The @MarquetteAIM Funds are ahead of their benchmarks for 2020 - February has been a true applied learning experience!

The Marquette Student-Managed Equity Funds are holding up despite the market turbulence resulting from Cornonavirus

Both AIM Equity Funds are beating their respective benchmarks on a YTD basis – the Class of 2021 is experiencing their first market correction – a true learning experience

The Russell 2000 Index registered a -8.39% return in February and on a YTD basis has generated a -11.33% return. The AIM Small Cap Fund racked up a -6.80% return for the month and is off -7.88% since the beginning of the year.

	YTD 2020	February 2020
AIM Small Cap Fund	-7.88%	-6.80%
Russell 2000	-11.33%	-8.39%
Variance	+3.44%	+1.59%

The MSCI All Country World ex-US Index registered a -7.85% return in February and on a YTD basis has generated a -10.36% return. The AIM International Equity Fund generated a -9.17% return for the month and is off -9.99% since the beginning of the year.

	YTD 2020	February 2020
AIM International Fund	-9.99%	-9.17%
MSCI ACWI ex-US	-10.36%	-7.85%
Variance	+0.37%	-1.32%

Marquette University's AIM Team Wins Milwaukee CFA Investment Research Challenge and Will Participate in the Americas CFA Challenge

Marquette University's AIM Team Returns to the Americas CFA Challenge for the 10th Time in the Past 12 Years

Marquette AIM Team Wins 2020 Milwaukee CFA Institute Investment Research Challenge - Advances to Americas CFA Challenge in NYC in April

Marquette CFA Blue Team (Challenge Winners) 

Gino Piscopo, Benjamin Schmidt, Edward Eisenhauer, 

Daniel Ptacek and Connor Jones

Dr. David Krause, AIM program director stated that, "For the 10th time in the past 12 years, Marquette University will again be headed to the Americas round of the CFA Investment Research Challenge. To be clear, this is not easy – the competition is intense, and the quality of presentations continues to improve each year."

Universities and colleges that participated in the local two Wisconsin CFA Research Challenges included:

• Carroll University
• Carthage College
• Milwaukee School of Engineering
• Marquette University (2 teams)
• UW-Eau Claire
• UW-Madison
• UW-Milwaukee
• UW-Oshkosh
• UW-Whitewater (2 teams)

According to Dr. Krause, “This marks the 12th year of AIM’s participation in the CFA Investment Research Challenge. Our past teams have enjoyed great success, and each former team member echoes the value of their experience. We hosted two teams who were both excellent representatives of the AIM program - and, in fact, they were both in the running for 1st place – I was very uncertain of the judges’ outcome."  

More information about the CFA Challenge can be found at this web site: http://www.cfainstitute.org/community/challenge/.

Marquette's two teams from the AIM program in the 2019-2020 CFA Institute Research Challenge included the following:

Marquette Blue Team – Mentor Joe Hodes

Marquette CFA Gold Team: Andrew O’Neill, 

Matthew Prinske, Mary Kate Simon, 

Nicholas Goehring, and Alexander Penkwitz

Edward Eisenhauer

Connor Jones

Gino Piscopo

Daniel Ptacek

Benjamin Schmidt

Marquette Gold Team – Industry Mentor Drew North

Nicholas Goehring

Andrew O’Neill

Alexander Penkwitz

Matthew Prinske

Mary Kate Simon

Today - for the 12th year - Marquette University's AIM program will be competing in the CFA Institute Research Challenge

Marquette's AIM teams are competing in the CFA Institute Research Challenge for the opportunity to advance to the Americas Region Finals

Marquette AIM Teams will be competing locally with the hope of advancing to the Americas CFA Research Challenge which will be held in NYC in April

The CFA Institute Research Challenge offers students a 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.  

Dr. David Krause, AIM program director stated that, "We love to compete in the CFA Challenge. We’re been fortunate that we have advanced to the Americas Regional Finals 9 times over the past 11 years. I hope that tomorrow a Marquette University AIM team will again be headed to the Americas round of the CFA Investment Research Challenge."

Universities and colleges that will be participating in the local two Wisconsin CFA Research Challenges included:

• Carthage College
• Marquette University (2 teams)
• UW-Eau Clare
• UW-Milwaukee
• UW-Madison
• UW-Oshkosh
• UW-Whitewater (2 teams) 

 According to Dr. Krause, “This marks the 12th year of AIM’s participation in the CFA Investment Research Challenge. Our past teams have enjoyed great success, and each former team member echoes the value of their experience. We are hosting two teams who are both excellent representatives of the AIM program."  More information about the CFA Challenge can be found at this web site:  http://www.cfainstitute.org/community/challenge/. 

Marquette's two teams from the AIM program in the 2018-2019 CFA Institute Research Challenge included the following:

Marquette Gold Team – Industry Mentor Drew North

Nicholas Goehring

Andrew O’Neill

Alexander Penkwitz

Matthew Prinske

Mary Kate Simon

Marquette Blue Team – Mentor Joe Hodes

Edward Eisenhauer

Connor Jones

Gino Piscopo

Daniel Ptacek

Benjamin Schmidt

Objective of the Challenge: The CFA Challenges provides a solid learning experience and exposure to the real world of investments through an investment research “competition” managed by investment professionals (i.e. the Milwaukee and Madison CFA Societies). Preparation for this competition introduces the students to the multiple steps that comprise the investment process, such as investment thesis development, company valuation, competitive analysis, and “selling” of investment thesis to a demanding audience.

 

AIM 2019 team

Structure/Timeframe: The structure of the competition is identical to that used by the New York Society of Financial Analysts in their competitions. Teams at the local competitions will evaluate a company selected by the local CFA society; meet with management of that company for questions and discussion; and prepare a written analysis (initiation report) of 10 pages maximum plus exhibits and appendix. The papers will be evaluated and scored by a group of investment professionals as judges. The teams will then present their analysis to another panel of judges, who will then select the winning team at the local level. Here is the time line for this year's challenge:

AIM 2018 team

a.       October 2019: Two teams of 5 students were selected. Dr. Krause is the faculty adviser and Joe Hodes and Andrew North served as the teams' industry mentors.

b.      November 2019: The kickoff meeting was held and the subject company was introduced – Fiserv (FISV). Then in December the CFA Society arranged for the teams met with Fiserv’s CFO, Bob Hau. At this time he made a presentation to the students similar to a typical “road show” for its investors.

c.       December 2019: The teams submitted the first draft of their paper to their mentor and faculty advisor for critique.

d.      January 2020: The two teams incorporated end of year data into their analysis, continued their financial modeling and wrote their final paper. Each team submitted their final research paper to the local CFA society for judging.

e.       February 2020: Local competition are held with each team making a 10 minute oral presentation to a panel of judges followed by 10 minutes of Q&A. The panel swill select which participating team will advance to the next level of competition (Americas level in NYC).

f.       April 2020: The winning local teams compete at the Americas (against nearly 70 North and South American teams) with the competition being held in New York.

g.       April 2020: Global Finals will also be held in New York. The Global Finals consist of the winners of the three regional finals from Asia-Pacific, EMEA, and the Americas.

 

The 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 thousands of students from nearly 1000 universities in more than 50 countries.

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.

How the Challenge Works:  Local CFA Societies, 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.

Dr. David Krause, who serves as the faculty advisor of the two Marquette CFA teams stated, "I'm very proud of all the students who are participating in the CFA Challenge. Like past teams, both of our teams worked hard and delivered a quality product. This experience and the friendships established will stay with them throughout their careers. I can't say enough good things about the CFA Challenge - it is one of the very best experiential programs in academia. Best of luck to all of the teams in the Challenge."  

The Seventh Set of Spring AIM Program Student Equity Pitches on Friday, February 28th - Join Us in Person or On-Line!

AIM Class of 2021 Student Equity Presentations 

Friday, February 28th

The seventh set of spring AIM equity presentations for the Class of 2021 will be on Friday, February 28th, 2020.

   

Follow the link to access the student equity write-ups. You can also find every write-up since AIM's inception in 2005 here.

February 28th Write Ups

Student	Company	Ticker	Fund/Sector
Luca Cardamone	iRobot Corporation	IRBT	Domestic Technology
Andrew Diedrich	Western Alliance Bancorp	STAA	Domestic Financials
Joe Vitrano	Aon PLC	AON	International Financials
Joel John	NextGen Healthcare	NXGN	Domestic Healthcare
Adán Jiménez	Millicom International S.A.	TIGO	International Communication Services
Andrew Hoy	F5 Networks	FFIV	Domestic Technology

• Location: Marquette University, College of Business Administration - Straz Hall, 1225 W. Wisconsin Avenue, Milwaukee 53233 - in Room 488. 

• Presentation Times: 2:30 to 4:00 p.m. CST

• Link to PDF Student Equity Write-ups

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

A Current AIM Small Cap Equity Holding: Iridium Communications (IRDM, $31.88): “Out of This World Opportunities”

Iridium Communications (IRDM, $31.88): “Out of This World Opportunities”

By Andrew Hoy, 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:

IRDM communications has secured a position as a leader in mobile voice and data communication services using a network of orbital satellites. They provide secure and reliable network access to regions not connected via traditional land network. Iridium derives much of its revenue from the provision of data transmission for governments and businesses, and the rest from selling and servicing equipment through a network of partners.

On January 28, 2019 Iridium announced the launch of CloudConnect, their satellite cloud based IoT application solution. The product combines with Amazon Web Services to extend customers’ reach to 80% of previously unreachable territory. Bryan Hartin, executive vice president of sales and marketing at Iridium described the project as “a direct, private connection between our gateway and AWS, making it secure and redundant. This is now a premier satellite cloud-based IoT service."

The company is undergoing a financial transformation. Management has indicated their commitment to de-lever the balance sheet after IridiumNext. The project’s implementation involved taking on a significant amount of debt, much of which they refinanced near the close of FY19. To date, they have reduced their obligation to the credit facility by $199M.

As of September 30, 2019, Iridium had 1,269 million subscribers globally, representing an increase of 16% YoY. The firm is riding out tailwinds from demand for reliable remote communication services, their growing portfolio of products and services, and their broad wholesale distribution network.

Key Points:

The launch of CloudConnect is designed to realize the benefits of management’s investment in the IridiumNext project. Completed in 2019, the project replaced the company’s first-generation satellites with new ones supporting new services and higher data speeds. The project involved nearly $3 billion in expenditures and is expected to be a significant contributor to growth.

To provide stability to their cash flows, Iridium has an agreement with third-party Aireon related to hosting fees of $200 million. The opportunity with respect to Aireon is significant because the Federal Aviation Administration has recently emerged as a likely end-market. Using Iridium’s network of satellites, Aireon provides the capability to track any ADS-B enabled aircraft in real-time. The FAA began field testing Aireon’s ADS-B tracking service this quarter.

The company’s core services segment, representing over 50% of revenues, is thriving. Investor sentiment was supported earlier this year by the company’s announcement of its GMDSS certification. Global Maritime Distress and Safety System provides a safety net for mariners in emergency situations. The process to get certified involved a multi-year review and positions IRDM to continue growing its portfolio. Further, the company renewed a contract with the U.S. government for unlimited voice, data, and access to their secure government gateway.

What has the stock done lately?

Iridium was recommended as an addition to the AIM Small Cap Portfolio on November 27, 2019 at a price of $23.80, and has since risen to a $31.88 valuation representing a 33% return to date. Lately, the stock has been trending up and broke above its 52-week high around $28.00. It is volatile with a Beta of 2.11.

Past year performance:

The company’s stock has returned 29% since the beginning of 2020, nearly doubling since January 2019. It is now trading above its previous valuation levels, reflecting the market’s bullish sentiment.

Source: FactSet 

My Takeaway:

The company’s earnings announcement on February 25, 2020 is likely to reflect the realization of benefits from the renewal of government contracts, investment in IridiumNext, the company’s contract with Aireon, a broad increase in voice, IoT data, data, and hosted payload demand. The company was pitched to the portfolio with the idea that these factors would ultimately drive growth, and they continue to do so.

Source: FactSet

  

A Current AIM International Equity Holding: IHS Markit Ltd. (INFO, $80.37): “Information Overload”

IHS Markit Ltd. (INFO, $80.37): “Information Overload”

By: Sean O’Leary, 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

• IHS Markit, Inc. (NYSE:INFO) participates in the provision of information, analytics, and solutions to customers in the finance, business, and government sectors in the United States, Europe, and Asia. IHS Markit operates in four segments of business financial services, transportation, resources, and consolidated markets & solutions.

• INFO products continue to face little direct competition, in the strong ability of creating information and data set’s that are difficult to replicate. INFO has an economic Moat through having customers that don’t leave because of the high switching costs to competitor products and quality products that INFO provides.

• Transportation segment (28% of total revenue in 2019) continues to be attractive, particularly through new markets in the automotive lineup that will be boosted through the Carfax lineup that includes vehicle listing and finance-related products.

• Management has indicated that there are struggles in facing long selling cycles to secure new contracts that require high amounts of resources and long lead times.

• INFO has about 85% of revenue coming from subscriptions that represent that customers are being loyal and are sustaining relationships.

Key points: 

IHS Markit remains a stock that has upside potential. Through the three main segments of business that INFO operates in, each has potential for growth. The financial services segment (39% of total revenue) shows promise in growth though its new lineup of products that are targeting primary issuance and alternative investments that complement INFO’s existing products. The Transportation segment (38% of total revenue) is predicted to post 7%-8% average organic growth till 2024. With the automotive products expansion and increased margin INFO will see growth through this segment of business. Growth will be seen in the new agribusiness unit that will complement the alternative energy offerings that INFO has in the resources segment (21% of total revenue).

INFO could face difficulties in a bear financial market through consumers conservative mindset that reduces client’s openness to new indexes and other investor facing products. This may decrease the amount of funds available for INFO’s trading system and enterprise risk management improvements and cause slow growth in new products they are trying to offer.

Recurring fixed revenue and variable revenue is approximately 85% of total revenue in 2019. With this mind, revenue is usually stable and easy to predict. This allows for INFO to develop strong long-term relationships with its customers and with the high cost of changing to a competitor product this allows INFO to have an economic moat currently and in the future.

The acquisition of Ipreo in mid-2018 will continue to produce cross-selling opportunities through leveraging its financial services ability to sell more existing products and create new products for capital and alternative investment markets. Through the ability to have a more comprehensive suite of products INFO has more valuable offerings that are embedded into client processes and long-term contracts.  

What has the stock done lately?

Since INFO was added to the portfolio at a price of $36.50 on September 23, 2016, it has risen 120% to $80.37. INFO has been recently beating earnings estimates and about a week ago beat there Q4 2019 estimates that helped stock performance. In the past three months INFO is up 12% through strong results in the end of Q3 and in Q4 and strong market performance.

Past Year Performance: 

Since last year INFO has increased 50.95% in value. From November 2018 to November 2019 sales have increased 10.11% and net income decreased by 7.30% due to increases in the amount of taxes that were paid. Net EBITDA Margin increased by 2.35% along with operating margin (EBIT) being up 2.77% due to increased revenues and lower cost initiatives.  Enterprise Value / Sales was up 1.02 on the year representing stronger growth in market value than sale growth. Due to lower labor inflation, SG&A expenses only grew .90% compared to sales growth of over 10%, which helped improve operating income margins.

Source: FactSet

My Takeaway

IHS Markit competitive advantage in its ability to provide products and services that are hard to imitate and compete with give INFO a big advantage. With majority revenues coming from subscriptions, INFO has fixed revenues that will allow for predictable and sustainable growth. INFO has growth opportunities with new products being offered in their financial segment of business that will allow for new markets to be a part of. These new products lines could have negative side effects as well if markets and consumers outlooks are negative, INFO’s products are very cyclical and can decline with the markets. INFO has been a strong performer and has potential to still have strong growth in the near future. I recommend that IHS Markit remain in the International Equity Portfolio.

Source: FactSet