Friday, February 16, 2018

Marquette's AIM Team Placed 1st in Milwaukee CFA Challenge - Next Stop is Boston for Americas CFA Finals

Stephen Arcuri, Charles Muth, Brooke Porath,
Andrew Crossman and Connor Konicke (l to r)

On February 15, 2018, Marquette University’s AIM ‘Blue’ team won the Milwaukee CFA Investment Research Challenge held at the Best Western Premier Park Hotel in Madison, Wisconsin. 

They advanced to the Americas Regional Finals in Boston, Massachusetts on March 19-20, 2018. 

The members of the AIM Blue team included: Andrew Crossman, Brooke Porath, Charles Muth, Connor Konicke, and Stephen Arcuri.

The faculty advisor was: Dr. David Krause. The industry mentor was: Dr. Joseph Wall. 









Thursday, February 15, 2018

Marquette's "Blue" Team Wins the Milwaukee CFA Investment Research Challenge and Advanced to the Americas Challenge in Boston

Marquette Team Wins Milwaukee CFA Investment Research Challenge

On February 15, 2018, Marquette University’s AIM ‘Blue’ team won the Milwaukee CFA Investment Research Challenge held at the Best Western Premier Park Hotel in Madison, Wisconsin. They advanced to the Americas Regional Finals in Boston, Massachusetts on March 19-20, 2018. 

Dr. David Krause, AIM program director and CFA team faculty advisor, commented “I’m proud of the members of the AIM program who participated in the CFA Research Challenge. Dr. Joseph Wall served as the team’s industry mentor and I want to send out a special thank you to him for his efforts to support the student teams. I believe that both the Blue and the Gold teams could have been the overall winner – they both did an outstanding job. We look forward to participating in the Americas Challenge in Boston next month.”

The members of the AIM Blue team included: 
  • Andrew Crossman
  • Brooke Porath
  • Charles Muth
  • Connor Konicke
  • Stephen Arcuri 
The members of Marquette AIM “Gold” team included:
  • Adam Hamilton
  • Grant Runnoe
  • Holly Kuffel
  • Mitchel Beine
  • Michael Dennison
The Milwaukee CFA Society research company this year was AptarGroup (ticker: ATR). The teams in the competition included students from:
  • ·         Carroll University
  • ·         Marquette University - Blue & Gold Team
  • ·         UW-Madison
  • ·         UW-Whitewater - Team 1 & Team 2


Each of the teams in the local competition were required to make a 10-minute oral presentation to a panel of judges followed by 10 minutes of Q&A. The panel graded the presentation and Question and Answer competitions – and when combined with the score on the written research report – were able to determine the winning team.

 The CFA Institute Research Challenge offers students the unique opportunity to learn from leading industry experts and compete with peers from the world’s top finance programs.  This annual educational initiative promotes best practices in equity research among the next generation of analysts through hands-on mentoring and intensive training in company analysis and presentation skills. 




Fourth Set of AIM Program Student Equity Pitches on Friday, February 16th - Join Us in Person or On-Line




AIM Class of 2018 & 2019 Student Equity Presentations - Friday, February 16th

The fourth set of AIM student equity presentations of the spring semester will be on Friday, February 16, 2018. 

 

Follow the link to review the student equity write-ups.  You can also find every write-up since AIM's inception here.


Location:  Marquette University, College of Business Administration - Straz Hall, 1225 W. Wisconsin Avenue, Milwaukee 53233 - in the AIM Research Room 488, 4th Floor (pdf directions to AIM Room).  
  • Date:  Friday, February 16th 
  • Location:  AIM Research Room
  • Presentation Times: 9:00 to 9:50 a.m. & 3:00 to 4:00 p.m. CST
  • Link to pdf Student Equity Write-ups 
  • If you are unable to attend, you can always view them via the webcast HERE 
AIM will again be utilizing Twitter for your comments and questions.  Please follow the instructions below.

How to comment using Twitter:
1. Go to the MarquetteAIM Twitter account (you can use Search Twitter on your site) and click Follow.
2. During AIM presentations, go to #AIMpitch and follow the tweets (discussion) on Twitter (it will also be appearing on the Rise Display Board in the AIM Room and on your smartphone)
3. Tweet your comments and questions during the AIM equity pitches

    • Follow the rules of etiquette for using Twitter during AIM pitches
    • Use the hashtag #AIMpitch to start each tweet
    • Use $TICKER (note: this is called a cashtag and it be should the unique ticker/symbol for the stock that is being presented, ex: $TSLA)
    • Keep you comment short because each tweet is limited to a maximum of 140 characters
    • Example for Tweeting on a student’s Tesla equity pitch (note: the ticker for Tesla is TSLA): #AIMpitch $TSLA How do lower gas prices impact demand for electric cars? 


A current AIM Program Small Cap Equity Holding: BlackLine, Inc. (BL) by: Michael Vidovic. "The Financial Recording Automotive"

BlackLine, Inc (BL, $32.98): “The Financial Recording Automotive”

By: Michael Vidovic, AIM student at Marquette University


Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.

 Summary

BlackLine, Inc. (NYSE: BL) is a cloud-based software platform focused around automating common accounting and financial processes through the following 4 solutions: reconciliation management, financial close management, intercompany hub, and insights.

• BlackLine has failed to be profitable thus far, despite outperforming revenue growth each quarter.

• The company operates globally, and only recently attained their first customer in Hong Kong. Europe also continues to show demand above expectations.

• Tammy Cole has been hired as a Chief Strategy Officer along with ex-CEO of SolarWinds, Kevin Thompson, though their contribution has yet to be fully seen.

• The intercompany hub segment showed very disappointing growth in Q2 paired with unfavorable insider share selloffs, which have hurt the stock sizably in the last 6 months.  

Key points: APAC remains the geographic for new growth, though the company has only a few customers in the area. However, each quarter the company has been able to attain first customers in various countries in the region. The situation looks favorable given BlackLine’s impressive customer renewal rate assuming the company can continue to lock in further customers in the surrounding area. Once BlackLine gains an influence in east Asia though, the growth outlook should notably improve.

BlackLine began by selling mainly to large enterprise players, and has only recently began penetrating the middle market. Many of these companies still do their accounting and financial close processes manually, and it seems only a matter of time until BlackLine is able to grab these low-hanging fruits.

BlackLine continues to operate in a low competition environment, and has stood to benefit from being the only company of its kind. However, if the company is able to scale successfully, the market will likely see competition arise given just how large the market is.

New management has been cited to be a strong source of growth, though expectations seem blown out of proportion, and may only serve as minor improvements for the company.

What has the stock done lately?

BlackLine IPO’d in late 2016, and saw the stock rise 40% by July of 2017. However, the stock then dropped 25% following a weak Q2 performance, and has been relatively stagnant ever since. The company is taking longer than expected to generate a profit, and concerns to the contrary have mounted since.

Past Year Performance: BL has grown by 22% over the last year, but the company remains disappointingly far from being profitable. The primary contributors to the stock’s performance in spite of profitability setbacks have been the company’s very strong gross margins and high renewal rate at 98%. The company has sustained high top-line growth, and the potential market remains daunting in terms of size.
BlackLine 1 Year Performance
Source: FactSet

My Takeaway

The investment thesis for BlackLine remains as strong as ever, and the potential upside on the company has not changed. With such a high renewal rate, the company has shown that once in practice, the solutions are invaluable, and the problems seem to stem from unhappiness surrounding the company’s profitability. The TAM remains enormous, and a lack of real competition puts the company in a strong light in terms of being a growth stock.

Sunday, February 11, 2018

A current AIM Program Small Cap Equity Holding: LendingTree, Inc. (TREE) by: John Wagner. "Does Money Grow on TREE(s)?"


LendingTree, Inc. (TREE, $370.60): “Does Money Grow on TREE(s)?”

By: John Wagner, AIM student at Marquette University



Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.

Summary

LendingTree, Inc. (NASDAQ:TREE) is the leading online loan marketplace connecting  consumers to over 450 lenders that offer student, personal, mortgage, automobile and other related types of loans. 

• TREE is continuously developing their MyLendingTree platform and investing in technology to conquer the digital gap in the mortgage industry, while working with lenders to provide consumers with training, information, and a better overall customer experience.  

 LendingTree has diversified their mortgage/non-mortgage revenue mix to about 45%/55% v. 65%/35% just two years ago. This diversification should continue to contribute to their 5-yr revenue CAGR of  41%.

• With a TAM worth over $19 billion and only a 30% market share, TREE looks to continue expansion through acquisitions and development of non-mortgage segments.

Key points: Lending Tree is back on track following its spin out in 2008. Following their decline, large amounts of M&A and internal development has occurred, creating over 50% growth since 2015. Management has placed emphasis on not only diversified product portfolio but conforming to needs of millennials, who are growing faster vs. peers. These millennials, who are technology dependent, will make use of all TREE has to offer, not only loan related, but also for filing taxes.

In it’s most recent M&A deal, LendingTree acquired Roostify, a leader in the real estate lending marketplace. Nikul Patel, Chief Strategy Officer of TREE, proposed that this acquisition will not only make matching lenders with consumers more seamless, but allows for loans to be completely digital in this segment of their business. Combining these two platforms allows for loans to be found, filed, and closed completely digitally. In essence, this new acquisition will diversify their product portfolio as well as make loans simple, paperless, and fitting for millions of people, especially millennials.

With that being said, it will be interesting to see how management reacts to the current mortgage industry, and home sales specifically. According to the National Association of Realtors, the number of homes on the market have hit an all time low, meaning consumer mortgage demand could be adversely impacted. Management claims that in their current product portfolio, a decline in purchase demand will be recouped with refinancing; that they are not worried about the current state of the mortgage industry.

Also to note, Purcell Julie & Lefkowitz LLP, a law firm committed to representing shareholders , has launched an investigation against LendingTree, Inc. for its potential breach of fiduciary duty. Pending results of the investigation, shareholder wealth could be largely impacted if it is found that TREE did not reach their fiduciary responsibility. There has been no more information released to this point.

What has the stock done lately?

The stock has just recently dropped ~10% from it’s 52 week high, $404.40, to now $362.25. This dip occurred on January 23rd  primarily as a result of overnight trading volatility. Since this dip, TREE is up 2.3%, to a current price of $370.60. 4Q-17 earnings are to be released February 22. 

Past Year Performance: Following four major acquisitions in 2017, as well as continuous development to its MyLendingTree app and platform, LendingTree, Inc.’s stock is up 227% this year. TREE has also hit its all time high stock price of about ~$404, however, it is now currently trading around $362. While TREE has beat consensus estimates twice in 2017, 4Q earnings could be very indicative of their position in the current market.

 Source: FactSet

My Takeaway

Management is a key factor in the continued success of LendingTree, Inc. Founder, Chairman, and CEO Doug Lebda has been with TREE since its IPO in 2000. After a series of ups and downs, it has ultimately prevailed on top. With continued technological development and expansion across both its mortgage and non-mortgage segments, there is potential for the stock to continue its incline. While issues arise regarding home sales, polls note 67% of people (79% of millennials) are optimistic about their personal financing improving this coming year. With millennials continuing to apply for school loans, technological upgrades, and continued expansion in non-mortgage segments, TREE has could have a bright future. However, pending the results of its current lawsuit and outlook on its mortgage segment, I am recommending a hold rating for LendingTree, Inc.

Source: Yahoo Finance

News about the AIM Program adding Blockchain modules to the curriculum

Starting Monday, February 12, 2018 - the AIM Program will launch its new FinTech curriculum

As I mentioned in previous blog entries, Michael Adam and Dr. David Krause are offering a module in FINA 4330 on blockchain and financial institutions - which will be followed next week by a module on blockchain and cryptocurrencies. These are the first of several modules that will be offered to AIM students at Marquette University on the topic of FinTech.


Bankmybiz
DocLaunchMichael Adam is the founder of BankMyBiz (https://www.bankmybiz.com/) and DocLaunch (https://www.doclaunch.com/). He and Dr. Krause have prepared three lectures on blockchain and its growing impact on financial institutions. The AIM juniors are encouraged to attend the 11:00 FINA 4330 classes this week and next, if possible. 

Additionally, the new Marquette student blockchain club has organized a tour of the MYOB bitcoin mining operation in downtown Milwaukee this Friday afternoon (2/16/18) at 4 p.m. Marquette students are welcome to attend. (To sign up or get additional information about the MU Blockchain Club), please reach out to the club officers at:  themarquetteblockchain@gmail.com.

Info about MYOB can be found at:  https://www.myobllc.com/about - they are doing some interesting work in the blockchain space and their operations are not limited to bitcoin mining - so finance students are encouraged to participate.

MYOB Tour Details - The tour of MYOB’s mining center will be this Friday, 2/16/18 at 4 PM. The address is 1101 N. Market St behind Bar Louie on Water St.  https://www.myobllc.com/about
www.myobllc.com
Mine Your Own Bitcoin | MYOB - Become a Bitcoin miner with no experience for less than cloud mining. Introducing a better way to mine Bitcoin!


Chris Jante is one of MYOB's partners and will meet the Marquette students in the lobby of MYOB at 4 PM.  No food or drink allowed. Keep in mind this is a data center.


Saturday, February 10, 2018

A current AIM International Fund Holding: Rio Tinto Plc, Inc. (RIO) by Clarence Darrow. "Is Rio Tinto Dead or Alive?"


Firm Name (RIO, $56.07): “Rio Tinto - Dead or Alive

By: Clarence Darrow, AIM student at Marquette University (As of 2/1/2018)



Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.

Summary

Rio Tinto Plc, Inc. (NYSE:RIO) is engaged in the business of exploring, mining, and processing of mineral resources. It is one of the largest and most cost-effective producers of iron ore, aluminum, copper, coal, diamonds, gold, and other industrial minerals. It distributes its commodities to many different countries and some of their biggest customers are China, Great Britain, Hong Kong, Norway, and Canada.

• The company's iron ore assets in Western Australia are some of the lowest-cost assets in the iron ore industry and given the proximity to China, provide a tremendous advantage.

• Any slowdown in Chinese steel production could weaken iron ore demand

• Current strong growth due to an increase in iron ore production levels of 360MM mtpa.

• The company maintains increased exposure to aluminum relative to other miners. If aluminum prices remain weak it could prove difficult to sell Pacific Aluminum assets at reasonable price.

• Environmental laws becoming stricter, restricting mine development or even mine closures

• Currency exchange rate fluctuations, have a profound effect on the prices of commodities and affect financial results due to the geographical diversity of the miners’ operations and sales.

• In the past year Rio Tinto has reduced debt from 25.37 million dollars to 15.85 million.

Key points: Rio Tinto is an interesting stock. With their current CFO and Chairperson ready to step down. This leads to increased uncertainty. Why are both leaving at the same time? The stock price is also the highest it has ever been.  In addition, the company’s performance is exposed to movements in commodity prices, which makes this a highly cyclical business. The company has capitalized on the strength in commodity prices seen in 2016 by improving its balance sheet and reducing its cost structure. The company has achieved roughly $2.1 billion of cost savings since the start of last year. It has managed to gradually reduce cash costs at its core iron ore production business from more than $22 per ton in 2013 to $13.80 per ton in 2017. This has made Rio Tinto one of the lowest cost operators that can continue generating strong levels of earnings and cash flows in a weak commodity price environment, which partly mitigates the commodity price risks.

The biggest risk is the global economy as demand for metals and minerals is highly correlated to economic growth. China is the world’s largest consumer of aluminum, coal, copper, iron ore, nickel, and steel. A material slowing in China’s economic growth trajectory could result in lower prices for commodities. May suppress global prices.

RIO is expected to continue seeking ways to reduce expense for its mining operations and closing any unprofitable branches while continuing the track it has been on. RIO’s cost effective ways have led RIO to being one of the top market performers but given the weak commodity price environment they will need to continue looking for ways to be more cost effective. This could lead to a reduction in stock price if they are not proactive.

What has the stock done lately?

The commodities market is notorious for boom and bust cycles and has been on the upswing since February 2016, Rio Tinto’s stock is up ~4.5% in the last month. That is a solid rate of growth, and RIO has increased from $45 a share to $56.07 a share in the last six months. RIO has recently reached its 52-week high of 57.78 and is currently at 56.07. Has this stock already reached its height? Hopefully the boom cycle will continue.

Past Year Performance: RIO has increased ~31.85% in value over the past year, but the stock may have reached its potential as it has reached its 52-week high recently at a high of $57.78. Though it pays high dividends and has reduced much of its debt expense in the past year and is one has one of the best capital structures in the industry. With the recent change in management and given the history of mining companies, this stock bears monitoring. This stock seems to be fairly priced, but it is hard to know if the stock has already reached its potential.

 Source: FactSet 

My Takeaway

The commodity market has been up since February 2016, and RIO has been able to take advantage. RIO has been able to improve its capital structure as a result as well as pay dividends. Though this is a highly cyclical company due to the industry the company is in. Therefore, if any commodity prices drop RIO could be in trouble. In addition, it is concerning to see the CFO and chairperson step down. Thus, this is a hard stock to read. RIO appears to be the industry leader in a weak industry that has happened to have a good run over the last year. Therefore, this stock has certainly caught my attention. As a result, this stock may need to be sold shorty depending on how one views commodity market playing out and if they want to have exposure to the commodity sector. Even though I’m cautious with this stock it does appear to be the best option of all the commodity stocks in the industry.

How are the AIM Funds performing during this period of market volatility? Just fine.

The AIM Funds are holding their own during the recent period of market turmoil.

AIM Funds as of 2/9/2018 Total Ret MTD Total Ret YTD Total Ret 1 Yr.
AIM Small Cap Fund -5.61 -3.78 17.88
Benchmark:Russell 2000 -6.14 -3.69 8.62
   
AIM International Fund -7.04 -2.94 13.68
Benchmark:S&P ADR -7.54 -2.86 13.84
   
AIM Fixed Income Fund -0.84 -1.86 0.44
Benchmark: Core US Aggregate Bond -0.78 -1.91 1.02