General Body Meeting - Mutual Investment Club of Cornell

General Body Meeting 9/1/2010

Agenda 2

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Welcome back Introduction to the team Club operations Previous investment pitches Opportunities to get involved Conclusion

Mutual Investment Club of Cornell

The executive board 3

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Jeffrey Hau Daniel Sherry Akshay Nagia Chirag Shah Melody Chu John Yoshida Jai Reddy

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Samantha Dong Terence Hu Derek Creadore Andrew Verri David Wong David Shim Scott Deuschle

Mutual Investment Club of Cornell

What does our club do? 4

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Manage money  ~$50,000

portfolio  Value orientation  Long/short equity

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Educate  Semester-long

training program designed by Dan Sherry  Great for new members  Teaches fundamental principles

Mutual Investment Club of Cornell

Analyst teams 5

Senior Analyst Junior Analyst 

Senior Analyst 

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Have strong knowledge of industry Generate investment ideas Approve additions to conviction list Manage pitch process

Junior Analyst 

Junior Analyst

Junior Analyst  

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Compile weekly industry news Propose new companies to add to conviction list Do fundamental research to put investment pitches together Help monitor current holdings

Mutual Investment Club of Cornell

Other ways to get involved 6

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Newsletter  Monthly

editions  Three types of articles: investment pitches, new club initiatives, opinions on the economy 

Writing for the website (blogging)  More

flexibility than newsletter  More opinionated 

Research reports  Opportunity

to produce investment theses Mutual Investment Club of Cornell

7

So how do we choose our investments?

Mutual Investment Club of Cornell

8

TBF Short 20+ Year Treasury Daniel Sherry

Mutual Investment Club of Cornell

Original Thesis 9

Factor

We think it will go:

Causing interest rates to:

X

Monetary Policy

Tighter

Increase

X

Fiscal Policy

Stay loose

Increase

-

Saving

Lower as recession eases

Increase

X

Capital Investment

Higher as recession eases

Increase

X

Inflation

Maybe up?

Increase

•10 year treasury rate at purchase: 3.42% •10 year rate now: 2.47% Mutual Investment Club of Cornell

Monetary & Fiscal Policy 10

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Monetary Policy: Never really as loose as we thought it was.  Interest

on reserves – 0.25%  Monetary aggregates  No tightening anytime soon – possible loosening 

Fiscal Policy: you don’t have to outrun the bear…  Euro

trouble

Mutual Investment Club of Cornell

M0 Money Supply 11

Mutual Investment Club of Cornell

M1 Money Supply 12

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M2 Money Supply 13

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Saving, Capex, and Inflation 14

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Personal saving: not exciting. Capital investment: not picking up like we thought. Inflation expectations: subdued, to say the least.

5-year market inflation expectations

Mutual Investment Club of Cornell

Looking Forward 15

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Fed’s options  Explicit

medium-term inflation target  Lower the interest on reserves  Additional quantitative easing  Do nothing – continue promising to keep rates low “for an extended period” 

None of these will increase rates, at least in the short term.

Mutual Investment Club of Cornell

16

HXM Homex Jai Reddy

Mutual Investment Club of Cornell

Original Pitch 17

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Thesis: Improvement in macroeconomic variables coupled with Homex’s competitive position makes for a substantial growth opportunity Macro variables:  GDP, employment, wages  Important for earnings acceleration and mortgage origination Competitive position  Leader in low income/entry level housing  Geographically diverse  Efficient building processes Mutual Investment Club of Cornell

2010 Market Expectations and Implications 18

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Economic growth to swing from -7% to 3% in 2010 Employment to expand 2.3% after drop of 3.9% in 2009 Demand side  Growing

salaries improve mortgage affordability  Employment growth increases potential size of homebuyers market 

Supply side  Infonavit’s

funding comes from taxes on salaries Mutual Investment Club of Cornell

What changed? 19

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Q4: Weak quarterly sales Change to a more conservative strategy No geographic expansion during Q4 Downgrades by analysts Though these may sound like too many negatives, they are all effects of a strategy to improve working capital management and free cash flow generation Mutual Investment Club of Cornell

Recent events & looking forward 20

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Strong revenues and margins in Q210  Due

to strategically focusing in more profitable areas/demographics  Increases in FCF as planned part of their strategy  Increase in EBITDA 

Potential Catalysts  Surprises

in economic growth expectations  Problems with technologies and leadership control  Changes in targets for mortgage origination Mutual Investment Club of Cornell

21

CSCO Cisco John Yoshida

Mutual Investment Club of Cornell

Cisco Systems, Inc. 22

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Designs and sells technology and service for electronics, networking and communications  Founded

in 1984 developing and selling routers

Mutual Investment Club of Cornell

Original Thesis (February 2010) 23

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Next-generation technologies are poised to take advantage of both existing and new markets Strong cash equivalents will lead to key strategic acquisitions

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Performance 24

Mutual Investment Club of Cornell

Earnings Update 25

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EPS slightly beats expectations but…  Sales

forecast miss expectations  “Unusual uncertainty” and “Mixed Signals” 

Company hiring employees

NO CHANGE IN THESIS

Mutual Investment Club of Cornell

26

TEVA Teva Pharmaceuticals Samantha Dong

Mutual Investment Club of Cornell

TEVA- Overview 27

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Originally pitched Nov 3, 2008 World’s largest generic drug maker  Market

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Cap: $47.37 BN

Generic and branded pharmaceuticals, active pharmaceutical ingredients (APIs)  Principal

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Products: Copaxone

Original thesis:  Upside:

Recession proof, industry leader, diversified pipeline, political environment, patent expiration  Downside: Growing competition Mutual Investment Club of Cornell

TEVA- Performance 28

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1 As

Purchased: $43.02; sold half position @ ~$60 Current price: $50.621

of market close on 8/31/2010

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Since pitched:

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Since summer:

Mutual Investment Club of Cornell

TEVA- Recent News 29

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Growth  Licensed

branded cancer drugs  Acquisition with Ratiopharm: Europe footprint 

Q2 Earning  up

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53%, boosted by Copaxone sales

FDA approved the first generic version of Lovenox  Sanofi-Aventis’ blood clot treatment  Concern

about generic version of Copaxone

Mutual Investment Club of Cornell

Applications 30

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Junior analyst applications will be accepted until September 10th Apply online at www.cornell-micc.com Please speak with me if you’d like to get involved in other ways

Mutual Investment Club of Cornell

Brain teaser 31 

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Three players enter a room and a red or blue hat is placed on each person’s head. The color of each hat is determined by a coin toss, with the outcome of one coin toss having no effect on the others. Each person can see the other players’ hats but not his own. No communication of any sort is allowed, except for an initial strategy session before the game begins. Once they have had a chance to look at the other hats, the players must simultaneously guess the color of their own hats or pass. The group shares a hypothetical $3 million prize if at least one player guesses correctly and no players guess incorrectly. The general problem is to find a strategy for the group that maximizes its chances of winning the prize.

Mutual Investment Club of Cornell

Answer 32

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Come to the next meeting to find out…

Mutual Investment Club of Cornell

Conclusion 33

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Next general body meeting will be Sept 15th where we will announce our junior analysts First training session will be Sept 8th Thanks for stopping by!

Mutual Investment Club of Cornell