Friday February 28Friday February 28thth, 2014 , 2014

Lafayette College Investment ClubLafayette College Investment Club

Meeting AgendaMeeting Agenda

• 1) Announcements1) Announcements• BAT (Bloomberg) Rescheduled BAT (Bloomberg) Rescheduled • Market MadnessMarket Madness• Mentor ProgramMentor Program

• 2) Market Update2) Market Update

• 3) Huron –Ticker HURN (BUY)3) Huron –Ticker HURN (BUY)

BAT TESTBAT TEST

• Bloomberg Aptitude Test Bloomberg Aptitude Test (BAT)(BAT)• April 5th at 10:00am April 5th at 10:00am

• Location is TBDLocation is TBD

• Information to follow on Information to follow on Registration in MarchRegistration in March

• The BAT aids employers in The BAT aids employers in identifying and screening identifying and screening students who wish to students who wish to pursue a career in pursue a career in business and finance.business and finance.

• Regardless of background Regardless of background will not inhibit you will not inhibit you

Market Madness 2014Market Madness 2014Lafayette College Investment ClubLafayette College Investment Club

How to Market MadnessHow to Market Madness

• 1. make a MarketWatch account 1. make a MarketWatch account --http://www.marketwatch.com/

• 2. Hit the “games” tab2. Hit the “games” tab

• 3. Hit the “find games” tab3. Hit the “find games” tab

• 4. type “4. type “Lafayette LeopardsLafayette Leopards” –then click ” –then click the name and it will enter you in, the the name and it will enter you in, the passwordpassword

Game Info Game Info

• Game name- Game name- Lafayette LeopardsLafayette Leopards

•    Password: lafpardsPassword: lafpards

• Start date- March 3Start date- March 3rdrd

• End date- March 31End date- March 31stst

• Budget: $100,000.00Budget: $100,000.00

PRIZESPRIZES

• First Prize - $First Prize - $

• Second Prize- Steak KnivesSecond Prize- Steak Knives

• Third Prize – You’re fired Third Prize – You’re fired

• We are currently in discussion what the total $ We are currently in discussion what the total $ amount for prizes will be.amount for prizes will be.

• Update next week on final prizes Update next week on final prizes

Mentor ProgramMentor Program

• Connect Students and Teach them fundamental Connect Students and Teach them fundamental analysis and technical analysis of a range of asset analysis and technical analysis of a range of asset classes.classes.

• Gain a basic understand of markets and narrow Gain a basic understand of markets and narrow focus into the goals of the Investment Clubs focus into the goals of the Investment Clubs Portfolio) Portfolio)

• It works both ways (The Mentor can learn from It works both ways (The Mentor can learn from youth an unbiased perspective with minor market youth an unbiased perspective with minor market knowledge asks questions that often may be knowledge asks questions that often may be overlooked)overlooked)

• THIS IS NOT A CLASS (this is entirely student run )THIS IS NOT A CLASS (this is entirely student run )

• We want to emphasize this is a student initiative We want to emphasize this is a student initiative and will be informal and interactive.and will be informal and interactive.

Example of Mentor Example of Mentor SessionSession

• Lunch Meetings and Potentially Evening DinnersLunch Meetings and Potentially Evening Dinners

• We will provide you with a company (single stock) you We will provide you with a company (single stock) you will do prior research and come in with questions.will do prior research and come in with questions.

• We will walk you through how we analyze companies We will walk you through how we analyze companies and why or why not the company will fit the vision of and why or why not the company will fit the vision of our portfolio.our portfolio.

• The success of this program is in the hands of you.The success of this program is in the hands of you.

• The greatest piece of feedback I received from the The greatest piece of feedback I received from the handout on recommendations for the club was the handout on recommendations for the club was the feeling of inadequate fundamental skills.feeling of inadequate fundamental skills.

• Here's your chanceHere's your chance

Board MeetingsBoard Meetings

• Mondays 12:15 PM Simon LobbyMondays 12:15 PM Simon Lobby

• If you have an idea please come with some sort of If you have an idea please come with some sort of substance as to what the idea is.substance as to what the idea is.

• Rough outline it doesn’t have to be Rough outline it doesn’t have to be comprehensive but an outline is necessary.comprehensive but an outline is necessary.

• If you have questions please don’t hesitate to If you have questions please don’t hesitate to contact me contact me Simont@lafayette.edu

• Sign in sheets up front for mentor program email Sign in sheets up front for mentor program email chain, general club news chain, and board chain, general club news chain, and board meeting chain (for those interested in running at meeting chain (for those interested in running at the end of the semester) the end of the semester)

Market UpdateMarket Update

By: Jason Shavel and Andrew FaettBy: Jason Shavel and Andrew Faett

Recap of Key Financial News in MarketsRecap of Key Financial News in Markets

S&P 500S&P 500

• Index hits record high – 9.13 points on the weekIndex hits record high – 9.13 points on the week

• Federal Reserve Chair Janet Yellen blamed recent Federal Reserve Chair Janet Yellen blamed recent weakness on weather.weakness on weather.• Testifying before the Senate Banking Committee, Testifying before the Senate Banking Committee,

Yellen also said the Fed would watch carefully to make Yellen also said the Fed would watch carefully to make sure weather was indeed behind the recent weakness.sure weather was indeed behind the recent weakness.

• Still maintained dovish outlook – stating positive data Still maintained dovish outlook – stating positive data would have to come for tapering to speed up.would have to come for tapering to speed up.

• 1,848.36 points has been a resistance point1,848.36 points has been a resistance point

• For the year, the S&P 500 index is now up 0.3 For the year, the S&P 500 index is now up 0.3 percentpercent

TreasuryTreasury

• Following S&P Treasury sells $35B in 5yr NotesFollowing S&P Treasury sells $35B in 5yr Notes

• 33rdrd Note Auction of the week pulling in $109B Note Auction of the week pulling in $109B

• Treasury 10-year note yields touched the Treasury 10-year note yields touched the lowest level in almost three weekslowest level in almost three weeks

• Ten-year yields fell three basis points, or 0.03 Ten-year yields fell three basis points, or 0.03 percentage point, to 2.64percentage point, to 2.64

• The Bloomberg U.S. Treasury Bond Index, The Bloomberg U.S. Treasury Bond Index, which was on track for a monthly decline until which was on track for a monthly decline until this week’s surge, has gained 0.2 percent in this week’s surge, has gained 0.2 percent in February.February.

PfizerPfizer

• 85,000 person study85,000 person study

• Prevnar-13 Vaccine (pneumonia immunization Prevnar-13 Vaccine (pneumonia immunization trial for adults aged 65 or more were trial for adults aged 65 or more were successful).successful).

• Physicians and providers showing interestPhysicians and providers showing interest

• Stock rose 2% following the news, almost up Stock rose 2% following the news, almost up 10% on the month. 10% on the month.

MicrosoftMicrosoft

• Emerging competitor in Health Care Tech MarketEmerging competitor in Health Care Tech Market

• Matching of Windows and Health Tech software Matching of Windows and Health Tech software could swing more attention back to Microsoftcould swing more attention back to Microsoft

• Return of Bill GatesReturn of Bill Gates• The return of Steve Jobs to Apple and Howard Schultz The return of Steve Jobs to Apple and Howard Schultz

to Starbucks are some of the best examples of to Starbucks are some of the best examples of companies that were reinvigorated with the founderscompanies that were reinvigorated with the founders

• He is not returning as the CEO, acting as a He is not returning as the CEO, acting as a consultant.consultant.

• Stock trades at relatively attractive multiples to Stock trades at relatively attractive multiples to comps comps

MarketsMarkets

• Dow- +74.24 (.46%)Dow- +74.24 (.46%)

• FTSE- +11.12 (.16%)FTSE- +11.12 (.16%)

• Nikkei 225- -21.59 (.14%)Nikkei 225- -21.59 (.14%)

• Gold- $1,331.80 (-.01%)Gold- $1,331.80 (-.01%)

• News to watch todayNews to watch today::

• The second estimate of Q4 GDP will be released at 8:30 ETThe second estimate of Q4 GDP will be released at 8:30 ET

• Chicago PMI for February will cross the wires at 9:45 ET. Chicago PMI for February will cross the wires at 9:45 ET.

• The final reading of the Michigan Sentiment survey for February will be reported at The final reading of the Michigan Sentiment survey for February will be reported at 9:55 ET 9:55 ET

• Pending Home Sales report for January will be released at 10:00 ET. Pending Home Sales report for January will be released at 10:00 ET.

Huron Consulting Group Huron Consulting Group (HURN)(HURN)

175 Shares @ $66.72175 Shares @ $66.72

BackgroundBackground

• Headquarters in Chicago, IllinoisHeadquarters in Chicago, Illinois

• Provides services in 4 broad segments:Provides services in 4 broad segments:• HealthcareHealthcare• Financial ServicesFinancial Services• LegalLegal• Education and Life Sciences Education and Life Sciences

ThesisThesis

• Clients face a changing marketplaceClients face a changing marketplace

• 20-40% cost cutting across all hospitals20-40% cost cutting across all hospitals

• Huron Financial has backlog of clients for 2014Huron Financial has backlog of clients for 2014

• Rely on consulting firms to help them adapt Rely on consulting firms to help them adapt

• Ability to deliver exceptional valueAbility to deliver exceptional value

RevenueRevenue

• $720 million in 2013 (15% growth)$720 million in 2013 (15% growth)

• Anticipate $765 - $795 million for 2014 (6-Anticipate $765 - $795 million for 2014 (6-10%) 10%)

• Revenue guidance conservatively estimatedRevenue guidance conservatively estimated

Competitive AdvantageCompetitive Advantage

• Drive revenue through: Drive revenue through:

• 1) Billable hours 2) Rate per hour1) Billable hours 2) Rate per hour

• Earned unexpected healthcare fees due to Earned unexpected healthcare fees due to value provided for clientvalue provided for client

• Fees increased across all 4 segmentsFees increased across all 4 segments

• Demonstrates ability to deliver resultsDemonstrates ability to deliver results

Executive Executive CompensationCompensation

• Board Members have “skin in the game”Board Members have “skin in the game”

• All own stock options in the company All own stock options in the company

• CEO James Roth has nearly $12 million CEO James Roth has nearly $12 million

• Aligns board and shareholder interestAligns board and shareholder interest

ValuationValuation

• P/E ratio = 22.91 P/E ratio = 22.91

• Industry Average = 23.17Industry Average = 23.17

• Key Competitors: ACN = 17.73 / NCI = 16.72Key Competitors: ACN = 17.73 / NCI = 16.72

• P/S ratio = 2 P/S ratio = 2

• Industry Average = .79Industry Average = .79

• ACN = 1.85ACN = 1.85

• NCI = 1.15NCI = 1.15

• Beta = .99Beta = .99

Company HeadlinesCompany Headlines

• Introduced share repurchase program – up to Introduced share repurchase program – up to $50 million for 2014$50 million for 2014

• Demonstrates confidence in company outlookDemonstrates confidence in company outlook

• Acquired Blue Stone International and Frankel Acquired Blue Stone International and Frankel Consulting in 2013 Consulting in 2013

• Further penetrate Life Sciences and IT marketFurther penetrate Life Sciences and IT market

• Paid off nearly 34% of debt in 2013Paid off nearly 34% of debt in 2013

• Have $58 million in cash still on Balance SheetHave $58 million in cash still on Balance Sheet

Word on the StreetWord on the Street

• Most Analysts have “buy” or “strong buy”Most Analysts have “buy” or “strong buy”

• Average target price of $75 Average target price of $75

• Upgraded following Q4 Earnings CallUpgraded following Q4 Earnings Call

• Beat Estimates by $.02Beat Estimates by $.02

RisksRisks

• Valuations are on the high sideValuations are on the high side

• Indicates stock could be a bit overvalued Indicates stock could be a bit overvalued

• 52 week increase of 72.6% 52 week increase of 72.6%

• Market may have priced in growth in Market may have priced in growth in HealthcareHealthcare

• Consulting is a client demand driven businessConsulting is a client demand driven business

• Reliant on client need to generate revenueReliant on client need to generate revenue

ConclusionConclusion

• Huron operates in volatile industriesHuron operates in volatile industries

• Generate high fees due to value providedGenerate high fees due to value provided

• Huron Financial enjoyed 36% revenue growthHuron Financial enjoyed 36% revenue growth

• Expected to continue due to client backlogExpected to continue due to client backlog

• Investment Club penetrates new marketInvestment Club penetrates new market

• Hedge risk against other investments:Hedge risk against other investments:• Pfizer, Gilead Sciences, Goldman, J.P. MorganPfizer, Gilead Sciences, Goldman, J.P. Morgan