Sunrise Trading

Professor Mary BoucheletFIN 230 – International Finance

Yvaly PrakOrnela Shtini

Ulrich BernardAlexis Cuny

Arthur Steghens

• Fiscal & Monetary Policy– Bailout Program ($700 billion)– IR Lowered to 0.25%

• Inflation & Components– Will Rise to approximately 2% (Low Estimate) or 5% (High Estimate)

• Unemployment– 10% (December, 2008)

• GDP & Components– Recession (Q3 2008)

• Treasury, Bond Market, & Yield Curve– Slow Recovery after Plunge of U.S. Economy

• Major Currencies– USD Depreciated, EUR Appreciated, JPY Stagnated, GBP Appreciated, CHF Appreciated

• Commodities– Gold Strong Growth, Crude Oil Recovery

• Sunrise Trading’s Beliefs & Values– Current State of the Economy

Slow Recovery Not Secured from Another Downturn

– Teamwork– Excellence

• Investments Strategy– First Phase - Conservative Allocation

Time Scale: From 2 to 3 Weeks Risk: Low Return: Low

– Second Phase - Strong Growth Time Scale: Until the End of the Class Risk: High Return: High

• Large capitalization

• Establish itself as a leader &Dominate the market

• Can easily enter new market & Acquire new businesses

($772)($772)

$9 513,48$9 513,48

$8 329,08$8 329,08

3/11/2010: 3/11/2010: Google Launching Android Business App Market2/25/2010: 2/25/2010: Google Inc. faces European Union scrutiny after complaints-Reuters3/11/2010: 3/11/2010: Google Launching Android Business App Market

Global air industry has been affected by the recession Only a “recovery” for the industry in 2010, no profits

Less Bullish than the Market

+3+1-1+20

Demand

Price

Worst

Worst

Worst

Worst

Our Case 2/22/2010

• Boeing (BA) expects China to spend $400 billion to purchase 3,770 planes from manufacturers.

• BA reported a 61% drop in commercial aircraft.

Worst Case 3/29/2010

• Boeing (BA) reported it completed a key test of its new 787 Dreamliner.

Best Case 2/8/2010

• Conflict between China and the U.S. because of the President Obama’s meeting with Dalai Lama.

($4,777)

($21,543)

$5,680

• Expiration Date 02/19/2010 (10 Days to exercise)

• Out of the money by $2.61 (2.15%)

• Leverage of 157

• Really risky position

• Investment fit our risky strategy

• 02/03/2010:02/03/2010:IBM announced an update of their servers and hardware to make them more energy-efficient than their competitors

• 02/09/2010:02/09/2010: Market Lower after Snow Day in WallStreet

• 02/19/2010:02/19/2010: IBM Signs three-year, 56 Million Euro Agreement with Slovak Ministry of Finance for integrated Finance system

• Symbol Meaning– PWQ = Prudential Financial Inc. – 10 = Expiration Year (2010) – 02 = Expiration Month (February) – 20 = Expiration Day (the 20th) – C = Call Option – 00050000 = Strike Price ($50.00)

• Graph

BPEP

• 02/07/2010:02/07/2010: Quarterly Report Gossips ($1.79 billion Net Income)

• 02/10/2010:02/10/2010: Disappointing Quarterly Report Data ($1.02 billion Net Income) Hanwha Securities Buys Prudential Inc.’s South Korean Unit

• 02/19/2010:02/19/2010: Prudential Financial, Inc. Upgraded by Morgan Stanley

• 02/18/2010:02/18/2010: Introduction of a New Dental Plan

$7,490

$50,000

$39,500

• Symbol Meaning

Expiration Date 02/19/2010 00065000 = Strike Price

($65.00) Out of the money by $1.73 Leverage of 301 Very risky position: Fits our

strategy• Graph

Our Case 2/9/2010

• MCD betas expectations with 2.6% increase in sales

• Boost the capital investment by 25% during the year

Worst Case 2/10/2010

• USA - Market likes McDonalds stock

• MacDonald’s Sale continue to grow

Best Case 4/6/2010

• McDonalds Rises To A New Lifetime High

$7,133

($50,001)

BE= $65.21

EP=$65.00

($50,001)

02/10/2010: 02/10/2010: Comcast Q4 earnings more than doubled and beat Wall Street expectations, but shares fell.

Worst Case: Did not exercice02/10/2010: Could not exercice

$8 190$8 190

($50 040)($50 040)

($50 040)($50 040)

• Put on: BSX 100320 00008000• Symbol Meaning

– BSX = Boston Scientific – 10 = Expiration Year (2010) – 03 = Expiration Month (March) – 20 = Expiration Day (the 20th) – P = Put Option – 00008000 = Strike Price ($8.00)

BE = $7.60

EP = $8.00

157,48%$78,720

02/11/2010:02/11/2010:• Announced of deceiving results• Good for us, as we expected• Largely undervalued compared to the industry

• 02/08/2010:02/08/2010:Zacks Analysis of Boston Scientific Corporation Further announce of good quarterly results expected Launch of new clinical program “Platinium Chromium”

• 02/19/2010:02/19/2010: Class Action Lawsuit against BSX Problem of patent Plunge of the stock

24,98%$12,490

-100%-$50,000

• Investors Recovers Confidence• Technical Analysis

– Moving Average 4days SMA > 9days SMA > 20days SMA

– RSI Current: 66 (overbought)

– Bollinger Bands Just above the moving average

• Demand & Supply Graph– Demand Increases– Index’s Value (Price) Increases

51,240%$51,240.00

• 03/2010: 03/2010: Greeks concerned made us think for a rebound of the dollar versus the euroSwiss franc hit a peak on the 21st

Greek aid: German support

• 02/08/2010: 02/08/2010: Emergence of the financial crisis in GreeceU.S. unemployment rose

• 02/23/2010: 02/23/2010: U.S. stock-index increased while the euro snapped a four-day decline versus the dollar Speculation on manufacturing is recovering around the world.

-3,,98%$3,980

-28,84%$28,940

• Fundamental Analysis• Swiss trade balance rose from a forecast of 1.8 billion to 2.42 billion• Inflation rose by 1.00% Y to Y: More than expected• Unemployment rate rose to 4.5% from 4.4% M to M

• Demand & Supply Graph• We expected investors to move away from the CHF • Exchange rate should decrease.

• 03/25/2010: 03/25/2010: Expiration Date A bigger drop from the CHF was expected

• 03/18/2010: 03/18/2010: The SNB maintained the LIBOR rate at 0.25% due to sign of economic recovery

• 02/18/2010: 02/18/2010: The Fed rose the discount from 0.5% to 0.75%The Swiss Bank was overvalued

($20,720)

($27,920)

$58,480

$12 930$12 930

($10 195)($10 195)

$205 145$205 145

•Cold weather and winter storms have impacts on cattle feeder

• Technical Analysis

– Analyst Opinion: Sell

• Demand & Supply Graph– Declining Market– Investors Exiting their

Positions– Demand Decreases– Commodity(Price)

Decreases

$71

($22)

($650)

Our Case 2/23/2010Worst Case 3/10/2010

• Industrial and precious metals markets is strengthening

Best Case 2/25/2010

• Demand for Dollar increase which had a negative impact on Silver’s price

• Technical Analysis– Moving Average

Current Price > Current 20 Days MA Price

– RSI Current: 67

– Bollinger Bands Above Upper Band

• Demand & Supply Graph– Declining Market– Investors Exiting their Positions– Demand Decreases– Index’s Value (Price) Decreases

• 02/18/2010: 02/18/2010: ZEW Economic Expectations (52.5/56.2)

• 02/17/2010:02/17/2010: The Federal Open Market Committee Meeting Minutes

• 03/18/2010: 03/18/2010: Consumer Price Index MoM (0.10%/0.10%/-0.10%)

• 03/16/2010:03/16/2010: The Federal Open Market Committee Rate Decision (0.25/0.25/0.25)

• 02/25/2010: 02/25/2010: Commodity Price Strongly Increased Greek Debt Downgraded by Fitch Ratings New Home Sales MoM (-11.20%/2.60%/-7.60%)

$2,755

$51,695

$10,405

2/16/2010: 2/16/2010: On the path of a merger On the path of a merger between British Airways and Iberiabetween British Airways and Iberia 03/09/2010:03/09/2010:A strike by British Airways crew cabin03/25/2010:03/25/2010:The boards of British Airways and Iberia approved a merger of the two airlines on March 25.

$3 043,14$3 043,14

($887, 44)($887, 44)

$12 570, 51$12 570, 51

•Sterling declining quite significantly due to the American economy strengthening.•Bank of England Governor said that the UK’s recovery was fragile with a risk of over-inflation.

£1.5099/$

£1.5066/$

!!!

• Industry Comparison– Management Effectiveness

All Worst than Industry

– Profitability Strong Losses

• Analysts Opinion– Reuters

Bearish

– Yahoo! Finance Bearish

• 04/05/2010:04/05/2010: Advantest Introduced New Air-Cooled Mainframe for its T2000 Test Platform

• 04/05/2010:04/05/2010: Advantest Introduced New Air-Cooled Mainframe for its T2000 Test Platform

• 03/04/2010:03/04/2010: U.S. Maco-economic Indicators Depressed the NIKKEI 255 (Pending Home Sales MoM & Initial Jobless Claims)

$10

-$11,336

-$11,336

• Hedging the Yen due to our Position on Advantest Corp.

• Indicators showed a strong “BUY”

• Technical Analysis– Moving Average

bullish

– RSI Current: 61 (quite overbought)

– MacD Indicator Extremly bullish

• 03/12/2010:03/12/2010:Dollar likely to rise in coming week on U.S. outlookGreece continues to weigh on euro zone outlookObserved a shift in indicators

• 04/02/2010:04/02/2010: Crude prices fall as Dollar soars against Euro and YenDollar hits 7-mo high v. yenJapanese investors looking for returns abroad in Q2

•03/06/2010:03/06/2010:The dollar touched a month low against the yen due to selling by Japanese exportersFalling long-term U.S. interest rates Expectations for weak U.S. jobs data.

• Industry Comparison• Management Effectiveness

– Worst than the Industry– Industry in very bad shape too– Beta:

• BIR: 2.53• Industry: 1.23

• Peer Analysis– 2nd in terms of employees– 8th in terms of Market Cap– 13th in terms of Net Income

WorstWorst

Worst

• Analyst Opinion : Sell– Bar Chart:

• Bearish– Yahoo!

• BearishOn a long term the

BEARISH is stronger,

which indicates that the Bank will

collapse.

4 indicators out of 6 are BEARISH

Our Case 2/25/2010

• Issued 184 million new shares to the Government

• Transfert 200 million shares to the Government

Worst Case 4/16/2010

• 56% increase in impaired loans

Best Case 3/1/2010

• Frank Fahey wrong on the banks - again

(Inaccurate analysis of the state’s taking of a 15.7% shareholding in Bank of Ireland)

-0.49%

0.11%

-1.13%

• Asset Allocation– 79% AAA– 3% AA– 11% A– 7% BBB

• Top Holdings

• Top Sectors

• Risk VS Return– Average Risk– High Return

• Beta = 0.52 Industry = 0.75

• Treynor Ratio: 4.66• Sharpe Ratio: 0.35

• Diversified Portfolio • Low Risk which fit our strategy

• 04/08/2010:04/08/2010: Loan Agreement for Greece

• 04/09/2010:04/09/2010: Last Day of Stocktrak

• 02/08/2010:02/08/2010: Impact of European Debt Issues (Greece & Portugal) Dow Jones down by almost 104 Points

• 03/23/2010:03/23/2010: Stocks and Indexes rose on more Stocks and Indexes rose on more signs of growthsigns of growth

$2,242$2,242

$2,729

($975)

• Management– Tenure

Wise Dynamism Mix

• Category & Investment Style– Mid-Cap Growth

• $2 billion < x < $10 billion Mkt Cap.

– Mid Growth

• Risk VS Return– Above Average Risk– High Return

• Asset Allocation

• Top Holdings

• Top Sectors

• 04/08/2010:04/08/2010: Loan Agreement for Greece

• 04/06/2010:04/06/2010: The Federal Reserve Minutes

• 04/05/2010:04/05/2010: ISM Non-Manufacturing Index (55.4/54/53)

• 02/08/2010:02/08/2010: Increasing Regulations in the Financial Sector Impact of European Debt Issues (Greece & Portugal)

• 02/04/2010:02/04/2010: Disappointing Earnings Unexpected Increase in Jobless Claims Growing Concerns about Budget Deficits (Greece, Spain, & Portugal)

• 04/08/2010:04/08/2010: Loan Agreement for Greece

• 04/06/2010:04/06/2010: The Federal Reserve Minutes

• 04/05/2010:04/05/2010: ISM Non-Manufacturing Index (55.4/54/53)

$11,056

-$3,586

$11,056

• Bond Pepsi Co. : – Coupon Interest Rate: 4.65% – Maturity: 02/15/2013– Corporate bonds: higher risk than

government bonds which means higher interests

– We choose it because PepsiCo delivered solid results for fiscal year 2009

•03/08/2010:03/08/2010: Pepsi Co to Buy Back shares Up to $15 BillionPepsi Co to Buy Back shares Up to $15 Billion

•03/06/2010:03/06/2010: Pepsi Co reaffirms its growth target Pepsi Co reaffirms its growth target

• 03/16/2010:03/16/2010: Hugh Johnston To Succeed Richard Goodman Hugh Johnston To Succeed Richard Goodman As PepsiCo Inc.'s Chief Financial Officer As PepsiCo Inc.'s Chief Financial Officer

• 03/22/2010:03/22/2010: Pepsi Co announced its expected growth rate Pepsi Co announced its expected growth rate between 11% and 13% for 2010between 11% and 13% for 2010

• 03/01/2010:03/01/2010: PepsiCo Inc. Completes Acquisition Of The Pepsi Bottling Group, Inc. And PepsiAmericas, Inc.

• 02/29/2010:02/29/2010: Announced a quarterly dividend

0,95%$8,909.00

-0,89%-$8,313.00

2,07%$19,580.00