JobCUCOB0110A-PracticumPortfolio-4.10-PATHSONLY_- 6/11/10 4:34 PM Page 1

Dr. John’s Cornerby John Wingender, Ph.D.

In 2009 the Portfolio Practicum class experienced both sides ofrisk's...the good and the bad. The Bear market turned out to beboth our worst and best year ever, as the portfolio experiencedan -18% return, but the SP500 was a -36%, so the classoutperformed its benchmark by an amazing 18%. As the 2008class did their valuations of companies, it seemed as if everystock was deeply discounted and undervalued. As aconsequence of the investment process, the 2008 classincreased the number of stocks in the portfolio from ahistorical average of 36 stocks to 48 stocks.

The 2009 class started their class with a plethora of stocks thatexperienced a rapid increase in value in the 2009 Bull market.The portfolio's raw return (22%) was lower than the SP500(26.5%), but so were its market risk (beta = .76) and total risk(standard deviation). Thus, its performance on a risk-adjustedbasis as measured by the Sharp, Treynor and Jensen ratiosoutperformed the SP500 in 2009.

The current class has had the task of evaluating if individualtarget prices have changed; if any stocks have gone above theirfair values and need to be sold; or if the stocks have revealedmore negative news and need to be sold. As the yearprogressed, the current class decided to hold stocks at about3% of portfolio by increasing the position in a stock or byselling the stocks out of the portfolio. The class hasincorporated the rule that to add a stock, a holding must besold. This guideline has definitely tightened up therecommendation process. As valuations increased in 2009, the class has difficult challenges ahead in 2010.

Laura MeadeHOMETOWN: Williamsburg, IAMAJOR: Finance and

Military MgmtPLANS: US Army

Alex KronHOMETOWN: Johnston, IAMAJOR: Accounting and FinancePLANS: Law School at

University of Iowa

Brett CapliceHOMETOWN: Clarendon Hills, ILMAJOR: Finance and EconomicsPLANS: BUNGENorth America, Inc.

Colin GordonHOMETOWN: Minneapolis, MNMAJOR: Finance and Economics PLANS: Aventine Renewable

Energy, Inc.

Michael CarmodyHOMETOWN: Denver, COMAJOR: Accounting and FinancePLANS: EnCana Oil & Gas

(USA) Inc.

Brian KooiengaHOMETOWN: Urbandale, IAMAJOR: Finance and MarketingPLANS: Graduate School

Taylor LemkeHOMETOWN: Columbus, NEMAJOR: Accounting and FinancePLANS: KPMG

Seth GoodwinHOMETOWN: Omaha, NEMAJOR: Finance

Steven MakowskiHOMETOWN: Stillwater, MNMAJOR: Finance and AccountingPLANS: Dec. 2010 Graduate

Travis HuckHOMETOWN: Aberdeen, SDMAJOR: FinancePLANS: MSAPM for CFA

Aleksandr KrutikHOMETOWN: Omaha, NEMAJOR: Accounting and FinancePLANS: Deloitte: ERS Consulting

Tara RyanHOMETOWN: Bellevue, NEMAJOR: Finance with an

emphasis in Psychology

Mary Burnett HOMETOWN: Omaha, NEMAJOR: Finance and Accounting

Christine ArchibaldHOMETOWN: Bettendorf, IAMAJOR: FinancePLANS: Financial Analyst

at UPRR

Steven CaiHOMETOWN: Rapid City, SDMAJOR: Accounting and FinancePLANS: Pursue CFA Designation

Dan KnauffHOMETOWN: Bloomington MNMAJOR: Finance and Economics

THE 2009-2010PORTFOL IO PRACTICUM TEAM

From the Deanby Anthony Hendrickson, Ph.D.

Most business school education attempts to applyyesterday’s business models to today’s business practice. In a financial and economic environment that has beenturned on its head, our job at Creighton’s business schoolis to provide relevant, real world experiences for ourstudents so they are prepared to develop business modelsthat will take us into the future. Our Portfolio Practicumclass is a clear example of just how we do that.

This year’s students have learned to find value in themarketplace by relying on their core values and knowledgeto make wise decisions in a fast-paced environment. They have followed in the footsteps of thirty classes beforethem who have gone to New York to see the financialmarkets first-hand. They have also built upon a new tradition– the Value Investing Panel, or VIP – which attracted over400 people from around the world who were in Omaha forthe Berkshire Hathaway Shareholder’s meeting in May.

I’m very proud of what our students have accomplished thisyear! Undoubtedly, their experiences will help them as theybegin their careers. We hope they come away from theseexperiences equipped with more than a roadmap for success,as a roadmap will only go as far as the course has beencharted. We hope they come away with a compass forsuccess, for they will be exploring more than just a newcareer…they will be charting new frontiers in the financialworld on which the future stability of our economy depends.

CREIGHTON UNIVERSITY | COLLEGE OF BUSINESS2

In January, a group of Creighton students discovered themeaning of this well-known phrase firsthand. During theannual New York trip, 52 finance and accounting seniorsencountered investment bankers on Madison Avenue,trading floors on Wall Street, FBI investigations of Ponzischemes, the closing bell of the NYSE, and the 354 stepsup Lady Liberty.

But it wasn’t just the incredible sights and scenes thattouched the hearts of so many young men and women.Senior Finance major Ashley Talley couldn’t believe,“how many Creighton alumni were established in New

York. It goes to show what aspringboard a Creightoneducation truly is and gives mehope that one day I’ll jump assuccessfully as they have.”

While it was truly anextraordinary six days in the BigApple, most students foundthemselves eager to head back tothe Midwest and leave behindthe musical display in CentralPark, $20 lunches and JerseyShore celebrity sightings. Butwhat these seniors didn’t leavebehind was the confidence thatthey too could follow in thefootsteps of Creighton alumniand “make it anywhere.”

In loving memory of Sydney Anne Jones who made the2010 New York Trip full of excitement and laughter.

Students seated in the New York Stock Exchange (NYSE) Board Room listen to a history of the NYSE by SteveWheeler, Director of Archives, Corporate Giving andEducational Services.

New York,New Yorkby Mary Burnett

“In trying to forminvestment ideas and

strategies, we have learnedthat there is no single

indicator or narrow set ofdata that can point us in

the right direction.”

While the first half of 2009 showed some signs of life, wewere reminded late in the year that there still may be roughseas ahead. While last year’s class witnessed how the worldcan come crumbling down, our class witnessed andparticipated in the rebuilding of our nation’s economy.

In trying to form investment ideas and strategies, we havelearned that there is no single indicator or narrow set of datathat can point us in the right direction. To create our idealportfolio, we quickly found that our class needed to look atthe whole picture. While the S&P was up over 20% in 2009,it is still well off its 2007 highs. The United States GDPstopped declining and even began to grow, butunemployment has persisted and the fear of a “joblessrecovery” has set in. Even the credit markets have improvedover the past year, but the increased lending has uncertainimplications for inflation.

These uncertainties have instilled in us a cautious outlook onthe year ahead. Most believe that at some fundamental level,our previous financial system failed us. While weacknowledge that changes need to be made, we are concernedthat proposed changes will address the symptoms and not thecauses. New bank regulations are being debated, but there isno consensus on what these laws should include.

Another concern is the federal deficit. It is looking morelikely that at some point taxes will have to be raised to servicethe national debt, which could adversely affect our emergingrecovery. This is one reason that while we have been able toidentify buying opportunities, the prospect of a ‘W’ shapedrecovery looms over our decisions.

Whichever way the market may take us in the first half of2010, the experience we have gained will prove invaluable aswe start our own careers. Our class experienced marketconditions that only our grandparents had before, andhopefully we will be able to learn from them and continue toprosper in the long run.

Looking Forwardby Brett Caplice

PORTFOL IO PRACTICUM REPORT 2009-2010 3

The 2009 Portfolio Practicum classoutperformed its benchmark, just as the class

did during McGill’s tenure in 2001-2002.

Spotlight on Art McGillby Alex Kron

FMA Updateby Steve Makowski

Creighton University’s Financial Management Association(FMA) is a student organization focused on preparingstudents for the future. FMA promotes conversation andcasual interaction with business professionals and theadvancement of its members in taking big strides toobtain dynamic careers in the finance industry.

The Creighton FMA Chapter is aimed at helping studentsexplore the world of finance though a variety of activitiesincluding networking, internship and career opportunitiesand professional speakers. Many business professionals inthe Omaha area offer the group their insights on a careerin finance. This year’s speakers were from ConAgra,Dundee Bank, McCarthy Group and First National Bank.

The Creighton FMA Chapter is proud to be sendingseveral individuals to the 2010 FMA Finance Leaders’Conference in Chicago. This unique event brings togetherFMA members from across the United States for panelsessions with a variety of renowned business professionals,leadership workshops, tours of local financial institutionsand other networking opportunities.

Opportunities like this allow the FMA to stay focused onbroadening business knowledge and preparing students forthe professional world.

Art McGill, a student in the 2001-2002 PortfolioPracticum class, began his career with Piper Jaffrey inMinneapolis. As an investment banking analyst, he spentmost of his time dealing with mergers and acquisitionsand initial public offerings.

In 2004, McGill took a job as an analyst with McCarthyGroup, a private equity firm in Omaha. Here, he took ona more active role in company operations.

In 2007, McGill attended Harvard Business School toreceive a Masters of Business Administration. In thesummer of 2008, he spent 12 weeks working for a hedgefund in Dubai. With markets on the verge of crashing,there were many opportunities and threats. McGillfocused on commodities in the economies of Brazil,Russia, India and China. He spent a significant amountof time studying the U.S. markets in order to betterunderstand the global economy, and finished his time inDubai researching financial firms in the U.S.

After completing his MBA in 2009, McGill took aposition as Vice President at Leader Bank in Arlington,Massachusetts, a community bank with $320 million inassets. This move was driven by a desire to work inmanagement. “I wanted to build a business, to use themanagement skills that I developed while at school,instead of just being an investor,” McGill said. “I wanted to see the impact I was making every day.”

In the future, McGill aspires to eventually start his own business. For now, though, he is focused on the short-term goal of growing the Leader Bank.

“The Creighton FMA Chapter is aimed at helping studentsexplore the world of financethough a variety of activities.”

“I wanted to build a business, to use themanagement skills that I developed while at school.”

– Art McGill

CREIGHTON UNIVERSITY | COLLEGE OF BUSINESS4

Finding Opportunity: Value Investingby Aleksanders Krutiks

Portfolio Investing Strategyby Steven Cai

The Portfolio Practicum investing strategy remainsconsistent with past years as we search for value. The difference is that we conduct that search underuncertain economic conditions. We have found over theyears that value investing serves us well in any economy.

By using the value strategy, we look for a stock with amarket value that is lower than its intrinsic value, which is calculated by our own Excel model that containsmany forms of fundamental analysis. One of the financialmodels that we use is called relative valuation. It considers price-to-book, price-to-earnings, price-to-salesand price-to-cash flow. We also use other analytical modelssuch as the H-model, constant stage and multi-stagedividend discount model, free cash flow to equity andBuffett’s 15% model.

We tried to minimize the risk of our stock portfolio with a diversification strategy. We invested in sevendifferent industry sectors, with no more than five percentof our total portfolio going into any specific investment.The time horizon is also an important part of ourinvesting strategy. Our typical time horizon for a stock isfrom one to three years. This time horizon allows us theflexibility to allocate our resources into more valuableinvestments in a timely manner.

Finding opportunity is a challenging task and does notcome with ease. Though we realize the challenges behindmaking investments in a time of unstable economicconditions, we also see this as great opportunity. As thePortfolio Practicum began the 2009/2010 academic year,we were cautious to make new investments after thesummer rally of 2009. Nonetheless, our class found goodinvestment opportunities by looking at fundamentalanalysis and referring to the roots of value investing.

Our general strategy for choosing investments this yearwas focused on understanding the company’s business aswell as the opportunities and risks that came with it.Because of market uncertainty we were more conservativethan our benchmark and focused on businesses withsteady cash flows and the ability to survive tougheconomic conditions over the next year. At the same timewe looked at companies that had potential to grow overthe course of one to two years.

Additionally, our class saw opportunity in the energysector, particularly in the natural gas segment. We lookedat historical trends of natural gas prices along withpolitical support for clean and domestic energy.

We identified natural gas prices to be significantlyunderpriced at times and we are optimistic that naturalgas prices will revert to the historical mean. That is one ofthe reasons we increased our investments in companiessuch as Devon Energy Corp. (DVN), Apache Corp.(APA) and ConocoPhillips (COP).

Due to the recession, the class also considered purchasingcompanies that we believe are recession proof. We identified these companies as those that sell goodswith lower cost and frequent use. Under these guidelines,we increased our investments in Wal-Mart (WMT) andMcDonalds (MCD). We believe both of these companiesare classic value investments that will continue to prosperin years to come. We believe in finding good businessesthat are well managed and that can be purchased belowtheir intrinsic value.

“[We] found goodinvestment opportunities

by looking at fundamentalanalysis and referring to the

roots of value investing.”

PORTFOL IO PRACTICUM REPORT 2009-2010 5

CREIGHTON UNIVERSITY | COLLEGE OF BUSINESS6

Current HoldingsCompany Name Ticker Market Cost Portfolio

Value Weight

3M Co MMM $49,602.00 $45,967.00 2.10%

Abbott Labratories ABT $26,995.00 $23,315.00 1.15%

Altria Group Inc MO $29,445.00 $25,320.00 1.25%

Apache Corp APA $87,694.50 $64,310.13 3.72%

Apollo Group Inc CL A APOL $54,522.00 $54,532.00 2.31%

Apple Computer Inc AAPL $42,146.40 $19,142.00 1.79%

Berkshire Hathaway Inc CL B BRK.B $72,292.00 $77,207.70 3.07%

Clorox Co CLX $45,750.00 $43,066.08 1.94%

ConocoPhillips COP $88,351.10 $93,196.68 3.75%

Devon Energy Corp DVN $95,550.00 $73,876.32 4.05%

Diagio PLC ADR DEO $69,410.00 $47,419.95 2.95%

Ecolab Inc ECL $44,580.00 $36,900.00 1.89%

Emerson Electric Co EMR $93,720.00 $91,175.96 3.98%

Fiserv Inc FISV $43,632.00 $39,592.00 1.85%

General Electric Co GE $27,234.00 $52,861.25 1.16%

Goldman Sachs Money Market GCPXX $135,779.41 $135,779.41 5.76%

Industrial Select Sector SPDR XLI $44,464.00 $54,351.85 1.89%

Intel Corp INTC $61,200.00 $48,148.50 2.60%

Johnson & Johnson Corp JNJ $57,969.00 $57,539.57 2.46%

JP Morgan Chase & Co JPM $57,296.25 $62,862.39 2.43%

Kellogg Co K $26,600.00 $18,664.85 1.13%

Linear Technology Corp LLTC $21,392.00 $22,648.00 0.91%

Matthews International Corp CL A MATW $46,059.00 $49,333.73 1.95%

Company Name Ticker Market Cost Portfolio Value Weight

McDonald's Corp MCD $74,928.00 $70,774.80 3.18%

McGraw-Hill Cos Inc MHP $50,265.00 $58,258.45 2.13%

MSC Industrial Direct Co Inc CL A Com MSM $23,500.00 $17,998.86 1.00%

Norfolk Southern Corp NSC $52,420.00 $37,420.20 2.22%

Oneok Inc OKE $44,570.00 $24,598.50 1.89%

Oracle Corp ORCL $61,325.00 $43,049.00 2.60%

Patterson Cos Inc PDCO $13,990.00 $18,357.54 0.59%

Pepsico Inc PEP $45,600.00 $39,461.45 1.93%

Potash Corp of Saskatchewan Inc POT $65,100.00 $39,749.40 2.76%

Powershares Global Water Portfolio PHO $80,085.00 $95,511.10 3.40%

Rockwell Collins Inc COL $34,876.80 $39,101.50 1.48%

St Jude Medical Inc STJ $45,975.00 $42,740.93 1.95%

Stryker Corp SYK $40,296.00 $37,062.00 1.71%

Vanguard Energy VDE $16,674.00 $22,205.33 0.71%

United Parcel Service Inc CL B UPS $51,633.00 $61,478.73 2.19%

UnitedHealth Group Inc UNH $33,528.00 $40,522.35 1.42%

Vanguard Consumer Staples VDC $45,983.00 $49,689.00 1.95%

Vanguard Large Cap Vipers VV $70,938.00 $79,309.88 3.01%

Vodafone Group PLC VOD $30,294.08 $30,331.76 1.29%

Wal-Mart Stores Inc WMT $69,485.00 $65,200.25 2.95%

Wells Fargo & Co WFC $45,883.00 $57,684.60 1.95%

Western Union Company WU $37,700.00 $42,420.00 1.60%

Portfolio Asset Allocation

ValuationPORTFOL IO PRACTICUM REPORT 2009-2010 7

Asset Class Balance

87% Equities $2,056,149.05

7% Foreign Equities $164,804.08

6% Cash & Equivalents $135,779.41

100% Total Assets Value $2,356,732.54

Cash & Equivalents 6%

Equities 87% Foreign Equities 7%

Value Core Growth

SizeLarge

Medium

Small

Sector Portfolio S&P 500 Weight [%] Weight [%]

Information 17.87 24.43

Software 3.24 4.78

Hardware 7.01 11.25

Media 2.60 2.58

Telecommunications 5.02 5.82

Services 40.30 38.76

Health Care 10.49 11.88

Consumer Services 8.68 8.66

Business Services 9.00 3.85

Financial Services 12.14 14.37

Manufacturing 41.83 36.80

Consumer Goods 12.86 10.89

Industrial Materials 15.46 10.73

Energy 12.65 11.55

Utilities 0.86 3.63

Stock Type Portfolio S&P 500Weight [%] Weight [%]

High Yield 4.48 0.00

Distressed 0.75 1.82

Hard Asset 15.26 12.81

Cyclical 33.81 34.56

Slow Growth 15.00 13.94

Classic Growth 7.31 20.46

Aggressive Growth 19.95 13.07

Speculative Growth 3.22 2.93

Not Classified 0.23 0.41

SECTOR BREAKDOWN

STOCK TYPE

PORTFOL IO PRACTICUM REPORT 2009-2010

The U.S. economy continues to strengthen after a year ofturbulence. The outlook is now brighter and morepredictable. Portfolio Practicum students think severalfactors indicate that the recession will persist in the shortterm, despite the widely held belief that the economy hasbottomed out and we are headed for recovery.

In contrast to 2008, the first three quarters of 2009 sawan increase in GDP. We expect it to rise an average of2.5% over 2010. We also believe the Fed will keepinflation under control and expect it to average at 2%throughout 2010. Since short-term interest rates cannotbe reduced more than current rates, we expect the Fed toincrease the Federal Funds rate to 1.3% as the economygains momentum.

Additionally, we expect long-term rates to rise to 4.2%from the current 3.3%. We anticipate crude oil per barrelto rise from current levels at $66 to about $93 over thenext year. Current national unemployment is at 9.7%and we expect it to rise to 10.2%. We have seen somerecovery in the housing market and expect the currenttrend of rising home prices to continue into 2010.Overall, we expect a steady, but slow, recovery in 2010.

Economic Outlook 2010by Tara Ryan

2009 Value Investing Symposium by Seth Goodwin

The year 2009 marked the start of a new tradition for thePortfolio Practicum class. On May 2, the class hosted thefirst annual Value Investing Symposium at the HarperCenter on Creighton's campus. The event was designed tocoincide with the annual pilgrimage of investors to Omahafor the Berkshire Hathaway Annual Shareholders Meeting.

Panelists included Dr. Bruce Greenwald, holder of theRobert Heilbrunn Professorship of Finance and AssetManagement at the Columbia Business School, ThomasRusso, General Partner of Semper Vic Partners, L.P.,James Crichton, Co-founder and Portfolio Manager ofScout Capital Management LLC., Ryan Sailer, VicePresident and Portfolio Manager of Union Investment

Management Group, Mark Wynegar, Equity PortfolioManager First National Bank, and Dr. Frank Reilly, theBernard J. Hank Professor of Finance, Mendoza Collegeof Business, University of Notre Dame. The panel wasco-moderated by John L. Maginn, President of MaginnAssociates, and Charles Heider, President of the CharlesHeider Company.

The inaugural event was well attended. Attendees ranged from students and faculty to outside community members and even guests fromforeign countries. At least five foreign countries wererepresented by attendees in town for the BerkshireShareholder’s Meeting.

The first annual VIP attracted 200 participants in 2009 and doubled to 400 in 2010.