With the New Year under way, its a great time to resolve to get your
portfolio
in shape. Students at the University of Maryland's Robert H. Smith School of
Business
have been closely following the markets as they manage the $2 million
Mayer Fund
and the Lemma Senbet Fund, run by select
groups of MBA and undergraduate students.
The students are on pace to meet their goals to achieve healthy returns for the
funds and outpace the S&P 500 index. Here's their collective outlook for the
year:
|
Company
|
Analyst
|
Rationale |
|
McDonalds (MCD)
|
Cindy Li
Consumer Discretionary Analyst
Senbet Fund
|
The company has had consistently strong operating performance led by
new product innovation, ongoing cost saving initiatives, steady new
restaurant
growth, effective advertising, and superior global brand equity. With
its
global strength, brand, stable market position, strong cash flow and
geographic
diversity its no wonder that McDonald's stands as the current market
leader
in the fast food restaurant sector.
|
|
Toll Brothers (TOL)
|
William Van Hest
Consumer Discretionary Sector
Mayer Fund
|
With multifamily fundamentals improving, the housing market is more
than
likely to return to pre-boom levels. Toll Brothers is uniquely
positioned
to continue exceeding the industry margins and has the optimal land
holdings
to pull out of the housing crisis faster than the other home builders
with
less risk in the event it drags on longer than expected. With the stock
priced at below a five-year low, this is a value play with great
potential
this year and in the coming years.
|
|
General Mills (GIS) |
Derek Criswell
Consumer Staples Analyst
Mayer Fund
|
Their recently launched Holistic Margin Management system has
positioned
them well amongst their competitors in facing rising commodity costs.
This,
along with an increased focus on advertising, has General Mills gaining
market share, despite already being the first or second brand rank in
over
a dozen retail food categories.
|
|
Pepsi (PEP)
|
Philip Whitley
Portfolio Manager
Mayer Fund
|
2010 was supposed to be the year of the recovery and because of
this,
staples were largely ignored. Pepsi has been increasing its cash levels,
pursuing growth in emerging markets, and continues to perform well with
niche market products. In 2011 it may unload that cash on acquisitions,
or return it to shareholders in the form of more dividends and share
buybacks.
|
|
Clean Energy Fuels Corp. (CLNE)
|
Nicolas Godfrey
Energy Analyst
Mayer Fund
|
Favorable legislation recently passed both the House and the Senate.
Natural gas as an alternative fuel for heavy duty vehicles is a game
changer
for the U.S. economy. Natural gas is economically viable, abundant,
domestically
produced and cleaner. Leading the market, CLNE is perfectly positioned
to
capitalize on that trend and is at the early stages of significant
growth
potential.
|
|
Cameron International (CAM)
|
Elan Rozmaryn
Energy Analyst
Mayer Fund
|
Cameron International is going to have a fantastic year over 2011.
Soaring
oil prices and the falling dollar will create a renewed deep sea
drilling
push, and this oil servicing company is very well positioned to profit
from
this renewed push.
|
|
JP Morgan (JPM)
|
Robert Quint Mansell
Financials Analyst
Mayer Fund
|
The bond market is pricing in higher growth. Higher long-term rates
with
steady short-term rates and improved loan growth will lead to higher net
interest margins. JPM has excess capital that may be released early next
year in the form of a dividend or a huge buyback program (10% of shares
outstanding from a Deutsche Bank analyst). Im not optimistic about
unemployment,
but I believe JPM has been conservative in reserving for loan losses and
will continue to see lower provision levels. The valuation is cheap
right
now at less than book value. There is downside risk due to
foreclosure-gate
and pending regulation changes from the Dodd-Frank bill, but I believe
the
current market valuation accounts for this risk.
|
|
Allied World Assurance (AWH)
|
Daniel Horowitz
Financials Analyst
Senbet Fund
|
Allied World Assurance (AWH) is a global diversified insurer and
reinsurer
with:
- incredible underwriting track record (average
combined ratio of
81.2% over the last 5 years)
- trades at a Price/Book ratio of 0.75 and a
Price/Earnings ratio
of 4.22
- Book value has grown from $36.82 at year end
2006 to $78.81 as of
Q3 2010 (114% appreciation)
- Float of over $8 billion invested
conservatively and transparently
(minimal exposure to munis, short duration of fixed maturity
portfolio)
Strong management has been successfully executing on an
international
expansion and branding campaign. This will lead to net premium growth
and
shield exposure to the industry's soft pricing, as the company continues
to differentiate itself from peers as a world class service provider
across
a diversified range of products.
|
|
US Bancorp (USB)
|
Steve Jain
Financials Analyst
Senbet Fund
|
A solidly managed, growing, and consistently profitable lender, US
Bancorp has
not had a single period of losses in the past three years. As the
fifth-largest
bank in the U.S. by assets, US Bancorp has a history of lending wisely.
The bank's other primary business, payment services, is among the most
profitable
and efficiently-run in the country.CEO Richard Davis has said that his
top
priority for 2011 is to become the first bank to increase dividends and
bring dividend yield at least somewhat closer to the 6% the bank paid
pre-crisis.
|
|
Teva Pharmaceutical Industries
(TEVA)
|
Alexander Wang
Healthcare Analyst
Senbet Fund
|
Teva is the worlds number one generic drug company. With nearly $150
billion in patents expiring by 2015 and numerous countries and
organizations
attempting to cut down on healthcare costs for their growing aging
populations,
Teva is very well positioned to benefit with these drastic changes in
the
pharmaceutical industry.
They recently acquired Barr and Ratiopharm, both very large competitors
in the United States and European markets respectively. These two
acquisitions
give Teva greater market share in the U.S., where it is now No. 1, and
in
Germany, where it is No. 2. Even as Teva continues to grow, exceeding
analyst
expectations, their share price has been greatly depressed in the past
few
months, creating a very compelling buying opportunity.
|
|
DaVita (DVA)
|
Lucy Qian
Portfolio Manager
Senbet Fund
|
DaVita is the second largest provider dialysis services in the U.S.
for
patients suffering from chronic kidney failure. It recently announced
plans
to expand internationally, where it expects strong margins and
higher-growth
in some largely untapped markets where there is a lot of room to gain
market
share.
|
|
Illinois Tool Works (ITW)
|
Philip Whitley
Portfolio Manager
Mayer Fund
|
Many cyclical firms rebounded in 2010 with leaner operations and
renewed
demand. However some were neglected and Illinois Tool Works fits the
mold.
With products that span commercial to consumer use, ITW was able to ride
out the recession more smoothly than others tied to specific industries
like housing. But this was ignored last year. ITW is diverse and fast
moving
and should be able to meet demand faster than competitors making it a
performer
for 2011.
|
|
Itron (ITRI)
|
Jim Hildebrand
Technology Analyst
Mayer Fund
|
World demand for energy and clean water will grow 30%-40% over the
next
two decades. To meet this need, the world has to become smarter where
businesses,
utilities and government continue to work together to increase
efficiencies
and reduce costs. With its current 35% worldwide share, Itron will play
a key role in this smart revolution with its meter products and software
management solutions.
|
|
Google (GOOG)
|
Lily Zhen
Technology Analyst
Senbet Fund
|
The company has recently launched many promising new services and
products
including Google Translate, the new eBook store, Cloud Connect, Google
Business
Apps, and Google TV (not to mention the success of Android). Also,
Google
succeeds where many companies are struggling: it can actually create
profit
from providing free products and services. Google's business model
allows
it to bypass the internet's free problem, positioning it perfectly to
take
advantage of the trend toward digitalization.
|
|
NII Holdings (NIHD)
|
Christine Perry
Telecom Analyst
Senbet Fund
|
NII Holdings is one of the fastest growing wireless service
providers
in the South American region. It recently acquired a Brazilian wireless
license, a move that significantly enhances the company's presence in
Brazil.
This should have a positive impact on the NII Holdings' earnings in the
near future as the Brazilian wireless industry is poised for strong
growth
in the coming years due to the rapid expansion of the middle class and
increased
discretionary spending in the country.
|
