McIntire Investment Institute

36 Pages·2011·1.83 MB·English

McIntire Investment Institute
Annual Report
FFoorr  tthhee  YYeeaarr  EEnnddeedd
December 31, 2010
Post Office Box 400173 • Charlottesville, VA 22904
www.uvamii.com
MMCCIINNTTIIRREE IINNVVEESSTTMMEENNTT IINNSSTTIITTUUTTEE
CONTENTS:
McIntire Investment Institute Description 3
Letter from the President 4
Portfolio as of December 31, 2010 5
Summary of 2010 Long Transactions 6
Summary of 2010 Short Transactions 7
NNottabblle PPorttffolliio EEventts ffrom 22001100 88
MII Restructures its Membership Selection Process 9
MII Focuses on Female Recruitment 10
MII Participates in and Sponsors Stock Pitch Competitions 11
MII Hosts Buysideand Investment Banking Recruiting Events 12
Profiles of Long Positions  13
Profiles of Short Positions  26
2010 Management Team Biographies 32
Recognition of Key Supporters 35
AAnnnnuuaall RReeppoorrtt December 22000190
22
MCINTIRE INVESTMENT INSTITUTE
McIntire Investment Institute:
MII is an entirely student-run long/short equity fund. With a
portfolio currently valued at approximately $495,000, the MII operates as a nonprofit organization under
the McIntire Foundation. Our mission is to educate present and future University students in securities
and portfolio management through investing experience with real money.
History:
The McIntire Investment Institute was conceived by McIntire alumnus (COMM, ’85) John
Griffin (President, Blue Ridge Capital). Mr. Griffin donated $1,000,000 to the University in 1993;
$575,000 was earmarked for a student-run investment organization. An initial $100,000 was made
available to the students in October 1994, and an additional $200,000 was allocated to the fund in 2000.
The Institute has since donated $150,000 of its gains, including $75,000 in April 2006 to the new McIntire
building on the Lawn.
Investment Philosophy:
The Institute strives to achieve real capital appreciation through a
variant perception of the market. The MII believes this variant perception is gained by focusing on the
key drivers of value for our investment idea and establishing credibility with our research through VAR
(value-added research). VAR involves contacting stakeholders (including customers, suppliers,
competitors, employees, experts, etc.) to understand the business. Our strategy is to go long companies
with a sustainable competitive advantage and go short companies with unsustainable business models.
IInvollvementt:
All University students are welcome and encouraged to actively participate. The MII
offers a number of programs for engaged students from the beginner to the experienced investor.
Students can seek management roles, research and present a company, or simply attend weekly
meetings and participate in discussion. The complete list of involvement positions includes: Manager,
Associate, Analyst, and Member. Managers are elected for annual terms based on investment memos
and prior involvement. Elections are held in December and April of each year.
AAnnnnuuaall RReeppoorrtt December 22000190
33
MMCCIINNTTIIRREE IINNVVEESSTTMMEENNTT IINNSSTTIITTUUTTEE
LETTER FROM THE PRESIDENT
Dear Friends of the McIntire Investment Institute:
22001100 was a very acttiive year as MMIIII ffocusedd on ambbiittiious porttffolliio, membbershhiip, andd outtreachh iiniittiiattiives. AAs tthhe
year began, MII managers hoped to raise the fund’s gross exposure, cultivate a more diverse and engaged
membership, and offer enrichment opportunities to MII members and the University community at large. As
reflectedinthisreport,eachofthefund’sgoalsweremetandsurpassed.
MIIreturned8.4percentin2010whilemaintainingacashpositionbetween15and25percentofAUMformuchof
the year. Managers inherited a portfolio with a 37.5 percent cash position. Rather than chase performance,
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percent by year end. Most importantly, managers tripled the fund’s short exposure during 2010 (p. 8). As part of
its portfolio management goals, MII also switched to Interactive Brokers, which provides lower commissions and
bettertradeexecutionthanthepreviousbrokerage.
The management team also focused on restructuring and invigorating MII’s membership. A competitive selection
process was installed and required prospective members to attend an education session, submit an investment
memo, and speak with an MII manager (p. 9). This process attracted 123 memo submissions and resulted in an
accepttanceratteoffjjustt3377.44percentt.TThhemajjoriittyoffnewmembbersareffiirstt-anddsecondd-yearsttuddentts.
Managers worked to increase the number of female members throughout the year and made significant progress
with this initiative (p. 10). During the fall semester, 13 percent of members were women and the first female
managerwaschoseninthreeyears. Thisinitiativeremainsapriorityforthe2011managementteam.
Themostexcitingeventin2010wasthe“InvestingasaCareer”panel(p.10).ThiseventwasmoderatedbyJohn
GGrriiffffiinn aanndd ffeeaattuurreedd tthhrreeee ccuurrrreenntt aanndd ffoorrmmeerr hheeddggee ffuunndd aannaallyyssttss.. PPaauull TTuuddoorr JJoonneess IIII eevveenn mmaaddee aa gguueesstt
appearanceviavideoconference.Over100studentsattendedandinteractedwiththepanelists.
MII offered several outstanding enrichment and educational events during the year. In March, the fund sent four
managers to the University of Michigan for a stock pitch competition (p. 11). MII won its bracket, which included
teamsfromtheUniversityofPennsylvania(Wharton),NewYorkUniversity,andOxfordUniversity.Duringthefall,
MIIheldtwostockpitchcompetitionsonGroundsforundergraduatestudents.
MMIIII sponsoredd edducattiionall eventts tthhroughhoutt tthhe year ((p. 1122)). TThhe ffundd enjjoyedd JJoell RRamiin’’s shhortt selllliing
seminar and plans to continue applying Joel’s lessons during 2011. Presenters from the University of Virginia
InvestmentManagementCompany(UVIMCO)andSandsCapitalManagementdiscussedrecentinvestmentsand
marketopportunities.Bill Richards ofUBSspoke to members onOctober 15andrecruiters from MorganStanley,
DeutscheBank,Citigroup,andBankofAmerica/MerrillLynchledinformationsessionssponsoredbyMII.
2010wassuchasuccessfulyeardue totheeffortsandsupportofMII’sbenefactor,managers,members,alumni,
ffrriieennddss,, aanndd aaddvviisseerrss.. JJoohhnn GGrriiffffiinn,, CChhrriiss GGoollddeenn,, DDeeaann ZZeeiitthhaammll,, BBiillll RRiicchhaarrddss,, NNoollaa MMiilllleerr,, JJooeell RRaammiinn,, DDeeggaa
Tufts, Rahul Gorawara, and Professors Dennis and DeMong were particularly supportive of the fund’s efforts. MII
hasoutperformedthemarketsinceinceptionandservedasapremiertraininggroundforstudentinvestorsdueto
theguidanceandenergyofthesesupportersandcountlessothers.
Respectfully yours,
James Rogers
22001100 PPresiiddentt
[email protected]
540-808-9474
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Annual Report 2010
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MCINTIRE INVESTTMENT INSTITUTE
PORTFOOLIO AS OF DEECEMBER 31, 2010
Annual Report Deceember 2009
5 2010
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MCINTIRE INVESTTMENT INSTITUTE
2010 LONNG TRANSACTTIONS
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6 2010
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MCINTIRE INVESTTMENT INSTITUTE
2010 SHOORT TRANSACCTIONS
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7 2010
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MCINTIRE INVESTMENT INSTITUTE
NOTABLE PORTFOLIO EVENTS FROM 2010
Focus on Short Selling
As one of its portfolio goals, the 2010 management team focused on adding more short positions.
This initiative tripled the fund’s percentage of AUM short from 3.6 percent on January 1, 2010 to
10.8 percent by year end. MII’s two most profitable shorts from the year are profiled below:
MII shorted Carmike at $16.75/share. We believed the Street’s expectations were too high
after the company released Q1 results, which were buoyed by surprise blockbusters,
including “Avatar,” and unsustainable cost cuts. A lingering disagreement with distributor
LLiionsgatte,hhiighh llevellsoffiinsiidder selllliing,andda miispercepttiion regarddiing tthhecompany’’spriiciing
powerinruralmarketscontributedtoourinvestmentrationale.
MII shorted Corinthian Colleges in early 2009 at a weighted-average price of $17.55. Our
thesis focusedon thecompany’s risky lendingandpoorqualityofinstruction.VAR foundthat
Corinthian had high teacher turnover and unsatisfied, and often unemployed, graduates.
CongressionalinvestigationsrevealedthesameconcernsandCorinthian’spriceplummeted.
Joel Ramin Seminar
Joel Ramin, a former MII manager and current analyst at Bridger Capital, led a short selling
seminar on October 15, 2010. Joel presented two case studies from his own research and
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idea generation, conducting research, and career opportunities. Joel’s presentation was very
informative and engaging and MII sincerely appreciates his involvement.
Long Positions Acquired
For brief pperiods duringg the fall semester,, MII inadvertentlyy resembled a mergger arbitragge fund
more than a long/short equity fund due to acquisitions of long positions! The transactions are
detailed below:
3M announced its acquisition of Cogent Systems on August 30, 2010. The
acquisition was completed at $10.50 a share in cash. MII entered Cogent in
early November 2009 at a weighted average price of $9.49. Following 3M’s
announcement, rumors swirled that another acquirer would bid for Cogent. MII
cllosedd iitt posiittiion att $$1111.1188//shhare. TThhe posiittiion resullttedd iin a ttottall retturn off 1188
percent.
Carlyle Group announced a buyout of Syniverseon October 28, 2010. Carlyle
offered $31 a share in cash, which represented a 30 percent premium to the
previous day’s closing price. MII entered Syniverseon January 25, 2010 at a
weiighhttedd average priice off $$1166.6666. TThhe posiittiion proviiddedd a retturn off 8866
percent.
Annual Report Decem2b0e1r 02009
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MCINTIRE INVESTMENT INSTITUTE
MII RESTRUCTURES ITS MEMBERSHIP SELECTION PROCESS
Selection Process
DDuriing tthhe FFallll 22001100 semestter, MMIIII iimpllementtedd an ambbiittiious reorganiizattiion off tthhe membbershhiip
program. Disappointed with membership demographics and engagement during the spring
semester, managers designed a competitive application process. The new selection procedure
was installed in September and required applicants to attend a research training session,
submit an original investment memo, and participate in a Meet-a-Manager conversation.
Participants
• AAllll applliicantts attttenddedd a vallue-addddedd researchh andd
160
Training fundamental analysis training session
Sessions • MII managers presented investment case studies and attendees
discussed how to structure an investment memo or pitch
• AApplliicants subbmiittedd an oriigiinall llong or shhort iinvestment
123
Investment memo that presented thesis points, risks, and catalysts
Memos • Managers reviewed all memos and invited outstanding memos
candidates to schedule a Meet-a-Manager conversation
• Each applicant met with an MII manager for 15 minutes 82
Meet-a-
Manager • Managers and candidates learned about one another and conversations
discussed MII’s structure and investment philosophy
46 new members selected
Vice President Ryan Comisky teaches an MII training session in early September.
Annual Report December 2009
Annual Report 9 2010
MCINTIRE INVESTMENT INSTITUTE
MII WORKS TO INCREASE FEMALE MEMBERSHIP AND HOSTS SPECIAL “INVESTING 
AS A CAREER” PANEL
GGaaiinniinngg FFeemmaallee MMeemmbbeerrss
The new selection process is an integral part of MII’s efforts to attract a more diverse and engaged
group of members. Historically, female members have been underrepresented in MII. The 2010
management team was particularly disappointed with MII’s lack of female members. The managers
focused on female recruitment as part of the new membership initiative. During the fall semester,
MII had eigght female members and selected its first female managger in three yyears. Events such as
the “Investing as a Career” panel and networking opportunities with MII female alumni encouraged
new female members to remain active.
“Investing as a Career” Panel
AAss ppaarrtt ooff iittss iinniittiiaattiivvee ttoo iinnccrreeaassee ffeemmaallee mmeemmbbeerrsshhiipp, MMIIII wwoorrkkeedd wwiitthh BBlluuee RRiiddggee CCaappiittaall, DDeeaann
Zeithaml, and the Women’s Business Forum at McIntire to host three female investors in the
“Investing as a Career” panel. Over 100 students attended the event, which was graciously
moderated by John Griffin. Paul Tudor Jones II spoke to attendees via video conference and the
panelists discussed their investing experiences. The panel’s poster is displayed below:
Annual Report December 2009
Annual Report 10 2010