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General Body Meeting 09-12-12 1

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Mutual Investment Club of Cornell Welcome 2

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Mutual Investment Club of Cornell Two Minute Drill 3 Guest Lecturer: Topic: Zachary Peskin FOMC

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Mutual Investment Club of Cornell 4 MICC South Korea Strategy

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Mutual Investment Club of Cornell 5 Agenda I. Introduction II. Thesis III. China/Asian Slowdown? I. Macro Overview II. Manufacturing IV. Analysis I. Fundamental II. Quant V. Proposal

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Mutual Investment Club of Cornell Nexen Tire Corp Current EPS: 878 KRW Est. EPS: 1,596 KRW Current P/E: 22.44 Estimated P/E: 12.55 Est. Peg Ratio:.46 Considering alliance with Michelin & Cie. 10% of Plants have been closed, so oversupply will disappear 6

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Mutual Investment Club of Cornell 7 Questions 1. Why stocks instead of an ETF? 2. Why is Asia still a good place to invest? Guarantees of future growth 3. Why should we move into these specific stocks? Pricing Performance

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Mutual Investment Club of Cornell 8 Introduction Held EWY (iShares-Korea) since the end of last semester. Invest in ETF as we do not actively manage over the summer. Hedge against European uncertainty. We can now move into individual stocks. Save management fees & maximize returns.

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Mutual Investment Club of Cornell 9 Korean Economy ETF is not diversified. Neither is the Korean economy. Tech, Auto & Heavy. 105 total holdings.

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Mutual Investment Club of Cornell 10 ETF Composition -Top 10 Holdings Name% Of Fund SAMSUNG ELECTRONICS CO LTD22.20 HYUNDAI MOTOR CO6.07 POSCO3.98 HYUNDAI MOBIS3.44 KIA MOTORS CORPORATION3.24 SHINHAN FINANCIAL GROUP LTD2.50 SAMSUNG ELECTRONICS-PREF2.57 LG CHEM LTD2.41 KB FINANCIAL GROUP2.33 KYNIX SEMICONDUCTOR INC2.40 Total51.14

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Mutual Investment Club of Cornell 11 Questions Why Stocks instead of ETF? Why is Asia still a good place to invest? Guarantees of future growth Why should we move into these specific stocks? Pricing Performance

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Mutual Investment Club of Cornell 12 Asia Manufacturing slowdown due mostly to slowing exports to US and Europe Should recover with new ECB action and stability after the US election Quantitiative easing by China encourage investment Services PMI, more reflective of the health of the domestic Chinese economy, has shown continuous expansion through the slowdown, suggesting that growth never really stopped

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Mutual Investment Club of Cornell 13 Asia Rising wages are creating a new Chinese middle class, creating an enormous new pool of consumers Chinas services sector is growing. Service transactions are more difficult to track than industrial ones GDP is most likely understated Electricity usage argument flawed Service industry uses much less electricity

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Mutual Investment Club of Cornell 18 Manufacturers in China expanded rapidly, without worrying if goods would be sold. Demand (from Europe) dropped, resulting in oversupply. Inventory buildup, Production plants closing. Manufacturing appears to be bottoming out. Supply has adjusted to demand. Inventories are sold off. Stocks ready for recovery.

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Mutual Investment Club of Cornell 19 Barring a catastrophe, Chinas ability to power world economic growth should continue for many years, as the Chinese service sector is still in its infancy and has enormous potential for growth Chinas & Asias rise shall continue recent events were merely a temporary inconvenience.

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Mutual Investment Club of Cornell 20 Questions Why Stocks instead of ETF? Why is Asia still a good place to invest? Guarantees of future growth Why should we move into these specific stocks? Pricing Performance

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Mutual Investment Club of Cornell 21 Current EPS: 878 KRW Est. EPS: 1,596 KRW Current P/E: 22.44 Estimated P/E: 12.55 Est. Peg Ratio:.46 Considering alliance with Michelin & Cie. 10% of plants have been closed, so oversupply will disappear. Substantial earnings increase.

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Mutual Investment Club of Cornell 23 Samsung Current EPS: 113,775 KRW Est. EPS: 143,554 KRW Current P/E: 11.31 Est. P/E: 8.97 Est. PEG Ratio:.62 Patent infringement only $1 billion, Samsung has $18 billion in cash on hand. Appeal, and will likely get reduced Both found guilty in South Korea Mixed results Fast reaction to German ban.

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Mutual Investment Club of Cornell 24 Samsung

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Mutual Investment Club of Cornell 25 Current EPS: 8,573KRW Est. EPS: 11,057 KRW Current P/E: 8.49 Est. P/E: 6.58 Est. PEG Ratio:.64 Sales will be driven by new vehicles (strong pipeline) Europe in some places (+30% yoy) (France) US: In line with expectation Further increases are entierly viable Quality: "The lever for the steering wheel release makes no sound while moving. BMW can't do it, we can't do it, why can they?!?!" - Martin Winterkorn, CEO, Volkswagen.

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Mutual Investment Club of Cornell 27 Current EPS: 8,573KRW Est. EPS: 11,057 KRW Current P/E: 8.49 Est. P/E: 6.58 Est. PEG Ratio:.64 Sales will be driven by new vehicles (strong pipeline) Europe in some places (+30% yoy) (France) US: In line with expectation Further increases are entierly viable Quality: "The lever for the steering wheel release makes no sound while moving. BMW can't do it, we can't do it, why can they?!?!" - Martin Winterkorn, CEO, Volkswagen.

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Mutual Investment Club of Cornell 29 Current EPS: 47,224KRW Est. EPS: 38,586 KRW Current P/E: 7.79 Est. P/E: 6.9.79 Est. PEG Ratio: 1.27 The company produces steel and steel products. Auto, Shipbuilding, Construction Same thesis as Chinese construction industries.

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Mutual Investment Club of Cornell 31 Questions Why Stocks instead of ETF? Why is Asia still a good place to invest? Guarantees of future growth Why should we move into these specific stocks? Pricing Performance

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Mutual Investment Club of Cornell 32 Proposal Liquidate ETF Holdings and move into proposed stocks (Samsung 25%, KIA 25%, Hyundai 25% Nexen 20%, POSCO 5%). Increase exposure to POSCO at later date.

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Mutual Investment Club of Cornell Hewlett Packard - Sell Technology Sector: Ihsan Kabir Russell Braun; Moseh Cho; Andrew Herring; Steven Lau; Vinay Ramprasad; Michael Walcott

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Mutual Investment Club of Cornell Agenda I. Thesis II. Hewlett Packard Overview III. HPs Performance IV. Recent News V. HP Moving Forward VI. Fundamentals VII. Technicals VIII. Recommendation

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Mutual Investment Club of Cornell HP Business Model Overview HP provides its subsidiaries products, technologies, software, solutions, and services to small- and medium-sized businesses (SMBs) They make their money by selling: 1. PCs 2. Printers 3. Services 4. Enterprise Servers, Storage, Networking 5. Software 6. Financial services

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Mutual Investment Club of Cornell Business Model Personal Systems Group: offers commercial personal computers (PCs), consumer PCs, related accessories, and software/services for the commercial and consumer markets Imaging and Printing Group: consumer and commercial printer hardware, supplies, media, and scanning devices.

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Mutual Investment Club of Cornell Business Model Services segment: Provides consulting, outsourcing, other tech services to infrastructure, applications, and business process domains. Enterprise servers, Storage, and Networking Segment: industry standard servers, business critical systems, storage platforms, networking products

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Mutual Investment Club of Cornell Business Model Software segment: management software, information management solutions, and security intelligence/risk management solutions. Financial services segment: leasing, financing, utility programs, asset recovery services for SMBs

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Mutual Investment Club of Cornell Thesis Since HPQ has been on our portfolio, it has consistently underperformed there is NO promising news, a WEAK balance sheet, and uncertainty over their management and business model It is time to sell!

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Mutual Investment Club of Cornell Performance Over Past 12 Months 40 PerformanceRecent NewsNew ProductsFundamentalsTechnicalsConclusion

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Mutual Investment Club of Cornell Severe Underperformance Down 32% Year To Date Down 40% from 52 Week High $30.00 on Februrary 17 th Down 58% from Purchase Price of $42.83 41 PerformanceRecent NewsNew ProductsFundamentalsTechnicalsConclusion

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Mutual Investment Club of Cornell Key Events Underperformed Analyst Estimates for Past 3 Quarterly Reports New CEO, Meg Whitman (Formerly of Ebay) Came in Last September Announced that 27,000 Employees will be laid off in May after 30% decline in profits Recently announced 2,000 Additional Lay Offs 42 PerformanceRecent NewsNew ProductsFundamentalsTechnicalsConclusion

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Mutual Investment Club of Cornell Key Events Ending All Business in Smartphone and Tablet Market Shifting Business Model Away from Consumer Electronics and PCs and More Into Software and Servers for the Commercial and Government Markets Rejected idea to completely do away with their PC Business, but this has seriously hurt their image among consumers 43 PerformanceRecent NewsNew ProductsFundamentalsTechnicalsConclusion

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Mutual Investment Club of Cornell Hewlett Packard In the News July Headlines Printing company Lexmark cut its outlook, which doesnt bode well for HP, which fell 2.5% on the news. HPs credit default swaps have greatly increased in price Layoffs confirmed at Rio Rancho facility Baird cuts outlook for HPQ PerformanceRecent NewsNew ProductsFundamentalsTechnicalsConclusion

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Mutual Investment Club of Cornell Hewlett Packard In the News August Headlines HP announced Q3 loss of $8.9B, largely attributed to $8B charge for its acquisition of Electronic Data Systems, and the general slow down of the PC market. The Street downgraded HPQ from Hold to Sell Credit Suisse cut HPQs price target nearly 20% Forbes: PC growth for 2012 has slowed to just 0.9%, leaving growth under 2% for the second straight year. PerformanceRecent NewsNew ProductsFundamentalsTechnicalsConclusion

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Mutual Investment Club of Cornell Hewlett Packard In the News August Headlines (continued) NY Times: HP claims that its mobile operating system, WebOS is alive and well, but in reality HP has moved hundreds of employees away from developing WebOS, many of which have gone to work for other companies. This isnt really a surprising move since it was primarily meant for HPs would-be iPad competitor, the TouchPad, which lasted only seven weeks on the market, which HP killed after very poor sales. WebOS also continues to struggle in mobile phone market share. PerformanceRecent NewsNew ProductsFundamentalsTechnicalsConclusion

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Mutual Investment Club of Cornell Hewlett Packard In the News September Headlines HPQ announced that they are going to cut an additional 2,000 workers, bring the total to 29,000 workers slated to be laid off by 2014. CEO Whitman sees this as just the beginning of restructuring efforts. Associated Press: Report detailing HPs failures since the iPhones launch in 2007. Since then HP has spent over $40B on acquisitions, most of have been duds, and are still losing money today. PerformanceRecent NewsNew ProductsFundamentalsTechnicalsConclusion

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Mutual Investment Club of Cornell Recent Products HP Pavilion HPE Phoenix h9z Mass Market Gaming PC Bold design: sharp edges, red LED lights AMD Radeon GPU Competitive market segment Poor performance for price Underperforms vs. cheaper competitors and HPs own similarly priced systems PerformanceRecent NewsNew ProductsFundamentalsTechnicalsConclusion

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Mutual Investment Club of Cornell Recent Products HP LaserJet Pro 400 M401dw Fully featured laser printer Disk-free driver install Cloud printing Walk-up USB printing 3.5 in. color touch screen Feature set falls short of $400 price Touch screen value Budget options PerformanceRecent NewsNew ProductsFundamentalsTechnicalsConclusion

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Mutual Investment Club of Cornell Recent Products HP 2311gt 23 in 3D LCD display Passive 3D Color Issues Color Scaling Green Tint Demand for passive 3D PC monitors Requirements Non-3D competition PerformanceRecent NewsNew ProductsFundamentalsTechnicalsConclusion

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Mutual Investment Club of Cornell Recent Product Launches Extremely Competitive Markets Price Sensitivity Aggressive Feature Sets Attention to Consumer Preferences PerformanceRecent NewsNew ProductsFundamentalsTechnicalsConclusion

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Mutual Investment Club of Cornell Comparable Company Analysis NamePrice Market Cap (Billion)P/E RatioPEG RatioEV/EBITDAPrice/BookProfit Margin HP (HPQ)17.9535.29NEG 50.581.14-4.55% Dell (DELL)10.6418.466.33NEG3.032.085.02% Apple (AAPL)660.59619.2415.530.4110.474.9026.97% Intel (INTC)23.34116.779.93NEG4.782.7422.73% Xerox (XRX)7.499.798.32NEG5.790.865.63% IBM (IBM)203.27232.2914.861.209.5210.9215.34% Accenture (ACN)64.8844.1116.761.498.729.528.72% 25 th Percentile14.3026.878.720.805.281.615.33% 75 th Percentile134.08174.5315.361.3410.007.210.19 Mean141.17153.7111.961.0313.274.5914.07% PerformanceRecent NewsNew ProductsFundamentalsTechnicalsConclusion

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Mutual Investment Club of Cornell Comparable Company Analysis NameDiluted EPSCurrent RatioROEQtrly Rev Growth HP (HPQ)-2.851.01-15.78%-3.34% Dell (DELL)1.681.3433.45%0.42% Apple (AAPL)42.531.6144.32%-10.62% Intel (INTC)2.352.1525.42%4.61% Xerox (XRX)0.901.2410.19%0.69% IBM (IBM)13.681.2174.66%4.50% Accenture (ACN)3.871.4566.17%5.25% 25 th Percentile1.291.230.18-1.46% 75 th Percentile8.781.530.554.55% Mean10.841.430.423.09% PerformanceRecent NewsNew ProductsFundamentalsTechnicalsConclusion

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Mutual Investment Club of Cornell Competitor Analysis Dell (DELL) Still recovering from financial crisis YoY Net Income flat in fiscal 2012 75% of revenues come outside of desktop PCs Expanding in infrastructure technology, and product- related support services >50% of revenue is generated outside of US Expanding in developing markets PerformanceRecent NewsNew ProductsFundamentalsTechnicalsConclusion

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Mutual Investment Club of Cornell Competitor Analysis Apple (AAPL) Innovation and Brand Loyalty Remarkably Consistent Despite most recent quarterly earnings, Apples share price has stayed strong New products on the horizon iPad 3 and iPhone 5 are expected to bolster already strong revenues PerformanceRecent NewsNew ProductsFundamentalsTechnicalsConclusion

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Mutual Investment Club of Cornell Hewlett Packard Williams %R Current = -62.26% PerformanceRecent NewsNew ProductsFundamentalsTechnicalsConclusion

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Mutual Investment Club of Cornell Hewlett Packard Bollinger Bands September 11 Lower Bound = 15.70 September 11 Price = 17.95 PerformanceRecent NewsNew ProductsFundamentalsTechnicalsConclusion

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Mutual Investment Club of Cornell Hewlett Packard Relative Strength Index (RSI) Current: 29.11 PerformanceRecent NewsNew ProductsFundamentalsTechnicalsConclusion

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Mutual Investment Club of Cornell Hewlett Packard Moving Average Convergence Divergence (MACD) Current: -0.53% PerformanceRecent NewsNew ProductsFundamentalsTechnicalsConclusion

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Mutual Investment Club of Cornell Hewlett Packard Technical Analysis Thesis Williams %R: Current - 62.26% Neutral BOLL: September 11: Lower Bound = 15.70, Price = 17.95 Neutral RSI: 29.11 Buy MACD: -0.53%, MACD crossing above signal Buy Overall technical analysis: Moderate Buy However, has inconsistently followed technicals PerformanceRecent NewsNew ProductsFundamentalsTechnicalsConclusion

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Mutual Investment Club of Cornell Recommendation Sell entire position Bad business model, no promising products, leadership hot potato Free up cash for better investments PerformanceRecent NewsNew ProductsFundamentalsTechnicalsConclusion

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Mutual Investment Club of Cornell Brainteaser A family has six children. Rick is 18 years old and Isaac is 9 years old. Katherine is 11 years and Ben is 2 years from the womb. Fay is 6 years old. How old is Olivia? 62