GREEN AND GOLD REPORTER THE

UNIVERSITY

VOLUME 2

A N OTE

OF

ALABAMA

ISSUE 1

FROM THE C HIEF I NVESTMENT

T his fall semester is ending

an interesting year for the U.S. markets. The U.S. markets were on an upward trend for three quarters and recently started faltering during the fourth quarter of 2014. Many people have wondered if this is a sustainable state Shane Thompson and if/when a [email protected] correction will occur. The coming year holds expected interest rate increases by the Federal Reserve, the continued effects of federal legislation, more international economic fluctuations, and typical U.S. market volatility. The extreme position of the market has been a great learning tool for fund members throughout this year. The current financial environment has shown the value of diversification and the downside of certain holdings. We, at the Green and Gold Fund, have continued focusing on the quality of our educational foundation to supplement the real world experience we gain from this opportunity. This quality driven focus has allowed the students to take the utmost advantage of research tools and publications supplied by UAB as well as the Bloomberg terminals UAB has granted us. Our faculty advisor, Dr. Rauterkus, began teaching some middle-level finance courses and an equity analysis course this year, and he is continuing to introduce valuation techniques and the thought process of security analysis earlier to students. This is extremely valuable because it gives fund members more time to develop their valuation skills and techniques to perfect their “art” of

AT

BIRMINGHAM

WINTER 2014

O FFICER : S HANE T HOMPSON

valuation. These classes test students’ understanding of the data and importance of certain figures through projects/presentations that have involved local professionals, depending on the course. In addition to professionals visiting certain classes, this semester, alone, our faculty advisor, Dr. Rauterkus and I were able to get individuals from IberiaBank, Regions, Vulcan Value Partners, and Warren Averett Asset Management to visit our fund, and give an insight into their careers, and let fund members take advantage of professional advice in their own research and valuations. Our Chief Marketing Director, Alicja Foksinska, has put forth a colossal amount of effort marketing us across campus, the country, and around the world, which has been accomplished using our website, LinkedIn, and Facebook page. Continued on page 2

I NSIDE THIS ISSUE : Chief Investment Officer Report

1-2

Chief Economist Report

2-3

Alternatives Sector

4-5

Consumer Goods Sector

5-6

Fixed Income Sector

6-7

Energy Sector

7-8

Financials Sector

8-9

Industrials & Materials Sector

9-10

Technology & Telecom Sector

10-11

Healthcare Sector

12-13

Page 2

GREEN AND GOLD REPORTER Just this semester we have had a 24% increase in Facebook likes, and our website has been viewed by people as far away as Japan. Since our restructuring last year, we have continued to delve even deeper into stock valuation and make ourselves known as a respected university endowment fund nationwide. As mentioned previously, 2014 is bringing a close to an interesting year with near zero interest rates, volatility in the U.S. equity market, and sustained low yields on debt instruments. The fixed income sector struggled this semester, but we liquidated our high yield bond holdings decreasing our vulnerability to market changes and lowering our duration. We seemed to sell these at the peak of a bubble, thanks to our Fixed Income Portfolio Manager, which lead to recognizing a capital gain relative to our cost basis. Concerning our equity portfolio, there was a large focus on liquidating investments that were past the two to three year time horizon and underperforming the benchmark of the Green and Gold Fund. Many sectors liquidated holdings that were unsatisfactory, therefore, freeing up cash for perspective investments. This was a strategy we saw fit for the current financial environment because some sectors needed to be revamped to take advantage of the positive growth in the equity markets, which would help to offset our fixed income holdings. Despite some of these negative results caused by the current financial markets, there has been a constant positive return this semester. The UAB Green and Gold Fund value was $564,945.37 on 31 July 2014 and valued at $580,470.76 on 30 November 2014. Calculating the compound annual growth rate resulted in a return of 8.47% for this period. With the fall equity restructuring, excess cash reserves, and the amount of returning members next semester, we feel quite confident in producing greater positive returns by focusing on quality investments that will result in future growth through 2015.

C HIEF E CONOMIST R EPORT : R OBERT M ANN

T he fall season has seen sig-

nificant changes in the United States economic environment from what has been the typical outlook since the 2008 financial crisis. Perspectives on the US economy is largely reassuring, with the Thomson Reuters/ University of Michigan Consumer Robert Mann Sentiment Index hitting an [email protected] year high in the month of December. The labor market has also shown signs of springing back to near prerecession levels, with November demonstrating a 5.8% unemployment rate, which is the lowest unemployment rate since July 2008, and U-6 unemployment dropping from 13.8% in 2013 to 12.5% in the fourth quarter of 2013 through the third quarter of 2014 averages. The US economy has bounced back in considerable fashion in 2014, but there are

still areas of concern for policy makers in Congress and at the Federal Reserve. The Federal Open Market Committee (FOMC) has been very active over the latter half of the year, sending signals to the economy of optimism for the future and their intention to slow down their accommodative monetary policy within the next year. The Federal Reserve, after a full year of tapering, decided to end its unprecedented and controversial quantitative easing program in October. The FOMC October meeting minutes show this decision was made with relative ease, with only one vote against ending the asset purchasing program. The market also seems to be preparing for a future rate hike in 2015, with the futures market predicting an almost 30% chance of the federal funds rate being at 0.75 and a 20% chance of being at 1 by the December meeting of 2015. The FOMC has also indicated a high probability of a rate hike in the Continued on page 3

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near future, and has expressed concern in two treasury securities have reached an all-time high, main areas: inflation still runs below the Federal also causing yields to decrease to American marReserve's preferred 2% long term goal and the lakets. Despite historic lows, there is an expectation bor market still lags in some of the deeper indicaof increased yields once rate hikes start. This extors such as labor force participation. New develpectation is consistent with historic trends in the opments in both of these areas will drive future fixed-income market. rate hike decisions. Higher consumer confidence shows that the The largest area of concern, however, has US economy has strong fundamentals and will likebeen international economic conditions. The Octoly weather the international economic conditions ber World Economic Outlook report compiled by in the upcoming year. Improvements in the labor the International Monetary Fund (IMF) downgradmarket and low gas prices will drive the Consumer ed the 2014 World Economic Outlook for 2014 by Goods and IT/Telecommunications sector to higher 0.1% and the 2015 Economic Outlook by 0.2%. returns and help free up credit in the economy. This downgrading is driven by uncertainty in the The NABE Business Conditions Survey administered Euro Area, Japan, and Eastern Europe. Despite an in October demonstrates increased willingness to unprecedented quantitative lend to companies for longeasing program, the Bank of term capital projects, specifi“Higher consumer confidence Japan will probably not be cally in the IT/ able to fulfill their promise shows that the US economy has Telecommunications sector. of 2% inflation by the end of Recent research done by the strong fundamentals and will 2014. The Euro Area has Federal Reserve also indialso been facing similar likely weather the international cates that default on all problems, with a 0.4% inflatypes of credit from housing economic conditions in the tion rate forcing the Europeto even consumer credit an Central Bank to lower all cards has reached its lowest upcoming year.” three of its long-term interlevel since pre-financial crisis est rates and send signals of level. These factors should a willingness to start a sovereign bond-purchasing drive a bull market in the United States and will program of its own in Europe. Lower world oil priclikely raise returns on assets in the next two to es and the global political environment in Crimea, three years, as is consistent with the Green and Syria, and Iraq has contributed to a more bearish Gold Fund's investment horizon. economic outlook in developing markets such as For the reasons mentioned above, there is Latin America, the Middle East, and Eastern Eureason for increased optimism for high returns in rope. the future year to come. The shift in Federal ReDespite global concerns, the American serve policy seems to indicate increased optimism markets remain bullish, and the majority of Ameriand confidence in the American economy. Concan investment institutions have an expectation of cerns over international economic conditions are above average returns. The Green and Gold Fund still high, and research in this sector will remain is positioning itself to address upcoming rate hikes crucial, specifically regarding the Euro area and the and heightening consumer confidence. Upcoming possibility of increased world oil prices. The Ecorate hikes have caused uncertainty in the fixed innomics sector will continue to monitor the activity come sector. Global yields on fixed income assets of the Federal Reserve and the strength of the U.S. have been decreasing, driven by uncertainty in economy in order to ensure the best investment global markets. Foreign demand in American decisions for the Green and Gold Fund.

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GREEN AND GOLD REPORTER

A LTERNATIVES S ECTOR : D ANIEL S ANABRIA The inflation-adjusted returns for the S&P 500 have averaged an annual rate of 9.05% since 1950. However, because the standard deviation during this same period has been 17.92%, it is exceedingly important that the Alternatives sector of our portfolio focuses on investDaniel Sanabria [email protected] ments that will hedge the risk of the fund as a whole by providing returns in a volatile market. For this reason, the two principal objectives of the alternatives sector of the fund over the winter semester have been to 1) invest in vehicles that can provide positive total returns in rising and falling markets and 2) generate returns that have minimal or no correlation to the S&P 500 index. To accomplish this, the Alternatives sector currently holds positions in four mutual funds:    

Permanent Portfolio (PRPFX) Oppenheimer Developing Markets (ODMAX) GlobalX InterBolsa Columbia (GXG) Virtus Dynamic AlphaSector Fund, (EMNCX)

The Permanent Portfolio ETF (PRPFX) invests in foreign securities, gold and silver bullion, and foreign real estate and natural resource companies. PRPFX represents a core holding of the Alternatives sector for its investments in a diversified mix of non-correlated asset classes. Although the YTD performance for the

fund is - 6.57%, in large part due to its substantial exposure to gold and silver, the fund has achieved consistent strong returns over the last decade. The Alternatives sector continues to view this investment as a core holding of the fund and does not recommend selling this position for the foreseeable future. Designed as core portfolio holdings, ODMAX and GXG represent part of our strategy to diversify through investments in developing markets. While the ODMAX invests in equity securities of issuers whose principal activities are in developing countries, GXG provides investment returns corresponding to the Colombia Capped Index. The recent dislocation in oil prices has particularly affected both of these positions in the past three months. Colombia is among the world’s top exporters of the commodity, and because of this reason, GXG has seen a dramatic decrease in share price because of the recent collapse in oil prices. The Alternatives sector is continuing to monitor the movement in oil prices as well as the correlation of both ODMAX and GXG to the S&P 500. TheVirtus Dynamic AlphaSector Fund (EMNCX) is a long-short equity fund utilizing a sector rotation strategy that invests in nine sectors of Continued on page 5

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the S&P 500. Over the last year, the management company running this fund has become one of the largest managers of investment products that actively use exchange-traded funds as investment vehicles. Over the last semester, we have also explored ways to make investments that will enable protection against a major market decline but are also appropriate for the sector according to the Investment Policy Statement (IPS). We have suggested that an amendment be made to the Derivatives section of the IPS that will enable the use of protective put strategies and are currently preparing a formal proposal to allow this type of investment. Additionally, a watch list of potential funds has been compiled, consisting of total return strategy funds that will bring exposure to non-correlated returns in all market conditions, which will be consistent with our overall strategy.

C ONSUMER G OODS S ECTOR : A BEDA I QBAL This past semester was good to the Consumer Goods sector with most of the companies beating both the performance of the S&P 500 and the Consumer Staples SPDR, with the exception of Ford Motor Company, F. The consumer goods sector owns Abeda Iqbal XLP as the core holding, along [email protected] with Brunswick Corp. (BC), Dollar General Corp. (DG), Ford Motor Co. (F), Pepsico, Inc. (PEP), and Whirlpool Corp. (WHR). The first task for next semester is to sell Ford to relinquish our holdings. Ford has had a rough year, with many stock price fluctuations and a few significant drops. Ford lost market share in Europe and South America, and we prospect it will continue to follow this trend for a few more months. The company has had some major setbacks that have harmed its performance. For example, it recalled 98,000 vehicles tied to faulty airbag mechanisms this year. However, Ford planned

2014 as a transition year and should see profits within the next two years. Ford is seeking longterm growth, but UAB’s Green and Gold Fund does not look for companies with long-term potential growth. As a result, we are planning to sell Ford. We have reached Dollar General’s target price and will take a closer look at the stock during spring semester if it manages to acquire Family Dollar. In the most recent earnings announcement, Dollar General saw its year-to-date revenue, net income, and free cash flow all increase. The company opened 617 new stores and has also increased customer traffic throughout the Continued on page 6

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GREEN AND GOLD REPORTER year. This shows the company knows how to bring in customers. If Dollar General manages to acquire Family Dollar, it would add to Dollar General’s economy of scale and lower prices to compete with bigger retailers. However, the potential acquisition will hold upside potential for the stock in the long-term, which would conflict with the investment policy of the Green and Gold Fund. The Consumer Goods sector will continue to produce positive returns throughout 2015. The Bloomberg Comfort Index climbed to 41.7 in the period ending December 2014, the highest in seven years. This is welcome news for U.S. businesses in the midst of the most important selling season. Gas prices are falling, and this will give consumers extra cash to spend during the holiday season. Fewer Americans are filing for unemployment benefits as the economy continues to show signs of improvement. The Federal Reserve also announced it will take its time to reign in interest rates, which would help the stock market significantly throughout 2015. In addition, this will give the consumer goods sector a better opportunity to find undervalued companies to replace Ford.

F IXED I NCOME S ECTOR : M ORGAN M AC D OUGALL D uring this semester, the pressed yields at the five and ten year mark. This

Fixed Income sector has excan be seen in the treasury yield curve below. perienced a consid(There is an image with this). erable amount of “If our sector was still holding As noted in the previous newschange. The most letter, the fixed income sector the same positions from notable of these of the Green and Gold Fund October of last year, we changes was the was restructured in an would have realized a announcement, in attempt to mitigate any posizeable loss of 37.85%” October, of tential losses due to the aforethe ending of mentioned market risks. This Morgan MacDougall the Federal Reserve’s [email protected] strategy has been successful considering the unfaQuantitative Easing Provorable conditions of the current fixed income gram. In addition to this, the fixed income market witnessed large Continued on page 7 capital outflows from the riskier high yield bonds in favor of less risky equity investments. Furthermore, there have been recent inflows of capital from Europe and Asia into the United States fixedincome market, which has de-

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market. If our sector was still holding the same positions from October of last year, we would have realized a sizeable loss of 37.85%; however, as a result of our restructuring, we have realized gains of 0.40% as of November 25, 2014. This is due in part to our investments in actively managed funds and the focus on minimizing overall portfolio duration. Moreover, we sold our position in Peritus High Yield (HYLD) at the beginning of the semester, which mitigated our losses, as the fund fell from $52.23 to its current price of $46.59. Our approach moving forward is to develop a barbell strategy centered on the two and five year mark. We feel this strategy will allow for acceptable returns while still minimizing potential market risks until interest rates stabilize. Furthermore, our sector has developed a number of industry-specific watch lists in an effort to identify undervalued bond issues. During the spring semester, we plan to liquidate our positions in sub-performing funds in order to purchase positions in corporate bonds at the two and five year mark.

E NERGY S ECTOR : B EN P HILLIPS S ince the summer, we have

sold off all of our Occidental Petroleum holdings in the Energy portfolio. We sold the holding because, at the time, the energy portfolio was overweight by $7,000 and Occidental Petroleum had a very low growth rate, which did not meet our investment criteria. Since the sale of Occidental Ben Phillips Petroleum, crude oil prices [email protected] have fallen dramatically for the first time since 2009, which has caused the energy sector to decline. Brent Crude Oil, an interna-

tional benchmark, declined over 40% in the past four months. This drop is caused by an oversupply of oil in the market provided by the United States oil shale boom, the overvalued energy stock market, the price war with OPEC, and the weakening global demand for oil. The energy portfolio has been deeply affected by the decrease in crude oil prices. Because of the destabilization of oil, we have been hesitant to invest in the Energy sector this past semester. As a result of the decline in oil prices, Oil and gas services holdings have been hit hard, which has caused our holdings, Power Shares Oil & Gas and Halliburton, to decrease in value. Oil exploration companies are seeing their profit margins squeezed, and that is forcing oil service companies to lower the price charged for the services that they provide to those companies. As a result of the downward pressure of oil prices, Halliburton has signed a deal to buy out Baker Hughes, which would optimize its costs and technology infrastructure. Despite the recent decline in crude oil prices, Alerian MLP ETF

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GREEN AND GOLD REPORTER has fared better compared to the overall energy market. This fund is primarily composed of pipeline companies, and it gives us coverage of the limited partnership arrangement. The fund’s shares outstanding has been growing year by year since its inception and continues to provide a haven for risk averse investors in the energy market. The same conservative outlook has shifted investments towards the Utilities sector, which has caused our holding, Vanguard Utilities ETF, to increase in value since the summer. In the upcoming semester, we plan to diversify our portfolio by replacing our core holding Power Shares Oil and Gas (PXJ), which is composed mainly of oil and gas services companies, with Energy Select Sector SPDR ETF (XLE). We are selling Power Shares Oil and Gas because it has been underperforming in the energy market. With the buy of Energy Select Sector SPDR, we will have more exposure to the entire Energy sector. Also, in order to be within our weight in the fund, we are seeking companies with good cash flow and return on equity that have been undervalued by the market’s reaction to the crude oil price drop.

Financials Sector: Robert Givens

Throughout the year, our goal

Altisource Residential Corporation (RESI), a REIT that we have held since December of 2012, for it is has been to continually improve less than three years old and has an unproven busithe performance of the Finanness model. In preparation for the sell, we did incials sector. To achieve this goal, depth portfolio analysis and determined that we we have restructured the Finanalso needed to reallocate the sector to maximize cials sector to maximize our effiour risk-adjusted return. For that reason, we not ciency, thereby improving our only sold our shares in RESI but also increased our ability to identify the weaknessposition in our ETF (XLF) and decreased our numes in our portfolio and locate Robert Givens ber of shares in our other holdings. While we are [email protected] replacements for any underperpleased with the decision to purchase additional forming companies. shares in XLF in an attempt to improve diversificaWhen we began in September, we decided to sell tion, we are currently seeking an investment fund Percent Return in Financials Sector that will not only 25 provide a higher XLF US Equity return but also alVRSK US Equity 20 low us to maintain BAC US Equity a high level of di15 AGO US Equity versification. 10 In addition to RESI, we have decided 5 that Bank of America (BAC) is no 0 longer a suitable 8/1/2014 9/1/2014 10/1/2014 11/1/2014 12/1/2014 company for our -5 sector because it -10

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has continually underperformed both our benchmark and the overall banking sector. We have created several screeners for various industries within the Financials sector to give us increased opportunities to identify a suitable replacement for BAC. Using our screeners, we have done extensive qualitative and quantitative research on numerous companies to find ways to enhance our sector’s performance. Rafael Rondino has been using his screeners to analyze numerous asset management companies, including KCAP Financial, and decided that Blackstone would be a good investment for our sector. Amanda Viikinsalo, who has been using her screeners to research insurance companies, believes that Aflac requires more extensive analysis. Similarly, Austin Yost, our REIT specialist, has taken a very close look at several Real Estate Investment Trusts. Additionally, we have analyzed banks like Regions Financial, PNC Bank, and JPMorgan Chase & Co. I am especially proud of our analysts, who have done exceptional work throughout their time in the Financials sector. When we return in January, we will not only continue to study these companies but also look for potential in other industries within the Financials sector.

I NDUSTRIALS & M ATERIALS S ECTOR : A NDREW C LIFTON O ver the course of the past ment horizon, this could prove to be a timely sell

two quarters, the Industrials and Materials sector has shadowed the fluctuations of the overall market. The most notable movement was a large decrease during mid-October, in which the S&P 500 and NASDAQ declined 5.40% and Andrew Clifton 5.71%, respectively. The month [email protected] of November saw very strong performance before yet another downturn during December. The industrial sector has followed these trends and XLI, our ETF, is currently on a downward move. Our highest performing holding this semester has been United Parcel Service (UPS), which has capitalized on the cyclical nature of the shipping industry. UPS experienced the midOctober slump, but unlike the rest of the market, UPS has continued to see positive results throughout December. However, because UPS operates in such a cyclical industry, its growth could be limited to the end of the holiday season. Given the Fund’s invest-

that could take advantage of UPS’s recent performance. The Fund’s investment horizon is 2-3 years, and UPS was bought in September 2011. On December 1, 2014, we liquidated our entire position in General Electric (GE). Despite being a multi-industry conglomerate that tracks very closely to the overall market, GE has been underperforming both the S&P 500 and XLI year to date. Its revenue stream has stagnated, and both its net income and free cash flow have declined over the past few years. Furthermore, GE Capital is likely to Continued on page 10

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GREEN AND GOLD REPORTER become regulated by the Federal Reserve as bank, which will have negative effects on the profitability and growth potential of GE’s largest segment. Another consideration for the sale is that GE makes up roughly 10% of XLI. As such a large percentage of our benchmark, we already reap the benefits of GE while taking a more conservative approach. GE has also been in our portfolio since 2009 and 2011, both of which were beyond the Fund’s prescribed investment horizon. The sale of GE leaves the Industrials sector slightly underweight, lending itself to a buy presentation in the coming semester. Several securities that are currently on the industrials watchlist are Danaher Corp (DHR), Southwest Airlines (LUV), and CSX (CSX). The performance of Kaiser Aluminum (KALU) has been pulled in opposite directions by several factors. The first, which has impacted the global aluminum market, is the Indonesian export ban on bauxite, used to extract aluminum. This has decreased global supply, thus spurring an increase in aluminum prices throughout the supply chain. But despite the global shortage, the specific input for KALU’s production, aluminum plate, is still abundant. KALU also benefitted from increased demand in the aerospace and automotive industries. This demand was offset, however, due to slowed economic growth in China. KALU experienced positive results through mid-September, but struggled throughout October. Along with the overall market, a November recovery has been followed by a December slump. One action moving forward for the materials sector is to diversify our portfolio. Particularly, we will purchase an ETF to comply with the Fund’s core/non-core approach. The lone materials holding is Kaiser Aluminum (KALU), which has been exposed to the unpredictable nature of the market. The materials sector is currently over-allocated. To respond, we will sell a majority of KALU and occupy the remainder of the sector with an ETF. Two ETFs that are being considered are Vanguard Materials ETF (VAW) and iShares US Basic Materials (IYM). Both indices place a large emphasis on the chemicals industry, representing over 65% allocation. However, VAW is more diversified than IYM, with more than twice the holdings representing three more industries.

T ECHNOLOGY & T ELECOM S ECTOR : J OHN (C HIP ) K ALOUSEK T he Information Technology ment holdings.

and Telecommunication secCloud computing continues to be a major tor has seen consistent trend in the technology sector as companies look growth with for ways to lower overall costs. a strong finCloud computing eliminates a “Although our IT holdings in ish to the company’s need to manage IT inAAPL, EMC, and ORCL are end of 2014. frastructure while staying on the preforming well in the current The holdcutting edge of technology. We market, we currently view the ings in the believe this technology has the John (Chip) Kalousek sector have IT sector as potentially potential to make big shifts in the [email protected] remained industry, but it is too early to say overvalued.” unchanged for sure. Despite drastic shifts in since our last management at ORCL and missed quarterly earnnewsletter. The sector currently holds iShare Globings at EMC, both of our cloud computing holdings al Tech ETF (IXN) and iShares Global Telecom ETF performed extremely well this past semester, and (IXP) as core holdings and Oracle Corp. (ORCL), we expect to see growth for the foreseeable fuEMC Corp. (EMC), and Apple, Inc. (AAPL) as investture.

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We have also recently seen strong consumer preference for larger-screen phones and new high tech wearable devices. This past semester APPL successfully launched its new larger-screen iPhone 6 Plus and the highly anticipated Apple Watch. These new devices pushed APPL to the next level increasing market share in all markets across the globe and overall contributing to the bottom line. Although our IT holdings in AAPL, EMC, and ORCL are preforming well in the current market, we currently view the IT sector as potentially overvalued. We believe the market is particularly bullish and the margin of safety in our holdings has diminished. As soon as the appropriate valuations have been completed, we intend to make a presentation to the fund to liquidate some of these holdings. In light of the recent cyber-attacks we have witnessed this past year, we believe a cyber-security holding would be an appropriate holding to replace the holding we decide to liquidate. We maintain a neutral outlook on the Telecommunications industry. We believe talk of consolidations has pushed telecom stocks above their fair value. Recent FCC talks on “Net neutrality” places an increased risk on these consolidations being put on hold. Despite this outlook, we believe there are still potentially undervalued operators abroad and also cell tower companies that may provide a sufficient margin of safety for our value investment strategy. The fund will continue to screen for potential new investments within this sector. In the spirit of being more active shareholders, the sector was honored in October to give the first proxy presentation to the entire fund based on Oracle’s (ORCL) most recent proxy statement. The sector gave recommendations about how we should vote regarding the election of the Board of Directors, executive compensation, and other stockholder proposals. We felt executive compensation was not properly aligned with company performance. Upon this conclusion, we voted against the new executive compensation proposal but voted for the stockholder proposals. The stockholder proposal included various performance metrics to determine executive compensation. The fund unanimously agreed to follow our recommendations and submit our vote to Oracle for all proposals except the new executive compensation proposal. We continue to monitor and strive to meet the fund’s allocation rates for our sectors. Information Technology was overweight by .98% at an allocation rate of 10.86%. Telecommunications was at an allocation percentage of .43%, or 1.21% underweight from the target 1.64%. Both sectors need improvements to reach our target allocation rates. Finally, the sector continues to look for undervalued securities that may provide better returns than our current holdings. Some of the securities under consideration are American Tower (AMT), Orange (ORG), Microsoft (MSTF), Vanguard Telecom Services ETF (VOX), Cisco (CSCO), and Barracuda Networks (CUDA).

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GREEN AND GOLD REPORTER

H EALTHCARE S ECTOR : W ILL D AVIS

R ecently, the Healthcare sec-

other holdings, we also decided to sell 50 shares tor has seen a boom in growth of AbbVie. AbbVie looks to have an extremely posfrom a universal increase in itive future given its drug pipeline, but at the time, biotechnology and pharmaceuit is producing returns lower than that of our ETF tical investment. With high perand Gilead. forming companies such as GilDuring the winter semester, our sector has ead leading the charge, the seen a number of interesting developments. As we consistent earnings from predicted, AbbVie has recently seen a massive Healthcare have become too surge in growth through continuously high sales of Will Davis good for many investors to its flagship drug Humira and consistently positive [email protected] pass up. While this is an exnews for its drugs in development. Humira is a tremely lucrative opportunity TNF inhibiting anti-inflammatory drug used to for the fund, the upward trend did lead to the treat inflammatory reactions resulting from a wide Healthcare sector being over-allocated at the berange of autoimmune diseases including rheumaginning of the semester by toid arthritis, Crohn’s disease, about $11,377. and ulcerative colitis. Touted “AbbVie is beginning to move Needing to sell as, “The world’s most popusome of our holdings, we lar drug”, Humira accounts in on other companies such carefully evaluated our for well over 60% of AbbVie’s as Gilead and Pfizer for their four investments, sales and brings in billions which at the time consistof dollars in revenue each share of the exceptionally ed of Abbott Laboratories, year. However, with its palucrative Hepatitis market.” Gilead Sciences, AbbVie, tent set to expire in 2016, and our Healthcare SPDR AbbVie is hard pressed to deETF. Looking initially at sign new therapeutics to repercentage growth compared to our benchmark, place the portion of future sales lost when biosimthe obvious candidate for liquidation was Abbott ilars become available for Humira. However, with Laboratories. The fund purchased 200 shares of their new Hepatitis C drug Viekirax garnering faAbbott in 2011. In 2013, Abbott split into two sepvorable opinion by the European Medicines Agenarate entities in the form of Abbott Laboratories cy’s Committee for Medicinal Products for Human and AbbVie. Abbott was to remain primarily as a Use (CHMP), AbbVie is beginning to move in on professional and consumer medical products comother companies such as Gilead and Pfizer for pany while AbbVie was to be a research-based their share of the exceptionally lucrative Hepatitis pharmaceutical firm. With their R&D capabilities market. Only time and careful observation will tell removed and a questionable set of products in the us if AbbVie can consistently match its currently pipeline, Abbott lost a considerable amount of exceptional growth. their already underperforming growth capability. Our other current holding Gilead has had a No longer up to par with our other holdings, we bit of a tumultuous time this semester. For the last sold all 200 of our shares. While this corrected a few years, Gilead has been the the poster child for majority of the problem, the sale of Abbott still left what is possible with the Healthcare sector as its our sector slightly over allocated. Comparing our Continued on page 13

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Hepatitis C treatment Sovaldi vastly outperformed With these fears in mind, our sector still does not all initial estimates and skyrocketed the compabelieve either will develop into anything more than ny’s stock price since its approval in 2013. Howeva speculative issue since similar situations in the er, as of late, there have been two primary issues past with other drugs have not lead to these dreadcausing Gilead’s growth to slow. In September, ed scenarios. The second development that hit GilGilead announced that they would license Sovaldi ead’s growth was the FDA’s approval of Harvoni. to generic manufactures in 91 developing counGilead’s newest drug, set to treat patients with tries. From Gilead’s perHep C, genotype 1, is groundspective, this would allow breaking in that it does not use “With Harvoni on the horizon, royalties through sales to interferon or ribavirin, which an untapped market, but patient warehousing, the act of both present dangerous side since the treatment was effects. However, while this holding back treatment until a new set to be sold at a fracsounds like excellent news to therapeutic is released, has caused tion of its hefty U.S. investors, it also sounds like exprice tag (around $1,000 sales of Sovaldi to decrease leading cellent news to physicians and per pill), the decision patients that would have used to a speculative slowdown in caused concern for a Sovaldi for treatment. With HarGilead’s stock price.” large portion of investors. voni on the horizon, patient This concern stems from warehousing, the act of holding back treatment two sources: the fear insurance companies would until a new therapeutic is released, has caused find it cheaper to send their patients to clinics in sales of Sovaldi to decrease leading to a speculative developing nations for treatment and the fear that slowdown in Gilead’s stock price. In closing, since the action would produce backlash from the Unitwe believe these concerns lack substance, our seced States Government, since the ability to protor still believes Gilead to be a heavy weight conduce the drug at such a low cost is indicative of tender in the market. price gouging by Gilead in developed markets.

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