General Body Meeting 02-29-12 1. Mutual Investment Club of Cornell Welcome 2

General Body Meeting 02-29-12

1

Mutual Investment Club of Cornell

2

Welcome

3


4

News Updates


5

General News


6

Warren Buffett’s Investment Letter Succession

An unknown successor (and two backups) has been chosen

Mistakes Berkshire Hathaway has underperformed

the market over the last couple years Energy Future Holdings – a Texas natural

gas utility Gold

Avoid it Focus on productive assets


7

Warren Buffett’s Investment Letter Stock buybacks

Justification for why he wants IBM stocks to “languish”

Inflation risks Bonds are risky

Buffett Rule


8

Healthcare


9

Retirement of Bill Weldon

CEO of Johnson & Johnson Replaced by Alex Gorksy

Previously VP and Head of J&J medical devices and diagnostic business

J&J had issued over 30 recalls since late 2009

Regulators now oversee control of operations at three plants linked to problems


10

Retirement of Bill Weldon

Recalls included Adult Tylenol, Benadryl, Zyrtec, and Motrin

Also: HIV medicine Prezista and Epilepsy pill Topamax

Weldon will continue to serve as Chairman


11

Media/Telecom News


Sprint Board vetoed $8 billion merger with MetroPCS

9.3 million more customers for Sprint Airwaves for faster Wireless service

Share Performance 42% decrease in share price in past 12

months Sprint CEO Dan Hesse already approved

Merger


13

Two Minute Drill

Guest Lecturer:

Topic:

Zachary Peskin

Following the News


14

Following the News

Television Radio Traditional News Financial Blogs Twitter Books Bloomberg Terminal


15

Traditional News

WSJ Financial Times Reuters Barrons New York Times AFP AP


16

Financial Blogs

The Big Picture - http://www.ritholtz.com/blog/

Calculated Risk - http://www.calculatedriskblog.com/

MACROFUGE - http://macrofugue.com/ VariantPerception -

http://blog.variantperception.com/ DealBook -

http://dealbook.nytimes.com/ DealBreaker - http://dealbreaker.com/

http://www.ritholtz.com/blog/

http://www.ritholtz.com/blog/

http://www.calculatedriskblog.com/

http://www.calculatedriskblog.com/

http://macrofugue.com/

http://macrofugue.com/

http://blog.variantperception.com/

http://blog.variantperception.com/

http://dealbook.nytimes.com/

http://dealbook.nytimes.com/

http://dealbreaker.com/

http://dealbreaker.com/


17

Twitter

@FT @BloombergFX @BloombergRates @TheEconomist @WSJ @B_Eichengreen @gregmankiwblog @dealbook @WSJDealJournal @BloombergNews @PIMCO @nytimeseconomix

@BloombergNow @BW @tomkeene @MarketWatch @ZipperTheory @ConvertBond @JamesGRickards


18

Sears Holdings


19

Results

Roughly 40% loss in two weeks


20

Sears Holdings

What in the world is going on?


21

Sears Holdings

Earnings Recap Expectations: $0.67 Earnings: $0.54

19% Earnings Miss

“Our poor financial results in 2011, culminating in a very poor fourth quarter, underscore the need to accelerate the transformation of Sears Holdings…own 95% of Sears Canada, which also experienced very poor results, and included a change in management in mid-year.”


22

Sears Holdings Spinoff

CIT Group Primary lender of Sears that extends

credit to buy inventory, operate stores Cut funding from Sears for line of credit

Liquidity Concerns These liquidity concerns led to rapid

decrease in stock price earlier in year


23

Sears Holdings Spinoff

Hardware and Sears Outlet stores

Specializes in Sears’ core strengths of Appliances and Hardware Craftsmen tool line Kenmore appliance lines


24

Sears Holdings Liquidation

Raised $270 million from sale of 11 stores Averages $24.5 million per store Owns 3500 stores Suggests a liquidation value above Book

Value Somewhere roughly around $70


25

Sears Holdings Liquidation

Accounted for $250 million of $270 million sale


26

Sears Holdings

Theories Is Sears going to be taken over by Private

Equity Premium over book value prices shares

around $70-$80 range Short Squeeze?

A short squeeze shouldn’t be this large… Volume indicates that Quant programs may

be hunting for stop limits and pushing up prices


27

Sears Holdings

What to do? Monitoring each day Hold tight and stick true to thesis If being taken over, cut losses and run


28

Semester Holdings Update


29

13,000


30

Portfolio Review

Short term rally provides us an opportunity to analyze our holdings Take advantage and lock in profits Restructure portfolio and free up assets

for other opportunities


31

Hewlett Packard [HPQ]

Current Profit & Loss:

Recommendation:

-44.4%

HOLD


32

Cisco Systems [CSCO]


Recommendation:

-17.3%

HOLD


33

Johnson & Johnson [JNJ]


Recommendation:

2.5%

HOLD


34

Las Vegas Sands [LVS]


Recommendation:

20.3%

HOLD


35

Otter Tail [OTTR]


Recommendation:

-5.3%

HOLD


36

Brinks Company [BCO]


Recommendation:

12.3%

HOLD


37

Archer Daniels Midland [ADM]


Recommendation:

-11.9%

HOLD


38

Proctor & Gamble [PG]


Recommendation:

10.1%

HOLD


39

Philip Morris International [PM]


Recommendation:

104.2%

SELL


40

Philip Morris International [PM] Strong run in share prices over the last few

weeks as markets have rallied


41


Strong Overbought Signals Williams %R – All time high Relative Strength – All time high


42

Philip Morris International [PM]Original Thesis (Purchased November 2009)

Hedge against recession Low beta International exposure

Take advantage of international cigarette consumption trends


43



44

Philip Morris International [PM]Comparable Analysis illustrates a fair valuation on a fundamental basis

P/E is in line with industry PEG is a bit high at 1.94

Steady cash flows have led to a steady rise as:

Strong International Growth Various expansions into further

geographic areas


45

Philip Morris International [PM] Despite this potential to growth…

Tobacco Industry has many externalities Increases in Government Taxes Competition from domestic manufacturers

China National Tobacco Corp “boasts a virtual monopoly in the People's Republic of China,

which accounts for roughly 30% of the world’s total consumption of cigarettes”

Potential for tighter restrictions on Philip Morris in China


46

Philip Morris International [PM]Overview

1. Technically is way overbought RSI, Williams, and MACD at all time highs

2. Fundamentally is fairly valued Fair evaluation leaves room to rise, but

doesn’t speak to any undervaluation

3. Externalities pose risks in long run Foreign regulations Increased competition


47

Philip Morris International

Sell: $2,505.60Portfolio Allocation: Roughly 5% of portfolioProfit: 104.2%


48

Visa [V]


Recommendation:

49.7%

HOLD


49

Walt Disney Company [DIS]


Recommendation:

-1.9%

HOLD


50

Telefonica [TEF]


Recommendation:

-37.8%

HOLD


51

Next Era Energy [NEE]


Recommendation:

6.5%

HOLD


52

Boardwalk Pipeline [BWP]


Recommendation:

7.8%

HOLD


53

Announcements


54

Stock Competition

Investopedia Trading Simulator $100,000 in Virtual Money Full Trading Platform (Short Selling,

Options) Weekly Leaderboard Update

Game Name: MICC Stock Competition Password: Cornell


55

Stock Competition


56

Stock Competition

Mitch: 5.45%


57

Student Assembly Campaigns


58

Student Assembly Campaigns


59

Brainteaser

You wake up early one morning and find the light in your bedroom is broken!

You get dressed in the dark. Your sock drawer has socks of three different colors: red, white and blue. How many socks do you have to take out to be certain of having a matching pair?

Documents

General Body Meeting 02-29-12 1. Mutual Investment Club of Cornell Welcome 2