ Improvements in Amgen’s
manufacturing efficiency will benefit
top-end margins, as well as provide
a cost advantage to mitigate
competitors within the biosimilar
euro markets.
▪ Amgen’s pipeline gives it several
blockbuster biologic therapies.
Amgen’s intangible assets provide a
wide moat and competitive
advantage over its respective peers.
Key Statistics 2016 2017 2018 2019 2020
Total Stock Return % -7.47 22.08 14.98 26.81 -1.97
Return on Assets % 10.35 2.51 11.47 12.44 11.8
Return on Equity % 26.65 7.18 44.48 70.73 76.13
Net Profit Margin % 33.59 8.66 35.35 33.57 28.57
Total Asset Turnover 0.31 0.29 0.32 0.37 0.41
Financial Leverage 2.60 3.17 5.31 6.17 6.69
Operating Profit Margin % 42.6 43.6 43.2 41.4 35.95
Revenue Growth % 6.14 -0.62 3.93 -1.62 8.83
Operating Income Growth % 15.63 1.83 2.91 -5.74 -5.53
EPS Growth % 13.02 -73.73 369.15 2.06 -4.43
Earnings Growth Estimates
Earnings Growth Estimate % Company Industry
2021 0.84 8.20
2022 8.84 1.00
Past 5 Years 10.10 14.30
Next 5 Years 8.40 20.60
Stock Valuation Ratios Industry Peers
Ratio 2016 2017 2018 2019 2020
P/E 14.6 15.7 14.5 18.5 18.5 Return % ROE %
P/B 3.5 3.9 8.5 13.0 12.1 Roche Holding AG 11.83 41.38
P/S 4.9 3.2 5.7 6.4 5.5 Gilead Sciences -6.16 0.60
P/FCF 12.8 5.6 12.0 15.2 12.56 Johnson & Johnson 10.62 23.97
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2020 Annual Report 37
Bristol-Myers Squibb (NYSE: BMY)
Market Cap: $137.77B
Sector: Health Care
Industry: Biopharmaceuticals
Stock Type: Large Value
Price
(12/31/2020): $62.03 52-Week Range: $45.76 - $68.34
Holding Return: 11.1%
Business Summary
Bristol-Myers Squibb is one of the leading biopharmaceutical
companies operating in the United States. BMY specializes in producing
biopharmaceuticals, also known as biological medical products or
biologic, which is any pharmaceutical drug product manufactured in,
extracted from, or semi synthesized from biological sources. Margins
are expected to expand as the high margin Celgene drugs are added
into Bristol’s portfolio, but the high royalty rate paid on Eliquis to Pfizer
will weigh on gross margins for the firm. Long term expected earnings
will fall in the 2023 to 2027 period as generic pressures on key drugs
Revlimid and Eliquis emerge. On the flip side, Opdivo, which has
potential to significantly alter the treatment paradigm in several major
cancer settings. The projected risk-adjusted peak sales are forecasted
to be close to $10 billion.
Investment Rationale/Risk
• Bristol-Myers Squibb’s acquisition of
Celgene in November of 2019 was
initiated with the goal of creating a
leading biopharmaceuticals
company. The acquisition intends to
increase BMY’s distribution channels
for their top performing drug
industries.
• Bristol Myers Squibb receives
European Commission Approval for
Opdivo (nivolumab) plus Yervoy
(ipilimumab) with two cycles of
chemotherapy for first-line treatment
of metastatic non-small cell lung
cancer.
• A major risk factor to Bristol-Myers
Squibb and its biopharmaceutical
developments is loss of exclusivity
(LOE). For BMY’s top performers,
Eliqis and Opdivo, their LOE in the
United States is not until 2026 and
2028 respectively, with other drugs
LOE not arriving until as distant as
2029.
Key Statistics 2016 2017 2018 2019 2020
Total Stock Return % -13.39 7.53 -12.57 26.64 0.20
Return on Assets % 13.62 2.99 14.36 4.17 -7.26
Return on Equity % 29.28 7.21 38.18 10.48 -20.16
Net Profit Margin % 22.94 4.85 21.81 13.15 -20.20
Total Asset Turnover 0.59 0.62 0.66 0.32 0.34
Financial Leverage 2.08 2.86 2.49 2.52 3.13
Operating Profit Margin % 23.40 16.60 22.70 22.60 5.12
Revenue Growth % 17.31 6.94 8.59 15.89 62.62
Operating Income Growth % 162.37 -23.99 48.35 15.53 -63.18
EPS Growth % 184.95 -76.98 393.44 -33.22 N/A
Earnings Growth Estimates
Earnings Growth Estimate % Company Industry
2021 15.68 8.20
2022 8.05 1.00
Past 5 Years 23.30 14.30
Next 5 Years 7.00 20.60
Stock Valuation Ratios Industry Peers
Ratio 2016 2017 2018 2019 2020
P/E 29.2 24.0 58.4 18.6 N/A Return % ROE %
P/B 6.2 6.7 6.2 8.1 2.75 AstraZeneca PLC 3.07 22.23
P/S 5.3 5.0 3.9 4.4 3.47 Eli Lilly & Co. 30.72 150.18
P/FCF 48.3 18.9 18.4 12.4 11.0 Merck & Co Inc. 59.50 38.76
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38 Investment Management Program
Cerner Corp. (NYSE: CERN)
Market Cap:
$24.00B
Sector:
Health Care
Industry:
Health Care
Technology
Stock Type:
Large
Growth
Price (12/31/2020):
$78.48
52-Week Range:
$53.08 - $80.90
Holding Return:
34.8%
Business Summary
Cerner Corp. designs, develops, markets, installs, hosts, and supports
health care information technology, health care devices, hardware, and
content solutions for health care organizations and consumers. It also
provides value-added services, including implementation and training,
remote hosting, operational management services, revenue cycle
services, support, and maintenance, health care data analysis, clinical
process optimization, transaction processing, employer health centers,
employee wellness programs, and third-party administrator services for
employer-based health plans. It operates through domestic and global
segments. The domestic segment includes revenue contributions and
expenditures associated with business activity in the United States. The
global segment includes revenue contributions and expenditures that are
linked to business activity in many different countries around the world.
Investment Rationale/Risk
▪ High switching cost create a narrow
economic moat for Cerner Corp. by
limiting bargaining power for
purchasers.
▪ Cerner Corp. integrates out
distributors by internally creating
and developing software, as well as
providing software services.
▪ Increasing complexity and know-
how of Medicare reporting, strong
upward trends of value-based pay
reimbursement arrangements, and
compliance/regulation of medical
records all increase demand for
health care information technology.
▪ Any errors or malfunctions within
the software pose a gigantic risk for
Cerner Corp. Additionally, IT
Infrastructure and software bears
risk to security and privacy of
information.
Key Statistics 2016 2017 2018 2019 2020
Total Stock Return % -21.27 42.26 -22.18 40.98 7.97
Return on Assets % 11.37 14.33 9.56 7.78 10.82
Return on Equity % 16.32 19.90 12.97 11.45 17.73
Net Profit Margin % 13.27 16.86 11.74 9.30 14.17
Total Asset Turnover 0.86 0.85 0.81 0.84 0.76
Financial Leverage 1.43 1.35 1.36 1.59 1.68
Operating Profit Margin % 18.99 18.68 14.44 10.60 12.61
Revenue Growth % 8.39 7.21 4.36 6.08 -3.28
Operating Income Growth % 16.63 5.43 -19.33 -22.47 15.55
EPS Growth % 20.13 38.92 -26.46 -12.70 52.73
Earnings Growth Estimates
Earnings Growth Estimate % Company Industry
2021 10.92 11.60
2022 13.33 22.90
Past 5 Years 5.50 5.60
Next 5 Years 12.00 18.40
Stock Valuation Ratios Industry Peers
Ratio 2016 2017 2018 2019 2020
P/E 25.1 33.6 21.1 47.0 30.66 Return % ROE %
P/B 3.6 4.9 3.4 5.2 5.45 McKesson Corp 59.50 38.76
P/S 3.5 4.5 3.3 4.3 4.39 Premier Inc. -6.34 N/A
P/FCF 13.9 18.9 12.6 18.6 23.92 Veeva Systems 93.55 19.33
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2020 Annual Report 39
Johnson & Johnson (NYSE: JNJ)
Market Cap:
$414.31B
Sector:
Health Care
Industry:
Pharmaceuticals
Stock Type:
Large
Core
Price (12/31/2020):
$157.38
52-Week Range:
$109.16 - $157.66
Holding Return:
85.7%
Business Summary
Johnson & Johnson is identified as the largest holder of market share in
the healthcare industry. The firm is made up of three different
departments: consumer products, medical devices and diagnostics, and
pharmaceuticals. Johnson & Johnson's drug and device groups equate up
to 80% of sales and is their main driver of cash flows. Looking at the
firm's drug division, it is comprised of the following specialties: cardiology,
immunology, neurology, oncology, pulmonary, and metabolic diseases.
Their device products are primarily directed to orthopedics, surgery tools,
and vision care. The last segment of consumer focuses on beauty, oral
care, baby care, over-the-counter drugs, and women's health. About half
of the firm's total revenue is generated within the United States.
Investment Rationale/Risk
▪ Being the leader in a competitive
healthcare industry, the firm has
looked outside the United States to
build a stronger brand recognition
worldwide. The firm currently
operates in 60 countries worldwide
and continues to expand their
outreach through both acquisition
and Greenfield investments.
▪ J&J’s size allowed them the
resources to help lead the fight
against COVID-19 as the pandemic
ravaged the world in 2020 and then
began work on its own vaccine in
partnership with the US
government.
▪ The vaccine showed lower efficacy
in trials compared to others, but the
company is hoping for an
advantage with its single-
shot dosing, as opposed to the
double-shot approach of many of its
key rivals, as well as it is easier
storage.
Key Statistics 2016 2017 2018 2019 2020
Total Stock Return % 15.23 24.16 -5.10 15.94 10.62
Return on Assets % 12.05 0.87 9.86 9.73 8.85
Return on Equity % 23.37 1.99 25.51 25.36 23.97
Net Profit Margin % 23.01 1.7 18.75 18.42 17.82
Total Asset Turnover 0.52 0.51 0.53 0.53 0.50
Financial Leverage 2.01 2.61 2.56 2.65 2.76
Operating Profit Margin % 29.40 24.48 24.58 24.50 24.11
Revenue Growth % 2.59 6.34 6.71 0.59 0.64
Operating Income Growth % 15.73 -9.65 10.74 -0.97 -5.04
EPS Growth % 8.21 -92.07 N/A 0.36 -2.13
Earnings Growth Estimates
Earnings Growth Estimate % Company Industry
2021 18.06 8.30
2022 7081 4.40
Past 5 Years 5.00 6.30
Next 5 Years 7.70 9.60
Stock Valuation Ratios Industry Peers
Ratio 2016 2017 2018 2019 2020
P/E 20.2 24.3 24.9 27.8 24.75 Return % ROE %
P/B 4.3 5.1 5.3 6.6 6.43 Roche Holding AG 11.83 41.38
P/S 4.5 5.2 4.3 4.8 5.20 Gilead Sciences -6.16 0.60
P/FCF 19.0 17.8 16.0 16.9 19.47 Amgen Corp -1.97 76.13
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40 Investment Management Program
UnitedHealth Group, Inc. (NYSE: UNH)
Market Cap:
$331.74B
Sector:
Health Care
Industry:
Health Care
Providers and
Services
Stock Type:
Large
Growth
Price (12/31/2020):
$350.68
52-Week Range:
$187.72 - $367.95
Holding Return:
497.6%
Business Summary
UnitedHealth Group is known as the largest private health insurance
provider in the United States. Overall, UnitedHealth has captured the lead
in self-directed, employer-sponsored, and government-backed insurance
plans. With the health insurance giant’s unrivaled scale in managed care,
peers are known to struggle with competing against the firm. Medical
benefits are offered to nearly 50 million members across its international
platform. Along with its insurance assets, United's continued investment
behind its Optum franchises has created a healthcare services titan that
covers everything from medical and pharmaceutical benefits, to providing
outpatient care and analytics to both affiliated and third-party customers.
Investment Rationale/Risk
▪ United's integrated strategy, in the
eyes of IMP, has been successful as
the U.S. healthcare system slowly
shifts from a fee-for-service model to
a more aligned with the value and
outcomes produced for patients.
▪ Being the leader across multiple
sectors, such as government- and
employer-sponsored insurance
programs, ambulatory care, and
health analytics, the firm's revenue
and cash flow stream is less reliant
on a single source than many other
areas of the industry which sees the
firm constantly spending large
amounts of resources to continually
improve each sector.
▪ With the firm’s long record of
success, UnitedHealthcare’s current
executive team ranks among some
the top tier of leaders in healthcare
services. The management team has
been known for gaining impressive
strategic foresight and has
developed the business into what it
is today.
Key Statistics 2016 2017 2018 2019 2020
Total Stock Return % 38.06 39.55 14.56 19.67 20.93
Return on Assets % 10.35 2.51 11.47 8.49 8.30
Return on Equity % 26.65 7.18 44.48 25.32 25.02
Net Profit Margin % 33.59 8.66 35.35 5.76 6.03
Total Asset Turnover 0.31 0.29 0.32 .37 1.38
Financial Leverage 2.60 3.17 5.31 3.02 3.01
Operating Profit Margin % 42.60 43.60 43.22 7.4 8.18
Revenue Growth % 17.66 8.76 12.36 6.85 6.40
Operating Income Growth % 17.37 17.22 12.56 11.47 17.44
EPS Growth % 20.63 47.86 13.71 17.56 11.86
Earnings Growth Estimates
Earnings Growth Estimate % Company Industry
2021 7.82 12.60
2022 16.26 8.00
Past 5 Years 19.90 16.80
Next 5 Years 12.70 12.40
Stock Valuation Ratios Industry Peers
Ratio 2016 2017 2018 2019 2020
P/E 23.6 25.1 19.5 21.4 20.1 Return % ROE%
P/B 4 4.7 4.8 5.1 5.1 Cigna 1.82 17.68
P/S 0.9 1.1 1.1 1.2 1.3 CVS Health Group -20.27 5.56
P/FCF 10.5 14.6 22.9 19.5 15.1 Anthem Inc. 7.57 14.08
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2020 Annual Report 41
INDUSTRIALS - UNDERWEIGHT
Sector Overview
Building Materials: The building products industry produces
building components, home improvement products, and
equipment.
Commercial Services & Supplies: This industry includes
companies providing commercial printing, environmental and
facilities services, office services and supplies, diversified support
service, and security and alarm services.
Construction & Engineering: The construction & engineering
industry engages mainly in non-residential construction.
Electrical Equipment: This industry includes companies that
produce electric cables, electrical components or equipment, and
manufacturers of power-generating equipment and other heavy
electrical equipment.
Diversified Industrials: This industry includes diversified industrial
companies with business activities in three or more sectors, none
of which contributes most revenues.
Machinery: The machinery industry includes manufacturers of
construction, farm and industrial machinery, and heavy trucks.
Marine: The marine industry includes companies providing goods
and passenger maritime transportation.
Historically, the industrial sector does not have
strong growth in the late stage and underperforms in
the recession stage. As consumers spend less and
save more, this sector stagnates because these
companies do not expand. The industrials sector
has a market cap of $5.94 trillion, which consists of
fourteen industries: aerospace & defense, air freight
& logistics, airlines, building products, commercial
services & supplies, construction & engineering,
electrical engagement, industrial conglomerates,
machinery, marine, professional services, road &
rail, trading companies & distributors, and
transportation infrastructure.
Aerospace & Defense: The aerospace & defense
industry includes manufacturers of civil or military
aerospace and defense equipment, parts, or
products. Historically, this is one of the stronger
performing industries in the Industrial sector.
Air Freight & Logistics: The air freight and logistics
industry includes companies providing air freight
transportation, as well as courier and logistics
services.
Airlines: The airlines industry includes companies
offering mainly passenger air transportation.
Trading Companies & Distributers: This industry
includes trading companies and other distributors of
individual equipment and products.
Performance* 1-Year 3-Year 5-Year
Sector 10.83% 7.54% 13.06% S&P 500 18.40% 14.18% 15.22%
*Annualized Returns
42 Investment Management Program
Honeywell International, Inc. (NYSE: HON)
Market Cap:
$152.57B
Sector:
Industrials
Industry:
Specialty
Industrial
Machinery
Stock Type:
Large Core
Price (12/31/2020):
$212.70
52-Week Range:
$101.10 - $216.70
Holding Return:
17.1%
Business Summary
Honeywell International, Inc. operates as a diversified technology and
manufacturing company worldwide. The company has operations in the
United States, Europe, Canada, Asia and Latin America. Honeywell
International, Inc. was incorporated in 1985 and has its’ headquarters in
Charlotte, North Carolina. Today, it operates through four business
segments including, aerospace, building technologies, performance
materials and technologies, and safety and productivity solutions. The
company is a global leader in refrigerants, aerosols, and foam-insulation
blowing agents that are used to replace ozone-depleting
Chlorofluorocarbon and Hydro Chlorofluorocarbons. These products also
improve the energy efficiency of homes, appliances, and commercial
refrigeration systems.
Investment Rationale/Risk
▪ Tariffs threaten Honeywell’s supply
chain and can impact its cost inputs.
▪ Aerospace segment can have a long
downturn period depending on the
demand for air travel.
▪ Honeywell’s business is split 60/40
between operating expenses and
capital expenditure cycles so they do
not worry as much about the macro
environment.
▪ Rapid changes in technology can
affect the safety and productivity
segment of Honeywell Inc. by
causing diminished returns on
capital projects.
Key Statistics 2016 2017 2018 2019 2020
Total Stock Return % 14.74 34.74 -8.61 36.51 22.22
Return on Assets % 9.30 2.92 11.55 10.55 7.75
Return on Equity % 25.54 9.03 38.16 33.50 26.52
Net Profit Margin % 12.24 4.08 16.18 16.73 14.64
Total Asset Turnover 0.76 0.71 0.71 0.63 0.53
Financial Leverage 2.80 3.44 3.18 3.17 3.68
Operating Profit Margin % 17.00 17.64 16.04 18.66 17.45
Revenue Growth % 1.87 3.13 3.13 -12.18 -11.09
Operating Income Growth % -2.12 7.00 -6.24 2.18 -16.86
EPS Growth % 2.65 -65.48 319.63 -6.35 -20.10
Earnings Growth Estimates
Earnings Growth Estimate % Company Industry
2021 10.85 13.10
2022 12.45 23.10
Past 5 Years 3.10 1.80
Next 5 Years 10.30 14.00
Stock Valuation Ratios Industry Peers
Ratio 2016 2017 2018 2019 2020
P/E 18.13 23.24 37.22 20.68 30.52 Return % ROE %
P/B 4.59 5.46 5.29 6.95 8.09 Carlisle Co. Inc. -2.23 12.36
P/S 2.29 2.99 2.34 3.52 4.57 Danaher Corp 45.20 10.77
P/FCF 16.82 20.31 14.24 22.29 25.16 ITT Inc. 5.12 3.45
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2020 Annual Report 43
Lockheed Martin (NYSE: LMT)
Market Cap:
$105.54B
Sector:
Industrials
Industry:
Aerospace &
Defense
Stock Type:
Large Value
Price (12/31/2020):
$354.98
52-Week Range:
$276.80 - $439.85
Holding Return:
30.7%
Business Summary
Lockheed Martin Corporation, a security and aerospace company,
engages in the research, design, development, manufacture, integration,
and sustainment of technology systems, products, and services
worldwide. It operates through four segments: aeronautics, missiles and
fire control, rotary and mission systems, and space. Lockheed Martin is
the largest defense contractor worldwide and is the market leader in next-
generation fighter aircrafts. The company is involved in the research,
design, development, integration, and sustainment of advanced
technology products and services. The company provides services in
cybersecurity, system integration, logistics, and engineering. The
applications of the services are in defense, civil, or commercial needs.
The company has contracts with the Department of Defense, foreign
military Sales, and a small amount of sales with U.S. commercial and
other customers.
Investment Rationale/Risk
▪ Lockheed has a strong hold on the
market due to the F-35 fighter
program and missile exposure. Their
contracts have a strong barrier to
entry against competitors, ensuring
future sustainability.
▪ The defense budget caps will return in
2020, hitting Lockheed’s growth.
Even if investors see growth in the
increase in budget in 2019, this cap
in 2020 can halt the company’s rapid
growth providing a slower, lower
return for investors.
▪ The slower production process for F-
35 will restrain growth and tougher
contracts will hurt margins. This can
hurt quarterly earnings, but the
company has stressed the goal in
improving operations in making these
products, enabling higher sales and
potential contracts. As of now, this
can be seen as a short-term threat for
investors.
Key Statistics 2016 2017 2018 2019 2020
Total Stock Return % 18.22 31.44 -15.89 52.15 -6.32
Return on Assets % 10.94 4.24 11.04 13.48 13.91
Return on Equity % 230.12 483.57 1419.4 275.60 149.49
Net Profit Margin % 11.22 3.92 9.39 10.42 10.45
Total Asset Turnover 0.97 1.08 1.18 1.29 1.33
Financial Leverage 31.64 31.66 32.19 15.20 8.43
Operating Profit Margin % 10.88 10.87 13.71 13.99 13.22
Revenue Growth % 2.42 8.04 5.32 11.25 9.34
Operating Income Growth % -3.02 7.90 32.84 13.53 3.31
EPS Growth % 52.62 -60.61 155.30 24.79 10.71
Earnings Growth Estimates
Earnings Growth Estimate % Company Industry
2021 7.43 24.40
2022 6.42 19.70
Past 5 Years 15.90 7.30
Next 5 Years 6.00 10.30
Stock Valuation Ratios Industry Peers
Ratio 2016 2017 2018 2019 2020
P/E 18.81 26.04 24.80 18.51 15.16 Return % ROE % P/B 31.09 43.61 78.02 28.11 20.07 Boeing Co. -33.66 -
P/S 1.52 1.89 1.39 1.90 1.56 Airbus SE -25.66 -187.74
P/FCF 13.17 16.48 30.94 13.78 12.72 Raytheon Co 43.41 13.80
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44 Investment Management Program
3M Company (NYSE: MMM)
Market Cap:
$112.90B
Sector:
Industrials
Industry:
Specialty
Industrial
Machinery
Stock Type:
Large Core
Price (12/31/2020):
$174.79
52-Week Range:
$114.00 - $182.50
Holding Return:
124.3%
Business Summary
3M Company was founded in 1902 and has its headquarters in St. Paul,
Minnesota. 3M Company develops, manufactures, and markets various
products worldwide. It operates through four business segments: safety
and industrial, transportation and electronics, health care, and consumer.
The consumer segment provides home improvement, home care, and
consumer health care products, as well as stationery and office supplies
to various consumers. This segment is also involved in the retail auto
care business. It offers its products through various e-commerce and
traditional wholesalers, retailers, jobbers, distributors, and dealers, as
well as directly to users. 3M has a strong emphasis on product
development and research and development among their segments.
Each segment, utilizing similar technology enabling efficient sharing of
business resources. Most of 3M’s revenues are from outside of the
United States. The company employs 96,163 people.
Investment Rationale/Risk
▪ 3M has a strong product portfolio,
adding value to the consumers. These
products are created through intense
research & development, making it
difficult for competitors to recreate.
This is evidence that the company will
continue innovating, remaining a top
competitor for the future.
▪ Historical data shows for every dollar
put into R&D, the company will make
$9, which is much higher compared
to its peers. Historically, the company
also puts more capital into research
and development; if these trends
continue, the competitors will be
forced to play catch up with 3M,
making 3M a strong investment
choice.
▪ The company may show a lack of
growth during the upcoming
recessionary phase since it is an
Industrial security. However, 3M has
products in Health Care to hedge
against this risk. This hedge allows
the stock to potentially grow even in
the market downturns.
Key Statistics 2016 2017 2018 2019 2020
Total Stock Return % 21.49 34.44 -16.74 -4.39 2.41
Return on Assets % 15.39 13.71 14.36 11.26 11.70
Return on Equity % 45.90 44.44 50.09 46.02 46.96
Net Profit Margin % 16.77 15.35 16.33 14.22 16.73
Total Asset Turnover 0.92 0.89 0.88 0.79 0.70
Financial Leverage 3.20 3.29 3.73 4.44 3.68
Operating Profit Margin % 23.99 22.85 20.33 18.86 21.04
Revenue Growth % -0.55 5.14 3.50 -1.92 0.15
Operating Income Growth % 3.99 0.15 -7.93 -9.01 11.75
EPS Growth % 7.65 -2.82 12.11 -12.15 18.44
Earnings Growth Estimates
Earnings Growth Estimate % Company Industry
2021 9.27 13.10
2022 9.11 23.10
Past 5 Years 2.30 1.80
Next 5 Years 9.50 14.00
Stock Valuation Ratios Industry Peers
Ratio 2016 2017 2018 2019 2020
P/E 22.49 26.27 25.54 20.93 20.49 Return % ROE % P/B 8.88 11.53 10.72 9.48 8.46 Honeywell Int. -6.32 33.50
P/S 3.69 4.65 3.53 3.24 3.21 Siemens AG ADR 23.18 9.54
P/FCF 16.34 21.89 19.15 14.83 12.82 General Electric Co -2.87 16.38
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2020 Annual Report 45
Roper Technologies, Inc. (NYSE: ROP)
Market Cap:
$44.02B
Sector:
Industrials
Industry:
Industrial
Conglomerates
Stock Type:
Large Core
Price (12/31/2020):
$431.09
52-Week Range:
$240.00 - $455.70
Holding Return:
9.6%
Business Summary
Roper Technologies, Inc. designs and develops software, and engineered
products and solutions. The company offers management, campus
solutions, laboratory information management, enterprise management,
information solutions, transportation management, financial and
compliance management, cloud-based financial analytics and
performance management, and diagnostic and laboratory information
system software, and software, services, and technologies for foodservice
operations. It also provides cloud-based data, collaboration, and
estimating automation software; electronic marketplace; visual effects
and 3D content software; wireless sensor network and solutions; cloud-
based software solutions; supply chain software; health care service and
software; RFID card readers; data analytics and information; pharmacy
software; and toll system and products, transaction and violation
processing services, and intelligent traffic systems.
Investment Rationale/Risk
▪ Roper Technologies historically has
outperformed its peer in a difficult
economy partly due to its high
tendencies on the acquisition front.
▪ Roper relies on large amounts of
deferred revenue because software
companies receive cash far in advance.
Roper uses this cash to invest in
businesses at incrementally higher
rates of return.
▪ Roper purchases businesses that have
little strategic rationale with one
another. Their business model carries a
lot of execution risk because the
company will eventually run out of
purchase targets.
Key Statistics 2016 2017 2018 2019 2020
Total Stock Return % -2.90 42.23 3.54 33.60 22.28
Return on Assets % 5.38 6.79 6.39 10.60 4.51
Return on Equity % 11.88 15.36 12.94 20.52 9.51
Net Profit Margin % 17.38 21.09 18.19 32.94 17.18
Total Asset Turnover 0.31 0.32 0.35 0.32 0.26
Financial Leverage 2.47 2.09 1.97 1.91 2.29
Operating Profit Margin % 27.83 26.27 26.90 27.92 25.89
Revenue Growth % 5.79 21.57 12.67 3.38 2.99
Operating Income Growth % 2.59 14.76 15.38 7.30 -4.49
EPS Growth % -6.13 46.03 -3.62 85.86 -46.61
Earnings Growth Estimates
Earnings Growth Estimate % Company Industry
2021 14.60 13.20
2022 5.96 20.00
Past 5 Years 14.10 3.50
Next 5 Years 10.50 13.70
Stock Valuation Ratios Industry Peers
Ratio 2016 2017 2018 2019 2020
P/E 27.33 37.59 24.54 32.17 29.03 Return % ROE % P/B 3.26 4.11 3.65 4.30 4.45 Pentair plc 17.40 17.66
P/S 5.03 6.09 5.51 6.94 8.40 A. O. Smith Corp. 17.13 19.62
P/FCF 19.45 23.52 20.82 25.44 32.11 W.W. Grainger, Inc. 22.38 37.74
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46 Investment Management Program
REAL ESTATE - UNDERWEIGHT
Sector Overview
Residential Real Estate: The residential segment of the
industry focuses on the buying and selling of properties used
as homes or for non-professional purposes. This segment
heavily relies on housing prices within the market to determine
the health of the segment. Construction of new houses
changes the supply and demand for residential real estate.
Firms that manage rentable properties perform well when
renting is attractive, and supply of rentable units is high.
Industrial Real Estate: The industrial real estate segment
focuses on properties that are used for manufacturing and
production. Some examples are the factories and plants that
are involved in vertical supply chain systems to provide
consumer products to retailers or other manufacturing centers.
Consumer spending and supply chain operating costs affect
this industry the most.
Commercial Real Estate: Commercial real estate segment
consists of the properties that are used for business purposes
such as retail and office spaces. The segment tends to perform
cyclically in relation to the economy.
Real Estate Investment Trusts: REITs invest in a variety of
properties to achieve returns that can sustain the company
financially. For REITs, the company must distribute 90% of
their taxable income in dividends to their investors. Other
income is invested in the development or acquisition of
properties to ensure higher returns for stockholders. They also
can provide mortgages on various real assets.
The real estate sector made a large comeback
after the recession of 2008 because properties
gained some of their value back after the
economic downturn. After 2008, GDP increased
and, hence, consumers had more household
income. People slowly began to buy houses
instead of renting. In 2010 and 2011, the sector
saw a 27.1% and 32.3% increase, respectively.
Between 2017 and 2020, there has been minimal
increase due to the stage of the business cycle-the
late stage. Each segment within the industry has
different metrics that are used to gauge the health
of the industry. The segments that lie in the real
estate sector are residential real estate, industrial
real estate and commercial real estate. Real
estate investment trusts are another segment
which can encompass all types of properties.
During the late stages of the business cycle, real
estate performs at an average rate compared to
the S&P 500. It is important to note that the real
estate industry does not perform well when
interest rates rise. As the cost of borrowing for
consumers and real estate carriers increases, the
demand for mortgages and acquisitions may
decline. The industry becomes very defensive in
the late stages of the business. Real estate
investment trusts focus on repositioning and
strengthening their portfolio in these stages. The
real estate industry must maintain a workable
supply to feed demand for rentable units when
unattractive factors are involved, such as rising
interest rates. Development of new properties
continues in the late stages to ensure supply is
adequate and higher returns can be achieved.
Performance* 1-Year 3-Year 5-Year
Sector -2.27% 7.16% 7.05% S&P 500 18.40% 14.18% 15.22%
*Annualized Returns
2020 Annual Report 47
American Tower Corp. (NYSE: AMT)
Market Cap:
$99.73B
Sector:
Real Estate
Industry:
Equity REIT
Stock Type:
Large Growth
Price (12/31/2020):
$224.46
52-Week Range:
$174.30 - $272.20
Holding Return:
119.99%
Business Summary
American Tower Corporation (AMT) is a real estate investment trust
founded in 1995 in Boston, Massachusetts. AMT invests in the global real
estate markets as well as being a large independent operator of wireless
and broadcast communication sites. American Tower owns and operates
more than 180,000 cell towers throughout the U.S., Asia, Latin America,
Europe, and the Middle East. Through its subsidiaries, AMT owns,
operates, and develops wireless and broadcast communications
properties. American Tower owns and operates more than 180,000 cell
towers throughout the U.S., Asia, Latin America, Europe, and the Middle
East. The company also leases antenna space on multi-tenant
communication sites to wireless service providers, radio, television
broadcast companies, government agencies, municipalities, and other
tenants in a number of industries.
Investment Rationale/Risk
▪ Concentrates investments in countries
that are in earlier stages of wireless
infrastructure. Invests in projects that
accrue in value as the infrastructure
develops.
▪ Has recurring revenue increases, high
operating leverage, predictable
operating costs, and minimal
nondiscretionary capital expenditures.
▪ Revenue is reliable due to strong credit
quality of tenants, low tenant turnover,
and growing wireless adoptions.
▪ Operating leverage is high due to the
availability for tenants to invest in new
towers within their current leases.
Key Statistics 2016 2017 2018 2019 2020
Total Stock Return % -5.60 11.43 24.25 47.85 -0.36
Return on Assets % 2.94 3.59 3.71 4.72 3.76
Return on Equity % 12.66 17.71 21.20 28.41 36.96
Net Profit Margin % 14.68 17.28 16.49 29.25 21.02
Total Asset Turnover .20 .21 .22 0.19 0.18
Financial Leverage 4.57 5.32 6.19 6.14 11..54
Operating Profit Margin % 32.00 30.00 25.6 37.79 38.89
Revenue Growth % 21.25 15.18 11.65 6.67 6.08
Operating Income Growth % 14.90 7.85 -4.67 12.57 16.34
EPS Growth % 40.43 34.85 3.75 52.71 -10.61
Earnings Growth Estimates
Earnings Growth Estimate % Company Industry
2021 10.31 5.20
2022 7.41 7.20
Past 5 Years NA -1.60
Next 5 Years 14.50 7.00
Stock Valuation Ratios Industry Peers
Ratio 2016 2017 2018 2019 2020
P/E 52.9 48.9 44.30 56.37 53.06 Return % ROE % P/B 6.7 11.9 15.0 20.94 26.73 Healthpeak Properties -8.01 6.39
P/S 8.2 9.4 10.8 14.05 12.77 Howard Hughes Corp. -37.35 -0.76
P/FCF 17.3 29.1 21.5 32.15 26.75 Brookfield Property Partners -13.57 -8.78
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48 Investment Management Program
INFORMATION TECHNOLOGY - OVERWEIGHT
Sector Overview
IT Services: The IT services industry includes providers of
information technology and systems integration services not
classified in the data processing and outsourced services or
internet software and services industries. It includes information
technology consulting, information management services, and
providers of commercial electronic data processing and/or
business process outsourcing services such as back-office
automation.
Technology Hardware, Storage & Peripherals: This includes
manufacturers of cell phones, personal computers, servers,
electronic computer components and peripherals. These extend to
data storage components, motherboards, audio and video cards,
monitors, keyboards, printers, and other peripherals.
Semiconductors & Equipment: This includes manufacturers of
semiconductors and related products. Semiconductors and their
equipment are used in IT as the essential portions of most
electronic circuits and are commonly made from silicon, hence the
name Silicon Valley.
Software: The software industry includes applications, home
systems, and home entertainment software companies that
engage in developing and producing software designed for
specialized applications for the business and/or consumer
market.
Information technology has emerged over the last
two decades as a high growth innovative area in the
market. Relatively young, IT contains multiple
industries highlighted below which encompass the
various facets that play a role in the global sharing
of information. IT has become a vital piece of sector
allocation even for the S&P 500 Index, which many
funds and investors have traditionally sought to
mimic and compete. Looking back at the great
recession, IT was the fastest sector to recover,
posting extraordinary annual returns for the better
part of the last decade.
Communications Equipment: This industry is
comprised of producers of the equipment and
products in communications. These items are
known as local area networks, wide area network,
routers, switchboards, and telephones.
Internet Software & Services: The software and
services industry involve companies that develop
and market internet software and and/or provide
internet services. These services include web
address registration services, database
construction, internet design, online databases, and
interactive services.
Performance* 1-Year 3-Year 5-Year
Sector 43.57% 28.45% 26.72% S&P 500 18.40% 14.18% 15.22%
*Annualized Returns
2020 Annual Report 49
Apple, Inc. (NASDAQ: AAPL)
Market Cap:
$2.232 T
Sector:
Information
Technology
Industry:
Consumer
Electronics
Stock Type:
Large
Core
Price (12/31/2020):
$132.69
52-Week Range:
$53.20 - $138.80
Holding Return:
1999.05%
Business Summary
Apple Inc. designs consumer electronic devices which consist of
smartphones (iPhone), computers (Mac), tablets (iPad), smartwatches
(Apple Watch), and streaming technology (Apple TV). Apple has also
continued to develop their services to contribute to the diversification of
revenue source. Big part of the company’s revenue it is because of its
fast-growing services business. Some of them are iCloud services, Siri
which was acquired in 2010, the streaming services such as Apple Music
and Apple TV+, Apple Care and Apple Pay. Apple integrates devices with
software and services to provide one of the strongest brand ecosystems
in the world. The company generates roughly 40% of its revenue from the
Americas, with the remainder earned internationally between Europe,
Greater China, Japan, and Rest of Asia Pacific. Apple has been recognized
as a leading pioneer in the Information Technology sector that shapes
consumer interaction with the latest technological advancements.
Investment Rationale/Risk
▪ Apple has strong brand loyalty
focused around the “Apple
Ecosystem”, which makes entry easy
and exit difficult. This provides
sharper stability in generating cash
flows.
▪ Market saturation for Apple’s
products have been seen recently
with the rapid influx of other
products in the market.
▪ Economic and political turmoil has
become a threat to negatively affect
Apple’s supply chains, and likewise,
their overall revenue stream.
Key Statistics 2016 2017 2018 2019 2020
Total Stock Return % 12.15 48.24 -5.12 88.97 81.85
Return on Assets % 14.93 13.87 16.07 15.69 17.33
Return on Equity % 36.09 36.87 49.36 55.92 73.69
Net Profit Margin % 21.19 21.09 22.41 21.24 20.91
Total Asset Turnover 0.70 0.66 0.72 0.74 0.83
Financial Leverage 2.51 2.80 3.41 3.74 4.96
Operating Profit Margin % 27.84 26.76 26.69 24.57 24.15
Revenue Growth % -7.73 6.30 15.86 -2.04 5.51
Operating Income Growth % -15.73 2.20 15.57 11.38 12.20
EPS Growth % -9.96 10.58 29.57 -0.34 10.44
Earnings Growth Estimates
Earnings Growth Estimate % Company Industry
2021 36.59 40.60
2022 5.13 4.50
Past 5 Years 10.30 2.60
Next 5 Years 11.00 17.70
Stock Valuation Ratios Industry Peers
Ratio 2016 2017 2018 2019 2020
P/E 13.9 18.4 13.2 24.70 40.45 Return % ROE %
P/B 4.75 6.42 6.96 14.23 34.16 Microsoft Corp. 42.37 40.14
P/S 2.95 3.88 2.97 5.25 8.47 Alphabet Inc. 30.85 19.00
P/FCF 9.7 14.0 10.2 19.67 28.83 HP Inc. - 23.17
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Accenture PLC Class A (NYSE: ACN)
Market Cap:
$176.695B
Sector:
Information
Technology
Industry:
IT Services
Stock Type:
Large
Core
Price (12/31/2020):
$261.21
52-Week Range:
$143.69 - $266.25
Holding Return:
228.40%
Business Summary
Accenture PLC is one of the world’s leading professional services
companies providing services such as management consulting,
technology services, and outsourcing. Accenture operates in North
America, Europe, and Emerging Markets totaling over 120 countries.
Accenture conducts their business with over 80% of Global Fortune 500
companies. This advanced network of insight provides a competitive
advantage in Accenture’s business structure. Though the company’s
business operations and structure classify the company as an
information technology firm, they provide insights and solutions for firms
across all GICS sectors from financials to healthcare. Accenture’s main
practice is to develop industry-specific solutions to enhance and ensure
the efficiency of business practices to produce better results.
Investment Rationale/Risk
▪ Accenture works with primarily
Fortune 500 companies that depend
on Accenture’s services, providing
stable revenue streams for future
years.
▪ Accenture’s dominate market share,
the nature of its services, and the
extensive industry knowledge
needed generates high switching
costs for their competitors.
▪ Outsourcing services, a segment
where ACN is the leader, are
estimated to continue to increase in
future years and is an essential
factor to the company’s outlook on
future revenue growth.
▪ Accenture has proven to deliver on
their clientele’s needs as 97% of
their top revenue generating clients
have been with the company for 10+
years. That figure jumps to 99% for
the past 5 years.
Key Statistics 2016 2017 2018 2019 2020
Total Stock Return % 14.3 32.9 -6.1 51.21 25.61
Return on Assets % 21.2 15.9 17.2 17.62 15.28
Return on Equity % 60.1 41.8 42.0 38.58 32.53
Net Profit Margin % 11.8 9.4 9.8 11.06 11.52
Total Asset Turnover 1.79 1.70 1.77 1.59 1.33
Financial Leverage 2.73 2.54 2.36 2.07 2.18
Operating Profit Margin % 13.82 12.60 14.04 14.59 14.69
Revenue Growth % 5.72 5.66 13.16 3.87 2.57
Operating Income Growth % 8.44 -3.70 26.09 7.94 3.31
EPS Growth % 35.50 -15.66 16.54 16.09 7.20
Earnings Growth Estimates
Earnings Growth Estimate % Company Industry
2021 13.67 5.20
2022 10.26 14.10
Past 5 Years 8.70 8.50
Next 5 Years 10.00 13.70
Stock Valuation Ratios Industry Peers
Ratio 2016 2017 2018 2019 2020
P/E 17.4 27.1 21.6 28.11 32.17 Return % ROE %
P/B 10.2 10.7 7.4 8.82 9.64 IBM Corp -1.23 26.98
P/S 2.2 2.7 2.2 3.11 3.78 Cognizant Tech. Solutions 33.55 12.74
P/FCF 15.6 20.6 15.2 21.42 18.72 Capgemini SE 28.27 13.18
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2020 Annual Report 51
Microsoft Corp. (NASDAQ: MSFT)
Market Cap:
$1.791T
Sector:
Information
Technology
Industry:
Software
Stock Type:
Large
Growth
Price (12/31/2020):
$222.42
52-Week Range:
$132.50 - $232.90
Holding Return:
773.61%
Business Summary
Microsoft develops and licenses consumer and enterprise software such
as the Microsoft Office Suite and Windows software. The company
operates within three segments, which are productivity and business
processes (Microsoft Office, Cloud-based Office 365, Exchange,
Sharepoint, Skype, LinkedIn, Dynamics), intelligence cloud infrastructure
and platform as a service offering (Azure, Windows Server OS, SQL
Server) and more personal computing (Windows Client, Xbox, Bing search,
display advertising, Surface laptops/tablets/desktops). Microsoft’s
revenues are split by product and service/other with products accounting
for about 60% of their total revenue. Microsoft has been transitioning
their focus to cloud-based computing which both individuals and
institutions have increased demand for.
Investment Rationale/Risk
▪ Services and subscriptions continue
to increase year over year, which
provides re-occurring sales and
strengthens the stability of the
business structure.
▪ Microsoft's Horizontal Diversification
Strategy gives them a potential first-
mover advantage in leveraging on
new growth trends and exposes
them to less political risk, which can
lead to revenue stability.
▪ Microsoft’s Azure cloud computing
service will replace the Office
productivity software as the
company’s largest source of revenue
by 2023.
▪ Poor performing business segments
have the potential to offset revenue
growth and development for
Microsoft’s strong performing
business segments in the future.
Key Statistics 2016 2017 2018 2019 2020
Total Stock Return % 14.7 40.2 20.2 57.6 42.37
Return on Assets % 11.2 11.5 6.5 14.39 15.07
Return on Equity % 27.0 31.9 19.5 42.21 40.14
Net Profit Margin % 22.5 26.4 15.0 31.18 30.96
Total Asset Turnover 0.50 0.44 0.43 0.46 0.49
Financial Leverage 2.7 2.9 3.1 2.80 2.55
Operating Profit Margin % 29.8 30.4 31.8 34.14 37.03
Revenue Growth % -8.83 5.43 22.69 14.03 13.65
Operating Income Growth % -24.42 6.29 54.90 22.54 23.28
EPS Growth % 41.89 29.05 -21.40 137.56 13.83
Earnings Growth Estimates
Earnings Growth Estimate % Company Industry
2021 27.95 1.70
2022 9.36 16.10
Past 5 Years 16.20 9.50
Next 5 Years 11.90 14.20
Stock Valuation Ratios Industry Peers
Ratio 2016 2017 2018 2019 2020 P/E 29.8 30.2 41.8 29.75 35.87 Return % ROE % P/B 6.8 7.4 9.1 11.32 13.60 Amazon.com Inc 76.26 27.44
P/S 5.8 7.2 6.9 9.40 11.59 Alphabet Inc 30.85 19.00
P/FCF 13.7 16.6 17.5 23.31 25.76 Apple Inc 81.85 73.69
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52 Investment Management Program
NVIDIA Corporation (NASDAQ: NVDA)
Market Cap:
$323.242B
Sector:
Information
Technology
Industry:
Semiconductors
& Equipment
Stock Type:
Large
Growth
Price (12/31/2020):
$522.20
52-Week Range:
$180.70 - $589.10
Holding Return:
174.46%
Business Summary
Nvidia is the leading designer of graphics processing units that enhance
the experience on computing platforms. The firm's chips are used in a
variety of end markets, including high-end PCs for gaming, data centers,
and automotive infotainment systems. In recent years, the firm has
broadened its focus from traditional PC graphics applications such as
gaming to more complex and favorable opportunities, including artificial
intelligence and autonomous driving, which leverage the high-
performance capabilities of the firm's graphics processing units. The
graphics cards and units are also widely desired and used by “miners” in
regard to cryptocurrencies like Bitcoin, Ethereum and Litecoin. NVIDIA
has been said to have technology that is years ahead of its competitors.
Investment Rationale/Risk
▪ High market share in cloud and
processing technologies will deliver
strong revenue sources for NVIDIA
for years to come.
▪ NVIDIA claims that automotive and
gaming devices are expected to
become their biggest growth drivers
in the future.
▪ The global chip shortage is expected
to continue to affect NVIDIA until
2022 which will result in supply
shortages.
▪ Economic turmoil in countries such
as China, which account for roughly
to 50% of NVIDIAs’ sales, prove to be
a leading risk factor for future
performance and revenue growth.
Key Statistics 2016 2017 2018 2019 2020
Total Stock Return % 226.9 81.98 -30.82 76.95 122.20
Return on Assets % 8.43 19.36 28.91 33.76 18.27
Return on Equity % 13.82 32.57 46.05 49.26 25.95
Net Profit Margin % 12.26 24.11 31.37 35.34 25.61
Total Asset Turnover 0.69 0.80 0.92 0.96 0.71
Financial Leverage 1.65 1.71 1.50 1.42 1.42
Operating Profit Margin % 17.53 28.03 33.05 32.47 26.07
Revenue Growth % 37.92 40.58 20.61 -6.81 52.73
Operating Income Growth % 120.62 65.72 18.50 -25.18 59.24
EPS Growth % 137.96 87.55 37.55 -31.38 52.65
Earnings Growth Estimates
Earnings Growth Estimate % Company Industry
2021 33.70 27.10
2022 12.12 17.50
Past 5 Years 37.70 26.30
Next 5 Years 12.60 8.60
Stock Valuation Ratios Industry Peers
Ratio 2016 2017 2018 2019 2020 P/E 54.74 48.01 17.85 60.18 85.33 Return % ROE% P/B 10.81 18.46 8.59 12.84 21.08 Advanced Micro Devices 99.98 57.48
P/S 10.85 13.94 6.74 14.52 22.08 Intel Corp 26.36 -14.55
P/FCF 45.54 43.68 19.91 34.69 62.50 Xilinx Inc 46.55 30.63
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2020 Annual Report 53
MATERIALS - OVERWEIGHT
Sector Overview
Containers and Packaging: This industry is comprised of
companies which manufacture metal, glass, plastic, paper, and
cardboard containers. The containers and packaging industry
relies heavily on food and beverage, pharmaceutical, and
household items industries to drive sales.
Metals and Mining: The metals and mining industry includes
producers of mining related products as well as companies
specializing in the extraction of base and precious metals.
Paper and Forest Products: Companies that are included in the
paper and forest products Industry are manufactures of timber
and related wood products as well as producers of all grades of
paper. Some companies specializing in paper packaging are
excluded.
As the United States economy moves along the late
stage of the business cycle, the materials sector
thrives. Historically, the materials sector
outperforms the S&P 500 Index due to the increase
in prices of raw materials during this time. The
materials sector has a market cap of $1.81 Trillion
and includes the following industries: chemicals,
construction materials, containers and packaging,
metals and mining, and paper and forest products.
Chemicals: The chemicals industry encompasses
the producers of commodity, fertilizers, diversified,
agricultural, and specialty chemicals. Industrial
gases manufacturers are also included in the
chemicals industry.
Construction Materials: The construction materials
Industry includes companies involved with the
procurement of raw materials used in construction.
These materials include clay, cement, concrete,
bricks, and sand. The construction materials
industry is expected to experience growth into 2020
due to the expansion in both domestic and foreign
construction industry, driving demand for
construction materials.
Performance* 1-Year 3-Year 5-Year
Sector 20.34% 8.39% 12.99% S&P 500 18.40% 14.18% 15.22%
*Annualized Returns
54 Investment Management Program
Franco Nevada Corp. (NYSE: FNV)
Market Cap:
$23.90B
Sector:
Materials
Industry:
Gold
Stock Type:
Large
Growth
Price (12/31/2020):
$125.33
52-Week Range:
$77.20 - $166.10
Holding Return:
79.00%
Business Summary
Franco-Nevada Corp is focused on precious metals royalties and
investments. FNV owns a portfolio of royalty streams and precious metals
that they actively manage to generate revenue. The majority of its
revenue comes from gold, silver, and platinum. FNV helps illiquid mining
companies fund exploration and production projects and takes a claim
(royalty) of an agreed upon amount of metal once ore has been mined.
The success, or failure, of royalty companies is based upon the success
of the projects they fund and the market price of the various
commodities.
Investment Rationale/Risk
▪ Historically, with a maturing business
cycle, commodity prices strengthen.
This presents an opportunity for FNV
to fund more projects and generate
more return on their portfolio of
metal in the short-term. In the long-
term, FNV will be affected by the
availability of development capital.
▪ One key risk associated with royalty
companies is the decline of
production. Since 2000, the amount
of gold ore produced has been
steadily declining, leading to supply
constraints. While this may drive up
the price, if less mines are being
built, FNV and its peers could be in
serious financial distress.
▪ The ROA and ROE figures being so
similar signifies that Franco-Nevada
Corp is not taking on much debt. This
prudent capital structure leads to
increased Current and Quick Ratios,
showing that the firm can remain
liquid in a financial emergency.
Key Statistics 2016 2017 2018 2019 2020
Total Stock Return % 32.52 35.31 -11.04 48.62 22.32
Return on Assets % 3.10 4.32 2.86 6.74 6.00
Return on Equity % 3.34 4.40 2.98 7.10 6.21
Net Profit Margin % 20.03 28.84 21.28 40.77 31.97
Total Asset Turnover 0.15 0.15 0.13 0.17 0.19
Financial Leverage 1.02 1.02 1.06 1.04 1.03
Operating Profit Margin % 33.84 34.83 40.52 48.25 57.99
Revenue Growth % 37.56 10.62 -3.23 29.23 20.86
Operating Income Growth % 77.41 13.85 12.59 53.87 45.25
EPS Growth % 331.25 53.62 -29.25 144.00 -6.56
Earnings Growth Estimates
Earnings Growth Estimate % Company Industry
2021 17.34 17.00
2022 4.09 9.10
Past 5 Years 26.90 28.30
Next 5 Years 4.00 10.20
Stock Valuation Ratios Industry Peers
Ratio 2016 2017 2018 2019 2020
P/E 114.90 100.00 61.70 97.10 90.1 Return % ROE %
P/B 2.50 3.20 2.80 4.00 4.60 Alamos Gold Inc. 46.43 5.20
P/S 17.80 21.80 19.50 26.40 24.40 B2Gold Corp. 18.45 13.43
P/FCF 27.50 29.90 26.10 36.50 32.10 Barrick Gold Corp. 24.21 10.38
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2020 Annual Report 55
Martin Marietta Materials, Inc. (NYSE: MLM)
Market Cap:
$17.69B
Sector:
Industrials
Industry:
Building
Materials
Stock Type:
Mid Core
Price (12/31/2020):
$283.97
52-Week Range:
$135.10 - $287.20
Holding Return:
34.00%
Business Summary
Martin Marietta Materials Inc. is one of the largest producers of
construction aggregates in the United States. Martin Marietta is a natural
resource-based building materials company. The company has a network
of over 300 quarries in 31 states, Canada, and the Bahamas. Martin
Marietta also provides ready mixed concrete, asphalt and paving
services. The company’s building materials are utilized in infrastructure,
nonresidential, and residential construction. The company also operates
a Magnesia Specialties business with production facilities in Michigan
and Ohio. The company was formed in 1993 as a North Carolina
corporation, and since then has completed over 90 smaller acquisitions.
Investment Rationale/Risk
▪ The company’s geographic footprint
is heavy in states that have a high
need and the financial capability for
an increase in road work. This
illustrates the potential for strong
and continued growth into the future.
▪ The company boasts a healthy
balance sheet that allows it to
consider large acquisitions. As
mentioned in the business summary,
it has over 90 successful
acquisitions, allowing the company
to grow in different markets, while
eliminating competitors.
▪ The company’s earnings depend on
volatile outside factors like economic
performance, government budgets,
and lending availability. If the
economic market takes a downturn,
this can be harmful to the growth in
the company and stock.
Key Statistics 2016 2017 2018 2019 2020
Total Stock Return % 63.40 0.56 --21.41 63.90 2.35
Return on Assets % 5.94 8.73 5.06 6.21 6.96
Return on Equity % 10.34 16.13 9.75 11.87 12.82
Net Profit Margin % 11.09 17.94 11.05 12.89 15.23
Total Asset Turnover 0.54 0.49 0.46 0.48 0.46
Financial Leverage 1.76 1.92 1.93 1.89 1.80
Operating Profit Margin % 17.52 17.88 16.59 18.68 21.28
Revenue Growth % 7.89 3.85 7.03 11.66 -0.19
Operating Income Growth % 37.12 5.98 -0.68 25.73 13.70
EPS Growth % 54.55 69.68 -33.96 31.09 18.48
Earnings Growth Estimates
Earnings Growth Estimate % Company Industry
2021 -2.08 14.70
2022 13.72 21.70
Past 5 Years 18.20 8.70
Next 5 Years 9.00 22.40
Stock Valuation Ratios Industry Peers
Ratio 2016 2017 2018 2019 2020
P/E 35.0 32.30 14.50 30.6 26.5 Return % ROE %
P/B 3.40 3.20 2.20 3.30 3.10 Summit Materials Inc -15.98 9.12
P/S 3.80 3.50 2.60 3.80 3.80 Eagle Materials Inc 11.90 6.51
P/FCF 21.40 20.70 15.90 19.20 17.70 Vulcan Materials Co 3.94 10.03
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56 Investment Management Program
UTILITIES - OVERWEIGHT
Sector Overview
Independent Power and Renewable Electricity Producers: This
industry includes companies that engage in the production and
distribution of renewable energy sources. Some examples of
renewable energy are biomass fuel, geothermal energy, solar
energy, hydropower, and wind power. This Industry also includes
companies that are Independent power producers, gas and
power marketing and trading specialists, or integrated energy
merchants.
Multi-Utilities: The multi-utilities or diversified utilities industry is
made up of companies who have business in more than one
specific utilities industry. Companies who can provide a
combination of electric, gas, or water utilities maintain
noticeable stability.
Water Utilities: The water utilities industry includes companies
who engage in the purchase and redistribution of water to
residential, commercial and industrial consumers. Companies in
this industry could also partake in water treatment. The water
utilities industry is strictly regulated by the Food and Drug
Administration to ensure the safety of drinking water. Stocks in
this Industry generally perform well in an economic downturn, or
in the summer, when demand for water is at its highest.
The Utility sector has a market cap of $1.46 Trillion
and is comprised of companies that provide utilities
like electricity, gas, or water. As investors begin to
take a more conservative outlook on the market,
Utilities is one of the most trusted and consistent
performers. While other sectors are distressed by
the volatility close to the end of an expansion,
Utilities appear to thrive.
Electric Utilities: The Electric Utilities Industry
includes companies that engage primarily in
providing electricity to individuals or companies.
This industry alone has a market cap of about $821
billion. Stocks in the electric utility Industry generally
offer high dividend yields and low volatility.
Distribution of electricity is regulated by state
commissions and transmission is overseen by the
states or the Federal Energy Regulatory
Commission. As environmental concerns have risen,
companies have been expected and regulated to
produce electricity with less of an environmental
impact.
Gas Utilities: The gas utilities industry includes
companies whose primary business is to distribute
and transmit natural gas to residential, commercial
and industrial customers. Demand and production
of natural gas has increased tremendously in recent
years due to its versatility. Natural gas is used for
electricity production, industrial uses (e.g.
petrochemical manufacturing), and heating and
cooking in homes. Natural gas is also the cleanest
burning fossil fuel, producing 20% less carbon
dioxide than oil.
Performance* 1-Year 3-Year 5-Year
Sector 0.35% 9.59% 11.33% S&P 500 18.40% 14.18% 15.22%
*Annualized Returns
2020 Annual Report 57
Dominion Energy, Inc. (NYSE: D)
Market Cap:
$60.61B
Sector:
Utilities
Industry:
Multi-Utilities
Stock Type:
Large
Value
Price (12/31/2020):
$75.20
52-Week Range:
$57.80 - $90.90
Holding Return:
12.91%
Business Summary
Dominion Energy Inc. was founded in 1909 and is headquartered in
Richmond, Virginia. Dominion operates in 3 segments: Power Generation,
Gas Infrastructure and Southeast Energy. The company has 26,000
megawatts of generating capacity with 6,700 miles of electric
transmission lines and 58,300 miles of electric distribution lines. In
addition, Dominion has 14,800 miles of natural gas transmission with
52,300 miles of natural gas distribution pipelines. Dominion completed a
liquefied natural gas export facility in Maryland and is now beginning a 2
GW wind farm 27 miles off the Virginia Beach coast. The wind farm would
be the largest in the U.S. It serves over 5 million utility and retail
customers, as well as sells electricity to wholesale markets.
Investment Rationale/Risk
▪ Dominion Energy has significant
infrastructure in several states and is
currently expanding with the Atlantic
Coast Pipeline. The new pipeline is
expected to increase revenue.
▪ Dominion’s stock offers a dividend
yield of 5.07% along with a history of
consistent dividend growth.
▪ Dominion has established a wide
economic moat through efficient
scale and conservative strategies.
This secures future revenue growth
and discourages competitors.
▪ Regulation of the natural gas industry
is the primary concern for Dominion,
however, they have signed long term
contracts and supported constructive
regulation to ensure steady growth.
Key Statistics 2016 2017 2018 2019 2020
Total Stock Return % 17.37 9.80 -7.72 13.05 -5.04
Return on Assets % 3.26 4.05 3.17 1.48 -0.40
Return on Equity % 15.57 18.89 13.14 5.39 -1.50
Net Profit Margin % 18.09 23.83 18.31 8.09 -2.83
Total Asset Turnover 0.18 0.17 0.17 0.18 0.14
Financial Leverage 4.9 4.47 3.88 3.51 4.04
Operating Profit Margin % 30.9 32.80 27.10 23.46 28.9
Revenue Growth % -.46 7.23 6.20 23.99 -14.48
Operating Income Growth % 2.57 13.87 -12.25 7.23 5.45
EPS Growth % 7.50 37.21 -20.76 56.68 -135.19
Earnings Growth Estimates
Earnings Growth Estimate % Company Industry
2021 8.76 3.30
2022 6.49 6.30
Past 5 Years -0.10 2.90
Next 5 Years 6.70 7.60
Stock Valuation Ratios Industry Peers
Ratio 2016 2017 2018 2019 2020
P/E 23.10 24.00 14.80 60.90 28.2 Return % ROE %
P/B 3.20 3.20 2.60 2.51 2.5 Exelon Corp -4.04 6.06
P/S 4.20 4.10 3.50 4.11 3.8 Sempra Energy -13.13 19.84
P/FCF 10.60 11.60 10.10 13.32 10.0 National Grid PLC -0.80 7.89
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58 Investment Management Program
Public Service Enterprise Group, Inc. (NYSE: PEG)
Market Cap:
$29.38B
Sector:
Utilities
Industry:
Multi-Utilities
Stock Type:
Mid
Value
Price (12/31/2020):
$58.30
52-Week Range:
$34.80 - $62.20
Holding Return:
76.59%
Business Summary
Public Service Enterprise Group Incorporated was incorporated in 1985
and is based in Newark, New Jersey. Through its subsidiaries, the firm
operates as an energy company primarily in the Northeastern and Mid-
Atlantic regions in the United States. It operates through two segments,
PSE&G and PSEG Power. The PSE&G segment transmits electricity;
distributes electricity and gas to residential, commercial, and industrial
customers, as well as invests in solar generation projects, and energy
efficiency and related programs; and offers appliance services and
repairs. PEG has electric transmission and distribution system of 25,000
circuit miles and 858,000 poles. The Power segment operates nuclear,
coal, gas, oil-fired, solar, and renewable generation facilities.
Investment Rationale/Risk
▪ Government regulations pose a risk
to PEG due to possible cost
increases or requiring new
equipment. Increases in these costs
could have a large impact on their
net income and an investors
valuation of PEG’s stock.
▪ Regulation could be a growth
opportunity for PEG through clean
energy projects, like residential solar
installation. PEG is already ahead of
competition in clean energy,
investing in solar energy since 2009.
Clean energy is a growing portion of
PEG’s revenue.
▪ Volatile power and gas market prices
in New Jersey and Long Island can
have a tremendous impact on PEG’s
revenue.
▪ Innovation, customer service and
infrastructure provide PEG with a
substantial competitive advantage in
the Northeast and Mid-Atlantic
Regions. The limited number of
competitors in their geographical
area makes their stock very
dependable.
Key Statistics 2016 2017 2018 2019 2020
Total Stock Return % 17.65 21.29 4.56 15.04 2.05
Return on Assets % 2.29 3.80 3.27 3.64 3.90
Return on Equity % 6.77 11.67 10.19 11.49 12.26
Net Profit Margin % 9.79 17.33 14.83 16.80 19.84
Total Asset Turnover 0.23 0.22 0.22 0.22 0.20
Financial Leverage 3.05 3.08 3.15 3.16 3.13
Operating Profit Margin % 17.39 15.73 23.70 23.27 22.4
Revenue Growth % -13.00 0.25 6.74 3.92 -4.69
Operating Income Growth % -47.17 77.45 -8.64 2.05 -8.44
EPS Growth % -46.97 77.14 -8.71 17.67 12.91
Earnings Growth Estimates
Earnings Growth Estimate % Company Industry
2021 -0.87 3.30
2022 1.47 6.30
Past 5 Years 3.70 2.90
Next 5 Years 3.80 7.60
Stock Valuation Ratios Industry Peers
Ratio 2016 2017 2018 2019 2020
P/E 17.30 50.00 12.00 20.65 15.46 Return % ROE %
P/B 1.60 2.00 1.80 1.99 1.86 National Grid PLC -0.80 7.89
P/S 2.40 2.90 2.80 2.97 3.05 Exelon Corp -4.04 6.06
P/FCF 6.50 8.00 8.70 9.57 9.27 Entergy Corp -13.54 13.13
0
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30
40
50
60
70
1/2 2/2 3/2 4/2 5/2 6/2 7/2 8/2 9/2 10/2 11/2 12/2
Pri
ce (
$)
Date
2020 Annual Report 59
Brookfield Renewable Partners LP (NYSE: BEP)
Market Cap:
$11.84B
Sector:
Utilities
Industry:
Utilities-
Renewable
Stock Type:
Mid
Value
Price (12/31/2020):
$43.15
52-Week Range:
$16.38 - $43.15
Holding Return:
20.44%
Business Summary
BEP is a power generating company that operates in renewables. The
company’s operations span across four continents including North
America, South America, Europe, and Asia. The company consists of
approximately 19,300 MW of power generation. Its assets consist of
generation in hydroelectric, wind, solar, storage, and distributed
generation. BEP has been a strong performer in the utilities sector as the
environmental, social, and corporate governance (ESG) practices have
been increasing in order to support decarbonization. BEP is ahead of
other companies within the industry for the plan for carbon neutrality. It
already annually saves the carbon emissions equivalent of 6 million
vehicles on the road. In 2019, they doubled the size of their business in
Asia by investing over $2 billion. This increased investment pairs well with
China’s plan to be carbon neutral by 2060.
Investment Rationale/Risk
▪ BEP has been achieving its goal of
reducing carbon emissions and has
been doing so through agreements
and acquisitions to help strengthen
its global profile.
▪ BEP has outperformed the S&P 500
Index, which abides to the IMP
classes goal. BEP also outperforms
the renewables industry which is
the best performing industry within
the utilities sector.
▪ BEP is exposed to several risks,
both internal and external to the
company. These risks provide
uncertainty to the valuations
provided in the DCF model.
Because of these risks, the future
results could be negatively
impacted if one of these were to
occur.
Key Statistics 2016 2017 2018 2019 2020
Total Stock Return % 27.60 - 34.49 - 73.49
Return on Assets % -0.15 -0.11 0.07 -0.10 -0.43
Return on Equity % -1.07 -0.78 0.50 -0.64 -3.58
Net Profit Margin % -1.47 -1.22 0.80 -1.14 -4.83
Total Asset Turnover 0.10 0.09 0.09 0.09 0.09
Financial Leverage 7.35 6.92 6.57 6.60 10.20
Operating Profit Margin % 23.29 29.83 35.11 26.11 18.45
Revenue Growth % 50.61 7.06 13.60 -0.07 27.85
Operating Income Growth % 38.59 37.13 33.72 2.77 -34.67
EPS Growth % - -14.29 -175.00 -244.44 369.23
Earnings Growth Estimates
Earnings Growth Estimate % Company Industry
2021 -73.77 3.30
2022 -25.00 6.30
Past 5 Years -263.60 2.90
Next 5 Years NA 7.60
Stock Valuation Ratios Industry Peers
Ratio 2016 2017 2018 2019 2020
P/E - - - 149.53 - Return % ROE %
P/B 1.31 1.52 1.11 1.69 2.82 Atlantica Sustainable 50.21 0.79
P/S 2.18 2,48 1.63 2.75 4.19 Meridian Energy Ltd 55.23 4.10
P/FCF 8.75 7.46 4.68 6.46 12.83 Algonquin Power & Utilities 20.61 17.77
0
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20
25
30
35
40
45
50
1/2 2/2 3/2 4/2 5/2 6/2 7/2 8/2 9/2 10/2 11/2 12/2
Pri
ce (
$)
Date
60 Investment Management Program
Vanguard High Dividend Yield ETF (NYSE: VYM)
Sector:
Large Cap
Value
Expense:
0.06%
P/E:
20.2
P/B:
2.3
ROE:
17.7%
Price (12/31/2020):
$91.51
52-Week Range:
$61.10 - $94.80
Holding Return:
48.80%
Overview
Vanguard High Dividend Yield ETF seeks to track the
performance of a benchmark index that measures the
investment return of common stocks of companies that
are characterized by high dividend yields. The fund’s
investment approach is to track the performance of the
FTSE High Dividend Yield Index. They are passively
managed, have large-cap equity with an emphasis on
stocks that are forecasted to have above average dividend
yields, and have low expenses to minimize net tracking
error.
Investment Rationale/Risk
▪ The fund is an excellent choice for exposure to
stocks with higher than average dividend yields
without taking outsize risk.
▪ The fund’s broadly diversified portfolio and its low
fee provide a persistent edge over its large-cap
value peers.
▪ The ETF effectively diversifies the risk of solely
focusing on yield by screening holdings based on
dividend yield weighted by market cap.
▪ The ETF stable income and provides a cushion to
stay invested during turbulent markets; however,
high-yielding stocks can be dangerous because the
companies can be under distress and cut dividends.
Sector Allocation (%) Consumer Discretionary 6.0
Consumer Staples 13.6
Energy 5.9
Financials 20.8
Health Care 13.7
Industrials 10.1
Real Estate 0.0
Information Technology 9.0
Materials 3.9
Communication Services 8.1
Utilities 8.9
Top 5 Holdings (%) Performance
Johnson & Johnson 3.7
JPMorgan Chase & Co. 3.5 VYM S&P 500
Procter & Gamble Co 3.0 1-Year Return % 1.14 18.40
Verizon Communications Inc. 2.2 3-Year Return % 5.74 14.18
Comcast Corp. 2.1 5-Year Return % 7.42 15.22
0
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20
30
40
50
60
70
80
90
100
1/2 2/2 3/2 4/2 5/2 6/2 7/2 8/2 9/2 10/2 11/2 12/2
Pri
ce (
$)
Date
2020 Annual Report 61
iShares Core U.S. Aggregate Bond Index ETF (NYSE: AGG)
Sector:
US Fund
Intermediate
Core Bond
Expense:
0.04%
Maturity:
8.10 years
Duration:
6.37 years
Credit
Rating:
A
Price (12/31/2020):
$112.37
52-Week Range:
$106.57 - $119.63
Holding Return:
-0.35%
Overview
The iShares Core U.S. Aggregate Bond ETF (AGG) seeks to
track the performance of the overall U.S. investment-grade
bond market. More specifically, AGG attempts to emulate
the investment results of the Bloomberg Barclay’s U.S.
Aggregate Bond Index. AGG has 8,327 holdings, all of
which are rated BBB or higher, with at least 80% of these
holdings being the exact same securities that are within
the underlying index. The fund’s weighted average
maturity is 7.97 years, making it an intermediate-term
bond fund, and has an effective duration of 6.02.
Sector Allocation (%) Treasury/Agency 37.82
Mortgage-Backed Pass-Through 26.17
Industrial 17.05
Financials 8.25
Utilities 2.23
Investment Rationale/Risk
▪ Tracks the same fixed income benchmark as the
IMP portfolio, putting the IMP portfolio in a better
position to beat our overall benchmark.
• Offers broad exposure to U.S. investment-grade
bonds.
• Low-cost ETF that can diversify the portfolio and
provide stability and income.
Credit Rating Breakdown (%) AAA Rated 69.41
AA Rated 2.86
A Rated 12.01
BBB Rated 15.37
Cash/Derivatives 0.33
Maturity Breakdown (%)
0-5 Years 60.68
5-10 Years 18.87
10+ Years 20.14
Performance AGG U.S. Agg.
1-Year Return % 0.70 0.71
3-Year Return % 4.60 4.65
5-Year Return % 3.05 3.10
100
105
110
115
120
125
1/2 2/2 3/2 4/2 5/2 6/2 7/2 8/2 9/2 10/2 11/2 12/2
Pri
ce (
$)
Date
62 Investment Management Program
iShares 20+ Year Treasury Bond ETF (NASDAQ: TLT)
Sector:
US Fund
Intermediate
Core Bond
Expense:
0.15%
Maturity:
26.18 years
Duration:
18.45 years
Credit
Rating:
AAA
Current Price:
$157.73
52-Week Range:
$136.74 - $171.57
Holding Return:
-5.7%
Overview
The iShares 20+ Year Treasury Bond ETF seeks to track
the investment results of an index composed of U.S.
iShares Treasury bond ETFs help you customize your
portfolio by offering funds with a variety of U.S. Treasury
bond maturity buckets. iShares U.S. Treasury bond ETFs
offer exposure to Treasury bonds that mature within
specific maturity years or ranges, allowing you to target
points on the yield curve.
Sector Allocation (%) Treasury 100.00
Mortgage Backed Securities (MBS) 0.0
Industrial 0.0
Finance 0.0
Utility 0.0
Commercial MBS 0.0
Investment Rationale/Risk
▪ Expect long-term bonds to outperform short-term
bonds in 2020. Gross Domestic Product (GDP)
increased by 2.1% in 2019. Even though interest
rates are currently low, these strong growth
numbers make it less likely for the Federal Reserve
to raise rates.
▪ TLT is a high-quality ETF, thanks to a low expense
ratio and liquidity.
▪ Creates a stable stream of income for the portfolio.
Credit Rating Breakdown (%) AAA Rated 100.0
AA Rated 0.0
A Rated 0.0
BBB Rated 0.0
Maturity Breakdown (%) 0-5 Years 0.0
5-10 Years 0.0
10+ Years 100.0
Performance
TLT U.S. Agg.
1-Year Return % -17.13 0.71
3-Year Return % 5.72 4.65
5-Year Return % 3.04 3.10
0
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40
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100
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140
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180
200
1/2 2/2 3/2 4/2 5/2 6/2 7/2 8/2 9/2 10/2 11/2 12/2
Pri
ce (
$)
Date
2020 Annual Report 63
Vanguard Total Bond Market Fund (NYSE: BND)
Sector:
US Fund
Intermediate
Core Bond
Expense:
0.035%
Maturity:
6.6 years
Duration:
8.5 years
Credit Rating:
AA
Current Price:
$88.19
52-Week Range:
$83.86 - $88.19
Holding Return:
4.9%
Overview
The Vanguard Total Bond Market Fund (BND) seeks to
track the performance of the Bloomberg Barclay’s U.S.
Aggregate Float Adjusted Index. BND holds over 10,000
bonds with an average coupon of 3.2% and average
duration of 6.6 years. BND focuses on U.S. investment-
grade bonds with maturity dates less than 10 years, with
an even bigger focus on bonds that will mature in less
than 5 years.
Investment Rationale/Risk
▪ Low volatility helps reduce risk while maintaining
relatively high potential for investment income.
▪ Tracks a similar index compared to the IMP fixed
income benchmark, offering greater potential to
beat our benchmark.
• With over half of the fund’s bonds having been
issued by the U.S. Government, the risk of default is
relatively low.
Sector Allocation (%) Asset-Backed 0.4
Commercial Mortgage-Backed 2.3
Finance 8.9
Foreign 3.1
Government Mortgage-Backed 21.0
Industrial 17.9
Treasury/Agency 43.2
Utilities 2.3
Other 0.9
Credit Rating Breakdown (%) U.S. Government 63.4
AAA Rated 5.0
AA Rated 3.2
A Rated 12.6
BBB Rated 15.8
Maturity Breakdown (%) 0-5 Years 35.92
5-10 Years 20.90
10+ Years 40.46
Performance
BND U.S. Agg.
1-Year Return % 7.71 0.71
3-Year Return % 5.39 4.65
5-Year Return % 4.46 3.10
74
76
78
80
82
84
86
88
90
92
1/2 2/2 3/2 4/2 5/2 6/2 7/2 8/2 9/2 10/2 11/2 12/2
Pri
ce (
$)
Date
64 Investment Management Program
SPDR Portfolio Aggregate Bond ETF (NYSE: SPAB)
Sector:
US Fund
Intermediate
Core Bond
Expense:
0.04%
Maturity:
8.14 years
Duration:
6.35 years
Credit
Rating:
AA
Current Price:
$30.79
52-Week Range:
$29,38 - $30.79
Holding Return:
4.2%
Overview
The SPDR Portfolio Aggregate Bond ETF (SPAB) seeks to
provide investment results that correspond to the price
and yield of the Bloomberg Barclay’s U.S. Aggregate Bond
Index. The fund has over 6,000 holdings with an average
maturity of 8.16 years and an average coupon of 2.66%.
Sector Allocation (%) Treasury 37.02
Mortgage Backed Securities (MBS) 25.71
Industrial 16.76
Finance 8.28
Utility 2.41
Commercial MBS 2.14
Investment Rationale/Risk
▪ Out of the IMP’s three fixed income ETFs, SPAB
manages to track the Bloomberg Barclay’s U.S.
Aggregate Bond Index the most efficiently.
▪ One of the lowest cost fixed income ETFs on the
market, making it a cheap option to diversify the
portfolio.
▪ Creates a stable stream of income for the portfolio.
Credit Rating Breakdown (%)
AAA Rated 69.73
AA Rated 3.38
A Rated 11.73
BBB Rated 15.13
Maturity Breakdown (%) 0-5 Years 53.50
5-10 Years 27.77
10+ Years 18.73
Performance
SPAB U.S. Agg.
1-Year Return % 0.73 0.71
3-Year Return % 4.57 4.65
5-Year Return % 3.02 3.10
26
27
28
29
30
31
32
1/2 2/2 3/2 4/2 5/2 6/2 7/2 8/2 9/2 10/2 11/2 12/2
Pri
ce (
$)
Date
2020 Annual Report 65
YTD Holding
Security Ticker Shares Price Value Weight Shares Price Value Weight Return Return
Equity:
1 3M MMM 25 176.42$ 4,410.50$ 1.96% 25 174.79$ 4,369.75$ 1.65% -0.9% 124.3%
2 Accenture PLC Class A ACN 40 210.57$ 8,422.80$ 3.74% 40 261.21$ 10,448.40$ 3.94% 24.0% 228.4%
3 Amazon.com Inc AMZN 8 1,847.84$ 14,782.72$ 6.56% 8 3,256.93$ 26,055.44$ 9.83% 76.3% 438.8%
4 American Tower Corp. AMT 20 229.82$ 4,596.40$ 2.04% 20 224.46$ 4,489.20$ 1.69% -2.3% 120.0%
5 Amgen Inc. AMGN 21 241.07$ 5,062.47$ 2.25% 21 229.92$ 4,828.32$ 1.82% -4.6% 42.3%
6 Apple Inc. AAPL 42 293.65$ 12,333.30$ 5.47% 168 132.69$ 22,291.92$ 8.41% 80.7% 1999.1%
7 AT&T Inc. T 100 39.08$ 3,908.00$ 1.73% 100 28.76$ 2,876.00$ 1.09% -26.4% -15.7%
8 Bank of America BAC 148 35.22$ 5,212.56$ 2.31% 148 30.31$ 4,485.88$ 1.69% -13.9% 48.5%
9 Brookfield Renewable Partners BEP 30 43.15$ 1,294.50$ 0.49% 20.4%
10 Bristol-Myers Squibb Co. BMY 16 64.19$ 1,027.04$ 0.46% 30 62.03$ 1,860.90$ 0.70% -3.4% 11.1%
11 Capital One Financial Corp. COF 50 102.91$ 5,145.50$ 2.28% 50 98.85$ 4,942.50$ 1.86% -3.9% 4.9%
12 Cerner Corp. CERN 50 73.39$ 3,669.50$ 1.63% 50 78.48$ 3,924.00$ 1.48% 6.9% 34.8%
13 Cheniere Energy LNG 40 61.07$ 2,442.80$ 1.08% 20 60.03$ 1,200.60$ 0.45% -1.7% -6.2%
14 Coca-Cola Co. KO 70 55.35$ 3,874.50$ 1.72% 70 54.84$ 3,838.80$ 1.45% -0.9% 106.0%
15 Dominion Energy, Inc. D 30 82.82$ 2,484.60$ 1.10% 30 75.20$ 2,256.00$ 0.85% -9.2% 12.9%
16 Domino's Pizza Inc DPZ 6 383.46$ 2,300.76$ 0.87% -2.4%
17 Facebook FB 17 205.25$ 3,489.25$ 1.55% 17 273.16$ 4,643.72$ 1.75% 33.1% 83.9%
18 Franco Nevada Co. FNV 57 103.30$ 5,888.10$ 2.61% 57 125.33$ 7,143.81$ 2.70% 21.3% 79.0%
19 Honeywell International, Inc. HON 20 177.00$ 3,540.00$ 1.57% 20 212.70$ 4,254.00$ 1.60% 20.2% 17.1%
20 Horizon Technology Finance Corporation HRZN 200 13.24$ 2,648.00$ 1.00% 5.9%
21 Johnson & Johnson JNJ 15 145.87$ 2,188.05$ 0.97% 25 157.38$ 3,934.50$ 1.48% 7.9% 85.7%
22 Lockheed Martin Co. LMT 9 389.38$ 3,504.42$ 1.56% 9 354.98$ 3,194.82$ 1.21% -8.8% 30.7%
23 Martin Marietta Materials Inc. MLM 7 279.64$ 1,957.48$ 0.87% 7 283.97$ 1,987.79$ 0.75% 1.5% 34.0%
24 Microsoft Corp. MSFT 75 157.70$ 11,827.50$ 5.25% 75 222.42$ 16,681.50$ 6.29% 41.0% 773.6%
25 NVIDIA Corporation NVDA 25 235.30$ 5,882.50$ 2.61% 25 522.20$ 13,055.00$ 4.93% 121.9% 174.5%
26 PENN National Gaming PENN 50 86.37$ 4,318.50$ 1.63% 134.4%
27 Procter & Gamble Co. PG 60 124.90$ 7,494.00$ 3.33% 60 139.14$ 8,348.40$ 3.15% 11.4% 173.1%
28 Public Service Enterprise Group Inc. PEG 60 59.05$ 3,543.00$ 1.57% 60 58.30$ 3,498.00$ 1.32% -1.3% 76.6%
29 Roper Technology Inc. ROP 6 431.09$ 2,586.54$ 0.98% 9.6%
30 The TJX Companies, Inc. TJX 43 61.06$ 2,625.58$ 1.17% 43 68.29$ 2,936.47$ 1.11% 11.8% 25.2%
31 TC Enery Corporation TRP 94 53.31$ 5,011.14$ 2.22% 94 40.72$ 3,827.68$ 1.44% -23.6% -4.9%
32 The Hershey Co. HSY 20 146.98$ 2,939.60$ 1.30% 20 152.33$ 3,046.60$ 1.15% 3.6% 4.0%
33 The Walt Disney Company DIS 45 144.63$ 6,508.35$ 2.89% 60 181.18$ 10,870.80$ 4.10% 25.3% 51.1%
34 UnitedHealth Group Inc. UNH 40 293.98$ 11,759.20$ 5.22% 40 350.68$ 14,027.20$ 5.29% 19.3% 497.6%
35 Visa Inc. V 40 187.90$ 7,516.00$ 3.34% 40 218.73$ 8,749.20$ 3.30% 16.4% 231.9%
Total 174,110.51$ 77.27% 221,215.50$ 83.46%
Equity ETFs
36 Vanguard High Dividend Yield VYM 81 93.71$ 7,590.51$ 3.37% 81 91.51$ 7,412.31$ 2.80% -2.3% 48.8%
Total 18,774.13$ 8.33% 7,412.31$ 2.80%
Fixed-Income Securities & Others:
37 iShares Core U.S. Aggregate Bond Index AGG 80 112.37$ 8,989.60$ 3.99% 80 118.19$ 9,455.20$ 3.57% 5.2% 4.8%
38 Vanguard Tota l Bond Market Index Fund BND 65 83.86$ 5,450.90$ 2.42% 65 88.19$ 5,732.35$ 2.16% 5.2% 4.9%
39 SPDR Portfol io Aggregate Bond ETF SPAB 200 29.38$ 5,876.00$ 2.61% 200 30.79$ 6,158.00$ 2.32% 4.8% 4.2%
40 iShares 20+ Year Treasury Bond ETF TLT 30 157.73$ 4,731.90$ 1.79% -5.7%
41 Bris tol -Myers Squib Contingent Value Rights BMY^ 16 3.01$ 48.16$ 0.02% 16 0.69$ 11.04$ 0.00% -77.1%
Total 20,364.66$ 9.02% 26,088.49$ 9.84%
Sold
Security Ticker Shares Sale Price Purchase Price Sale Proceeds Cost Basis Gain/Loss Return Date
1 Healthpeak Properties Inc. PEAK 35 33.32$ 30.12$ 1,166.10$ 1,054.20$ 111.90$ 10.6% 2/27/2020
2 Cisco Systems CSCO 120 38.00$ 18.72$ 4,560.00$ 2,245.80$ 2,314.20$ 103.0% 3/6/2020
3 Cheniere Energy LNG 20 32.39$ 63.99$ 647.80$ 1,279.80$ (632.00)$ -49.4% 3/31/2020
4 Anheiser-Busch BUD 25 44.44$ 78.24$ 1,111.00$ 1,956.00$ (845.00)$ -43.2% 3/31/2020
5 Vanguard Tax-Exempt Bond ETF VTEB 50 54.53$ 54.95$ 2,726.25$ 2,747.25$ (21.00)$ -0.8% 8/28/2020
6 Anheiser-Busch BUD 25 55.29$ 78.24$ 1,382.34$ 1,956.00$ (573.66)$ -29.3% 10/5/2020
7 PowerShares S&P 500 High Div Port SPHD 254 33.92$ 35.84$ 8,614.41$ 9,103.36$ (488.95)$ -5.4% 11/3/2020
Actively Managed Totals 213,201.14$ 94.36% 254,716.30$ 96.10%
Insured Deposit Account (IDA) 12,700.77$ 5.62% 10,332.13$ 3.90%
Portfolio Value 225,950.07$ 100% 265,048.43$ 100.00% 19.95%
Scholarship Distributions (1/29/2020) 5,000.00$
Benchmarks
S&P 500 index change 3,230.78 3,756.07 16.26%
S&P 500 dividend yield 2.14%
S&P 500 total return 18.40%
Bloomberg Barclays US Aggregate Bond index 7.51%
Benchmark (80% the S&P 500 index + 20% the Bloomberg Barclays US Aggregate Bond index) 16.22%
vs. benchmark 3.73%
Investment Management Program Portfolio2020 Performance
Summary
December 31, 2019 December 31, 2020