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FLORIDA INTERNATIONAL UNIVERSITYSTUDENT MANAGED INVESTMENT FUND
ANNUAL REPORT 2012
TABLE OF CONTENTSCONTENTS
• FROMTHEPRESIDENTOFFIU 3
• FROMTHEFACULTYADVISOR 4
• CONSUMERSTAPLESSECTOROUTLOOK 6-7
• ENERGYSECTOROUTLOOK 8
• FINANCIALSSECTOROUTLOOK 9
• HEALTHCARESECTOROUTLOOK 10
• TECHNOLOGYSECTOROUTLOOK 11
• HISTORYOFTHESMIF 12
• STUDENTMANAGEDINVESTMENTFUNDCLASSOF2012 13
• INVESTMENTPOLICYOFTHESMIF 14
• PORTFOLIOSECTORALLOCATION 15
• STOCKVALUE 16
• TRANSACTIONSANDUNREALIZEDGAINS 17
• UNREALIZEDGAINSGRAPH 18
• REALIZEDGAINS 19
• DIVIDENDYIELDS 20
FEATURED ON FRONT PAGEAlexChediak
AllisonO’RourkeCharlieStack
CliffaniqueTownbridgeDr.HelenK.Simon
EdHarveyIgnacioChavarriaJanisSt.Port
JasmineMcMillanJuanAlfonsoJustinGarciaKathyGrau
LaurenGonzalezMarcusGent
MichaelGarridoReneMauriceRhondaLewisShaunHoyes
TABLEOFCONTENTS|FIUSMIFANNUALREPORT|PAGE2
ANNUAL REPORT DESIGNED BY JUSTIN GARCIA
May2012
IamdelightedtowriteinsupportoftheFIUStudentMan-agedInvestmentFund(SMIF)program’sClassof2012An-
nualReport.TheSMIFisaleadinginvestmentstudiescourseforstudentsinterestedinequityanalysisexperienceandportfoliomanagement.FinancestudentsparticipatingintheCollegeofBusinessAdministration’sSMIFgainreal-timeexperientiallearningandWorld’sAheadtrainingaswellasvaluableinsightintothefinancialsector.
UnderthementorshipoftheirFacultyAdvisor,Dr.HelenSimon,andotherfacultyandstaff,andthesupportofthebusinesscommunity,SMIFstudentshaveonceagainhadasuccessfulyearinmoneymanagement.IamespeciallygratefultoKirkLandon,DanyGarcia,andthestaffoftheStateFarmFinancialLiteraryLabfortheirgeneroussupport.Thisyear’sannualreportisevidencetothededicationoftheSMIFstudentsandtheskillstheyhavedevelopedthrough-outthecourseoftheprogram.
OnbehalfofFloridaInternationalUniversityandourCollegeofBusinessAdministration,Iinviteyoutoreviewthisyear’sreport,asignaloftheSMIFprogram’scommitmenttoexcel-lence.MarkB.RosenbergPresident
FROM THE PRESIDENT OF FIU
FROMTHEPRESIDENTOFFIU|FIUSMIFANNUALREPORT|PAGE3
Mark B. Rosenberg, President of FIU
OnbehalfoftheFIUSMIFClassof2012,Iampleasedtopresentour thirdannual report for theperiodendingApril27,2012.
OnApril29,2011thevalueofourportfoliowas$214,575.31andweclosedtheyearonApril27,2012withavalueof$217,282.90.Theactualtotalreturnfortheperiodwas1.26%.Ourreturnsforthecalendar-yearending12/31/2011beattheS&P500by5.78%,witha standarddeviationof5.21% less than thebenchmarkS&P500;ouralphais7.79andourbetais0.63.Ourphilosophyofmanagingour risk and having a total return perspective appears to havepaidoff. Over thepastyear, theSMIFClassof2012hasworkeddiligently screening, evaluating, and presenting their investmentselectionstoouradvisoryboardattheendoftheFallandSpringterms.Theapprovedselectionsandpurchaseinformationislistedinthetransactionssectionofthisreport.
ThesectorteammanagersandIattendedthesecondannualGlobalAssetManagementConference(G.A.M.E) inNewYorkCityduringthelastweekofMarch2012.WeenteredtheSMIFcompetitionforthesecondyearinarow.Ourteamwasinvitedtopresenttothejudges (only ten teamswere invited). Wedidnot,however, takehomethetrophy,butwearegettingcloser.Asidefromtheactivitiesattheconferenceitself,oursincerethanksgoouttotheNewYorkfriendsoftheFIUSMIF:AllisonO’Rourke,EdHarveyandJesusDiazforgoingaboveandbeyondtomakeourtripamemorableone.
Once again, the support of the local South Florida businesscommunityhasbeenoutstanding. Overthepastyear,weaddedsixnewmemberstoourexisting15-memberadvisoryboard:EricBarberioBBA‘90,JohnGutekunstBBA’07,JackKahn,KevinLeahy,JohnMousseauandRicardoNietoBBA‘10.
IamsoappreciativeoftheStateFarm®FinancialLiteracyLabstaffand interns - Shaun Hoyes, Kathy Grau, Justin Garcia, ChristineMontero and Charles Stack - for their assistance in planning theSMIF activities, supporting our trip to G.A.M.E in NY and theirassistance incompilingthis report;noneof thiscouldhavebeenpossiblewithouttheirsupport,enthusiasmanddedication.
HelenK.Simon,CFP®,DBA
FROM THE FACULTY ADVSIOR TO THE FIU STUDENT MANAGED INVESTMENT FUND
FROMTHEFALCULTYADVISOR|FIUSMIFANNUALREPORT|PAGE4
Helen K. Simon, CFP®, DBA, Faculty Advisor
OUR ADVISORY BOARD
Mr. Alexander Acosta, AssociateACMCapitalPartners,LLC
Miami,Fl
Ms. Sofia W. Bitela, PartnerBrickellFinancialModelingServices,LLC
Miami,Fl
Mr. Eric Barberio,CMAFounder/ManagingPartner
EMBIManagementConsultantsPalmBeach,Fl
Dr. Chun-Hao Chang, PHDDept.ofFinanceandRealEstate,CBA
FloridaInternationalUniversityMiami,Fl
Mr. Jack Christian, CFA, CFP®ExecutiveDirector
JPMorganMiami,Fl
Ms. Dottie Doucet-Sillano, C.P.A., M.B.A.
ChiefFinancialOfficer&VicePresidentDreamsInc.Plantation,Fl
Mr. Ricardo Eichenwald HornEichenwaldInvestmentsCorp
Miami,Fl
Mr. Timothy J. Ellington ManagingDirectorPrincipal
BearStearns,adivisionofJ.P.MorganPrivateClientServices
Atlanta,GA
Mr. James M. Farwell Associate
AssociateCrossKeysCapital,LLCFt.Lauderdale,Fl
Mr. Jon Gutekunst, CFAHSBCBankMiami,Fl
Mr. William Johnson Founder
OptionsAtoZBocaRaton,Florida
Mr. Jack KahnEditor
NightlyBusinessReportMiami,Fl
Mr. R. Kirk Landon TheKirkFoundation
Miami,Fl
Mr. Kevin Leahy, CFP®StateFarmMiami,Fl
Mr. Rafael Madan ManagingDirector
WellsFargoMiami,Fl
Mr. John MousseauManagingDirector-PortfolioManaging
CumberlandAdvisorsSarasota,Fl
Mr. Ricardo NietoMorganStanley
Miami,Fl
Ms. Nina NikolicFinancialAdvisorYoung,Stovall&Co
Pinecrest,Fl
Mr. Barry M. Sine, CFA, CMT DirectorofResearchCapStoneInvestments
SanDiego,CA
Mr. Tony Vu UniversityTreasurer
FloridaInternationalUniversityMiami,Fl
Mr. Roark Young President-Young,Stovall&Co.
Miami,Fl
OUR DONORSNoneofthiswouldhavebeenpossiblewithoutthegenerousdonationsofMs.DanyGarciaandMr.R.KirkLandon.
OUR ADVISORY BOARD WewouldliketoexpressourdeepestappreciationtoouroutstandingSMIFAdvisoryBoardmemberswhohavetakentimeoutoftheirbusyschedulesduring
thepastacademicyeartomeetwithourclassandoffertheirinsightandexpertise.
OURADVISORYBOARD|FIUSMIFANNUALREPORT|PAGE5
Helen K. Simon, CFP®, DBA, Faculty Advisor
During economic downturns, investors often flock to theconsumerstaplessectorbecauseconsumerstaples ismainly
comprisedofcompaniesthatsellnondurablegoods-goodsthatdo not last longer than three years. These products, which arenecessities,haveinelasticdemandbecausewhentheeconomyisinarecession,consumershavelowerdisposableincome;thissteersconsumersawayfrombuyingdurableorluxurygoods(i.e.washingmachines,automobiles,televisions,etc.)andforcesthemtofocusonnecessities(i.e.food,beverages,cosmetics,andcleaningsupplies).This iswhyconsumerstaples isa safehaven for investorsduringtougheconomic times; consumers are alwaysgoing topurchaseproductssuchastoiletpaper, toothpaste,anddiapers,nomatterwhatkindofeconomicdisparitytheymightbedealingwith.
The consumer staples sector is comprised of mainly blue chipscompanies in their mature growth phase, which dominate theirsubsectors in an oligopolistic fashion.We can find examples ofthis inthebeverageindustry,suchasPepsiandCocaCola.Thesetwobeveragegiantsownmostofthemarketshareandfollowoneanother’s leadiftheotherissuccessful(i.e.CocaCola’sCokeZeromadeahugesplashandPepsisoonfollowedsuitwiththeirownzero-caloriesoftdrink:PepsiMax).
Threatswithin the consumer staples sector are substitute goodssuchasgenericbrands.Supermarketsaresupplyingtheirownbrandnamesinwhichthequalityisremarkablyclosetothoseofindustryleaders.DuetotheGreatRecessionpeoplehavebeenforcedtotrythesegenericproductsandhavesomewhatshiftedawayfromtopbrandnames.Theseconsumersmayevenbecomecomplacentandcontinuetousegenericbrandseveniftheeconomyheadstowardanupswing.
The consumer staplessector is not normallyknown for havinghigh-yielding growth(i.e.Apple Inc. in2011),but because industrygiants constantlymanufacture commonstaple products thatthe average consumerneeds,thesecompanieshave become moreknownfortheirreliablehigh-dividend yields.Thisiswhyaconsumerstaple stock is a greatway to protect yourportfolio: such stocksare the suppliers ofnecessities.
Consumerstapleswasthebestperformingsectorin2011,andourportfoliohadtwopositionscalledKimberlyClark(KMB)andChurch& Dwight (CHD), leaving only one remaining position Proctor &Gamble(PG).TheconsumerstaplesteamdecidedtokeepProctor&Gamble,becauseoftheir3.1%dividendyieldandmanagementhas recaptured decent market share through marketing efforts,buybacks,andashowingofstrongconfidenceintheirbusiness.The Spring 2012 Consumer Staples group is headed by sectormanger Justin Garcia and analysts Erick Saize, Ryan Brewer, andFelipeFernandez.
CONSUMER STAPLES SECTOR OUTLOOK
(CONTINUED...)
CONSUMERSTAPLESSECTOROUTLOOK|FIUSMIFANNUALREPORT|PAGE6
Justin Garcia BBA’12, Sector Manager
Justin Garcia BBA’12, Sector Manager
Withtheapprovalofthefinanceboard,theconsumerstaplesteampurchasedPepsiCo.(PEP),whichwaspresentedbyErickSaize.ThereasonforthepurchasewasbecauseofPepsi’sdiverseportfolioinnotonlythebeveragemarketwithPepsiandGatorade,butalsointhesnackmarketwithproductslikeFrito-lays,andDoritos.PepsiCo.alsohadrecentpartnershipsand acquisitions thatwill give them exposureto BRIC nations with thetransparency of GAAPregulations. Pepsi Co.purchased of “Mabel”,a Brazilian cookiemanufacturer, and recentlypartneredwithTingyi-AsahiBeverage Holding Co. Ltd.(TAB), the largest bottlingcompany inChina.AnotherattractiveaspectofPepsiCo.istheirconstantdividendgrowthrateof7%,amountingtoa3.1%annualdividendyield.
The next purchase for the consumer staples team was Sysco(SYY), presented by Ryan Brewer. The reason for this purchasewasbecauseSyscoisanindustryleaderinthefoodtransportation
business;theydominatethemarketwith180distributionfacilitiesacrosstheU.S.andCanada-amarketsharethatcannotbematchedby competitors. SYYalsohavea sustainabilityprogram inwhichtheyworkhand-in-handwithgrowersandranchers,makingsurethequalityoftheirproduceandmeatsareexceedtogovernmentstandards.SYYusesEnterpriseResourcePlanningsoftware,whichis an integrated system that mirrors Walmart’s supply supportsystem,allowinganeasy streamline to support customerswhentheirsuppliesarelow.SYYalsohadanattractivedividendyieldof3.5%, even through the rough economic periods of 2008, 2009,and2010whereSYYdisbursedadividendof1.83,1.77,and1.99respectively. The consumer staples team is also hoping for therise of economic prosperity.With recent jobless claims trendingdownward,wearehopingtheaverageconsumerwillhavemoredisposable income to spend in restaurants, which is SYY’smaincustomerbase(62%).There isan inversecorrelationbetweentheSYY stock price (green line) andU.S. Jobless claims (red line). In2009,joblessclaimshitahighandSYYwasatitslowestpoint;thiscoincideswith2003-2008 jobless claims at a lowandSYYbeinghigh.Itlookslikejoblessclaimsfiguresarefollowingsuit.
JustinGarciaBBA’12,ConsumerStaplesManager
PEPSI’S DIVERSIFICATIONFRITO LAYSGATORADE & COMOUNTAIN DEW & COPEPSIQUAKER FOODS TROPICANAAQUAFINADIET PEPSI 45.4%
16.5%
10.2%6.5%6.2%
5.8%5.3%
4.1%
ANNUAL DIVIDEND
12/07 12/08 12/09 12/10 12/11
DIV. AMT 1.425 1.65 1.775 1.89 2.025
DIV. GR% 15.79% 7.58% 6.48% 7.14%
YEAR-END YIELD 1.88 3.01 2.92 2.89 3.05
CONSUMERSTAPLESSECTOROUTLOOK|FIUSMIFANNUALREPORT|PAGE7
(redrepresentjoblessclaimsintheU.S.,greenrepresentsSYYstockprices,andbluerepresentsdividendpayments)
Wesaw an explosive growth in the energy sector as global demandforenergyproductsincreasedallacrosstheworld.AsGDPcontinues
to grow, we expect demand from developed economies and emergingmarketstogrowinsimilarstride.InorderfortheSMIFtotakeadvantageofthisdemandgrowth,wehavedevelopedatraditionalapproachtoinvestingwithintheenergysector.
TheSMIFhas traditionally takenadvantageof themid-streamsectorandMaster Limited Partnerships (MLPs), and will continue to do so movingforward through 2012. MLPs traditionally provide a high dividend yieldtotheirunitholdersandarenotdouble-taxedastraditionalcorporations,making these companies highly attractive. Along with high dividendyields,MLPprices reactpositivelywhen interest ratesare lowsince thereisastrongerexpectedcashflowthatisusuallyredistributedintheformofdividends.SincetheFedhaspledgedtokeepinterestrateslowuntilatleast2014,theSMIFseekstokeepitspositions inMLPsandinthemid-streamsector.
Astheglobaleconomycontinuestorecoverandconventionaloilexplorationbecomesmoredifficult,companiesareturningtodeepwaterexplorationtomeet the need of continued growth in oil demand. This is where oilservicecompaniescomeintofocus,providingthematerialsandproductsnecessary for deep water explorations. The SMIF plans to benefit froma limitednumberofcompanies thatprovidesuchservicesatapremium,makingthisparticularsectorverypromisingaswemoveforward.
We understand the inherent political risk that comes from investing inenergy as over the past year tensions from thewestern region of AfricaandpoliticalturmoilintheMiddleEasthaveprovedtoshowthevolatilityand uncertainty that comeswith the energy sector. In order tomitigatethisriskweproperlyhedgeallofourpositionstolimitourdownsidewhilecapitalizingontheupsidepotentialthissectorcontinuestoshow.
CharlesStackBBA’11,EnergySectorManager
ENERGY SECTOR OUTLOOK
ENERGYSECTOROUTLOOK|FIUSMIFANNUALREPORT|PAGE8
Charles Stack BBA’11, Sector Manager
FINANCIALSSECTOROUTLOOK|FIUSMIFANNUALREPORT|PAGE9
Thefinancialsectoriscomprisedofseveraldifferentsubsectorsincluding:creditunions, banks, asset management firms, credit card companies, insurance
companies,stockbrokerages,investmentfunds,andseveralgovernmentsponsoredenterprises. Financial firms are different from firms in other sectors in that theygeneratetheirprofitsbasedonmarketconditions,ratherthanthetangibleproductsthat theysell. Firms in thefinancial sector tendtogenerate largerprofitsduringbullish time periods, when interest rates are low. This is because financial firmsbenefitfromtherevenuefrommortgagesandloans,whichgainvalueasinterestratesdrop.Theytendtosuffergreaterlossesduringeconomicrecessionsorbearishtimes.Duetothefinancialcrisisof2008,thefinancialsectorhassufferedfromgreatlossesin addition to a negative sentiment for financial firms in general by the publicgiven the struggle and fall ofmany banks and firms. In order to regulate banksandother financial firms from falling susceptible to another financialmeltdown,manyregulationshavecomeaboutsuchasDodd-FrankandtheBaselIIIAccords.Inaddition,theUSgovernmenthashadtointerveneandinjectcapitalintosomeofthesefirms.Thispastyearof2011hasalsoseenanincreaseinpanicastheUnitedStatesteetereduponthepossibilityofdefaultingonit’sgovermentdebtobligationsandit’screditratinglowered,andseveralcountriesintheEuropeanUnionwereonthebrinkofbankruptcy.Astheprofitsoffinancialfirmsaretiedtothemarket,2011sawsomeoftheloweststockpricesinyears.In thenext few years the economy is expected tomovebackon track andgainmomentumduring its recovery,whichwill leadtogreaterreturns inthefinancialsector.Becauseofthecurrentdownturnintheeconomy,investorsareencouragedtolookforstrongfinancialfirmsthatcanwithholdarecession,andthatarecurrentlyundervaluedsothatwhentheeconomyisbackontherise, thesefirmsaremoreprofitablethantheywereintheirprecedingyears.
LaurenGonzalezBBA’12,FinancialsSectorManager
FINANCIALS SECTOR OUTLOOK
Lauren Gonzalez BBA’12, Sector Manager
The Healthcare care sector is one that is crucial in the assetallocationofanyportfolio.Whenclassifyingthesector,wefind
that it includesavarietyof sub-sectors. Thediversitywithin thissectoristrulyfascinating;companiesrangeinspecializationsthatinclude, but are not limited to: pharmaceuticals, biotechnologydrug developers, medical equipment suppliers, hospital holdingcompanies,managedcareandpharmacybenefitmanagers.
Healthcare is historically non-cyclical and defensive in timesof overall market underperformance. Our target companiesenjoy rather wide economic moats through high start-up costs,significantpricingpower,strongpatentprotectionandeconomiesofscale.Theyalsoprovidesteadyrevenuesstreams,haveefficientoperatingmetrics,andboaststrongcashpositions,ontheirbalancesheets,whichisusedtoincreaseshareholdervalue.Dividendsareaverypopularformofincreasingshareholdervalueinhealthcare.Companies also use the cash on their balance sheets to issuestock buy-back programs and further strengthen their businessthroughtheacquisitionsofothercompanieswithpromisingnewinnovations.
Duetothegovernment’s involvementthroughprogramssuchasMedicareandMedicaid,wewillcontinuetoseepoliticalpressuresdue to increased scrutiny of their budgets and the continuedimplementation of “Patient Protection and Affordable Care Act”.Additionally, we are in a period that major pharmaceuticals arebeingtaxedatleast$2.3Billionaspartof“ObamaCare”;theyarealsoscheduledtohavemajorpatentexpirationsuntiltheyear2016.
From a macro perspective, we continue to expect increaseddemandforhealthcareproductsandservicesfueledbytheagingpopulationinthedevelopedworld.SpecificallyintheUnitedStates,it is expected that by 2030, 19% of the population (72.1millionpeople) will be over 65 years of age. Additionally, if sustained,
health care reform will present approximately 34 million newlyinsured customers seeking health care products and services.Theseincreasingdemandtrendsareprojectedtocontinueandthecompanies in ourportfolio are inpristineposition toprofit fromthesedevelopments.
In conclusion, we expect to further diversify our holdings inthe healthcare sector by decreasing our exposure to brandedpharmaceuticals, increasing our exposure to the medicalequipment and managed care sub-sectors. We are staying oncoursewithourholdinginthepharmacybenefitmanager.Fromariskmanagementstandpoint,wewillcontinuetoactivelymitigateriskthroughoptionsstrategiesinordertoensurewecapitalizeonthemaximumbenefits possiblewhile ensuring our investmentstrategyandrisktoleranceisstrictlyadheredto.
JuanAlfonso,HealthcareSectorManager
HEALTHCARE SECTOR OUTLOOK
HEALTHCARESECTOROUTLOOK|FIUSMIFANNUALREPORT|PAGE10
Juan Alfonso, Sector Manager with Guy Adami of CNBC
Thepastyearhasbeenaninterestingperiodfortechnologyinvestors.Fueledby the uncertainty in Europe and fear of contagion, late July 2011 saw
volatilityquicklyrisingandspreadingacrossindustriesandmarkets.Thisriseinvolatilitycausedasudden-yetverystrong-sell-offacrossthetechsector,whichwasreflectedinthe18.08%dropintheNASDAQfromJuly21throughAugust 18, 2011. Fortunately, 2012 brought promising news from Europe,drivingvolatilitydowntoitsaveragelevelsandfuelingasubsequent30.66%YTDriseintheNASDAQ.
Lastsemesterwebought700sharesofMicrosoftat$24.28.Ourinvestmentstrategy of a 15% gain within three months worked perfectly, and uponreachingourtargetpriceof$28,wecollectedourgainsandclosedourpositiontomakeroomforourpromisingnewinvestments.Insummary,theprofitfromtheMicrosoftcallswesoldandthecapitalgainsonthestock–alongwiththecompany’shighdividendyield-,madethisaveryprofitableholding.
Werecentlypurchasedtwoverypromisingcompanies:CATechnologiesandOracle Corporation. By investing in these two companies, we have gainedsignificantexposuretotheshiftinthetechsectortowardscloudcomputing.Most tech companies are trying to find different ways to integrate thisnew technology to becomemore profitable and efficient. But whilemanycompanies invest their money in reasearch & development (R&D) –whichusuallycomesatthecostoflaggingbehindcompetitors,CAandOraclehavebothmadeverypromisingacquisitions.Notonlydidtheseacquisitionsallowthemto immediatelyaddcloudcomputingservices to theirproducts lines,theyalsoshowedbothcompanies’drive tobeat the forefrontof thecloudcomputingshift.
IgnacioChavarriaBBA’12,TechnologySectorManager
TECHNOLOGY SECTOR OUTLOOK
TECHNOLOGYSECTOROUTLOOK|FIUSMIFANNUALREPORT|PAGE11
Ignacio Chavarria BBA’12, Sector Manager
Foundedin2008,theFundwasoriginallyspearheadedasaninvestmentclubthatwouldgathereveryweektoexchangeideas.Eventually,theclubreceiveddonationsthatlaunchedtheStudentManagedInvestmentFundandcreatedaclass
forgraduate andundergraduate studentswhich servedas ameans forobtainingknowledgeandhands-onexperience inequity-analysisandportfoliomanagement.TheFundisarrangedintoastudent-run,faculty-advisedstructurewithgraduateandundergraduatestudents.WiththeassistanceoftheFacultyAdvisor,Dr.HelenSimon,CFP®,thefundengagesinthoroughresearchandFundamentalanalysisforequities,ETFs,andADRstodiscoverundervaluedandprofitablelongtermpositionsinU.S.markets.Toensureminimizationofriskandproperriskmitigation,theteamuseseffectivemeansofdiversificationandriskmanagementtoolsincluding,butnotlimitedto,sectordiversification,correlationcoefficients,technicalanalysis(assistinginentryandexitpoints),andoptionstrategies.
Segmentedintosectorteamscomprisingofonesectormanagerperteamandmultiplesectoranalysts,theteamsexchangeideasandstayuptodateonsectorandmarketnews.Additionally,theFundusestheUniversity’sresearchlab,otherwiseknownastheStateFarm®FinancialLiteracyLab,asafacilityforresearch.Thelabconsistsof49dual-screencomputerterminalswithavarietyoffinanceandbusinesssoftwareconsistingoftradingplatforms,researchtools,andriskmanagementprograms,andmarket simulations.Themain softwareused includesBloombergProfessional (15 terminals; overall researchandanalysis),ThinkOrSwim(placingpositions),@RISK,CrystalBall(riskmanagementanalysis),S&PCapitalIQ,andMorningstar.
Theprocessof researchandanalysis revolvesaroundmanydifferentapproachesusedwidelyand innovatively.The teamsfirstanalyzethesectoranditsvariousindustries.Eachindustryconsistsofitsindividualdriversandfundamentals;thehistory,currentoutlook,andfutureoutlookofpotentialinvestmentsarealltakenintoconsideration.Oncetheindustrieshavebeenanalyzed,anequityscreeningprocessbeginsusingBloombergProfessionalbasedonrespectivemetrics.Afterthesecuritiesarechosen,ananalysisisrequired.Businessmodels,profitability,liquidity,growth,efficiency,andotheraspectsareassessedandmeasured.Becauseeverysecurityhasdifferentrisksinvolved,suchrisksmustbecarefullyrealizedandusedtomanagerisk.TheteamsthencreatereportsandgathertopitchthepositionstotheFacultyAdvisorand,withapproval,totheAdvisoryBoard.
TheFundhasbeen,thusfar,anamazingexperiencethathasgivenstudentsanadvantagetobetterpreparestudentsforacareerinfinance.Asthestudentsgraduate,theypavethewayforneweranalyststogainfurtherknowledgeinequityanalysisandportfoliomanagement.TheFundisessential inprovidingexperienceandknowledgeunseenintheaverageuniversityclassroom.
HISTORY OF THE STUDENT MANAGED INVESTMENT FUND
HISTORYOFTHESMIF|FIUSMIFANNUALREPORT|PAGE12
STUDENT MANAGED INVESTMENT FUND CLASS OF 2012
J u s t i n G a r c i a *R y a n B r e w e r
F e l i p e F e r n a n d e zE r i c S a i z
J u a n A l f o n s o *D a v i d A r c a
M i c h a e l G a r r i d oS t e v e H a r r i s
M a n n y S a u r e z
I g n a c i o C h a v a r r i a *J o s e C a b r e r aM a r i o I t u r r i
G i o v a n n a M e c o z z iM a n n y S a u r e z
L u a r e n G o n z a l e z *A b r a h a m C e b a l l o s
J a v i e r C o r t e sJ e a n - M a r c N a r i n e
J a n a y W a t e r s
C h a r l e s S t a c k *E n r i q u e C h u j o yS t e f a n o D e l l o r o
J u a n M o l i n a
A l e x C h e d i a k *H o r a c i o A g u i r r eM e l i s s a S t a n t o n
W i l l i a m S w i n kSMIF’12
CONSUMER STAPLES
REAL ESTATE
ENERGY
HEALTHCARE
FINANCIALSTECHNOLOGY * Sector ManagersSTUDENTMANAGEDINVESTMENTFUNDCLASSOF2012|FIUSMIFANNUALREPORT|PAGE13
PURPOSE:ThepurposeofthispolicyistoprovideguidelinesfortheinvestmentofthefundsoftheStudentManagedInvestmentFund(SMIF)atFIU.
OBJECTIVE:TheobjectiveofTheFundistoprovideFIUstudentswithatooltoenhancetheirknowledgeofequityinvestmentmanagementstrategiesandtechniques;subjecttofiduciaryresponsibilitiesofthirdpartyfinancialmanagers.
SMIF STRATEGY:TheSMIFwillbemanagedtomaximizeriskadjustedreturnsrelativetotheS&P500,usingportfoliodiversificationtechniquestominimizenonmarketrisk.
MANAGEMENT:TheSMIFwillbemanagedbyaportfoliomanagerselectedbytheSMIFInvestmentCommittee(usuallytheFacultyAdvisor).TheSMIFAdvisoryBoardwillbecomprisedof theportfoliomanager, thechairof theFIUDepartmentofFinanceandRealEstateorhis/herdesignee,andavaryingnumberofoutsidebusinessprofessionals.TheSMIFInvestmentCommitteewillbecomprisedofafacultymemberdesignatedbytheExecutiveDeanoftheCollegeofBusinessfromtheFinanceandAccountingfacultyinconsultationwiththeDepartmentChairoftheFinanceandRealEstateDepartmentandtheDirectoroftheSchoolofAccountingwillbeamemberoftheInvestmentCommittee,alongwithanothermemberchosenbyandfromtheFIUFoundationBoardofDirectors.TheFIUFoundationthrough its InvestmentCommitteehasultimateauthorityoverinvestmentdecisionsasdefinedintheFIUFoundationInvestmentPolicy.
POLICIES:
1 TheFundseeksabove-averagereturnsby investing in securities that aredetermined, through analysis by studentanalysisteams,tobeundervaluedorpoisedforabnormalfuturegrowth.Theanalysisoftheportfolio investmentswillbebasedoncommonly accepted fundamental intrinsicvaluationtechniques,e.g.,discountedcashflowmodels.Portfoliosaleswillbebasedonthesametypeofanalyses.
2 Theportfoliowill consistofpublicallytraded common stock investmentsandExchangeTradedFunds(ETFs)listedontheNYSE, AMEX, or NASDAQ. Cash and/ormoneymarketfundsmayalsobeemployed
for non-invested funds, along withprotectiveputoptions,coveredcalloptionsandoptioncollarsasriskmanagementtoolsonly.Noindividualpositionshallhaveafiveyear average standard deviation of morethan twice that of the five year averagestandarddeviationoftheSPYETF.
3 Portfolio stock purchases will befor cash; no margin trading will be
permitted.
4 Short positions and naked derivativetradesarenotpermitted.
5 Sectoranalysisisrequiredaspartofthefundamentalstockanalysis.
6 No stock sector will comprise morethat20percentoftheportfolioandno
individualstockpositionwillcomprisemorethan10percentoftheentireportfolio
7 Fifty(50)percentofthenetannualgainwill be reinvested into the Fund. Theremainderofthenetgainwillbedistributedto the CBA State Farm® Financial LiteracyLab(SFFLL).Shouldanannuallossincur,thecumulative loss must be recovered beforedistributionsaremade.
8 Thispolicycanbeamendedandrevisedasneeded.
INVESMENT POLICY FOR STUDENT MANAGED INVESTMENT FUND (SMIF) AT FIUAS OF SEPTEMBER 30, 2009
INVESTMENTPOLICYOFTHESMIF|FIUSMIFANNUALREPORT|PAGE14
Cash 33.1% Technology 12.1%
Consumer Staples 8.7%
Energy 10.8%
Healthcare 15.1%
Financials 20.2%
SECTORS WEIGHT VALUEFINANCIALS 20.2% $44,573.00
HEALTHCARE 15.1% $33,288.00
TECHNOLOGY 12.1% $26,690.10
ENERGY 10.8% $23,902.00
CONSUMERSTAPLES 8.7% $19,092.00CASH 33.1% $2,863.78OPTIONS $348.37H
SHORTOPTIONS ($3,474.35)TOTAL PORTFOLIO VALUE $217,282.90
PORTFOLIO SECTOR ALLOCATIONASOFAPRIL30,2012
PORTFOLIOSECTORALLOCATION|FIUSMIFANNUALREPORT|PAGE15
0
5000
10000
15000
20000
25000 POSITION VALUEBLACKROCK $19,158.00THETRAVELERCO. $12,864.00FRANKLINRESOURCES $12,551.00KINDERMORGANENERGYPARTNERS $16,488.00SCHLUMBERGER $7,414.00MICROSOFT $22,410.50MILLICOMINTL.CELLULAR $4,279.60NOVARTIS $16,551.00EXPRESSSCRIPTS $16,737.00PROCTOR&GAMBLE $19,092.00
STOCKVALUE|FIUSMIFANNUALREPORT|PAGE16
STOCK VALUEASOFAPRIL30,2012
POSITIONS TICKERQUAN-
TITY COSTTOTAL COST
CLOSING PRICE
MARKET VALUE NET P/L
NET P/L %
BLACKROCK BLK 100V $190.64 $19,064.00 $191.58 $19,158.00 $94.00 0.49%EXPRESSCRIPTS ESRX 300 $56.06 $16,818.00 $55.79 $16,737.00 ($81.00) (0.48%)FRANKLINRESOURCES BEN 100 $99.93 $9,993.00 $125.51 $12,551.00 $2,558.00 25.60%KINDERMORGANENERGYPARTNERS
KMP 200 $69.46 $13,892.00 $82.44 $16,488.00 $2,596.00 18.69%
MICROSOFT MSFT 700 $25.80 $18,060.00 $32.02 $22,410.50 $4,350.50 24.09%
MILLICOMINT’LCELLUAR MIICF 40 $102.98 $4,119.20 $106.99 $4,279.60 $160.40 3.89%NOVARTIS NVS 300 $53.73 $16,119.00 $55.17 $16,552.00 $432.00 2.68%PROCTOR&GAMBLE PG 300 $64.92 $19,476.00 $63.64 $19,092.00 ($384.00) (1.97SCHLUMBERGER SLB 100 $75.37 $7,537.00 $74.14 $7,414.00 ($123.00) (1.63%)THETRAVELERSCO. TRV 200 $61.80 $12,360.00 $64.32 $12,864.00 $504.00 4.0TOTAL EQUITY VALUE $137,438.20 $147,545.10 $10,106.90 7.35%CASH BALANCE $72,863.78
DATE POSITIONS TICKER BUY/SELL QUANTITY PRICE TOTAL9/08/2011 PEABODY BTU S -100 $48.86 $4,880.909/23/2011 EBIXINC EBIX S -300 $14.92 $4,471.3612/07/2011 SCHLUMBERGER SLB B 100 $75.32 ($75536.98)12/08/2011 PROCTOR&GAMBLE PG B 100 $99.88 ($9,992.9012/09/2011 MICROSOFTV MSFT B 700 $25.79 ($18,063.36)12/09/2011 MILLICOMINT’LCELLULVAR MIICF B 40 $102.85 ($4,119.00)12/21/2012 THETRAVELERSCOMPANIES TRV S -100 $102.85 ($4,119.00)1/23/2012 CHURCH&DWIGHT CHD S -500 $45.00 $22,484.561/23/2012 KIMBERLYCLARK KMB S -300 $72.50 $21,734.58
UNREALIZED GAINS
TRANSACTIONSANDUNREALIZEDGAINS|FIUSMIFANNUALREPORT|PAGE17
TRANSACTIONSASOFAPRIL30,2012
-1000
0
1000
2000
3000
4000
5000
UNREALIZEDGAINSGRAPH|FIUSMIFANNUALREPORT|PAGE18
UNREALIZED GAINSASOFAPRIL30,2012
-4000-3000-2000-1000
010002000300040005000600070008000
EBIX Inc
Church & Dwight
Kimberly
Clark
Peabody Energy
POSITIONS TICKER QUANTITY COST SOLD PROCEEDS NET G/LPEABODY BTU 100 $65.13 $48.86 $4880.90 ($1,627.00)
EBIXINCV EBIX 300 $25.98 $14.92 $471.36 ($3,317.55)THETRAVELERCO. TRV 100 $61.78 $58.24 $5,818.89 ($354.00)
CHURCH&DWIGHT CHD 500 $32.29 $45.00 $22,484.56 $6,357.50KIMBERLYCLARK KMB 300 $61.48 $72.50 $21,734.58 $3,306.00
REALIZEDGAINS|FIUSMIFANNUALREPORT|PAGE19
REALIZED GAINSASOFAPRIL30,2012
0
1%
2%
3%
4%
5%
6% POSITIONSDIVIDEND YIELD (%)
KINDERMORGANENERGYPARTNERS 5.8%
NOVARTIS 3.8%PROCTOR&GAMBLE 3.5%BLACKROCK 3.1%THETRAVERLERSCOMPANIES 2.9%MICROSOFT 2.5%
MILLICOMINTL’CELLULAR 1.7%SCHLUMBERGER 1.5%FRANKLINRESOURCES 0.9%EXPRESSSCRIPTS 0.0%
DIVIDENDYIELDS|FIUSMIFANNUALREPORT|PAGE20
DIVIDEND YIELDSASOFAPRIL30,2012