 Welcome. My name is Jerry Dothrieb. I have the honor of being the Dean of the Gabyllis School of Business here at Roger Williams and I'd like to welcome you to the presentation of our Center for Advanced Financial Education program. I think you'll be very impressed with what you see. They were very pleased to have our President here to see this for the first time as well as board members, my advisory board members are here as well. And the purpose, I know most of you know something about this program, but if you're here thinking, okay, they talked about managing real money, real dollar portfolio, they're going to tell us how they did and that's it. But what the students are going to explain today is the process, the learning process. And this is really, really exciting because I just finished a few minutes ago a meeting with my advisory board and we had a very good meeting with the Gabyllis School advisory board and the theme of the meeting was really experiential learning and one of the comments made by one of the members, the key is to keep it real and that's what it's all about. We do a wonderful job here at Roger Williams in education, in the classroom with faculty or great teachers, but you know beyond that what's so critical is the experiential opportunities that our students have. And so when one of the faculty members that was presenting this morning said, you know, so my job is to keep it real, you know, that just said it all about about programs like this. And so I come back to this program because this really is, I won't say the first program we did here at Roger Williams, it kept it real but it is an example of experiential learning at its best because obviously real dollars, you know, is involved here but it is a real-world experience so we're very pleased that you're here to have the students explain what they've been doing for the past semester and look ahead to the futures. And having said that I'd like to have the honor of introducing our relatively new president who's joined us today to give you his welcome and then we'll turn it over to the students so I'm happy to welcome Ian, busy guy, he's got a board meeting this afternoon and meetings all day but I'm very pleased to introduce our new president, Dr. Donald Parish. Thanks for our introduction, I didn't know I was going to be asked to do anything today, I was already sleeping down here but this is good stuff. I know when I was at my last university they were the students in the business school were pushing and Dean was pushing to be able to do something a little bit like this to actually not use monopoly money anymore but actually use real money and I said wait a minute, real money? Are you kidding me? They said no, no, this is the way to go and I said are you sure about this because I mean this is real money, no, no, no, this is the way to go so they may have done that but it's only here, you know, my plan is if they do an impressive presentation I'm sure they will to take all of the money in our endowments and give them to me because, you know, let's home go on expertise if we could stop and say if you do well enough you got a scholarship, I think we can have something going here and it beats our current philosophy which is to go down and buy a lot of lottery tickets. Anyway, you're not here for me, you're here to hear what the students have to say so Jeremy I'm going to turn it back to you I guess you're going to turn it over to Leland, so Dean Jeffers? Thank you Dean Doachry, President Farris. First I'd like to introduce to you the fall 2011 student fund managers to my left, Alex Palios, Ryan Taylor, Danny Shearhold, Suzanne Steele, and I'm Leland Jeffers and to my right we have Abdomosan Althuazery, Anthony Dibotolomeo, Ashley Joseph, Karen Hamill, and I'm Adam Betancourt. To begin, the Student Investment Management Fund housed in the Center for Advanced Financial Education is a real-dollar portfolio managed by selected students under the supervision of Dr. Michael Melton going to those in the business school as doctor. This financial capstone course, Finance 450 Portfolio Analysis, is a very unique and valuable experience that provides each student fund manager with the opportunity to take what they've learned throughout their education and apply it to the real world of portfolio management. The Center for Advanced Financial Education is not the only program of its type across the nation, however there are several defining characteristics that set us aside from our competition. First, the student fund managers do not inherit a previously constructed portfolio. In order to take on the role of student fund manager from day one, we inherit only cash and create an entire portfolio from scratch. This is essential because each student fund manager must understand every single aspect of portfolio management from initial economic assessment to portfolio evaluation and reallocation. Additionally, student fund managers in this program experience a level of autonomy not found in other programs across the nation. We have the freedom to make trades needing only the approval of Doc. Imagine where other schools have to take their decisions to award advisors for approval, possibly waiting weeks for a buyer's self-decision. Here at RWU, student fund managers benefit from the ability to train real-time. This entire process is conducted in an industry-like atmosphere. The Center for Advanced Financial Education is designed to replicate a private wealth management firm and incorporates technology that allows us to use real-time market data so as to remain as up-to-date and current as industry professionals. As you will learn, working in the cafe and managing a real-dollar portfolio is truly a full-time job, requiring long hours often overnight. All the student fund managers would agree that no other experience could better prepare you for life and industry today. Throughout this presentation, you will learn about the extreme market conditions that we have endured throughout the semester. Behavioral news changed market perceptions on an hourly basis, and even companies with strong fundamentals suffered from severe downswings due to global economic bias. As we have mentioned, students took on the role of fund managers from day one. In order to do so, we as a group had a specific mission to follow. First, we followed guidelines set forth in the Markowitz portfolio theory. Secondly, the top-down approach would be used to provide the most in-depth analysis, incorporating all that we have learned throughout our academic career. And finally, managing a real-dollar portfolio meant that each student fund manager must represent the cafe in the most professional manner while understanding the fiduciary responsibility that we have for our university. We concluded that our objective would be domestic, large-cap blend, based on the global uncertainty that exists in the marketplace as a blade. To carry out the subjective, we followed the time-tested yet old-school approach of top-down analysis. In order to create a well-diversified portfolio, Dr. Mellon has taught us that it is first important to understand global economic conditions so as to target successful sectors, industries, and finally companies. This entire process is done in hopes of creating a portfolio yielding the highest possible amount of return for the lowest possible amount of risk. Tony and Alan will now come up to take you through the initial stages of our top-down approach. Thank you, Leland. The first step in our top-down approach is economic analysis. We separate our analysis into both international and domestic analysis. Each simp manager was allocated specifically to the cross-blown to research and gauge performance. Through our international economic analysis, we focused heavily on GDP, unemployment, inflation, as well as past performances. As you can see from the chart behind me, we were bullish on only 10 of these countries. However, each of these countries had strong ties to the European debt crisis. This led us to our domestic, large-cap blend. During our holding period, the European debt crisis was the center of market volatility. You can see here that this has been characterized by high valuables, understandable bond yields, and most importantly, lack of cooperation among EU government leaders. This led us in managers to reevaluate our international outlook to bearish. We continue with our top-down approach moving to domestic analysis. Initial economic analysis was performed prior to our portfolio construction. On a weekly basis, student fund managers would update these economic indicators to get a strong grasp on the markets moving forward. In comparison to countries around the globe, corporate America is extremely strong, as companies are hoarding cash, raising dividends, and showing strong signs of future growth. This led us to our moderately bullish outlook on the U.S. markets. You can see here that 13 economic indicators over to updated week. We only felt a small section of these economic indicators heavily influenced market movements. The first one displayed is GDP, which grew to an annual rate of 2% moving in the third quarter. This was coupled with consumer confidence, which rose to a rate of 56, showing renewed optimism among consumers moving to the new year. Furthermore, unemployment fell to its lowest level in two-and-a-half years, falling from 9% to 8.6%. Following, industrial production rose 0.7% due to an increase in factory outputs and mining production. And lastly, retail sales, coming at a record pace during Black Friday and Cyber Monday. This led us to our bullish outlook on the retail industry. All of the SIF managers weren't very bullish on the domestic markets. We understood that the EU debt crisis, etc., from international markets to domestic markets, meant that we needed to do an in-depth sector analysis to diversify this risk. The scope of all sector rotation was used to depict a typical economic cycle. You can see here specific ETF funds used during portfolio construction to accurately weight each sector with an portfolio. Anticipating our economy was coming out of a contractionary period, into an expansionary period. We heavily weighted technology, services, and consumer goods based on the cyclicality of the sector. However, we did underweight financials, industrials, and basic materials due to the strong ties to the European debt crisis. After we had accurate sector weightings, the next step of the top-down approach was industry analysis. We understood within every sector, of course, there are numerous industries, meaning that we needed to narrow down the best performing industries within each sector. Behind me is an example of services sector, which is made up of 57 industries. Each sector manager evaluated an industry moving to the fourth quarter. If you look closely into this chart, you can see that we were bearish on airlines as recently supported by American Airlines filing for bankruptcy. However, we were bullish on air freight and transportation as UPS is the leading distributor throughout the holiday seasons. Resorts and casinos was another industry in which we looked at which we are extremely bearish on due to the high market volatility and the high beta attached to these stocks. And lastly, specialty eateries. Starbucks has an extremely effective management that is going to show strong growth in the near future. Once this invention had accurate target sector and industry weightings, the last step of the top-down approach was company analysis. We want to naturally now take you through our first and most relevant company analysis technique incorporated in the cafe today. Thank you Tony. While carrying out the company selection process, we used fundamental analysis first and foremost, followed by technical and behavioral analysis. The goal of fundamental analysis is to find financially sound companies in comparison to their industry and direct competitor to determine how this fiscal strength will weight the company's future growth. Incorporated in this method, we considered a combination of key fundamentals, financial statements, ratios, and earnings per share. Beginning our fundamental analysis, we focused on key statistics like beta, PE, PEG, and financial ratios like return on assets and return on equity. In each instance, it is necessary to compare these fundamentals against their direct competitor and their industry. As a group, we targeted our holdings down betas that were comparable with that of the industry. It is important to understand that the beta for basic material will be much higher than that of utility. One of the differentiating factors of this program is that we calculated our own betas for each company using regression analysis. Behind me you'll see an example of the final outcome of this calculation. In order for this number to hold relevance, it must fall within two constraints. The R squared must be greater than 0.25, and the absolute value of the key statistic must be greater than 2. If these numbers do not comply, then we know that our data is not strong enough to provide us with an accurate depiction of beta. Just as important, the price-to-earnings ratio played a significant role in determining the fiscal strength of a firm. We targeted our holdings to have a lower forward than prevailing PE, as this indicates stronger earnings relative to price. This concept can be seen here on the company summary sheet from Kiva Pharmaceutical, showing strong fiscal strength and growth for the company. We targeted companies with a price-to-earnings growth ratio less than one and are lower than the industry average. A peg lower than one shows that a company has great potential growth. Furthermore, financial ratios like return-on-assets and return-on-equity were considered when evaluating management effectiveness and efficiency of the firm. As you can see, our holdings to Kiva Pharmaceuticals was much more efficient in regards to return-on-assets and return-on-equity in comparison to its direct and vital network. The company met these initial requirements. We then continued the fundamental analysis on a deeper level. We performed an analysis of the company's financial statements for further insight into the firm. In this stage, we common-sized the balance sheet and the income statement of the company and its direct competitor. Common-sizing is done in order to standardize all elements of the statements as percentages of a common-base figure. In the balance sheet, the base figure has total assets, while in the income statement, the common-base figure has sales. Looking at that income and SHG expenses, you can see how this process allowed for an easy analysis of trends using our stop-light technique. It was essential in comparing companies of different size. We also looked at the statement of cash flows, which shows how changes in the balance sheet and income statement affect cash and cash-equipments, breaking down the analysis to operational investing and financing activities. As fund managers, we like to follow the model of cash as king while analyzing the fiscal strength of the company. Continuing with our fundamental analysis, each student fund manager performed a complete analysis of the company's ratios and statistics. Behind me is an example of how we compared the potential holding against its competitor. The focus on ratios was to determine if the company was properly valued. Our next step was to examine the company's earnings per share. Here, students looked at second, third, and forecasted fourth-quarter earnings to ensure these numbers had not been negatively trending. These findings were then compared to those of their direct competitor. Next, we looked at historical EPS surprises. If the company historically missed earnings, then they would clearly be a risky buy. However, if the company historically met or beat earnings, then they would be a safer buy with potential benefits from earnings releases. In this final stage of EPS analysis, we calculated projected earnings growth using forecasted and current earnings estimates from Zach's. This gives us a good picture at the rate at which a company will roll earnings over the course of the year. Brian and Adam will now continue explaining the company selection process by taking you through the steps involved in performing a complete technical analysis. Thank you, Ashley. After carefully examining each company from a fundamental standpoint, we then follow up by performing technical analysis. It is important to note that we are one of the only pools in the nation that focuses on technical analysis at the undergraduate level. Technical analysis is a method of evaluating securities by analyzing statistics generated from historical market activity. With a shorter holding period, we understand the importance of buying and selling opportunities. Therefore, technical analysis plays a key role when determining the proper time to purchase one of our historical holders. We also use technical analysis to determine the directional momentum of a stock, identify cyclical patterns based on past performance data, and to determine whether there are any bullish or bearish trends that we might see in the near future. Some of the relevant indicators that we use in the cafe are Bollinger Bands, Relative Strength Index, MACD Oscillators, Stochastic Oscillator, and support and resistance levels. Bollinger Bands are informative indicators that we use to determine the volatility in the stock's price. They consist of a 20-day moving average and upper and lower resistance levels. These resistance levels represent two state of deviations away from the moving average. When the price of a stock touches the lower bound three times in a row, it sends a bullish signal to the index. Inversely, the opposite is also true for three touches of the upper bound. As you can see from this chart of one of our selected holdings, Bed Bath and Beyond, the price of a share touches the lower constraint three consecutive times. The first of which occurs on November 21st, the second on November 23rd, and finally on November 25th. Immediately following the third touch of the lower bound, we see the price begin to appreciate. As in, we understand that looking at one technical indicator alone does not provide a clear picture of a stock's future trends. Having said that, we also observe the readings of the Relative Strength Index. The RSI is a technical indicator that determines an overbought or oversold condition based on the directional momentum of a stock and recent gains compared to recent losses. The graph of the RSI ranges from 0 to 100. A company is considered to be overbought when the RSI reaches a level of 7th and greater. Inversely, a company is considered to be oversold as the RSI drops to a level of 30 or less. This is an extremely useful indicator when determining the proper time to buy or sell one of our selected holdings or make a momentum play within the market. Looking back to this chart of Bed Bath and Beyond, we see the RSI drop to a level of 30 indicating an oversold condition. Immediately after, we see the price show immense gains. Another indicator that we use in the cafe is the MACD Oscillator, and we generally use it to determine the directional momentum of a stock based on 12 and 26 day moving averages. The MACD Oscillator stands for the Moving Average Convergence and Divergence Oscillator, which measures the difference between a 12 day moving average of the price and a 26 day moving average. An analyst can assume a bullish trend when the 12 day average crosses the 26 day average from below, and the opposite is also true for assuming bearish trends. The gap or divergence between the two averages sends a signal to the analysts to count the significant and persistent growth or decline in the price of the week. Looking back to this chart of Bed Bath and Beyond, we can observe a bullish trend from the MACD Oscillator as we actually see the 12 day moving average across the 26 day moving average from below. As Ryan just discussed, this large divergence between the two moving averages shows that the persistence for growth is very strong. An informative indicator we use to help improve market time is the Stochastic Oscillator. This specific indicator gives an analyst a feel for the short term momentum direction of the stock price. This is an extremely helpful indicator when determining short term trends due to the fact that the momentum of the price will always change direction for the actual price. These trends can be observed by following the movements of the short term and long term lines. The short term line depicted as the blue line on the chart behind me represents the closing price in relation to a price range over a specified period of time. While the long term line depicted as the red line is the three period moving average of the short term line. Similar to the MACD Oscillator, we can assume a bullish trend when we see the short term line cross the long term line from below. As you can see from the Stochastic chart of Bed Bath and Beyond, the short term line has crossed the long term line from below and consequently the price shows substantial growth. We also use other more advanced technical indicators in the Center for Advanced Financial Education. However, in the interest of time, I'm just going to touch on them rather than explain them. As you can see from a chart of a different one of our holdings, UPS, there is an initial strong decline in the value of a share. Within this downtrend, we can identify two bear flags which signal that the price will continue to fall. However, as the price turns around, we can identify a bull flag showing that the price will begin to appreciate. There is also another very strong bullish indicator that we can observe from this chart called an inverse head and shoulders pattern. And as you can see, immediately following this second shoulder, the price begins to rise. Observe this positive indicator and then follow by a long period of consistent price growth. These two parallel lines you see demonstrate a channel in which the price generally follows and ultimately shows an upper and lower bound in which the price will remain. As analysts, we understand that using one of these technical indicators standalone does not actually paint an accurate picture of what is to come in the future. Having said that, we use these indicators in conjunction with each other to tell a very specific story. However, it is necessary for everyone to keep in mind that no decision will be made from a technical standpoint before we first confirm the company's strong fundamentals. We now invite Danny and Ashley to discuss our final stage in the company selection process. Thank you, Ryan. The third and final stage in the company selection process is behavioral analysis. Behavioral analysis involves influential news that drives specific companies, industries, sectors, and the overall market. Some of these news drivers come from economic indicators, comments from the Fed, presidential speeches, mergers, upgrades, downgrades, and more recently news from Euroleaders. In the cafe, we use news sources such as SDS MarketWatch, Zach's Investments, Bloomberg Online, and CNBC, all of which provides real-time market data. We use all of these news sources when evaluating new stock picks to determine if there's any news that could be behaviorally drive the stock price. Behavioral news was extremely important considering the market we faced during our holding period. I'm sure you've all heard of the Lehman Brothers Collapse of 2008, which represents the largest bankruptcy in U.S. history and a massive failure in the U.S. financial sector. On September 15, 2008, the day the news of the bankruptcy was released, the market was driven down 4.7 percent. More recently, on July 8, 2011, standard and forced downgrade to United States creditworthiness won not from a AAA rating. As news, the market fell 6.7 percent in one day. This example demonstrates how the intangible news of the downgrade negatively affected the market 2 percent more than the tangible collapse of the Lehman Brothers. This shows just how much more of an impact behavioral news has on the volatility of our markets today. Comments from the Fed also play a huge role in driving our markets. On September 21st of this year, Chairman of the Fed, Bamburn Ackee announced a plan to lower interest rates, known as operation twists. This aimed to encourage people and businesses to borrow more, allowing them to spend more. Over a period of time, the Fed intends to purchase $400 billion in long-term charging securities, while simultaneously selling equal-amount short-term securities. The initial response was negative. Investors feared the economic recovery would take longer than first expected, and the market declined 3.2 percent in a single day. Not only does the news affect the markets, it also plays a significant role in driving the stock price of specific companies. Research behavioral news during the construction of our portfolio, as well as throughout our holding periods, we can get a better idea of the stock's direction, so we can either purchase more shares or sell out our holdings if necessary. McDonald's, for example, raised us quarterly dividend 15 percent, marking the 35th consecutive year that McDonald's has given the shareholders a raise. As you can see on the chart behind me, over the next three days, their stock price appreciated 6.5 percent. Although we are a domestic portfolio, globalization is growing, which is why it's extremely important for us to say, up to date the market at all times. We do this by reporting on the market throughout the U.S. trading day, as well as 11 p.m. and 4 a.m. in the morning. A major focus throughout this presentation has been on the European debt crisis. News regarding Europe has been one of the most influential drivers of global markets during our holding period, considering there have been a number of days when the market has seen drastic points. November 9th demonstrates a day when investors became more worried about Italy's default risk, as their 10-year bond yield spiked above 7 percent. In addition to this high yield, European Union officials said they had no plans in rescuing Italy. As you can see, the market declined 3.7 percent. A major focus throughout the semester has made several momentum trades based off of news coming out of Europe. One example was on October 26th, a day where European Union leaders reportedly reached a major agreement. The new plan was aimed to resolve the debt crisis in Greece, instability in the banking industry, and an unattainable bailout fund. This news is released around 3 p.m. on Wednesday. We expected investors to react positively to this news, so we immediately purchased a European financial ETF, EUFN. The next day, the market spiked 3.4 percent, and we sold our position later in the day for a gain of over 11 percent. As you can see from our examples, behavioral news plays a huge role in driving specific companies as well as the overall market. It's extremely important to take into consideration behavioral risks in the market today before investing. Pagirl Analysis is the last step in the company's election process. Now that we've selected our companies, Suzanne and Garen will discuss the construction of our portfolio. Thank you, Ashley. Tomorrow's portfolio theory states that a portfolio consisting of 20 to 25 assets should be diversified across at least 8 sections and 17 industries. Our portfolio covers all sectors besides the raw rights of 25 different industries. The ultimate goal of the students funding managers is to create a simple field to natural return and minimize risk. For the first stage of the portfolio process, the construction process, we brought 250-plus companies to the table and narrowed it down to the best of 50. From there, we examined each company more thoroughly and slimmed our selection to the ideal portfolio size of 25. The best way to narrow down from those 15 stocks is to cut them into a correlation matrix which gives the correlation coefficients of each stock compared to all the others. A correlation coefficient measures the relative strength of movements of two assets in relation to one another. It ranges between negative one and positive one where negative one represents a perfect negative correlation and movements in opposite direction, which we want to diversify the way you need to risk, and positive one which represents a perfect positive correlation and movements in the same direction, which we don't want. We color-poded our matrix using the stoplight approach, making values greater than .75 red values less than zero green and values in between yellow. We then played our final matrix overholding using 220-day daily data. The weighted red indicates that all our stocks can well together and overall uncorrelated. It also shows that many of our stocks move inversely with market limiting or new interest. If you take a look at the relationship between McDonald's and the SMB 500, you'll see a great example of an inverse correlation, having a coefficient of negative .55. So, if the market were to go up one day, McDonald's should go down, but if the market were to go down, in theory, McDonald's would go up. To establish that we had a diversified portfolio, we then considered the weightings of each holding within its second. To help us in the weighting process, we calculated an efficient frontier. This tool was used to weight the portfolio with the correct levels of risk and return. To calculate the efficient frontier, we used the macro in Excel, which changes the weights based on percentage constraints. The three points calculated are the highest return, the minimum standard deviation, also referred to as the minimum variance portfolio, and the lowest return. Any portfolio which lies on the frontier has the highest level of return for its given level of risk. Our portfolio does lie below the efficient frontier and to the right of the minimum variance portfolio. A major reason for this is that throughout our holding period, we held a select few stocks at higher levels beneath risk, which were not able to fully diversify weight. At least once a week, we created a visual representation of our over and under performers in order to decide if we needed to reallocate our assets. The capital market line illustrates the relationship between a stock's daily standard deviation and average return. As you can see, based on this technique, we currently hold 19 over-performing assets. The security market line shows the relationship between the market risk and return by graphing each asset's beta against its average daily returns. We currently have 20 stocks that are outperforming and 5 that are underperforming on a market risk-adjusted basis. These 5 are also underperformers on the capital market line. You justify holding the underperformers because you see strong firms going forward if they are undervalued and fund mentions down companies. To now give you some insight into our current holdings, as early discussed by Tony and Al, we've decided on the weightings of each sector early on in the semester based on the economic cycle. This pie chart displays how we are over-weighted in services, technology, and consumer goods while underweighted in utilities, financials, and basic distribution. From there, we decided on individual weightings of the stocks within the sector based on our company analysis. This pie chart shows that every industry is weighted close to 4%. However, we hold more industries within the sectors that we decide to over-weight. When deciding on weightings, it is also important to take into consideration our objectives of a large cap-lend fund. Of the 74% value stocks involved, the three largest dividend-paying assets are Verizon, Northeast Utilities, and Intel, the 5.5%, 3.9%, and 3.6% yields respectively. Example of a non-dividend-paying asset we chose to hold for growth, MasterCard, which returned 14.7% over our holding period. After discussing the selection process, I am now proud to show you our final portfolio holdings. Keep in mind that this portfolio differs from what we originally held due to active portfolio management and reallocation. This is also a great visual representation of what Suzanne earlier discussed, where we hold more companies in the sectors which we over-weighted. Based on these holdings, here are some of our key statistics. Our weighted beta is 0.69, showing that we took on much less risk in the market over our holding period. Weighted trailing board PE ratios are 19.37 and 16.97 respectively. Weighted tag is 1.24, and the dividend yield is 2.3%. All of you are now probably wondering how we actually perform. Well, we compare ourselves to competitors with equivalent objectives on a raw return basis and now perform Vanguard, Fidelity, and J.P. Morgan funds. As you can see, we did slightly underperform that of financial genesis in one day. However, we feel these are great benchmarks for comparison, as they are all highly rated, time-tested, well-known funds. And for our performance compared to the market, on December 2nd, our portfolio returned 1.29%, since its initial inception date on October 17th. During the same period, our benchmarked S&P 500 returned 1.612%. So hang on, raw return is not the industry standard when evaluating performance, when evaluating performance. When comparing to benchmarks and other funds, you have to take into account the amount of risk involved in the investment. Like industry, that is why we measure our true performance based on these three different calculations. Behind me are the ratios which we use to measure our performance on a risk-adjusted basis. The sharp ratio is the first measure which student fund managers look at, which tells us how many units of reward we earn for every one unit of total risk we take on. As displayed above, we did slightly underperform the market in this regard due to a select few holdings containing high levels of unique risk. The trader ratios used commonly in industry as well. It simply shows the excess return earned for every one unit of market risk taken on. Using this calculation, we outperform the market on a systematic basis. Jensen's alpha is the industry standard when comparing performance on a risk-adjusted basis. Ultimately, alpha shows us if we outperform the underperformed dark benchmark when considering the amount of risk taken off. Our alpha of 0.176% clearly shows that we have outperformed the market on a risk-adjusted basis. We'd now like to invite Tony and Al to discuss the lessons that we have learned over this course this semester. Thank you, Ryan. As student fund managers, we gain the wealth of knowledge throughout this unique educational experience. We learn the importance of market timing, active portfolio management, and managing risks through portfolio reallocation. Tony will discuss market timing, the lessons learned, and how we will avoid these issues moving forward. Market timing is making a fine or self-decision on a specific financial asset of predicting future market movements. The submitters use this technique when deciding when to sell an equity and take profits. Silver Wheaton was one of our higher beta growth stocks. As you can see from our share price, it appreciated 16% from our initial purchase price. Hindsight being 2020, we should have sold out of our position and kept our profits. However, we did see future growth within the quarter, so we held on as it retreated back to our initial purchase price. Well, we do have stop losses on all our positions, but the specific experience we realized with trailing stop losses would benefit the group. Although we do have a buy and hold strategy, we must maintain a fiduciary responsibility of protecting portfolio returns. In addition to market timing, we learned the importance of active portfolio management. We learned specifically that current earning releases are relatively very risky. We learned that if a company hits earnings, it does not necessarily mean its company will appreciate and share price. The chart behind me displays Julie Provider, Tiffany and Carl on November 29th. This is the date when they released it. EPS increased at 63%. They did miss on future projections, lowering guidance, and price to lower 8.7%. The $67.17. As you can see, these earnings releases are very risky. Not only do current earnings per share matter, but future guidance, revenues, cash flows, and even profit margins all play a large role in a company's earnings per share. On top of EPS releases, the team also learned about company-specific risk, which needed immediate action in the reallocation process. One company that we held in our portfolio that had negative behavioral data release was Haynes Brand. They closed down a factory, laid off workers and insiders with large amounts of stock. With that being said, we sold out of our Haynes Brand's position in acquired Nike. In blue is our Haynes Brand's position, which we would have held on to, which would have saw a 12.6% decrease. However, since we swept into Nike, we saw a 5% share appreciation, which cut further losses and improved our portfolio efficiency. Now, to incorporate our lessons learned, Ryan, Danny, and Ashley will discuss our top picks moving forward. Thank you, Val. This is a solid growth going into the next 12 months. Starbucks Corporation is one of our exciting picks going into 2012. As you know, they're one of the world's most recognizable brands of high-quality coffee and distinctive experience. Over the past two years, they continue to aggressively saturate the global markets. They just raised their dividend after another solid quarter of earnings. Starbucks entered a deal with Green Mountain Coffee Roasters, allowing them to sell single-serving K-Cups. Starbucks is making about two thirds of the profit from this deal, which is very substantial. Due to these solid fundamentals and behaviors, there's strong growth out of Starbucks in the future. Another strong company that we believe will continue to see solid growth through 2012 is United Parcel Service Inc. UPS is the world's largest package delivery corporation, offering various logistics and financial services. From the behavioral standpoint, UPS is continuing to expand. Earlier this year, they expanded their fleet in Asia by opening 10 additional ocean-free service ports and constructing several new distribution centers. More recently, UPS hired 55,000 employees to, as they believe, their holiday season delivery will be much higher than 2010. As we move forward to the first and second quarters of 2012, UPS has been selected to be the official logistics and express delivery supporter for the 2012 Summer Olympic and Paralympic Games hosted in London. As part of their contract, they will be required to deliver 30 million different items, including one million sports equipment items. Now, on a fundamental level, UPS looks extremely solid as well. They are a high-cash generator with high-payout ratios as well. This year alone, their dividend yield growth rate is 4.4%. As we move into 2012, revenues are expected to increase 8% and earnings per share 19%. In addition to all this news, this year alone, the earnings per share growth rate is over 30%. All this fundamental data shows us that while they are a large-valued corporation, they continue to show solid growth as we go forward. The next company that we feel will be rewarding moving forward comes from the consumer goods sector, selling products in high demand by women. Limited Brands currently own seven world-renowned brands, primarily known for lingerie and personal care home and beauty products. Their two major brands, Victoria's Secret and Bath & Body Works, account for 85% of sales. Limited Brands is one of the largest specialty retailers, operating 3,000 stores across North America. Over the past few years, they've been rapidly expanding into Canada due to increasing popularity. They've decided to avoid entering the European markets with the exception of a few stores that will open in London next year. We see this lack of expansion as extremely responsible, given all of the current and future risks involved. They've instead decided to enter the wealthy cities in the Middle East. On a fundamental basis, Limited Brands is concrete. They surprised earnings quarter over quarter since before their session began. Most recently, Limited Brands reported earnings per share 30 cents above expectations. Within the same time period, they were able to increase same-store sales by 9%. Their net income has nearly quadrupled over the past two years, and on top of that, Limited Brands has zero short-term debt. Offering products in intimate apparel and home-and-beauty care. Limited Brands products are in high demand by women year-round. On a behavioral standpoint, their products are must-haves for the holiday season. Limited Brands is a specialty retailer with major upsides without all of the risk. This next investment is for those of you that believe the global economy will fare well in the future. Dearer Company is the world's largest producer of agricultural and grocery equipment by revenue. They offer a wide variety of high-quality equipment for all of its users. Their domestic market share accounts with 58% of sales. Internationally, their market share should continue to increase mainly in Brazil, excuse me, China, India, and Russia. Their price is currently relatively inexpensive at only 11 times earnings per share. And in addition, Dearer has consistently surprised earnings over the past 10 quarters while maintaining strong fundamentals on the books. Now that we have given you what we believe to be strong stock picks as we move forward, we'd like to give you our opinion on the market's future. While we are moderately bullish on a domestic economy, there's still much uncertainty which is partially due to the lack of sustainable resolution to the Eurozone debt crisis. The U.S. is becoming more stable when we need to reduce our deficit, which is currently 100% besides our GDP. We believe that behavioral news will continue to drive volatility through 2012. It is unlikely that the Eurozone will come to a solid conclusion to avoid their massive debt problems. We suggest that investors put a heavy weight on fundamentally solid value securities that pay strong dividends. By doing so, investors will hedge their risk from any excess volatility in the market. Leon and Adam will now come up to conclude our presentation. Thank you, Ryan. As demonstrated throughout our presentation, students have gone responsibilities similar to those required of fund managers in the industry today. Total commitment was necessary of the entire group in achieving our goal of constructing an imaginative portfolio that beat our benchmark on a risk-adjusted basis. Now, Adam and I would like to touch on some valuable opportunities that were reported to us over the course of this semester. First, we had the chance to travel to London to visit numerous financial institutions such as Lloyds of London, the London Metals Exchange, J.O.Hambro Capital Investments, Bank of England, as well as the Baltic Exchange, where we adopted our new slogan of our word, our bond, which we feel accurately depicts our attitude towards our fiduciary responsibility. At Bank of England, we learned about the history of different currencies and economic policies from all over Europe. Thanks to Mr. Mario Gabelli, we had the opportunity to visit J.O.Hambro Capital Management, an independent investment firm with the global span. There, we sat down with Mr. Christopher Mills to discuss the Student Investment Management Fund, as well as gain valuable insight into the world of portfolio management on a larger scale. We also had the opportunity to host student fund managers from Northern Ohio University. These students chose to travel all the way to Roger Williams University to learn more about the non-approach to company selection. These students aspire to emulate our program. We spent an entire day sitting down with them, taking them through our entire process of portfolio management. I wish they were impressed not only with the technology that we use, but also how in-depth our analysis is. We would like to take this opportunity to thank each and every one of you for attending our semi-annual performance report, and now Leland and I will direct any questions that you guys may have. Commodities and bonds? No, we don't invest in bonds for the most part. We did have an ETF tips, but we just were an equity portfolio. That's what our objective is overall, so that's what we stick with and for the most part. We do spend some time aside trying to learn about different things just to prepare ourselves even more, but we focus mainly on just equities. We also have had a little bit of exposure to commodities throughout the semester, but we generally do it through ETFs rather than through options or futures contracts because they're more liquid and easier for us to actually trade. Yes? I'm here representing Rachel Maddow, John Stewart, and the left wing of the Democratic Party. Gary and I have talked about this in the class a bit. When you select... I know your job is to make profits for your share. But when you select your companies, do you ever think about the extent to which they're helping with job creation or engaging sustainment practices or don't shift jobs offshore, those kinds of concerns? We look at it a little bit, but in managing a portfolio, our job is to make money, and that is our bottom line goal. We do like to take that into consideration if we find a company that helps out benefits to the world and jobs, that's better, but as a whole we do try to make as much money as possible. We have invested in some companies that have been hiring UPS primarily, Starbucks or some examples of these McDonald's as well, and from the socially responsible aspect, we do not have a huge focus on it, but Gary also has some information that might provide you with a little more insight. I believe it's Mattel, which is going green, they're doing everything they can with their toys and trying to manufacture more here than in China would do to all the catastrophes they've had in the past. As well, they're trying to make all their packaging more recycled, either with recycled material or make it so it's recyclable. Great job, Gary, very impressive. Thank you. Anybody else? Sir, I have a question. You guys did a fantastic job. You all look great. Thank you. Very impressive. We also worked through one of the most volatile tiles in the market yesterday, so congratulations for the farthest you can handle all the close business. Part of some of the best managers. If you were to buy international shares, would you buy ADRs? Would you buy local shares? Do you have access to that US market? For the most part we would generally look more towards the ADR side, but some companies that we have been trading actually have they're actually traded on our exchange, like Nike, we actually hold Nike which is a foreign company, but is traded on the New York Stock Exchange. So it's more, we have a focus on liquidity because there's a short time horizon so we really need to remain liquid in the market at all times. If we had a global objective we'd work towards the ADRs. Sir? The comment about relative volatility as you were going through this and again you commented about maybe a trailing stop loss or other things, what would you do differently? Knowing what you know at the end of the semester, what did you do? For instance, I know you're a professional, you get stopped out and at the end of the day you stop prices above your stop-out price. What would you do and what can you suggest to future student classes in terms of what you do, what type of strategies you might want to do, because the idea of a stop-out is obviously you're not going to learn this much. Protecting profits is a big thing as you pointed out in the opportunity that you missed. How would you do it and what would you recommend in your experience? I'm sure a couple of us love things to say. In addition to stop-out stopping out and things like that we would also take profits earlier too. We sold a generous profits and we maybe got a little greedy thought they would still go higher so with market this volatile you could take smaller profits and just do that as often as possible so you can guarantee that you have those gains. I think to combat the actual volatility of the market technical analysis is going to play a larger role than what we initially expected. We can use all these technical indicators to show directional momentum and stuff like that so we would definitely focus a little bit more on technical analysis. Although with the volatility we have seen a few whipsaw effects throughout the semester so it would have to be a conjunction of a few different methods. As far as stop-loss it's a good way to use it as a standard deviation going either one or two standard deviations away. So widen your edge-loss. In this way when you have a profit though you would tighten your stop so you guarantee a profit. However as you were saying the volatility of the markets widening them would prevent you from stopping out right away instead of touching the stop and then bouncing right back like you were saying as your price would go right back. Did you, were there any days that you got stopped out that you would go right back and you would stop out at the same time? Of course. Also another thing I would add is it's okay now to have some of your money in cash for longer than you normally would and wait for better timing not necessarily when the market's better but during the week you don't need to have all your money in the assets at all times. If you're managing portfolio the way we do you need to really focus on timing and that's where technical analysis can really come in as well. Do you have to have a percentage invested? You could have some in cash for our group. For our group? We like to have like 10% in cash we can use for different momentum plays and things like that. So that's where we can use behavioral and technical analysis to make a trade that's normally want to be our portfolio but we try to increase our gains. Besides that we do keep the rest of our money in our holdings and we always have sweeps ready in case something comes up whether behaviorally, performance wise we can take out that stock and have it write its place. Did you listen to the earnings characters' calls on most of the stocks and make any trade decisions? For the most part we try to listen to them whenever they were available to us. It's easier for us to get scripts of what happened so we do lag a little bit but generally most of the companies we were lucky most of our companies reported after the bell, after 4 o'clock so the transcripts that we could read gave us insight into how to play their stock the next morning but otherwise if there was a stock that had an earnings release in the morning sometimes we would lag behind the rest of the market sentiment on that particular stock on certain occasions. But yeah earnings calls definitely do give you very good insight especially when you hear the CFOs or CEOs speak about guidance because that's huge in predicting where the companies' revenues and profits are in the future. In that regard did you listen to companies' work coverage or did you suggest a deal or did you just look to cap? We focused on particular sectors as student fund managers which are our own thing and we focused on all the main direct competitors the industry leaders because we realized how our company could be affected by things like that and we absolutely paid attention to any main competitor in the industry. For example while we held MasterCard and the earnings in the range were very good so it gave us good news on MasterCard as well. Can you provide some additional color in terms of how you moved to the 250 stocks to start with given the Russell 3000 for example and then what you did to move to the 25 was it solely based on the correlations? It was based on the entire process starting with the fund-ventil. We performed all these ratios the comparison using our stoplight technique the coloring. We analyzed these and then that's how we brought it down to 25. Additionally we looked into like the top within each sector there's industries that were outperforming and we tried to look into those industries to find the top performing stocks and from there that definitely narrowed down our prospects. During our company selection process we always had to keep in line our objective of the large caps that it was. The metrics that you trapped which do you think is the best gauge in terms of quality of management? I would say ratios such as return on assets return on investment, return on equity things like that because that is actually a direct reflection of how management is handling the operations of the company. Terrific job and you look like you're well tuned machine wonderful team how did you get there? Can you speak a little bit to the beginning of the development of your team process what were some of the challenges that you encountered and how did you address those? Alright if you guys would all turn around for a second I know he doesn't like taking credit but Dr. Mountain back there he has bred us from start to finish so academically we all have very similar backgrounds and while we do have little niches within our studies we do have generally the same philosophies so we work very well as a team in the start we always have and I think within this group we have a very very strong dynamic and we work very well together essentially I'm sorry mom and dad but we are a family as well so yeah it really comes with the dynamics of the group we just we really enjoy each other's company we work well together we everyone knows each other strengths and weaknesses so we just excel from those perspectives controversial I'll tell you that right there alright we initially we held Apple and from a fundamental and behavioral perspective Apple is rock solid pretty much everybody knows this and however we decided to double our holdings right before their earnings call because for the past it was over 10 quarters in a row they have surprised and beat actual street expectations of 10% or over on each one of those 10 quarters so we kind of went with it was my idea I'm not going to lie but when I pitched it we actually had a 5 and 5 split but I had actually decided to take a few people aside and kind of sway their decision a little bit we ended up placing the trade and it actually didn't work out in our favor they while increasing their profits over 60% they did miss street expectations so the share price decreased and we actually did take a little bit of a hit on that now turn it around what was the one what was the investment that surprised you the most in terms of how performing you went in with expectations because again you started saying you mentioned taking small profits and not getting greedy again just like to realize when do you make that decision and if you have expectations going in what was the one that was better than you expected then how would you put on new measures next time to say well my expectation is a 5 and it's a 6 I think my profit is a 4 I think my profit how would you do that okay one that surprised us with the gains we talked about EUFN the ETF that we bought European financials and we gained 11% on that in less than 24 hours of what it was and we were confident about this as a whole this had a whole group consensus the only question was were they wanted EUFN or Deutsche Bank and then we figured let's not put all our eggs in one company we'll take the ETF Deutsche Bank did indeed return 19% in that same 24 hour period so we went back we played Monday morning quarterback we were fine with our 11% we did sell out the next day right away which was perfect timing so that was definitely one that we were pleased surprised with how well it turned out and I'm sorry what was the second part you mentioned that in the future you would take you wouldn't be so greedy so would you instead put limits and say I expect this to be a 10% return we're in a world that a 5% wouldn't have in a day so it's a little hard but is there one that you would say in a history's number I should sell or take 10% off or something like that we talked about 10 as a number that we should really seriously sit down and start to take profit we did see our holdings that went over 10% and they were our shulls no we didn't we either took except for when we took the last side of Apple we just either sold or bought we didn't take part shulls because of the amount of money we're given to put in that transaction caused play a big role if we took out a partial percentage of our holding to build upon that answer the first question you had as far as one of our holdings I think BlackRock which is actually a financial return to us around 13% which is surprising as a financial sector didn't perform too well during our holdings so yeah that was another great return that we saw yeah just a touch upon the taking gains as we saw gains like in 5% we would well halfway through the semester we decided to tighten the stop loss and then as it got to 10, tighten it even more and that way we knew we were solidifying some of the gains that we set also to touch on you mentioned setting a goal for when we would start to take profit I think that should be a function of beta as that shows the amount of fluctuation we should see within each security so I think that by analyzing each company's beta we can set an accurate target of where we where we think the stock should be based on the volatility inherent in the stock well again we'd like to thank everybody for attending today to open a 5 reward meeting and one of the things I mentioned about reward is sometimes it's kind of fun to be dean of the business school this is one of those times every semester at this time it is one of those times when it really is fun to be dean of the village school but in fact the sense here for tonight has something to do with this and I really didn't understand the fact that I did teach kneeling the squash economics course as a freshman for years but that, the people that are responsible for this kind of presentation are in this room, a lot of them are finance faculty professor of goss professor of smuts I'm booking and accounting to the profiles of finance my assistant dean is the strong the rota, my assistant the person that I think has to do this as well Mike Sylvia our facility staff Mike you're on the line when I come to school 11 to 7 so Mike's always sleeping when I get to the office and this morning as I came in Mike said, you know, I'm coming to the presentation and I said, you're always in the screen I gotta support my guys and that just gives you an indication of the kind of work ethic that these people have and that, you know, I certainly can't take credit for but again, a lot of people in this room who happen to be parents of these wonderful students you know, can take credit for that and so I want to thank the families for providing us with this kind of role material because it makes our job a lot easier and I guess I what's the name? Michael Melton it's a finance faculty member who heads up this program he's the director of the center but I'm sitting here watching him he's driving me crazy his roots are in coaching his dad was a defensive coordinator for the University of Nebraska forever and so Michael acts like a coach he stands there the whole time pacing back and forth he's basically the real love would be on the sidelines with his dad coaching the University of Nebraska he couldn't get that job so we're really grateful for that but I did want to just mention one other thing that I think is really special we just went through an AECSB maintenance of the accreditation visit last year AECSB is the goal standard in terms of business accreditation less than 5% of all business schools worldwide are accredited by the AECSB we had a very good visit last year and the visitation team involves three deans who do a lot of these visits and that went very well and so this semester I got a call from one of the deans that was part of our visitation team Jim Fenton from Ohio Northern University he's been needed at a couple of schools he's visited schools and he called me and said Jerry, we're starting up a portfolio management program for our students and I want to send our faculty member and some of our students to Roger Williams to see what you do I want them to meet with these students and so Jim from Ohio Northern University sent his faculty member his students to our school and I think the best of the best so I'm very proud of that and the students did a great job and Michael did a great job with them so I think I'm very proud of that also the maintenance of accreditation does it went very well as I told the president so we're very proud of that again I want to thank you all for your participation today I want to thank these wonderful students they have one of the great things about this is I'm now at that stage where I said initially I had interviews I meet with our seniors and any time I meet with the seniors they've been to this program and say the best experience for Roger Williams was this experience in finance portfolio management now I'm at that stage where I'm actually getting to know some of the alums and one of the great things about going out and meeting alums as we have in Boston and New York is to see the products of this program and what's great about it is if they're in the industry they talk about how much this program prepared them for the industry but even if they're not in the industry I was struck we did a visit recently up to Boston where we met with some alums and one of the alums was for my time but he had been one of the early students in this program and he had been in the finance industry for a while an investment industry for a while and just witnessed the thing and he changed now he's doing something totally different he's basically involved in placement of IT professionals but even he talked about how much this program contributed to his preparation Dean our head wrestling coach our head wrestling coach our new head wrestling coach is another product of this so this program will be one of these students for success that's why I told my advisory board that again it's all about experiential learning getting them real make it real and that's what this program does so I'm very proud of that again we have a nice reception set up outside I hope you'll join us I hope you'll grab these students pick the brains, find out about other stock ideas find out what their plans are for the future but again and I hope to see you here in the spring as we do this once again thank you very much