 So good afternoon everyone and welcome to all of you It is great to have so many alumni and friends of the cafe program with us this afternoon For our very first online report on the GSB portfolios Thanks to all of you who are attending I want to extend a very special welcome to the alumni of the cafe program to those who have supported the campaign for cafe and And to mr. Hans christensen CEO of mjx asset management Mr. Christensen has been a major supporter of the cafe program and it's great to have him with us this afternoon. Good afternoon, Hans I also would like to acknowledge the continued leadership of dr. Michael melton Who is the founding director and the biggest supporter of the cafe program whose hard work makes all of this possible Thank you. Michael for another great semester under amazingly difficult circumstances um So we had quite an unprecedented semester here at roger liens and the gablee school of business has had so many other institutions But where as many other business schools Completely shut down their portfolio management programs because of the circumstances we've been trying to work through The cafe adapted to keep going We remotely accessed the bloomberg data that was needed and that was through the hard work of dr. Melton and his students They've been working as a team on Analysis and trading I've been wondering actually if they like me wish they had bought zoom at 68 Or maybe they did i'm not sure maybe we'll hear about that later But this presentation I think is a clear example of the resilience and the resourcefulness that characterizes the students in the gablee school And especially our student fund managers so good for all of you kudos to you for working through some very difficult circumstances And really with roger liens very strong focus on experiential learning It has been quite an experience and it has been certainly a lesson in adaptability I've heard from professor melton about the student fund managers very long and unusually timed zoom meetings And a bunch of other things that were characteristic of this semester's cafe program today's presentation has amazingly attendees from 16 states and from five countries So we're in a lot of different time zones today And the large number of cafe alumni in attendance is really a testament to the relationships developed by the students In the program and their devotion To the cafe portfolio management program some of them for many many years since its original inception So again a special thanks to all of you for joining us I know we're in for a terrific afternoon. I wish the cafe students well I know you don't need good luck because you're experts and you do a great job all the time So i'm going to now introduce jake palcord who is going to take the presentation from here jake Thank you very much dean mctanon So a little bit of housekeeping first all mics and video have been disabled for this presentation Should you have any questions during the presentation? Please use the q&a feature and we will answer at the end of the presentation We apologize for fixed picture presenters as we are trying to conserve bandwidth in order to bring you the clearest audio we have We will however be having live videos for our presenters during the q&a session. This presentation is also being recorded So welcome everyone to the center for advanced financial education portfolio management final presentation for the spring 2020 semester Thank you to everyone for listening and supporting us today with the first virtual cafe final presentation My name is jake hallgren and i am the managing director of the cafe and i would now like to introduce the associate directors and student fund managers Hi, my name is matt umbrowski and i'm currently one of the associate directors I'm natalie tochillo and i'm the other associate director I'm brendan bayez and i'm an analyst for industrials materials and communication services I'm matt wasnik and i'm a consumer discretionary utilities and financials analyst i'm brett monofo and i'm an analyst for information technology and reeds i'm madison disantis and i'm a healthcare and consumer staples analysts i'm david willett and i'm an analyst for industrials materials and communication services i'm brendan kath and i'm an analyst for information technology and reeds I'm Anthony Borrella and I'm a consumer discretionary utilities and financial analyst. I'm Jake Sapia and I'm a health care and consumer staples analyst. I'm Leah Cognato and I fulfill an operations and compliance role. Thank you guys. Now we all know this semester has been a lot different than any other semester here in CAFE. Immediately upon Dom, Nat and I's arrival back from our trip to Dubai we had to quickly deal with earnings announcements beginning as well as the beginning of the COVID-19 crisis hitting US borders on January 19th in Washington state. As the pandemic started to grow this semester's spring break trip was canceled on February 15th. After that date Dock and I's main focus quickly shifted to being about getting our money back from Tokyo and planning a trip that wasn't as close to the epicenter of the outbreak. Within a week period Dock and I had fully booked and planned for a trip to London from March 4th to March 12th. In the period we were planning the trip a seven day stock slide began and the floors we once thought would hold steady began to crash seeing a decline of over 13%. And on March 1st the first case of coronavirus hit New York City showing that COVID-19 was about to hit the East Coast. Two days later RWU as well as most institutions around the world canceled international travel and our trip to London was officially canceled. Four days later on March 7th Roger Williams went on our week long spring break. Now Roger Williams wasted no time and took measures to protect their students immediately by extending spring break a week and announcing online learning until the conditions of the pandemic lightened up. Little did we know this was the end of our in person semester. This measure led to a long and difficult decision between Dock and I. How does the cafe continue with little to no resources a lack of real time data and no access to the room. While most other academic institutions called it quits we knew we aren't like any other academic institution. We decided to try and manage the fund during spring break as much as possible. However it proved to take too long to maintain the standards that we expect here in cafe and we took on a blackout period. This period was due to how much work had to be done to get back in operating with our fact sheets modeling portfolio trackers and of course trying to get Bloomberg at home while trying to operate in capacity with limited resources. We saw our first day at home order from the governor of California and the mayhem that was about to happen to the United States economy really started the show. On March 23rd RWU began online learning and our analysts were hard at work making all of our excel sheets now compatible with Google sheets. Then finally on April 9th the cafe gods or as we like to call them dock told us we now had Bloomberg anywhere and the cafe was fully up and running like nothing ever happened. Now with everything in our fingertips and operating from our home desk setups or our beds the cafe is back making trades making decisions and getting back to generating alpha but our associate director is Matt Natalie will love to tell you more about that. As you all know the cafe is traditionally conducted in the cafe room however this semester was completely different as the COVID-19 pandemic forced the cafe program to do our work from home. Working from home presented a challenge because without access to the room our analysts lost the ability to access Bloomberg plus the information flow and camaraderie was interrupted that the room creates with us all working side by side each day. So we have to reinvent this dynamic through endless zoom calls and alternative ways to do our research. Today we are proud to say that we are fully up and running and we've done what we can to overcome the curve ball the coronavirus through us with the help of Bloomberg plus bringing real time data to our homes shown here is the flow of the corporate structure of cafe that mimics that of industry as close as possible. First we have our director doc who oversees the whole program. Next we have our managing director Jake who works as Doc's right hand man helping with all the background discussions that must go on overseeing the associate directors and giving the final approval of all trades before they go to doc. Matt and I the associate directors report directly to the managing director and we run the day to day of the room through endless discussions with the analysts and helping shape our funds. We oversee the funds daily performance. Lastly we have our student fund managers and they work day in and day out wearing three different hats as analysts traders and portfolio managers. In the cafe we have the privilege of managing two real dollar portfolios each containing different objectives time horizons and analysis procedures. The cafe core fund contains domestic large cap equities that have the ability to perform well in the short term time horizon. As analysts we place a large importance on behavioral aspects of companies such as seasonal cyclicalities earnings reports and company announcements that cause positive price reactions. We thoroughly sift through all relevant and current news articles that impact the companies and use technical analysis to help us find short term buy signals before significant price increases. The Gabelli value fund also contains domestic large cap equities. However we look for stocks to provide long term value with steady and consistent performance. We heavily emphasize fundamental analysis looking at financial statements valuation metrics and company structure to make sure that the company has successful business strategies in place making them an established player in their respective industries and sectors. We kicked off our semester with an extensive overnight economic analysis looking at over 45 different indicators to determine our outlook for the market in 2020. When analyzing we placed a heavy emphasis on the trend and rate of the trend as described in the last two columns of the table. Since our core fund has a short term objective we focused on capitalizing on the strengths of the economy to target sectors that would benefit most from current economic conditions. The first trend we noticed was the combination of low unemployment and inflation which is an ideal economic scenario for maintaining consumer spending. It also indicated that businesses were hiring employees to meet the steady consumer demand for their products and services. Additionally as we know low interest rate environments in a healthy economy is attractive for businesses and individuals to fund a large capital expenditures. Furthermore consumers increase in sentiment gives them confidence to spend and decrease saving to drive economic activity which contributed to housing housing starts increases in personal consumption increases. Since our value fund has a longer term time horizon we had to be more forward thinking and determine what indicators would forecast economic health through the full year of 2020. Investing activities allows us to forecast future growth in the economy. We noticed that real growth domestic private investment began decreasing at an increasing rate which indicated that businesses ability to provide long term value from investing activities with plateauing. Additionally we saw the average hourly earnings of employees increasing at a decreasing rate that was less than the inflation rate. As prices outpace income growth consumers will experience a loss in buying power which contribute to a decrease in spending on luxury and large expense items. Also capacity utilization was decreasing at an increasing rate which indicates that firms are beginning to experience decline in demand for the future and scaling back operations. Furthermore industrial production leveled off in 2019 due to slowing demand domestically and abroad in manufacturing mining and utilities. We also noticed retail sales increasing at a decreasing rate and likely slowing down coming off of a surge from the holiday shopping season. Lastly the 10 year treasury yield was flashing warning signs from inversion fluctuations. This made us uncertain and not as confident in continued long term economic strength. As we headed into 2020 our market outlook for the value and the core fund differed based on key behaviorals and indicators. For the core fund we had a market outlook of moderately bullish in the short term. This was indicative of our economic indicators such as the employment rate and inflation being very low at the beginning of the year. This caused consumer sentiment to rise with consumer spending continuing to drive the economy. With the value fund having a long term time horizon we decided a moderately bearish outlook was appropriate. With leading economic indicators such as GDP slowing we knew securities were becoming overheated and a pullback in the economy was probable. Additionally we were concerned with how the market would respond to the presidential election relating to fiscal policy and health care reform proposals. The continuous decrease in business investment is also a concern as businesses are choosing to not spend money which may start to drive the economy downward. Traditionally we examined the economy as a whole. However due to the fact the market was not reacting to economic indicators appropriately we had to adjust our strategy to a modified bottom-up approach from a top-down approach. We focused on sectors and industries that would outperform based on the inelasticity of a given company's product or service to ensure continual demand. Our next step was to analyze valuation metrics to find undervalued companies based on their price ratios. We also performed a thorough fundamental analysis and emphasized liquidity looking for companies with low leverage in short term debt that would face less financial strain in the event of a prolonged shutdown. Lastly we took into account any economic indicators that could specifically impact a given company's supply chain or revenue stream. This provided safety to the downside while capitalizing on well managed and established companies which were the main focus in constructing our value portfolio. Given our different outlooks and time horizons for each fund we looked into different sectors and industries as we began selecting equities. In the short term we focused on discretionary and technology companies that can perform now in the stay-at-home economy. Homebuilders are able to continually produce despite the stay-at-home orders that hurt much of the sector. On the other hand, technology is leading the way forward as we see more and more in businesses rely on cloud networks provided by the IT services industry. Now when looking in the long term we expect to healthcare and communication services to perform well. Media companies like Charter are providing an essential service during this time as more people rely on their home and internet networks than ever before. Then the healthcare sector's inelasticity will allow them to sustain in the short term. When looking long term pharmaceuticals will continually provide new revenue drivers as they continually produce new products. Once we identified which sectors and industries we wanted to target we had to devise our waiting scheme because our core fund stresses what companies can do for us now we overweight the sectors we felt would be relatively immune to the market's fluctuations or at least that would outperform if the market were to take another drop. We are overweight in industrials communication services and materials although we do not have any holdings in utilities real estate financials or energy we do hold some weight in in them accounting for our SPI ETF. Due to the different mindsets and timeframes we carry when looking at investments for the core fund and the value fund we had to devise a different waiting scheme and outlook for each time horizon. Our longer term outlook is more bearish than the near term outlook leading us to put more weight into healthcare and consumer staples. In our value fund we hold a utility and a read because we are confident in the long-term performance of these industries. We also hold a good bit of discretionary weight but this is not due to any particular holdings. This is a function of an ETF we hold which diversifies us across a handful of discretionary stocks that carry too much unique risk as individual holdings. When looking at industries within the sectors of the market we had the mindset to target inelastic products and services which had the best chance of performing through this pandemic. These inelastic industries have steady demand whether there's a pandemic or not. This approach led us to target a household durables healthcare equipment and IT services industries. In our value fund we focused on companies that were financially stable and had no chance of going away within our time horizon. Since this fund uses a buy and hold approach we are able to buy companies at their lows from the systematic drops in the market and hold them for long-term price appreciation. With this in mind we targeted the software pharmaceuticals and interactive media and services industries. Now as you can see we hold a discretionary ETF in each of our funds. Now when running our analysis on the sector we saw unique unsystematic risks brought on due to the coronavirus. However we knew that we didn't want to ignore the sector completely for portfolios so we chose to invest in two ETFs with very different compositions that fit the mold of our funds objectives perfectly. In short-term focused core fund we own iBuy. This fund gives us exposure to online consumer services like Etsy, Spotify and Chegg that have high demand due to the outbreak. These companies have a strong online presence and ability to provide services needed during the stay at home orders. This fund fits our core objective because the holdings are being driven up due to the current global trends as consumers spend more time than ever at home. Finally we hold RTH in the value fund. This ETF gives us exposure to beaten down brick and mortar retail stores like Home Depot, Best Buy and Target. However it also gives us exposure to businesses that are set up to succeed now like Amazon and Walmart. There's strong online presence and ability to provide services needed during the stay at home orders allowing them to thrive in the short-term. We invest in these ETFs in order to avoid the wild swings we are seeing during earnings season. With more uncertainty around earnings than ever, investing in the ETF allows us not to be fully exposed to the swings in value an individual company can have. Now the holdings that we would like to highlight in our core fund are EA, DR Horan and Gillian Sciences. Now these companies all have short-term drivers like current consumer trends, timeliness given the current market conditions and in-demand products. Our value holdings we highlight are Charter Communications, Johnson & Johnson and Facebook. The companies are all fundamentally stable, have limited downside and were very undervalued when compared to their previous valuations. We'll be having a deeper discussion of all these holdings later on in the presentation. Because each fund has different time horizons and objectives, we place different emphasis on behavioral drivers as well as technical and fundamental analysis. Our varying approaches allow us to select companies that best fit the fund's objective. In our short, in our core fund with a short-term outlook behavioral drivers are the most important aspects of a company that will propel them into a quick growth scenario. We look for information through various news sources and company filings such as product releases, sudden increases in demand and dig deep into how the company is operating at the moment. Utilizing technical analysis helps us find short-term bullish triggers that signal opportune buy-in points. Fundamental analysis is of lesser importance in the core fund as we are primarily concerned with how the company is financially positioned in the short term. On the other hand, because we are looking for long-term growth in our value fund, the most emphasized part of our company's selection process is fundamental evaluation. This is essential to selecting a fundamentally sound company that delivers consistent profits and have strong cash flows. Second to that, we look for behavioral drivers that are important for the company's long-term success such as long-term contracts and the history of management. Technical analysis serves the purpose of identifying historical trends and fluctuations in price to provide us with an estimation of how much more room the stock has to the up or the downside. While we conduct in-depth analysis in each fund, we emphasize certain aspects of fundamental behavioral and technical analysis. In our short-term time horizon core fund, we look at fundamentals such as turnover to indicate demand, HEG and G-prime to look at growth and valuation, as well as free cash flow margins and estimated year-over-year earnings growth. To add on to that, behavior is our key driver within the core fund and our emphasis on this is what truly distinguishes it from the Gabelli Value Fund. We look to insider purchases, analyst revisions, and company announcements such as the release of contracts within industries like aerospace and defense, along with closely examining earnings in the past and future projections. Technical analysis is used heavily within the core fund to find short-term optimal buying points. Indicators include MACD crossovers, RSI levels and trends, as well as the percent off from the 52-week high that a stock is currently trading at. This is especially important in conditions such as these. Now on the other hand, our Value Fund places heavy significance on fundamentals and their trends due to our long-term time horizon. We place emphasis on financial statements, specifically the statement of cash flows. Our group looks to model future cash flows and thus predict future price appreciation. We also look at asset utilization metrics and debt structure to further understand the company's corporate structure while determining the degree of safety and how a company is organized and run. Last, we look at standard deviation, which we use as a way to evaluate safety and gauge unique risk. Now although we do not place significant emphasis on behavioral drivers to make our decisions within our Value Fund, we look to news that will drive companies in the future. This includes things like mergers and acquisitions that's revenue will appear in future years, projected guidance and changes in overall company structure. When we look at technicals in the long-term, we focus on lines of support and resistance, along with looking for strong upwards trend channels. We also consider moving averages as they are active support and resistance lines and can signal reversals. Lastly, when we look at cumulative volume, this indicates whether or not the volume is supporting the current price movements within a stock. With a modified bottom-up approach in our core fund, we first look through the 11 sectors within the market. Although past performance is not indicative of future performance, we still find to be useful to look into what has been driving sectors now and could continue to drive growth into the future. This chart on the left shows a tech sector in yellow, financials in red, and the energy sectors in green against the S&P here to date. It shows us that the energy and financial sectors have severely underperformed the market. The chart on the right shows the S&P tech sector and the three industries within tech. As you can see, software and services as shown by the blue line has outperformed the market even over the past two months. This gives us the sense this industry is more inelastic than some of the others. Using this information, we put the respective industry into an equity screener, along with a few key fundamentals to find companies within the industries that have been driving it to outperform. At this point, we would begin researching companies that fit our fund's objective. After we have companies that fit our objective, we conduct a company-specific analysis. We use fact sheets to efficiently compare prospective companies to their top competitors. We like to look through risk characteristics, as shown in the blue box, to show us potential risk-reward relationships to each short-term holding. We also implement technical analysis into our fact sheets, which shows us the 52-week highs, lows and percent target price. These measures help us determine how much more room the stock has to the upside. The earnings analysis section is also a very important step, as companies can swing wildly after their announcement, as we've seen in the past few weeks. Since the cafe moved to a remote setting, we had to change our approach in the tools that we use on a daily basis. We like to pull the value line reports, which show us how other analysts rate companies on timeliness, as shown in the green box. This shows us how probable the performance of a stock is. These screenshots from the website of version of what value line display the same information as the standard print ones, or use a different format to better visualize the information. The red box in the report shows us the transactions from the insiders of the company. This can be important because if insiders are selling, it could be a tell-tale sign for bad news of the company. Armed with fact sheet we form our own opinions and begin looking for more information to support ourselves by sifting through news stories and articles that have the potential to make or break our argument. These are just a sample of the many Bloomberg functions and pages we look at on a daily basis to help us conduct our analysis. The bottom left image shows what we see when we pull up a company's earnings page. With this tool, we can see their earnings history, as well as current estimates. We also have been looking at the revisions to estimates as they give us the best hope of understanding what to expect through the surrounding season. This has been crucial, especially with the uncertainty surrounding guidance for next quarter and the rest of the year. The picture in the middle is from the Bloomberg Intelligence page. This shows us the growth and profitability trends within a given company. Ideally, we would like to see these measures higher than industry averages and increasing in order to supplement growth. As analysts, we use technical analysis to identify patterns within a price chart of a given stock or index. In the cafe, we start to look for levels of support or resistance or prices of tendency to bounce between. Recognizing these areas is important because it gives us a better way of visualizing the potential risk and reward shown by distance to the next floor and ceiling. As Brett mentioned, it's also important to note that these levels shouldn't be thought of as fixed price, as they're more of a range that price tends to bounce between. We also like to look at the relative strength index because it gives us a sense of the stock's momentum and whether it's getting overbought at 70 or oversold at 30. We also use the moving average convergence divergence indicator, also called the MACD, which is plotted using two moving averages. As price moves, the moving averages react accordingly and you can infer buy and sell signals based on the moving averages crossing over each other. While this indicator can be useful to find buying points, it shouldn't be used to find reversals as the current trend can continue long after there's been a divergence between price and MACD. Lastly, we looked at cumulative volume, which is essentially a way of keeping track of buying and selling on a price chart. On updates, volume is added to the total whereas on down days it is subtracted. Cumulative volume is also considered a sentiment indicator as it gives investors a good idea of whether people are entering or exiting a position. Using these four different measures helps us in the short term to forecast possible market movements over a given time period. Behavioral measures help us to see how behavioral drivers are some of the more important aspects of a core company. As they are focused on short term gains, we want to see drivers in news that will help a company grow in the short term. This could be anything ranging from a new product or service to take market share from a competitor, approval for a drug, or any other potential news story that could benefit or hurt a company. In our core fund, we focus on behaviorals because we see them driving companies within our time horizon. One of the strongest behavioral drivers is the coronavirus. As we begin to see the virus spreading in Asia in late February and early March, we felt that though it was crucial to begin keeping track of how the virus was spreading rapidly, we were very fortunate to have an analyst who understands Mandarin and helps us to decipher some of the important information coming out of China. The articles to the left are about two Chinese doctors that were on the front lines of the pandemic when it first started. Both were speaking out about the virus and the doctor pictured up top actually lost his life to the virus after being told to stop spreading rumors about it by the Wuhan authorities. The doctor below posted a video online claiming China was reporting only a small fraction of cases and after the video she coincidentally went radio silent. After these revelations, we decided it would be best to start keeping track of the pandemic in every report. We used the John Hopkins University COVID-19 tracker as the best way to track the global spread of the virus. Although we recognize not every country is conducting tests and reporting data in the same manner, it is still important to note that we affect the available data has had and will continue to have on the global economy. We would now like to turn it over to Brandon and Dave to discuss one of our first core companies, Electronic Arts. Thanks, Brian. Now that we have brought you through our process within the cafe, we would like to show you some of the holdings that have performed well and that we project to be successes in the short-term time horizon within this core fund. The first company from the core fund we'd like to highlight is Electronic Arts, a company within the communication services sector and entertainment industry that provided us an opportunity within a volatile coronavirus-driven market. This year-to-date chart shows EA as good against a good picture of the S&P. This year's technical analysis in order to help determine which direction price will move. As you can see by the dark green line and arrow, price has been treading up since the bottom in March. The red circle shows our buy-in point shortly after the blackout period where we had no access to Bloomberg or real-time data. We need to accurately track the market. We bought into them close to the open, almost right as price was touching the trend line, which is generally a nice time to purchase price, as it has a tendency to bounce off of the trend line. When we saw the opportunity to buy in, we had to look to some other indicators for confirmation that this trend was going to hold. Looking at RSI, we saw it had moved nicely right before the time of purchase and even afterwards. It still had upside pressure. RSI continued to move flat when EA established a new floor and volume started to hold relatively flat as well, showing a temporary slowdown in buying pressure, which was likely when profit taking started coming after the stock ran up. We noticed that consumers shifted their behavior and with video games gaining popularity, the behavioral drivers were there. Verizon reported gaming usage on their networks was up 75% and Steam activity skyrocketed in March. Now with diversified revenue across the globe, this limits exposure to a single economy. Roughly 40% of the revenue comes from the United States and the other 60% is from abroad, primarily in Europe and Asia, other areas that found citizens homebound for extended periods of time. To add to your point, Brandon, we occurring revenues from yearly releases of sports games have also provided safety. As FIFA, their popular soccer title, accounts for nearly 15% of their total revenue. This company provided the safest opportunity within the behaviorally driven industry. Now EA truly demonstrates financial health when compared to its peers. EA has a strong asset turnover, better margins, a lower standard deviation, and more liquidity. With the fund looking to protect the downside given the current environment, EA provided the best option to capitalize on behavioral drivers while still selecting a financially stable company. Now despite lower turnover than their competitor Take-2, EA has the stronger margins to do more with less. Releasing major sports titles limits expenses as these games are similar each year, lowering total costs, and thus making margins much stronger than competitors. Thinking about it from a safety perspective, EA would be less vulnerable if consumers were to begin spending less on games due to poor economic conditions, and this is why we feel that it will see continued success moving forward. Despite fluctuating revenues centered around the releases of games, yearly cashflow growth is strong. EA's reoccurring customers on major titles provide strong consistent growth, and this was strengthened during the coronavirus. This was demonstrated in their strong earnings beat on EPS by nearly 12%, and promising future outlook for sales despite economic headwinds. Now despite the pullback after the company's earnings call, consistent growth along with their newer popular title Apex Legends, having even stronger margins than other titles indicates that we will continue to see an uptrend even after we move on from the coronavirus. Now that we've given you a little taste of electronic arts, we would now like to turn it over to Anthony and Matt to discuss DR Horton, another company that truly demonstrates the objective within our short-term core fund. Thank you, Brandon. When looking through consumer discretionary, as per the name, almost all companies are elastic goods that are non-essentials. The pandemic was pushing people away from spending extra money on their Lulu joggers and more on groceries and toilet papers. We saw the home builders industry as a promising opportunity for the short term due to their cheap valuation and a service that was set up to succeed in the low interest rate environment. Now this was a very unique opportunity that came about due to the coronavirus pandemic as it had pulled the entire market down. DR Horton's unique location advantages allowed them to be less affected by the pandemic than most investors had actually realized. Now this company shows how we found opportunities in the ever-changing market conditions. When we came across DHI, it was because of the low valuation. We found that DR Horton was trading at a cheaper valuation based on its price to earnings, price to sales, price to book, and its EV to EBITDA. I showed in the left-hand side of the screen one other metric we all spent looking at was the Ben Graham number. This is an old school value metric that was developed by the famous investor. It is a quick calculation that shows you how to see a rough price the stock should be trading at. DHI was the only company we found that showed an upside to the Ben Graham number. The metric shows that DHI was clearly trading at a discount when compared to the value determined through this measure. The decision to buy DHI was not only due to their low valuation because when compared to other home builders, they all had similarly attractive valuations. The real advantage of DHI was also due to their location. Now some of you may know construction is not considered an essential service in some states. But the majority of their building occurring in the southeast and midwest, DHI avoided these limitations and continued to build. Only 3% of their business came from shutdown areas. So they were able to continue to build up their inventory and fill the backlog of orders that they had. This set up the business to succeed through the pandemic concerns that limited practically the entire sector besides internet retail. We saw a strong growth from DHI leading up to their earning state. With DHI, we saw a much larger price decline year to date than their EPS really growth, which had decreased significantly less. This meant that analysts were more bullish when compared to the price movement. This ties back in with DHI's geographical advantage, where they were still able to build due to being deemed an essential service. The market decrease caused the stock to be oversold when in comparison to their projected EPS. This provided us with even more reassurance that they would appreciate back to a more appropriate value. Now as DHI approached their earning state, we would be lying if we said we weren't slightly skeptical of them beating. And after a long Zoom conversation with the ADs, we decided to hold them through. We knew once we bought back in that we would need to hold through one of the scariest earning seasons ever. Our first metric in order to measure the overall downside to an earnings call is a year to date price change that is equal to or greater than the overall earnings revisions. This helps us understand with a fair amount of certainty that any misses on earnings are already priced in, but if they beat there is still more room to the upside. Now the only concern that Anthony I had was that people may be less inclined to lead their homes and go search for new ones due to the virus. However, when the earnings call was posted, we were pleasantly surprised that client inquiries had actually increased over the past two weeks, along with an increase in new mortgage issues to back it up. This pushed DHI to take off after earnings, giving them about a one day return of over 11.5%. We would now like to turn it over to Maddie and Jake who will talk about how we look at the healthcare sector in the current market environment, with Gilead Sciences. Here to date, the biotechnology industry has recovered completely from the market load, getting over 6%, while other industries within the healthcare sector have losses ranging anywhere from 3 to 10%. We targeted the biotechnology industry in our core fund to capitalize on the investment opportunity of companies developing vaccines and treatments. Gilead was one of most attractive and promising players in the race based on our analysis. We compared Gilead's fundamental metrics to two of their competitors, Vertex and Regeneron, as well as the biotechnology industry. One thing we would like to draw your attention to is Gilead's price-to-book ratio, which is favorable compared to their competitors and their industry. When looking at their efficiency, they have the highest inventory turnover, which means that they quickly get their products to their patients. Although they did not beat their competitors on return on equity, it was still a favorable strength compared to the industry. Lastly, their healthy free cash flow margin tells us that they effectively convert their sales to cash resulting in profitability and strong earnings. Gilead is a fundamentally sound company with a strong and established core business in antiviral drugs. We were confident in buying them due to their superior price metrics, efficiency, liquidity, and the promising news coming out around their COVID-19 treatment. Already established as an antiviral world leader meant that they had the proper research and development resources already in place, which gave them a drastic advantage over their competitors. Currently, their sales are primarily derived from HIV and HCV medications. Over the past 10 years, Gilead has received FDA approval for 15 antiviral drugs. The FDA on average approves 15 to 20 drugs a year. With this being said, Gilead has been efficient at moving products through their pipeline. Year over year, the company has increased their sales in quarter four by 13 percent. As shown on the graph, their antiviral segment has a compounded annual growth rate of 14 percent since 2011. Additionally, their strong business relationship with three major wholesalers, Amerisource, McKesson, and Cardinal Health accounts for 87 percent of their total U.S. product sales. Their wholesale distribution channels give them the ability to quickly send out their products in very large quantities. We bought into Gilead on April 14th. During the time we held the position, we watched it swing on behavioral news outside of its two-time daily standard deviation range. Despite its volatility, we knew it was a fundamentally strong company with a behavioral play aspect. We got a rush of excitement when we quickly gained an HPY of over 16 percent after the New England Journal of Medicine released positive news on the effectiveness of remdesivir for compassionate use patients. Our hearts sank, along with a price, when our phones lit up with headlines reading, Gilead antiviral drug remdesivir flops in first trial. This behavioral news dragged Gilead down enough to make our HPY negative. Investors reacted immediately to the headline and quickly sold out. However, Maddie and I did our due diligence to avoid becoming victims of the hurting effect. In our detective work, we found that the clinical trials were canceled in China due to low enrollment. This called into question if the leaked information on the trial that was never completed was factual. We also noticed the discussion of patients on ventilators and the premature data. The FDA's strict enrollment criteria raised suspicion. When looking into the FDA website, the arm of the trial allowing for patients on ventilators to be enrolled was posted only two days before the trial was canceled, which led us to conclude that this leaked news was insignificant. Therefore, we decided to continue to hold Gilead and has since performed on the news of the National Institute of Allergy and Infectious Diseases completing their trial. Since then, the U.S. Food and Drug Administration announced an emergency use authorization for remdesivir. This concludes our core fund holding examples. Now I would like to turn it over to Brian and Brett to explain our in-depth long-term analysis procedures for our value fund. Thank you, Maddie. When we look into a value holding, we look at price metrics to see how undervalued a company is compared to their competitors and industry leaders. We also compare them on a book value, cash flow and sales basis. We also look at the profitability, especially margins and turnover ratios. These metrics tell us if a company is able to do more with less. We also focus on debt management because there may be companies with great price and efficiency metrics, but they're simply weighed down by debt, especially in this market. Debt coming due could really hurt a company if the revenues have been affected by shutdowns. The pink boxes over the value line screenshots show their ratings of a company's safety and financial health. In value, we want to limit unsystematic risk associated with the hold, so the safety measure is a good way to get insight into their overall risk. The financial strength is another way to look into a company's internal risks by analyzing their balance sheet as well as cash flow generation. When using Bloomberg to analyze value companies, we tailor our approach to get a better sense of long-term trends that will continue for years to come. The image on the bottom left shows the trends in revenue, free cash flow, and net income. These upwards trends show us that this company has been improving their operations consistently over time. Like Doc always says, cash is king and the image on the right shows us cash flows from operations. This company has been increasing their cash flows consistency over the past few years, showing what we like to call a stairway to heaven. Another tool we use is the supply chain analysis as it shows us how vulnerable a company could be to any disruptions in the future. The image in the middle shows a company's suppliers, competitors, and who their customers are. With this information, we can determine the risk associated with this company from overseas production, military conflicts, or even a global pandemic. The image on the bottom right is a screenshot of a discount cash flow model that Anthony, David, and Brett automated as much as possible. All we have to do is input a ticker in an estimated growth rate based on our other analyses, and the model gives us an implied equity share price. Although discounting cash flows in these turbulent times, it might not be the most reliable way of forecasting. It at least gives us a basic understanding of whether a company is over or undervalued. Now I'm going to turn it over to Brandon and David as they're going to take us through our first value company, Charter Communications. Thank you, Brett. A company brought down systematically by the market's fall was Charter Communications. The company provides internet, cable, and phone services, competing with Comcast as the second largest provider within the United States. After exponential growth fueled by acquisitions, the company now boasts a strong market share. But roughly half the area they service are potential customers, providing long-term stability. While Charter was known for growth, this company displays value through the needs of the services it provides. Charter gained attraction before the major drop from the highs. Due to their strong earnings fee, in part helped by lowered CapEx spending integrating acquisitions which improved their bottom line. Now while the acquisition has dragged on the company as it has taken years of integration, this was a sign the conditions were starting to improve. Uniform pricing was another major driver in this improvement. While Charter has seen success over the past few years, its integration of its acquisitions will drive it for years to come. Now let's be honest. Court cutting has hurt the industry and the realized subscriber growth losses this quarter across the board show that cable television business is sure to shrink. Court cutting simply refers to consumers shifting from cable providers to cheaper streaming services. But Charter distinguishes itself through its residential and commercial internet and its service offerings that account for over a third of revenue. Going off that Brandon, cloud is a service for businesses along with data connectivity for residential customers has driven and will continue driving the business, especially after their acquisitions of Time Warner Cable and Brighthouse Networks. Now I've shown in the graphs on your screen the acquisitions only boosted Charter's high speed data revenue growth, which we feel will be the driver in the future for this company. Some may ask us, why not Comcast? Despite Comcast trading at a discount, their exposure to Europe through Sky, their European segment will damage their revenue in the future as more move away from their service in the short-term from discretionary income losses. Charter's domestic focus, along with only having tapped roughly 50% of potential customers, provides steady growth potential moving forward. Universal Parks will also be a concern for Comcast, facing the same headwinds as the parts that Disney owns. Now this difficulty already showed up within Comcast's earning report and management said that they expect that to be a concern within the short to medium term. Charter provides the safest opportunity with a stronger focus to succeed in 2020 as well as 2021. In addition to this, Charter has a deal with Verizon to provide mobile phone services and this is acted to keep Charter's market share. The deal pushes customers to bundle their Verizon services with Charter and this makes customers less likely to leave. Now this was truly demonstrated when this quarter, Comcast reported losses of over 200,000 subscribers for their cable service while Charter only reported less than half of that at 70,000. Charter has outperformed its respective industry and sector year to date even during the fall, demonstrating the inelasticity of the services this company provides. The company showed strong consistent price appreciation due to their market share and growth potential prior to the market's major draw. Now this was also shown through its rating of 95 for price persistence growth by value line and we feel that the stock will bounce back to trade at its deserved premium as it already has. To confirm the decision to buy into Charter, we turn to technical analysis. Due to the longer term mindset we carry with our value fund, we thought it best to look at longer term charts. This five-year weekly chart of Charter gave us some pretty clear indications that they were at a discount given their drivers and strong fundamental standing. The red line is the 200-day simple moving average and acts as a long-term trending support line. We can see that Charter was at a discount because it historically hovered a good distance above the moving average but had fallen back to it and bounced off breaking through an old ceiling. Furthermore, volume has been trending up over the past several years and haven't broken the trend when they systematically fell demonstrating technical strength in Charter as well as undamaged optimism. Now that we've shown you our analysis of Charter we'd like to shift to healthcare with Marty and Jake speaking from a value perspective. Within the healthcare sector Johnson & Johnson is primarily viewed as one of the largest pharmaceutical companies. However, for over 130 years they have aimed at providing a wide range of accessible and affordable health and personal care products. Aside from their prescription medication and medical devices Johnson & Johnson supplies a wide range of everyday personal health products such as body wash over-the-counter medications and baby products. Consumers reliance on their products gives them a proven track record of outperformance during economic hardships due to the inelasticity of their products. During the 2008 Great Recession they outperformed the S&P by 28%. The chart on the top right shows how Johnson & Johnson significantly outperformed as well as the healthcare sector from 2007 to 2009. Johnson & Johnson has proved to be a safe haven investment during economic contractions amid volatility. The bottom right chart shows you how they repeated this outperformance during the coronavirus pandemic. Johnson & Johnson is well diversified across product segments and operates primarily within the United States. Their diversification offers additional protection to the downside as the contraction in their medical devices segment could be offset by consistency in their pharmaceutical and consumer segment. We also wanted to invest in a primarily domestic company to hedge to the downside of foreign economic conditions. On the right you can see we compare them to Pfizer, the second largest pharmaceutical company in terms of market cap. Johnson & Johnson overall has stronger earnings growth, better valuation metrics, less leverage and greater efficiency. Given their inelastic and diverse product segments, strong fundamental metrics and historical performance during economic recessions, Johnson & Johnson passed our equity analysis test. Therefore we decided to buy in on April 1st on a slight down day to capture them at the lowest price we saw available before they would start to gain. Even though we bought into Johnson & Johnson while we were still in our blackout period, we were confident in investing in them during these uncertain times because of the inelastic nature of their products, strong brand name and their CFO holding his position through the great recession. While in the dark, we relied on their 10k filing on the Edgar database to gain a better understanding of the company's financial health. We would be holding the company through the COVID crisis and because of the longer time horizon emphasis on real-time data was not as prevalent as their behavioral analysis. With their earnings report day approaching on April 14th, we conducted another round of analysis when we gained access to Bloomberg to decide on whether to hold them through earnings. Our only concern was how their medical devices segment would be impacted as elective procedures are rolled back. Overall, they had strong historical EPS and revenue surprises, limited downward revision and steady performance leading up to earnings, giving us the confidence to hold them through. Our hard work paid off as Johnson and Johnson surprised by over 15% and experienced an over 4% price increase. Since our purchase date, we have seen steady price appreciation gaining an HPY of over 15%. I'll now pass it back to Dave and Brandon to explain the analysis behind selecting Facebook for our final value holding example today. Thanks, Jake. Our final value holding we'll be discussing today, Facebook is representative of several different analyst techniques we incorporate when looking for a company in our value fund. Now, as shown here, Facebook has moved back in line to trade at its historical premium after the dramatic loss of over 32% it faced as the market tumbled. Now, since our buy-in point, this led to an HPY of over 29% and a little over a month of holding the company. Well, Brandon, let's look at the big picture here. While a 29% a month is not a sustainable price appreciation, Facebook will continue to see steady growth which will drive it as a true value company. Facebook has always traded at a premium and the systematic losses that incurred change this. Upon analyzing the company, we noticed several discrepancies in their valuation metrics relative to their five-year averages. The biggest discrepancy we saw was price to sales being 44% off their average along with a price to book of being 20% off its previous premium. Now, along with the ridiculously cheap premium that Facebook is trading at, their margins beat out competitors and even industry leader by market share Alphabet. And we knew that this systematic loss was simply unwarranted. Even in a condition where global ad spending would decrease due to the coronavirus, Facebook would simply do more with less. However, a company being cheap does not necessarily warrant purchasing it. Facebook has drivers that made us know the price would move back in line with historical valuation metrics. Daily active user growth for Q1 skyrocketed to double the amount normally seen as consumers found themselves home and connecting through social media. Now, this translates to increased ad revenue due to pay-per-click and view schemes that are popular with online advertising. Well, Facebook also has new developments that are driving growth in the current economy. The introduction of Facebook Live, a competitor of popular video conferencing service Zoom, will drive growth in the short term. Augmented reality through Oculus will also contribute to growth as users use it for interactive mapping which will be beneficial for workforce application. Now, don't forget about WhatsApp, which provides international growth opportunities as the company looks to better monetize the app in the future. In addition to this, with global ad spending still expected to continue its upward trend, which is Facebook's key revenue driver, we knew that this systematic loss was unwarranted. Now, to add on to this, it really warrants mentioning that with 24% of market share of online advertising in 2019, Facebook was still poised to continue its growth despite the short-term headwinds inflicted by the coronavirus. Facebook was simply too cheap to ignore for such a solid company. Facebook faced significant downgrades due to analysts citing reduced advertisement spending. The assumption was that with small businesses closed, ad revenue would disappear as small businesses make up a significant portion of total revenue for Facebook and its industry peers. Now, despite this, we noticed that ad spending actually continued and rather shifted to products and services that are in demand now. Despite reports of lowered advertisement prices, ad revenue still grew on a month-to-month basis as volume and purchases picked up. Due to this, along with our prediction of increased usage surrounding coronavirus lockdowns, we held the company through earnings and despite their minor gap-adjusted EPS miss, their revenue beat by almost 3% as online ad spending was not severely damaged. The company trading at levels below their historical premiums protected to the downside from a miss and the risk-reward scenario caused us to make the call. The stock ran almost 5.5% on the news. Throughout our holding period for Facebook, we saw a steady uptrend that quickly gained momentum once Snap, Inc. reported their quarterly earnings that surprised estimates. Facebook jumped nearly 7% on this day as well as when their main advertisement revenue competitor Alphabet reported jumping an additional 6%. Now, these were clear indications that analysts over revised the downside and we never felt more confident about holding a company through a scary earnings season. We had to perform a scary part of value investing which was taking the contrarian view to others. Now that we have shown our holdings, we would like to go a bit more in-depth into our performance throughout the semester. Up until this point, we have shown how we determine our investment approach by choosing a modified bottom-up approach for our core fund and a top-down approach for our value fund. We also discussed our current weighting scheme and how we analyze, examine, and manage the companies within our funds. All of this leads to our performance. Anthony and Matt would now like to explain further how we performed during this extremely volatile time in the market. The systematic drop downwards due to the coronavirus and subsequent rise back up words resulted in almost all stocks moving in the exact same pattern. Now, this correlation matrix depicts the market movement during the entire semester. The red cells clearly depict how all sectors moved together during the volatile market. Investors were liquidating regardless of positions during the drop. Then after the stimulus bills began rolling out, you started buying back in all at once. The collective movement of the market during this time frame lowers beta significance as stocks were not getting driven in a normal fashion but moving all together. The lowest correlation between two sectors during this time frame was high at over 0.75. With this in mind, we chose to focus on a risk metrics driven by state or deviation as it shows more cumulative view of company risks as opposed to beta. Throughout the year, we have seen incredible volatility with the market reaching all-time highs earlier this year. Shortly after, as we all know, the market then began to fall as the longest ever bull run came to a crashing end. Our funds unfortunately fell with the market during this drop. And during this time, the cafe shifted to online learning and with limited information, we decided to protect the funds and move out of the market and into cash. A few weeks later, as we began buying back in, so we saw the market begin its rebound and settle into its current upward trend. Now, as you can see, during this time frame, our funds underperformed the market raw and risk-adjusted measures. The Batao market conditions, along with late moves in and out of cash, held back our performance from the high standards that we set for ourselves. These unprecedented market conditions proved to be incredibly challenging and pulled down many other funds in addition to ours. As Anthony and Matt stated, the market conditions we have experienced thus far have been something we've never seen before. The coronavirus pandemic took a huge toll on our semester as we had to adapt to work-at-home conditions and heightened market volatility. Once we were able to get up and running fully with Bloomberg anywhere, we managed to adjust to our new environment and prepare for any case scenario the market throws at us. Now, everyone in cafe, along with industry professionals, struggled to understand the market during this pandemic, as behavioral news was a main driver, making this market very unpredictable on a day-to-day basis. Now, as you can see from the charts comparing performance, our cafe core fund, along with the Gebelli Valley Fund, despite the issues we encountered throughout the semester, still performed relatively in line with industry. These uncommon times have created an uncertain earnings season, as virtually all companies experienced some kind of disruption from the coronavirus pandemic. Companies across the globe had to deal with supply shortages from factory closures, operational disruptions, or decreases in demand. Getting access to Bloomberg contributed to our fund's successful earnings season. Due to our careful selection and analysis process, we were confident in our company performances through earnings. The table displays how our holdings in our core and value funds performed compared to the S&P 500. As you can see, the value in core fund both outperform the market on earnings and revenue. We would like to draw your attention to our core fund, as every single one of our companies surprised on earnings during one of the most volatile earnings seasons in history. In our core fund, we fell short on our one-day price reactions as many of our companies were expected to perform well on earnings. Most companies did not experience significant price increases immediately the day after reporting earnings. Many of the price fluctuations occurred leading up to or the week following their announcement. Now within industry, this is saying I'm sure many of you know, and it's that past performance is not indicative of future performance. We take this notion to heart as we continue to look ahead. This past semester's performance is not indicative of our future performance and we're here to tell you why. There currently are two-thirds of the trading days remaining in 2020, and we've already started preparing. We have two analysts from this group to account management positions in the summer, and their experience gain during the semester will allow them to guide the new analysts through the current volatility of today's markets. Now looking ahead, we are excited to say that all current fund managers will be returning to the cafe in the fall semester besides the graduating seniors. There will also be a set of new fund managers that will be working with us. It is imperative that we hit the ground running as soon as the fall semester begins. Now having the guidance of the current team, especially imparting valuable information on how a post-coronavirus market works is what's going to get us there. Now while the market is running now, it has gained back losses at a rapid rate despite the concerns over the 2020 economy. To signal to us that it would be time to shift our waiting scheme for a full-out bear market once again, we would look to four specific triggers that would indicate the market simply priced in too much. Earning season has been a mixed bag, and if we continue to see forward projections that are grim, we could begin to see major companies driving sectors downwards. Any projections of issues past the second quarter would indicate that there's still more downside in the market. Another driver that could send markets down significantly would be if cases of the coronavirus do not flatten, and instead rise at elevated rates as before. This would indicate to us that our actively managed funds would need to shift to prepare for losses in the market once again. We are also monitoring the VIX, which measures implied volatility. It's been on a steady downtrend, but faced support from falling any lower than the mid-30s. If we were to see this trend in the VIX move upwards once again, this would also be an indicator that the market could correct in a volatile fashion. Now as we look a little bit further out, especially with our value fund, our concerns are on poor economic data that the S&P is yet to fully price in, including sentiment, discretionary spending, and GDP. We've seen the market ignore economic indicators that have signaled a slowdown, specifically GDP contractions year-over-year worldwide. Brenda and I want to stress that continued poor economic data can begin to drag the market downwards, and we would shift our weightings to be prepared. As an actively managed fund, we have anticipated a bearish as well as a bullish scenario to determine where in the market to target to ensure we outperform in either case. With that being said, we would also like to discuss specific triggers that would cause us to move to a bullish weighting scheme in anticipation of a continued run. We would want to see states steadily continuing reopening as COVID cases decrease, showing us that the pandemic has slowly started to come to an end and consumers are ready to leave their homes increasing economic activity. A vaccine for the virus would also go hand-in-hand with the economic reopenings as it would give hope to consumers that the virus spread is weakening. Consistent earnings surprising across most sectors would also be a hint to switch to a bullish weighting scheme. This would show us that analysts were too pessimistic and overestimated the impact the pandemic is having on companies. While we know that this will won't be the case for every sector, we would want to see a good portion of sectors and industries beat estimates. We also believe the volatility index starting to return to normal levels will be a driver, showing that investors aren't any more worried about the downside risk. While the market has been on a roll over the past month, we look to make our decisions in anticipation of future market conditions to stay ahead in our actively managed fund. If the market is to break its trend and move to the downside, most likely influenced by the coronavirus, we would look to move into companies in safer sectors with supporting behavioral drivers. Now specific sectors include consumer staples, communication services, utilities, and healthcare. In a stay-at-home economy, these sectors will transfer inelastic demand to outperformance. Systematic losses will occur, but these specific sectors will provide protection to the downside and even make gains while the market trends downward due to earnings growth faltering along with sentiment. We would underweight financials, industrials, and consumer discretionary and place no equity weight in energy. This sector allocation strategy will provide us the most upside in a bear market while avoiding sectors that we feel could see continued downside. On the other hand, utilizing our active management strategy in a bullish scenario, we would opt to overweight sectors that we believe represent a higher risk tolerance such as technology, consumer discretionary, and real estate. This would be done in order to capture the run we'd expect to see in these riskier sectors that tend to outperform in a growing economy. Now as you will notice, there is no weight in energy in either scenario. The sector doesn't have strong projections right now, and we feel will be left behind in either case. However, we would see sentiment around technology and consumer discretionary return as consumers spending increases due to discretionary income returning as unemployment gets back to normalised levels. Real estate will rebound with force as economic activity normalizes. In a swift V-shaped recovery that a bullish scenario would price in, these sectors will drive the market upwards. Looking forward in regards to the Gaveli Value Fund, we have two weighting schemes given a bullish and bearish scenario. Should we continue to see bullish trends in the market and little signs of another correction, we would want to weigh some of the beaten down sectors higher leaving more room for steady price appreciation as companies start to regain their footing after this outbreak. We would want to put more weight in the sectors like consumer discretionary, industrials and real estate that have not only been beaten up but would lead the way as the economy reopens and consumers start returning to old habits. We would also be underweight in communication services as consumers would shift away from their stay at home mentality especially as the long-term outlook starts getting better. However, if we were to see a shattered economy and continuous damage being done, we'd want to have change weights ready, consumer staples would be overweight especially as they traditionally outperform in a bear market. In a bearish scenario where consumers are still social distancing and quarantine to their homes, they would be more focused on purchasing the essentials. We would also overweight utilities because everyone is running water in their homes and electricity to power their computers, TVs, you name it. The sectors we over and underweight come from our forward thinking mindset which helps us to find sectors that would stand to gain the most from the economy and markets regain their strength as it had in the past. However, on the flip side, our mentality is more about which sectors will prove to be safe havens in times of uncertainty and market weakness. In conclusion, this semester has been like no other. COVID-19 forced the cafe to work from home and use Zoom as a number one form of communication. Most people would say we were crazy for continuing cafe without being in the cafe room and having the team spread across many different states. However, we were determined to continue on. We take pride in the fact that the cafe program allows the group to actively manage our two funds which helps us make decisions in real time. Our active management is successful because our analysts are writing three to four reports every day to keep up with the current market conditions and they have full training authority. This is what makes cafe represent a true experiential learning experience that mimics that of industry and allows our student fund managers to invest real money into the market and experience what it is like to answer to a boss and take responsibility for their decisions. This semester especially gave the analysts the most real world experience while investing in the market during a pandemic and having to have two market scenarios in mind throughout all of it. These challenging market conditions allowed our analysts to truly be prepared for anything moving forward in the future. They have knowledge of how to be in the market during a crash what it's like to be in cash and invest in ETFs that is different from any other cafe semester. I can speak for everyone when I say that we have seen major growth within the current student fund managers. They've been truly dedicated to making cafe from home successful and quickly adapted to do so. Our confidence moving forward is at an all time high as all of our analysts except the graduating seniors will be returning in the summer and fall programs. If we do see another pull back in the market due to a second wave of COVID or the market runs our current analysts are all well prepared for both scenarios and will be able to help the new wave of student fund managers coming in. We would like to thank everyone for taking the time to watch our presentation today. We will now begin going through the questions that have been asked using the Q&A feature. Please feel free to ask questions as the question and answer portion progresses. So our first question is from Charles and it says great work everyone curious to hear your forecast on Facebook's earnings moving forward assuming we'll be in a recessionary state and they'll see a subsequent reduction in ad spend from most companies using their services. I know from personal experience of my company our Google PLA bids which is their ad platform are currently at around 50% of what they were pre COVID-19. I assume Facebook is seeing a similar reduction in spending and advertising. So thank you for the question to start off. We really appreciate that. So we've been looking at Facebook for a very long time and we've pretty much been bullish since we first discovered them. But in terms of the ad spending and the difficulty that that will face with their earnings per share moving forward we do notice that there is reduced ad spending right now especially due to the headwinds inflicted by the coronavirus and obviously this is going to continue to be an issue as we do enter this recessionary state. But in terms of us holding it as a value company we feel that these are going to be short term headwinds and it's actually going to be made up a bit by the fact that we're starting to see those ad revenues shift into different products and services that are sort of in need now. So while we are slightly in the short term concerned with those earnings in the long term we remain bullish as we hold them in our value fund. So our next question comes from a cafe alumni Alexander Palios. What are your views on the fixed income market with negative rates around the globe and the U.S. 10 year trading at 65 bits? How does this play into your future outlook and in your financial models? So with rates so low it really reduces the purchasing power of individuals who hold bonds. So at the moment that market is not very attractive for investors to get into. Yeah and just sort of adding on to that a little bit Jake just in general we're starting to see sort of global coordinated monetary policy and we're starting to see these lower rates sort of everywhere. So as we move on we're starting to see short term headwinds from this especially considering the fact that rates are already near zero but it's sort of just that transfer between we need to sort of figure out how to get over their short term headwinds to stabilize the economy at this point. So it is going to be a concern but you know the monetary policies what's helping companies move forward right now. We next have a question from cafe board member Megan Bishop. Can you speak to the analysis you've done on past recessions compared to current market conditions and do you believe the market has already hit the bottom and how do you see current market valuations? Currently we think that it probably has seen the lowest to lows around the 2200 floor but right now we see the market as a rubber band. It's really stretching up and getting tightened right now and we do expect that there could be a slight pullback in the future with a possible W shaped recovery. And going off what Anthony said one of the interesting things that we've done to kind of track out the coronavirus pandemic is we took a step back and looked in 2003 when we had the SARS pandemic. So we try to use that as a model to get a sense of where the market could be going and I know they're not perfect counterparts but they are similar in a lot of transmission methods so we definitely use that like to our advantage to see where we're going moving forward. Our next question comes from Hans Christensen of MJX asset management and his first question is how did Dawkins forces dress code or did you all just use the Jetson trick and put up a picture as you did this presentation? It suits and ties every day even from home. You look good. You feel good. Dress for the job you want. We now go back to Cafe Alumni Alexander Palios for I've seen the program evolve over time. What recommendations do you have to better the program for future students? I can take this one. I think one of the things that at least helped us a lot this semester that moving forward was the interaction and ability to use Zoom. It means it gave us the ability to get together at any point. So if something was happening during the day, maybe someone was out of their house or something while we were watching the fund while being home, it gave people the ability to just hop on maybe the Zoom app on their phone and be able to just have discussions at any point of the day and night as sometimes we call meetings closer to maybe 11 or 12 just to talk about maybe what we were seeing currently in the market or currently going to affect the market the next day. So I think using Zoom was definitely an added benefit this semester that we would like to continue moving forward. And just to go off of that having multiple ways to communicate with each other was something that was really big. So like we set up like a Snapchat group chat so we would just always be in contact with each other. That was the biggest thing because we were just used to always being in the room together and having no problem reaching out to each other but everybody was really good about just keeping as much contact with each other as possible. Now we have a question from a 2012 Cafe alumni under the name Joe Exotic. He would like to hear our thoughts on forward looking inflation. So in terms of inflation so the Fed has said that they're going to keep rates low until they see any inflationary pressures or employment increasing. So looking into the future especially with oil prices being really low inflation really I don't see inflation being a problem in the short term. It's going to take a while before we have any inflationary pressures coming along. Now we have a question from Dean Kaskaris. Market halts are definitely historic moments in history. There were four market halts during the semester in March although those are there are definitely stresses when managing a real dollar portfolio during these times. Can you guys describe what it was like to experience these moments in history. Yeah so I could start with that. So it's actually funny because we started all the market halts right when we started their spring break. So they of course they go together you know. But essentially Dave and I were on essentially duty writing reports throughout the entire day the day of the first market haul. Dave and I have a phone call about six hours that day. During those unprecedented times it was all about just staying in communication and just sort of taking a step back from all the red and starting to think about which individual holdings that we had were more susceptible to those kinds of conditions. Because across the board we saw systematic losses everything was down but it was all about sort of figuring out where we could transition and pivot just to sort of kind of limit those losses in a sense. So now we have a question from Professor Scott Mackey thank you for coming Mackey and he says related to Alex's question what are your views about the role the Fed has played and what are your thoughts going forward. So I think the Fed has really jumped quick into trying to get as many lending facilities and ways to get liquidity into the market to fuel businesses to kind of come out of this and start getting up and running as much as possible. And additionally their collaboration with big banks reducing their credit requirements has been really helpful just try to get as much money out there for businesses to utilize to kind of get back on their feet. Also just to add on to a SAP's point so we have a lot of small businesses closed down right now there's a third of the population unemployed and we're seeing this really large disconnect and a growing divergence between what the economy doing what the economy is doing and what the market is doing. So filling that divergence right now is essentially the Fed and all this fiscal stimulus has been rolled out. So we're seeing government stimulus packages focused on putting money into the pockets of Americans and we're allowed all these unemployment benefits which are essentially propping off consumer and investor sentiment. So now we have a question from Sam Sherwood says guys phenomenal job was curious if there were any gold bugs in the group and if it was held at all during the semester. So as a materials analyst I'm a pretty big fan of gold. So throughout the semester especially as we started to see the market drop we all kind of know gold is considered the safe haven asset the hedge that you have in your portfolio but as we were starting to see the unprecedented market movements we were starting to see gold run with the market as opposed in its counter cyclical fashion that it normally does. So we sort of made that executive decision after having a huge discussion about it to not enter gold as we felt that our positions within equities were better off at the time and then also when we went to cash we felt that gold wasn't necessarily a good idea as we wanted to be all in cash for that time. Another thing too going with that is when we saw a lot of the drops in the market on certain days we would see gold follow suit falling and I believe that's probably because is that other investors were just selling out their gold positions to settle their losses and other asset classes. So we weren't as totally comfortable holding that especially if that was one of the cases that we saw. We now have a step question from Steph Owing is the compliance and operational rule new and how are the guidelines drafted or did you follow a pre-determined procedure. So I'll answer this one the rule itself is not new it's been used a few times over the last few years but the guidelines for this current rule was made by me and Doc as we found we needed somebody to really focus on reporting as well as tracking the market for us. So she specialized in that for us during the entire semester. And now from an anonymous attendee we have for healthcare analysts I would like to hear your thoughts on the future of the genomics sector. That definitely has a lot of growth potential I think in the next couple of years and we're seeing that Moderna the company Moderna right now that's producing the mRNA vaccine which is in currently phase two trials they play a role in that specific industry and I think it's going to be big in the upcoming years. It definitely has a lot of growth potential but right now it doesn't align with our investing objectives. So we're not invested in that industry right now. Yeah just to go off of that seeing that it's fairly new and Moderna is really the only company that has the technology to push it forward. We're kind of seeing how that plays out with them to find out if there's any other viable options for companies other companies looking to get into there but it's still pretty risky to hedge on a company that is doing that since it's such a new technology. Mostly small cap companies that are very volatile so it's not really something that we're looking to invest in right now. So now we have a question from Ryan Lambert. He says great job guys during these tough times is there anything else you guys struggled with outside of just the virus? We have seen a lot of changes in the market before this turn but I was wondering if there was anything else as a group you had to overcome. I think one of the biggest things that we had overcome was just being at home the first week or so getting used to this new change and not being around each other 24-7 is what it feels like so it was definitely tough to kind of shift gears and work at home and figure out how that's all going to happen but I mean since that I think we've all adapted and the 14-hour zoom calls definitely helped. If I can add on to this it's also different trying to conduct our analyses without the proper tools and it just spent a lot of time redoing these models to get back up to the standards we set for ourselves. So now we have a question from Mike Whittick. He says hi first of all great job I was part of the cafe in its early years 2006-2007 and it's amazing to see what it's become also the determination of the team to push through this is a testament to the team and doc. With regards to health care did you see any correlation between the reduction in revenue health systems we're seeing during the COVID-19 and the holdings you invested in or were targeting and did that guide your strategy in this sector? That definitely played a role we didn't want to invest heavily in companies that were giving out a lot of free resources seeing as that would hurt their revenues. Additionally we stayed away from health care services because that was kind of a risky play seeing as we didn't know about any health care reforms in the future coming on with the election that could hurt their revenues. Yeah just going off what Jake was talking about pretty much there wasn't a lot of correlation between the health care providers and health care services industry compared to biotech and pharma so we're seeing biotechnology and pharma run while health care equipment health care providers are kind of lagging and moving in opposite directions year to date but we are we're avoiding health care providers right now like Jake was saying because many of the companies are waving certain co-pays and COVID-19 related treatments so obviously this is going to affect their bottom line moving forward so it's just not something we're looking to invest in right now. From Joe Exotic we have hypothetically speaking we fast forward 10 years from today and COVID version 2.0 hits the world what will your personal investment strategy be? Well I think that oh I could take it go ahead go ahead bro I think that'll really depend on the circumstances I mean 10 years is a it's very far down the line I think it'll ultimately depend where each of us are in life and what our risk tolerance is at that point I think we'll ultimately have to tailor it to what our goals are as opposed as for our personal investment strategy and I mean just quickly adding on to that you know I'm pretty sure a lot of us look back and wish we bought the VIX at 25 you know so there's there's a lot of different investment strategies that we could take on due to the coronavirus I mean it sort of just shows like how big of a shock this really was to the economy so you know resurgence of cases you know possibly in the future you know as we get back into the fall or something like that there's there's a lot of different strategies that we've sort of noticed that have worked well you know like the cleaning products companies things like that so behavioral drivers are really what drove companies during this market so it's all about sort of taking a step back and thinking what do people want right now and what are people doing and what are consumers doing that's going to drive our investments from Hans Christensen we have since everyone withdrew outlooks what were what were their company earnings calls that you got broader information that directed your investment I could probably speak to that I definitely think that DHI shed a lot of light on the current you know housing market conditions that we're seeing you know like we said in the presentation we were a little concerned that individuals would be less likely to leave their house during the stay at home orders to go seek for really seek for new houses however it went hand in hand with new mortgage issues being up and that definitely directly ties into you know the Fed's actions with lowering interest rates so that was something that we were really happy to see especially due to the company and going hand in hand that the economic data is backing it up so from Jamie Bakari we have can you discuss your cash cash position and the two funds and how it fluctuated throughout the semester how would you position it moving forward you know you know you know from the start of yeah I'll I'll just start Dave real quick you know from the start of the from the start of the year you know with a long-term outlook of moderately bearish we did hold a bit of cash but you know most of our money was in the market just because in the short term we did see that the market would continue its run up I mean the market did return roughly three percent before we started to see those drops from the highs so you know we went from holding very little cash to holding full cash and right now we're sort of using our holdings along with cash as a hedge so we don't have substantial amounts of cash currently but cash is always that hedge just in case we are to see some downside pressure start to form in the market I mean a run up right now with companies trading at 20 times 2020 earnings is a a little bit scary in the sense that those earnings aren't necessarily guaranteed but you know we're picking specific holdings that we feel are better than cash right now so cash is always the hedge but we're we're moving forward with holdings we now have a question from Kelly Fitzpatrick congrats on all of your hard work has the upcoming presidential elections swayed any of the decisions your class made to set the funds up for success through 2020 um yes the that definitely was been a consideration that we've been taking into account so um drug makers hospital operators and health insurers have a stake in that outcome of November's elections and make up a significant portion of the market so leading into the election the healthcare sector is definitely most exposed and there's a variety of different outcomes that are possible so and we're positioned to handle all these possible scenarios one large consideration that we are taking into account right now is um the fact that authorization for the federal government to negotiate drug prices would result in Medicaid spending reductions on drugs so this is obviously going to affect pharma and biotechnology so companies like Bristol mayor and abby would be facing significant revenue reduction so we're we're actively managed bond and we have the ability to keep biotech and pharma companies fluid if we foresee these pricing pressures become a problem let's say about that also to go along with this one of the things like being the discretionary and financials analysts we also see you know m2 for discretionary issues moving forward with implications on you know different tax rates and how that's changed with different administrations so that's one of the things we're also looking for right now at least current market conditions we see that discretionary has been doing pretty well so far with the market rebound but that's always something we're still trying to take into account when you know trying to manage our funds for the outlook of the 2020 election we now have a question from Laura for golly excellent work everyone question some traders are betting that the Fed will push interest rates into negative territory either late this year or early next year what do you think the implication of this will be on the market and what sectors stand to gain or lose in this context so one sector that would really lose is the financial institutions the banking sector we already saw some banks their revenues were impacted by almost 60 percent in their last earnings reports having to suffer from that and in terms of the Fed reducing it to negative they're trying to refrain from that as long as they can they've stated that they want to keep it at zero until they see employment starting to increase GDP starting to bounce back so in terms of them going to negative I think that's more of a unlikely scenario at the moment and then another question from Laura for golly some analysts see the potential for a lasting recovery in the energy sector considering the stocks have reached a level of resistance what are some concrete reasons while you think that there will not be a rebound as you mentioned earlier so currently obviously you know we saw that May contract turned negative for oil and we're seeing just fluctuating oil prices right now it comes down to the argument of risk tolerance for the cafe and how much we're willing to sort of lose to the downside in that sense in terms of oil yes there is the argument that we are going to see a lasting recovery in the future as demand comes back but currently as we're starting to see the sort of oil markets get driven specifically by coronavirus induced shutdowns re-opening of the economies and we're seeing wild swings due to our risk tolerance within our funds right now it doesn't seem like a viable investment although in the future we do project that we will start to see a recovery but for right now we just don't believe that it fits into our current risk tolerance so we now have a question from cafe board member Guthrie Carpenter says great job everyone historically in the cafe we have used beta to measure risk relative to the market given a single factor correlation given your comments on the unilateral direction of market correlation amidst the equity sell-off how has the team's view on risk changed is beta a relevant metric anymore so i'd actually like to answer this one Guthrie ask the market downturn instead of the go into fruition we kind of moved away from looking at betas themselves as the standard unit of risk that we use and we look more towards their standard deviation and you can see that in both of our funds performance that they both stand around about 27 to 28 percent while the markets is currently about 46 percent so we have stopped really using that in the short term as the most relevant risk metric okay Jake are we finished with our questions that is all of the Q&A Dean okay well you all are amazing and i'm going to be back in just a minute with a few concluding comments but president mellis has joined us this afternoon for his very first cafe presentation welcome professor welcome president mellis i think you wanted to make some brief comments thank you sure or it's a pleasure to be well virtually here this was not the plan when i visited the alams in new york of the cafe along with professor melton we had made these grand plans to have an event here at the president's house during this time and celebrate our new cafe i don't know the right words graduates or participants along with our veterans unfortunately we cannot do that this year but i'm sure there will be many more years that we can do this as you know we all feel that this program is one of the jewels in the crown of roger williams and you the participants on the program you are a grand plan of the future of our alarm body you're going to be leaders in the financial sector or whatever sector you end up being and we're very proud of you so it's a pleasure to be here and looking forward to seeing you in person those of you that are graduating right now the plan is to have commencement in may 2021 and i'm not sure if all of you are graduating but if you're not then you'll have your commencement next next year as well we're planning to have and probably back to back commencement together and if i don't see you between now and next time during commencement have a great summer congratulations thank you thanks president mellis it's great to have you with us today and thanks again to the cafe team to hans christensen to michael melton all the people who make this wonderful program possible i think natalie's comment of earlier that this has been a semester like no other is probably an understatement because it certainly has been quite an incredible semester and no surprise to me that all of you involved in the cafe program really rose to the occasion and with so many other programs at other schools just going on hiatus i'm even more impressed with everything that you've done this year i miss all of you i miss walking by your your your space in our building and watching you hard at work and it's good to see jake's little background shot there of reminds me of what the wigan lab looks like so congratulations to all of you congratulations especially to the graduating seniors we know this isn't the semester that you had planned on as being your last one at roger nor did we we will honor you when we're able to and recognize your accomplishments at commencement as as president mealis had stated so stay safe and stay well and congratulations to all of you for a great job to those of you who are returning i can't wait to see you back in your space in our building and hope that will be early in the fall in the meantime enjoy the summer months and thank you again to all of you who have joined us alumni parents friends supporters it's been great to have you with us this afternoon and now you guys can go out and celebrate maybe you figured out a way to do something virtually to celebrate i certainly hope that you have so thanks again terrific job terrific job guys thanks so much thank you thank you thank you thank you thank you thank you very much thank you so much if anyone would like more information regarding two more in-depth presentations relating to each portfolio we manage please contact dr michael melton at m melton at rw dot edu additionally if anyone is interested in carrying on a more personal conversation with the student fund managers after the q and a please contact matt wasnik at m wasnik five three seven at g dot rw dot edu for more information regarding that session thank you everyone for coming out today in fact md i've also received some emails that i'll forward over to matt with regards to this okay everyone before we go i would like to thank all of you as we'll talk about a little bit later on and please refer back to your chat to be able to see a few congratulations great work everyone really terrific job you are just amazing thanks everyone thank you dr melton thank you dean appreciate it now this was a home run really worked out well good job everybody enjoy the rest of the weekend thank you okay thank you thank you now thank you thank you