Thursday, October 27, 2016

Marquette University 2016 Presidential Election Economics and Finance Panel Discussion

Marquette University 
Economics – Finance Pre-Election Panel Presentation and Student Q&A

Date: Thursday, November 3, 2016
Time: 3:30-4:45 pm
Location: DS 105

Join Marquette and Canisus faculty members and alumni for an economic and financial analysis of the upcoming presidential election. What have we learned from the candidates about their positions on economic and financial issues? How unique is this election cycle? What are the implications for equities and fixed income markets? How might the election (and its outcome) affect US and global markets?

  • Joseph Daniels, Chair and Professor, Economics, Marquette University

  • Christian Bartley, Managing Director, Faleiro (International Trade and Development), Washington D.C.
  • John Davis, Professor, Economics, Marquette University
  • David Krause, Director Applied Investment Management & Assistant Professor, Finance, Marquette University
  • Kathryn Wagner, Assistant Professor, Economics, Marquette University
  • Richard A. Wall, Vice President of Academic Affairs and Professor of Economics and Finance, Canisus College

An AIM Equity Fund Holding: LeMaitre Vascular (LMAT) by Joe Mungenast. “A Soft Buy on LeMaitre for the Time Being”

LeMaitre Vascular, Inc. (LMAT, $19.94): “Has This Vascular Company Stopped Pumping?”
By: Joe Mungenast, AIM Student at Marquette University

Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.

Image result for lemaitre vascular logo

 ·         LeMaitre Vascular Inc. produces medical devices that specialize in the treatment of peripheral vascular disease. LeMaitre produces balloon catheters, carotid shunts, biologic patches, radiopaque marking tape, and vascular grafts, among other components.

·         Based in Burlington, MA, LeMaitre was founded in 1983 by George D. LeMaitre. His son, George D. LeMaitre, is the current CEO and Chairman.

·         LeMaitre just reached its all-time high on the market in September, hitting $22.50. It has since drifted down to $20, where it has floated for nearly a month. An earnings release on October 26 will generate the most movement since LeMaitre’s 52-week high.

·         LMAT remains a strong buy to analysts, while the consensus estimate is $20.25.

LeMaitre Vascular Inc. (LMAT) was originally pitched as a micro-cap to the AIM fund. Since it was added in October 2015, LeMaitre has shown strong core growth as it emerged in the small-cap area, well exceeding the target price of $15.55. The majority of this stock’s increase has from beating estimates, particularly this past quarter.

LMAT is to release its Q3 earnings report on October 26, and Wall Street is anticipating very strong YoY growth of 16.54% for revenue and 39.09% for EPS. This is nothing new to LeMaitre, as they have experienced extremely positive EPS and revenue growth in Q2 from the expansion of its product line. LeMaitre’s products cater to a growing global population of those affected by peripheral artery disease (PAD). According to the CDC, roughly 8 million people in the US suffer from this disease, with a growing emphasis on patients over the age of 60. From 2000 to 2010, researchers in the US and UK found that PAD had grown by nearly 24%. 

Currently, PAD affects every 1 in 10 people over the age of 70, and 1 in 6 over the age of 80. Beyond the US – and in global markets where LeMaitre is pursuing – areas of weaker economies such as Southeast Asia have seen rampant growth in this form of heart disease. While all LeMaitre products have nearly been approved in the UK and US, only a third are allowed to be sold in Asia, pending further approval. While the market for expansion of LMAT’s products appears to be fruitful, the company’s success depends heavily on approval of their products abroad and whether or not it can compete with larger competitors.

What has the stock done lately?

In mid-September, LeMaitre achieved its all-time high of $22.50. This greatly contrasts its 52-week low of $12.03 in February, showing a doubling of the stock price in just over two quarters’ time. The company’s strong operating performance has been the reason for such positive growth over the past few months, and the company currently holds no debt.

Past-Year Performance: LeMaitre has seen quite a bit of movement this year, with most of its growth coming from the past two months. After closing out the 2015 fiscal year around $17.75, the stock had a steady decline into February before reaching its 52-week low of $12.34. After a volatile March, LeMaitre was stagnant until it beat Street estimates for its 2Q performance, jumping from $14.63 to $17.89 in late July before peaking to $22.50 in September.

 Source: FactSet

My Takeaway
 LeMaitre is sitting on excellent growth opportunities in the future, but its PEG ratio of 2.68 is one of the primary concerns for at least the next few years. It is my belief that analysts will start to drift more towards soft buy recommendations as this company’s dollar-to-earnings growth becomes less and less undervalued to the market, especially considering recent earnings beats. From a macro perspective, this company will be considered a strong buy once its products are approved overseas and LMAT can better utilize its pricing power (70% gross margin) against difficult peer competition in this healthcare space.

Tuesday, October 25, 2016

This week the AIM students learned about SRI and Catholic responsible investing from representatives of Christian Brothers Investment Services

 Christian Brothers Investment Services  (CBIS) 
Promotes Socially Responsible Investing

Image result for christian brothers investment services
On Monday, October 24th, Dr. Krause and the students in the AIM program heard an excellent presentation about socially responsible investing (SRI). Representing Christian Brothers Investment Services were Julie Tanner, Director of Catholic Responsible Investing; Tim Schwarzenberger, Head of Portfolio Services; and Tom Kelly (AIM alumnus), Portfolio Specialist, Distribution Services Team

Christian Brothers Investment Services (CBIS) is a Catholic socially responsible asset management firm. Founded in 1981 by the De La Salle Christian Brothers, CBIS works exclusively with Catholic institutions and their fiduciaries. They offers services to numerous dioceses, colleges and universities, religious institutes and health care systems. They currently manage over $6 billion in assets globally and have offices in the U.S. and Europe (New York, Chicago, San Francisco and Rome).

Julie Tanner, Tim Schwarzenberger,
Tom Kelly, and Dr. David Krause
Christian Brothers uses Catholic beliefs as the basis of their ongoing corporate dialogues, encouraging companies to create long-term strategies and policies that potentially reduce investment risk and increase shareholder value.

Dr. Krause said, “Christian Brothers is a manager of managers. In other words, they engage third parties to actively sub-advise the assets in their portfolios. They offer two product lines: US-domiciled, commingled funds and Ireland-domiciled global funds for Catholic institutions in select countries around the world.

The AIM students learned that CBIS’ primary investment philosophy is to deliver highly competitive risk adjusted investment returns in a manner consistent with the moral and social teachings of the Catholic Church. They believe that they successfully utilize investors who can generate favorable long-term risk-adjusted performance and support the conviction of Catholic responsible investing. Their process is to utilize Catholic investing screens to avoid companies providing products or services that violate Catholic teachings.
Image result for christian brothers investment services tanner
Julie Tanner, Director,
Catholic Responsible Investing

Examples of key issues that could exclude firms from their portfolios include those that produce or engage in providing the following: abortifacients, contraceptives, embryonic stem cell research, human cloning, fetal tissue research, pornography, major weapons manufacturers, producers of landmines, manufacturers of firearms, tobacco products, etc.

Their process involves reviewing company researchand creating a list of prohibited companies to their sub-advisers. They employ a diverse range of strategies to implement their Catholic responsible investing program which includes screening and activism.

By active ownership of the shares of firms that do not meet their standards they engage in some or all of the following activities: corporate engagements, shareholder resolutions and proxy voting.

Image result for christian brothers investment services Tim Schwarzenberger
Tom Kelly
Dr. Krause commented, “It was great to see Tom Kelly and I am pleased that he was able to bring his colleagues to campus. The AIM students engaged in a discussion with our guests from CBIS about socially responsible investing (which is an investment strategy which seeks to consider both financial return and social good).  They were very interested in learning more about ESG investing – which is the incorporation of environmental, social and governance factors into traditional financial analysis. It was an excellent presentation and the AIM students are likely to not only select companies with strong financial performance prospects, but also those that are ESG leaders in their respective industries.”

After the class, Mr. Bill Walker (AIM Adjunct Lecturer) and I met with Julie, Tim and Tom to discuss ways that the AIM program can work SRI practices into the investment curriculum. Krause summarized, “This was an excellent presentation and I know that the students are committed to making sound investment decisions that consider both financial return and social good – it is consistent with our mission and values at Marquette University.”

An existing AIM Fund holding: Open Text (OTEX) by Taylor Smith: “Acquiring Optimism in OpenText”

Open Text Corporation (OTEX, $63.81): “Acquistitons Instill Optimism about OpenText's Future”
By: Taylor Smith, AIM Student at Marquette University

Image result for open text logo

Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.


Open Text Corporation (OTEX, $63.81) is a software company that provides products and services that assist organizations locating, utilizing, and sharing business information from different devices. Its solutions include digital asset management, enterprise content management, cloud, business process management, content management and legal.
• OpenText announced 4 acquisitions expected to generate $300 million in annualized revenues in 2017
• The company will Acquire Dell’s Enterprise Content Division for $1.62B, expecting to improve its Vertical Offerings, Managed services, and more.
• Management has also agreed to acquire CCM from HP for $315 million, expecting to enhance its selection of software solutions and multi-channel customer engagement
• OTEX has appreciated 130% in share price since being added to the AIM portfolio in 2008

Key points:
Adequate would be the most appropriate word in describing Q4 2016 financials for OpenText. Revenue totaled $484 million, up 0.2% Y/Y with demand concentrated in license and cloud segments. Highlights included an increase in Cloud revenue by 5% Y/Y, non-GAAP Operating Margin of 33%, and Operating Cash flow reaching $119 million. However, the quarter overall still marked pivotal for the company, primarily through the announcements of agreed acquisitions. 

Over the past ten years, OpenText has put intense focus on strategically acquiring companies to grow its cash flows. Since 2006, Operating Cash Flow has increased from $61 million to $526 million, yielding a 24% CAGR. This past quarter, the company displayed its interest in continuing the strategy by announcing four acquisitions that are expected to add approximately $300M in annualized revenues for 2017.

On September 12, OpenText announced a definitive agreement to acquire Dell’s EMC Enterprise Content Division to improve its vertical offerings, managed services, customer base, and geographical coverage. The acquisition was priced at $1.62B, which is 2.7 times ECD FY15 revenue of $599M. ECD accretion to earnings is expected to take place immediately and is targeted to add to the operating model within the first 12 months. Management is confident with the play and released a statement describing their expectations: “This acquisition further strengthens OpenText as a leader in Enterprise Information Management, enabling customers to capture their Digital future and transform into information-based businesses.”

The company also agreed to another acquisition in June, this time regarding the the CCM (Customer Communications Management) division from HP, which will include HP Exstream, HP Output Management, HP TeleForm, and HP LiquidOffice for customer communications management, process automation and document delivery solutions. The price is set at roughly $315 million with accretion to earnings expected by the end of Q1 2017. The acquired solutions are expected to bring in between $110 and $125 million in annualized revenues.

What has the stock done lately?
Since Quarter 4 results came in during July, the stock has appreciated 7% - a very solid increase in roughly a three month span. The growth is assumed to be from optimism based off of the announced acquisitions in the Q4 results. Investor confidence did however temporarily drop after the Citi 2016 Global Technology Conference in September, demonstrating a decrease in 5.8% overnight but recovering almost immediately.

Past Year Performance:
OpenText has experienced an annual increase of 37% in value, a remarkable comeback after the stock had dropped 39 percent the year prior. Multiple sources have the stock marked as a discount. The company has also announced a buy-back of up to $200,000,000 of its common shares, displaying confidence for continued growth in share price.

Source: FactSet

My Takeaway
OpenText has maintained an extremely strong foothold in the information technology industry. Since added to the International AIM Fund, the stock has appreciated 130%, showing inarguable excellence thus far. Based off of the firm’s success with growing cash flows from acquisitions over the past ten years, and its strategy to continue acquiring companies, I believe this company is on pace to only continue its growth and success.

Monday, October 24, 2016

Marquette's Dean of the College of Business Administration, Dr. Brian Till, Traveled with Dr. Krause and the Finance Students to New York City During Fall Break

Dean Till joined Dr. Krause and Jeff Germanotta – along with 26 Marquette finance students – for the 13th NYC trip!

Fall 2016 NYC Trip Members (at 30 Rockefeller Center)
Dr. David Krause (Director of Marquette’s Applied Investment Management program) and 26 finance students were joined during their annual New York City trip by the COBA Dean, Dr. Brian Till. In addition, Finance Lecturer, Jeff Germanotta, also accompanied Dr. Krause and the students as they visited investment banks and asset managers this past week. 

Dr. Krause said, “The students and I appreciated having Dean Till and Mr. Germanotta 'embedded' with the troops during our NYC experience. They traveled with us to all stops – grabbing pizza on the go, riding the subway and fighting through the crowds during rainy weather. I know the students appreciated their involvement.”

Marquette students in Times Square
Krause added, “Michele Galioto, Marquette’s Regional Advancement Director in New York was also with us the entire time. Michele is invaluable given her understanding of NYC and her close work with our New York based alumni. She also played a valuable role in making the trip a success again.”

Everyone stayed in the heart of Times Square at the Novotel Hotel and enjoyed the close proximity to major New York attractions. “While we were busy almost the entire time with visits to major investment banks and asset management firms, we still found time to view Central Park, Rockefeller Center, Grand Central Station, 5th Avenue, and other landmarks,” Krause added.

The visits on Wednesday afternoon included stops at Morgan Stanley and Bank of America Merrill Lynch. “We had another good visit with Steven Holtkamp, Berent Kowarick and Brendan Mahon of Morgan Stanley’s Private Wealth Management group. We also had an opportunity to hear from their campus recruiter about internship opportunities. It was a good first visit and allowed the students an opportunity to hear from three alumni close in age to them,” Krause commented.

Manhattan - the center of the financial universe
The group next proceed to nearby Bank of America Merrill Lynch. This was a special visit with John Barrett as he provided access to two high level capital market and investment banking speakers. The students then had an opportunity to discuss a case study with Mr. Barrett, Tom Kruse and Ross Michler - all Marquette alumni. 

Dr. Krause said, “Our alumni at BoA/ML put together a fantastic visit. Besides the presentations of two very senior executives, the case study was a great idea. I know that John Barrett and Jeff Germanotta had conversations about this prior to the visit – and it paid dividends. This was a great way to connect the different functional areas within the bank.”

While Dean Till, Dr. Krause and Mr. Germanotta were attending a dinner on Wednesday evening with 15 Marquette alumni, the students had an opportunity to relax and explore the restaurants in nearby Hell’s Kitchen. Given that many had been up since 3:00 am – there were probably a decent number of students that turned in early.

Marquette students at 30 Rock in Manhattan
The first visit on Thursday morning was at BNP Paribas. Notable alumni at the firm include Rick Broeren, Louis Moran, Monica Raciti, Hendrik van der Zandt, Connor Muth and Jack Casey. "Claire Cerni again did a tremendous job organizing the visits and BNP remains one of the students’ favorite NYC visits," according to Dr. Krause.

After visiting the Paris-based global investment bank, the students hustled across mid-town Manhattan (stopping for pictures at Rockefeller Center) to learn about private wealth management at Citi Private Bank. 

Marquette has many prominent Marquette alumni with Citi including Dan Williams, Robert Leonard, Ann Eberle Thomas, Adam Bordner, Ryan Bailey, Kevin Lane, Colin Canfield and Clermond Jean. Nearly every year since 2005, the Marquette students have been hosted by Citi during the fall visit and this year’s group had a chance to learn about the inner workings of Citi Private Bank. 

The 2016 Marquette NYC Experience
Again on the move, the group headed down Park Avenue to JP Morgan. Current Marquette alumni at JPM include Gerry Madigan, Ryan Loftus, Christina Starkey, Alex Ibrahim, Demetrius Liston, Mariano Sanz and Vanessa Foltinger Garcia. Christina Starkey hosted a large group session and the students had an opportunity to learn firsthand about the firm and the five different functional areas represented at the gathering.  

Times Square view
from the Novotel Hotel

The group then headed further down Park Avenue to visit FactSet Research Systems. The AIM program is a subscriber to FactSet and Greg Romais and other personnel provided an overview of the FactSet platform. The students had an opportunity to view a demonstration of the newest features of the firm’s financial software and data services.

The final site visit of the day was at the Americas’ headquarters of Societe Generale. Guido van Hauwermeiren was the host and he was joined by Dan Alon, an AIM alumnus, and other key members of the capital markets and investment banking teams. The students also were treated to a visit of Soc Gen's trading floor.

Dean Till waits for our subway
to lower Manhattan
Societe Generale, another Paris-based bank, then hosted this year’s Marquette Finance Student & Alumni Reception. Dr. Krause, , Dean Till and Megan Carver, Associate Director of the Kohler Center for Entrepreneurship, provided insights about new developments at Marquette. 

Dr Krause said, “We were pleased to be the guests of Guido van Hauwermeiren and Societe Generale. It was a wonderful evening of Marquette fellowship and celebration. We are fortunate to have the support of many great friends and alumni – it was a fantastic networking event for the students and young alumni.”

On Friday morning the students and Dr. Krause started the day at Balyasny Asset Management (a major hedge fund), located at the corner of 5th Avenue and 59 Street – a famous location in the heart of Manhattan. Scott Schroeder is a current Marquette trustee and a co-founder of BAM – and along with Jack Sullivan, an analyst and AIM alumnus – organized the event. 

Jack Sullivan explained his role and responsibilities as a consumer goods analyst and then proceeded to bring in numerous speakers to talk about the different functions within the hedge fund, including portfolio management, risk management, business development, and data analytics. Dr. Krause said, “Many of the students indicated to me after the visit to Balyasny that this was one of the major highlights of the trip. The firm’s culture is very unique – with an enormous amount of collegiality and cooperation. You could see that people at BAM genuinely enjoy working there and function well as a team.”

2016 Marquette NYC Trip Members (at the NYSE in the rain)

Unfortunately the skies of New York opened up at that point and the students had to sprint to nearby Bloomberg. Breaking into small groups, the students were taken on a tour of the global  media and financial services giant.  The AIM program is a Bloomberg subscriber and Cody Clarkson served as the host demonstrating the newest features and functions of the information system. 

Image result for tom keene
Bloomberg's Tom Keene
The students had a special treat as they had an opportunity to interact with Tom Keene, Editor of Bloomberg News. The Marquette students then had the opportunity to travel to one of the top floors of the famous NYC skyscraper and view Central Park – which was spectacular even during the rainstorm.

Dean Till embedded with the Marquette students
in NYC subway system
Next the students had to navigate the NYC subway in order to reach lower Manhattan. Upon exiting at the Wall Street station, they were greeted by another downpour – and after the annual visit to the New York Stock Exchange and the Wall Street bull – the students scattered for shelter with most heading directly to RBC Capital Markets – the next investment bank on the schedule. 

Dr. Krause and a group of students attempted to brave the weather and view various lower Manhattan landmarks (i.e. Battery Park, Statue of Liberty, Ellis Island and the World Trade Center memorial); however, they eventually sought shelter at the food court in the RBC building. The alumni hosts at RBC included Jason Spacek, Leslie Vowell, Michael O’Carroll, and Colleen Osborne. This meeting again afforded the students an opportunity to learn more about different functions areas of a major investment bank.

After this visit the students returned via subway to the Novotel Times Square where they enjoyed their free time. While most hit the town during the rest of the evening, they were in the lobby early on Saturday morning and on their way to LaGuardia Airport and back to Milwaukee by early afternoon.

New York skyline at sunset
Dr. Krause said, "This was again another outstanding trip – and it was all made possible through the support of our NYC Marquette alumni group. In addition to the yeoman’s pre-visit work done by Michele Galioto, we’d like to thank Dean Till for joining us this year." 

"We are all extremely thankful for this special opportunity to visit NYC. Our alumni are fantastic – they go out of their way to open up their firms and allow our students to experience the workplace and corporate culture - it is an amazing opportunity for our students. I know for some that this visit is a career altering event," Dr. Krause said.