investment club april 4 th 2014. overview 1.market update 2.portfolio overview 3.wealth management...

INVESTMENT CLUB

April 4th 2014

OVERVIEW

1. Market Update

2. Portfolio Overview

3. Wealth Management Intro

4. Buy Presentation

MARKET UPDATE

FBI PROBE HIGH FREQUENCY TRADING

Investigating high-speed trading firms and potential insider trading

Potentially cancel trades to create confusion

Manipulating other investors

Tool to cover up insider information

Question if firms use fasterdata streams

YELLEN CALMS MARKETS

Confirmed that interest rates would remain low for foreseeable future

Unsurprising given Yellen’s dovish tendencies

Cited weak job market

• Long-term unemployed• 7 million Americans working part-time • Slow wage growth

U.S. TRADE GAP WIDENS

Exports fell due to weak demand overseas

Largest trade deficit since September

Economists lowered GDP forecasts for 1st Qtr.

Following increase in exports last month

Overseas demand was unsustainable

• Growth continues to slow in China• Europe volatile

U.S. STOCK MARKET

Fell on Thursday for 1st time all week

Investors worried about export data

Looking forward to today’s job report

U.S. economy supposed to add 200,000 jobs

Unemployment estimates = 6.6%

ABROAD

Asia

• Nikkei 225 + 3.10%• Hang Seng + 2.86%

Europe

• FTSE 100 + 1.26%

ASIA

China’s official Purchasing Managers Index rose in March.

1.5% expected inflation in Japan

EUROPEData raises inflationary concerns

Hints for QE

PORTFOLIO UPDATE

GEORGE RAKIC

ERIC TILSON

IRVIN CEDILLO

OTHMAN GUENNOUN

CURRENTLY

Invested: $463,002.42 (93.35%)

Cash: $33,000.00 (6.65%)

Total $496,002.42

37 single name equities

SECTORS

Sector NameDollar

amount Weight Benchmark

Information Technology $85379.87 18% 18.70%

Financials $48725.52 11% 16.40%

Health Care $83065 18% 13.40%

Consumer Discretionary $78589.2 17% 12.20%

Industrials $46750 10% 10.70%

Energy $45263.3 10% 10.10%

Consumer Staples $35944.48 8% 9.60%

Materials $15956.55 3% 3.50%

Utilities 0 0% 3.00%Telecommunication Services $19384 4% 2.40%

FIVE LARGEST POSITIONS

Ticker Name Value Weight

GE GENERAL ELECTRIC COMPANY $23,607.00 4.76%

GILD GILEAD SCIENCES INC $22,200.00 4.48%

UNH UNITEDHEALTH GROUP INC $20,562.50 4.15%

CAT CATERPILLAR INC $20,510.00 4.14%

MFC MANULIFE FINANCIAL CORPF $16,653.00 3.36%

POSITIONS UNDER 2%Ticker Name Value Weight

CVX CHEVRON CORPORATION $9,523.20 1.92%

BIDU BAIDU INC $9,447.00 1.90%

DNR DENBURY RES INC NEW $8,380.00 1.69%

CSCO CISCO SYSTEMS INC $8,266.22 1.67%

EBAY EBAY INC $8,187.00 1.65%

CHKP CHECK PT SOFTWARE TECH F $8,044.80 1.62%

CHL CHINA MOBILE LTD $6,913.50 1.39%

BK BANK OF NY MELLON CP NEW $6,653.32 1.34%

BAC BANK OF AMERICA CORP $3,944.50 0.80%

OPPORTUNITIES

George Rakicrakicd@lafayette.edu

INTRODUCING PRIVATE BANKING / WEALTH MANAGEMENT MARKET

JASON SHAVEL

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Some Slides Borrowed and/or edited from Phil Molyneux

DEFINITION OF WEALTH MANAGEMENT & PRIVATE BANKINGWealth Management:

• financial services provided to wealthy clients, mainly individuals and their families , typically with $100,000+ investable assets

• deals with managing both the assets & liabilities side of clients’ balance sheets

Private banking:• more exclusive, subset of wealth management, typically with

$1 million + of investable assets. • banking services (deposit taking and payments),• discretionary asset management, • brokerage, • limited tax advisory services

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WEALTH MANAGEMENT - PRODUCTS While asset management is a key feature, wealth management has a greater emphasis on financial advice and is concerned with gathering, maintaining, preserving, enhancing and transferring wealth.

Products include:• Brokerage.• Core banking-type products • Lending products (credit cards, mortgages and private jet

finance)• Insurance and protection products,• Advice in all shapes and forms: asset allocation, wealth

structuring, tax and trusts, various types of planning (financial, inheritance, pensions, philanthropic), family-dispute arbitration – even psychotherapy to children suffering from ‘affluenza’.

• A wide range of concierge-type services, including yacht broking, art storage, real estate location, and hotel, restaurant and theatre booking.

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CLIENT SEGMENTS

Private banking targets only the very wealthiest clients or high net worth individuals (HNWIs): broadly speaking, those with more than around $1 million in investable assets.

Wealth management, by contrast, targets clients with assets as low as $100,000, i.e. affluent as well as high net worth (HNW) clients.

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DEFINING THE WEALTH MANAGEMENT SERVICE PROPOSITION

The following three criteria differentiate a firm as a wealth manager:

• The relationship that wealth managers have with their clients, both in terms of breadth (where providers emphasise terms such as ‘holistic’, ‘comprehensive’ and ‘all-inclusive’) and depth (‘intimate’ and ‘individualised’).

• The products and services provided, with a particular emphasis on estate planning and multigenerational planning services, as well as tax advisory expertise and alternative investments.

• The specific objectives of wealthy clients, such as investment performance, wealth preservation or wealth transfer.

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INVESTMENT MANDATES

Custodian for a client’s assets. That involves, essentially, asset safekeeping, income collection, fund disbursement and associated reporting.

Execution-only mandate, the wealth manager executes, or selects brokers to execute, securities transactions on behalf of the client. Not investment advice, service aimed primarily at self-directed clients.

Advisory mandate

Discretionary mandate

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DISCRETIONARY MANDATESThe wealth manager usually has sole authority to buy and sell assets and execute transactions for the benefit of the client, in addition to providing investment advice.

Starts off with:

Construction of a brief with the client, detailing investment aims, level of risk-aversion and other factors that will influence the portfolio (In some discretionary accounts, the wealth manager is given only limited investment authority). However, in all cases, major investment decisions, such as changing the account’s investment strategy or asset allocation guidelines, may be subject to the client’s approval.

The wealth manager is generally paid on the basis of a flat-fee arrangement linked to the value of the assets under management.

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ONSHORE & OFFSHORE WEALTH MANAGEMENTOnshore wealth management is the provision of products and services within the client’s main country of residence.

Offshore wealth management, by contrast, serves clients wishing to manage their wealth outside their main country of residence for reasons such as:

• financial confidentiality;• legal-system flexibility; • tax considerations; • the lack of appropriate products and services onshore;• a low level of trust in domestic financial markets and

governments; and• the need for safety and geographical diversification in response

to domestic political and macroeconomic risks. Some clients treat their offshore account(s) primarily as a ‘vault’.

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MAIN PLAYERSPure private banks

Trust banks

Retail and universal banks

Family offices

Financial advisors

Stockbrokers and wirehouses (US term for large brokerage houses)

Direct banks

Asset managers

Investment banks

Others – insurance companies, accountants, solicitors, financial planners

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CONCLUSION

Do you have a million dollars?

Do you want to work with people who have millions of dollars?

If not then Wealth Management is not for you

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BUY PRESENTATION

170 SHARES @ $46.80

SOUTHWESTERN ENERGY

BACKGROUND

Independent Energy Company

• Natural Gas and Crude Oil Exploration , Development and Production

• Fayetteville Shale in Arkansas• Marcellus Shale in Pennsylvania• Niobara Formation in Colorado• Owns other land in Canada, Louisiana, Arkansas, and

Colorado

Midstream Services

• Transportation of Natural Gas to Market• Marketing of Gas Production

FUNDAMENTALS/COMPARISON

Market CapRevenueGross MarginEBITDAOperating MarginNet IncomeEPSP/EPEGP/S

SWN16.23B3.37B0.67

2.02B

0.36703.50M2.0023.101.834.77

COG14.54B1.75B0.77

1.18B

0.30279.77M0.6652.920.548.17

CHK17.21B17.51B0.34

5.46B

0.15474M0.7336.430.350.97

Industry454.06M257.94M0.65

186.66M

0.17N/A0.0223.332.303.29

THESIS

Technological advances and new drilling techniques have unlocked vast North American natural gas reserves

Will allow the US to move away from dependence on foreign oil

Natural gas is preferable to coal and other fossil fuels because it is clean burning, easily transportable, and much more affordable

Demand for natural gas is increasing and is expected to be the 2nd largest source of energy worldwide by 2035

Currently natural gas pricing is starting to rise

Resulting in higher income for natural gas companies

COMPETITIVE ADVANTAGE

Strong Management

Large land holdings in the right locations

Diversified Business Model

Multiple Sources of Revenue

FINANCIAL STATEMENTS 2013Revenue:

• 2011: 3.0B• 2013: 3.4B

Net Income:

• 2011: 637.8M• 2013: 703.5M

Income Before Income Tax:

• 2011: 1.0B• 2013: 1.2B

Net Cash Provided by Operating Activities:

• 2011: 1.7B • 2013: 1.9B

Lots of Cash

EXECUTIVE COMPENSATION

Executives all own stock and have stock options

Incentive based contracts

Aligns interests of board members and shareholders

Helps decrease excessive risk

Chairman of the Board owns ~150,000 shares

WORD ON THE STREET

Consensus Buy Rating

Goldman Sachs and Deutsche Bank each lifted target price

Banner Year in 2013

Project to Break Many Earning Records in 2014

RISKS

Volatile Industry

Unknowns of fracking

Efforts largely concentrated in three spots

Supply is greater than demand

Stock is close to 52 week high

CONCLUSION

Industry is starting to heat up

Alternative source of energy for the US

Growth Potential

Land holdings have proven to be quite profitable

New sector for our portfolio to enter

VOTE170 Shares @ $46.80