Advisory Board Presentation - AIM€¦ · Advisory Board Presentation . AIM XXXV . Fall 2012 . AIM XXXV Page 2 AIM Analyst Bios Justin Asuncion . ... Robert Crow . Champaign, IL

Advisory Board Presentation AIM XXXV Fall 2012

AIM XXXV Page 2

AIM Analyst Bios

Justin Asuncion Omaha, NE AeroVironment, Bridgepoint Education

Michael Donnelly Rochester, NY Halliburton, Constellation Brands

Matt Roesch West Chester, OH Discover Financial Services, Medifast Inc.

Justin Barnes Los Angeles, CA Activision Blizzard, OpenTable

Alex Draime Warren, OH Google, Expeditors Int’l.

Matt Rossetto Frankfort, IL Williams-Sonoma, Constant Contact

Sam Beres Brookfield, WI Apple, Coinstar

Alberto Elizondo Monterrey, Mexico Qualcomm, RadioShack Corp.

Adam Scmitz Highlands Ranch, CO Dollar Tree, Acuity

John Cameron Arlington Heights, IL Caterpillar, La-Z-Boy

Bradley Holenstein Newton, NJ Potash Corp, Idexx Lab

Richard Si Montreal, Quebec CarMax, Tim Horton’s

Shawn Cappello Monmouth Beach, NJ Cummins, KapStone

Alex Kimball St. Paul, MN Dick’s Sporting Goods, AutoZone

Tyler Smith Carlisle, MA Alliant Tech Systems, Michael Kors

Andrew Charnesky Grosse Pointe, MI Harley-Davidson, Glu Mobile

Chad Lavelle Prospect, KY UnitedHealth Group, Life Time Fitness

Michael Thomas St. Clair Shores, MI Teradata Corporation, Domino’s Pizza

Michael Cochran Oceanside, NY Chevron, Yum! Brands

Joseph Marek St. Paul, MN eBay, Select Comfort Corp.

Allison Tompkins Jackson, MI Gilead Sciences, J.M. Smucker Co.

Adam Cox New Palestine, IN PNC Financial Services Group, Teavana

Joseph Rampino Long Beach, CA Continental Resources, Madison Square Garden

Alex VanderLinde Hinsdale, IL Coca-Cola, IPG Photonics

Robert Crow Champaign, IL LabCorp, Cerner Corp.

Brett Rocheleau Naperville, IL Flowserve, Wynn Resorts

Erin Welcenbach Menomonee Falls, WI KeyCorp, Rockwell Automation

AIM XXXV Page 3

Presentation Agenda

• Personal Introductions • Presentation Topics

I. Investment Objectives and Guidelines II. Economic Environment III. Security Analysis IV. Portfolio Performance Evaluation V. General Information

• Concluding Remarks

I. Investment Objectives and Guidelines Course Overview Investment Philosophy Investment Policies Market Capitalization Profile

AIM XXXV Page 5

AIM Overview

• Objective: – Provide analysts with a thorough grounding in portfolio

management by combining theory with hands-on experience

• Analyst Selection: – Prospective analysts must submit an application and

resume – Diverse backgrounds in finance

AIM XXXV Page 6

Individual Responsibilities

• Each of the 27 analysts covers two companies – The first is assigned, the second is selected

• For each company, analysts produce and present the

following reports – Company overview – Fundamental analysis – Industry report – EPS forecast – Technical analysis – Valuation and final recommendation

AIM XXXV Page 7

Group Responsibilities

• Economic analysis – Recent trends in unemployment, inflation, GDP growth – Current events and significant political events

• Performance analysis – Benchmark comparisons and performance measures – Industry allocations – Best and worst performers

• Trading group – Executes trades – Works closely with ND Investment Office

• Newsletter group – Summarizes above analyses – Provides alumni and trip updates

AIM XXXV Page 8

Investment Philosophy

• Investment objective – Outperform our primary (S&P 500) and secondary benchmarks

(Russell 2000 and HBI) through alpha generation while maintaining the purchasing power of the principal over the long-term

• Investment decisions

– Bottom-up fundamental research – Value & growth – Industry agnostic

• Risk management – Diversification & position size limits – Allocation to small, mid, and large cap stocks

AIM XXXV Page 9

Investment Policies

• Only US traded equities – No bonds, money market instruments or derivative instruments

• Roughly match the industry composition of the S&P 500 (within a 5% range)

• No one stock exceeds 10% of market value of portfolio • Long-term cash at 0% • All stocks within approved lines of business • No stocks of companies whose values are not in line to

those of the University

AIM XXXV Page 10

Market Cap Profile (11/30/2012)

• 35% Small (<$2B) & Mid ($2B-$10B) Cap stocks – AIM XXXV – Small & Mid Cap: 38.4%

• 65% Large (>$10B) Cap stocks – AIM XXXV – Large Cap: 61.6%

Small Cap Holdings Mid Cap Holdings Large Cap HoldingsStock AIM Holdings Market Cap Stock AIM Holdings Market Cap Stock AIM Holdings Market Cap

Kapstone $287,152 $1,030 Domino's $220,480 $2,384 Teradata Corp $249,816 $10,110Open Table $278,318 $1,025 Acuity $277,830 $2,699 Continental Resources $247,320 $12,647Select Comfort $278,512 $1,505 IPG Photonics $271,860 $3,101 Activision Blizzard $269,193 $12,752Total $843,982 Dick's Sporting Goods $257,299 $6,502 Cerner Corp $262,548 $13,260Percent of holdings 12.3% FlowServe Corporation $207,825 $6,979 Wynn Resorts $281,000 $13,924

Expediters Int'l $276,908 $7,805 Cummins $265,032 $18,978Lab Corporation $270,688 $7,966 Discover Financial $270,465 $20,968Total $1,782,890 Halliburton $280,140 $30,549Percent of holdings 26.1% Potash $269,010 $33,242

United Health Group $261,072 $55,528Gilead Sciences $330,000 $57,051eBay $290,510 $67,546Chevron $301,217 $207,050Google $279,348 $227,351Apple $351,168 $554,406Total $4,207,838Percent of holdings 61.6%

II. Economic Environment Summary of Current Economic Indicators Expected Federal Reserve Policy Inflation and Interest Rate Movements Outlook for the Economy Potential Impact on Portfolio

AIM XXXV Page 12

“The New Normal”

“New Normal” Short Run Long Run Unemployment 7.3% - 7.8% 6.5%

Inflation 2.2% - 3.0% 2.0% - 2.2% Change in GDP 1.9% - 2.9% 2.0% - 2.3%

Uncertainties

Looming Fiscal Cliff

Monetary Easing

Political Gridlock

National Debt Burden

New Regime in China

Eurozone Crisis

The Economy

Inflation Concerns

Poor Confidence

Unemployment

AIM XXXV Page 13

The Consumer

Source: Bureau of Economic Analysis

-$2.00

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

$16.00

1996 2001 2006 2011

GD

P (tr

illio

ns o

f 200

5 do

llars

)

Components of Gross Domestic Product (GDP)

Consumption Government Investment Net Exports

16% 4% 24%

AIM XXXV Page 14

• In 2011, consumption continued to rise despite lower income

– Consumption driven by a decreased savings rate

– Slower growth from previous year • Outlook on consumption neutral

as potential tax increases hamper confidence

$9,630

-4.0%

-2.0%

0.0%

2.0%

4.0%

$8,600

$8,800

$9,000

$9,200

$9,400

$9,600

$9,800

2007 2008 2009 2010 2011 2012

Billi

ons o

f 200

5 do

llars

Real Personal Consumption Expenditures

Real Personal Consumption Expenditures YoY Growth

The Consumer


3.7%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

Mar-07 May-08 Jun-09 Jul-10 Aug-11 Sep-12

Perc

ent

Savings Rate

$32,778

$31,500

$32,000

$32,500

$33,000

$33,500

$34,000


2005

chai

ned

colla

rs

Real Disposable Income Per Capita

AIM XXXV Page 15

Business Investment

Source: Bureau of Economic Analysis, St. Louis Federal Reserve

• Real private fixed investment (excl. residential) growth has begun to slow down

• New orders slowing down as well • Business investment slowing down as uncertainty continues to

pervade the market and businesses lose confidence

$1,478

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

$0

$400

$800

$1,200

$1,600

$2,000

2007 2008 2009 2010 2011 2012

Billi

ons o

f 200

5 ch

aine

d do

llars

Real Private Fixed Investment (Excl. Residential)

Investment YoY Growth

$61

-40%-30%-20%-10%0%10%20%30%

$0

$20

$40

$60

$80

$100

2007 2008 2009 2010 2011 2012

Percent change Billi

ons o

f dol

lars

Non-defense Capital Goods Orders (Excl. Aircraft)

New Orders YoY Growth

AIM XXXV Page 16

Government Expenditures


$2,502

$2,350

$2,400

$2,450

$2,500

$2,550

$2,600

$2,650


Billi

ons o

f 200

5 do

llars

Real Gov‘t Consumption and Expenditures

• Government expenditures has recently faced pressured due to increasing debt levels and budget deficit issues

• State and local level entities in particular have exhibited weak financial positions

• Expect spending to decrease as government continues to address deficit issues

AIM XXXV Page 17

Net Exports


$1,835

$2,248

$500

$1,000

$1,500

$2,000

$2,500

$3,000


Billi

ons o

f 200

5 do

llars

Real Exports and Imports

Exports Imports

$137

0

50

100

150

200

250

2007 2008 2009 2010 2011 2012

$ in

bill

ions

Current Account Deficit

• Currently maintaining gap between exports and imports • Current account deficit continues to climb • U.S. Dollar → downward pressure

– Tension between U.S. and trade partners – Structural changes in U.S. trade → depreciating dollar not effective

AIM XXXV Page 18

Fiscal Cliff


Economic Growth Debt + Deficit

AIM XXXV Page 19

Fiscal Cliff


Consumption Consumption

decreases as tax hikes decrease

spending power

Investment Business investment

hampered as businesses face

uncertainty

Gov’t Expenditures Gov’t expenditures

decrease in accordance with

policy

Deficit and Debt Budget deficit and

national debt issues mitigated

Falling Off the Cliff

Consumption Tax breaks extended;

consumption steady

Investment Business investment

continues

Gov’t Expenditures Gov’t expenditures

increase as gov’t stimulates economy

Deficit and Debt Budget deficit and

national debt continue negative

trend

Kicking the Can

AIM XXXV Page 20

Unemployment

Source: Bloomberg

5.0%

7.0%

9.0%

11.0%

13.0%

15.0%

17.0%

19.0%

U-6 Unemployment Rate

14.6%

• U.S. Unemployment Rate: 7.9% This is celebrated • “Underemployment” Rate: 14.6% This is ignored • Average Duration: ~40 weeks This is a problem

0.05.0

10.015.020.025.030.035.040.045.0

Wee

ks

Mean Unemployment Duration 40.2

AIM XXXV Page 21

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

60.0%

65.0%

70.0%

75.0%

80.0%

85.0%

Oct-02 Oct-03 Oct-04 Oct-05 Oct-06 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12

Une

mpl

oym

ent R

ate

(%)

Cap

acit

y U

tiliz

atio

n R

ate

(%)

Capacity Utilization Unemployment

Unemployment

Source: Capital IQ and American Heritage New Dictionary of Cultural Literacy

• At current capacity levels, should see ≈ 5% unemployment • Structural unemployment “results from long-term shifts in

economies rather than short-term savings in economic conditions”

Capacity Utilization (Red) vs. Unemployment (Blue)

AIM XXXV Page 22

Unemployment

Source: Calculatedriskblog.com

AIM XXXV Page 23

Unemployment

The Past Asymptote at ≈ 5%

Need for marginally skilled workers

“Do more with more”

The Present Asymptote at ≈ 6.5%

Need for high-skilled workers “Do more with less”

7.9%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Oct-02 Oct-03 Oct-04 Oct-05 Oct-06 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14

Unemployment

AIM XXXV Page 24

Housing

Source: Fannie Mae

• Consumer expectations that mortgage rates will continue to decline, with the 30-year mortgage rates recently hitting all-time lows at 3.36%

• Percentage of respondents saying it would be a good time to sell rose to 19%

• Homebuilders are showing increased optimism

Stay the Same (Percent)

Go Up (Percent) Go Down (Percent)

Share of Respondents Who Say Mortgage Rates Will … In the Next 12 Months

AIM XXXV Page 25

Housing

Source: S&P, Calculatedriskblog.com

• According to S&P, average home prices increased by 2.1% for the 10-City Composite and by 3.0% for the 20-City Composite in September 2012 versus September 2011

• For the sixth consecutive month, all 20 cities and both Composites recorded positive monthly changes

2.1%

3.0%

-25.0%-20.0%-15.0%-10.0%-5.0%0.0%5.0%

10.0%15.0%20.0%25.0%

YoY

Chan

ge

Case Shiller Composite Indicies, Year-Over-Year Change

Composite 10 Composite 20

AIM XXXV Page 26

Housing

Source: US Census Bureau

• Sales of new single-family houses in October 2012 were at a seasonally adjusted annual rate of 368,000, a 0.3% drop from the downward-revised rate of 369,000 in September 2012

368

0

200

400

600

800

1000

1200

1400

1600

Seas

onal

ly A

djus

ted

Ann

ual S

ales

Rat

e (00

0s)

New Home Sales

AIM XXXV Page 27

Housing

Source: St. Louis Federal Reserve

4.5

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

Mon

ths'

Sup

ply

(Mon

ths)

Months Supply of Homes in the United States

• The seasonally adjusted estimate of new houses for sale at the end of September was 145,000. This represents a supply of 4.5 months at the current sales rate. Any level below 6 months is considered normal.

AIM XXXV Page 28

FOMC Oct 24th Meeting Highlights

• Slow employment growth • Inflation has risen-due to higher energy prices • Fed stimulus insufficient without policy accommodation • Continue Operation Twist through the end of 2012

– Goal: Flatten the yield curve (without increasing size of the Fed’s Balance Sheet)

– $267 billion extension in June • Maintain QE3 until labor markets improve

Source: Federal Reserve

AIM XXXV Page 29

QE3 Update

• The Federal Reserve announced a policy in September to indefinitely purchase $40 billion of mortgage-backed securities every month to stimulate the economy and improve the labor market – Target Fed-Funds rate at 0-.25 percent through mid-2015 – JP Morgan expects the Fed to spend at least $1 trillion


AIM XXXV Page 30

QE3 Effect on S&P 500

– Very early, but the first impression is effects are neutral – No spike in equity prices like QE1 and QE2


400

600

800

1000

1200

1400

1600

1/2/2008 1/2/2009 1/2/2010 1/2/2011 1/2/2012

Quantitative Easing Effects on S&P 500

QE2 15% CAGR

QE3 -15% CAGR

QE1 26% CAGR

AIM XXXV Page 31

Ballooning Balance Sheet

Source: Federal Reserve Board

$0.0

$500.0

$1,000.0

$1,500.0

$2,000.0

$2,500.0

$3,000.0

$3,500.0

Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12

Billi

ons o

f USD

Selected Federal Reserve Balance Sheet Data

Total Assets Securities Held Outright All Liquidity Facilities Support for Specific Institutions

$2,873

$2,630

$13 $2

AIM XXXV Page 32

Interest Rates in Perspective

Source: U.S. Treasury

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

Nov-82 Nov-86 Nov-90 Nov-94 Nov-98 Nov-02 Nov-06 Nov-10

Yield

(%)

Historical Treasury Yields - Last 30 Years

30-Yr Treasury 10-Yr Treasury 3-Mo Treasury

2.79% 1.63%

0.10%

AIM XXXV Page 33

Historical Inflation

Source: U.S. Department of Labor

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

Jan-50 Jan-60 Jan-70 Jan-80 Jan-90 Jan-00 Jan-10

Perc

enta

ge C

hang

e (%

)

Annual Percentage Change in U.S. CPI Since 1950

Percentage Change in CPI

3.12%

AIM XXXV Page 34

Current “Breakeven” Inflation

Source: U.S. Treasury; Bloomberg

1.24 1.07

1.46 1.76

2.12 2.22 2.44 2.41 2.43

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

6-Month 1-Year 2-Year 3-Year 5-Year 7-Year 10-Year 20-Year 30-Year

Yield

(%)

Breakeven Inflation Curve

Breakeven Inflation Treasury Yields TIPS Yields

AIM XXXV Page 35

Upside Risk to Inflation

Source: U.S. Treasury; Bloomberg

Unprecedented Monetary Easing

Increased Bank Lending

Fed’s Inability to Curb Inflation

Loss of Credibility in Bond Markets

Decreased Productivity

AIM XXXV Page 36

Global GDP Revisions

3.5%

7.1% 8.0%

-0.3%

0.2%

3.3%

6.7% 7.8%

-0.4% -0.4% -1.0%0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%9.0%

Global DevelopingAsia

China Euro-Zone UK

2012 IMF GDP Growth Estimates

July Revised

3.9%

7.5% 8.4%

0.7% 1.4%

3.6%

7.2%

8.2%

0.2% 1.1%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

Global DevelopingAsia

China Euro-Zone UK

2013 IMF GDP Growth Estimates

July Revised

• Global growth slowing, on the back of potential recession in Europe

• China and developing Asia hurt by lower external demand in US and Europe

• Growth reductions for China also based on a shift toward more balanced domestic demand

• 2013 China should experience its boost from kick in of easing measures

Source: IMF

AIM XXXV Page 37

European Austerity Targets

• EU rule to maintain budget deficits ≤ 3% of GDP

• IMF easing off Greek target of 4.5% – Greek debt expected to

reach 182% GDP by year end 2013, up from 161%

• Deeper than expected recession and implementation of fiscal measures complicating deficit reduction targets

Source: IMF

3.5%

5.7%

4.4%

7.3%

1.8%

3.0%

4.5%

3.0% 3.0%

1.8%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

France Spain Slovenia UK Italy

2013 IMF Euro-Zone Deficit % of GDP Estimates

Expected Target

AIM XXXV Page 38

Forecast Summary

Economic Forces GDP Effect Portfolio Effect

Unemployment Negative Neutral

Housing Positive Neutral

Business Spending Negative Neutral

Consumption Neutral Neutral

QE3 Neutral Neutral

Fiscal Cliff Negative Negative

Global Forces Negative Neutral

Households Neutral Neutral

Overall Negative Neutral

AIM XXXV Page 39

Portfolio Impacts

• UnitedHealth Group

• Cerner

Industrials • KapStone

• Flowserve

US Fiscal Uncertainty

Healthcare Reform

• Wynn Resorts

• Cummins

• Teradata

Eurozone Crisis

China / Emerging Markets

• Continental Resources

• Chevron

Oil / EPA Regulation • Discover Financial

Financial Regulation

Consumer Discretionary • Dick’s Sporting Goods

• Apple

• Wynn Resorts

• Domino’s

• Acuity

• Select Comfort

Housing

• Apple

• Potash

• Halliburton

• Cummins

• LabCorp

• Gilead

• Expediters International

• IPG Photonics

• Cummins

• Select Comfort

• Open Table

• Activision Blizzard

III. Security Analysis Overview of Research Assignments Earnings Forecast Multiples Valuation Discovery/DCF Valuation Company/Industry Analysis Fundamental Analysis Ratio Analysis/DuPont Beta/WACC/DCF Valuation Technical Analysis Special Circumstance

AIM XXXV Page 41

Security Selection Process

• Bottom-up approach to security selection • Analysts complete six reports that address the following

areas of interest: – Company Background – Fundamental Analysis – Industry Analysis – Earnings Forecast – Technical Analysis – Final Valuation and Recommendation (including Beta)

• Each analyst makes a buy or sell recommendation

AIM XXXV Page 42

Analyst Agenda

Analyst Stock Focus Matt Rossetto Williams-Sonoma Earnings Forecast

Erin Welcenbach KeyCorp Multiples Valuation

Sam Beres Coinstar Multiples Valuation

Tyler Smith Michael Kors Discovery/DCF Valuation

Alex Vander Linde IPG Photonics Company/Industry Analysis

Justin Barnes OpenTable Fundamental Analysis

Brett Rocheleau Wynn Resorts Beta/WACC Valuation

Robb Crow Cerner Corp. Technical Analysis

Adam Cox Teavana Special Circumstance

AIM XXXV Page 43

Williams-Sonoma (WSM)

Source: Yahoo! Finance, Derived

Price (11/30/2012): $45.26

1-year forward P/E: 16.7

Market Cap: $4.39B

Dividend Yield: 2.0%

LTM EPS: $2.43

WSM: 1 Year Price Chart

Focus: Earnings Forecast

0.02.04.06.08.010.012.014.016.0

$30.00

$34.00

$38.00

$42.00

$46.00

$50.00

Nov-11 Feb-12 May-12 Aug-12

Mill

ions

of S

hare

s

Volume (mms) Price

AIM XXXV Page 44

WSM Company Overview

• Retailer of high-end, specialty home goods • Dominated catalogue home goods sales,

attempting to do the same in internet sales • Now experimenting with international

storefronts Retail 56%

Direct 44%

2011 Revenue

Retail 42%

Direct 58%

2011 Operating Income

Source: WSM 10-K

AIM XXXV Page 45

Forecast Assumptions

• Increasing percentage in internet sales improves margins

• A slow housing recovery pulls along revenue growth

• Material international growth is not projected for several years

2010A 2011A 2012E 2013E Revenues (mm) $3,504.2 $3,720.9 $3,970.2 $4,244.1 % Growth 12.9% 6.2% 6.7% 6.9% % of revenue DTC 41.5% 43.9% 45.0% 47.0% SGA (% of sales) 22.3% 22.4% 22.0% 21.0%

Source: WSM 10-K

AIM XXXV Page 46

EPS History and Estimates

$2.6

7

$2.4

7

$1.9

5

$0.9

5

$0.3

5

$1.7

6

$2.5

5

$2.2

0

$1.8

8

$0.8

1

$0.1

9

$1.7

4

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

FY 13FY 12FY 11FY 10FY 09FY 08

EPS History and Estimates

AIM Estimate Actual Street Estimate

Source: Bloomberg

AIM XXXV Page 47

Valuation & Thesis

Investment Thesis: • Top position to benefit from a housing recovery • Migration to online sales will improve margins • Market has priced in the upside. The stock is technically a ‘Buy’, but

the analyst group identified other superior opportunities

Recommendation - Buy

Valuation Method Weight Value Contribution

Forward Price/Sales 25% $42.18 $10.54

Forward Price/Earnings 25% $44.72 $11.18

Discounted Cash Flow 50% $46.78 $23.39

Final Valuation $45.11

Market Price (11/19/12) $45.02

Estimated Upside/(Downside) 0.2%

AIM XXXV Page 48

KeyCorp (KEY)


Price (11/30/2012): $8.08


Market Cap: $7.80B


LTM EPS: $0.88

KEY: 1 Year Price Chart

Focus: Multiples Valuation

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

$6.00

$6.50

$7.00

$7.50

$8.00

$8.50

$9.00

$9.50

Dec-11 Mar-12 Jun-12 Sep-12

Mill

ions

of S

hare

s

Volume (mms) Price

AIM XXXV Page 49

KEY Company Overview

• Holding company for Key Bank National Association • 1,087 branches located in 14 states • Loan portfolio consists of commercial, commercial real estate,

and consumer loans

Key Community

Bank 54%

Key Corporate

Bank 38%

Other Segments

8%

2011 Revenue Breakdown

Commercial 36%

Commercial Real Estate

33%

Consumer 31%

Loan Portfolio Composition

Source: Company Filings

AIM XXXV Page 50

Key Assumptions

Net Interest Margin Net Charge-Offs

• Margin compression, though not as extreme as 2011

• Short-term rates near zero • Increased industry competition • Q3 2012 NIM: 3.19%

• Returning to normal levels: 1.11% in 2011

• Management stated goal of returning to moderate levels of 0.4%-0.6%

3.20%

1.50%

2.50%

3.50%

4.50%

2006 2008 2010 2012 2014

Net

Inte

rest

Mar

gin

KEY: Net Interest Margin Analysis

1.05% 0.00%

1.00%

2.00%

3.00%

4.00%

2006 2008 2010 2012 2014

Net

Cha

rge-

Offs

KEY: Net Charge-Offs to Average Total Loans Analysis

Source: Bloomberg

AIM XXXV Page 51

Multiples Analysis

Implied Forward P/E Price / Tangible Book Value

• Currently trading at 9.79x • Historically traded at 10.37x • FYE 2013 EPS: $0.89 • Intrinsic value: $8.73

• Currently trading at 0.90x • Peer group mean: 1.47x • Peer group median: 1.22x • Intrinsic Value: $9.40

0.90x 1.02x 1.11x 1.17x 1.32x 1.58x

2.33x 2.54x

0.00x0.50x1.00x1.50x2.00x2.50x3.00x

BAC

KEY RF

ZIO

N STI

JPM

HBA

NPN

CFI

TBFN

FGC

OF

WFC BB

TM

TB BK USB

Pric

e / T

angi

ble B

V

Banking Industry: Price / Tangible Book Value

9.79x

0.00x2.00x4.00x6.00x8.00x

10.00x12.00x14.00x

Q12010

Q32010

Q12011

Q32011

Q12012

Q32012

Impl

ied F

orw

ard

P/E

KEY: Implied Forward P/E

Source: Capital IQ, Analyst Derived

AIM XXXV Page 52

Valuation & Thesis

Investment Thesis • Poorly positioned for increasingly strict regulatory

environment and industry consolidation • Net interest margin compression • Well capitalized • Stock is technically a ‘buy,’ but the analyst group identified

other superior investment opportunities



Forward Price/Earnings 33.33% $8.73 $2.91

Price/Tangible Book Value 33.33% $9.40 $3.13

Discounted Cash Flow to Equity 33.33% $7.73 $2.58


Market Price (11/19/12) $8.17


AIM XXXV Page 53

Coinstar, Inc. (CSTR)

CSTR: 1 Year Price Chart


Price (11/30/2012): $47.04


Market Cap: $1.38B

Dividend Yield: -

LTM EPS: $4.91

0.02.04.06.08.010.012.014.016.018.0

$30.00$35.00$40.00$45.00$50.00$55.00$60.00$65.00$70.00$75.00$80.00


Mill

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Focus: Multiples Valuation

AIM XXXV Page 54

CSTR Company Overview


4.2%

-40.0%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

Q1

2009

Q3

2009

Q1

2010

Q3

2010

Q1

2011

Q3

2011

Q1

2012

Q3

2012

Redbox Same Store Sales Growth 42,400

05,000

10,00015,00020,00025,00030,00035,00040,00045,000

Q12008

Q32008

Q12009

Q32009

Q12010

Q32010

Q12011

Q32011

Q12012

Q32012

Number of Redbox Kiosks

Redbox 84.6%

Coin 15.3% New Ventures

0.1%

2011 Revenue • Redbox is the primary business driver • Kiosks sell tickets and rent DVDs, Blu-rays, and video games directly to consumers •Currently in a joint venture with Verizon to develop “Redbox Instant” – a streaming service that will compete with Netflix and Amazon

AIM XXXV Page 55

Multiple Analysis: Price/Book

CSTR Current Price/Book Multiple 2.42x Projected Price/Book Multiple 2.70x

Intrinsic Value $50.82

Source: Bloomberg, Analyst Derived

2009A 2010A 2011A 2012E Return on

Equity 9.7% 14.9% 21.6% 27.3%

Return on Assets 3.1% 4.9% 7.5% 8.8%

012345678

Pric

e/Bo

ok

Price/Book

Coinstar Netflix S&P Consumer Discretionary S&P 500 Proj. P/Bk

AIM XXXV Page 56

Multiple Analysis : Forward P/E

CSTR Subjective Forward P/E Multiple 10.5x FYE 2013 EPS $5.20

Intrinsic Value $54.60

Source: Bloomberg, Analyst Derived

0

5

10

15

20

25

30

35

40

Impl

ied F

orw

ard

P/E

Implied Forward Price/Earnings

Coinstar S&P 500 Consumer Discretionary S&P 500 Netflix Proj. Forward P/E

AIM XXXV Page 57

Valuation & Thesis

Investment Thesis: • Market leader in hard DVD rental market • Multiples trading near all-time lows • Ultimately not purchased due to concerns over the future of the hard

DVD rental market and uncertainty regarding entrance into the streaming market



Implied Price/Book 30% $50.82 $15.25

Forward Price/Sales 10% $51.13 $5.11




Market Price (11/19/12) $45.12


AIM XXXV Page 58

Michael Kors (KORS)


Price (11/30/2012): $58.15


Market Cap: $10.2B

Dividend Yield: -

LTM EPS: $1.26

KORS: 1 Year Price Chart

0.0

10.0

20.0

30.0

40.0

50.0

$20.00 $25.00 $30.00 $35.00 $40.00 $45.00 $50.00 $55.00 $60.00

Dec-11 Mar-12 Jun-12 Sep-12

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Focus: Discovery/DCF Valuation

AIM XXXV Page 59

KORS Company Overview

Retail 48%

Wholesale 47%

Licensing 5%

2012 Revenue Breakdown • Global luxury apparel and accessories company • Men’s and women’s apparel, handbags, small leather goods, eyewear, jewelry, footwear and watches • Operates in three segments: Retail, Wholesale and Licensing

Source: Bloomberg

$627

$610

$65

$1,302

$0

$500

$1,000

$1,500

2009 2010 2011 2012

Thou

sand

s (D

olla

rs) Revenues

Retail Wholesale Licensing Total Revenues

45%

0%10%20%30%40%50%60%

2007 2008 2009 2010 2011 2012 Q12013

Q22013

Perc

ent G

row

th Same Store Sales Comps

AIM XXXV Page 60

Discovery

• Alicia Carter- Store Manager, Sevierville, TN

• Increased sales of handbags, watches, small leather goods

• Surge in store traffic – Have seen a 50% increase in traffic over the

past two years

• Expecting to double sales this year – Had already reached over 50% of sales

guidance without having hit holiday season

• Growth like this is not abnormal for Michael Kors stores

– Main growth driver is brand awareness

Store Manager

Source: Interview with Alicia Carter

AIM XXXV Page 61

Impact on DCF Analysis

• Bullish on company-wide revenues

2011A 2012A 2013E 2014E 2015E 2016E 2017E 2018E AIM Rev Projection

$803.35 $1,302.25 $2,031.11 $2,727.96 $3,424.95 $4,096.42 $4,685.59 $5,228.55

Growth YoY 62.1% 56.0% 34.3% 25.5% 19.6% 14.4% 11.6%

Consensus Estimate

$1,996.00 $2,596.00 $3,220.00 $3,870.00 $4,420.00

• Bullish on company-wide gross margins 2011A 2012A 2013E 2014E 2015E 2016E 2017E 2018E

AIM GPM Projection

55.54% 57.83% 60.50% 59.80% 60.00% 59.50% 59.00% 60.00%

Consensus Estimate

59.03% 59.21% 59.45% 59.4%

Source: Bloomberg

$ in (000s)

AIM XXXV Page 62

Valuation & Thesis

Investment Thesis • Luxury retailer with huge growth potential • Domestic and international expansion as well as shift to higher

margin accessories products • Strong multi-channel distribution system • Great company, bad stock

Recommendation – Do Not Buy


Forward Price/Earnings 8.33% $64.01 $5.33

Forward Price/Sales 8.33% $63.31 $5.28

Forward EBITDA/Sales 8.33% $69.24 $5.77



Market Price (11/19/12) $50.61

Estimated Upside/(Downside) -3.1%

AIM XXXV Page 63

IPG Photonics (IPGP)


Price (11/30/2012): $59.10


Market Cap: $3.09B

Dividend Yield: -

LTM EPS: $2.80

IPGP: 1 Year Price Chart

Focus: Company/Industry Analysis

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

$30.00$35.00$40.00$45.00$50.00$55.00$60.00$65.00$70.00


Mill

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AIM XXXV Page 64

IPGP Company Overview

• #1 producer of industrial fiber lasers with 75% market share • Vertically integrated cost leader reducing costs from $80 to $3 per watt • Industry leading 55% gross margins • Fiber lasers superior to traditional lasers in nearly every metric • Founded in Russia in 1990 and all technology has been developed in-house

Source: Company Filings, Company Presentations, Analyst

Applications Materials Processing Breakdown

Revenue Breakdown

44%

38%

6%

6% 6%

GeneralManufacturing

Automotive

Heavyindustries

Aerospace

Other88%

6% 4% 2%

MaterialsProcessing

AdvancedApplications

Communications

Medical

AIM XXXV Page 65

Technology Overview

Source: Company Presentations, Analyst

Proprietary Design

Modular / Scalable

Durable / Stable

70% less energy

Compact

Dual advantages

• Long Life • High Efficiency

Semiconductor Diodes

• High Amplification • Precise Beam Qualities

Specialty Optical Fibers

Superior Performance

Superior Reliability

Superior Usability

Lower Cost

AIM XXXV Page 66

Market Opportunity

Source: Company Presentation

6% 2007A

Fiber Laser Market

29%

2015E

Fiber Laser Market

16%

2011A

Fiber Laser Market

$3,288 $3,197 $3,413

$200 $588 $1,365 $3,488

$3,785

$4,778

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

2007A 2011A 2015E

Reve

nues

Traditional laser market Fiber Laser Market

AIM XXXV Page 67

Valuation & Thesis

Investment Thesis • First mover advantage • Dominant player revolutionizing a $4B growing industry • Vertically integrated cost leader • Superior technology




Forward TEV/EBITDA 10% $53.03 $5.30

Forward TEV/EBIT 10% $61.15 $6.12



Market Price (11/19/12) $57.43


AIM XXXV Page 68

OpenTable (OPEN)


OPEN: 1 Year Price Chart

Price (11/30/2012): $44.89


Market Cap: $1.02B

Dividend Yield: -

LTM EPS: $1.01

0.01.02.03.04.05.06.07.08.0

$30.00

$35.00

$40.00

$45.00

$50.00

$55.00


Mill

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Focus: Fundamental Analysis

AIM XXXV Page 69

OPEN Company Overview

• Provides free real-time online restaurant reservations for diners, as well as reservation management solutions for restaurants

• Since inception in 1998, over 350 million diners have been seated, representing $10 billion spent at partner restaurants

• Customer base of over 25,000 restaurants worldwide

7,861 10,335 12,351

20,049 25,119

05,000

10,00015,00020,00025,00030,000

2007 2008 2009 2010 2011

Inst

alled

Res

taur

ants

Fiscal Year

Installed Restaurants at FY End

North America

85%

International 15%

2011 Revenues

24,858 34,178 42,866 65,355

96,674

020,00040,00060,00080,000

100,000120,000

2007 2008 2009 2010 2011

Seat

ed D

iner

s

Fiscal Year

Seated Diners Per Year

Source: OPEN 10K, Derived

AIM XXXV Page 70

Business Risk - Low

Sales Volatility

EBIT Volatility

Vs. Mean – 41% Vs. Linear – 10% Vs. C.G. – 4%

Vs. Mean – 91% Vs. Linear – 14% Vs. C.G. – 51%

Source: Analyst Derived

$0.0$50,000.0

$100,000.0$150,000.0

2008 2009 2010 2011

Sales

Fiscal Year Sales Linear Constant Growth

$0.0$10,000.0$20,000.0$30,000.0$40,000.0

2008 2009 2010 2011

EBIT

Fiscal Year EBIT Linear Constant Growth

AIM XXXV Page 71

Financial Risk - Low

Total Debt/Total Capital Interest Coverage 424.7x

0.0x50.0x

100.0x150.0x200.0x250.0x300.0x350.0x400.0x450.0x

2009 2010 2011

Tim

es In

tere

st E

arne

d Fiscal Year

0.17

0.08

0.10

0.12

0.14

0.16

0.18

0.20

2009 2010 2011

Tota

l Deb

t/Tot

al C

apita

l

Fiscal Year


• OpenTable’s only debt obligations are capitalized leases • Operating income sufficiently covers any implied interest

AIM XXXV Page 72

Return on Equity – DuPont Analysis

Financial Leverage Return on Equity

Total Capital Turnover Net Profit Margin


15.4%

0.0%

5.0%

10.0%

15.0%

20.0%

2009 2010 2011

Net

Pro

fit M

argi

n

Fiscal Year

1.05

0.000.200.400.600.801.001.20

2009 2010 2011

Capi

tal T

urno

ver

Fiscal Year

19.6%

0.0%

10.0%

20.0%

30.0%

2009 2010 2011Retu

rn o

n Eq

uity

Fiscal Year

1.20

1.081.131.181.231.28

2009 2010 2011

Leve

rage

Fiscal Year

AIM XXXV Page 73

Valuation & Thesis

Investment Thesis • First mover in the market for online restaurant

reservations, giving OpenTable a competitive advantage in terms of established customer base

• Future growth due to small businesses using OpenTable for its marketing capabilities




Forward Price/Book 25% $55.36 $13.84



Market Price (11/19/12) $43.55


AIM XXXV Page 74

Wynn Resorts (WYNN)


Price (11/30/2012): $112.40


Market Cap: $10.85B


LTM EPS: $5.26

WYNN: 1 Year Price Chart

0.02.04.06.08.010.012.014.016.0

$0.00$20.00$40.00$60.00$80.00

$100.00$120.00$140.00$160.00


Mill

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Focus: Beta/WACC Calculation

AIM XXXV Page 75

WYNN Company Overview

• Hospitality & gaming company • 2 resorts

– Las Vegas and Macau • Strategy-focus on high-end individuals • CEO Steve Wynn has 30 years experience


Las Vegas 28%

Macau 72%

2011 Sales Breakdown

Las Vegas 58%

Macau 42%

2011 Asset Breakdown

AIM XXXV Page 76

Beta Valuation

Beta considerations • Management issues • Operating leverage of 5.5 times • Inherent risk vs. Business strategy

Final Beta: 2.10

2-year weekly 5-year monthlyBeta 1.48 2.39Adjusted Beta (Mean reversion) 1.32 1.93Adjusted R-squared 38.0% 44.9%

Regression Beta Analysis

Avg. Published Beta 1.95Avg. Regression Beta 1.94Avg. Adj. Regression Beta 1.63

Weighted Beta

Source: Yahoo Finance!, Reuters, Value Line, Bloomberg

Yahoo 1.74Reuters 2.38Value Line 2.39Bloomberg 1.30

Published Beta

AIM XXXV Page 77

WACC Valuation

Equity risk premium 5.0%Risk free rate 1.8% 10-year US Treasury rateBeta 2.10 Beta ValuationCost of equity 12.30%

Credit rating BBB Source: BloombergCost of debt 4.61% Assume 10-year debtTax rate 35.0% Historical averageAfter-tax cost of debt 3.00%

Equity weight 68.2% Market CapitalizationDebt weight 31.9% Balance SheetWACC 9.35%

WACC Calculation

Source: Bloomberg

AIM XXXV Page 78

Valuation & Thesis

Investment Thesis • Competitive advantage in Macau – 1 of 4 license holders • Tremendous growth opportunity – Cotai expansion soon • High risk, high reward






Market Price (11/26/12) $105.79


AIM XXXV Page 79

Cerner Corp (CERN)


Price (11/30/2012): $77.22


Market Cap: $13.2B

Dividend Yield: -

LTM EPS: $2.15

CERN: 1 Year Price Chart

0.0

1.0

2.0

3.0

4.0

5.0

6.0

$30.00

$40.00

$50.00

$60.00

$70.00

$80.00

$90.00


Mill

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Focus: Technical Analysis

AIM XXXV Page 80

CERN Company Overview

• Develops, installs, and supports healthcare information technology and solutions

• Solutions used by over 9,300 facilities in over 25 countries

• Electronic Health Records software changes doctor and patient experience

25%

16%

6% 15%

25%

11% 2%

2011 Revenue Breakdown

ProfessionalServices

ManagedServices

Subscription

LicensedSoftware

Support &Maintenance

TechnologyResale

Travel


AIM XXXV Page 81

1 Year Moving Averages

SELL: Death Cross (50 day MA crosses below the 200 day MA)


$30.00

$40.00

$50.00

$60.00

$70.00

$80.00

$90.00

Nov-11 Jan-12 Mar-12 May-12 Jul-12 Aug-12 Oct-12

Adj Close 50 Day MA 200 Day MA

AIM XXXV Page 82

$30.00

$40.00

$50.00

$60.00

$70.00

$80.00

$90.00


Price

1 Year Support & Resistance

SELL: Lower levels of resistance, lower levels of support


AIM XXXV Page 83

0.040

0.045

0.050

0.055

0.060


RSI

1 Year Relative Strength Index

BUY: Upward trend in relative strength over past month


AIM XXXV Page 84

Valuation & Thesis

Investment Thesis • Varied opportunities for growth • Market leader in growing healthcare IT sector • Hospital consolidation displaces smaller competitors

Valuation Method Weight Value ContributionForward Price/Sales 33% $80.00 $26.40Forward Price/Earnings 33% $66.00 $21.78Free Cash Flow 33% $154.72 $51.06Final Valuation $99.24Market Price (11/19/12) $77.47Estimated Upside/(Downside) 28.1%


AIM XXXV Page 85

Teavana Holdings, Inc. (TEA)


Price (11/30/2012): $14.75 Market Cap: $576.77M LTM EPS: $0.43 52-Week Low: $9.75 52-Week Low Date: 11/14/12

TEA: Price Chart since IPO

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12

Mill

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Focus: Special Circumstance

AIM XXXV Page 86

Company Overview

• Specialty retailer of premium loose-leaf teas and related merchandise

• Over 300 locations in United States and Canada • 900 – 1,000 square foot, high-end mall locations • “Heaven of Tea” retail concept • Acquired Canadian retailer, Teaopia, in June

2012

306

650

0100200300400500600700

FYE2009

FYE2010

FYE2011

FYE2012

FYE2013

FYE2014

FYE2015

FYE2016

FYE2017

FYE2018

Num

ber

of S

tore

s

Teavana Store Growth

Historic Projected


Tea 55%

Durables 41%

Beverages 4%

FYE 2012 Sales Breakdown

AIM XXXV Page 87

“Heaven of Tea” Concept

Source: Google Images

AIM XXXV Page 88

Advantages and Concerns

Competitive Advantages Company Concerns • First-movers in large industry

– $56.6B global tea sales ($5.2B in US) – Differentiated brand and concept

• Premium pricing – Lipton “Black Pearl” ($4.40 / 2 oz.) – Teavana “Black Dragon Pearls”

($15.00 / 2 oz.) – 85% proprietary tea blends

• Considerable white space – Unsaturated market – No material international presence

Source: Company Presentations, IBISWorld, Analyst

• Perceptions of upselling – Negative internet “chatter” – Personal and anecdotal experience

• Employee relationships – Compensation driven by sales

targets – Disgruntled former employees

• Growing faster than financing – Projected negative cash flows next

2 years – Equity market already tapped

AIM XXXV Page 89

Valuation & Thesis

Investment Thesis • Differentiated, niche company creating an industry • Ability to buy into growth story as Wall Street waits

for “proof of concept” • Not the next Starbucks, but if it becomes 5% of

Starbucks, the price would quadruple

Source: Analyst





Market Price (11/9/12) $10.30


AIM XXXV Page 90

The Rest of the Story

• Starbucks to acquire Teavana – Announced on November 14, 2012 – $15.50/share in cash – Made a buy/no buy decision

irrelevant – not a merger arbitrage fund

• Starbucks Investment Thesis – Complement to current Tazo tea

brand – Ability to unlock value by cross-

branding and taking Teavana products to grocery stores

• Ramifications for Teavana – Access to reliable financing – Accelerates growth while staying

true to brand

Source: Bloomberg News

IV. Portfolio Performance Evaluation Historical Return Comparisons/Benchmarks/Sector allocations Risk-adjusted Performance Measures Attribution Analysis Top 5 / Bottom 5 from Initial Portfolio Portfolio transactions - Additions and Deletions Presentation and discussion of Final Portfolio

AIM XXXV Page 92

Portfolio Relative Returns

Source: BNY Mellon Workbench, iShares

13.0%

16.8%

4.4%

10.3%

11.6%

13.2%

0.4%

6.9%

11.3%

13.4%

0.5%

7.0%

10.9%

13.9%

0.7%

7.2%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

1 Year 3 Year 5 Year Inception

Aim Portfolio vs. Major Indices

AIM Portfolio S&P 500 - Total Return Index HBI Russell 2000 Index

AIM XXXV Page 93

Consumer Products

• AIM consumer staples have underperformed the S&P index both recently and over the long-term

– 5-year horizon exception • AIM consumer discretionary stocks have outperformed the S&P index YTD

and over the long-term – 1-year horizon exception


12.02% 12.02%

7.51%

3.86%

22.01%

14.11%

6.58% 9.88%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

1 year 3 year 5 year 10 year

Consumer Staples

AIM S&P Consumer Staples Index

13.81%

20.71%

9.83% 9.65%

25.63%

13.80%

1.45%

8.28%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%


Consumer Discretionary

AIM S&P Consumer Discretionary Index

AIM XXXV Page 94

Financials & Healthcare

• AIM financials have outperformed S&P 500 Financial Index during all periods

• AIM healthcare stocks have outperformed in all periods • Largest outperformance for both sectors was over 3-year period

• AIM financials beat Financial Index by 19.89% • AIM healthcare stocks beat Healthcare Index by 14.29%


43.88%

18.36%

(5.87%)

6.08%

24.46%

(1.53%)

(11.40%)

2.96%

(20.00%)

(10.00%)

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%


Financials

AIM S&P Financials Index

30.22% 26.63%

7.87% 7.13%

26.04%

12.34%

3.77% 6.90%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%


Healthcare

AIM S&P Consumer Discretionary Index

AIM XXXV Page 95

Energy & Industrials

• Energy has only been in portfolio a short time, and has underperformed since

• Only marginally below in 2012, but underperformed by more than 10% over the past year

• Industrials have been underperforming over the last five years over all periods

– Weighed down by performance of Potash and fluctuations in CAT and CMI


9.11%

21.67%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

1 year

Energy

AIM S&P Energy Index

8.35%

2.13%

(10.20%)

20.64%

8.63%

(2.95%)

(15.00%)(10.00%)

(5.00%)0.00%5.00%

10.00%15.00%20.00%25.00%

1 year 3 year 5 year

Industrials

AIM S&P Industrials Index

AIM XXXV Page 96

Information Technology

• IT has consistently outperformed the corresponding S&P index in all periods except the 5-year

• Has performed exceptionally well in 2012, when it has outperformed its peers by over 10%


30.22%

21.23%

(1.81%)

27.62%

11.29%

1.66%

(5.00%)0.00%5.00%

10.00%15.00%20.00%25.00%30.00%35.00%

1 year 3 year 5 year

Information Technology

AIM S&P Information Technology Index

AIM XXXV Page 97

Sharpe Ratio

• Risk-Reward performance measure, indicating excess return per unit of variation in investment returns

• Used to determine whether returns are generated by management decisions or by additional risk

• A higher ratio means greater management efficacy

Where: 𝑅𝑝 is the portfolio return 𝑅𝑓 is the risk-free rate (3 Month T-Bill) σp is the standard deviation of the portfolio

AIM XXXV Page 98

Sharpe Ratio

Source: BNY Mellon Workbench

1.23

1.13

0.29

0.46

1.29

0.85

0.12

0.45

1.45

0.88

0.09

0.45

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1 Year 3 Years 5 Years Since Inception

AIM HBI S&P

AIM XXXV Page 99

Jensen’s Alpha

• Measures portfolio’s excess return on a risk adjusted basis (CAPM)

• Compares returns adjusted for systematic risk (risk that affects the entire market)

• Higher positive values are indicative of better management

Where: Rp is the portfolio return Rf is the risk-free rate (3 Month T-Bill) βp is the portfolio beta RM is the market return

AIM XXXV Page 100

Jensen’s Alpha


0.40

4.98

3.73

3.20

-1.30

4.36 4.28

3.45

-2.00

-1.00

0.00

1.00

2.00

3.00

4.00

5.00

6.00

1 Year 3 Years 5 Years Since Inception

%

AIM vs. HBI AIM vs. S&P

AIM XXXV Page 101

Attribution: Definition

• Comparative value added by over or underweighting sectors relative to benchmark

– Overweight top performing, underweight poor performing

• Value added by choosing securities that outperform the benchmark at each sector level

Total Net Management Effect

Allocation Effect Selection Effect

AIM XXXV Page 102

Attribution: One Year


(0.0) (0.0)

0.0

(0.0)

0.0

(0.0) (0.0)

0.0

(0.0) (0.0)

4.1

1.3

0.0

1.0

0.2 0.3 0.1

(1.1) (1.1) (1.1)

4.1

1.3

0.0

1.0

0.2 0.3 0.1

(1.1) (1.1) (1.1)

(2.0)

(1.0)

0.0

1.0

2.0

3.0

4.0

5.0

InformationTechnology

Financials Utilities Health Care Energy ConsumerStaples

TelecommServices

ConsumerDiscretionary

Materials Industrials

Out

perfo

rman

ce v

s. S&

P 50

0 (%

)

Allocation Selection Net Total Management

AIM XXXV Page 103

Attribution: Three Year


0.0

0.8

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AIM XXXV Page 104

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AIM XXXV Page 105

One-Year Performance Overview

Source: Yahoo! Finance

Gilead Sciences (GILD) +92.1% •First-mover drug advantage

Ebay, Inc. (EBAY) +82.5% •Immense growth in PayPal

Discover Financial (DFS) +79.8% •Awareness & merchant adoption

Apple Inc. (AAPL) +62.1% •Innovation & rapid product adoption

Dick’s Sporting Goods (DKS) +38.1% •Geographic expansion, unique layout

AeroVironment Inc. (AVAV) -18.6% •Sequestration concerns

PNC Financial (PNC) -12.9% •Bad mortgages acquired

Activision Blizzard (ATVI) -7.4% •Concerns w/ video game market

Potash Corp. (POT) -5.6% •Issues with foreign contracts

Caterpillar (CAT) -2.4% •Global macroeconomic concerns

Best Performers Worst Performers

AIM XXXV Page 106

Portfolio Turnover – Stocks Bought

BOUGHT 1) Wynn Resorts (WYNN) – Presence in Macau, growth prospects 2) Select Comfort Corp. (SCSS) – Sustainable competitive advantage 3) Cerner Corp. (CERN) – Market leader in healthcare IT sector 4) Kapstone Paper (KS) – Great management 5) Expediters Int’l (EXPD) – Management, attractive valuation 6) Open Table (OPEN) – First mover in restaurant reservations 7) Acuity Brands (AYI) – Growing LED & lighting remodeling 8) Domino’s Pizza (DPZ) – Domestic innovation & international growth 9) IPG Photonics (IPGP) – First mover in industrial lasers

Source: Commentary provided by AIM XXXV analysts

AIM XXXV Page 107

Portfolio Turnover – Stocks Sold

Source: Commentary provided by AIM XXXV analysts

SOLD 1) Caterpillar (CAT) – Exposure to macroeconomic weakness 2) AeroVironment (AVAV) – Sequestration concerns 3) KeyCorp (KEY) – NIM compression & slow loan portfolio growth 4) PNC Financial (PNC) – Regulation & legacy mortgages 5) Alliant Tech (ATK) – Fiscal cliff concerns / sequestration 6) Williams-Sonoma (WSM) – Market has priced in housing recovery 7) CarMax (KMX) – Optimistic outlook has led to over-valuation 8) Qualcomm (QCOM) – Risk of margin contraction, fully-priced growth potential 9) Dollar Tree (DLTR) – Declining same-store sales growth & peak margins 10 ) Coca-Cola (KO) – Unattractive valuation due to flight to safety

AIM XXXV Page 108

Final Portfolio (11/30/2012)

General Information In-class Speakers Chicago Trip New York City Trip Newsletter AIM Website

AIM XXXV Page 110

Visiting speakers

CEO - Peter Kalan, SVP - Investor Relations Liz Bauer

Ed Trubac, Finance Professor Emeritus Scott Malpass, Chief Investment Officer

Equity Research Analyst - Tom Roderick

AIM XXXV Page 111

Chicago Trip

Health Care Private Equity

Fund of Funds

International Real Estate

Equity Long/Short MCN Capital

AIM XXXV Page 112

New York Trip

Equity Long/Short

U.S. Equities

Private Equity

AIM XXXV Page 113

New York Trip

Multi-Strategy Hedge Fund

Financials: Long/Short

Special Situations Fund

AIM XXXV Page 114

New York Trip

AIM XXXV Page 115

Newsletter

• Objective – Alumni Updates – Portfolio Performance – Economic Outlook

aim.nd.edu

AIM XXXV Page 116

AIM Website

• Course Overview • Current Analysts • Portfolio Performance • Alumni

– Career Opportunities – Upcoming Events – Social Networking

• LinkedIn • My Notre Dame

AIM XXXV Page 117

Thank You

AIM XXXV would not have been possible without the generous support of: • The Advisory Board • Scott Malpass and the Notre Dame Investment Office • Professors Langley, Reilly and Trubac • Rachel Karnafel

Post - Presentation Agenda • Due diligence and discovery of Domino’s Pizza • Advisory Board panel discussion

Documents

Advisory Board Presentation - AIM€¦ · Advisory Board Presentation . AIM XXXV . Fall 2012 . AIM XXXV Page 2 AIM Analyst Bios Justin Asuncion . ... Robert Crow . Champaign, IL