Saturday, April 27, 2019

The Investment Returns Remain Strong for Marquette's AIM Equity Funds (through the week ended 4/26/2019)

The AIM Small Cap and International Funds posted gains for the week and continue to run well ahead of the benchmarks for 2019

Technology-related stocks posted strong returns for the week ended 4/26/2019. Over the past year the AIM Small Cap Fund has outpaced the Russell 2000 Index by over 800 bps (returning 11.93% versus 3.58% for the benchmark).




A Current AIM International Equity Holding: ICON Plc (ICLR, $138.49): “ICON is no longer an icon as it continues to fall” By: Clarissa Vazquez, AIM Student at Marquette University


ICON Plc (ICLR, $138.49): “ICON is no longer an icon as it continues to fall”
By: Clarissa Vazquez, 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.
Summary:

  Icon Plc (NYSE: ICLR) is a Global Contract Research Organization, that specializes in the strategic development, management, and analysis of programs that support Clinical development.

• Icon Plc generates revenue from Ireland (41.1%), United States (34.5%), and the remaining from China, Germany, and the United Kingdom. The company was founded in 1990 and is headquartered in Dublin, Ireland.

• Icon Plc is at risk of share loss into 2019. Its customers are starting to use data-driven patient recruitment strategies. Which is leading to the expectation of ICLR’s book-to-bill to underperform that of IQV (who is leading data-driven competitor).

  Icon Plc reached its long-term margin target. ICLR was in an expansion period for 6 years and saw a 200 bps of expansion per year on average. ICLR is currently at the top of the industry’s margin range. They will reach a plateau for the margin capabilities. 

  ICLR’s long-term guidance assumed that there will a be a stable backlog conversion. The conversion has been on a consistent decline for 15 years, but it is expected that within the next five years this trend will slow down.

  ICLR is currently in line with 2019 growth estimates of 7-8%, which indicates that there will be stable-to-accelerating growth. Wall Street expectations is for deceleration in the coming future.

• Icon Plc has grown since being added to the AIM portfolio on April 12, 2013, for $30.66 and is now currently trading at $138.49 showing a 351.70% increase from the initial purchase price.

Key points:

Icon Plc released Quarter 4 earnings call on February 21, 2019. Icon Plc reported a revenue increase of 3.6% of organic growth [ml2] which was a $24 million increase. Icon Plc continues to reaffirm guidance of revenue in the range of $2,560 - $2,640 million and earnings in the range of $5.98 - $6.12. Along with that, they repurchased $72 million worth of shares in Q4 2018. Icon Plc full year financial guidance is expected to be US dollar to Euro exchange rate of $1.16. Along with an effective tax rate of circa 12%. ICLR has decided to build its patient recruitment by investing in site networks such as buying PMG’s site network (they will not be outright owning the sites themselves but rather it will be more of an alliance). Also, ICLR uses data analytics from public sources such as TriNet, EHR4CR, and EH2EDC (they currently do not own their own data). ICLR believes this method will allow for more patients to enroll at each site which is 37% of sites under-enrollment.

Icon Plc updated their fiscal year 2019 guidance. Icon Plc’s low guidance for EPS in 2019 is expected to be in a range of $6.69-$6.89 growth of 11.49% at the midpoint.

What has the stock done lately?

Over the past 12 weeks, ICLR has seen a change of 3.50% trading at $133.80 on January 16, 2019, and $138.49 on April 10, 2019. However, the company released Q4 earnings in February and upon doing so, the stock declined 10.81% from $142.15 on February 21st to $128.28 on March 8th.

Past Year Performance:

ICLR has a 52 Week H/L of $153.75- $116.09. They were trading as high as $153.75 in September of 2018 and as low as $116.09 at the beginning of April, representing a change of 32.4%. As stated above, the company has since seen an increase in price throughout the last year, but now is in the mid-range from where the stock price has been in the past. Overall, Icon Plc is up 19.30% YoY as they were trading at $116.09 on April 10, 2018, and are now currently priced at $133.80.



         Source: FactSet

My Takeaway:

In terms of stock price, ICLR is facing some issues on gaining margins in the coming future and is starting to see a decline in the stock price. Also, management is not able to deliver future growth compared to before. Looking forward, ICLR will be staying constant but will not be seeing the extreme growth opportunities that they have experienced before. ICLR’s CEO, Steve Cutler, stated that being in this line of business you must “… be aware of potential threats… along with potential opportunities”. The Biotech industry is a huge distributor in their field currently and they must learn to adapt to this new revolution quickly or they will be behind compared to their competitors. As of right now, they have not done anything to show that they are working with the “potential opportunities”.

The 11th Set of Spring AIM Program Student Equity Pitches on Friday, April 26th in the AIM Room and at Janus Geneva Capital

AIM Class of 2020 Student Equity Presentations 
Friday, April 26th
Watch the rebroadcast on Marquette AIM YouTube Channel



The eleventh set of spring AIM student equity presentations for the Class of 2020 were held on Friday, April 26th, 2019, at 10:00am CST in the AIM Room.  
   
Follow the link below to access the student equity write-ups.  You can also find every write-up since AIM's inception in 2005 here.



StudentCompanyTickerFund/Sector
Brandon ShanklinRedfin CorporationRDFNFinancial Services 
Luke SmrekNovartisNVSInternational Healthcare
Connor JonesKeane Group, Inc.FRACEnergy
Chez DaggsEvolent Health, Inc.EVHHealthcare
Danny SmerzWillis Towers WatsonWLTWInternational Financial Services

  • Location: Marquette University, College of Business Administration - Straz Hall, 1225 W. Wisconsin Avenue, Milwaukee 53233 -  Room 488 (pdf directions to Marquette)
  • Presentation Times: 10:00 to 10:50 a.m. CST


If you are unable to attend in person, you can always view them LIVE via YouTube HERE.



    A Current AIM Small Cap Equity Holding: Vicor Corporation (VICR, $31.08): “Data Center Disruption” By: Sean Halverson, AIM Student at Marquette University


     Vicor Corporation (VICR, $31.08): “Data Center Disruption”
    By: Sean Halverson, 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.

     Summary

    Vicor Corporaton. (NYSE:VICR) is a designer of components and power systems that are built to convert, regulate, and control electric currents.  

    • The company has developed a 12V to 48V converter that is being used in data centers and supercomputers to enhance their operational capabilities.

    • Struggles with the impact of tariffs on imports by China created headwind for the company on the backend of 2018.

    • The company experienced weaker demand because of the “softening” in data center spending in China.

    Key points:

    Even with the unexpected issues at the end of 2018, Vicor’s backlog grew by 41% and management believes that bookings are going to increase in Q2 and Q3 of 2019. They are strong believers that their converters and Power-on-Package solutions are going to bring the company a lot of success in creating a faster, more efficient data center. 

    As discussed within the Q4 earnings call, the company has enabled their 48V technology to save 60 to 70 watts of power per processor. This is an extreme amount of savings in power and is bringing an increase in the speed within the data center. The CEO, Patricio Vinciarelli, commented that the automotive market is demanding the change to 48V. This can create a battery within vehicles that will increase fuel efficiency by 10% or more.

    VICR is moving quickly towards what they are calling, “4G control”. In 2019, the company is going to have a more developed point-of-load solution that is incorporating an RFM front-end. This essentially means that this newer 4G model will become more cost effective with higher performance attributes. With these advancements, the company recognizes the potential of reaching an additional $10 million in revenue over the course of the next year.

    Vicor’s management is still very firm in their belief that they are holding a technology that nobody can compete with. Their ability to convert from 12V to 48V will eliminate the need for excess wiring and space within the data center. Currently, NVIDIA is utilizing Vicor’s technology in their newest supercomputer, the DGX-2. There is strong evidence of the company becoming a serious disruptor in the computing environment. 

    What has the stock done lately?

    After the Q4 release in February of 2019, the stock had dropped 10.8% due to the headwinds with China. However, a majority of the issues was within the rescheduling of orders. These are expected to be fulfilled in 2019 and should hopefully reassure shareholders of a more positive outlook. 

    Past Year Performance:

    At January 5th of 2018, the stock was at a share price of $19.90. The price at the end of the year was at $37.52, an 88.5% increase. Total revenue was up 25.4% on a year over year basis and their “Advanced Product” revenue was up 36.8% between 2017 and 2018. 




    Source: FactSet

    My Takeaway:

    There is no question that Vicor has been developing an innovative technology that will be extremely hard to compete with. They currently recognize that they have no competition when it comes to their 12V to 48V converters. Additionally, with a rapidly growing backlog and a 50% increase in capacity to their largest facility, Vicor is going to be positioned to be very successful in the coming years. It will take a good portion of Q1 and Q2 of 2019 to smooth out the issues with China, but this obstacle will be obsolete once the company is at its strongest. VICR is the true definition of a disruptor and it will be interesting to see the results of the first quarter in 2019.



    Source: FactSet



    Friday, April 19, 2019

    Marquette AIM Equity Student-Managed Funds Weekly Performance as of 4/19/2019



    Healthcare stocks took a beating in the US for the week following stronger support for 'Medicare for All' following Bernie Sanders televised town hall event

    Image result for bernie sanders medicare for all
    'Medicare for All' talk spooked healthcare stocks this week

    • Healthcare companies' shares slumped after the CEO of UnitedHealth, the nation's biggest health insurer, warned about "Medicare for All" politics in a company earnings call. 
    • UnitedHealth's CEO David Wichmann said that a Medicare-style single-payer program would cause a "wholesale disruption" in healthcare.
    • Investors seem more spooked that Medicare for All, backed by Sen. Bernie Sanders and other Democratic presidential candidates, could supplant private health insurers.



    Wednesday, April 17, 2019

    A Current AIM Small Cap Equity Holding: Steven Madden, LTD. (SHOO, $33.75): “A Shoo-In Stock, Only Time Will Tell” By: Nathan Zirpolo, AIM Student at Marquette University

    Steven Madden, LTD. (SHOO, $33.75): “A Shoo-In Stock, Only Time Will Tell”
    By: Nathan Zirpolo, 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.

     Summary

    Steven Madden, LTD. (NYSE:SHOO) designs and sells private label and name brand footwear, handbags and accessories for both men and women. They operated through e-commerce and retail stores within the United States, Mexico, Canada and joint ventures in South Africa, China, Europe and Taiwan.

    • SHOO saw YoY net sales growth of 13% and a 31% diluted EPS increase in 2018. 

    • The stock is currently trading with a P/S and P/B of 1,76 and 3.39 respectively, significantly better when compared to their peers.  

    • Management has indicated that its main priority is to continue to expand their product into international markets

    • SHOO saw net sales grow nearly 20% in 2018. This is following a mid-teen percentage increase in the prior fiscal year.

    Key points:

    After surviving the turbulent fourth quarter of FY 2018 paired with the lack of notable news regarding the tariff war with China, Steven Madden remains ‘in play’. The company was originally pitched in late November of 2018, with drivers that included brand development, international expansion and mitigated tariff costs due to reduced production costs in China. In the fourth quarter, the company delivered better than expected results, producing both top and bottom line growth YoY.
    In 2018, the company saw net sales increase in international markets, an increase of 22% from the prior year. This was led by strong increases in Canada and Mexico, paired with 40% revenue growth in the firms SM Europe joint venture. When pitched, a key driver was the expansion in international markets, both in store and online, that would lead to top line growth. As stated in their fourth quarter earnings call, the firm states their top priority is to continue to grow their international markets.  

    In 2015, the frim acquired Blondo, an innovative waterproof brand to further expand their markets and strengthen their reputation as a firm who offers creative and high-quality products for affordable prices. In Q4 FY18, net sales for Blondo increased more than 50% for the year, proving that products that are both waterproof and fashionable will continue to resonate with consumers.  

    Finally, Steven Madden continues to move production out of China. As of Q4 FY18, the firm has approached 50% of all production impacted by the tariffs moved out of China and into Cambodia. The other 50% of taxed product are receiving price concessions, as forecasted in the originally pitch. Between redistributing their products to other overseas distributors and receiving price concessions from Chinese manufactures, Steven Madden has mitigated the effect of the tariffs to only impact 10% of their products.

    What has the stock done lately?

    As of April 11, 2019, Steven Madden has seen a 7.43% gain over the last 52-week trading period. Year-to-date, the stock has increased 9.58%, while seeing a 2.31% gain over the past month. The company has seen an average trading volume of 555.86K shares over the past three months.  

    Past Year Performance:

    Since being purchased at $30.93 in late November, Steve Madden has seen recent volatility, with the stock price falling to $27.93 on December 24th, yet regaining their market cap in the first two months of 2019. Both the December decline and the following recovery can be attributed to the market, however their beta has declined from .98 in late November to their current beta of .58.

    1 Year Graph:


    Sources: Tableau, Yahoo Finance

    My Takeaway:

    As stated in the investment statement policy, a stock is added to the portfolio with a time horizon of 3-5 years. As a firm who was pitched in late November, it is recommended that the Marquette AIM program continues to hold the stock until the drivers presented in the originally write up run their course. As stated above, the firm is starting to see initial effects of the three drivers, with both international markets and acquired brands seeing double digit sales increases in 2018. Due to this, it is pivotal that Steven Madden is not sold due to possible minor discrepancy that could slightly effect the stock’s price in the short term. 


    1 Month Graph:


    Sources: Tableau, Yahoo Finance



    Tuesday, April 16, 2019

    Silvercrest to acquire Cortina Asset Management

    Silvercrest Asset Management Group, an investment adviser, has agreed to acquire Milwaukee-based Cortina Asset Management LLC, a Milwaukee-based asset manager

    NEW YORK, April 15, 2019 /PRNewswire/ — Silvercrest Asset Management Group Inc. (NASDAQ: SAMG) (the “Company”) today announced that Silvercrest Asset Management Group LLC (“Silvercrest”) has entered into a purchase agreement to acquire substantially all of the assets of Cortina Asset Management, LLC (“Cortina”), an independent asset management firm based in Milwaukee, Wisconsin, managing $1.7 billion in small cap growth equity strategies.
    Founded in 2004 by a highly regarded team of investment professionals, Cortina’s disciplined investment philosophy and process is unique to the marketplace, achieving highly successful results throughout market cycles. The Cortina Small Cap Growth and SMID Growth Strategies employ a “thematic based” approach to investing in vibrant and innovative growth companies. The Cortina Small Cap Opportunity Strategy utilizes a “franchise company” framework to capture established industry leaders with strong and growing cash flows.
    “We have long sought the right partner to establish an innovative and high-caliber growth equity capability at the firm,” said Richard R. Hough III, Chairman and CEO of Silvercrest. “Silvercrest seeks to combine strong intellectual capital within a supportive partnership culture to benefit institutional and individual investors alike. We found terrific professionals at Cortina who are committed to their investment craft, to each other and to our partnership. We are excited to support their special talent and to further support and enhance their strategies in the marketplace, setting the stage for our next phase of growth.”
    “In Silvercrest, we found a client-driven firm that acts and thinks just like us,” said John Potter, a Founding Principal of Cortina. “Solidifying our boutique investment management practice for our clients is our singular focus. We are delighted that we will invest, trade and service client assets in the same manner as we have since 2004. With Silvercrest, our investment team will enjoy deeper research resources and greater scale. As important, our employee-owner culture will seamlessly meld with the Silvercrest partnership model that works tirelessly for and with clients.”
    Silvercrest was advised by Raymond James | Silver Lane and the law firm of K&L Gates LLP. Cortina was advised by Park Sutton Advisors and the law firm of Quarles & Brady LLP.
    ABOUT SILVERCREST
    Silvercrest was founded in April 2002 as an independent, employee-owned registered investment adviser, and as of December 31, 2018, Silvercrest reported $19 billion in assets under management on behalf of family and select institutional clients. With offices in New York, Boston, Virginia, New Jersey, and California, Silvercrest provides traditional and alternative investment advisory and family office services to wealthy families and select institutional investors.


    From BizJournal

    Cortina Asset Management to be sold to New York's Silvercrest for $44.9 million


    Cortina Asset Management LLC of Milwaukee entered a purchase agreement to sell its assets to New York-based Silvercrest Asset Management Group LLC for $44.94 million. 

    Silvercrest announced its acquisition plans Monday in a press release and regulatory filing.

    Cortina, founded in 2004, manages $1.7 billion in small cap growth equity strategies. In 2011, the firm expanded into New York City. At the same time, the company launched the Cortina Small Cap Value strategy and the Cortina SMID Value strategy. 

    Cortina was the 19th largest investment manager in the Milwaukee-area last year, ranked by assets managed from the local office as of Dec. 31, 2017

    Silvercrest said in a news release that it views Cortina’s investment philosophy and process as unique to the marketplace. The Cortina Small Cap Growth and SMID Growth Strategies use a “thematic based” approach to investing, Silvercrest said. 
    The Cortina Small Cap Opportunity Strategy uses a “franchise company” framework to engage established industry leaders. 

    John Potter, a founding principal of Cortina, said in the release that Silvercrest is a client-driven firm that acts and thinks the same as Cortina. 

    “Solidifying our boutique investment management practice for our clients is our singular focus,” Potter said. “We are delighted that we will invest, trade and service client assets in the same manner as we have since 2004. With Silvercrest, our investment team will enjoy deeper research resources and greater scale.” 

    Richard Hough III, the chairman and chief executive officer of Silvercrest, said his company had long sought a partner to establish an “innovative and high-caliber growth equity capability.” 

    “We found terrific professionals at Cortina who are committed to their investment craft, to each other and to our partnership,” Hough said. “We are excited to support their special talent and to further support and enhance their strategies in the marketplace, setting the stage for our next phase of growth.” 

    Silvercrest was founded in 2002 as an independent, employee-owned registered investment adviser, according to the release. As of Dec. 31, the company reported $19 billion in assets under its management. 

    Marquette students are busy preparing for the CFA Institute Research Challenge (Americas Regional and Global Finals April 23-25, 2109)

    Marquette AIM students again advance to regional finals of CFA Research Challenge


    Five students from Marquette University’s Applied Investment Management program have advanced to the regional finals of the Chartered Financial Analyst’s Institute Research Challenge. The CFA Institute’s Americas regional competition is April 23-24 in New York City. The Global Challenge will be held on April 25th.


    CFA Institute Research ChallengeAmericas Regional and Global Final

    23-25 April 2019
    New York, USA
    Teams from 53 local level competitions will move on to the regional event to compete for the title of Americas Champion. Teams will randomly be assigned to one of two Americas sub-regions and compete within those sub-regions to determine two Regional Champions. Prior to the semifinal round, a team of CFA Charterholders will grade the written reports, and these scores (along with the semifinal presentation score) will determine which teams advance to the regional finals. Following the semifinal round, scores will be based on presentation only. The two Americas Regional Champions will advance to the Global Final on 25 April to compete against the winning teams from the Asia Pacific and EMEA regions.
    Venue:
    New York Marriott Marquis
    1535 Broadway
    New York, NY
    10036
    Event Registration
    All attendees must register here.
    Marquette's CFA Research Challenge Team Members;
    Michael Healy, Stephen Lane,Andrea Blomquist, Gregory Glaab, Tommy Borin
    CFA Institute is the global, not-for-profit association of investment professionals that awards the CFA and CIPM designations. We promote the highest ethical standards and offer a range of educational opportunities online and around the world.

    The CFA Institute Research Challenge is an annual, global competition that provides university students with hands-on mentoring and intensive training in financial analysis. Students work in teams to research and analyze a publicly traded company and then write a research report on their assigned company with a buy, sell, or hold recommendation.


    Fifty-six teams from throughout the Americas will compete for the title of Americas Regional Champion. The two winning teams will advance to the Global Final on 25 April to compete against the Asia Pacific and EMEA Regional Champions.

    Agenda Overview:
    23 April 2019
    • 3:30pm: Registration and Exhibits Open
    • 6:00pm: Welcome and Kickoff Meeting
    • 7:30pm: Opening Reception

    24 April 2019
    • 8:00am: Americas Semifinal Rounds
    • 12:00pm: Lunch
    • 1:00pm: Advancement Announcement
    • 2:00pm: University Affiliation Program Overview
    • 3:15pm: Research Challenge Volunteer Session
    • 4:30pm: Americas Regional Finals
    • 8:00pm: Regional Final Celebration

    25 April 2019
    • 10:00am: Rise Against Hunger Community Service Activity
    • 3:00pm: Global Final
    • 7:30pm: Global Final Reception

    Details

    • When

    • Tuesday, 23 April, 2019 - Thursday, 25 April, 2019
      15:30 - 21:30
      Eastern Time
    • Where

    • New York Marriott Marquis
      1535 Broadway
      New York, New York 10036
      USA

    Saturday, April 13, 2019

    A Current AIM Small Cap Equity Holding: LendingTree (TREE, $365.09): “Growing like Weed” By: Ryan Dahlen, AIM Student at Marquette University


     LendingTree (TREE, $365.09): “Growing like Weed”
    By: Ryan Dahlen, 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.

    LendingTree, Inc. (Ticker: TREE) engages in the operation of online loan marketplace for consumers seeking loans and other credit-based offerings. It provides mortgage loans, home equity, reverse mortgage, auto loans, credit cards, personal loans, student loans, and small business loans. The company was founded Douglas Lebda in April 2008 and is headquartered in Charlotte, NC.

    • LendingTree is one of the nation’s leading online insurance marketplaces.

    •Although, LendingTree had another terrific year, TREE finished Q4 with a non-GAAP EPS of $1.22, missing earning by $0.25.

    • Record revenue from non-mortgage products of $156.2 million in the fourth quarter represents an increase of 67% over the fourth quarter 2017 and accounted for 77% of total revenue.

    • Mortgage revenue of $46.5 million declined 31% compared to the fourth quarter 2017, driven by a decline in refinance revenue.

    Key points: 

    LendingTree remains strong with its estimates for 2019, with their revenues estimated between, $1,010- $1,045 million representing growth of 32%-37% over 2018. Variable Marketing Margin is expected to be in the range of $385 - $400 million, up from prior range of $365 - $385 million. Adjusted EBITDA is now anticipated to be in the range of $205 - $215 million, up from prior range of $195 - $205 million, and representing growth of 34% - 40% over 2018.

    Since the new year, the FED has announced that the interest rates will not rise soon and with the drop-in expectations of rates, combined with reduced capacity and competition for LendingTree provides a bit of external stimulus to lender profitability. The company is optimistic that this will help them return to sequential growth in their mortgage segment.

    As for the company’s credit card business across the My LendingTree platform, there are tremendous opportunities. Although, still in the early stages with revenues less than $1 million, the company has already generated $600,000 in January and are confident that their efforts will provide sustained growth throughout 2019.

    The company is seeing a 40% year-over-year increase in direct-to-site loan requests, a 43% life in branded SEM loan requests, and a 17% increase in loan requests in SEO channels. LendingTree is making every effort to make sure their goals are hit, launching several TV spots focusing on a variety of different loan and credit products.

    The acquisition of ValuePenguin, who’s business was 80% insurance, LendingTree is confident that QuoteWizard clients will benefit from the high-quality content.  The company is hoping that ValuePenguin acts as a catalyst for QuoteWizard in the marketplace with carriers and agents in order to increase their revenues.

    What has the stock done lately?

    Over the past three months, LendingTree has seen their stock increase 56% while the Russell 2000 only saw a 13% increase. A major catalysis for the stock price was the complement of the company’s acquisition of ValuePenguin as well as exercising the option to acquire Dubond Infotech Services, LLP for $449k.

    Past Year Performance: 

    TREE has increased 15% in value over the past year while the Russell 2000 has seen 3% increase. LendingTree has a P/B multiple that has increased from ~8x to 13.58x while their PE multiple is at 53.6x according to FactSet. 


    Source: FactSet

    My Takeaway:

    LendingTree has made acquisitions and has proven successful over the past months. With continued focus on developing their platform and fulfilling their acquisitions, the company is in strong financial state and is positioned very well to benefit in the future. FinTech remains an attractive investment theme for the remainder of 2019 and beyond.  


    Source: FactSet