Cougar Investment Fund Fall 2012 Investment Meeting Guidelines
Cougar Investment Fund Fall 2012 Investment Meeting Guidelines
Cougar Investment Fund Fall 2012 Investment Meeting Guidelines
Create successful ePaper yourself
Turn your PDF publications into a flip-book with our unique Google optimized e-Paper software.
<strong>Cougar</strong> <strong>Investment</strong> <strong>Fund</strong><br />
<strong>Fall</strong> <strong>2012</strong><br />
<strong>Investment</strong> <strong>Meeting</strong> <strong>Guidelines</strong><br />
Please make note of another round of TA change (as of September 24, <strong>2012</strong>).<br />
The new TA is Sangyong Han (sangyong.han@wsu.edu)<br />
Please email your reports to the TA and the supporting spreadsheet to the<br />
Professor (glenda.kao@wsu.edu )<br />
Plagiarism<br />
Plagiarism is cheating. The APA Manual (Publication Manual of the American<br />
Psychological Association. Washington DC: American Psychological Association,<br />
1995 p. 292-95) suggests the following principle to avoid plagiarism:<br />
Quotation marks should be used to indicate the exact words of another.<br />
Summarizing a passage or rearranging the order of a sentence and<br />
changing some of the words is paraphrasing. Each time a source is<br />
paraphrased, a credit for the source needs to be included in the text.<br />
Anyone engaging in plagiarism will receive a “F” in the course. Make sure you<br />
understand the following:<br />
• If you use the exact words from another source (e.g., web site), you must<br />
enclose it in quotation marks and provide a citation. If you have more<br />
than three or four words from a sentence, those words should also be in<br />
quotation marks. For example, if I re-wrote the first sentence, using “the<br />
exact words from another source” means…<br />
• If you paraphrase (see definition above) you still must provide a citation<br />
1
(A) Presentation Schedule<br />
We will have a total of 15 <strong>Investment</strong> <strong>Meeting</strong>s this semester. Please refer to the “CIF<br />
<strong>Investment</strong> <strong>Meeting</strong> Presentation Schedule” handout (also available on the CIF website in the<br />
“CIF Instructions” link) for your respective presentation dates.<br />
(B) <strong>Meeting</strong> Structure<br />
Three students from this class have been designated as Portfolio Managers (PMs). They will<br />
take turn to chair the <strong>Investment</strong> <strong>Meeting</strong>s. With the exception of the first three meetings<br />
(#1~3), the structure of each meeting is as follows:<br />
(B-1) Market Color and Portfolio Review —by the Portfolio Manager on duty (5 minutes)<br />
The PM on duty will provide:<br />
• A brief market color including<br />
o Recent stock market performance and why<br />
o Any noteworthy headline news<br />
o Any noteworthy upcoming events<br />
• A brief portfolio performance review including<br />
o Portfolio performance relative to the SP500 benchmark (over-/ under-performance)<br />
o Brief performance attribution<br />
o Biggest winner and loser in the portfolio<br />
o Biggest sector over-weight and under-weight (relative to SP500 sector weight)<br />
The portfolio holding spreadsheet (“CIF Portfolio Holding”) will be available on the CIF website<br />
in the “CIF Portfolio” link)<br />
(B-2) Sector Recommendations and Stock Re-evaluations - by Sector Analysts (5 minutes<br />
each)<br />
Please read carefully the “Pre-<strong>Investment</strong> <strong>Meeting</strong> <strong>Guidelines</strong>” as well as the “Sector Review<br />
<strong>Guidelines</strong>” handouts as you begin your work on sector recommendation and stock reevaluations.<br />
Both handouts are also available on the CIF website (in the “CIF Instructions” link).<br />
You must follow the guidelines and use the provided templates to complete your reports.<br />
Each Sector Analyst will provide:<br />
• A brief sector performance review including<br />
o Sector performance relative to the broad market (SP500) and why<br />
o Any noteworthy headline news from the sector (company-, industry-, or sector-specific<br />
news)<br />
o Sector outlook (including noteworthy upcoming events)<br />
• A brief holding (from the sector) update including<br />
2
o A brief update on each of stocks we currently own in the sector (please refer to the “CIF<br />
portfolio holding” spreadsheet on the CIF website in the “CIF Portfolio” link)<br />
o Any noteworthy headline news on the stocks (e.g., earnings, changes in analyst<br />
recommendation or estimate revisions, and any other significant headline news) in the<br />
sector<br />
o Highlighting the biggest % mover, both up- and down- movers from the sector and<br />
explain why such big moves<br />
o Highlighting the largest two holding from the sector<br />
• A brief recommendation for the sector and re-evaluation of the current holdings from the<br />
sector<br />
o Sell any or all of the stocks the portfolio owns in your sector<br />
o Adjust any of the target prices<br />
o Adjust any of the stop loss prices<br />
o Your recommendation should be consistent with your other comments as described<br />
above<br />
• Be mindful that definitions of sectors and industries vary. The resources you reference to<br />
may not use GICS (which is what Standard & Poor’s uses) to classify sectors. You need to<br />
mention it If when there is a discrepancy<br />
• You have only five minutes. Please keep your comments and slides brief and up to the<br />
point. The class can access your submitted Stock Report on the CIF website (in “CIF<br />
Reports” link) for details<br />
(B-3) Stock Recommendations – by Stock Analysts (8 minutes each including 5 minutes of<br />
presentation and 3 minutes of Q/A)<br />
Each Stock Analyst scheduled to present at the <strong>Investment</strong> <strong>Meeting</strong> will have 5 minutes to<br />
present to the class their research and make recommendation on whether to “buy” the stock.<br />
The Portfolio Manager on duty will select out of the submitted questions a small set (time<br />
permitting) for the Stock Analyst to address<br />
Please read carefully the “Pre-<strong>Investment</strong> <strong>Meeting</strong> <strong>Guidelines</strong>” as well as the “Stock<br />
Recommendation <strong>Guidelines</strong>” handouts as you begin your work on stock recommendation.<br />
Both handouts are also available on the CIF website (in the “CIF Instructions” link). You must<br />
follow the instructions and use the provided templates to complete your reports.<br />
Each Stock Analyst will provide:<br />
• A brief summary of the company, their competition and strategy (please keep it brief)<br />
• Your investment thesis, i.e., what and why you make the recommendation you do. Please<br />
keep in mind you only have five minutes so do not spend too much time going over<br />
details of your analyses. The class can access your submitted Stock Report on the CIF<br />
website (in “CIF Reports” link) for details<br />
3
• Whether or not you recommend to “buy” the stock. If you recommend a “buy”, you will<br />
also need to provide a “target price” (the price at which CIF will sell the stock for a profit)<br />
and a “stop-loss price” (the price at which CIF will sell the stock to mitigate further loss).<br />
Please refer to the “Stock Recommendation <strong>Guidelines</strong>” handout (also available on CIF<br />
website in the “CIF Instructions” link) for suggestions on target and stop-loss prices<br />
Please keep in mind<br />
• Refrain from an automatic “buy” recommendation. Your recommendation should be<br />
consistent with findings from your analyses<br />
• <strong>Investment</strong> is built on expectations and forecasts. A past winner may be a future loser and<br />
a past loser may be a future winner. Your recommendation should be based on what you<br />
think the stock will do in the future<br />
• A good company may not be a good stock while a lousy company may be a good stock<br />
• Many of the most celebrated calls from Wall Street analysts were bearish<br />
recommendations (“sell”, “underperform”, etc.)<br />
• Find out when the company will be making their next quarterly earnings announcement.<br />
Big up- (down-) moves on the stock tend to follow positive (negative) earnings surprises.<br />
It pays to wait till the dust is settled<br />
• Some stocks might be cheap (based on valuations) for a reason. They are often referred to<br />
as “value trap” and are stocks to stay away<br />
(B-4) Update on stock recommendations voted previously as “Further Research” – Stock<br />
Analyst (1 minute each)<br />
Please refer to (C-2) for when Stock Analyst must return a week after his/her original<br />
<strong>Investment</strong> <strong>Meeting</strong> to provide additional information or clarifications previously requested by<br />
the class. This follow-up presentation should focus specifically on what was requested by the<br />
class<br />
(B-5) <strong>Investment</strong> <strong>Meeting</strong>s #1-3<br />
The structure of <strong>Investment</strong> <strong>Meeting</strong>s #1-3 is same as described above except no presentations<br />
from Sector Analysts are scheduled.<br />
(C) Class Vote<br />
Buy recommendations from the Stock Analysts are put to a class vote. So are adjustments of<br />
target or stop-loss price as well as sell recommendations from the Sector Analysts.<br />
(C-1) Voting Ballot<br />
Voting ballot will be distributed at the beginning of each <strong>Investment</strong> meeting. Students are<br />
encouraged to cast their vote at the end of each presentation. The Portfolio Manager on duty<br />
will collect the ballot at the end of the class and tally the vote on the same day. Voting results<br />
and the trades, if any, will be announced at the next <strong>Investment</strong> <strong>Meeting</strong>. Portfolio Manager on<br />
4
duty and the Analyst who recommended the stock will generate the trade tickets before the<br />
end of the day. The trade ticket needs to be reviewed and signed by the Professor and the<br />
Portfolio Manager. The Portfolio Manager will deliver the ticket to the Senior <strong>Investment</strong><br />
Officer who will execute the trades.<br />
(C-2) Buy Recommendations<br />
The class will vote on each stock that Stock Analyst recommends to “Buy”. Cast your vote for<br />
one of the following three:<br />
• “Yes” if you agree to the “Buy” recommendation<br />
• “No” if you disagree<br />
• “Further Research” if you need additional information or clarifications from the Analyst to<br />
reach a decision. Please state briefly next to your vote the requested information or<br />
clarifications if your vote is “Further Research”<br />
A minimum of 75% of “Yes” votes from the class is required to approve a “Buy”<br />
recommendation<br />
“Further Research”<br />
If the most vote a stock recommendation received is “Further Research”, the Stock Analyst has<br />
one week to address the issues. The Stock Analyst must return a week after his/her original<br />
<strong>Investment</strong> <strong>Meeting</strong> to provide additional information or clarifications previously requested<br />
by the class. The stock will be on the ballot for another round of voting. The choices are either<br />
a “Yes” or a “No”. A minimum of 75% of “Yes” votes from the class is required to approve a<br />
“Buy” recommendation. This second voting round is the last chance the Analyst has to gain<br />
support of the class<br />
(C-3) Sell Recommendation<br />
The class will vote on each stock that Sector Analyst recommends to “Sell”. Cast your vote for<br />
one of the following choices<br />
• “Yes” if you agree to the “Sell” recommendation<br />
• ”No” if you disagree (which means you think CIF should continue to hold the stock)<br />
A minimum of 51% of “Yes” votes from the class is required to approve a “Sell”<br />
recommendation<br />
(C-4) “Target Price” or “Stop-Loss Price” Adjustment Recommendation<br />
The class will vote on each stock that Sector Analyst recommends to “Adjust Target Price”<br />
and/or “Adjust Stop Loss Price”. Cast your vote for one of the following two choices<br />
• “Yes” if you agree to the respective “Adjustment” recommendation<br />
• “No” if you disagree (which means you would like to maintain the current respective price)<br />
You will vote on the two “Adjustment” recommendations separately<br />
5
A minimum of 51% of “Yes” votes from the class is required to approve an “Adjustment”<br />
recommendation<br />
(D) Trades and portfolio holding<br />
(D-1) Trades<br />
For the “buy” recommendations that receive a minimum of 75% votes, a pair of trades will<br />
need to take place: a “Buy Order” to purchase share of the stock and a “Sell Order” to sell<br />
enough of the sector ETF to raise cash for the stock purchase. The dollar amount of the stock<br />
we purchase is determined based on its total market capitalization and relative weight in the<br />
SP500 index.<br />
Total Market Capitalization $ Buy Order<br />
$5-10B Approximately $10,000<br />
$10-15B Approximately $15,000<br />
$15-25B Approximately $20,000<br />
$25-35B Approximately $28,000<br />
$35-50B Approximately $35,000<br />
$50-100B Approximately $40,000<br />
$100-150B Approximately $45,000<br />
$150-200B Approximately $50,000<br />
>$200B Approximately $55,000<br />
For the “sell” recommendations that receive a minimum of 51% votes, a pair of trades will need<br />
to take place: a “Sell Order” to liquate CIF’s holding in this stock and a “Buy Order” for sector<br />
ETF from the raised proceeds.<br />
The Portfolio Manager on duty and the Analyst recommended the “buy” or the “sell” will<br />
generate the trade tickets before the end of the day. The trade ticket needs to be reviewed and<br />
approved by the professor, and signed by the Professor and the Portfolio Manager. The<br />
Portfolio Manager will deliver the ticket to the Senior <strong>Investment</strong> Officer who will execute the<br />
trades.<br />
(D-2) Portfolio Holding<br />
Holding Constraints<br />
As one of the managers of the University’s Contributed <strong>Fund</strong>s Quasi Endowment <strong>Fund</strong>, students<br />
in the CIF class operate under a numbers of constraints including:<br />
• <strong>Investment</strong>s limited to NYSE, and NASDAQ securities<br />
• $5 Billion minimum equity market capitalization<br />
• 5% maximum position in any one security (except ETFs)<br />
• University’s Senior <strong>Investment</strong> Manager may veto any investment recommendations<br />
6
• University’s Senior <strong>Investment</strong> Manager has the option to liquidate any position<br />
• Excess funds invested in sector ETFs<br />
• No margin trading, short positions, or derivatives<br />
• Holding in each sector is within +/-5% of the SP500 index sector weights<br />
Monitoring<br />
The Professor along with the Portfolio Managers monitor the portfolio holding to ensure it<br />
complies with the mandate and constraints. If necessary, we will generate trade tickets to align<br />
the portfolio with the holding constraints.<br />
The “CIF Portfolio Holding” spreadsheet is available on the CIF website in the “CIF Portfolio”<br />
link.<br />
7