4/16/08

On April 11, 2008 the class conducted a vote on what securities to buy, hold, or sell. Below is the outcome of the class vote conducted via e-mail.

# of Votes To Buy # of Votes to Hold Avg. Vote on Position
BXXX 15 19 2.3
ELRN 20 14 1.4
SGMS 9 25 3.0
ZOLT 21 13 1.8
GRMN 18 16 3.6
# of Votes to Sell # of Votes to Hold Avg. Position
SGMS 6 28 0.2
KWK 21 12 5.0
SOHU 24 10 1.1
LHTCF 19 15 1.9
EGOV 13 21 0.2
KSU 12

Total Votes 34

Since the vote the portfolio has made 10 new transactions. The details of those transactions are below.

14-Apr-08 SOHU 500 share SOLD at $48.38 - $24,190.00

14-Apr-08 KWK 900 shares SOLD at $39.72 - $35,749.80

14-Apr-08 GRMN 300 shares BOUGHT at $44.76 - (-$13,428.60)

14-Apr-08 ZOLT 1,000 shares BOUGHT at $25.65 – (-$25,653.00)

14-Apr-08 BXXX 3,000 shares BOUGHT at $2.29 - (-$6,861.00)

14-Apr-08 ELRN 2,000 shares BOUGHT at $8.95 - (-$17,900.00)

14-Mar-08 8196 10,000 shares SOLD at $0.13 – $1,250.00

14-Mar-08 0904 35,000 shares SOLD at $1.00 - $35,000.00

14-Mar-08 CHINA 7,000 shares BOUGHT at $4.03 - (-$28,210.00)

13-Mar-08 BXXX 5,000 shares BOUGHT $3.26 – (-$16,310.00)

Our first speaker was Marc Hensel of Plains Exploration (PXP). He talked about the companies new reserve build up project called T-Ridge development. He explained the company’s strategy regarding oil and natural gas reserves. Most of their properties are acquired through an auction process, because they aren’t big enough to be buying an oil property straight out. They usually fund the construction of an oil rig, and then split profits with whomever they split the license with. He explained the differences between how energy companies classify and account for their types of reserves. They’re only able to extract about 40% of each properties resources, so they base their proved reserve numbers on what they can expect to get. They also use several different processes to extract the oil. Everything from using a water flush, to forcing carbon monoxide into wells.

He discussed Master Limited Partnerships with us, and explained why they were hesitant to form an MLP last year despite pressure from The Street to do so. PXP’s take on the situation was that MLPs have a hard time generating cash flows, and their profits are unsteady with the volatility of gas prices. Choosing not to form an MLP turned out to be a wise decision, as most MLPs have taken a dive in the market since November of last year. He was also very bullish on the future of oil prices in the future, and expects profits at PXP to continue growing.

Our next speaker was Peter Went from GARP. He taught us all about risk management. He delved mainly into credit risk and market risk, and questioned us on ways to prevent these different types of risks. His main emphasis was on the importance of risk management and he gave a number of examples of companies and individuals that failed horribly at managing risk. We discussed the current mortgage crisis, and the resulting collapse in the credit market. He attributes the crisis to the greed of Wall Street.

He wrapped up by speaking about the GARP organization and how their structure works. It’s preferred that students have a few years of work experience before taking the GARP exam. The job potential in risk management is big right now, especially with the current fallout from the housing bubble. He encouraged us all to look into GARP in the future as a possible career.

April 2, 2008

Class started with the R.I.S.E. presentation that the assistant portfolio managers presented at the national R.I.S.E. conference the previous Friday. The portfolio managers were faced with several questions at the end of their presentation about everything from how they handle ethical issues to our methods of diversification. The winners are based on their return in 2007, unfortunately APM wasn't able to take home this award this time. A special thank you to Scott Jones for providing the funding so that 8 students could go.

We discussed the Bear Stearns events that have been in the news recently. The issue of moral hazard came up, and the concern that nothing will be learned from this fiasco. Now investment banks have access to lending from the Fed, much like commercial banks. Commercial banks are much more tightly regulated, and have to keep a certain amount in reserves. Investment banks are getting the privilege of lending from the Fed, without meeting the requirements that commercial banks have to keep. Some question if this is really a fair policy.

Also on the agenda was to discuss upcoming Proxy votes. Budweiser has 6 different issues coming up for vote including: Re-electing their directors, bumping up the directors compensation, and approval of their auditors. Other issues proposed by the shareholders were the the thought that the directors are getting overpaid, and asking for more disclosure about donations.

Other proxy votes included ELRN, their vice president is going to take a part time position with the company and earn 25% of his salary. KSU is voting on the election of three new board members and auditor selection. TTO has just one big issue, deciding whether or not they should be allowed to sell assets below net asset value.

Our speakers for the class were Scott Jones and Todd Preheim, both former APM students. We are grateful to them for providing our Thomson One subscriptions for the class each year. They spoke to us about career options in the finance industry and different career path options. they told us about their experiences and recommendations. We discussed the case for the week about ZOLT, a manufacturer of carbon fibers. Then they fielded questions for the remainder of the class period about their personal investment strategies and career options.