A Current AIM Program International Equity Holding: Danone SA ADR (DANOY) by: Andy O'Neill. "Not at its Expiration Date"

Danone SA ADR (DANOY, $14.94): “Not at its Expiration Date”

By: Andy O’Neill, 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:

• Danone SA ADR (OTC: DANOY) operates in the food processing industry, producing dairy products, water, and other foods. They operate all over the world, but mainly out of the United States, France, Russia, and China.

•The Economist published an article saying the food industry is going nowhere.

• Management has detailed a plan to help decrease marketing inefficiencies in developing countries.

• Management has also said they are looking into different ways to be environmentally friendly in the water department.

• Due to changes in the company’s plans, a shift in focus towards the long term could have the stock back on the rise.

Key points: 

One of the biggest concerns facing DANOY during the most recent investor seminar was the fact that The Economist published an article saying that the food industry was going nowhere. They said that it was a stagnant industry because nothing about the food industry was changing, so many stocks would either hold their position, or lose some of their position. This concern would be a big problem for DANOY, as they have lost 12.2% of their stock price over the last twelve months.

The company responded to this claim from The Economist by saying that the food industry, while somewhat stagnant as a whole, can have large movers within it based off of who is making the right moves for their companies. It was then outlined that DANOY was going to be helping one of their largest suppliers, Brookside, to help cultivate the dairy markets. Previously, the different seasons in Lake Victoria made it either too wet or too dry to do efficient dairy farming, and Brookside had to charge a higher price. Now, the two companies are moving the farming from extensive to intensive farming, using less land but using that land more efficiently. This should decrease the cost of dairy for DANOY.

Also, the company is working to become more environmentally friendly, through their Waters division. They are focused on their planet’s platform, and are looking to make the company circular by 2025. This will likely improve their image of their different water brands, and make their sales increase.

What has the stock done lately?

Since October 29^th, the stock has risen 6.8%, from $13.99 to $14.94. This has been very good for them, as the stock has consistently dropped over the past year. If this were to continue that would be excellent for the company, as they have had few positive months in the past year. Hopefully some of the things that they are planning on implementing coming up soon are going to be helpful to the company.

Past Year Performance: 

DANOY has decreased 12.2% in value over the past year. They have struggled the whole year, and a few minor attempts at bouncing back has only led the stock further downward. However, this is partially because of new leadership trying to direct the company towards more of a long term focus.

Source: FactSet

My Takeaway:

Having an involved CEO knowing that changes are needed are a big first step for this company. The idea for them to build up a supplier to cut down on their own costs is definitely interesting, and could have serious benefits in the future. Their presence in emerging and developing countries would be much higher if ideas like this were constantly implemented. Even after a rough year, DANOY could be in a position to make a big rebound.

Source: FactSet

Final Set of Fall AIM Program Student Equity Pitches on Friday, December 7th - Join Us in Person or On-Line

AIM Class of 2019 Student Equity Presentations 

Friday, December 7th

The final set of fall AIM student equity presentations for the class of 2019 will be on Friday, December 7, 2018. 

   

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

December 7th

• Location: Marquette University, College of Business Administration - Straz Hall, 1225 W. Wisconsin Avenue, Milwaukee 53233 - in the AIM Research Room 488, 4th Floor (pdf directions to AIM Room).
• Presentation Times: 3:00 to 4:00 p.m. CST

If you are unable to attend, you can always view them via the webcast HERE

AIM will again be utilizing Twitter for your comments and questions.  Please follow the instructions below.

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

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? 

A Current AIM Program International Equity Holding: Golar LNG Limited (GLNG) by: Ben Schmidt. "Smoother Sailing Ahead"

Golar LNG Limited (GLNG, $25.25): “Smoother Sailing Ahead”

By: Ben Schmidt, 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:

• Golar LNG Limited (NASDAQ:GLNG) is engaged in the transportation, regasification and liquefaction of LNG. They operate through three main segments: Vessel Operations, FLNG and Power (i.e. FSRUs and power generation infrastructure)

• Golar’s Hilli Episeyo FLNG finally came 100% online in 3Q18 and contributed $54.5 million in revenue which should recur every quarter

• Avenir LNG limited, a leading provider of small scale LNG for the Power, Bunkering, and Trucking markets, was privately placed with the help of Golar, Stolt-Nielsen and Hӧegh LNG

• Revenues have increased at a 67.7% quarterly CAGR since Q1 of 2017 with more growth expected from its FLNG division.

• Vessel operations had TCE earnings of $41,200/day ($48,100 for TFDE vessels and $11,000 steam vessels) up from $19,600 in 2Q

Key points: 

Golar is now turning the corner on profitability. With the tightening of the LNG market, higher top and bottom line growth can be expected. LNG supply is supposed to continue to outstrip the supply of vessels available to move this product which is expected to lead to spot rates of $150,000/day by 2020. One to two years ago, the spot rates hovered around $20,000/day. Golar finds itself in a lucrative position with a fleet of 14 operational vessels available to meet this demand. They were able to jump on the TCE increases from Q2 to Q3 and are likely to do the same in Q4 of 2018. From management’s guidance, every $10,000 increase in TCE, adjusted EBITDA will grow by $40 million per annum.

Moving from GLNG’s vessel operations to its FLNG segment, the same narrative of better future profitability holds. In 3Q of 2018, their Hilli Episeyo FLNG operated for the full quarter and helped Golar post its record high EBITDA totaling $84m. Golar has been seeking new opportunities to take advantage of the FLNG segment such as its BP’s Tortue agreement and interest in Delfin’s LNG LLC FNLG project.

During the past four years, Golar has been in an investment phase taking on increased debt loads to fund these decisions. Their D/E has increased 1.4x as of FY 2017 up from .96x and 1.06x in 2015 and 2016, respectively. Given their weak operating cash flows from low spot rates in the past, it has raised the necessity of higher rates to cover current interest payments coming due.

What has the stock done lately?

In the past three months, GLNG has fluctuated within the $24-30 range. It has been strongly tied to the changes in spot rates in the market. Before the increase in rates, analysts were worried about GLNG’s hitting earnings and being able to continue to pay their dividend. As rates have rebounded, it has led to a direct increase with a 5.5% gain being posted on November 28^th, 2018.

 Past Year Performance: 

YoY, GLNG experienced a rise and drop attributable to its agreement with BPs FLNG unit and missing earnings. When the news came out about the preliminary agreement with BP, shares rose $4 from $30.6 to $34.6 or 13%. It subsequently declined a couple weeks thereafter when it missed its first quarter revenues and earnings.

Source: FactSet

My Takeaway:

Despite the tight financial situation Golar finds itself in from its investment phase, it should be a large beneficiary from the rise in spot rates and its FLNG projects. These rates are expected to increase as more LNG supply continues to come online. Over the next couple years, it is expected that this LNG supply will still outpace the rate at which vessels are manufactured. With this being said, rates should rise to levels that have only been seen twice since 2008, and Golar has made large profits on it both times. Moreover, the first of GLNG’s FLNG projects was fully operational this quarter and helped generate some its best earnings in five years. Also, BP’s Tortue project is on pace for its 2018 FID. This FLNG segment has relatively low costs to operate and will expand their EBITDA margins in the coming quarters and years.

Source: FactSet

A Current AIM Program Small Cap Equity Holding: Wintrust Financial Corporation (WTFC) by: James F. Oddo. "Should We Trust in Wintrust?"

Wintrust Financial Corporation (WTFC, $77.24): “Should we Trust in Wintrust?”

By: James F. Oddo, 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:

• Wintrust Financial Corporation (NYSE:WTFC) operates as a bank holding company, which engages in the provision of banking and financial services in the Midwest of the United States.

• WTFC’s Net Income is up 3.9% on its $247.6 million total. This was determined by higher deposit and loan growth, sensible expense tendencies, and higher mortgage proceeds.  

• Total loans at quarter end was at $23.1 billion, up 2.3% quarterly and 10.6% year over year.

• Management stays attracted to the idea of diffidently extending the duration of the securities portfolio over a period of time; the goal is to not be aggressive without a move volatile yield curve. It can be expected for Wintrust to continue to progressively add longer duration securities at its conservative pace.

.

• Wintrust Financial Corporation continues to find and execute on small acquisitions.

Key points: 

Wintrust took quite a hit this October, but it remains profitable and growing in its industry. Management will continue to reiterate its goal to lower the loan to deposit ratio over the next few quarters. While this will continue to bring in higher deposit costs, they will be manageable as Wintrust continues to use this new liquidity to bring in loans or longer duration securities.

Management recapped that they are looking at numerous profitable options to decrease their processing expenses, which could be helpful for the future of their production margins. With management’s views on expenses, apart from revenue and growth associated expenses, there is no expectation for any noteworthy pressures. The net result should be a well put together fundamental position for the company over the close to medium period.

Management does have expectations for some reduction in mortgage volumes in quarter 4, but this is only due to ordinary cyclical trends and higher mortgage rates. The overhead ratio dropped to 1.53% from 1.57% in the previous quarter. Additional noteworthy trends were a 13 bps growth in earning asset yields, however this was balanced out by a 22 bps growth in deposit costs and a 17 bps growth in interest bearing liability costs. It can be expected for the quarter 4 earnings call to concentrate on their future successes and goals in loan growth, mortgage volume, and a big picture view of their acquisition growth opportunities for the coming years.

What has the stock done lately?

Year to date, Wintrust Financial Corporation is down .91% and down 13.47% on the last 3 months. This is due to the correct period this October. From December 2017 to the end of September 2018, was up 8.98%. This was due to WTFC’s excellent revenue growth in its commercial banking division. Now that we are out of the correction period, it can be expected for WTFC to get back on track with its strong growth.

Past Year Performance: 

WTFC has decreased .91% in value over the past year, but the stock should still be considered for a buy. WTFC's market valuation implies a 2 year target price of $92/share, resulting in a 16% upside.

My Takeaway: 

Wintrust Financial Corporation has a definitive presence of revenue share in the United States, sitting at 4% and growing. WTFC is worth adding to a portfolio due to the correct period this October, leaving the share price undervalued. Due to the positive trends in loan growth, as well as management’s goals for lowering processing expenses Wintrust will rally and get over the hit it took during October.

While Q4 2018 Has Been Challenging for U.S. Equity Funds; the Performance of the AIM Small Cap Fund Remains Stronger Than the Benchmark

Despite the Larges U.S. Stock Market Declines in October and November 2018, the AIM Small Cap Equity Fund is Maintaining Good Relative Performance Versus the Russell 2000 Benchmark

The following table shows the recent performance of the AIM Small Cap Equity Fund as of the end of November 2018. Hopefully the worst of the stock market correction is over. The AIM students remain optimistic about the long-term performance of the Small Cap and International Funds.

The following table contains the current AIM Small Cap Equity Fund Holdings as of 11/30/2018. Also included are the sector and individual holding returns for Q4 (as of the end of November 2018).

Q4 2018 Has Been Challenging for the AIM International Equity Fund; However, YTD Performance Remains Better Than the Benchmark

Despite the Global Stock Market Declines in October and November 2018, the AIM International Equity Fund is Maintaining Respectable Relative Performance Versus the Russell Global ex US Benchmark

The following table shows the recent performance of the AIM International Equity Fund as of the end of November 2018. Hopefully the worst of the global market correction is in the rear-view mirror. The AIM students remain optimistic about the long-term performance of the fund.

The following table contains the current AIM International Equity Fund Holdings as of 11/30/2018. Also included are the sector and individual holding returns for Q4 (as of the end of November 2018).

A Current AIM Program Small Cap Equity Holding: Fair Isaac Corporation (FICO) by: Derek Gross. "Growth Prospects Proving To Be More Than Fair"

Fair Isaac Corporation (FICO, $191.92): “Growth Prospects Proving To Be More Than Fair”

By: Derek Gross, 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:

•Fair Isaac Corporation (NYSE:FICO) is a provider of products, services, and solutions designed to optimize business decision making processes. The company utilizes what they describe as ‘predictive analytics’ to forecast consumer behavior, evidenced by their widely known FICO Score within the insurance and credit industries.

• AS FICO’s fiscal 2018 year ended in September, the company grew both revenues and net income by 11%. Diluted EPS increased 15% from $3.98 in 2017 to $4.57 in 2018. The company has continued its consistent margins and has benefited from top-line growth in the industry.

• Cloud technology and the Scores segment continue to be a major drivers behind growth. FICO expects roughly 50% growth in cloud bookings, and the Scores segment has seen revenue growth of 29% over the last year, accounting for roughly one third of total revenue.

• FICO continues to buy back shares through its stock repurchase program. In FY 2018, the company spent $336.9 million to purchase 1.9 million outstanding shares, and expects to spend an additional $199.3 million on stock repurchases. FICO discontinuance of dividend payments took full effect in 2018. Moving forward, the company will use excess cash for share repurchases.

Key points:

FICO posted another strong quarter and year ending in September, 2018. Both revenue and net income grew by 11% in FY 2018, and revenue and net income were up 10% and 26% over the last quarter versus last year. Additionally, FICO has grown both its basic and diluted 2018 EPS by 15.1% and 14.8%, respectively. Quarterly EPS beat analyst estimates by roughly 24%.

FICO continues to dominate the industry, and has demonstrated that there is still room for growth. End customers of FICO products include 98 of the largest 100 domestic financial institutions and 9 of the top 10 domestic insurers. The Applications and Scores segments (the two largest segments comprising 90% of revenue) each grew by 6% and 29% over the past year. These two segments continue to be major drivers behind growth.

The Applications segment has been fueled by advances in cloud technology that have expanded total addressable market size. FICO has begun to pursue what they describe as a ‘cloud-first strategy’ as they look to expand and prioritize product selection utilizing the cloud. In 2018, cloud revenues reached a record high of $241.5 million, an increase of 19% from 2017. The Scores segment continues to show impressive growth. Although not compatible with FICO cloud solutions, Scores revenue continues to be the highest growing of FICO’s three segments. FICO continues to innovate this segment, introducing the UltraFICO score allowing more accessibility and control to end consumers in the credit scoring process.

FICO is able to reasonably estimate future financial performance through bookings, or contracts signed in the current reporting period that generate future revenue streams. From these reported numbers, it is clear that cloud revenues are expected to have continued growth (49% increase in cloud bookings). Additionally, management expects revenue growth of 9% and net income growth of 18% in 2018.

The company is currently using its excess cash to repurchase shares from the public. Over the past year, FICO spent $336.9 million on stock repurchases and plans to spend an additional $199.3 million. Cutting dividends was a necessary step to implement the share repurchase program, as the company believes this is a better way to return value to shareholders. Do not expect dividends in the near future from this stock.

What has the stock done lately?

On September 11^th, 2018, FICO hit an all-time high at an intraday price of $241.10. Since then, the stock has lost 20.4% of its value, partially fueled by a correction in the technology sector. Over the last 3 months, the stock has declined 11.7%. As technology stocks are highly cyclical, FICO will likely continue to ride the wave of tech sector conditions as a whole in the short term.

Past Year Performance:

Despite being hit hard recently, FICO is still up 25.7% over the past year. The company has posted impressive growth in both sales and revenues over the last 3 quarters, which have been the catalyst of the past year’s appreciation in price. FICO’s transition into cloud based solutions have increased the company’s total addressable market and continue to drive customer acquisition growth in industries once thought to have become saturated, such as insurance and banking. Although the stock has lost significant value over the past couple of weeks, I still like the long term outlook and I expect a rebound in the near future.

Source: FactSet

My Takeaway:

Despite the overall market correction in October and the tech sector being pulled down by poor performance from giants such as Amazon and Apple, FICO still maintains a strong position in the industry and expects solid growth over the next several years. The expansion of FICO’s cloud capabilities will allow them to expand their product mix and win new deals. Although some might say FICO has reached peak market share (evidenced by the dominance in the financial and insurance industries), the company’s innovation in the scores segment and cloud solutions (the company expects continued ~50% annual growth in cloud bookings) will expand their addressable market. I’m willing to bet these catalysts will propel FICO back closer to what it was trading around two months ago in the $220-$230 range.

Source: FactSet

A Current AIM Program Small Cap Equity Holding: Green Dot Corp. (GDOT) by: Matthew Vieth. "Green Dot Showing Growth"

Green Dot Corp. (GDOT, $84.81): “Green Dot Showing Growth”

By: Matthew Vieth, 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:

• Green Dot Corp. (NYSE:GDOT) Green Dot Corp. (GDOT) is a consumer financial technology company offering accessible and affordable financial services to primarily unbanked, underbanked, and unsatisfied groups, as well as Millennials. GDOT is currently the largest provider of reloadable prepaid debit cards and reloading services in the United States.

• GDOT’s management team is under pressure to drive EPS after announcing a six step plan in February, 2018.

• GDOT announced strong 3Q earnings data in 2018 beating EPS expectations by $0.13 per share.

• Management has indicated that it continues to implement this plan to boost shareholder value and increase EPS for investors.

• Management’s plan to boost EPS has also included the proposal for stock repurchases.

Key points: 

Green Dot Corp. in the last three quarters has posted strong sales growth percentages with 24.5%, 16%, and 14.5% respectively. Tax season is the result of the larger 24.5% quarter as is expected. In addition, other key metrics such as the number of active accounts grew by 3% totaling 5.43 million active accounts. In each of the past 9 months, the number of cash transfers also grew by 9% in part to new mobile banks features. Continued growth and consistent performance shows evidence that GDOT can continue to grow EPS as planned by management.

Purchases of other businesses were made by Green Dot Corp. in 2017 and early 2018 such as the purchase of UniRush LLC for $142.2 million. These purchases have enabled Green Dot Corp. to offer new features in their mobile banking and increased peer to peer services. Green Dot Corp. has expanded their peer to peer services by enabling clients to use Apple Pay in connection with their Green Dot account. Making transfers more readily available has increased the flow of transactions at Green Dot and have increased transactional revenues. New mobile banking features give more control and easier usability to clients which have added to overall growth. As previously mentioned, account totals have grown by 3% and transactions have increased 9% in the past 9 months in part due to these new features and additions.

What has the stock done lately?

Today, the stock price of GDOT remains at the price point of $84.81 which as the same as three months ago. Although the price may be similar GDOT’s stock price has been volatile in that three month period. The stock hit a 3 month low of $72.50 following the large October correction. The stock climbed back to $78 before market news on November 7^th of GDOT beating EPS expectations by $0.13 per share pushing the stock as high as $92.50 before settling at $84.81. The volatile change of the stock price seems realistic given market corrections and positive market news which affected prices.

Past Year Performance:

GDOT has increased 35.7% in value over the past year and is still growing. This continued increase in value is coming from their ability to acquire new customer accounts and offering new mobile banking features which driver users experience and transaction value. The recent volatility of the stock comes from market corrections and positive quarter news.

Source: FactSet

My Takeaway:

GDOT has continued to report strong quarterly earnings while continuing to grow its consumer base and transaction activity. Along with support from its recent acquisitions, I expect GDOT to continue its growing rate and surpass the current market price of $84.81. Management has shown a desire to increase EPS and have shown positive results month after month as previously shown. Based upon these facts and the quality of management, the AIM Portfolio should increase its holdings of Green Dot Corp.

Source: FactSet