Monday, December 5, 2016

An AIM Intl Fund Holding: Cameco (CCJ) by Chengbin (Henry) Lu. "Is uranium alive and well post-election?"




Cameco Corporation (CCJ, $8.97): “Is President-elect Donald Trump going to kill alternative energy?”

By: Chengbin (Henry) Lu, AIM Student at Marquette University

Image result for cameco 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.

Summary

Cameco Corporation (NYSE: CCJ) operates underground uranium mines and produces uranium to be selling to US, Canada, and Germany. It operates in three business segments: Uranium, Fuel Services, and NUKEM.

• Since the accident at Fukushima over five years ago, people are still very cautious about the safety issue of using nuclear energy. The uranium spot price and term price have decreased 70% and 45% respectively since then.

• The weak current market for uranium is driven by the combination of weak demand and strong supply. The management is expecting to see mitigation of this adverse supply-demand relationship over the next ten years.

•Under the challenging nuclear energy environment, the company is able to achieve average realized prices for uranium above the market prices continuously and maintain a 3.4% dividend yield.

•The management is actively seeking for building long term relationship with several Asian countries including China and Japan.


Key points:

Since the Fukushima reactor accident in 2011, the nuclear industry has been a challenging area to operate. Many nuclear reactors around the world, especially in Japan, shut down and went through thorough reconstruction to ensure the safeness. In the long term, according to Cameco’s management, uranium demand is backed by steady reactor growth as the 57 reactors under construction worldwide.

Despite record-low uranium spot price, Cameco’s contract portfolio has provided good protection for the company and helped deliver a much higher average realized price. Additionally, Cameco has been continuously optimizing its cost structure including reducing operating cost and strengthening agility on the uranium supply side.  

The clean energy sector was supported greatly by President Barack Obama as the concerns about global warming and climate change. However, Donald Trump, who is the next U.S. President, would like to remove Obama administration’s Clean Power Plan (CPP). Even though this might be a concern for the consumption of clean energy going forward, it might be too early to make a reasonable projection for the clean energy path. Additionally, the cost per megawatt of utility-scale solar power in the U.S. is now lower than the cost of coal.

Currently the company is focusing on staying competitive in the market and positioning for price and operating leverage to get prepared for the rising demand in the long term.



What has the stock done lately?

Since its addition into the AIM International Equity Fund on December 2015, stock price has slipped down about 30%, which is reasonable considering the challenging macro environment for nuclear energy industry. The company’s announced its 3Q earnings at November 2 with a surprising estimation beat on higher uranium sales, the stock price has recovered more than 15% since then.


Past Year Performance: CCJ has decreased about 30% in value over the past year largely because the combination of lower average realized price and challenging uranium market. Over the last year, the stock has been as low as $7.46 in November 2016 and as high as $13.11 in March 2016. Even though CCJ does not sell uranium on the spot market, the movement of the stock price has been showing a strong positive correlation with the movement of the uranium spot price. CCJ missed the earnings estimates in the first two quarters of 2016 mainly caused by lower average realized price and flat sales volume of uranium.  


Source: FactSet

My Takeaway

After the meltdown of Japan’s Fukushima nuclear reactor in 2011, demand for uranium as the energy resource has been greatly undermined mainly because people are cautious about the safeness on using nuclear energy. In the long term, with more than 50 new nuclear reactors coming online, CCJ is well-positioned in terms of strong balance sheet and operating leverage to meet to uranium demand.





                                     

Saturday, December 3, 2016

Marquette AIM and FMA Students Visited Chicago This Past Week

Over 40 Marquette Finance Students Enjoyed a Full Day in Chicago 

 
Dr. David Krause, Applied Investment Management program director, (along with Bill Walker, Jeff Germanotta and Tim Brady) led a group of over 40 Marquette finance students to Chicago on Friday, December 2nd. The event, which was a joint effort of the Financial Management Association and the AIM program, was a success.  Krause said, "Thanks to the efforts of Marquette's alumni and staff in the Chicago area, the students had a wonderful experience.  This was a highlight of the fall semester for many of the students."

 Steve Marszalek, Dr. Krause,  John Bender and Jaime Rehm
at a site visit by Marquette students to Legal & General 
Following a 6:30 a.m. bus ride to Chicago, the students first had an opportunity to visit Legal & General. Thanks to the efforts of Marquette alumni including: John Bender (Chief Investments Officer), Steve Marszalek (Research Analyst, Fixed Income) and Jaime Rehm (Analyst, Investment Analytics and Reporting), the students had the opportunity to learn more about the firm’s operations in Chicago and London. They also heard from others at Legal & General on the fixed income team.

Following this visit the students will proceed to the Union League Club (65 W Jackson Blvd.) where at 10:30 they began their stock pitches. There will nearly twenty Marquette alumni who attended the pitches and were able to enjoy lunch (which was hosted by Tom Digenan of UBS). Dr. Krause said, "Unfortunately Tom Digenan had a meeting out of town during our visit - we'll catch up with him soon on campus. We are thankful for his and UBS' hospitality in helping to host the Marquette event at the Union League Club."

Here is the link to Friday's AIM pitches:  https://gallery.mailchimp.com/b996c58f08e8b00aaa936fdb2/files/AIM_Equity_Write_Ups_12_02_16_v2.pdf.
Jaclyn Godwin presented Credicorp (a Peruvian bank)
AIM Equity Presentations for Friday, December 2, 2016
Student Presenter
Sector
Company Name
Ticker

Nicholas Christman

International Financial Services

Deutsche Bank AG

DB
Casey McClelland
Consumer Discretionary
Shake Shack
SHAK
Dominic Delia
International Consumer Staples
Heineken NV ADR
HEINY
Jaclyn Godwin
International Financial Services
Credicorp
BAP
Joe Mungenast
Healthcare
Ardelyz
ARDX
Nathaniel Penn
Utilities
MDU Resources            MDU     


At 11:30 the students and alumni in attendance were treated to a working lunch and had the opportunity to hear from two prominent Marquette alumni: Jim Bianco, Presidentof Bianco Research and William Heard, Founder and CIO of Heard Capital.

Jim Bianco addressing Marquette students and alumni
Jim Bianco, a frequent guest on CNBC and Bloomberg television, he has been producing highly respected daily financial market commentaries since 1990 with a circulation of hundreds of global portfolio managers and traders. His talked on Friday focused on the major trends (i.e. passive v. active investing, algorithmic trading, dark pools, and market regulation) and was well received by the students and alumni. His talk prompted many questions and the audience and Jim engaged in a lively discussion.

William Heard provides career advice to Marquette students
William Heard, a graduate of the Marquette with degrees in Finance and Real Estate – and a key supporter of the AIM program during its creation in 2004, also addressed the group. He talked about his experiences in creating Heard Capital and elaborated on his investment strategy and philosophy. William also provided the students with excellent career advice. The students and William had a useful Q&A session about personal development, work-life balance and the importance of networking.

Nick Christman pitched Deutsche Bank
Following the student stock pitches, the group proceeded to GCM Grosvenor (900 North Michigan Avenue). Grosvenor is one of the world's largest independent alternative asset management firms, with over $45 billion in assets under management and over 450 professionals. The firm offers hedge fund and private equity investment management and advisory services to clients worldwide. It is one of the world's top discretionary allocators to hedge funds and private equity investments. 
Marquette alumni at Grosvenor include Nicholas Parrish (Director) and Varun Varma (Investment Analyst). Following an overview of Grosvenor, the students will learned more about the firm’s approach to investment advisory in the hedge fund and private equity sectors - and had an opportunity to learn about internship and career opportunities. 



Nick Parish and Dr. Krause at Grosvenor in Chicago
Dr. Krause stated, “This was another successful field trip to Chicago. I know the students in AIM and the FMA club enjoyed the visit and appreciated hearing from our alumni. 'The entire day was a success and we would like to thank all of the Marquette alumni and staff in the Chicago-area for providing these opportunities to the students. It was a high-point of the fall semester and the AIM/FMA students and I are appreciative of these opportunities."



Thursday, December 1, 2016

Access the AIM Student Stock Presentations (Friday, December 2nd, Union League Club, Chicago)

Marquette’s AIM Students Ready for Friday’s Equity Pitches in Chicago on Friday, December 2, 2016


Dr. David Krause over 40 Marquette finance students are heading to Chicago on Friday for the Fall 2016 FMA/AIM Chicago trip. A previous blog entry contains the details of the trip: http://aimprogramblog.blogspot.com/2016/11/the-annual-marquette-university-fall.html.


At 10:30 in the Union League Club there will be four AIM students’ equity presentations. At 11:30 we will provide a working lunch and we’ll hear from our keynote speakers (Tom Digenan, Jim Bianco, and William Heard).  At 1:00 there will be the final three AIM equity pitches.

The following link provides access to a pdf file of the AIM equity reports: https://gallery.mailchimp.com/b996c58f08e8b00aaa936fdb2/files/AIM_Equity_Write_Ups_12_02_16_v2.pdf.



These student presentations are an important element of the applied learning experience in the AIM program. The students conduct fundamental equity research and present their recommendations in written and oral format – with the goal of adding their stock to the AIM Equity Fund.

Your comments and advice add considerably to their educational experience and is greatly appreciated. Each student will spend about 5-7 minutes presenting their formal recommendation, which is then followed by about 8-10 minutes of Q & A.



Interested in attending? Please respond to Michael Kielczewski at michael.kielczewski@marquette.edu  or call:   (414) 288-3328.   

For additional information, please contact:

Timothy R. Brady  (Bus Ad ‘85, Law ’88)
Director of Regional Development – Chicago
Marquette University
140 South Dearborn St.
Chicago, IL  60603
T 312-739-2155  C 847-417-7323

Dr.. David Krause
Director of the Applied Investment Management (AIM) Program
Marquette University
436 Straz Hall
Milwaukee, WI  53201
T 414-288-1457
david.krause@marquette.edu





   

Marquette's 2017 CFA Research Challenge Teams Announced

Marquette University’s 2017 CFA Institute Research Challenge Teams Visited Strattec Security Corporation on Wednesday, November 30, 2016

Image result for cfa research challengeThe CFA Institute Research Challenge offers students the unique opportunity to learn from leading industry experts and compete with peers from the world’s top finance programs.  This annual educational initiative promotes best practices in equity research among the next generation of analysts through hands-on mentoring and intensive training in company analysis and presentation skills. 

The first ever CFA Institute Research Challenge competition was hosted by the New York Society of Security Analysts in 2002 and involved just five teams from the New York area. Since then, the competition has grown to involve tens of thousands of students from nearly 1000 universities in more than 55 countries.
Image result for cfa society madison 
The Challenge gathers students, investment industry professionals, executives from publicly traded companies, and corporate sponsors together locally, regionally, and globally for a real world competition.  Participation in the Challenge promotes best practices in equity research and company analysis, as students research, analyze, and report on a company as if they are practicing analysts.  Additionally, all participants are introduced to and held to the standard of the CFA Institute Code of Ethics and Standards of Professional Conduct.

Image result for cfa research challengeHow the Challenge Works: Local CFA Societies, the CFA Institute, and other organizations host and launch a local Research Challenge in conjunction with their participating universities.  The universities assemble teams of 3-5 business and finance students who work directly with a company in researching and preparing a company analysis.  The team’s final presentations are locally evaluated by high-profile panels of heads of research, portfolio managers, and chief investment officers from the world’s top firms.  The local champions advance to regional competitions in the Americas, Asia, and Europe and then to the Global Finale.

The Challenge gathers students, investment industry professionals, publicly traded companies, and corporate sponsors together locally, regionally, and globally for a real world competition.  Participation in the Challenge promotes best practices in equity research and company analysis, as students research, analyze, and report on a company as if they are practicing analysts.  Additionally, all participants are introduced to and held to the standard.


The CFA Societies of Madison and Milwaukee are proud to host the annual local level of the CFA Institute Research Challenge.  Participating universities include two teams from Marquette University, as well as teams from the University of Wisconsin-Madison, University of Wisconsin-Milwaukee, Milwaukee School of Engineering, University of Wisconsin-Eau Claire, Carthage College, University of Wisconsin-Whitewater, and the University of Wisconsin-Oshkosh. 

Pat Hansen presents to CFA Challenge students
On November 30th, the Marquette CFA teams visited this year’s subject company Strattec Security Corporation (ticker: STRT). The firm engages in the design, development, manufacture, and marketing of automotive access control products under the VAST brand name primarily in the United States. The company offers mechanical locks and keys, electronically enhanced locks and keys, steering column and instrument panel ignition lock housings, latches, power sliding side door systems, power lift gate systems, power deck lid systems, door handles, and related products. Strattec Security Corporation is headquartered in Milwaukee, Wisconsin – it also has operations in Canada, Mexico, Europe, South America, Korea, and China.
Image result for strattec

Pat Hansen, Senior VP & CFO, provided an excellent overview of Strattec. The informational session was followed by a question and answer period during which teams posed questions to Mr. Hansen.


Marquette students participating the Challenge include:
  • Andy Krueger
  • Andy Reed
  • Dan Drew
  • Jaclyn Godwin
  • Joe Kennedy
  • Martha Wong
  • Nicholas Christman 
  • Richard Bernard
  • Sarah Hillegass
  • Steve Hoffmann


Marquette's 2017 CFA Research Challenge Teams


Sarah Hillegass, Martha Wong, Richard Bernard, Andy Krueger, Andy Reed


Joe Kennedy, Nick Christman, Steve Hoffmann, Dan Drew, Jaclyn Godwin