Wednesday, November 30, 2016

An AIM Fund holding: Federal Signal Corp (FSS) by Mike Robinson: “FSS Signals Positive Growth Moving Forward"

Federal Signal Corporation (FSS, $15.26): “Federal Signal Signals Positive Growth
By: Michael Robinson, 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.

Federal Signal Corporation (NYSE:FSS) designs and manufactures integrated solutions and products for governmental, municipal, industrial, and commercial customers. They operate in two segments: Safety and Security Systems Group and Environmental Solutions Group (ESG). The Safety and Securities segment is a manufacturer and supplier of comprehensive systems used to protect people and property by law enforcement, fire recuse, and military facilities. The ESG segment supplies street sweepers, vacuum trucks, and water blasting equipment for municipal and industrial customers. Federal Signal was founded in 1901 and is headquartered in Oak Brook, IL.
• Earlier this month, Federal Signal reported their quarterly earnings and the stock price rose 28%.
• FSS completed the acquisition of Joe Johnson Equipment in early June. The expectations were that the acquisition would boost sales. The third quarter’s sales were up $7 M over the same period last year.
• The Environmental Solutions Group led the charge with total orders for the segment increasing by $27.5 M compared to the same period last year.
• FSS’s Board of Directors announced that the Executive Chairman of the Company, Dennis Martin, will retire at the end of the calendar year.  

Key points:
The booming increase in the ESG segment was fueled by the acquisition of Joe Johnson Equipment. The acquisition of the Canadian rental agency caused Canadian orders to increase. The Safety and Securities segment decreased sales by $9.6M but that was not enough to offset the $27.5M increase from the ESG segment. Overall sales went up 11% for the quarter compared to the quarter last year.
U.S. municipal and governmental orders increased by 4% with a $3.4 M increase in orders for sewer cleaners. U.S. industrial orders increased by 9%. This increase is related to orders of the newly acquired product lines from Joe Johnson Equipment. Non-U.S. orders increased by 24%. This increase was mostly concentrated in Canada and due to the acquisition. The large increases in orders were focused in the ESG segment.

Because of the increase in ESG sales, Federal Signal’s backlog is significantly reduced, moving from $179.3 M in 2015 to $148.7 M in 2016, a 17% decrease. The lower backlog is due to the increase in ESG sales and the decrease in demand for vacuum trucks, street sweepers, and sewer cleaners.

What has the stock done lately?
Since the earnings release on November 1, Federal Signal’s stock price has risen 29.04%. This large jump in the last month is great for the company, which has had a very stagnant stock price for the past 6 months

Past Year Performance:
Federal Signal started the year at $15.25. It is currently at $15.24. The stock has not done much over this past year. The large 24% drop in early March was corrected by the 30% rise in this past month. The stock price has fluctuated slightly over the year but has remained pretty consistent.

 Source: FactSet

My Takeaway:
The company has not had a record setting year. Ending the year at almost the exact same stock price that they started at may not look good for 2016. I do believe that the company’s earnings beat in the last quarter signals a positive future for the next few years. It shows that the company is benefiting from the acquisition of Joe Johnson Equipment and the future growth of sales is looking up. Since it was pitched the stock is up 14%. The stock has not reached its price target yet and I see room for even more upside. Therefore, I recommend that FSS should stay in the AIM Portfolio.

Tuesday, November 29, 2016

AIM and Commercial Banking programs to hold an Open House on Monday, December 5th

Applied Investment Management & Commercial Banking
Open House

All freshmen and sophomores interested in the AIM program

and/or the Commercial Banking program

You should attend this open house.

Straz Hall, AIM Research Room, DS 488

Monday, December 5th, 3:30 4:30 pm

If you have questions or need more info, please contact:

AIM program:      

Commercial Banking program:  

The Annual Marquette University Fall FMA/AIM Chicago Trip Will Occur This Friday

Finance Students from Marquette Will Be Headed to Chicago on Friday, December 2, 2016
Image result for chicago loop
Dr. David Krause and the student officers of the Financial Management Association (FMA) have completed the final plans for the fall 2016 Marquette University FMA/AIM Chicago trip. 

Dr. Krause and other finance faculty (including Jeff Germanotta and Bill Walker) will be headed to Chicago on Friday, December 2, 2016, accompanying over 40 Marquette finance majors on the annual fall trip. Freshmen, sophomores, juniors and seniors studying finance at Marquette will make the trek to Chicago.

Following their crack-of-dawn departure from campus on Friday, they hope to arrive at Legal & General Investment Management America (71 South Wacker Drive, Chicago) and begin their day at 9:00. The group will be provided a tour, followed by a presentation. Marquette alumni at Legal & General include: John Bender (CIO Fixed Income), Steve Marszalek (Research Analyst, Fixed Income), and Jaime Rehm (Analyst, Investment Analytics and Reporting). 
Image result for legal & general investment management 
Legal & General Investment Management America was founded in 2006 and specializes in fixed income, liability driven investment solutions and index capabilities for the US institutional market. They offer a range of strategies to help clients manage their investment objectives including investment grade fixed income, which can range from market-based alpha-oriented strategies to those that are designed to be more liability-centric, derivative overlays, or indexed solutions.

Dr. Krause said, “We are looking forward to our visit to Legal & General – I know the students are interested in learning more about the firm. Many of our students are from the Chicago-area and I know they hope to learn more about future career opportunities at Legal & General – and it will be good to see our AIM program alumnus again. It should be a good visit.”
Image result for union league club chicago

Following this visit the students will proceed to the Union League Club (65 W Jackson Blvd.) where at 10:30 they will begin their stock pitches. There will be four pitches prior to lunch – with three more following in the early afternoon.

AIM Equity Presentations for Friday, December 2, 2016
Student Presenter Sector Company Name Ticker
Taylor Smith International Technology Criteo SA CRTO
Nicholas Christman
International Financial Services
Deutsche Bank AG DB
Casey McClelland Consumer Discretionary Shake Shack SHAK
Dominic Delia International Consumer Staples
Jaclyn Godwin International Financial Services
Credicorp BAP
Joe Mungenast Healthcare Ardelyz ARDX
Nathaniel Penn Utilities MDU Resources, Inc.  MDU

Image result for thomas digenan
Tom Digenan, UBS
At 11:30 the students and alumni in attendance will be treated to a working lunch and have the opportunity to hear from three prominent Marquette alumni: Tom Digenan, UBS; Jim Bianco, Bianco Research; and William Heard, Heard Capital.

Tom Digenan (CFA, CPA) is a Managing Director at UBS and the Head of US Intrinsic Value Equity. In this role, he is responsible for US equities portfolio construction and research. An alumni of Marquette, he also teaches Investments in our Graduate School of Management.

Image result for james bianco research
Jim Bianco, Bianco Research
Jim Bianco is the President of Bianco Research. A frequent guest on CNBC and Bloomberg, he has been producing highly respected daily financial market commentaries since 1990 with a circulation of hundreds of portfolio managers and traders. His commentaries are primarily devoted to the fixed income markets with special emphasis on: Federal Reserve policy and money flow characteristics of primary dealers, mutual funds, hedge funds, futures traders, banks, and institutional investors. He is Marquette alumnus and a frequent guest on campus.

Image result for william heard heard capital
William Heard, Heard Capital
William Heard is CEO, CIO and Founder of Heard Capital (a Chicago-based hedge fund). William is a graduate of the Marquette University with degrees in Finance and Real Estate. Prior to starting Heard Capital, he was a Special Situations Analyst for Stark Investments, a global alternative investment firm. William was instrumental in the creation of Marquette’s Applied Investment Management (AIM) program.

Following the student stock pitches, the group will proceed to GCM Grosvenor (900 North Michigan Avenue). Grosvenor is one of the world's largest independent alternative asset management firms, with over $45 billion in assets under management and over 450 professionals. The firm offers hedge fund and private equity investment management and advisory services to clients worldwide. It is one of the world's top discretionary allocators to hedge funds and private equity investments.

Image result for grosvenor capital management

GCM Grosvenor's clients are mostly institutions, such as pension funds, sovereign wealth entities, banks, corporations, insurance companies, charitable organizations and endowments. The firm develops customized investment programs and also manages commingled investment products for its clients. 

Marquette alumni at Grosvenor include Nicholas Parrish (Director) and Varun Varma (Investment Analyst). Following an overview of Grosvenor, the students will learn more about the firm’s approach to investment advisory in the hedge fund and private equity sectors.

Dr. Krause stated, “This will be our fourth visit to Grosvenor and we are delighted to be returning. It will be beneficial for the students to learn about the fund of funds approach Grosvenor employs - I'm confident this will be another successful FMA/AIM visit to Chicago.”