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2008-2009
Thomas Steiner
AllStar Portfolio Manager
The All-Star Portfolio Team will primarily employ a fundamental growth investment strategy to drive superior returns in spite of broader market uncertainty. We see tremendous opportunities in equities in the wake of the credit crisis as panic and anxiety have overshadowed strong global economic fundamentals. Yet, we expect these circumstances to still favor a "stockpicker's market" over the next nine months as broad indexes suffer slower corporate earnings growth for the domestic economy as a whole. We will therefore concentrate our strategy on companies that we believe will continue to rapidly grow (or preferably accelerate) earnings in the current market environment.
Given the six to nine month time horizon of our investments, we will also employ an opportunistic trading strategy to drive our performance beyond our 10% target over the S&P 500. Determining attractive entry and exit points to adjust our industry and security allocation will allow us to fully capture the benefits of short-term market volatility and the catalysts we expect to drive our picks to their true value.
Lastly, we will constantly maintain a diversified portfolio of equities in order maintain a level of risk largely in line with our benchmark the S&P 500. Though we clearly favor high-growth names, we will scour for growth across market sectors and market capitalizations, continuously monitoring the risk level of our portfolio versus our benchmark. Thus, at the end of our investment period, we will ensure that we have predominantly captured true outperformance over the market and have not achieved our superior returns by simply assuming more risk.
Arvindh Rao
Initiative Portfolio Manager
The Initiative believes that the current market environment is not priced on fundamentals. To say that fear rules the market is an understatement and we are content with that - securities are more likely to be undervalued when panic is the norm.
We will look for firms that are of sound quality and are trading at a significant discount to their historical valuation and their intrinsic value. Such firms will consist of 70% of our holdings. At the same time, however, we do acknowledge the difficult and volatile reality and will invest up to 30% of the portfolio in defensive names for the intermediate term and make some opportunistic trades as we see inefficiencies in pricing. We expect such inefficiencies around federal reserve meetings, the weeks leading up to the election of the 44th president, and the transition phase thereafter.
Ideally, we would look for a firm that has been beaten down significantly since their 2-3 year high, with strong operational cash flows and little debt. This sound framework will enable a prudent investor to be greedy when others are fearful. Some common multiples we will use to roughly estimate soundness and quality are : EV/EBITDA, Degree of Operational Leverage, Degree of Financial Leverage, Price/FCF, Price/Net Tangible Assets.
2007-2008
Neal Sangani
AllStar Portfolio Manager
The All-Star Portfolio Team will primarily employ a fundamental growth investment strategy to drive superior returns in spite of broader market uncertainty. We see tremendous opportunities in equities in the wake of the credit crisis as panic and anxiety have overshadowed strong global economic fundamentals. Yet, we expect these circumstances to still favor a "stockpicker's market" over the next nine months as broad indexes suffer slower corporate earnings growth for the domestic economy as a whole. We will therefore concentrate our strategy on companies that we believe will continue to rapidly grow (or preferably accelerate) earnings in the current market environment.
Given the six to nine month time horizon of our investments, we will also employ an opportunistic trading strategy to drive our performance beyond our 10% target over the S&P 500. Determining attractive entry and exit points to adjust our industry and security allocation will allow us to fully capture the benefits of short-term market volatility and the catalysts we expect to drive our picks to their true value.
Lastly, we will constantly maintain a diversified portfolio of equities in order maintain a level of risk largely in line with our benchmark the S&P 500. Though we clearly favor high-growth names, we will scour for growth across market sectors and market capitalizations, continuously monitoring the risk level of our portfolio versus our benchmark. Thus, at the end of our investment period, we will ensure that we have predominantly captured true outperformance over the market and have not achieved our superior returns by simply assuming more risk.
Todd Tamagnini
Initiative Portfolio Manager
The Initiative Portfolio Team will employ a defensive and contrarian investment strategy to preserve our principal in this increasingly uncertain market. Each investment will be evaluated by performing in-depth research and a bottom-up analysis of the company and industry.
The Initiative Portfolio philosophy primarily focuses on companies that are misunderstood, out of favor on Wall Street, and not correlated to the overall U.S. economy. More specifically, they will be companies that have perpetual business models, near term catalysts, and prices that are trading well below their intrinsic value, thus offering a strong margin of safety. We will apply these criteria to the universe of small cap stocks, in the belief that they are overlooked by large institutions and investors and thus offer more attractive risk-return profiles.
The Initiative Portfolio sees the recent problems in the credit and housing markets as an impediment to the U.S. economy, and thus will look for investments in other countries, as well as maintain cash levels that will allow the portfolio to take advantage of shifts and opportunities in the current market. We will also be undeterred by the increasing volatility in the equity markets, viewing this as an opportunity to find solid businesses that have been over-sold due to liquidity and fear, rather then fundamentals. Lastly, we will never fall in love with any of our investments as we will constantly re-evaluate our investment theses.
2006-2007
AllStar Portfolio
Krish Daftary, Manager
The All-Star Portfolio Team will employ a defensive & contrarian value-driven investment approach in order to generate alpha or returns beyond systematic volatility. We largely believe the markets are efficient so we will scour the small and micro cap universe to find companies hidden from the Wall Street radar that are unloved, unrecognized, misunderstood, and/or cloaked in a special situation. Ideally, our investments will possess three key characteristics:
- Strong qualitative business fundamentals that have long-term sustainability
While we invest to generate returns over an eight month span, we are paranoid where businesses will be ten to fifteen years down the road. Stock markets price most securities with the assumption that they will generate cash flows into perpetuity. When analyzing securities, however, we never make this assumption. As a result, the All-Star Portfolio will only invest in businesses that we perceive to have long-term sustainability and stability.
- A price that allows for a significant margin of safety
We will only buy businesses in which we believe trade at a discount to its intrinsic value under the most conservative assumptions. To value businesses, we like to get comfortable with an annual cash flow figure that we feel is sustainable into perpetuity. We hate to assume value accretive growth in that figure outside of what is plainly visible and defensible. Ideally, we would pay only 50 cents on the dollar for every investment we make.
- Short-term catalyst(s) that can potentially unlock the true value of a company
While investing in securities that are under the Wall-Street radar may present compelling investment opportunities, we must make sure that our "undervalued" investments do not stay undervalued forever. As a result, we will only invest in businesses that have short-term catalysts that will unlock the true value of the company within our eight month time frame.The All-Star Portfolio Team will be undeterred by short-term volatility, viewing it as more of an opportunity than a threat. When we find a business that we love at the right price, we will not hesitate to make a sizeable bet. Lastly, we will never fall in love with any of our investments as we will constantly reevaluate our investment theses.
Initiative Portfolio
Andrew Yeh, Manager
Due to our required 10% outperformance over the S&P 500, the initiative portfolio will seek high dividend yielding companies operating in attractive sectors with little to no analyst or investor coverage.
Typical to any value strategy, our investment philosophy is based on seeking out complicated and difficult to understand situations, since the amount of work required to understand them renders them even more likely to be overlooked by market participants. Stock prices often fail to reflect their 'fair' value as the market is inefficient and too focused on short term factors. Using a fundamental, active, value-drive approach, we can exploit this inefficiency.
We will evaluate and look for companies that we believe exhibit qualitative characteristics such as a sustainable business franchise, an accomplished management team and strong financials. We will also assess pending legislation or changing regulations that may affect the industry that the company operates in to identify a catalyst that will unlock a stock's intrinsic value.
2005-2006
Krish Daftary
AllStar Portfolio Manager
The All-Star Portfolio team will pursue a contrarian value-oriented approach to investing in the markets. We will look for companies that are hidden from the Wall Street radar that are unloved, unrecognized, misunderstood, and/or cloaked in a special situation. We believe the markets are generally efficient so we will scour mostly the small & micro cap universe to find value and potential outsized returns. Ideally, our investments will possess three key characteristics:
- Strong qualitative business fundamentals that have long-term sustainability
- A price that allows for a significant margin of safety
- Short-term catalyst(s) that can potentially unlock the true value of a company
The All-Star Portfolio team will operate within our core competence and invest only in businesses that we truly understand. We will not pay a steep premium for growth and will be undeterred by short-term volatility - viewing it more as an opportunity than a threat. When we find a business we love at the right price, we will not be hesitant to make a sizable bet while constantly reevaluating our investment thesis.
Ming Che
Initiative Portfolio Manager
Our main goal is to over-perform the S&P500 index by 10%+, while protecting our assets from any significant market downturns. We will be utilizing extensive and painstaking research to reach an understanding of each and every one of our investments to ensure that it fits all three of the following requirements before we invest:
- That the stock is trading for less than intrinsic value. A company is worth the stream of cash-flows that it is able to produce in its lifetime, and we typically will look more into a company if we can buy into it at a 10% cash yield or more (10x Market Cap/FCFE or less). We will typically buy into a company if it is trading significantly under such, and will sell when it reaches our target. We will utilize a valuation method based on a unique understanding of the business, (valuing assets based on liquidation value, management projections, for example) and will typically stray from the usual DCFs we are used to, unless it pragmatically applies to our investment scenario.
- We want a degree of certainty that the stock price will go up. We will not buy into a company unless a specific catalyst is in place for it to reach its true value. In other words, we want to recognize specific factors that will occur to make sure that our "undervalued" companies do not stay undervalued forever. Typically, our biggest catalyst is an earnings release.
- We want a close to omniscient understanding of the current company, the industry, and the market environment surrounding our potential investment. We must be able to justify why the pricing on a stock might be inefficient temporarily. Typically, some traits that fit our requirement for initial market inefficiency is in the Small-Cap, OTC, and Pink Sheet arena. We will also be looking into special situations, massive changes, eccentric financial statements,etc. where the market at large generally do not see true value, or do not care enough to find out.
2004-2005
Steven Sakamoto (Fall 2004), Ming Che (Spring 2005)
AllStar Portfolio Manager
Our philosophy is that companies are only worth the stream of cash flows that they will produce. Thus, we want 1) a degree of certainty as to what the cash flows may be and 2) to pay a low price for those cash flows. We will attempt to find these situations in unusual or complex businesses, companies undergoing temporary problems, and special situations (e.g. spin-offs, bankruptcies, restructurings, rapid industry change). Of these, we intend to seek out in particular, businesses that offer growth (in revenue and/or income) along with strong operational and/or financial leverage that have the potential for colossal returns.
Douglas Heinz (Fall 2004), Rishi Trivedi (Spring 2005)
Initiative Portfolio Manager
The Initiative Portfolio will invest in companies that are industry leaders in growing markets, though this alone is not enough. Business structures must be incredibly easy to understand and the majority of cash flow derived specifically from those core operations. Other criteria influencing selection will include a reasonable forward-looking P/E ratio and an ability to pay off debt. These competencies will allow Initiative to produce juicy returns under any market conditions without experiencing volatile swings.
2003-2004
Thomas Wollmann
AllStar Portfolio Manager
The All-Star Portfolio will focus on businesses that will have substantially higher earnings in the near future and seek firms with high long-term return on invested capital. The portfolio will not focus on individual characteristics such as age, capital expenditures, or leverage nor will it seek diversification simply for its own sake. The portfolio will maximize returns by finding businesses which are priced well below their inherent worth and which have not only operations but also economics which are understandable.
Steven Sakamoto
Initiative Portfolio Manager
The Initiative Portfolio will focus on investments that offer low P/E or Price-to-Book ratios as well as capital preservation. Primary screening of stocks will utilize a bottom-up approach to find firms undercovered or misunderstood by Wall Street due to 1) having market caps between $25mil to $1bil (micro and small caps), 2) being in smaller industries and/or 3) having unique traits that separate them from their own industries. This universe of firms will be narrowed down to those with strong balance sheet positions, competent management, best-in-class products, superior bargaining strength, strong barriers of entry, earnings not reliant on macroeconomic trends, and ultimately, stock price appreciation potential
2001-2002
Matthew Cheng
All-Star Portfolio Manager
The All-Star Portfolio will focus on performance and growth acceleration in both the long and short term market conditions. These stocks will exhibit strong fundamentals; exceptional, visible growth; and also continued stock performance. The portfolio will continue to seek out growth prospects this semester, despite lower tolerance for risk and growth in the market. Higher volatility and risk in the portfolio will be partially offset by a strong reliance on fundamentals, and by conservative price targets and stop-loss.
John DeRaimo
Initiative Portfolio Manager
The portfolio will be focusing on companies that are selling at discounts to their intrinsic values. While value often implies that a stock is selling at a low P/E or a low Price/Book ratio, such limitations will not be blindly enforced if sufficient due diligence has been performed. Should the opportunities arise, the portfolio will also focus on special situation investing in activities such as spin-offs and mergers where managers sometimes have incentives to keep stock prices artificially low.
2000-2001
Suzanne Romano
All-Star Portfolio Manager
I plan on diversifying it as the semester proceeds, as requested by the members. I also plan on maintaining a New Economy technology component to the portfolio. Although all technology certainly no longer means all profits for investors, the Internet and everything it entails has changed our society forever. Tech is a market segment that will always carry promise - even when value investing is the current moneymaker.
John Pairaktaridis
Initiative Portfolio Manager
The Initiative portfolio will invest in undervalued stocks to accomplish the task of outperforming the S&P 500.. The Initiative is a value based portfolio that will mimic the S&P 500 by sector weight. By applying market analysis and financial evaluation techniques, the market is sifted to uncover the undervalued equities. Stocks are purchased depending on strength of financial statements (cash flows), calculated intrinsic value, and the filter rule. The Initiative portfolio constraints are a) no short selling, b) only equities (stocks), and c) positive earnings.