general body meeting 5/3/2010. the cornell investment club agenda announcements quant group amx...

General Body Meeting5/3/2010

The Cornell Investment Club

Agenda

Announcements Quant Group AMX earnings report GGP update Headlines iGo pitch by TMT junior analysts What to do with our excess cash? Conclusion


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Announcements

Social event May 11th in Collegetown.


Quant Group

Analysts:

Ali Yazdi Jimmy Zhou Armando Acosta


History

The Theory of Speculation (1900) Brownian motion to evaluate Options?

Modern Portfolio Theory (1952) Maximize returns & minimize risk.

Black-Scholes (1973) The absolute gold standard for valuing options.


Objective

Set up with the primary aim of: Risk Management:Perform quantitative analysis of our

investments, and successfully hedge for Equity, Interest Rate, Currency, and Commodity Risk.

Quantitative Investment Strategies:Complement the club's fundamental approach

by proposing pitches based on Quantitative models and Technical Analysis.


Quantitative Hedging

Some Tools… Calls Puts

Methods Spreads

Straddle Bull

Greeks Delta Hedging

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Simple Delta Hedging Example

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Objective: Find the amount of call to long or short to create a delta neutral portfolio that reduces the risk of price movements in the underlying stock


AUD/NZZ-score= -2.66812

Doji Candle

Substantial Reversal

Z-score= -2.66812Technical Analysis


América Móvil Earnings

Beats estimates on subscriber growth Revenue, Net Income, EBITDA all

increasing yoy Below estimates

Data Growth Telmex Merger to still go through in

May


Thesis Revisited

Three factors to drive company performance Fundamental strength of prepaid

operations Integration with Telmex Data use growth


Decision

Some thesis points still hold Uncertainty of the future

Sell 50% of our Position


General Growth Properties

Bankrupty Court Exit Plan hearing extended to May 4 More time to talk to Simon Property Group

Inc and other potential investors Bankruptcy Court has confirmed plans

of reorganization to restructure the final two major secured mortgage loans in its portfolio Bankruptcy Court has now confirmed

plans of reorganization for the debtor subsidiaries associated with 107 of the Company's 108 secured mortgage loans, aggregating a total of $14.8 billion.


Macro Update part 1

GDP grew at 3.2% (annualized) for Q1 Businesses increased inventories by $31b

Expectation of continued growth

Still no sign of improved unemployment numbers Increased consumer spending from savings

not increased hirings

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Macro Update part 2

Panic spreading from Greece Spain-downgraded to AA from AAA+ Portugal-downgraded to A- Greece-currently at JUNK status

Portugal-recover full GDP in 2013 Spain- recover in 2015 Greece- recover in 2020

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HP Acquires Palm

@$5.70/share (Total value =$1.2B) HP Slate killed Implications for Google, Apple, RIM,

Microsoft

“Doubling Down on WebOS”


Energy and Industrials

First U.S. offshore wind farm Approved by Federal

Government after years of controversy and court battles

Green energy and reduced dependence on fossil fuels

Opponents continue to fight Cite destruction of

scenery Could spark creation of

hundreds of new wind farms


Emerging Markets - Baidu19

Baidu’s Q1 Profit more than doubles YoY New advertising

system Thanks to Google

64% of search market

Expecting 30% advertising dollars from Google

Planning on 10-for-1 ADS split


Financials Update-Goldman Sachs The Justice Department opened a

criminal investigation over mortgage securities deals

GS officials called before Congress to testify

Analysts downgrades on Friday GS shares drop 9.5% to $145

$21 Billion in market cap erased since being accused of fraud two weeks ago


Financials-Berkshire Hathaway Buffet gives GS a strong vote of

confidence Q1 earnings up to $3.5 B from ($1.5) B



iGo, Inc. (IGOI)Miles Moen

Armando AcostaZack Zaranka

Howard Yu


The Company

Based in Scottsdale, Arizona 52 employees Market Cap: 55M Make ‘power solutions’


Products

Chargers for various devices “Tips” for gadget compatibility One charger for all devices


Products

Portable Computer Market Low-Power Mobile Electronic Devices

Phones, PDAs, iPods, etc. Green Technologies

iGo Green chargers reduce vampire power


Customers

Retailers: RadioShack Private Label Resellers: OEMs, Microcel Resellers: Superior Communications

Inc. End users: Through ww.igo.com


Thesis

Undervalued at current price New Vampire technology with patents

pending No debt, strong cash position Large growth potential with Walmart

and other retailers



Growth


Consumer Sales Growth

September 2009 – Verizon Stores October 2009 – Office Max, Best Buy Airport

Kiosks November 2009 – Staples (Canada) December 2009 – Wal-mart trial period in

US and Canada European outlets grew from 500 to 3,000

last year


Recent News

4/6/2010 – Board of Directors announces intention to continue current business plan

3/29/2010 – Rick Welts (former NBA chief marketing officer) placed on Board of Directors


The Future?

Expansion to other major retailers Q1 2010 Earnings – 5/6/2010 iGo Green Technology patent-pending,

fastracked for possible approval by US Gov’t

Large cash reserves, stock repurchase?



Financials


iGo Financials

Current Ratio:

Year2007 2008 2009

Current Ratio 3.05 4.45 7.01

Debt Ratio 0 0 0


iGo Financials (Continued)

Operating Cash Flow Ratios:

Return on Equity Ratios (ROE):

Year 2007 2008 2009

Operating Cash Flow Ratio (%) 17.9 24.5 12.2

Year 2007 2008 2009

Net Income -12564 451 -549

Average Shareholder's Equity 37456 39697 40310

ROE (%) -33.5 1.14 -1.36

(Numbers are in thousands)


Why History Won’t be Repeated

The net incomes of 2006-2007 are large negative values, affecting the ROE ratio.

Attributed to: Declining interest rates Loss of interest income Gain on disposal of assets (i.e. sale of patents)

decreased Sold handheld hardware business (Large part of

Total Returns) Great mark down of inventories Targus not a client anymore

ROE stabilized in 2008-09



Valuation


Future Different than Past

Loss of Targus drops revenue 42% Major economic downturn unlikely to

happen again Now with vampire technology


Income Statement


iGo Value


Risks

Large dependence on a few customers Narrow Range of customers Patents Pending Delisting from NASDAQ


Key Points: Summary

iGo is a strong company with no debt and a large amount of cash

Price very low compared to historical values

Strong growth potential with larger retailers such as Walmart

New Vampire technology means unique power saving, licensing deals

Possible acquisition target


Buy Proposition

525 shares at ~$1.71 for a total of ~$900

12 month price target: $2.50 (46% increase)

Re-evaluate in 12 months



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What to do with our excess cash?

Andrew Verri


LQD – Investment Grade Corp Bond ETF

5.25% yield @ $3,000 ≈ $160 Disregarding crisis of 2008-2009, price has

been incredibly stable Relatively riskless vehicle for cash that

yields more than a money market account

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Consumer Staples ETF (XLP)

Dividend: 0.473 Yield: 1.7119 Beta: 0.65 $3,000/27.63

109 shares

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Dynamic Food and Beverage (PBJ)

Yield:1.65% Holdings include: Coca-Cola, Yum!

Brands, Starbucks, McDonald’s, ConAgra Foods, etc.

Recommendation: $3,000/16.04=187 shares

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Utilities Select ETF (XLU)

Dividend: 1.06628 Yield: 3.5029% $3,000/30.44

98 shares

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Name WeightExelon Corp 7.69%Southern Co 7.65%Dominion Res Inc Va New 6.67%Fpl Group Inc 5.64%Duke Energy Corp New 5.37%American Elec Pwr Inc 4.38%Pg&E Corp 4.37%Public Svc Enterprise Group 4.34%

Entergy Corp New 4.10%Consolidated Edison Inc 3.45%


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Interview question

You have someone working for you for seven days and a gold bar to pay them. The gold bar is segmented into seven connected pieces. You must give them a piece of gold at the end of every day. If you are only allowed to make two breaks in the gold bar, how do you pay your worker?


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Interview Answer

Day 1: break off one piece and give it to him Day 2: take back the one piece, break off two pieces

and give him that block Day 3: give him back the original one piece so he

has three in total Day 4: Take back everything you’ve given him and

exchange the remaining block of four Day 5: Have him keep the block of four and give him

the one Day 6: Have him keep the block of four but take

back the one, and give him the block of two. Day 7: Give him everything


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Conclusion

Have a great summer! Come to the social event!

general body meeting 5/3/2010. the cornell investment club agenda announcements quant group amx...

Documents

cornell investment club

position slide

conclusion slide

technical analysis slide

underlying stock slide

telmex data use growth

portfolio bankruptcy

plans of reorganization