 Today I have the distinct honor to introduce to you all the new lead of the Mary of J. Gavelli School of Business in Susan McKinnon. Thank you Susan. All of you and a very special welcome either back to Roger Williams in the Gavelli School or a brand new welcome for those of you who are visiting us for the first time. I'm not exactly the new dean anymore. I've been here almost four months now so that doesn't make me the old dean but I'm so excited to be here this afternoon. When I was interviewing as a candidate for this job last year I was at this presentation in May and I was completely blown away by how confident our students are that are part of the cafe program, especially those who are interested in going on to careers in finance and investing. And this of course is just a great representation of the overall approach and focus on experiential education that has become such a part of the fabric of this institution under President Donald Farrish who was fortunately with us here this afternoon. And I think you are going to really enjoy hearing this wonderful presentation. The students have worked incredibly hard. This is actually the 10th anniversary of the cafe program and I want to extend a special congratulations to Professor Michael Melton and to the students for that milestone because it certainly is a big one. And the group is mostly just back from a trip to Tokyo and for those of you who have made that trip you know it's pretty long and the jet lag can ensue for quite a while so I think everybody is on top of their game and I hope they've gotten a lot of rest. Again welcome. I hope I'll have a chance to meet all of you individually at the reception that will take place after this wonderful presentation. So I will turn it back over to you. Good luck. Thank you Dean McTunan for the introduction and of course thank you all for being here. As the Dean mentioned this is the cafe's 10th anniversary and so today's presentation is going to be very very unique. But before we begin I would like to introduce myself. My name is Laura Elfigali and I'm one of the associate directors for the cafe program this semester. I was a student fund manager myself last semester and I can tell you this. The market that I experienced last semester as a student fund manager is nothing like the market that I had this semester as an associate director. In fact the market that we experienced this semester is unlike any other market in recent years in terms of the level of uncertainty among investors. And so when we first walked into the cafe we had absolutely no idea where the market was going and neither did anyone else for that matter. But you know we had to make a decision. We had to decide were we going to be bulls or were we going to be bears. Because at the end of the day that determines the level of risk that we take on and what our potential return is going to be. Now it gives us so much pride that the cafe program won two national championships in 2014. And hopefully we can keep that legacy going forward. But first let's pause and understand why we won those two national championships in the first place. We invested in very well known companies that many other investment management funds were invested in. We had our money in Apple, we had our money in American Express, in Time Warner Cable and Coach. Very well known companies that everyone else knew about. So why did the cafe program win? Or in other words what makes us different? And that is the question that the student fund managers are going to address in today's presentation. We're going to walk you through our process. We are going to pitch to you some of our companies and recommend some hot picks that we have along the way. And hopefully at the end we hope that you understand what makes us unique and what drives our alpha. Let's start by introducing to you the semesters team who worked by them and who worked and learned about everything under the supervision of our beloved Dr. Michael Milton who is standing in the back right now. The same fund managers to my right are Jack Winfaira, Zainab Yatku, Austin Schofield, Eric Gilman and Michael Ventura. The student fund managers to my left are Sam Kevell. It's actually his birthday today, just thought I'd put that out there. So make sure to show him a good time after the presentation. We have Guthrie Carpenter, Molly Petrone, Ben Arcobaccio and Cooper Foster. Now as members of cafe we take part in the very unique program that differentiates us not only from other academic portfolio management programs, but also from those in the industry today. And we have learned and applied every single step of the portfolio construction and management process and taking into account that standing in front of you this afternoon are not industry professionals, not students of the graduate level, but juniors and seniors in college. We take great pride in what we do today and all of us can attest to that. So now put down for the adieu, let the presentation begin. Thank you Susan Lara for the introduction. The cafe program allows students to manage two real dollar portfolios worth over $230,000. We manage two different portfolios with unique objectives. One on the slide behind me you can see is domestic large cap value. The other portfolio we manage is the domestic large cap growth fund. Managing two portfolios differentiates us from programs across the country due to Rod Williams being the only undergraduate program that manages two real dollar portfolios at the same time. The cafe program goes beyond the classroom environment, provides us with the taste of what industry is going to be like and what to expect after graduation in terms of atmosphere and setting. With that being said, unlike other academic programs, we don't need to seek trade approval from a board of directors to execute our trades. We simply need consensus from our fellow student fund managers, our ADs, and our managing director doc. All of which can be obtained in a relatively short period of time. Thank you to our regular stream of communication via in person, text, and email. Furthermore, our quick decision making capabilities allows us to have a high level of agility and a comparative advantage to other similar competing funds. Other student run portfolio management programs have difficulty operating within real time constraints and need extended time in order to obtain trade approval. Additionally, the cafe program differentiates us fundamentally by hedging against potential losses in a volatile marketplace. Student fund managers must construct the most optimally diversified portfolio possible. Through the utilization of industry standard financial platforms such as Bloomberg and Quote Equity Plus, we can achieve our portfolio goals of a positive alpha and diversification through strong companies. Also, these are the same platforms or extremely similar platforms that we'll be using when we enter the real world environment, thus giving us a leg up on our competition. As all of you know, two weeks ago we traveled to Japan to present our methodology. We presented to one of the top universities in Japan as well as multiple portfolio managers. We're posed a question of how our fund differentiates us from fellow professional funds. We have several differentiating factors that have driven our success to beat these professional competitors. Firstly, our value funds investment strategy encompasses the principles of Graham and Dodd with a top-down approach. Many other investment firms have their own economics research departments that serve to provide them with advisory. When looking at our portfolio, we usually go through our student fund managers and then we go into our ADs to get trade decisions and finally we'll go into DOC to get the final trade approval. This helps us in order to give us a better understanding of trade decisions. With that being said, Roger Williams understands that the trade decision is going to benefit our program. Generally, in industry, funds are managed by smaller teams. They all have similar backgrounds and belief systems, though the cafe is different. We strive to foster an environment of diversity. We have different majors, different ideas, and different inversions to risk, but we all come together to achieve the same portfolio objective. Also, having the larger team allows us to run an in-depth economic analysis of the economy and the market, like Zane upset. So we don't just follow the street, we follow our own beliefs and invest off that. Furthermore, another differentiating factor for the cafe program is that we have a fiduciary responsibility to our managing director DOC. Therefore, the principal agent relationship is deeply connected with direct oversight. With that being said, the cafe program embodies a message to mitigate risk before maximizing return. In any economic environment, student fund managers understand the various risks and different allocation strategies. Thus, we'd all sacrifice reward in order to mitigate undue risk to our funds. Throughout the semester, DOC has preached to us to prepare for the worst and hope for the best. We've seen this message. We've had this message throughout the semester and sort of reflect in both of our portfolios. Now, I can invite up Eric and Guthrie to discuss our economic analysis. Thank you, Sam. Our value approach targets companies whose current price does not reflect its intrinsic worth. To really view the actual value of the company, we had to look from the top down. We began by conducting a global economic analysis to better understand our own domestic environment. We identified the strongest sectors that have been driving markets in the best position industries within those sectors to help perform in the coming year. From this analysis, we are able to arrive at the last stage of our top down approach, which is individual company selection. We performed a full global economic analysis to begin. From here, we analyzed over 40 plus countries and then we identified three major foreign countries that we believed would have the biggest effect on overall global growth. Those were Europe, Japan and China. Now, I'd like to begin with Europe. We can't necessarily say at this point that the European recovery has gained very much momentum. High unemployment and deflationary conditions have led Mario Draghi and the ECB to implement a combination of monetary policy instruments such as quantitative easing to aid their struggling economy. We also see that Japan is on the brink of our recession. Japan's diminishing labor markets coupled with weak domestic consumption due to an increase in the sales tax have driven them into the current recession. Despite its negative economic implications, Albinomics has driven the Japanese equity markets to new seven year highs as being supported by aggressive stimulus policies. We feel, however, that these policies have run their course as they've added consistent pressure to consumers and have the effort to increase export power through a weaker yen have not yet been realized. As you may have noticed, slow and global growth has been a trend widespread across the board. Even China, once a significant growth story, has begun to slow as their economy transitions from industrialization to a more service and consumption driven economy. As is normal after periods of excessive growth, China's expansion has begun to normalize, reverting to the media. In summary, the global economic environment has been characterized by aggressive monetary policies, overall stagnation and slowing economic growth. We feel that these policies have helped us determine our weights and the foreign economies are hard to engage at a certain time. With the insights from our global economic analysis, we are able to establish our domestic market outlook. Our analysis is such that the U.S. will continue to improve and drive the global recovery. Robust economic growth and improving labor market conditions have led to an increasingly hawkish Federal Reserve as we see Janet Yellen at FOMC moving closer to the imminent interest rate hike. After successfully winding down the third round of quantitative easing on October 29, the Fed is set to increase rates by mid-2015. Although that inflation is still well below the Fed's 2% target and global growth remains tepid, we are very confident that the U.S. economy is the best investment area for our portfolio. Now, we maintain our bullish outlook on the economy. However, our outlook on the elderly bull market has diverged. With market gains continuously outpacing such economic indicators as GDP, labor market conditions, and industrial production, we've seen the S&P outperform these certain indicators. We've developed a more bearish outlook on the equity market and a resulting risk aversion as we believe a pullback is due. Looking at the table behind me, you'll see the major drivers and concerns that we expect to affect global economies and equity markets over the upcoming years. With that said, our analysis is such and has made us confident in the U.S. market as it has diverged away from other economies. At this time, I'd like to transition into the second tier of our top-down approach, which is sector analysis. We waited the financial sector the heaviest within our value portfolio. With the strengthening U.S. economy and the Federal Reserve's pledge to raise the short-term domestic interest rates, we believe that the sector will outperform. Prior to our reallocation, we held AON PLC, Berkshire Hathaway, and Allstate Corporation. However, we felt it was necessary to take advantage of our striving economy once a global economic slowdown. Therefore, we reallocated our funds into domestic companies that would benefit the most from an increase in U.S. interest rates. For this reason, we decided to purchase BlackRock and replace AON PLC with Wells Fargo and Company. Wells Fargo, as some of you may know, is the largest money center within the banking industry by market cap. We believe that Wells Fargo is the best position within its industry to benefit from an increase in the federal funds rate. Banks, as you may know, profit on the spread between the long-term interest rate that they receive on loans and the short-term interest rate on which they pay on deposits. An increase in the short-term interest rate would allow for a widening of the spread and expand banks' net interest margins. With short-term rates near zero, compressing net interest margins had led banks into an undervalued state. Now, this is true for the entire sector as a whole. However, there are a few key factors that differentiate Wells Fargo from its leading competitors. JP Morgan, Citigroup, and Bank of America. Now, one of the most important aspects of Wells Fargo that really stood out to our student fund managers was its consolidated revenue portfolio. Wells Fargo derives 85% of its revenue from traditional wholesale banking, where its aforementioned industry peers have much more exposure to more risky revenue streams such as institutional brokerage. As JP Morgan, Citigroup, and Bank of America continue to face significant legal charges due to mortgage-backed securities and currency manipulation, Wells Fargo has remained immune. In addition to its low exposure to litigation risk, Wells Fargo is also the industry leader by market cap and market share. Wells Fargo continues to command the most market share with the least amount of total assets compared to its industry competitors, which we believe indicates strength within the company's management and also their ability to retain a strong customer base. Speaking on an evaluation standpoint, Wells Fargo is currently trading at a slight premium to its industry competitors as indicated by its trailing price earnings ratio. We believe that this premium is warranted, however, given its low exposure to legal risk, underlying business model, and strong positioning to benefit from the interest rate hike. At this time, I'd now like to juice Eric and Molly to discuss our healthcare sector. As I'm sure all of you are aware, the Affordable Care Act or Obamacare has ramped up healthcare spending so far in 2014. Nevertheless, it has provided a more plentiful and subsidized health insurance market for the average American. With the aging population of America playing into the entire healthcare sector, we saw healthcare as one of the most profitable investment areas, and therefore positioned them as our second highest-rated sector. The position illustrated behind me are our previous holdings in the healthcare sector. After reallocation, however, our holdings are comprised of two pharmaceutical companies, ABV and Novo Nordisk, the nation's largest health insurance provider, United Health Group, and the most well-known drug retailer in the United States, CVS Health Group. As admission growth and drug demand have tremendous tailwinds on the indispensable needs of consumers, we are confident that all four of these companies are set to prosper from any quarters to come. The company that we were the most bullish on was ABV, a bioparmaceutical company that spun off from Abbott Labs back in 2011 and was listed to the New York Stock Exchange at the beginning of 2013. ABV's most grossing product is Humera. Now, outside of their euphoric drug commercials, Humera is actually used to treat rheumatoid arthritis and Crohn's disease. It accounts for 70% of the firm's annual sales and has generated nearly $11 billion in revenues. Along with this backboard for the firm, ABV has recently entered the Hepatitis C market and in some cases even presented more profitable results than the industry leader, Gilead Sciences. We see their Hepatitis C drug entry to drive revenues beyond 2015. As well, the recent abandonment of their $51 billion shyomager has sparked other tax-abiding companies to abandon their deals. We see this as a true testament to ABV's strong management strategy. Looking at their fundamentals, we see the spread between their PE indicates around 40.23% growth potential. As well with an inline dividend to that of the industry but greater than that of their top competitor, Amgen, there are sets of continue appreciating as illustrated by their compelling revenue and EPS growth charts. ABV also has a higher ROE than both their top competitor and industry average. This shows that ABV is more profitable by revealing how much profit the company is able to generate from the money that shareholders have invested. In conclusion, ABV is a must-buy in the healthcare sector. With 12 drugs currently under regulatory review or in direct oversight, we see that their ability to outpace competitors will continue to make them a profitable investment for healthcare investors. I'd now like to invite up Jaclyn and Ben to further discuss their company selection within the technology sector. Prior to our reallocation, we had a bearish outlook on the aging bull market, which is why we decided to underweight technology and comparison to the S&P 500. Now with the sector as volatile as technology, we knew that we had to make cautious decisions going to the sector due to the amount of unsystematic risk that is present. For this reason, we held on to EMC, diversified into new territories and industries, and switched Cisco for Apple. We could talk all day about why you should get into the largest tech company, Apple. A few of those reasons, though, is just for their safety component. Apple sees a lot less volatility in times of market uncertainty. Another reason why you should hold Apple is due to their largest revenue-driving product, the iPhone. The iPhone is responsible for over 50% of Apple's revenue, and it is also far more successful than its competitor in Samsung smartphones. An example of this is when the iPhone 6 and 6 Plus were released in South Korea, Samsung's home country. There, pre-orders outnumbered those of Samsung's Galaxy Note 4 by over 70,000 units. We could go on about why you should invest in Apple. However, today we want to talk to you about why you should invest in IBM. Because with IBM, you're not just investing in the company, you're investing in their management. When taking a look at IBM, we looked at the company's annual report doing our due diligence in addition to Bloomberg. IBM is a 103-year-old company that has only had nine CEOs. Their current CEO, Janie Romiti, has a vision for their company which we recognize as a girl of catalyst. And if you look at the bar graph behind me, you'll see the changes made to their business strategy in recent years. Her strong business plan entails that they awful the errors of the company that are not performing well, such as semiconductors and hardware, and innovate themselves by investing in errors where they see potential growth, such as big data analytics and cloud computing. However, after IBM released their Q3 earnings reports for 2014, they entered into an undervalued state due to a new jerk sell-off by investors. The earnings had fallen to its lowest since 2009. However, we as analysts did not feel that this price depreciation accurately reflected the intrinsic value of the company, but rather presented us with a perfect opportunity to buy IBM cheap. This company has managed to stay on top of the most current technological trends, adapting to the ever-changing environment and proving that they are capable of anything that has thrown at them. We knew that IBM was beat up after disappointing on earnings. However, we also believe that they have the strength to come out of this rut and perform well in the future, which is why we hope that you consider IBM for your portfolio. I would now like to invite Mike and Molly to talk about consumer discretionary. We chose to overweight consumer discretionary due to the strengthening of the U.S. economy. GDP, consumer confidence, and unemployment have all been improving since the financial crisis. With unemployment as low as state since 2008, consumers are confident in spending again. E-commerce sales were up 23% year-over-year from this Thanksgiving day through Cyber Monday. Low oil prices have also been a catalyst providing consumers with additional discretionary income, driving consumer confidence numbers to their highest state since July of 2008. Therefore, the student fund managers decided that we were going to sweep our previous holding coach with the Walt Disney Company. With regards to the Walt Disney Company, we were very satisfied with the strong fundamentals and financial strengths that we saw in the company, which for us was perfect, especially with the volatile month that we saw in October. On top of that, it had a great growth potential within its movie pipeline, which we'll talk about in a little bit. We used financial statement analysis to determine the financial stability of all of our companies. We looked at the income statement, balance sheet, and statement of cash flows for every company. We focused on the statement of cash flows due to its transparency and lack of variability. By doing so, we were able to gain a further insight into a company's future performance. Thanks, Molly, and if you were to look behind me, you will see the statement of cash flows for Walt Disney. The cash flow operations, free cash flows, and free cash flows to the firm, all highlighted in green behind me. I know it's hard to see, but they've been increasing over the years. On the other hand, cash from investing activities has been decreasing due to an increase in capital expenditures. Although the changes in cash fell negative in the fourth quarter, we are confident that this increase in capital spending to fund their extensive movie pipeline, park improvements, and retailing lines will continue to drive revenues throughout the years. And to follow up on Molly's point about the movie pipeline, the student fund managers were very impressed to see that Walt Disney's acquisitions over the past few years are really starting to pay off. We say that because of the recent movie that came out, Frozen. Frozen drove $700 million in the box office, and that's just the box office. That doesn't include the retail sales. On top of that, Disney in 2013 announced for the first time in company history that its retail sector or retail lines increased over a billion dollars in sales that year. Just the other day, Disney increased their annual dividend by 34%. This along with all the other factors shows us why Disney is such a good investment. Their strong creativity is going to help drive sales for years to come. I would now like to invite up Zana and Cooper to further discuss our company's selection within the energy sector. Thank you, Molly. Through our evaluation of the energy sector, we concluded that oil prices will continue to pose undue risk, whereby we decided to underweight this sector. In this uncertain environment, two of our previous holdings stopped out, Phillip 66 and Valero. We replaced these two companies with Kayama and Kingdom Morgan and Slumber J. So with oil prices having declined over 35% since mid-June, we've seen a steep sell-off in the sector as a whole. I'm sure you've all seen this reflected in gas prices at the pump. To provide a brief explanation as to the reasons why, we can assume the cause to be slowing global economic growth in the supply and demand balance which has been thrown off considering this decline. To further perpetuate the problem, OPEC has been reluctant to cut its production levels in attempt to stifle record production levels in the United States and maintain its dominance as the industry leader. Now in order to cap our exposure to commodity risk, we decided to focus on those industries that are more or less resilient to oil price volatility. One such industry is Midstream Oil and Gas as it generates its revenues through fee-based pipelines and its energy infrastructure. We found the most compelling company within this industry to be Kinder Morgan, so the holding company comprised of MLPs or master limited partnerships. Kinder Morgan was founded in 1997 by Richard Kinder, arguably one of the best CEOs in the nation, in a sense become the most prominent and well-diversified pipeline company in North America. Kinder Morgan's prominence can be attributed to Richard Kinder's progressive management style. As a testament to this, Richard Kinder has revolutionized the use of MLPs which has given Kinder Morgan a competitive advantage within the industry while bolstering growth. In fact, Kinder Morgan realized the development of energy infrastructure within the shift towards energy independence within the United States. Through this, Richard Kinder, using MLPs and focusing on asset expansion, has been able to expand his company from an enterprise value of $325 million to over $130 billion over the course of just 17 years. We expect to see substantial growth in the Midstream Oil and Gas industry over the next decade, especially in natural gas storage and transportation. Furthermore, we expect Kinder Morgan to capitalize on this growth given their focus on natural gas and dominant position within the industry. In fact, through the recent merger of its underlying subsidiaries, Kinder Morgan has better positioned itself for growth. Management expects mergers synergies including lower cost of capital, higher dividends, and a significant tax shelter through 2020. With a dividend yield of 4.2% and potential long-term capital appreciation, Kinder Morgan truly represents the best of both worlds. Now to further reinforce our decision to invest in Kinder Morgan, we identified the development of an inverse head and shoulders as you can see behind me. As the name implies, a head and shoulders is characterized by a head, two shoulders, and a neckline. We purchased this holding at the tip of the second shoulder which is indicated by the yellow circle. Since then, we have seen price action break the neckline and test the green resistance level to provide us with a current holding period yield of 10%. So in conclusion, Kinder Morgan presents a unique buying opportunity. As highlighted in white, you can see that Kinder Morgan has been the underdog here to date. However, the white trend channel helps to identify that Kinder Morgan has been able to manage and diminish relative volatility while maintaining upward price trajectory. Recent trading also reasserts our decision to invest in Kinder Morgan as it has begun to outpace industry peers and diverge from the sector in the benchmark index. We expect continued capital appreciation and increased dividends through 2020, thus supporting our long-term buy recommendation for any portfolio. I would now like to invite up Austin and Sam to discuss our company selection within the industrial sector. Thank you, Zana. Through to our bullet stance on the economy moving forward, commented by industrial production GDP improving commodity prices and oil prices being low, we decided to moderately weight our industrial sector. As you can see, our previous three holdings were Dover, FedEx, and Balmont. We have since swept all three of these holdings. We currently hold UPS, GE, and Boeing. We specifically decided to focus on the aerospace and defense industry due to record backlogs as well as low oil current prices. The defense industry of today is not that many of you may remember. The U.S. government is investing heavily into its new global strategy, the Pivot to Asia. With the Pivot to Asia, there's decreased spending on land-based weapons systems and a greater focus on forward air and sea power. Now, this is all coupled with a continuing focus on cost reductions and efficiencies. The reason for Boeing being one of our optimal holdings and our value fund is due to its diversified revenue in both the commercial and defensive segments as well as its dominance in the aerospace industry. We can also see growth catalysts being its diversified pipeline as well as continuing innovation. One of their products is the Boeing 737, which makes up a large portion of their commercial industry. Now, the 737 is such a prominent product that three major regional airlines being Southwest, Alaska Airlines and Ryanair have developed a business strategy around the exclusive operation of these planes. Now, with that in mind, Boeing's also ramping up production and pushing sales of this plane. That's because the 737 is a key driver of Boeing's above industry average profit margin and a driver of revenues for them. Boeing's diversified pipeline has given them extensive amount of money to fund their research and development program. One such example is their 787 Dreamliner, which is revolutionizing the aircraft industry. Due to its early life-stage, the product life-stage cycle, it has heavy pressure on the costs, so it drives margins down. However, we forecast with more planes being made that the profit margin will increase, thus making Boeing having an undervalued seat. Now, let's not forget that Boeing is one of America's leading defense contractors. And they're very well positioned in this because of their cost-effective products and proven weapon systems. A perfect example of this would be the F-18 platform. It competes directly with the F-35 made by Lockheed Martin, but costs half as much, with an F-18 costing roughly $60.9 million a plane versus $114 million, which each F-35 costs. We foresee significant price appreciation moving forward next one to three years due to extensive backlogs as well as diversified product pipeline. And we definitely recommend this in everyone's portfolio to invest in the future. I'd now like to invite up Mike and Ben to discuss our utility sector. Based on the sector rotation theory, the utility sector performs best in times of a overall bear market or a correctional period, such as what we saw earlier on October. This is due to the fact that it is both highly regulated and subsidized by the US government, and thus is not likely to see any type of massive falls. It also performs very well in times of extreme winter conditions, such as what we saw at the beginning of the year, which is what allowed the utility sector to perform well during 2014 despite the being a bull market. Given these factors, we chose to overweight the utilities in our portfolio and use as a hedge against types of systematic risk. We decided to invest in the Southern Company, which is headquartered in Atlanta, Georgia. The reason why we decided to invest in Southern Company was because of its strong fundamental strength, which we thought would be great for volatile months. One aspect that is going to be affecting Southern Company is a weakened demand in coal. With weaker coal prices, Southern Company is going to see an ease of pressure on their margins. And I would like to follow up on Ben's point about lowering coal prices. Southern Company will benefit greatly from this because of their fossil fuel power plants and these power plants generate a majority of their electricity. One threat that all utilities companies are facing, not just Southern Company, is the fairly recent announcement by the EPA that all utilities must cut their carbon emission levels by up to 30% based on their current state levels by the year 2030. The student fund managers were impressed with the ability of Southern Company to be able to react to those market changes. Since 2005, Southern Company has cut these emission levels by 26%. They were able to cut these emission levels through their fleet of nuclear reactors and that equips 18% of their electrical power. Another factor that we like so much about Southern Company is their low beta of 0.45, which makes them safe and in line with our market objective. They also have an industry leading debt-to-acquiry ratio, or I'm sorry, rather a dividend yield of 4.56%, which is actually almost a full percent higher than the industry average. In an industry that is so highly debt leveraged, the student fund managers wanted a company that had a strong credit rating. We saw that in Southern Company's A credit rating, given a wide standard, that credit rating assured us as investors that Southern Company can take out debt and also repay it in a responsible manner. Based on these fundamental and behavioral factors, we feel that Southern Company is a must-own and any portfolio. I would now like to invite my colleagues, Eric and Cooper, to talk about a portfolio composition. The composition of our value portfolio that we will present to you mainly reflects the reallocation process that began on September 25th. The construction of the current portfolio encompasses tricky approaches, correlation, valuation, and dividends. The first step is creating correlation matrices to better understand how our holdings move in relation to one another. Now as you can see from our year-to-date correlation matrix, we've been successful in minimizing parallel interaction between our holdings. The green and yellow indicates stocks that have a negative or low level of correlation, whereas red signals stocks that move in tandem. With 32 preliminary stocks, we're able to narrow down our selection to 26 companies by pulling multiple correlation matrices. This year-to-date matrix is just one of the many that we use to help us determine the companies that were the best fits for our portfolio based on the overall correspondence with the market and with each other. The main goal in doing so was to diversify our assets in hopes of having a portfolio that performs similar to that of the middle chart as it kept Dock happy to see our portfolio outperform on both up and down days. Without proper diversification, a portfolio that is all green on a particular day could easily turn red on another, therefore increasing volatility and downside risk. Diversification allows us to utilize Markowitz portfolio theory. The purpose behind his methodology is to formulate the minimum variance portfolio or MVP. During the remodeling process, we aim to disperse our fund across 20 to 27 assets through 18 to 25 industries across 8 to 10 sectors. This has produced the optimal levels of risk and expected return and positioned our value fund above and to the right of the MVP. So taking into account our top-down analysis, we are able to reduce systematic risk for the risks associated with the market by appropriately weighting each sector. The largest portion of our fund has been invested into financials due to the improving economy and expectations of higher interest rates, healthcare because of the implementation of Obamacare and the age of American population, and technology due to the constant need for innovation as well as the high growth nature of the sector as a whole. On the other hand, we decided to invest the smallest portion of our portfolio into basic materials due to the poor growth across the entire sector, utilities due to companies in the sector being highly leveraged and telecommunications due to the low ease of entry into the market. Our allocation techniques have produced a year-to-date beta of 0.77. While this is ideal considering our value objective and it reflected to be efficient in the current environment to minimize systematic risk, our standard deviation is still higher than that of the market due to higher levels of unsystematic risk. This high level of risk resulted in particular from four previous holdings, Newskin, Amgen, Valero and KN, who all had standard deviations well above 2%. The model that we used to combat this volatility was to prepare for the worst and hope for the best. Thus, having a standard deviation greater than that of the market was a humongous concern to us and ultimately drove us to reallocate our portfolio. Now, in addition to reducing company-specific risk, we've been able to minimize potential losses in our portfolio by investing in those stocks that are undervalued in relation to their sector, industry and historical company valuations. By targeting company valuations, we've also been able to optimize expected returns by positioning our portfolio to capture earnings growth in the future. Now, this can be measured between the spread of the trailing and forward price-to-earnings ratios. As you can see behind us, the S&P 500 is slightly overvalued and when compared to our forward price-to-earnings average ratios. Therefore, we've been moderately successful in selecting companies. Sorry for interrupting. With our relatively conservative valuations, our low risk tolerance is reflected through our risk-to-reward ratios. One reward that we're very proud of is our coefficient of variation, or CV, of 0.53. This simply implies that we take on around half a unit of risk for every one unit of reward we gain. The risk management strategies that we've adopted ultimately portray our current overall sentiment on the market conditions. However, more importantly, they portray our expectations for the future. Now, in order to ensure a return on investment and supplement capital appreciation, we also focused on selecting dividend yielding stocks. As illustrated by the pie chart behind me, we were successful in obtaining these companies with strong dividends as reflected in our near 2% dividend yield. In fact, 89% of our companies have a dividend yield greater than 1%. This allows us to secure cash flows that would be otherwise lost to non-dividend-paying companies. We then automatically reinvest these dividends back into the fund as we strive to have the least amount of cash at all times due to the buy-and-hold nature of the portfolio. We'd now like to invite Molly and Ben to discuss our portfolio's performance. Thank you. Looking on a year-to-date timeline, the Capital Value Fund has performed similarly to that of the S&P 500 on a raw return basis. The lag in our value fund was due to one particular company, Newskint, which fell almost 42% at the beginning of the year. After losing more than $1,700 on January 14, 2014, we found out that the company had actually canceled its stop-loss order after it had paid dividends on December 4, 2013. This was an invaluable lesson for us as student fund managers in sense that we have practiced our policy of implementing a stop-loss order on all companies at all times to further protect our performance from such risk. In regards to our performance against similar funds with similar objectives of large-cap value, we have outperformed those from Vanguard while underperforming those from Fidelity and Schwab. We realize that in the industry, raw return is not everything. So in order to get a more accurate view of our portfolio, we measure ourselves on a risk-adjusted basis. This is done by calculating Jensen's alpha, which tells us based on the amount of reward that we get. It tells us the reward that we get based on the level of systematic risk that we're taking on. Our year-to-date alpha, as you can see, is 2.29% against the S&P and 5.43% against the Dow Jones, proving that we are a more profitable investment when compared to the market in terms of the capital asset pricing model predictions. As previously mentioned, after assessing our portfolio's performance in the market environment, we decided to reallocate our portfolio starting September 25th. This proved to be the right idea as we were able to minimize risk and maximize rewards. Our beta since reallocation has dropped to 0.5B, which is significantly lower than our year-to-date beta of 0.77. After an overall improvement in the market, we saw a holding period return of 6.95%, whereas the S&P returned 5.11% during that same time period. Also, we produced a sharp ratio of 9.445, which indicated that for every unit of total risk we take on, we are generating over nine units of return. In addition, our standard deviation has fallen to 0.73%. This low standard deviation helped us to outperform the market given the volatility throughout the drop of October by 3.37%. Our low beta allowed us to beat the market during our holding period by 3.92% on a risk-adjusted basis. Proving that our reallocation process allowed us to mitigate risk while maximizing return. This graph behind me shows our performance over the past two months, showing that we were able to minimize risk while maximizing rewards and actually outperform the market. We were confident that our portfolio was positioned to outperform all competition in the next coming years. With the equity, with the boom, with the elderly bull market continuing to reach new heights at the trade-off of increased volatility, we are confident that our portfolio will continue to keep a positive alpha through the slightly more defensive nature of our portfolio. Although we could talk about our performance for quite a while, we realized that it is necessary to take precautionary measures in order to ensure the protection of our earnings. This is done through the use of stop-blast source, which just allows us to mitigate the downside risk and volatility that we see while protecting our portfolio from any type of risk, whether it be systematic or unsystematic risk. As learned with Nu Skin, a trailing stop is crucial in protecting capital investments from downside risk. We tailor each of our trailing stops to accompany standard deviation and CV to give it a parameter of potential volatility within the company. I would now like to invite up Jackie and Gufford to join Molly to conclude our presentation. Thank you, Ben. As our presentation suggests, the undergraduate students that you see before you have taken on responsibilities only paralleled by that of industry professionals, such as some of the undergraduates right now. United under a common goal, we are able to overcome adversity and outperform in a real-world setting. Since inheriting both funds, we have faced extreme volatility within the market. This has provided us with an invaluable learning experience that could never have happened within a classroom setting. We were immediately forced to do a real-world setting. We worked the hours of that in industry in order to reconstruct our portfolio, change our market outlook, and reduce the amount of risk that was present. This has led us to adopt the slogan, Prepare for the Worst and Hope for the Best. With this in mind, we reallocated our sector weightings to reflect our top-down analysis. From our economic analysis, down to our individual company selection, we were truly able to build a more stable value portfolio. The cafe allows student fund managers to incorporate all of their strengths within and outside of finance. Along the finance, we are encompassed by majors such as economics, mathematics, and marketing. This diverse educational background allows us to see all aspects of every situation. We worked as individuals, and partners, and as a team. We explored each other's unique perspectives. Although we did not always agree, we took redress strength from our diverse opinions, and we were able to reallocate our fund and adapt to the market, every changing market. Encompassing all aspects of the Gabelli School of Business, our fearless leader, Doc, has truly prepared us for life after graduation. In addition to managing our funds here at home, we were able to travel abroad and present our value portfolio methodology to foreign finance institutions. At this time, I'd like to invite our associate directors, Susan and Lara, to tell you a little bit about our trip to Tokyo, Japan. Thanks to Hans Christensen, CEO of MJX Asset Management, we had the opportunity to travel to Tokyo, Japan this semester. We had absolutely amazing time, and I'm sure any one of the student fund managers can attest to this. We had two students at the University of Tokyo, who are also the members of the University's Center for Advanced Research in Finance and not only were we able to share with them our investment methodology, but we were also able to get feedback and insight on the Japanese economy. We had the opportunity also to tour the Bank of Japan and the Museum of Currency, and that allowed us to learn about the financial market that we are today. We also presented our portfolio methodology to the Nikkei Press Corps. Many in attendance were many reporters, CIOs, CEOs, portfolio managers, and many others. From there, we went on to Mizuho Financial Group, where we met with the two senior economists who were able to give us more insight into the Japanese economy, and then finally, we ended the day with a visit to the Tokyo Stock Exchange as you can see in the picture behind me. In all of the, you know, all the academic aspects of the trip, we also managed to have a lot of fun. The cultural experience was second to none, and we're not going to tell you about it. We'd like to show you a short video that pretty much summarizes all that we went through there. Therefore, although we're done after this semester, we do look towards the future, you know, along your term holding period, so that the students that come after us will also benefit. You know, it's very hard to look at stocks in a short-term time, as I'm sure you were alluding to. Whoever's group had the greatest value fund that stayed the longest would get a black, so we're hoping to get that. Your bullish on was the one Jeff mentioned today, or a poor bearish on? We're bullish on India's market. Actually, in our SIF Fund, we hold Infosys Systems, which is an IT services company, and it's done very well in our growth fund. One international company that we hold is Novo Nordisk in Denmark. We're not so much bullish on the entire economy over there, but their ability to compete. A lot of, you know, kind of economic movement that we've seen within central banks has been, you know, extremely helpful for equity markets as well. So as we were bearish on a lot of the economies, like Jackie said, in India, in Europe, and in Japan, as Eric talks about in our economic analysis, a lot of the quantitative easing and stimulus policies were extremely helpful to help the stock markets recently rise. First of all, congratulations to all of you. I think you did a great job, and I'm sure that being in the position, I know that it was probably tough prepping for the presentation given the lack of sleep, so congratulations. I applaud you all. Kind of a side question. What do you think is the one experience you'll take with you most leaving CAFE heading into the real world? Maybe one at a time. Has it been good to start with you, Ben? For me, CAFE offered a great experience to learn kind of what this issue was like and to prepare you in that sense for long hours of work, trying to establish yourself rather and just to work very hard. Yeah, I would agree with that, but also I think that the whole idea of working with the team, it sounds easy, but it can be very difficult at times. You know, in our conclusion, we discussed a lot about how we spend a lot of long hours together. Oftentimes, we're feuding each other's statements, our ideas, perceptions, so coming to a general consensus can be difficult at times. Besides extreme due diligence we do, like Ben Coop said, being in the market during that such a volatile time really gives a good education of what's expected when we're in industry ourselves, so definitely we set this close to you guys really at the time, so preparing for the worst and hoping for the best really should be driven into our minds. Somebody's not a fan of group projects, it was definitely tough to learn everyone's own perspective and whatnot, but I think that we did a great job in doing that and this whole semester has been one large group project and we've definitely prevailed and done well and I don't think any of us have ever worked so hard in one particular class. You know, working in this cafe environment it kind of really gives us a small firm idea how to work in small teams, how to work as a group, how to really kill each other when we don't agree, which happened multiple times, but at the same time the ability to go abroad and also experience those kind of different environments, different types of financial institutions, that's something that will really resonate with me forever because I had the opportunity to go and speak to professionals not only at home but over in Tokyo and never had any experience with them. I took back that one of the really important things cafe taught us is actually to find ourselves as analysts and really figure out what we really feel about the environment, so I think it really taught us how to do research and stand as an analyst. So I would have said that my takeaway was kind of along with what everyone said kind of learning to work with people and everyone's different kind of perspective on things. You kind of find an easy medium and also along with that because of the volatility that we experienced in October I think we all got invaluable lesson that I don't think any of you could have experienced anywhere else because actually having gone through it and had to reallocate everything again that's something that I'll take with the rest of my life. My colleagues really summed it up they're ready to do anything really training your mind to tell yourself that you can do these things getting ready for lack of sleep is definitely one thing that I'll take away from this but also just gaining the exposure to all the different disciplines is huge and I think that the cafe really prepares you for life after school. I really took away from the top-down approach but expanding beyond that Doc has brought up to us the concept of seeing the forest through the trees and it's really easy to get really narrow minded and get either attached to a company attached to an industry and just looking beyond that and trying to see the big picture because once you understand that then you can really move forward and be successful. I'd first like to start off with number one is I learned the importance of food water and sleep number two having that experience working for a client and we said before that Doc was our client and there's days where Doc would call us up and say, gang you're doing a great job and I'm really happy for you and there would be days where he would fly through that door after we did maybe two well-nighters and we're stressed out and about to pull our hairs out and he says, nope, we're doing it again and that's something that you're going to find in an industry where you could work your absolute hardest and if your boss doesn't like it you have to put a smile on and say, yes sir and get my back to work and I think that's a great experience that you won't find in any other educational institution. You guys were weighted about 18% in financial services and you talk a lot about evaluating risks but did you think of regulatory risk and if so how did you evaluate that? I can take that Absolutely, especially when jumping into the banking industry a lot of what we saw was the new capital adequacy framework the new Basel III requirements which above the amount of reserve capital that they had to have and at the same time different asset managers having higher regulatory regulations as far as what assets they can hold and stuff like that we absolutely did and at the same time we believed that the strengthening of the economy was kind of enough to be able to support these regulations and we also believed that it kind of gave a more ethical background to the asset managers where people might not still trust them based on the 2008 financial crisis however we believed that their actual strength would drive our portfolio What was your implementation strategy did you trunch in or did you go fully invested? We went fully invested for the most part it was more or less just to avoid confusion we want to get our portfolio started and there were some regrets moving forward especially with regards to our growth fund unfortunately we invested a large amount prior to the drop which we live and learn that type of experience but fortunately the value fund was pretty well hedged against that and despite buying in within the course of the day or two we've seen great results because of that to add on to Cooper it's a buy and hold portfolio so a few basis points that we might move from staggering we're going to really affect our decision to go in or not and we actually use technical analysis Austin if you want to talk about that We would look through all the different trade chargers between Sycastic, MACD and then even the VWAP so we would very much not just buy in all at once but in certain companies, certain scenarios where we knew we wanted to wait or two a day or two or there are companies that we would maybe rush in a little more because of earnings or various other news that we knew was coming out but the month of October as well as it was did you guys stop out on a lot of stuff and get earned on the reverse going on from what? I mean we did have maybe 10 of our companies our growth fund stopped out our value fund was pretty well hedged though it was mostly blue-shift companies that were less volatile so they didn't stop out so our value fund I think did pretty well in terms of their competition in terms of not stopping out We also weren't fully invested in our value fund and at that time most of it happened after the problem We definitely learned a strong lesson from our growth portfolio which allowed us to change our objectives because of the surprise in October semiconductors such as skyworks because of micron coming in and flooring guidance for the entire industry but on the bat, on the up-shoot that was driven a lot by industrials and we did take a pretty sizable amount of our portfolio in there so that helped carry us upward I think there were a few industries that we actually weren't from in particular energy stopping out was actually beneficial considering that all the prices have continued to decline by chance some things balance out basic maths, energy we've seen commodities continue to just get crushed so that was very beneficial for us Can you talk a little bit about the competition between other universities and how that works and what are the results coming for this session? Yes Yes, we had the opportunity to go down to New York actually I was on a trip for our 80s who are fortunately present in the room had the opportunity to go down we presented basically our methodology and also based on performance composition and the diversification of our portfolio that we had a chance to win the national championship twice and we also were able to learn from other schools and we have ideas and change throughout those trips and we are looking forward to go back next year And the two competitions that I alluded to in the beginning of the presentation are the Quinnipiac Game Challenge and the Rye Symposium in Dayton, Ohio maybe I should specifically mention the names of the competitions but hopefully we'll re-enter this year We forgot from Boeing the biggest competitor Airbus recently announced they wanted to pure play commercial aviation defense and not some of the other things what makes you think the defense industry for defense part of Boeing is going to succeed so oil prices are going up and that's going to hurt in particular Airbus because we mentioned the 787 that plane is really known for its efficiency and is a whole new style of commercial aircraft it's one of the first commercial aircrafts ever to be made out of a fully composite single body and Airbus aren't making plans like that it's competing product the A350 is still built in the classic condition of titanium steel bolting together they've only really tweaked the engines on the Airbus whereas Boeing is now taking the money that they spent in that and updating their other planes such as the 737 MAX200 is coming up 16% improved fuel economy and 20 more seats but the defense side of it is definitely important just because we've seen a drawback in the past couple years it's all about targeting the right areas but the pivot to Asia is all about air and sea power thus driving Boeing and the European Union is also getting a lot of tension between Russia and Ukraine so that's going to drive things in the future defense spending may be mitigated a bit in the U.S. but it's not going anywhere we'll take one more question observation the video was great I think the best part of those watching your faces watching it looks like it was a real bell ring do we get to meet who Doc is he's shy everyone you first so Doc didn't tell me I had a role to play today I was this is an event that we do twice a year and I try and get to every one of them because I find it inspiring to be part of this presentation these young people are working so hard and what I find particularly impressive is that they're just as good on the Q&A as they are in the presentation it's not as if they rehearsed one thing and that's all they know they're ready to deal with tough questions and you're giving them those it's inspiring to see what they've accomplished here I'm very proud of all of them and certainly proud of Michael Melton what he's done with our campion program it's a signature part of this university I think it's emblematic of what it is that we stand for in preparing our students for the world they're going to enter and I'm very pleased to be part of it and thanks for the standing room only crowd today it's great to have you we have a reception outside so if you would like to have some pictures with us we'd love that and after of course we get to the real party outside thank you so much