September 15, 2008
The class discussed market events that took place in the market over the weekend - the Chapter 11 Bankruptcy filing by Lehman Brothers late Sunday night, Bank of America’s buyout of Merrill Lynch and the probable failure or bailout of AIG. Professor Shenoy led the discussion on the underlying causes and bad assets that led to Lehman’s failure.
We were fortunate to have two guest speakers representing UMB, CFO Mike Hagedorn and IR representative Begonya Klumb. Mike has 20 years of experience in the finance and banking industry working at Wells Fargo before being hired on by UMB in March 2005. He presented an overview of the bank, its operations and how UMB manages risk to make a profit. The highlights were: UMB is growing and focused on fee-based businesses that currently account for 56% of total revenue, UMB prefers the commercial lending business, but likes diversification, and UMB has been risk-averse and is performing well in the current market.
Several students were curious about the HSA business and its ability to remain profitable. Mike said that is Obama was elected, that revenue would likely not exist anymore.
Professor Shenoy highlighted our group cases and discussed the company’s balance sheet and revenue segments. The class felt like UMB was a great bank providing excellent service to customers but was overvalued. The term “flight to quality” was used to describe the trading volume and share appreciation. There was no need to vote on the stock as majority of the groups recommended a “Sell” on UMB.
Wednesday, September 17th Special Class
Brett Leeth of Koch Equity Capital presented to the Security Analysis and APM classes. Brett discussed the business development group and how the market based management philosophy is implemented by Koch Industries. His presentation provided students insight on how Koch builds models and what type of information decision makers at Koch want highlighted. A focus is the work done prior to the model, particularly a thorough Industry Analysis.
Friday, September 19th 4th Annual APM Golf Tournament
We hosted 36 golfers at Lawrence Country Club. The tournament was a great success and we would like to extend our thanks to our sponsors and players!
Until next time,
APM
Wednesday, September 24, 2008
Tuesday, September 16, 2008
September 8, 2008
As many of you know we usually start class by discussing current events that are relevant to the APM portfolio. After Sunday’s announcement that the government would be bailing out Fannie Mae and Freddie Mac, there were plenty of topics to discuss. Professor Shenoy explained that many community banks hold the preferred stock of Fannie and Freddie. Having a preferred stock position in Fannie or Freddie is not good. This could be important to the APM portfolio due to our holding of Capitol Federal. Students will check those holdings. Also, the class is performing an analysis of UMB this week so a breakdown of the securities that they hold is important.
We also discussed the iron ore industry. Companhia Vale Do Rio Doce (an iron ore minor) makes up approximately 1% of the APM portfolio. We need to form an opinion on the commodity and the industry. We will return to the topic again in the coming weeks.
On August 29, the class voted to sell our position in Energy Conversion Devices (ENER). At the time they were trading at around $75 and recently they were trading as low as $53.55. We still believe in the long term prospects of the company, but at the time of the sell their valuation was just too high. Scott Jones, our mentor for the stock provided us with a timely and excellent analysis.
Our speaker this week was APM alum Joe Onofrio. Joe is an analyst for Jayhawk Capital and just returned from China. While in China, Joe visited the various Golden Meditech locations and also spent time with Golden Meditech’s management and employees. Our first group assignment was to write a research report on Golden Meditech. We discussed how to value Golden Meditech. We discussed each segment of the company in detail. Two of the class models are on the APM website .
A couple of the key uncertainties in valuing some of the segments are the time of the plasma exchange release. The device’s release has been repeatedly delayed, but the company says it should be out within the year. When released will the product cannibalize the sales of the ABRS? Perhaps, but it should increase sales over all because the target market is emergency rooms, while ABRS is used for surgery.
Until Next Time,
The APM Class
We also discussed the iron ore industry. Companhia Vale Do Rio Doce (an iron ore minor) makes up approximately 1% of the APM portfolio. We need to form an opinion on the commodity and the industry. We will return to the topic again in the coming weeks.
On August 29, the class voted to sell our position in Energy Conversion Devices (ENER). At the time they were trading at around $75 and recently they were trading as low as $53.55. We still believe in the long term prospects of the company, but at the time of the sell their valuation was just too high. Scott Jones, our mentor for the stock provided us with a timely and excellent analysis.
Our speaker this week was APM alum Joe Onofrio. Joe is an analyst for Jayhawk Capital and just returned from China. While in China, Joe visited the various Golden Meditech locations and also spent time with Golden Meditech’s management and employees. Our first group assignment was to write a research report on Golden Meditech. We discussed how to value Golden Meditech. We discussed each segment of the company in detail. Two of the class models are on the APM website .
A couple of the key uncertainties in valuing some of the segments are the time of the plasma exchange release. The device’s release has been repeatedly delayed, but the company says it should be out within the year. When released will the product cannibalize the sales of the ABRS? Perhaps, but it should increase sales over all because the target market is emergency rooms, while ABRS is used for surgery.
Until Next Time,
The APM Class
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