A Midsummer SMIF Update
SMIF Officers are preparing to conduct interviews for new applicants and inactive members over the next few weeks. We plan on hosting a "Superday" event on Saturday, August 11, where we can get through most interviewees in single day. With that being said, prospective members should have an idea of what team (Equity or Fixed Income) they would like to be on and have a willingness to dedicate time and effort towards the club.
Furthermore, the RFP competition is confirmed to take place on November 30. We will be competing against UC Irvine, Chapman University, Cal Poly Pomona, Cal State Long Beach, and UC Riverside. For those interested in attending, please mark this date on your calendar.
Portfolio Update (6/13 - 7/24)
On June 29, 2018, CSUF SMIF sold 13 shares of Microsoft (MSFT), netting us $179.14 in profits. While we remain bullish on MSFT's outlook, we trimmed down our position due to the tech sector's strong performance this year. As a result of its dominance, our individual position in MSFT within our equity portfolio appreciated above compliance levels. To remain in compliance with CFAOC's IPS of having no individual security exceed 10% weighting, we sold some of our MSFT shares to bring our position back down to 5%.
We have also proposed to purchase CVS Health (CVS). Please see the buy report included below to see our rationale behind this proposal.
Since our last update in early June, our portfolio has outperformed the benchmark by 260 basis points (+2.6%). The leaders in our equity portfolio include: HAS +11.4%, BMY +8.5%, PYPL +8.3%, CRM +8.2%, and MSFT +8.0%. Our laggards include: FDX -10.2%, TSN -10.1%, AMAT -9.9%, STZ -6.4%, and ABBV -5.4%. Please refer to the chart below to see how our other securities have performed.
To Infinity &...?
After beating expectations on Monday, 7/23, Hasbro (HAS) closed the day at $106.04, netting +13% appreciation in a single day. HAS is "focused on moving beyond the near-term disruption of losing a major customer" following the Toys R Us liquidation in Q2 2018. Going forward, Hasbro will look to invest in "its business - in innovation, entertainment and a modern global commercial organization - to drive profitable growth in 2019 and beyond." As such, CSUF SMIF remains positive on the outlook of Hasbro.
Grabbing the Rebound
Our last update had Bristol-Myers Squibb (BMY) as our bottom equity performer since April; however, since then, BMY has rebounded nicely due to bullish sentiment. The company is expected to report Q2 2018 results on July 26 before market open.
Above the Cloud
Salesforce.com (CRM) has been one of the tech sector's best performers this year at +42.58% price appreciation. As the Software-As-A-Service (Saas) market continues to grow, CRM is seeing a direct impact in its top line, leading to appreciation in its stock price. As of market close on Wednesday, 7/25, CRM's share price sits at 148.87. Since this price exceeds our initial price target 147.75, we will reevaluate our position to see if we should continue holding this security.
Amazon's Latest Victim?
After Amazon asked small businesses to help deliver packages in late June, Fedex's (FDX) stock price plummeted. Amazon stated it would "take an active role in helping interested entrepreneurs start, set up, and manage their own delivery business" and "successful owners" could make up to $300,000 in profits annually. Ultimately, FDX may now be another victim of Amazon's dominance. We look to reevaluate our FDX position within the next few months to determine whether or not we hold or sell.
Trade War Casualties
Since inducting Tyson Foods (TSN) into our portfolio, the stock price has been on a downward trend. We attribute the stock's poor performance to the recent trade war proposals, including 25% Chinese tariffs on meat and poultry, which directly affects the business of TSN.
Another security that has been affected by the trade war is Applied Materials (AMAT). AMAT gets a considerable amount of its bottom line from China and has plans to invest $615 million to construct a facility within its borders.
With that being said, we are going to analyze the outlook of the Meat Products and Semiconductors industries then look at company fundamentals to reevaluate our positions in TSN and AMAT.
Our fixed-income portfolio has been strong since our last update on June 12, with zero negative contributions to our portfolio's return during the period. Performance is indicated in the graphic below.
As interest rate risk is expected to continue increasing amidst a strong market and economy, we look to reevaluate our portfolio's duration compared to the Barclays U.S. Aggregate Bond Index. With strong company earnings this year, we also look to reevaluate our credit risk exposure.