CAYUGA MBA FUND: What a Long Strange Trip It’s Been
Sean Alexander '01 and George Sent '01
Issue date: 11/5/00 Section: Johnson News
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Since our last article in early October, the student Portfolio Managers (PMs) at the Cayuga Fund have seen extensive volatility in the market, specifically in the S&P 500-our performance benchmark. In the midst of this market turmoil, the PMs have taken active steps to implement the quantitative and fundamental analysis learned in their first month on the Fund.
As for performance, October is not over. Equities in general have experienced a significant decline in the past few weeks (at one point, the S&P500 was 7.43 percent below the start of October). However, we remain cautiously optimistic about beating the benchmark, as we have done for the past four consecutive months.
The Cayuga Fund has seen an inflow of funds over the past few months. We began the semester with an asset base close to our target of approximately $2.6 million. Given a target portfolio of 52 stock holdings, the PMs plan their stock pitches in units of $50,000 (a full position) or $25,000 (a half position). The decision to hold a full or a half position is driven by a stock’s expected return and impact on the risk of the portfolio. Since the beginning of the semester, we have sold seven positions and acquired three new positions.
New Positions
Edison International (EIX) - Pete Morris
Pete, our utilities guru, brought Edison International into the Cayuga Fund and expects strong future performance because:
· It trades at a 60 percent discount to the sector; It has a forward P/E of less than ten.
· It has one of the largest fleets of unregulated power plants in the world.
· If Edison Mission Energy was spun-off from Edison International, the value of EME would exceed the current value of the entire company.
· Long term, bilateral contracts, additional capacity in Arizona, and more moderate summer temperatures, should reduce the risk of future deficits.
EMC Corporation (EMC) - Brayden Matthews and Mike Emery
Brayden, our friendly bartender, and Mike presented a compelling argument to add EMC Corp., a Storage Area Network software and equipment provider, to our portfolio based on the following:
As for performance, October is not over. Equities in general have experienced a significant decline in the past few weeks (at one point, the S&P500 was 7.43 percent below the start of October). However, we remain cautiously optimistic about beating the benchmark, as we have done for the past four consecutive months.
The Cayuga Fund has seen an inflow of funds over the past few months. We began the semester with an asset base close to our target of approximately $2.6 million. Given a target portfolio of 52 stock holdings, the PMs plan their stock pitches in units of $50,000 (a full position) or $25,000 (a half position). The decision to hold a full or a half position is driven by a stock’s expected return and impact on the risk of the portfolio. Since the beginning of the semester, we have sold seven positions and acquired three new positions.
New Positions
Edison International (EIX) - Pete Morris
Pete, our utilities guru, brought Edison International into the Cayuga Fund and expects strong future performance because:
· It trades at a 60 percent discount to the sector; It has a forward P/E of less than ten.
· It has one of the largest fleets of unregulated power plants in the world.
· If Edison Mission Energy was spun-off from Edison International, the value of EME would exceed the current value of the entire company.
· Long term, bilateral contracts, additional capacity in Arizona, and more moderate summer temperatures, should reduce the risk of future deficits.
EMC Corporation (EMC) - Brayden Matthews and Mike Emery
Brayden, our friendly bartender, and Mike presented a compelling argument to add EMC Corp., a Storage Area Network software and equipment provider, to our portfolio based on the following: