brighton presentation
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INVESTMENT OPPORTUNITY PRESENTATION
3
rd
Dec 2013
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Table of Contents
Investment Team 3-4
Investment Philosophy 5
Methodology & Investment Process 6-8
Representative Portfolio 9-15
Operations 16-17
Q&A 18
Appendix 19-27
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Organizational Structure
Brian Garcia,
CFAPortfolio Manager
David Tao
Client Service Officer
Harsh Sharma
PortfolioManager
Louis Civitarese
Compliance Officer
Walter Hyde
Accounting Manager
Investment
TeamPhilosophy Process Portfolio Operations
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Investment Team
Investment
Committee
John Menke
ConsumerStaples, Utilities
Shantong Zhang
IT, Telecom
Lifan Yang, CFA
Energy,Industrials
Xiakai Cheng,MD
Health Care,Financials
Ian Melonuk,
CPAConsumer
Discretionary,Materials
Investment
TeamPhilosophy Process Portfolio Operations
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Investment Philosophy
Growth orientation, but at a reasonable price
Diversified portfolio of 30-50 stocks
Go anywhere style
Flexible market capitalization restrictions
Process-driven
Utilize fundamental research to verify quality of financial
statements Risk management through Northfield Risk Modeling
Process Portfolio OperationsInvestmentTeam
Philosophy
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Methodology & Investment Process
Create Investment Policy Statement
Universe Screen
Fundamental Research & Risk Management
Decision-making & Construction of the portfolio
Ongoing Monitoring
Philosophy Portfolio OperationsInvestment
TeamProcess
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Methodology & Investment Process
Universe: United States Stocks
Market cap >$1B
ROE>20%
5 year annualized sales
growth > 10%
80 - 120 stocks, to be
researched by analysts
13,000 Stocks
350-400 Stocks
Philosophy Portfolio OperationsInvestment
TeamProcess
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Risk Management
Northfield Risk Modeling Standard Deviation
Information Ratio
Operations Asset Allocation
Rebalancing
Comply with guidelines and objectives set forth in RFP
Adhere to CFA Code of Ethics and Standards ofProfessional Conduct
Philosophy Portfolio OperationsInvestment
TeamProcess
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Strategy Backtest
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
2000
2000
2001
2001
2002
2002
2003
2003
2004
2004
2005
2005
2006
2006
2007
2007
2008
2008
2009
2009
2010
2010
2011
2011
2012
2012
2013
2013
Growth of $10,000
Backtest S&P 500
Backtest S&P 5001-Year 41.2% 27.2%
3-Year 19.1% 16.6%
5-Year 20.8% 15.2%
10-Year 11.6% 7.5%
Since Incept
(Feb 2002)
11.2% 5.9%
YTD 34.1% 25.3%
2012 14.0% 16.0%
2011 0.7% 2.1%
2010 26.6% 15.1%
2009 43.8% 26.5%
2008 -44.1% -37.0%
2007 17.0% 5.5%
2006 13.0% 15.8%
2005 16.3% 4.9%
2004 20.5% 10.9%
2003 39.5% 28.7%
2002 -7.4% -20.9%
StdDev
R-Sq Beta TrackingError
SharpeRatio
InfoRatio
PositiveMonths
NegativeMonths
UpMarket
DownMarket
Backtest 18.80 0.82 1.09 8.0% 0.55 0.96 61.8% 38.2% 129.7% 96.4%
S&P 500 15.27 1.00 1.00 0.0% 0.35 0.00 64.5% 35.5% 100.0% 100.0%
Philosophy OperationsInvestment
TeamPortfolioProcess
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Representative Portfolio
Philosophy OperationsInvestment
TeamPortfolioProcess
Name SectorMarket Cap
($mil)PEG Ratio
P/E Ratio
5 Yr Avg
ROE TTM
(%)
5-Yr Rev
Growth (%)
3-Yr EPS
Growth
(%)
Net
Margin
TTM (%)
Portfolio
Weight
(%)AmTrust Financial Services, Inc. Financial Services 3,080 0.74 8.15 23.86 26.62 19.74 10.63 5.00
Apple Inc Technology 467,684 1.38 15.59 32.11 45.49 37.92 21.67 2.78
Boston Beer Company, Inc. Class A Consumer Staples 3,176 1.84 30.44 24.15 11.17 26.87 10.08 5.00
Celgene Corporation Healthcare 67,303 1.12 19.33 25.79 31.40 23.30 24.23 2.78
Chipotle Mexican Grill, Inc. Class A Consumer Discretionary 16,632 1.97 34.06 22.30 20.26 30.33 10.07 1.39
Cirrus Logic, Inc. Technology 1,231 0.41 -0.62 26.28 18.55 50.52 17.18 2.78
Cognizant Tec hnology Solutions Corporation Class A Tec hnology 28,169 1.07 22.60 24.22 28.03 24.60 14.02 2.78
Continental Resources Inc Energy 20,840 0.63 43.66 22.64 34.60 118.03 25.63 2.78
Credit Acceptance Corporation Financial Services 2,898 0.61 10.01 39.34 20.49 23.02 37.10 5.00
CVR Energy, Inc. Energy 3,181 1.00 23.58 46.40 23.63 76.08 5.13 2.78
Erie Indemnity Company Class A Financial Services 3,250 2.14 15.97 22.93 37.24 14.00 2.64 5.00
Gilead Sciences Inc Healthcare 113,882 0.81 17.00 30.72 18.06 -0.56 28.55 2.78
HollyFrontier Corp Energy 9,233 0.74 24.65 27.30 33.20 345.51 5.20 2.78
InterDigital Inc Communication Services 1,355 0.89 20.57 53.80 23.14 46.05 12.49 2.78
Intuitive Surgical, Inc. Healthcare 14,834 2.01 34.26 20.73 29.39 41.33 29.58 2.78
IPG Photonics Corporation Technology 3,755 1.17 45.65 20.76 24.42 199.10 24.57 2.78
Joy Global, Inc. Industrials 5,858 0.95 11.92 26.15 17.32 18.79 13.26 2.78
Las Vegas Sands Corp Consumer Discretionary 57,800 1.43 26.44 23.10 30.41 62.76 19.00 1.39
Marathon Petroleum Corp Energy 24,157 1.33 12.30 29.82 21.80 2.64 10.52 2.78
Monster Beverage Corp Consumer Staples 9,611 1.47 25.84 31.75 17.90 17.67 15.18 5.00
Myriad Genetics, Inc. Healthcare 2,152 1.14 20.92 21.57 25.85 -1.14 25.28 2.78
NIC, Inc. Technology 1,501 1.52 35.29 39.11 19.75 23.61 14.03 2.78
O'Reilly Automotive Inc Consumer Discretionary 13,495 1.09 19.73 27.00 19.64 23.96 9.99 1.39
Outerwall Inc Consumer Discretionary 1,874 1.03 24.81 29.43 32.15 40.96 7.67 1.39
Portfolio Recovery Associates, Inc. Industrials 2,875 1.18 14.05 21.23 21.84 41.90 23.50 2.78Priceline.com, Inc. Consumer Discretionary 59,604 1.02 24.84 35.67 30.14 42.61 27.99 1.39
Questcor Pharmaceuticals, Inc. Healthcare 3,593 0.31 19.68 104.32 59.22 95.07 36.92 2.78
Raven Industries, Inc. Industrials 1,406 2.43 19.79 26.20 11.89 22.70 12.90 2.78
SolarWinds, Inc. Technology 2,472 1.00 28.20 22.19 34.22 40.20 29.20 2.78
Steven Madden Ltd Consumer Discretionary 2,652 2.26 15.15 20.57 23.27 33.65 10.05 1.39
Sturm, Ruger & Company Industrials 1,487 0.46 11.95 62.42 25.74 36.94 16.12 2.78
Tractor Supply Consumer Discretionary 10,216 1.38 20.28 26.88 10.61 32.17 6.19 1.39
TransDigm Group Inc Industrials 7,821 1.62 21.97 24.16 23.46 22.82 6.19 2.78
Ubiquiti Networks Inc Technology 3,676 1.00 32.80 70.83 32.80 54.33 27.80 2.78
Ulta Salon Cosmetic s & Fragranc es, Inc . Consumer Disc retionary 8,182 1.81 35.18 25.25 18.66 63.67 7.74 1.39
United Therapeutics Corporation Healthcare 4,688 1.03 35.18 24.83 34.14 150.10 26.90 2.78
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Representative Portfolio
Philosophy OperationsInvestment
TeamPortfolioProcess
11.1%
10.7%
10.5%
17.1%
12.9%
10.8%
16.7%
3.5%
3.7%
3.1%
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0%
Consumer Discretionary
Consumer Staples
Energy
Financial Services
Health Care
Industrials
Information Technology
Materials
Telecom
UtilitiesSample Portfol io S&P 500
Consumer
Discretionary,
11%
Consumer
Staples, 10%
Energy, 11%
Financials,
15%Health Care,
17%
Industrials,
14%
Information
Technology,
19%
Materials, 0%Telecom, 3% Utilities, 0%
Value Core Growth
Large 3 3 15
Mid 0 21 23
Small 0 12 23
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Questcor Pharmaceuticals, Inc. (QCOR)
Stock Price Performance - 5 year period
Current Price: $56.53
Screen:
Market Cap $3.4B
ROE 104.32%
5 yr Rev Growth 59.22%
Philosophy OperationsInvestment
TeamPortfolioProcess
Sector: Healthcare
Performance Versus Industry QCOR Industry
5 yr growth estimate (consensus) 31% 22%
Margins:
Gross 94% 74%
Operating 58% 19%
Pre-tax 58% 10%
5 year average ROE 106% 19%
PEG Ratio 0.35 2.18
Forward P/E 8.54 24.87
P/E 13.03 54.47
EV/EBITDA 7.95 30.23
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Questcor Pharmaceuticals, Inc. (QCOR)
Biopharmaceutical company that markets two major drugs- H.P.Acthar Gel and Doral, to treat serious autoimmune conditions and
insomnia, respectively.
Acthar shipments have grown on average 42% over the past 4 years
and shipments are projected to 15% in 2013 YoY.
Fundamentals are very attractive, as seen by average operating
margin of over 51% in the last 6 years, and the company operates on
very little debt outstanding. June 2013, acquired the drug Synacthen from Novartis. The drug is
not currently FDA approved for distribution in U.S. but provides
growth opportunity in international markets.
Philosophy OperationsInvestment
TeamPortfolioProcess
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Las Vegas Sands Corp (LVS)
Stock Price Performance - 5 year period
Philosophy OperationsInvestment
TeamPortfolioProcess
Current Price: $70.77
Screen:
Market Cap $57.8B
ROE 23.10%
5 yr Rev Growth 30.41%
Sector: Consumer Discretionary
Performance Versus Industry LVS Industry
5 yr growth estimate (consensus) 17% 11%
Margins: Gross 45% 54%
Operating 22% 15%
Pre-tax 19% 8%
5 year average ROE 21% 15%
PEG Ratio 1.43 4.01
Forward P/E 19.66 25.99P/E 26.44 23.88
EV/EBITDA 15.73 14.16
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Las Vegas Sands Corp (LVS)
Sands is best positioned to exploit growth opportunities in the
attractive Asia casino market, with a dominant position in Singapore
(about 50% share) and a strong competitive position in China (above
20% share).
Sands current operations positions it well to receive licenses in
countries that are expected to legalize casino gambling in the next
several years, including Japan, Taiwan, and South Korea.
The company has a strong economic moat, thanks to its possession of
one of only two licenses to operate casinos in Singapore and one of
six licenses to operate casinos in China.
Philosophy OperationsInvestment
TeamPortfolioProcess
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Operations
Daily flash report
Weekly performance update
Monthly detailed performance
and attribution analysis
Quarterly client service meeting
Philosophy Process PortfolioInvestment
TeamOperations
CFA Institute Code of Ethics and Standards of Professional
Conduct
XiakaiCompliance Officer
Custodian and broker/dealerState Street Bank
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Appendix
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Market Commentary
Dow above 16,000!
U.S. central bank has repeated it will not taper until the economy can stand on
its own
Interest rates will remain low in the near term.
There is now some possibility of Fed scaling back its $85 billion a month in
quantitative easing.
Inflation is well controlled considering the scale of money printing, and real
GDP growth advances.
Unemployment statistics continues to present a bullish case.
Investors are cautious - this round of the bull market likely has not reached its
end.
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MarketCommentary
Steadily decreasing at 0.7%/yr
since 2010 October.
Total nonfarm payroll
employment rose by 204,000 in
October.
Unemployment rate currently at
7.3%.
Employment increased in a
majority of industries.
Room to grow & potential
concern.
Unemployment Rate
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Market Commentary
Inflation & Real GDP Growth
Historically low inflation
Increasing GDP
Fed looking to taper
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Sample of Statement of Account
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Research Example
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Ubiquiti Networks
Ubiquiti Networks is a technology companystarted in 2005. Based in San Jose,California they are a manufacturer ofwireless products whose primary focus is onunder-served and emerging markets.
ROE: 70.83% Revenue Growth(3 year average):
39.94 Net income Growth(3 year
average): 54.33 Net Margin: 27.8%
P/E: 34.8
Higher growth rate and net marginratio than the industry average.
Wins Product of the Year for airFiber
Platform High growth stock to boost portfolio
performanceYear 2011-06 2012-06 2013-06 TTM
EPS 0.48 -0.12 0.89 1.21
Source: Morningstar
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Celgene Corp
Celgene Corp is a global biopharmaceuticalcorporation focusing on the discovery, thedevelopment, and the commercialization ofproducts for the treatment of cancer and othersevere, immune, inflammatory conditions.
ROE:25.8% Revenue Growth(3 year average):
27.0% Net income Growth(3 year
average): 23.3% Net Margin: 24.2%
P/E: 46.9
Higher growth rate and net marginthan industry average.
Pipeline consists of more than 25
unique compounds addressing morethan 30 disease areas ranging frommultiple myeloma to solid tumor.
Strong cash flow to support futureacquisitions.
Year 2008 2009 2010 2011 2012
EPS (3.46) 1.66 1.88 2.85 3.30
Source: Morningstar, Celgene website
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Raven Industries
Raven Industries is a conglomerate withdivisions that manufacture high-precisionagricultural electronics, specialty plasticsheeting, tethered aerostats, high-altitudeballoons, surveillance equipment, and radarsystems.
ROE: 26.2% Revenue Growth(3 year): 19.7% Net income Growth(3 year): 22.7% Net Margin: 12.9% P/E: 26.9
Higher than industry average salesand EPS growth
Strong cash flow
Clean balance sheet Increasing dividends (payout rate
~30%)Year 2008 2009 2010 2011 2013
Sales(M) 280 238 315 382 406
EPS 0.85 0.79 1.12 1.39 1.44
Source: Standard and Poors, Raven Industries
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