Notice of AIM Student Equity Presentations: Thursday, November 11, 5 pm, AIM Research Room

Notice of Marquette University AIM Student Equity Presentations

Date: Thursday, November 11

Location: AIM Research Room, 4th Floor, Straz Hall (College of Business Administration)

Time: 5:00-6:00 pm first set of four presentations, 6:00-6:15 break (introduction of the AIM Class of 2012 students), 6:15-7:15, second set of four presentations

The first set of four AIM student presentations will begin at 5:00 pm and should last until about 6 pm. We will then have a 15 minute break that will allow the guests to meet the new students in the AIM Class of 2012. At about 6:15t we will start the second set of the four AIM student presentations which should last until about 7:15pm. (We understand that some guests will only be able to attend one of the two sessions).

For those interested in attending the AIM equity presentations next week, you will receive a pdf file containing the eight student equity presentations in advance of the session (early next week). If you wish to attend or want to receive the pdf file, please contact the AIM Administrative Assistant, Lee Hovorka, at: lee.hovorka@marquette.edu or call her at 414 288-8024.

The list of AIM student presenters and the stocks they will be presenting on Thursday, November 11th include the following:

(Click on table to expand)

Each student will spend about 3-5 minutes presenting their formal recommendation – which will then be followed by about 5-7 minutes of questions and answers. If you cannot attend, please feel free to e-mail Dr. David Krause, AIM Program Director, with questions that you would like asked during the Q&A period. If you have never attended an AIM Investment Advisory meeting (or it has been a few years), we believe you will enjoy the presentations.

David S. Krause, PhD
Director, Applied Investment Management Program
Marquette University
College of Business Administration, Department of Finance
436 Straz Hall, PO Box 1881
Milwaukee, WI 53201-1881
Telephone: (414) 288-1457
E-mail: david.krause@marquette.edu

Visit www.busadm.mu.edu/aim for more information.

AIM Investment Advisory Chicago “Road Show” Scheduled for November 12th

Marquette University’s Alumni team in Chicago is offering a special Applied Investment Management (AIM) Investment Advisory meeting on Friday, November 12th. If you'd like more information about the event, please contact Brian Liedlich, Managing Director, Regional Development - Midwest, Marquette University, (312) 739-2155, brian.liedlich@marquette.edu.

The first set of four AIM student presentations will begin at 11:00am and should last until about noon. We will then have a 15 minute lunch break that will be followed at 12:15pm by the second set of four AIM student presentations which should last until about 1:15pm. (We understand that some attendees will only be able to participate in one of the two sessions).

For those attending the Chicago AIM 'road show' program, you will receive a pdf file containing the eight student equity presentations in advance of the session (early next week). The list of AIM student presenters and the stocks they will be presenting include: 

(Click on table to expand)

 

Each student will spend about 3-5 minutes presenting their formal recommendation – which will then be followed by about 5-7 minutes of questions and answers. If you cannot attend, please feel free to e-mail Dr. David Krause, AIM Program Director, with questions that you would like asked during the Q&A period. We believe you will enjoy the AIM Chicago “Road Show.”

 

David S. Krause, PhD

Director, Applied Investment Management Program

Marquette University

College of Business Administration, Department of Finance

436 Straz Hall, PO Box 1881

Milwaukee, WI  53201-1881

Telephone: (414) 288-1457

E-mail: david.krause@marquette.edu

Visit www.busadm.mu.edu/aim for more information.

Two AIM Students Will Be Featured in Next Monday's Edition of the Milwaukee Journal-Sentinel's "Investment Trends"

The Milwaukee Journal Sentinel focuses on one Wisconsin money manager or analyst in its weekly feature, Investment Trends, written by Kathleen Gallagher. The goal of the weekly feature is to look at an investment trend that helps investment professionals make their decisions.

Next Monday, November 8, two AIM students will be featured in an Investment Trends article in the Journal Sentinel. Kristin Holzhauer and Mark Rutherford are the two Marquette AIM students who are the lead analysts for the industrial materials sector of the AIM Equity Fund. Kathleen Gallagher interviewed them this week for the story which will feature two of the stocks they recently added to the AIM Equity Fund.

Kathleen Gallagher is a business reporter for the Milwaukee Journal Sentinel. She has written about emerging growth companies and technology, and early stage and venture financing in Wisconsin since 1993. She also writes the weekly piece featuring an investment trend identified by a Wisconsin money manager and corresponding investment ideas. 

Dr. David Krause, AIM program director said, "We are excited that Kristin and Mark - and the AIM program - are being featured by the Journal Sentinel. Kathleen read through their investment analyses and asked thorough questions. I've always enjoyed reading the feature each Monday and I especially look forward to seeing her article next week."

Janet Rilling of Wells Capital Management Presented to Dr. Krause's Fixed Income Class Last Week

On October 25, Janet Rilling, CFA, senior portfolio manager for the Wells Capital Management Fixed Income team, presented in Dr. Krause's Fixed Income class at Marquette University. Krause commented, "Janet always does a great job in the classroom. She provides excellent content and has the experience to provide the students with practical real world examples. I've told her before that she would be an outstanding instructor - and I mean it - she connects with the students."

Janet Rilling

Janet joined Wells Capital Management from Strong Capital Management in 2005. She began her investment industry career in 1995, joining Strong as a research analyst and then becoming a portfolio manager in 2000. Prior to joining Strong, she was an auditor with Coopers & Lybrand for three years, specializing in the manufacturing and financial services industries. She earned a bachelor’s degree in accounting and finance and a master’s degree in finance from the University of Wisconsin, Madison. Janet is a Certified Public Accountant and has earned the right to use the CFA designation.

Dr. Krause continued, "Janet talked about credit analysis during his visit to campus and was able to provide examples of current credit research she was involved with. She did such a strong job in the classroom that she allowed me the opportunity to move ahead in the course syllabus. Her handout was literally the ideal template for the students as they tackle their own fixed income credit analysis project this semester. Janet was also able to talk about the current macro-economic environment and answered the students' questions about credit research, interest rates, and Federal Reserve policy. I know she was among the most impressive speakers the students have seen on campus recently. We are thankful she was able to visit us again."

Following the recent integration of Evergreen Investments into the Wells Fargo asset management organization, there were several changes for certain Wells Fargo Advantage fixed-income funds. Janet Rilling is the portfolio manager of the Wells Fargo Advantage Income Plus Fund and she is also focused on longer duration strategies for other WellsCap Fixed Income teams. 

The Wells Fargo Advantage Income Plus Fund seeks to maximize income while maintaining prospects for capital appreciation. The fund invests principally in debt securities, including corporate, mortgage- and asset-backed securities, bank loans and U.S. Government obligations. These securities may have fixed, floating or variable rates and may include debt securities of both domestic and foreign issuers. Janet's team invests in both investment-grade and below investment-grade debt securities. The Income Plus Fund has a 5-star Morningstar ranking over the most recent five year period and a 3-star ranking over the past year. The fund has over $650M in assets as of the end of the third quarter.

Brian Andrew of 1492 Capital Management Visited the AIM Program Yesterday

Brian K. Andrew, CFA, Principal, Chief Operating Officer, and Chief Compliance Officer of 1492 Capital Management, visited the AIM program on November 1. Brian has worked in the money management industry as an analyst, portfolio manager, Chief Investment Officer and business head since 1987. He has provided investment advice to individual and institutional investors through separate account, co-mingled and mutual fund investment vehicles. Brian joined 1492 Capital Management in 2008 and is responsible for the overall management of the firm including operations and compliance.

Brian Andrew

Dr. Krause, AIM program director said, "It was a pleasure to have Brian back to the AIM program. He has been a frequent guest lecturer and adds considerable value to our classroom discussions. Brian focused on valuation and the sell discipline - a very important topic that is not often emphasized in standard investment courses or texts. We spend weeks, if not entire courses, on the buy discipline; however, rarely focus on the sell process."

Dr. Krause added, "Brian talked about the two strategies that 1492 Capital management offers - their growth and value products. It was interesting for the students to hear about the different valuation processes that they follow as they consider growth and value equity opportunities. I know that the students appreciated Brian's discussion about the importance of enterprise value and earnings normalization in the evaluation process - especially in the current market environment. Another important point that Brian emphasized was the need to understand the specific industry metrics in considering investment opportunities. He did a nice job with the balance of art and science in evaluating equity opportunities."

"Brian's dissuasion about the sell discipline - and how it fits into his firm's risk management strategy - was highly useful," Krause said. "A weakness that we have experienced in the AIM program has been the lack of a strong sell discipline. We unfortunately have ridden several stocks up and then back down to their original purchase price. Using some of the risk controls and stop loss screens that Brian presented should help future AIM classes establish better discipline into knowing when to sell stocks. I think we're pretty good with the buy discipline; however, Brian gave the class some excellent insights into how we can improve the sell discipline."

Brian was the CFA mentor to last year's AIM Global Investment Research Challenge team. The team won the Wisconsin CFA Challenge and advanced to the Americas' Challenge in New York.  Krause commented, "Brian was an excellent mentor. He asked questions and got the AIM students in the CFA Challenge to think about issues that they might not have considered. Rather than tell them how to do a fundamental analysis of Brady Corporation, he asked questions that allowed them to begin to think like equity analysts. The entire team appreciated Brian's efforts to be a part of the CFA's Global Investment Research Challenge."

Marquette Finance Students Visit Daruma Asset Management

During their visit to New York during fall break, the finance students traveling with Dr. Krause, AIM program director, had an opportunity to visit Daruma Asset Management.  Dr. Krause said, "Daruma might be one of the best performing investment companies you've never heard about. Founded in 1995, they invest in a high-conviction portfolio of small-cap stocks. They are 100% employee-owned and manage funds for public and corporate pension plans, endowments, foundations and individuals. Their performance has been excellent."


Continuing to talk about Daruma, Dr. Krause said, "They practice pure active equity management by owning only their most compelling ideas - and holding for the long-term. They buy stocks with the potential to go up 50% or more over the next 24 months. And their strategy has resulted in outstanding long-term performance with an average annual portfolio turnover of about 40%."


"Their small-cap composite performance (net of fees) on an annualized basis since inception (7/28/95 to 09/30/10) has been amazing. They have earned 12.6% compared to 6.9% for the Russell 2000 Index and 6.7% for the S&P 500. The table below shows the annual returns versus the R2K," Krause commented.

"The visit to Daruma is one of the highlights of our NYC trip," Krause stated. "The students gain a good appreciation of deep, careful fundamental analysis. Daruma’s small-cap style of investing is a good model for the students to evaluate - by paying attention to valuation and developing a thorough understanding of the company - they are able to add stocks that beat the Russell 2000 with less overall risk. Mariko Gordon and Patty Clarkson laid out the investment process for the students, which involves:

• Systematically generating new ideas
• Understanding the target company's history
• Carefully evaluating future outcomes
• Developing a clear investment thesis
• Monitoring the holdings closely
• Establishing a clear sell strategy with price targets and an eye to new opportunities"

Mariko Gordon

Krause concluded, "Visiting Daruma during our view trip is a nice change of pace. Because we visit many bulge bracket investment banks, it is good for the students to see that it is possible to generate superior performance in a less stressful environment. Everyone at Daruma meets with the students in small groups to discuss their role in the company - and we end up with a great appreciation for what it is like to be a part of a firm with an open, caring culture. We are thankful for the opportunity to visit with Daruma....it's a great experience. And we'd like to thank Mariko, Patty, Neal, Steve, Mark, and everyone who took the time to talk with our students."

Comments on Purchasing Managers’ Index (PMI) for October - Massive QE2 Might Not Be Needed

Dr. David Krause, AIM program director commented on today's PMI, "The composite Purchasing Managers’ Index from the Institute for Supply Management (ISM) came in at 56.9 for October, as compared to 54.4 for September.  According to the ISM’s internal estimates, the latest PMI reading if sustained, would be consistent with 5% inflation-adjusted GDP growth." 

"Manufacturing in the U.S. remains the leader in the economic recovery," according to Dr. Krause. "The orders component of the survey jumped nearly 8 points while the production component surged 6 points. The “double-dip recession” talk during the summer seems to have ended and the fourth quarter is off to a strong start."

Dr. Krause continued, "This was a positive report today. Construction spending for September rose an unexpected 0.5%.  Private residential construction spending expanded 1.8% (a change from the past several years), private nonresidential spending retreated 1.6%, and public construction expenditures grew 1.3%. It appears that the stimulus spending might finally be hitting! Because these results were not included in the Q3 GDP report, it is possible that we might see an upward revision of the 2% Q3 growth number."

"It was reported today that prices were higher according to the ISM," said Krause. The Prices Paid component increased to 71, which is the 16th consecutive month the Prices Index has registered above 50 percent. As the graph shows, the ISM price index is leading the CPI."

"While 49 percent of respondents reported paying higher prices and 7 percent reported paying lower prices, 44 percent of supply executives reported paying the same prices as in September. A Prices Index above 49.3 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices. Dr. Krause added, "This raises the question: Where’s the deflation? The timing of the higher ISM prices - right before this week's Fed meeting - is quite interesting. Is QE2 really needed to thwart deflation? The Fed needs to be careful that it doesn't let the inflation genie out of the bottle, because it might be hard to put it back in!"

October 2010 AIM Funds' Investment Performance

Marquette's AIM students manage three separate portfolios which are part of the University’s endowment. The three funds, which were each funded with $500,000, have been managed by the students since 2005. They are named:

     • AIM Equity Fund (benchmark: Russell 2000 Index)
     • AIM Fixed Income Fund (benchmark: Barclays Aggregate Bond Index)
     • AIM International Equity Fund (benchmark: S&P ADR Index)

The following tables contain the investment performance results of the three funds as of the end of October 2010. Each AIM class is responsible for the portfolios for a one-year period beginning on April 1. The performance of the funds is monitored by each AIM class and for the entire holding period (since their inception). Quarterly and annual reports are prepared and presented to the CIO of Marquette University’s endowment. 

AIM Equity Fund

As the graphs below demonstrate, the AIM Equity Fund is sector neutral with a slight growth bias. The average market capitalization of the AIM Equity Fund is $727M, while the Russell 2000 has a mean market capitalization of $857M. The AIM Equity Fund's average P/E ratio is 16.3x versus a 15.8x for the R2K. The other relative valuation metrics are nearly identical for the AIM Equity Fund and the benchmark.

(Note: To expand the view of the graphs below, click on the individual graph).

AIM International Equity Fund

The graphs shown below indicate that the AIM International Equity Fund is nearly sector neutral with a slight bias toward the manufacturing sector. The AIM International Equity Fund has a slightly lower market capitalization and has more of a core bias than the S&P ADR Index. The AIM Fund has a larger emerging market tilt than the benchmark and is under-represented with European holdings (especially United Kingdom stocks). The AIM International Equity Fund has an average P/E ratio of 15.0x versus 12.5x for the S&P ADR Index. Other valuation metrics indicate higher average relative values for the holdings in the AIM Fund versus the benchmark. 

 
 
 
 
 
 
 
 
 
 
 
 

 

AIM Fixed Income Fund

The graphs shown below indicate that the AIM Fixed Income Fund is duration neutral (4.10 vs. 4.05 for the Barclays Aggregate Index). The Fund is over-weighted in credit and under-weighted in U.S. Treasuries.