Slide 1

Generating Investment Ideas Presented by Ryan Rechkemmer September 12, 2012

Slide 2

Sage Advice It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price. I try to buy stock in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will. Never invest in a business you cant understand. -Warren Buffett

Slide 3

Thesis Points Key arguments justifying the pitch Specific to companys unique situation and investment time horizon Builds on Value-Added Research (VAR) to reveal informational edge and explain variant perception Complements valuation analysis Considers relevant risks

Slide 4

Example: Apple, Inc. New Entrants: Low -Established brand name -Intellectual property Suppliers: Low -Economies of scale -Retains pricing power Buyers: Moderate -Significant switching costs -Carrier subsidies Substitutes: Moderate -Indispensible gadgets -Incremental tech change Rivalry: High -Oligopolistic competition -Mimicry and knock-offs Threat of New Entrants Rivalry Among Existing Competitors Bargaining Power of Suppliers Threat of Substitute Products or Services Porters Five Forces Analysis Bargaining Power of Buyers

Slide 5

Superb management Competitive moat Limited downside risk Underappreciated growth potential Under-reaction to positive news Hidden assets / overstated liabilities Actionable catalysts for outperformance Poor management Few barriers to entry Bond downgrade Overly optimistic projections Under-reaction to negative news Acquisition hungry Accounting irregularities Actionable catalysts for underperformance LongShort Long vs. Short

Slide 6

What to Look for Small-cap stocks (market capitalization < $1 B) Overlooked by most analysts Untouched by large investors Likely to be inefficiently valued Foreign companies Same as above, plus offers international diversification (but check with me to make sure that MII can trade it) Special situations Includes IPOs, spin-offs, distressed / post-bankruptcy companies, takeover / buyout targets, etc. Potentially wide disparity between price and value Inherent catalysts to resolve temporary inefficiency

Slide 7

Slide 8

Easily accessible Expert opinions Current events Pros News (including online portals like CNBC, Forbes, Bloomberg, etc.) Widely read Potential biases Too broad Cons

Slide 9

Timely commentary Individual perspective Very specific focus Detailed analysis Pros Investing Websites Highly opinionated Questionable veracity Possible hidden conflicts of interest Cons

Slide 10

Stock Screeners (also applies to industry browsers) Instantly compares stocks by relative valuation, past performance, etc. Pros Purely quantitative Anchoring bias Myopic snapshot Cons

Slide 11

Informational asymmetry Discover emerging trends before professional investors Foundational to VAR Pros Personal Experience Potential biases Limited scope Cons

Slide 12

Other Resources Professional stock reports (Standard & Poors, Thomson Reuters, etc.) Yahoo! Finance stock screeners (http://screener.finance.yahoo.com/newscreener.html)http://screener.finance.yahoo.com/newscreener.html Yahoo! Finance industry browser (http://biz.yahoo.com/p/)http://biz.yahoo.com/p/ Individual companys annual and quarterly SEC filings (http://www.sec.gov/edgar.shtml)http://www.sec.gov/edgar.shtml Mutual fund and hedge fund holdings (Blue Ridge Capital, Fidelity Contrafund, etc.)

Slide 13

How to Learn More These slides will be made available on MIIs website under the Research Presentations tab, and more information can be found in the Fundamentals section.

Slide 14

Questions? Thank you!