Friday, November 17, 2017

Tenth set of AIM student equity presentations of the fall semester will be on Friday, November 17, 2017 from 2:30 - 3:30 pm


AIM Class of 2018 Student Equity Presentations - Friday, November 17th



The tenth set of AIM student equity presentations of the fall semester will be on Friday, November 17th, 2017 from 2:30 - 3:30 pm.

Follow the link to review the student equity write-ups for November 17th (Write-up) presentations.


Location:  Marquette University, College of Business Administration - Straz Hall, 1225 W. Wisconsin Avenue, Milwaukee 53233 - in the AIM Research Room 488, 4th Floor


Equity presentations will continue the rest of the semester on Friday afternoons in the AIM Room except for the following dates:
  • Road Show in Chicago on December 1st




Wednesday, November 15, 2017

Marquette University's Milwaukee Blockchain Conference Update

Milwaukee Blockchain Conference News

Last week's Milwaukee Blockchain Conference was a big success. The morning drew close to 300 guests and the room was abuzz with excitement over this groundbreaking technology. The full event footage is now available on YouTube at https://www.youtube.com/watch?v=tM6OsKKCtig..

The conference marked the beginning of what we hope will be continued conversation around this topic. In the interest of gauging your feedback about the kinds of activities we should explore, please take a moment to complete a follow-up survey at https://marquette.az1.qualtrics.com/jfe/form/SV_eM8CBMtrfw69BrL.  Your feedback will be kept anonymous and will help inform our decisions as we plan future blockchain-related events and activities.

Finally, in case you missed it, reporter Jeff Buchanan wrote a follow-up article about the conference for Xconomy Wisconsin.




If you have any questions or comments related to Marquette's blockchain initiative, please do not hesitate to contact Heather Sullivan, Associate Director of External Relations at heather.sullivan@marquette.edu College of Business Administration and Graduate School of Management, Marquette University  http://www.marquette.edu/business/.

Tuesday, November 14, 2017

Jim Bianco will be guest hosting Bloomberg Daybreak on November 15, from 9:00am - 10:00am ET.

Jim Bianco back on campus
Jim Bianco Spoke at Marquette University Today

Jim Bianco of BiancoResearch visited some of his major Milwaukee clients today and took time to stop by Marquette’s campus at the end of the day. He talked with the students in the Investment Club, FMA, and AIM program about the financial markets, politics, Fed policy, and disruptive technology.

Jim Bianco is a nationally recognized expert on financial markets, interest rates, and geo-politics. His research is widely followed on the Street and he is a frequent guest on Bloomberg and CNBC. He's a Marquette COBA alumnus and a strong supporter of the College of Business.

Jim Bianco will be guest hosting Bloomberg Daybreak tomorrow, November 15, from 9:00am ET - 10:00am ET. He will discuss a range of topics, including tax reform, earnings, interest rates and the morning's economic releases.


Jim Bianco talked about disruptive technologies
Founded in April 1998 by James A. Bianco, Bianco Research is located in downtown Chicago. Bianco Research L.L.C is an affiliate of Arbor Research & Trading, L.L.C. Arbor is a fixed income research and brokerage firm headquartered in Barrington, IL, with offices in New York, Ft. Lauderdale, London and Geneva. Bianco Research L.L.C. has been a source of objective research and unique insights into financial markets for nearly 20 years. 

Their team of macro strategists and data scientists boasts decades of experience in financial markets. We combine cutting edge analytics and a highly visual approach to provide clear, concise conclusions. Our clients trust us to provide objective, data driven analysis and market commentary on the latest themes in financial markets.  


A current AIM International Fund Holding: ICON Plc (ICLR) by: Brian Holland "A Strong Hold for ICON"

ICON Plc (ICLR, $112.83): “ICON Keeps Momentum after Strong Q3”
By: Brian Holland, 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

• ICON Plc (NASDAQ: ICLR) is a contract research organization, which engages in the provision of outsourced development services to the pharmaceutical, biotechnology, and medical device industries.  The company operates in four geographical segments: Ireland, Rest of Europe, United States, and Rest of World.

• ICON’s acquisition of Mapi strengthens their existing commercialization and outcomes research business. The company continues to have a preference regarding capital deployment toward tuck-in M&A.

• Client Concentration continues to diversify with Pfizer declining to 16.6% of overall revenue.

• ICON posted a gross book-to-bill of 1.57x and a net book-to-bill of 1.32x.

Key points: ICON completed the acquisition of Mapi in the third quarter of 2017.  The deal was completed for $144.1 million.  Mapi is a leading patient centered health outcomes research and commercialization company.  The acquisition adds significant commercialization presence, analytics, and evidence generation and strategic regulatory expertise.  The acquisition enables ICON to access the Mapi Research Trust, the industries most subscribed library of Clinical Outcomes Assessments.  The acquisition of Mapi has led to a net revenue increase of 2.4% so far.  The company has substantial free cash flow to continue to seek attractive targets.

ICON has made an emphasis on diversifying client concentration for the company.  In the third quarter of 2016, Pfizer represented around 25.2% of the company’s net revenue.  However, in the third quarter of 2017, Pfizer accounted for only 16.6% of total revenue.  Revenue growth of 4.8% year over year was achieved in the quarter, with a 17% increase in non-Pfizer revenue.  The company expects Pfizer to account for around 18% of total revenue for the fiscal year and plans to reach 10-12% moving forward.

Finally, in the third quarter ICON posted a gross book-to-bill of 1.57x and a net book-to-bill of 1.32x.  The book-to-bill ratio is widely used in the CRO industry as a measure of demand for services.  A ratio above 1 means the company has backlog contracts or strong demand.  In the third quarter, Icon recorded business wins of $691 million, representing a 20.8% increase year over year.  Furthermore, company backlog was boosted by 8%.

What has the stock done lately?

ICON is currently trading at $120.47.  For the majority of the last 3 months, ICON has been trading around $105-$112.  However, on October 26, 2017 the stock jumped to $122.79.  The increase represented an 8.8% jump in pricing.  The increase was primarily due to a strong earnings report on that day.  The company reported EPS of $1.35, an increase of 13.4% from the third quarter in 2016 and $0.04 increase from last quarter.

Past Year Performance:

ICON has increased 57.10% in value over the past year.  The company has continued to perform strongly in the market, trading very closely to the company 52 week high.  The tremendous growth this year can be attributed to three impressive quarters and an EPS that has grown each quarter.

Source: FactSet


My Takeaway


ICON Plc has proven to be a great buy for shareholders in the past year.  The acquisition of Mapi should add a significant presence to ICON’s commercialization and improve analytics.  The company has successfully diversified their client concentration while continuing to increase revenue.  Finally, the company continues to post impressive book-to-bill numbers and business wins.  After a strong third quarter, ICON’s management believes the company will continue their success in the fourth quarter.  For these reasons, it is recommended that ICON Plc remain in the AIM International Equity fund for the time being.

Friday, November 10, 2017

Ninth set of AIM student equity presentations of the fall semester will be on Friday, November 10, 2017 from 2:15 - 3:30 pm


AIM Class of 2018 Student Equity Presentations - Friday, November 10th


The ninth set of AIM student equity presentations of the fall semester will be on Friday, November 10th, 2017 from 2:15 - 3:30 pm.

Follow the link to review the student equity write-ups for November 10th (Write-up) presentations.



Location:  Marquette University, College of Business Administration - Straz Hall, 1225 W. Wisconsin Avenue, Milwaukee 53233 - in the AIM Research Room 488, 4th Floor

Equity presentations will continue the rest of the semester on Friday afternoons in the AIM Room except for the following dates:
  • Road Show in Chicago on December 1st





Wednesday, November 8, 2017

A current AIM International Fund Holding: Kone (KNYJY) by Kevin Blank "Keen on a Kone Hold"


Kone Oyj ADR (KNYJY, $26.75): “Elevating Order Growth”
By: Kevin Blank, AIM Student at Marquette University

Disclosure: The AIM International 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

Kone (OTC:KNYJY) is a global leader in the elevator and escalator industry with 41% of revenue coming from the Asia-Pacific region and 33% coming from the European market. The Americas, Africa and Middle East represent the remaining 26%.

• The underlying fundamentals in the Chinese real estate show a healthy market, but government policies and restrictions will decide short-term cycles.

• Urbanization and equipment aging in China may provide growth opportunity in new equipment sales and management has transitioned from a cyclical business to a more defensive business through required maintenance and servicing.    

• The Americas and EMEA have seen significant order growth and a growing market share. 

Key points:

Kone had a positive third quarter with orders returning to growth China and continued order growth in the Americas and EMEA. Q3 orders received grew at a comparable change of 2.1% and sales at 4.4%. According to management, the near-term market outlook remains mixed. The Chinese new equipment market is expected to remain stable for full year 2017 and government restrictions in the Chinese residential market will have a negative effect on new equipment demand for 1H2018. The outlook remains positive for services and other new equipment markets. Kone has a proven high-quality business model that provides reoccurring maintenance revenue and participates in upside from new equipment orders.

Concerns on a China slowdown, especially due to the fast price growth in the real estate market, will impact Kone in the short term. Government restrictions in place will affect property sales and inventory levels in China. Kone is a market leader in China with ~30,000 customers including nine of China’s top ten developers. Real estate investment in China has been driven by construction activity and rising land prices. China is the world’s largest elevator and escalator market by installed base and although new equipment orders will see pressure, the market in China may shift more to services and maintenance.

Urbanization and aging equipment provides an excellent growth opportunity for Kone in the future years. The number of people living in urban areas within China continues to increase. With the lack of space and land available, buildings will continue to be built higher. By 2018, it is estimated that elevators over 15 years old will increase 22% each year, showing the need for new equipment and required maintenance.

Growth of core cities in Europe and the need for affordable housing is driving new equipment orders in Europe. New residential construction expanded 8.8% in 2016 and 2017 is expected to be ~7% growth. New non-residential construction grew 2.5% in 2016 and 2017 is expected to be ~3% in 2017. The UK and Germany are Kone’s largest modernization markets and the aging installed base provides opportunity for new building and renovation.

What has the stock done lately?

KNYJY has hovered around $26 – $28, the month of October remained relatively flat posting a 0.65% increase in share price. The market saw increased volume heading into Q3 earnings, Kone’s performance was in line with the market. In 3Q17, global new equipment market was stable in units ordered compared to 3Q16.

Past Year Performance:

The stock has increased 19.81% over the past year. The 52-week range is $21.29 - $28.17. Energy efficiency has been a major trend in the industry and Kone has benefitted from replacing hydraulic elevators with more technically advanced, space saving, energy efficient elevators.

Source: FactSet


My Takeaway


Kone’s net sales are estimated to grow by 1-3% at comparable exchange rates as compared to 2016. Revenue from orders are back on growth track and servicing segment continues to expand. EBIT has been impacted by FX and raw material costs. Growth in Europe and China will be key drivers for Kone in 2018 with the aging equipment and urbanization. Compared to their competitors, Kone has emphasized improving customer loyalty, through fast delivery of service and improving efficiency. Kone is a leader in the elevator and escalator industry and I believe Kone should remain a position in the AIM International Equity Fund.

Source: FactSet


Tuesday, November 7, 2017

A current AIM International Fund Holding: Iberdrola (IBDRY) by Derek Grifka "Powering Up"


Iberdrola (IBDRY, $31.07): “Headwinds and Tailwinds on the Horizon for Iberdrola”
By: Derek Grifka, 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
Iberdrola SA Sponsored ADR. (OTC:IBDRY) is a Spanish electric utilities company that distributes electricity and gas with an increasing emphasis on renewable energy. The company had over 34 million users across the globe in 2016 with 46% of revenue coming from Spain, 23% from the UK, and almost 21% from the US. Its primary facilities include more than 300 windfarms, over 100 hydro power plants, and hundreds of other power plants.

• Expansion in the Baltic Sea is providing energy across Germany.

• Political uncertainty in Spain presents danger for the company.

• Success in Brazil has greatly helped the company, thanks to increased wind generation.

• H1 2017 slow compared to exceptional H1 2016.

Key points:

70 wind turbines have been installed off the coast of the German island of Rugen, as of late October 2017. The 350 megawatt home should be able to power around 350,000 homes across the globe and save the environment 600,000 tonnes (1,000 kg) of CO2 emissions. This project created about 2,000 construction jobs.

Although only 5.4% of the company’s total revenue comes from Brazil, the country is becoming a major player in the company’s success. In August of 2017, the company decided it would incorporate the activity of its Brazilian subsidiary, Elektro, into Brazilian power distributor, Neoenergia.

This merger makes the company the largest electricity utility in Brazil, servicing more than 34 million people. Both companies combined for total FY 2016 revenue of 7.9 billion euros. Additionally, Iberdrola as a whole is reporting success in Brazil and reported about a 99% increase in wind generation in Brazil during Q3 2017.

Although H1 2017 was slower than H1 2016, the company is still seeing some positives. Its net profit grew 4.2% to 1.5 billion euros and it still maintains a generous dividend of 3.4%. However, Q1 EBITDA dropped 8.2% and fell 3.6% in Q2. Despite success across the globe, Spain saw lower output compared to the exceptionally high 2016.

What has the stock done lately?

The Catalan crisis in Spain caused the stock to dip to a low of just above $29 from mid-August to October 4th. In that time span, the stock decreased over 10%. The Catalan region of Spain is seeking independence to become its own independent and sovereign country because many inhabitants believe the unemployment throughout the country is slowing the region. Catalonia accounts for about 19% of Spain’s GDP, so if the region were to enact independence, this could have adverse effects on the company. However, the stock has rebounded in the recent weeks, mostly due to confidence that the break-up will not occur. This confidence comes with the ability of the Spanish government in Madrid to observe Article 155, which allows the government to intervene in the running of Catalonia.

Past Year Performance: Despite the recent blip due to the Catalan government crisis, the stock has done almost nothing but rise. In the past year, the stock rose over 19% with little volatility. Coupled with a strong dividend and a 52 week beta of -0.37, the stock is a rather safe investment with growth potential.
Source: FactSet


My Takeaway

The company still remains to be a dominant player in the utilities sector, despite slower H1 2017 results. It is a little concerning that the majority of revenue comes from Spain, and the company has been slightly struggling there. However, the slower 2017 should slightly be offset by the increase in success in Brazil and Germany. Despite the uncertainty with the Spanish government, the company should continue to be a major force across the globe.



Krause, Wall and Walker - along with 18 Marquette students - attended the 2017 'Invest For Kids' Conference in Chicago on 11/3/2017

Investment Picks from the Investment Professionals Who Presented at the 'Invest For Kids' Conference in  Chicago on November 3, 2017


The 9th annual Invest For Kids Chicago investment conference was held on Friday, November 3, 2017, at the Harris Theater. Dr. David Krause, AIM program director, and Dr. Joe Wall, Accounting professor, and Bill Walker, Adjunct Instructor of Finance, took 18 students to Chicago for the event.
The students thoroughly enjoyed the event and are thankful that Balyasny Asset Management again hosted their admission to the event and the pre-conference university scholars conference at the University Club, featuring a session with Ariel Investments CEO, John Roberts. See a previous blog posting for more background on the conference. Last year's conference picks returned 22.9% in an equal-weighted portfolio over the past year.  Here are this year's picks: click each link to go to that speaker's presentation.

Still Time to Register and Attend Thursday's Milwaukee Blockchain Conference at Marquette University Sponsored by the College of Business Administration


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DESCRIPTION

Blockchain. It’s a word that can be seen everywhere from the pages of business magazines to the websites of global professional services and tech companies. What began as the technical undergirding of the anonymous cryptocurrency bitcoin is now poised to revolutionize life as we know it by enabling the sharing of immutable contracts and records via trustless, transparent systems that remove middle men. The nascent blockchain has the potential to disrupt nearly every industry and could change the future of jobs globally for generations to come.
Join us as we bring together the area’s blockchain thought leaders for a morning of exploration on this fascinating disruptive technology.
Speakers include:
  • Marc West, Chief Technology Officer of Fiserv
  • Jennifer O’Rourke, Illinois Blockchain Business Liaison and Deputy Director of Entrepreneurship, Innovation and Technology for the State of Illinois
  • Lamont Black, Assistant Professor of Finance at DePaul University
Presentations will be followed by a panel discussion on blockchain and industry moderated by Dr. David Krause, finance professor and director of Marquette’s Applied Investment Management Program and featuring the following panelists:
  • Bob Cornell, Lead Emerging Technology Analyst at Northwestern Mutual
  • Bill Caraher, Chief Information Officer at von Briesen & Roper
  • Michael Adam, CEO of BankMyBiz.com and Founder of DocLaunch
  • Girish Ramachandra, Senior Manager for Market and Solutions at WIPFLI
  • Derek Urben, CFO and Director of Business Development at Coinigy
Doors will open at 8 a.m. for networking and a light continental breakfast, followed by presentations starting at 8:30 a.m.
The Milwaukee Blockchain Conference, an event of Milwaukee Startup Week, is sponsored by:
Questions about the Milwaukee Blockchain Conference can be directed to Heather Sullivan, associate director of external relations for Marquette's College of Business Administration, at heather.sullivan@marquette.edu.

A current AIM International Fund Holding: BAE Systems (BAESY) by Derek Grifka


Derek Grifka (BAESY, $33.17): “Aircraft Headwinds and US Tailwinds”
By: Derek Grifka, 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

BAE Systems ADR. (OTC:BAESY) is Britain’s largest defense contractor with operations in aerospace and defense and operations in cyber security. The company pays a hefty dividend of almost 4%.

• The increase in US defense spending is likely to be a major player in the success of the company.

• Disappointing Typhoon aircraft orders have caused the new CEO, as of July 2017, to cut as many as 2,000 jobs in the UK.

• An increase in electronic systems revenue from products such as flight and engine controls, electronic warfare systems, and surveillance are helping drive success.

Key points: Unfortunately, terrorism is still a threat to all countries. In response, the US government is increasing defense spending. About 39% of the BAE Systems’ revenue comes from the governments of the US, 22% from the UK, and 21% from Saudi Arabia. In early 2017, the company was awarded a $177 million contract to build a new facility at its Radford, Virginia plant. This plant will focus on the creation of smokeless gunpowder, which is projected to make its presence known again in the US defense budget. BAE is the only supplier of this product in North America.

President Trump has expressed interest in defense spending and has even grown the defense budget by over 4%, which is the fastest growth in more than a decade. Many believe that this increase will work its way to the UK eventually. Currently, the UK has not expressed too much interest in increased defense. For example, NATO demands that 2% of GDP be devoted to defense spending. While the US sits at over 3.6%, the UK dipped to 1.98% as its GDP grew faster in 2016 than its defense spending.

As for BAE’s products, almost a third of its air unit’s sales comes from the Typhoon aircraft. However, new CEO, Charles Woodburn, is cutting around 2,000 jobs (about 6% of the total UK workforce) in the production of the aircraft, since sales have been lagging. This Cold-War era aircraft has been the company’s pride and joy in the past, but times are changing and this expresses concerns about the UK’s disposition to defense spending.

This job cutting is a move towards a wider restructuring plan that could determine the fate of the aircraft as a whole. In fact, the Typhoon’s main factory in Brough, UK is losing about 400 of its 900 employees. With this many heading out of the facility, the question of whether or not to continue operations or even discontinue production of the aircraft entirely comes into play.

What has the stock done lately?

Since the announcement of the job cuts, the stock has only dropped 21 basis points as investors see the company able to focus on different aspects of the company, such as its new hybrid drones. Additionally, many see promise with the new CEO’s oil and gas background to provide a new vision and restructuring of the company as a whole.

Past Year Performance: The day Trump won the election, the stock surged over 13% because of his interest in defense spending. Since then, the stock has risen almost 23%. The stock has risen about 9% since the announcement of the new CEO in February.

Source: FactSet


My Takeaway

Terrorism will most likely never go away and there are concerns about whether or not countries have the capacity to increase defense spending. There is a greater demand for BAE’s products now, but this does not mean there will be greater profits, pending the future defense budgets of countries. There is currently a lot of pressure on the CEO to drive growth. Despite the Typhoon’s headwinds, it is possible the US could drive growth for BAE with a ripple effect that will extend overseas to Europe and beyond and ultimately feed the beast that is BAE Systems.



A current AIM International Fund Holding: Heineken NV (HEINY) by: Michael Dennison


Heineken NV (HEINY, $49.85): “HEINY at High Heights”
By: Michael Dennison, 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

Heineken NV (OTC: HEINY) engages in the manufacturing and distribution of alcoholic as well as non-alcoholic beverages. Brands include: Heineken, Dos Equis, Tecate and Strongbow. The company is the world’s “most global beer brand” with the bulk of sales coming from the United States. Heineken is located in Amsterdam, Netherlands.

• The stock has been enjoying recent success after continued sales growth and hit a new 52 week high of $53.17 last month. 

• Although domestic beer sales remain flat, growing imported beer sales remain a boon for HEINY in the United States.

• Management plans to stay active in M&A.  

Key points: Recently HEINY has been on a tear (+32.68% YTD). The firm experienced revenue growth over 5.7% in the first half of the year over the same period in 2016. A 3.9% increase in volume in the first half is the most important number here because that is that is the data point indicative of demand. The reading was a 2.6% increase in the first half of 2016. Outside the U.S. people are drinking more beer than ever as the global middle class continue to grow (+140 million people per year) and people begin to turn toward premium brands.

The United States represents a $104 billion beer market, the largest in the world. Domestic sales have been slowing (+1.8%), but this contrasts to the story being told with imported beer (+8.7%). This serves as a major boost to the world’s most global beer brand as it continues to penetrate markets with its premium, cider and non-alcoholic brands.

Management expects to continue its aggressive M&A. After finishing the purchases of both Kirin Holdings in Brazil and Punch Taverns in the United Kingdom, HEINY looks to be poised for growth in Asian emerging markets. Vietnam, which represents the 11th fastest growing market in the world for beer could be a key site for Heineken. The Vietnamese government recently announced it would divest its majority stakes in brewers Sabeco (40% market share in the country) and Habeco (18%). Vietnam represents a key launching pad for Asian emerging markets for a number of reasons. HEINY already maintains a 28% market share position in the country’s $6.5 billion market. Putting a great emphasis Vietnam would also create greater opportunity for HEINY to continue to penetrate the broader Asian markets, where 60% of the world’s population lives. 

What has the stock done lately?

After reaching a 52-week high in September, reality caught up with the company. Fears over declining consumption growth in the United States and possible tariffs being slapped on the firm’s Mexican and South American brands lead to a 5% pullback in the stock over the past month.

Past Year Performance: HEINY shares are up 15.52% over the past year. As the company continually shows sales growth overseas this trend is likely to continue. 2016 was a solid year for HEINY as the company was encouraged by solid consumption growth. 2017 is now far outpacing that of 2016 and gives claim to the stock’s recent performance described above.

Source: FactSet

 
My Takeaway

Despite the woes being felt across the broader brewing industry and declining volume growth in developed countries, HEINY continues to find new ways to compete. By positioning itself as the world’s most global beer brand, the company has diversified its market base and hedged against such developed world stagnation. With Asian emerging markets such as Vietnam poised for growth and acquisition, HEINY is perfectly set on continuing its platform. The company recently issued $800 million in long-term debt for this very purpose. I would expect to see a new 52 week high before 2017 is over.
Source: FactSet