Monday, February 29, 2016

43rd AIM Equity Update by Travis Mantel. Prudential Plc (PUK). "Not a Piece of the Rock, But Acting Like It"

Prudential Plc (NYSE: PUK, $33.81):
“Insurance Giant Hitting Small Markets”
By: Travis Mantel, AIM student at Marquette University

Image result for prudential plc

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.


Prudential Plc. (NYSE:PUK) operates as a holding company with units that provide insurance and financial services.  Their products include life insurance, pensions and annuities, and a collection of investment schemes.  Their international exposure includes the UK (39.3%), the United States (35.7%), China (10.6%), Japan (4.7%), and many other smaller markets.

• Prudential has seen a lot of growth over the past five years due to both organic and inorganic means.  Most notably, PUK has grown profits by 12% YoY for the past five years.

• Prudential is well positioned to take advantage of the growing middle classes and high economic growth potential in emerging markets.

• The EU has passed regulation (Solvency II) that was implemented in 2016 that called for higher reserves for insurance companies, and Prudential had no compliance issues with Solvency II.    
• Prudential has seen a decrease in stock price in recent weeks due mostly to the volatility in the financial markets and investor skepticism in Asia.

Key points: Prudential Plc has experienced tremendous growth over the past five years.  They have grown profits by 12% YoY during that period and have down so through both organic and inorganic means.  Even with this growth, PUK has recently been under pressure due to their exposure to Asian markets.  With 10.6% of their revenues coming from China, they have been hurt by China’s plan to cap the use of UnionPay bankcards for the purchase of overseas insurance products at $5,000 each time.  That being said, they continue to show potential for growth in emerging markets.

Prudential has been able to get exposure to emerging markets through acquisitions.  Most recently they have entered the Zambia life insurance company by acquiring Professional Life Assurance (Zambia’s fourth largest life insurance company).  Prudential is targeting emerging markets because these markets are expected to grow at a more rapid rate than developed markets.  Also, emerging markets have continued to grow their middle classes, which is the target customer for PUK.  

In 2009 the EU had been pushing for a new regulatory framework for insurance companies.  The Solvency II regulation was finally passed and implemented in January 2016.  This regulation called for higher surpluses and better risk management for insurance companies.  Prudential Plc is compliant with this and have enough liquidity to deal with debt obligations through 2019.  The new regulation has not affected Prudential like it has many other smaller insurance firms in the EU.  Management mentioned that they would not be surprised if more regulation was passed for insurance companies, but nothing is on the table at this point.

What has the stock done lately?
Prudential Plc has been beaten down in recent weeks due to their Asian exposure.  The stock dropped about 10% on February 2, 2016, due to slowing growth and investor distrust in China.  They currently are trading at two year lows due to the volatility in the markets and troubles in China.  Since the beginning of 2016 Prudential has dropped 25%; however, once the markets stabilize, they are well positioned to grow.

Past Year Performance:
Prudential has decreased 31.7% in value over the past year, but with their current market position, PUK is a bargain.  PUK has seen a 52-week high at $52.60 and a low of $32.20.  They continue to pay a dividend that yields 3.5%.  

  Source: FactSet 

My Takeaway
Prudential has been beaten down in 2016, but will experience a rebound once the markets stabilize.  They are a very acquisition-heavy firm, but that has set them up well to profit on under-penetrated markets.  PUK is definitely a great buy right now because of how cheap it is selling and will be selling closer to the 52-week high once they have the opportunity to capitalize on their many recent transactions. 

Past Month Performance

Source: FactSet

42nd AIM Equity Update by Patrick Sanchez. Volaris (VLRS) "The Southwest Air of Mexico?"

Volaris (VLRS, $20.09): “Vuela con Volaris”
By: Patrick Sanchez, 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.


Volaris (NYSE:VLRS) is a Mexican low-cost airline that operates in Mexico and internationally. The company engages in the provision of air transportation services for passengers, cargo, and mail.

• The firm has positively been impacted by the current price and availability of oil. Fuel is Volaris’ largest operating expense (aprox. 40%). If commodity prices remain low, growth will continue.  

• Economic turmoil in China and internationally hasn’t affected demand for flights due to the company’s focus on operations in Mexico and North America.

• Volaris will benefit from the modernization of the bilateral air service agreement. The agreement is aimed at improving intermodal rights and pricing flexibility among Mexican and American airlines. This contract entered into effect on 01-Jan-2016.

• The stock has reached its all time high following outstanding year over year results.

Key points: Volaris continues to be a solid position in the AIM International Equity Fund. Volaris is Mexico’s second largest airline behind Aeromexico with a growing market share of over 23% of domestic traffic. Volaris continues to be the leader in Ultra-Low Cost Carrier (ULCC) business model in Mexico, which has allowed for significant growth while maintaining a low CASM over the last five years. The firm continues to improve its workforce flexibility and reduced costs while simultaneously improving product offerings.

In January 2016, VLRS reported solid results. Demand measured in Revenue Passenger Miles (RPMs) reached $1.2B (31% increase YoY), and total passengers for the month increased 32.2% YoY. Capacity increased 23% YoY to 1.364B available seat mile (ASMs) in both domestic operations and 20.5% YoY internationally. VLRS’s load factor increased from 80.01% to 85.9% YoY for domestic flights, and an 88% load factor for international operations.

On February 22, 2016 Volaris announced financial results for the fourth quarter and full year 2015. Highlights include an increase in total operating revenues of 29.5% YoY,  EBITDA margin expansion of 5.7% YoY, and an increase of 12.3% YoY in operating income margins. Volaris’ EPS for 4Q15 produced a positive surprise ($0.38 vs. $0.27) proving the company’s uniform fleet, high asset utilization, and focus on direct sales.

What has the stock done lately?
Recently, the stock has shown volatility as the rest of the market. For February 2016, the stock has continued to see volatility but has managed to trend in a positive direction and is +18.6% for the month. Positive results have caused an increase in investor demand and have lead to rating upgrades. The rapid depreciation of the peso against the US Dollar appears to have found a level of stability, which is expected to improve margins moving forward. The stock currently sits at $20.09 and has reached an all time high.

Past Year Performance: Since added to the AIM International Fund in December, 2015 the stock is +12.36%. The headwinds surrounding international currencies have affected Volaris much less on a relative basis. These fluctuations in currency have only resulted in short term gains and losses and have not significantly affected the core of the business. The stock continues to appear undervalued based on its P/E multiple of 20x compared to an industry average of 33x.

Source: FactSet

My Takeaway
Volaris continues to outperform its peers as it has taken advantage of the consolidation of the traditional legacy network airline industry by implementing solutions aimed to reduce their cost structure and gain market share.  CEO, Enrique Beltranena is a firm believer that economic indictors suggest that there is much expansion potential remaining in the Mexican aviation market. Volaris results are a combination of operational excellence and its niche focus on the ULCC market. If the company continues to open new segments at the same rate (22 new routes in FY15) the stock could reach new highs in the near future.

Source: FactSet

Reminder about an Opportunity from the CFA Institute for Students to Learn about Careers in Finance. Join the CFA Forum Livestream Event on Thursday, March 3, 2016

CFA Institute
Careers in Finance Forum 
Students should participate in the livestream event:
The Forum is designed for undergraduates and postgraduates to learn more about the professional opportunities that the finance industry offers and how to pursue a successful career within it. CFA Institute will share information on its educational programs, before inviting a panel of practitioners who completed those programs to share their experiences working in the industry. This will be followed by a panel of recruiters who will advise the students on what they look for when hiring. Throughout the session, there will be a focus on women in investment management and why it's important to increase diversity in the industry.
Date: Thursday, 3 March 2016
Time: 12:00 p.m. EST (5:00 p.m. GMT)

Please click here to start the livestream.
CFA Institute

Saturday, February 27, 2016

41st AIM Equity Update by Daniel Fernandez. HollySys Automation Technologies Ltd. (HOLI): “HOLI Schneikes - This Firm Faces Some Challenges”

HOLI (HollySys Automation Technologies Ltd.): “When (or If) Chinese Stocks Come Back in Favor, Keep Your Eye on HOLI”
By: Daniel Fernandez Guerra, student at Marquette University

Image result for hollysys logo

Disclosure: The AIM International 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.


HollySys Automation Technologies Ltd. (NASDAQ: HOLI) engages in the provision of automation and control technologies and applications in China (77.3%), United States (5.9%), Japan (1.6%), Brazil (0.8%) and Western Europe (3%).

• Small-cap stocks have become a primary attraction for investors for 2016 as analysts expect low returns from the S&P.

• HollySys Automation Technologies remains highly liquid and has experienced an expansion of its margins recently.

• HOLI has some delayed projects that have caused revenue to slow. However, when these projects are fully implemented, they will become the basis of the company as it would ensure its growth and competitiveness.

• HollySys Automation revenues increased 17.3% in FY2016 Q2 compared to FY2015 Q2

• The company’s stock hit an all-time 52-week low price of $15.00 on January. HollySys has been affected by the underperforming numbers that China presented compared to analysts’ expectations.

Key Points: HollySys has been on a tightrope due to the current uncertainty of the Chinese economy and the weakened currency. The significant slumps in their stock price since December 29, 2015 has been a reflection of the ambiguity in the country. Shares went down from $22.59 to $15.29, 32% decrease in less than a month. This decline can be seen as a clear reflection for investors that are slowly staying away from small to mid-cap Chinese companies.

On February 4, 2016 the company announced its earnings call for Q2 2016 results. Despite the stock price dramatic decline, HOLI reported solid numbers. Total revenues were $152.77M compared to $125 in the previous quarter. Net Earnings reached $32.95M, almost 14M higher than the same quarter of last fiscal year. Earnings per Share (EPS) stayed consistent at 0.54, similar to the past three quarters. An outstanding figure was the widened of the gross margins, going from 37.08% to 39.65% compared to the same period last year. Lastly Operating EBITDA scale almost 6%, being at 20.36% from 14.51%.

The company’s earnings growth was inclined by improvements from one year to another in gross margins from 37.08% to 39.65% as well as better cost controls. Management has shifted its focus to start working on expanding for new Railway Transportation products and technologies such as track circuit which would make potential revenue contribution in the near future. Along with this, management has stated their intentions to gain market share in the High Speed Rail market as it has become the principal contributor for their total revenues.

What has the stock done lately?
HollySys has been investing in several projects and contracts to its different segments in order to increase the market share. The power segment has maintained stable, HOLI has been able to sing large and important contracts that create large number of high-level generator units. In regards to the Railway Transportation segment which accounts for the largest portion of its revenues ($63.8M in Q2), HollySys signed a large contract to provide Automatic Train Protection equipment and system to China Railways Corporation which is expected to make a large revenue impact in short-term. 

Lastly, a key catalyst for the stock price will be the performance of the Industrial Automation segment ($54.2 M) that due to the weak macro environment, the IA business experienced a revenue contraction. Analyst believe that this trend could continue through the rest of the fiscal year given the strong backlog for the rail segment (50% of total excess 2QFY16) and weak IA sales trend.

Past Year Performance: HollySys Automation Technologies was bought at $23.49 on May, 2015. The company is currently trading at $17.74, representing a -25% decrease in value since it was added to the international portfolio. Most analyst have been given a price target to HOLI of ~$30, and they have not make adjustments despite the poor performance of the stock. The reason for the recent unfavorable performance can be attribute to the unexpected slowdown in China as well as in the railway market, and to its slow overseas expansion.

Source: FactSet

My Takeaway

HollySys Automation Technologies' revenues comes primary from China (77.3%) which represents a big risk for the company. China’s economy has entered into a slowdown stage and has been continuously devaluing its currency in order to stay worldwide competitive. The lack of diversification can be one of the biggest areas of improvement for the company. However, despite the tough conditions that the company is facing, management has followed a strategy that consist on developing aftersales and services which has been successful and has continuously helping to take a larger percentage of their revenue.

The AIM Seniors Pitched 5 Stocks on Friday Afternoon Before a Packed Room of Marquette Finance Students

Marquette Students Deliver the Fourth Set of AIM Presentations for the Spring 2016 Semester on Friday, February 26, 2016
Wenting (Mavis) Peng, Mark Lakowske, Robert Uhland, Daniel Fernandez, Brendan Duffy
Over 50 students attended the equity pitches delivered in the AIM Room on Friday, February 26th. The five AIM student presentations also were viewed on-line via a webcast by more than 20 alumni and parents across North America.
Daniel Fernandez

These presentations also included the opportunity for real-time micro-blogging (via Twitter). During the AIM student equity pitches on Friday more than 20 questions and comments were posted at #AIMpitch at the @MarquetteAIM Twitter site.

Wenting (Mavis) Peng
The presenting students have the opportunity to respond to the questions over the weekend before the students vote on whether or not to add the stocks they pitched.

The student equity pitches have always been one of the main highlights of the AIM program. 
The opportunity for students to actively manage domestic and international equity portfolios has been an important part of Marquette AIM program’s experiential learning.
The AIM students who presented on Friday included:
·         Daniel Fernandez (Grupo Televisa, TV, International Telecommunications) 
·         Brendan Duffy (Bank of the Internet, BOFI, Financial Services)
·         Mark Lakowske (Cracker Barrel Old Country Store, CBRL, Consumer Staples)
·         Wenting (Mavis) Peng (Lazard Ltd., LAZ, International Financial Services)
·         Robert Uhland (Nutrisystem, Inc., NTRI, Consumer Discretionary)
Their AIM equity write-ups can be accessed at:

Copies of all student presentations since the inception of the AIM program can be viewed at the AIM web site.

Friday, February 26, 2016

Societe Generale’s Guido van Hauwermeiren was today’s guest speaker at the Financial Management Association event

Guido van Hauwermeiren, Societe Generale’s Head of Coverage and Investment Banking - Americas' Region, was today’s guest speaker at Marquette’s Financial Management Association gathering. He spoke to a group of more than 100 finance students.

Guido van Hauwermeiren and Dr. David Krause
Dr. David Krause, AIM program director and finance professor at Marquette, and Martha Wong, FMA co-president, began the meeting with an overview of the group’s upcoming events this spring. Notably, the FMA will be hosting an April 29th field trip to Chicago – and the students were updated about spring FMA officer election.

Mr. van Hauwermeiren, a multi-talented financial professional, who speaks 6 languages, talked about his work experience. He has worked on 4 continents, and has successfully managed teams in North America, Western Europe, the Gulf region and South Africa. Prior to working at Soc Gen in New York, he was an executive at BNP Paribas and Cetelem, when he started consumer finance businesses and retail banking operations in China, Russia, Algeria, Vietnam, Ukraine, and Turkey.

Guido van Hauwermeiren
Guido van Hauwermeiren
He talked during his speech about his international experiences. Guido emphasized the importance of understanding different cultures and working with people of different background.  to bring out the best in people through mentoring and encouragement has been his key to success.

Mr. van Hauwermeiren talked about a variety of current issues including the geo-political situation in Europe and the impact of post-2008 regulatory reforms. He noted that the banking industry is changing – and that students’ abilities to adapt to change is vital to their success.

After his presentation he took time to talk with numerous students about career opportunities. Dr. Krause said, “It was marvelous to have Guido join us today. He serves as an inspiration to many people and I know the students befinited from his visit. We look forward to again visiting Societe Generale’s  facility in October when the FMA makes it annual New York City trip.”

News Release from the CFA Society of Madison about the 2016 CFA Investment Research Challenge Results

From the CFA Society of Madison's Blog

  • ​CFA Society Madison announced today that Marquette (Team 1) has won the local competition of the CFA Institute Research Challenge and now advances to the Americas Regional where it will compete against universities from the United States, Canada, and Latin America.
    The Marquette team consists of Conor Connelly, Michael Reardon, Paul Tran, Ryan Woo, and Joanne Wycklendt. The team’s faculty advisor is Dr. David Krause, Ph.D and their Industry Mentor is Travis Keshemberg, CFA of Wells Fargo.

  • Each university sent a team of four to five students to participate in the local challenge. The CFA Society Madison Local Challenge was the first step of two for a local team to advance towards the global final in Chicago. The students from Marquette will now travel to the first-ever “super regional” where they will match their wits, analytical skills and presentation abilities against teams from around the world. All three regional competitions and the Global Final will take place the week of 11 April 2016 in Chicago.

  • The students presented their analysis and buy/sell/hold recommendations on ManpowerGroup (ticker: MAN).  Their presentation at the Local Finals was the culmination of months of research; interviews with company management, competitors, and clients; and presentation training.

  • Comments from the Team’s Advisor Dr. Krause
    “I'm very proud of the students who participated in the CFA Challenge. Both teams from Marquette worked extremely hard and I was delighted with their work quality. The experience and the friendships they established will stay with them throughout their careers. I can't say enough good things about the CFA Challenge - it is truly one of the best experiential programs in academia. Best of luck to all of the teams in the Challenge."  

  • Michael Reardon, Ryan Woo, Joanne Wycklendt, Paul Tran, Conor Connelly​

Thursday, February 25, 2016

View the 4th Set of Marquette AIM Student Equity Pitches for the 2016 Spring Semester on Friday, February 26th at 2:00 CST (and join us on Twitter)

You Can Join the AIM Program Student Equity Presentations on Friday, February 26th at 2:00 pm CST  

The AIM student equity pitches take place each Friday afternoon during the semester – either in the AIM Room or at a local investment company. The students prepare and distribute a professional equity write-up (note: every AIM write-up since the inception of the program in 2005 is archived here). 

This week’s equity write-ups can be found at:

Student PresenterCompany NameTickerSector
Daniel FernandezGrupo TelevisaTVInternational Telecommunications 
Brendan DuffyBank of the InternetBOFIFinancial Services
Mark LakowskeCracker Barrel Old Country StoreCBRLConsumer Staples
Wenting (Mavis) PengLazard Ltd.LAZInternational Financial Services
Robert UhlandNutrisystem, Inc. NTRIConsumer Discretionary

The students are responsible for making a five-minute pitch before their peers, faculty and any alumni or investment professional in attendance (note: the Friday afternoon equity presentations are also webcast live - see below on how to join the webcast).

Following the student’s pitch the floor is opened for questions and answers for about ten minutes. This has been highly instructive as the students must be prepared to defend their investment recommendation and answer questions in an extemporaneous manner.

How to view the AIM Student Equity Presentations on February 26, 2016:

How to comment using Twitter:

Go to the MarquetteAIM Twitter account (you can use Search Twitter on your site) and click Follow

During AIM presentations, go to #AIMpitch and follow the tweets (discussion) on Twitter (it will also be appearing on the Rise Display Board in the AIM Room and on your smartphone)

Tweet your comments and questions during the AIM equity pitches and remember to:

    • Follow the rules of etiquette for using Twitter during AIM pitches
    • Use the hashtag #AIMpitch to start each tweet
    • Use $TICKER (note: this is called a cashtag and it be should the unique ticker/symbol for the stock that is being presented, ex: $TSLA)
    • Keep you comment short because each tweet is limited to a maximum of 140 characters
    • Example for Tweeting on a student’s Tesla equity pitch (note: the ticker for Tesla is TSLA):
      •  #AIMpitch $TSLA How do lower gas prices impact demand for electric cars?