general body meeting 02-29-12 1. mutual investment club of cornell welcome 2
TRANSCRIPT
General Body Meeting 02-29-12
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Mutual Investment Club of Cornell
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Welcome
3
Mutual Investment Club of Cornell
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News Updates
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General News
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Warren Buffett’s Investment Letter Succession
An unknown successor (and two backups) has been chosen
Mistakes Berkshire Hathaway has underperformed
the market over the last couple years Energy Future Holdings – a Texas natural
gas utility Gold
Avoid it Focus on productive assets
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Warren Buffett’s Investment Letter Stock buybacks
Justification for why he wants IBM stocks to “languish”
Inflation risks Bonds are risky
Buffett Rule
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Healthcare
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Retirement of Bill Weldon
CEO of Johnson & Johnson Replaced by Alex Gorksy
Previously VP and Head of J&J medical devices and diagnostic business
J&J had issued over 30 recalls since late 2009
Regulators now oversee control of operations at three plants linked to problems
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Retirement of Bill Weldon
Recalls included Adult Tylenol, Benadryl, Zyrtec, and Motrin
Also: HIV medicine Prezista and Epilepsy pill Topamax
Weldon will continue to serve as Chairman
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Media/Telecom News
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Sprint Board vetoed $8 billion merger with MetroPCS
9.3 million more customers for Sprint Airwaves for faster Wireless service
Share Performance 42% decrease in share price in past 12
months Sprint CEO Dan Hesse already approved
Merger
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Two Minute Drill
Guest Lecturer:
Topic:
Zachary Peskin
Following the News
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Following the News
Television Radio Traditional News Financial Blogs Twitter Books Bloomberg Terminal
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Traditional News
WSJ Financial Times Reuters Barrons New York Times AFP AP
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Financial Blogs
The Big Picture - http://www.ritholtz.com/blog/
Calculated Risk - http://www.calculatedriskblog.com/
MACROFUGE - http://macrofugue.com/ VariantPerception -
http://blog.variantperception.com/ DealBook -
http://dealbook.nytimes.com/ DealBreaker - http://dealbreaker.com/
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@FT @BloombergFX @BloombergRates @TheEconomist @WSJ @B_Eichengreen @gregmankiwblog @dealbook @WSJDealJournal @BloombergNews @PIMCO @nytimeseconomix
@BloombergNow @BW @tomkeene @MarketWatch @ZipperTheory @ConvertBond @JamesGRickards
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Sears Holdings
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Results
Roughly 40% loss in two weeks
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Sears Holdings
What in the world is going on?
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Sears Holdings
Earnings Recap Expectations: $0.67 Earnings: $0.54
19% Earnings Miss
“Our poor financial results in 2011, culminating in a very poor fourth quarter, underscore the need to accelerate the transformation of Sears Holdings…own 95% of Sears Canada, which also experienced very poor results, and included a change in management in mid-year.”
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Sears Holdings Spinoff
CIT Group Primary lender of Sears that extends
credit to buy inventory, operate stores Cut funding from Sears for line of credit
Liquidity Concerns These liquidity concerns led to rapid
decrease in stock price earlier in year
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Sears Holdings Spinoff
Hardware and Sears Outlet stores
Specializes in Sears’ core strengths of Appliances and Hardware Craftsmen tool line Kenmore appliance lines
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Sears Holdings Liquidation
Raised $270 million from sale of 11 stores Averages $24.5 million per store Owns 3500 stores Suggests a liquidation value above Book
Value Somewhere roughly around $70
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Sears Holdings Liquidation
Accounted for $250 million of $270 million sale
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Sears Holdings
Theories Is Sears going to be taken over by Private
Equity Premium over book value prices shares
around $70-$80 range Short Squeeze?
A short squeeze shouldn’t be this large… Volume indicates that Quant programs may
be hunting for stop limits and pushing up prices
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Sears Holdings
What to do? Monitoring each day Hold tight and stick true to thesis If being taken over, cut losses and run
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Semester Holdings Update
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13,000
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Portfolio Review
Short term rally provides us an opportunity to analyze our holdings Take advantage and lock in profits Restructure portfolio and free up assets
for other opportunities
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Hewlett Packard [HPQ]
Current Profit & Loss:
Recommendation:
-44.4%
HOLD
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Cisco Systems [CSCO]
Current Profit & Loss:
Recommendation:
-17.3%
HOLD
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Johnson & Johnson [JNJ]
Current Profit & Loss:
Recommendation:
2.5%
HOLD
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Las Vegas Sands [LVS]
Current Profit & Loss:
Recommendation:
20.3%
HOLD
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Otter Tail [OTTR]
Current Profit & Loss:
Recommendation:
-5.3%
HOLD
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Brinks Company [BCO]
Current Profit & Loss:
Recommendation:
12.3%
HOLD
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Archer Daniels Midland [ADM]
Current Profit & Loss:
Recommendation:
-11.9%
HOLD
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Proctor & Gamble [PG]
Current Profit & Loss:
Recommendation:
10.1%
HOLD
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Philip Morris International [PM]
Current Profit & Loss:
Recommendation:
104.2%
SELL
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Philip Morris International [PM] Strong run in share prices over the last few
weeks as markets have rallied
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Philip Morris International [PM]
Strong Overbought Signals Williams %R – All time high Relative Strength – All time high
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Philip Morris International [PM]Original Thesis (Purchased November 2009)
Hedge against recession Low beta International exposure
Take advantage of international cigarette consumption trends
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Philip Morris International [PM]
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Philip Morris International [PM]Comparable Analysis illustrates a fair valuation on a fundamental basis
P/E is in line with industry PEG is a bit high at 1.94
Steady cash flows have led to a steady rise as:
Strong International Growth Various expansions into further
geographic areas
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Philip Morris International [PM] Despite this potential to growth…
Tobacco Industry has many externalities Increases in Government Taxes Competition from domestic manufacturers
China National Tobacco Corp “boasts a virtual monopoly in the People's Republic of China,
which accounts for roughly 30% of the world’s total consumption of cigarettes”
Potential for tighter restrictions on Philip Morris in China
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Philip Morris International [PM]Overview
1. Technically is way overbought RSI, Williams, and MACD at all time highs
2. Fundamentally is fairly valued Fair evaluation leaves room to rise, but
doesn’t speak to any undervaluation
3. Externalities pose risks in long run Foreign regulations Increased competition
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Philip Morris International
Sell: $2,505.60Portfolio Allocation: Roughly 5% of portfolioProfit: 104.2%
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Visa [V]
Current Profit & Loss:
Recommendation:
49.7%
HOLD
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Walt Disney Company [DIS]
Current Profit & Loss:
Recommendation:
-1.9%
HOLD
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Telefonica [TEF]
Current Profit & Loss:
Recommendation:
-37.8%
HOLD
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Next Era Energy [NEE]
Current Profit & Loss:
Recommendation:
6.5%
HOLD
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Boardwalk Pipeline [BWP]
Current Profit & Loss:
Recommendation:
7.8%
HOLD
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Announcements
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Stock Competition
Investopedia Trading Simulator $100,000 in Virtual Money Full Trading Platform (Short Selling,
Options) Weekly Leaderboard Update
Game Name: MICC Stock Competition Password: Cornell
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Stock Competition
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Stock Competition
Mitch: 5.45%
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Student Assembly Campaigns
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Student Assembly Campaigns
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Brainteaser
You wake up early one morning and find the light in your bedroom is broken!
You get dressed in the dark. Your sock drawer has socks of three different colors: red, white and blue. How many socks do you have to take out to be certain of having a matching pair?