haslam.utk.edu · studio entertainment direct-to-consumer walt disney co (dis) market price target...

Communication Services

Consumer Discretionary

Consumer StaplesEnergy

FinancialsHealth Care

Industrials

Information Technology

Cash

MCCLAIN SECTOR WEIGHTS

$150,000.00

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Period 2 Fund Performance

Portfolio AppraisalUT-McClain Torch Fund

3/31/20

Quantity Security Cost Basis Price Market Value Percent AssetsCOMMON STOCK

Consumer Staples271 Molson Coors Beverage Company 73.91 39.01 10,571.71 4.78

10,571.71 4.78Health Care

191 CVS Health Corporation 69.85 59.33 11,332.03 5.1285 Laboratory Corp of America Holdings 154.07 126.39 10,743.15 4.85

135 Alexion Pharmaceuticals, Inc. 94.00 89.79 12,121.65 5.4878 ICU Medical, Inc. 182.11 201.77 15,738.06 7.11

49,934.89 22.56Consumer Discretionary

116 Five Below, Inc. 39.01 70.38 8,164.08 3.69188 Johnson Outdoors Inc. - Class A 71.65 62.70 11,787.60 5.33

19,951.68 9.01Industrials

218 Owens Corning 61.71 38.81 8,460.58 3.828,460.58 3.82

Information Technology132 Paypal Holdings, Inc. 87.71 95.74 12,637.68 5.71307 Cisco Systems, Inc. 45.45 39.31 12,068.17 5.4576 Visa Inc. - Class A 136.38 161.12 12,245.12 5.53

36,950.97 16.69Communication Services

134 Electronic Arts Inc. 102.17 100.17 13,422.78 6.0664 IAC/InterActiveCorp 174.87 179.23 11,470.72 5.1872 Facebook, Inc. 144.85 166.80 12,009.60 5.4397 The Walt Disney Company 111.66 96.60 9,370.20 4.23

441 Discovery, Inc. 30.86 19.44 8,573.04 3.8754,846.34 24.78

Energy231 Marathon Petroleum Corporation 61.68 23.62 5,456.22 2.47

5,456.22 2.47Financials

160 Encore Capital Group, Inc. 33.00 23.38 3,740.80 1.69490 Universal Insurance Holdings, Inc. 24.37 17.92 8,780.80 3.97

COMMON STOCK TOTAL 12,521.60 5.66

CASH AND EQUIVALENTSFidelity Cash Reserves 22,645.76 10.23

TOTAL PORTFOLIO 221,339.75 100.00

Purchases and SalesUT-McClain Torch Fund

From 1/1/2020 to 3/31/2020

Date Quantity Price Company Ticker AmountPurchases

3/3/20 135 94.00$ Alexion Pharmaceuticals, Inc. ALXN 12,690.00$ 3/12/20 160 33.00$ Encore Capital Group, Inc. ECPG 5,280.00$

Sales1/31/20 150 78.24$ Grand Canyon Education, Inc. LOPE 11,736.24$ 3/5/20 761 14.48$ Newell Brands Inc. NWL 11,021.74$ 3/13/20 7 1,324.00$ Booking Holdings Inc. BKNG 9,267.79$

Market Price Target Price Market Capitalization EPS (TTM) P/E (TTM) Period 2 Return

$89.79 $133.00 $19.88B $10.70 8.39 (4.48%)

Alexion Pharmaceuticals, Inc. (ALXN)

Description: Alexion Pharmaceuticals, Inc. is a biopharmaceutical company that focuses on the development of biologics. They research novel molecules to treat rare and ultra-rare diseases. Recognized as a global leader in the complement cascade for their C5 portfolio including blockbuster Soliris and recently approved biosimilar Ultomiris, they are continuing to expand their footprint into new indications and therapeutic areas.

Investment Thesis: Alexion currently is valued by the market below its intrinsic value due to unwarranted downward price action resulting from the impending patent loss on blockbuster drug Soliris. The recent approval of Ultomiris, a biosimilar to Soliris, with a less intensive dosing schedule and more affordable price tag in conjunction with the early stage of competitor biosimilar development decreases the risk associated with this loss of patent protection. Furthermore, Alexion has a significant pipeline with 10 planned launches before 2023.

It is our view, the focus from this company on rare and ultra-rare diseases provides ample opportunities for growth as only 5% of diseases in the rare category have approved treatments1. These diseases also breed inherently sticky relationships as many of these diseases only have one treatment option available to them.

At this time, Alexion is scheduled to present on the impact of COVID-19 on May 6th. Due to the severe nature of the diseases that Alexion’s products treat, we view current revenue streams as more resistant to adverse effects related to the pandemic. We are closely monitoring updates from Alexion’s clinical trials should they suffer delays as other clinical trials have from the pandemic.

Return Compared to Related Indices

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SPX Index RAV Index ALXN US Equity


$39.31 $45.00 $174.72B $2.86 13.86 (17.45%)

Cisco Systems, Inc. (CSCO)

Description: Cisco Systems is one of the largest manufacturers of network gear -- routers, switches, and servers as well as software -- that moves information around the internet and corporate networks. Cisco, which has dominated the market for internet protocol-based networking equipment, also makes security devices, internet conferencing systems and other networking equipment for businesses and government agencies.

Investment Thesis:

For years, Cisco has been heavily investing into developing the global 5G expansion’s backbone. With strong adoption of the Catalyst 9000 series and release of the Silicon One Chip, they are already reaping some of the rewards of their investment. Cisco, with their IP core, is completely ready for and going to experience long-term software revenue growth from the marketplace’s longer-term shift to cloud, 5G, and 400G WIFI.

In the past quarter, Cisco has announced its planned integration with Microsoft Azure and Amazon Web Services to deliver highly secure end-to-end connectivity and better application performance. At this point, every company in the Fortune 100 is using one or more of Cisco’s security features.

Additionally, a huge portion of Cisco’s software revenue is subscription based (72%); Outside of supply chain shocks to their hardware offerings, Cisco is largely shielded from COVID-19 impacts on regular cash flow. The continued shift to a subscription model will further protect them from future macroeconomic uncertainties and slightly increase their margins. Overall, as a result of their strong infrastructure growth drivers and strength of revenue safety, Cisco is a well-devised long-term investment.

Return Compared to Related Indices 5 Year 1 Year


$59.33 $83.00 $77.38B $5.10 11.63 (19.46%)

CVS Health Corporation (CVS)

Description: CVS Health Corporation is a leading healthcare-services company operating through its 3 segments: Pharmacy Services, Retail/LTC, and Health Care Benefits, a newly created segment as a result of their merger with Aetna in 2018. They are one of the largest pharmacy and drug store chains with over 9,900 retail locations, around 1,100 walk-in medical clinics, and a major pharmacy benefits manager with 105 million members1.

Investment Thesis: CVS has marked itself as a customer-centric company focused on providing end-to-end healthcare services. HealthHUB, an integrated health care solutions concept focused on providing a one-stop-shop for community health needs, is the culmination of this model. We are currently awaiting quantitative reports on this new concept expected in Q2 of 2020, but the company reports positive qualitative factors at this time2. We are closely monitoring CVS and its exposure to COVID-19. As of this time, there have been no updates around HealthHUB. Social-distancing practices, in line with the recommendations of the WHO and the CDC, present challenges to CVS’s retail format. While CVS has been at the forefront of helping to develop a robust testing system through their drive-thru testing sites, this is unlikely to offset the reduction in store traffic, a challenge faced by all retail operators during these unprecedented times. Furthermore, we are closely monitoring developments in the health care benefits segment of the business given the increased costs associated with the pandemic that will not be matched by an equivalent increase in premiums. We remain optimistic on the fundamentals of CVS but are watchful in the face of rapid developments that have become commonplace in this environment


9.96

18.2616.79

8.84 8.35

6.87

468

101214161820

2018 Q3 2018 Q4 2019 Q1 2019 Q2 2019 Q3 2019 Q4

Total Debt to EBIT

5 Year 1 Year

36%

36%

15%

13%

Revenue by Segment

Media Networks Parks and Resorts

Studio Entertainment Direct-to-Consumer


$96.60 $144.63 $173.37B $6.68 21.42 (32.79%)

Walt Disney Co (DIS)

Description: The Walt Disney Company, together with its subsidiaries, is a diversified worldwide entertainment company with operations in four business segments: Media Networks, Parks and Resorts, Studio Entertainment, and Direct to Consumer and International. Disney has also created a new streaming service called Disney+ that contains their entire library of shows and movies1.

Investment Thesis:

Disney has been hit hard by the nationwide stay-at-home orders as its business thrives on people visiting their parks and viewing their studio films. All of their parks and hotels have been closed indefinitely since at least March 20th and it is rather unclear when they will reopen3.

They have also been forced to push back at least 7 movie premiers including Mulan and Black Widow. The movies that were supposed to premier during this time are not the only ones being affected. Production on all future movies was forced to be stopped due to social distancing guidelines2.

Due to people being forced to stay inside, Disney +’s streaming numbers will exponentially rise and Disney is expediting the speed where new titles are available on the platform.

The team is currently closely monitoring how the parks are reopening in other countries and also how many additional subscriptions the streaming services pick up. With movie theaters being closed and their parks closed for this period, Disney is not generating any revenue in those segments that made up 51% of their total revenue from 2019. Disney is a holding we will have a close eye on for P3.



$19.44 $32.74 $13.12B $2.89 6.14 (40.62%)

Discovery Inc. (DISCA)

Description: Discovery Inc. (“DISCA”) is a global media company that provides content across 220 countries and territories including the U.S. through multiple and linear distribution platforms including: pay-television ("pay-TV"), free-to-air ("FTA") and broadcast television, authenticated GO applications, digital distribution arrangements and content licensing arrangements. $DISCA is one of the world’s largest pay-TV programmers providing original and purchased content and live events to approximately 4 billion cumulative subscribers and viewers worldwide through their networks1.

Investment Thesis:

One of the big risks at the beginning of this period for Discovery was the threat of the increase of chord cutters. Discovery depends on cable subscriptions for the majority of their business.

Now that people are locked in their homes, cable viewership will increase which is an added benefit to DISCA. They have such a wide variety of shows that it caters to multiple niches of viewers.

Some cable companies might be struggling with original content right now but Discovery is loaded with a vast variety of content that has never before been seen. Due to their low production costs, Discovery does not have the pressure to deliver extremely profitable shows every single time due to the fact it can easily be replaced3.

Discovery has also made great progress on their streaming service, Discovery Go. It has become more available in other countries and has recently premiered in India.

DISCA was supposed to hold the cable rights in Europe for the Olympics this summer but that has been pushed back unto 2021. Our team thinks DISCA will continue to be a strong holding for us in the future2.



$100.17 $127.00 $30.65B $9.69 10.39 (6.83%)

Electronic Arts Inc. (EA)

Description: Electronic Arts (EA) puts gamers in action with its most popular games. Its leading titles are Madden NFL, FIFA, and Star Wars, all of which it licenses from other companies, and its own Battlefield, Apex Legends, and The Sims. While EA generates increasing sales from mobile games, the bulk of its revenue comes from games played on consoles and PCs. The company is also moving into competitive gaming and eSports with its Competitive Gaming Division.

Investment Thesis:

EA has published a well-reviewed game in every gaming sub-market that exists. From sports, to shooters, to action-adventures, and beyond, EA has created high quality titles for every type of gamer. The game diversity that EA has developed puts it in a prime position for its games to be picked up and played by any gamer, new or old. Its subscription service (EA Access) will allow new gamers to dip their toes into the ocean that is EA’s gaming library.

Gaming is simply the most cost-efficient escapist entertainment that exists. Though EA is exposed to a discretionary spending cut, as people are trapped in their housing for extended durations, the direction of discretionary spending is forced to shift towards cheaper forms of indoor entertainment. We also expect a small shift from TV to gaming. Gaming’s progression and social atmosphere, over time, is more compelling. This is emphasized with their “Stay at Home, Play Together” campaign. Quarantine is a catalyst for permanent growth in EA’s consumer base.

With fewer people being outside to make physical purchases, digital bookings will increase, subsequently increasing EA’s profit margins. Overall, EA is a strong holding in today’s environment.



$23.38 $64.50 $727.07M $5.33 5.38 (29.15%)

Encore Capital Group, Inc (ECPG)

Description: Encore Capital Group is an international specialty finance company providing debt recovery solutions and other related services for consumers across a broad range of financial assets. Encore primarily purchases portfolios of defaulted consumer receivables at deep discounts to face value and manage them by working with individuals as they repay their obligations and work toward financial recovery1.

Investment Thesis:

Encore Capital is one of the largest debt purchasers in the United States, giving them a competitive advantage in a high barrier to entry industry. The ability for Encore to purchase portfolios of non-performing loans at well below par value allows them to often times double their return on any particular portfolio1. Encore has recently focused their purchases in the United States, where cost to collect is significantly lower, leading to attractive margins1. Encore has also recently divested interest in markets where cost to collect is still relatively high, allowing them to deleverage and increase operating margin while simultaneously increasing estimated remaining collections (ERC)1.

Given recent conditions caused by COVID-19, debt in the U.S. is rising to historical amounts2. Despite the possible reduction in consumers ability to pay debts and a relaxing of regulatory framework surrounding banks holding non-performing loans, we believe collections will continue to rise with an increase in future portfolio supply characterized by lower repayment rates.

Encore’s deleveraging combined with an increase supply in U.S. debt provides not only a clear path to recovery, but opportunity for growth, making them an attractive investment moving forward.



$166.80 $225.00 $474.23B $6.48 20.29 (18.73%)

Facebook, Inc. (FB)

Description: Facebook, Inc. operates a social networking website that generates the majority of their revenue by advertisements. Facebook connects family, friends, and coworkers across the world by different programs such as Instagram, WhatsApp, and Oculus. People can share videos, pictures, and much more on their pages to encourage engagement with other users. With over 2 billion users, Facebook is one of the most popular websites in the world1.

Investment Thesis:

In a time where people are spending the majority of their time inside and constantly glued to their phone, social media use is quite prevalent.

Facebook’s overall usage rate has skyrocketed due to the amount of people working from home and quarantined. The usage rate is a key indicator for advertisers in where they should spend their dollars strategically. On the left you can see their Daily Users per quarter and should see a large increase in their Q1 Earnings Presentation. Facebook has said that their advertising revenue has not risen like the usage rate due to the lack of people willing to advertise right now2.

For a company that struggles gaining the public’s trust, Facebook has done a great job of helping people during the COVID-19 pandemic. They have banned price gouging, banned negative content, and also have provided locations of the different COVID-19 testing centers3.

With those growth drivers recently developing, Facebook still is executing its planned growth of its Facebook Messenger feature and also its groups feature.

Facebook is a company that we think will remain strong during the pandemic due to its high cash balance, low debt levels, and a business model that is robust to a moratorium on in-person commerce.


5 Year 1 Year


$71.39 $105.72 $3.95B $3.14 26.60 (44.96%)

Five Below Inc. (FIVE)

Description: Five Below is a rapidly growing specialty value retailer offering a broad range of trend-right, high-quality merchandise targeted at the teen and pre-teen customer. They offer an assortment of products, all priced at $5 and below, including select brands and licensed merchandise. Five Below seeks to transform the shopping experience of its target demographic with a unique merchandising strategy and a high-energy retail concept.

Investment Thesis:

Five Below sells a broad range of products through categories of leisure, fashion, home, party, and snacks in high traffic areas. FIVE wanted to broaden this range while still being affordable so they have created specialty “$10 below” sections in their stores. This opens up an entire new market of potential products to sell. While some stores will only receive a “$10 Below” section, others will be seeing an entire store of “$10 Below.” Benefits of this expansion include wider product range, potentially higher revenue, and more incentive to have recurring visits.

FIVE is also starting a new initiative towards customers that play video games; they will start hosting esports tournaments, trainings, and other esports events. We are monitoring the viability of this campaign as social distancing restrictions in the future could impose restrictions to these types of gatherings.

Another thing to consider in this market is that a majority of revenue is obtained through in store sales, which currently, all 900 stores are closed. However, on January 13, 2020, Five Below announced its acquisition of e-commerce platform, Hollar.com, in an effort to expand their digital capabilities1. Hollar offers a wide range of products starting at $1. We believe this move will positively contribute to the bottom line and provide as a hedge to brick and mortar retailing in the long run.



$179.23 $285.00 $16.53B $4.57 44.85 (28.05%)

InterActive Corp. (IAC)

Description: IAC/InterActiveCorp (IAC) has a portfolio of websites including influential brands with a fair share of name recognition. IAC revenues come from six business segments: Match Group, ANGI Homeservices, Applications, Vimeo, Dotdash, and Emerging & Other. IAC has become known for incubating businesses and spinning them off into separate companies; it has announced plans to spin off dating service Match Group in 2020’s second quarter.

Investment Thesis:

IAC is primed to do incredibly well as we move through the hump that is the COVID-19 pandemic. For years, they’ve been stockpiling cash to be able to handle a crisis. They have enough cash on hand to pay interest payments for about a year. They aren’t strapped for continued revenue, as more than half of their sales are subscription based2.

Moreover, only ~30% of IAC’s expenses are fixed, so, while revenues will undoubtedly take some hit, the associated costs of goods sold will also adjust downwards2. IAC’s dating services have continued to see usage, growth, and innovation1. Though ANGI Homeservices is the most likely to be hurt by a lack of home renovation in this uncertain time, a large portion of their essential-work profits will likely remain un-touched. IAC’s strong balance sheet should be able to weather this storm.

IAC still plans on spinning off Match Group, their online dating services provider, in Q2 2020. The spinoff is expected to leave non-MTCH IAC with a mountain of cash (~2.3B) and no debt2, allowing for the cheap incubation of businesses that are mortally wounded during the global pandemic. IAC is primed for an extended period of growth over the next couple years.



$201.77 $238.00 $4.19B $4.69 43.02 7.83%

ICU Medical, Inc. (ICUI)

)

Description: ICU Medical, Inc. develops, manufactures, and sells products used in infusion therapy, IV systems, and critical care applications. They are the number one provider of IV sets, needlefree connectors, and oncology CSTDS. Their primary customers are acute care hospitals, wholesalers, ambulatory clinics and other health care facilities and providers.

Investment Thesis: ICU Medical, ranked number one or number two across all its product categories1, provides essential products to hospital operations worldwide. Infusion pumps, one of its main business lines, breeds inherent customer stickiness due to the high expenditure required for customers to switch providers2. ICU is increasing the stickiness of these relationships by its investment in IV-EHR interoperability and its involvement in infusion consumables manufacturing. We are optimistic of their market position as a recent recall on Becton Dickinson’s Alaris infusion pump system presents the opportunity for ICU to increase its market share in the infusion pump business.

We were disappointed to see Smiths pull out of plans to sell their medical device unit as ICU has consistently been interested in the business. We are continuing to monitor ICU’s efforts to execute on its global strategy moving forward given this development.

We are also closely monitoring the impacts of COVID-19 on ICU’s business model. Shuttering of saline production in Puerto Rico in the wake of Hurricane Maria showed how a major shortage could rock this industry. Therefore, supply chain risk is top of mind as we actively assess industry developments.


Baxter International Inc., 40.5%

B. Braun Inc., 22.8%

ICU Medical

Inc., 17.0%

Minor Players, 19.7%

IV Solution Manufacturing Market Share 2019

5 Year 1 Year


$62.70 $91.93 $600M $5.11 11.48 (18.07%)

Johnson Outdoors Inc. (JOUT)

Description: Johnson Outdoors is a leading global innovator of outdoor recreation equipment and technologies that inspire more people to experience the awe of the great outdoors. The company designs, manufactures and markets a portfolio of winning, consumer-preferred brands across four categories: Watercraft Recreation, Fishing, Diving and Camping. Johnson Outdoors' top iconic brands include: MINN KOTA fishing motors, batteries and anchors; Cannon downriggers; Hummingbird marine electronics and charts.

Investment Thesis:

Johnson Outdoors makes outdoor activities more fun with easy to use products. Johnson Outdoors has a strong balance sheet with a large cash position and no debt. This allows for great innovation and acquisition opportunities when they arise. However, current market conditions pose a situation where we are monitoring closures of campgrounds, boat ramps, and marinas.

Johnson Outdoors cares about innovation and wants to give their customers the best outdoor experience, each and every day. Johnson Outdoors knows one the hardest factors in fishing is trying to see where the fish are, so they decided to fix that. With the all new MEGA 360 imaging fish finder, you can now see through the water with ease with the use of beam imaging technology1. MEGA 360 is a sophisticated fish finder that gives you vision underneath the water. It scans the water continuously and you get access to where the fish are and where they are hiding. It is as if there is a camera at the end of your line, it is that easy2.

While this is just one of their products, it exemplifies JOUT perfectly; deliver a superior product that exceeds customers wants, that simple. We are really excited to see how JOUT benefits the industry next.



$126.39 $149.00 $12.30B $8.35 15.14 (25.29%)

Laboratory Corp of America Holdings (LH)

Description: Laboratory Corporation of America (LabCorp) provides and develops clinical laboratory services in its LabCorp Diagnostics (LCD) segment to a variety of healthcare providers and research organizations. Through its other primary segment Covance Drug Development (CDD) it provides early-stage drug development services to biopharmaceutical clients.

Investment Thesis: LabCorp is the largest player in the diagnostic testing business with its only other major competitor as Quest Diagnostics. Customers in this industry prefer to contract with the largest labs in order to be able to reach the largest geographic base while minimizing their number of contracts with testing organizations1. LabCorp continues to expand their reach with initiatives like LabCorp at Walgreens, placing testing locations in more convenient locations for customers. While M&A activity has decreased significantly in the face of COVID-19, we believe that opportunities for bolt-on acquisitions, now pushing into the medium rather than short-term, will present opportunities for growth in the mature LabCorp Diagnostics segment. Despite the recent spin-up in testing related COVID-19, we believe there will be a significant decrease in testing volumes as a result of the pandemic. This increases our emphasis on the diversification offered by Covance over Quest. Barring a significant recession inflicting major pressure on LabCorp’s business, we continue to maintain our medium-to-long-term appraisal of growth opportunities and remain optimistic on LabCorp overall.


67% 62% 63% 62% 61% 62% 61% 60% 59%

33% 38% 37% 38% 39% 38% 39% 40% 41%

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LCD and CCD as % of Revenue

LCD CDD

5 Year 1 Year


$23.62 $35.50 $15.60B $3.97 6.04 (60.14%)

Marathon Petroleum Corporation (MPC)

Description: Marathon Petroleum Corporation is a US energy company operating in the refining & marketing, retail and midstream segments with refineries in the Gulf Coast and Midwest and a retail presence under its Speedway business segment. With more than 16 refineries, it is the US’s largest refiner and produces more than 3.1 million barrels of crude oil a day1.

Investment Thesis:

Like many companies, MPC’s value was affected by the selloff in response to COVID-19. Marathon’s value was also affected by the oil production war between Russia and Saudi Arabia. The price of oil on January 6th, 2020 was $59.04 and had fallen to $21.51 on March 23rd, 20202.

We believe that MPC’s price was overly depressed in reaction to the Saudi-Russia stand-off that began in early March, but the subsequent cratering of oil demand from the COVID-19 shutdown measures led to a drop-in crack spreads and thus MPC’s refining margins.

MPC is replacing its long time CEO, Gary Heminger, with Michael Hennigan, who has served as CEO of their limited partnership, MLPX. His ability to spin-off Speedway, their retail arm, will determine how MPC operates financially in the future3.

MPC has had a rough few months, but we still believe that they can be a solid holding for our portfolio. With new leadership coming in, a deal to slow down oil production between OPEC, Saudi Arabia, and Russia, and the future spin-off of Speedway, MPC can weather the storm and become a premier energy company.


5 Year 1 Year


$38.81 $70.22 $4.20B $3.68 11.98 (40.18%)

Owens Corning (OC)

Description: Owens Corning produces residential and commercial building materials, glass-fiber reinforcements, and engineered materials for composite systems. The company offers its products globally to various industries. Owens Corning makes insulation, roofing, and fiber-glass composites. Owens Corning is organized into three business units: composites, insulation, and roofing.

.

Investment Thesis:

Owens Corning remains the top provider for insulation, roofing, and composites in the United States. Owens Corning also has a significant presence elsewhere, with 57% of their 2019 composite revenue coming internationally1.

Owens Corning entered the year seeing high utilization rates due to manufacturing consolidation, automation, and standardized work processes2. Continued improvement in this space has allowed for a three-year average EBIT margin of 13%, which is a key metric to gauge growth, operating efficiencies, and future FCF generation.

In early 2020, Owens Corning secured $400 million in additional capital to provide for seasonal working capital needs3. Owens Corning’s next debt maturity is not until their $150M term loan due March 20213. Owens Corning is focused on curtailing operations as COVID-19 has restricted consumer spending, particularly impacting the U.S. residential roofing market.

Owens Corning’s diverse customer base along with increased operational efficiencies provides flexibility to weather economic downturns and allows for high organic growth moving forward.



$95.74 $108.60 $112.29B $2.07 51.13 (11.49%)

PayPal Holdings, Inc (PYPL)

Description: PayPal Holdings, Inc. operates a technology platform company that enables digital and mobile payments on behalf of consumers and merchants. The company’s platform allows users to shop by sending payments, transfer funds to and from their bank accounts, and hold balances within their PayPal accounts. The company offers online payment solutions along with PayPal branded credit and debit cards.

Investment Thesis:

PayPal continues to diversify its growth opportunities within the digital payments industry. Impacts from COVID-19 have contributed to decreased revenue estimates on Q1 revenues to start the year. However, with the newly acquired Honey beginning integration, PayPal expects Honey to already contribute 1.5bps to topline revenue for 20201. PayPal has realized 100,000 downloads of the Honey browser extension since the acquisition finalized earlier this year2.

Recently, PayPal also announced a collaboration with Synchrony to provide a Venmo credit card, backed by Visa. Venmo saw 56% volume growth in the recent quarter. PayPal has also been expanding into emerging markets, as their recently announced commercial partnership with MercadoLibre now allows over 50 million users in Brazil and Mexico use PayPal when they make purchases at any MercadoPago online checkout page2.

PayPal saw 22% growth in total payment volume while peer-to-peer payment volume grew 35%, representing 27% of total payment volume1. PayPal’s strong growth is helping them hedge against the estimated 1bps headwinds from the eBay operating agreement that expires in July of 20201.

PayPal’s continued expansion into emerging markets along with strong growth within their core competencies makes PayPal an attractive investment providing valuable exposure to the rapidly growing digital payments industry.


Market Price Target Price Market Capitalization EPS (TTM) P/E (TTM) Period 2 Report

$39.01 $73.25 $8.57B $1.12 11.88 (26.51%)

Molson Coors Beverage Company (TAP)

Description: Molson Coors Beverage Company is one the world’s largest brewers and is expanding into beyond beer beverages. Brands include Miller Lite, Coors Light, Carling, Blue Moon, Creemore Springs, and Doom Bar. They produce some of the biggest names in the beverage industry and they are committed to bringing new products to market that appeal to changing consumer tastes.

Investment Thesis:

While sales have been relatively flat the past few years, TAP is aiming to become a market leader. For too long they were stagnant and just let the market develop around them. They are now adamant about being proactive and are releasing new products in all beverage categories. The first big step in the right direction is launching their new hard seltzer line, Vizzy.

Vizzy has officially launched in stores country-wide and they are targeting a healthy conscious consumer. Vizzy is filled with antioxidants from the superfruit acerola. This is TAP’s largest bet in the hard seltzer space, and they are trying to capitalize on the increased popularity around the drink. Hard Seltzer sales are up almost 300% in 2020 and have shown no sign of slowing down1.

The current market has actually boosted alcohol sales as well as people remain inside. Alcoholic beverage sales saw a boost of 55% in the third week of March compared to the same time a year ago2. Beer sales specifically grew 34%3. This will partially be offset by lost sales to restaurants, stadiums, and other major beverage consumption outlets. TAP will continue to pursue innovative new drinks and will provide returns for years to come.



$17.92 $106.07 $585.72M $1.26 14.18 (35.41%)

Universal Insurance Holdings Co. (UVE)

Description: Universal Insurance Holdings Inc. operates as a holding company offering property and casualty insurance and value-added insurance services. It develops, markets, and underwrites insurance products for consumers in the personal residential homeowners’ lines of business.

Investment Thesis:

Universal Insurance Holdings Co. (UVE) provides end-to-end services within the insurance industry. UVE continues to be prominent within Florida while continuing their expansion to other states. They have recently boasted organic growth while maintaining a debt to equity ratio of 2.0%, providing flexibility and breathing room in times of economic downturn1. UVE also saw an uptick in their investment portfolio returns, up 23.9% year over year as the low interest rate environment provided price appreciation for UVE’s current debt holdings, which make up approximately 92% of their investment portfolio1.

Clovered, UVE’s in house developed proprietary software, has seen strong results in generating/retaining customers in states outside Florida. Direct premiums written outside of Florida are up 23.3% year-over-year1. Contracts outside of Florida now represent 36% of UVE’s total insured value1. Moreover, UVE’s recent growth has been complimented by their balance sheet strength, as UVE has over 75% their reinsurance capacity for June 1st, 2020 already secured1.

UVE continues to show promising signs of expansion while maintaining a solid balance sheet. Along with Clovered, UVE’s competitive advantage in the insurance industry, UVE is positioned for growth moving forward.


5 Year 1 Year


$161.12 $209.07 $317.25B $5.48 31.70 (14.11%)

Visa, Inc. (V)

Description: Visa is a global payments technology company that enables fast, secure, and reliable electronic payments across more than 200 countries and territories1. The company aids financial transactions across the globe, between and among consumers, merchants, financial institutions, businesses, and government agencies. Visa’s cards are accepted at over 53 million merchants worldwide1.

Investment Thesis:

Visa continues be at the forefront of the digital payments industry, which is growing at a 23% CAGR1. Visa is positioning themselves to now provide services to all business participants.

While impacts of COVID-19 have impacted Visa’s Q2 revenue guidance. Visa’s continued innovation/acquisition strategy has allowed new revenue streams to emerge. Visa’s recent $5.3B acquisition of Plaid, a company that allows consumers to link financial accounts to multiple apps, demonstrates Visa’s ability to expand their product line.

Visa’s consulting and analytics arm is another growth point, growing at an estimated 20% and generating $3.5 billion worth of new revenue for Visa in 20201. Furthermore, Visa is looking to further grow new opportunities within the $120T volume that involves card-based solutions, cross-border, and domestic AR/AP payments. Currently, these transactions represent only 25% of Visa’s total transaction volume but possess >75% of Visa’s revenue opportunity1.

Visa remains a leader in the digital payments industry, and their enhanced focus on providing value added services and expanding their revenue streams makes Visa an attractive investment moving forward.


joined the McClain Torch Fund in August 2019. He is a native ofKnoxville and currently a Junior pursuing a double major in Finance and Economics with acollateral in Business Analytics. This past summer, he completed an internship with CapitalOne in Richmond, Virginia working with the retail and direct bank’s fraud strategy team as a

Business Analyst Intern. He is also a brother of Pi Kappa Phi, Alpha Sigma chapter and abrother of Delta Sigma Pi, Alpha Zeta chapter. Braeden will be interning as a Summer

Analyst at JPMorgan Chase in their investment bank this upcoming summer. Following hisgraduation in May 2021, he hopes to pursue a career in investment banking.

Braeden Sheppard

joined the McClain Torch Fund in August of 2019. He is currently a Seniormajoring in Finance with a collateral in Business Analytics. He is a member of UT Investment

Group and also serves as the Philanthropy Chair of his fraternity, Alpha Tau Omega. In theSummer of 2018, Chase interned at Sallie Mae Bank as an Enterprise Risk Management Intern

where he rotated between the Credit Risk and Operational Risk departments. The followingsummer after studying abroad in London in May of 2019, he interned at Sallie Mae again as a

Loss Forecasting Intern. After he graduates in May of 2020, he will start his career in Business Valuation in Deloitte’s Philadelphia office.

Chase Truitt

Returning Managers

joined the McClain Torch Fund in January of 2020. He iscurrently a Junior majoring in Finance and Mathematics with a collateral inBusiness Analytics and a minor in Computer Science. He is a member of theChancellor’s and Math Honors programs, as well as a member of theTennessee Capital Markets Society. As a Melton Scholar, he is currently doingresearch with Dr. Bozdogan in the Business Analytics Department using deeplearning tools and genetic data to predict whether or not someone is autisticbased on their genes. He is also starting game theory research with Dr. Shulzein the Math Department. He plans to sit for the CFA Level One Exam in Juneof 2020. After he graduates in May of 2021, he hopes to pursue a Ph.D. inapplied mathematics or a career in investment banking.

joined the McClain Torch Fund in January 2020. He is aJunior majoring in Finance with a concentration in Supply ChainManagement. In Summer 2019, he interned with Holman Automotive as aFinance/Accounting Intern in Mount Laurel, New Jersey. Currently,Austin works for a local start-up called Nexidus Commodities as aCommodity Trading Intern. In this role, he is responsible for allmarketing activities as well as customer inventory analysis, customerweekly market reports, and general hedging assistance. This comingSummer, he will be returning to Holman Automotive in their VentureCapital division. Austin has a strong passion for helping entrepreneursgrow and expand businesses so he hopes to find himself in a venturecapital or private equity role after an early graduation in December 2020.

Harry Channing

Austin Taylor

joined the McClain Torch Fund in January of 2020. He iscurrently a Junior majoring in Finance and minoring in Economics alongwith a collateral in Business Analytics. He is a member of the Chancellor'sHonors Program along with continued involvement in the University ofTennessee Investment Group and the Financial Management Association.Currently, he works as an operations associate at Prosperity PartnersWealth Management in Knoxville. This summer, he will be interning atPNC Bank within their Asset and Liability Management group inPittsburgh, Pennsylvania. Upon graduation in May of 2021, he plans onpursuing a career in private equity or investment banking.

Joshua Davis

New Managers

Sources Top Ribbon *All market numbers (Market Price, Market Capitalization, EPS, P/E) came from Bloomberg* 1.Bloomberg Finance L.P. ALXN 1.“Progress in Fighting Rare Diseases.” PhRMA, https://www.phrma.org/en/Media/Progress-in-

Fighting-Rare-Diseases Graphic: Alexion Fourth Quarter and Full Year 2019. Alexion Pharmaceuticals, Inc., January 2020, https://ir.alexion.com/static-files/d81e4397-5c68-44a1-86d2-1fa0ba4ca1ab

CSCO

1.“Cisco Systems Inc. Q2 FY 2020 Results.” Cisco Systems, 2020, https://edge.media-

CVS 1.“CVS Health Corporation Form 10-K for Fiscal Year Ended December 31, 2019.” EDGAR.

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DIS

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DISCA

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2.“Overview.” Discovery Communications, 8 Apr. 2020, ir.corporate.discovery.com/investor-overview.

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EA

1.“Electronic Arts Inc. Q3 FY 2020 Results.” Electronic Arts, 2020,

ECPG

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FB

1.Bloomberg

2.Bloomberg.com, Bloomberg, www.bloomberg.com/news/articles/2020-03-24/facebook-says-ads-

3.“Keeping People Safe and Informed About the Coronavirus.” About Facebook, 10 Apr. 2020,

Ventures, 24 Mar. 2020, www.espn.com/olympics/story/_/id/28946033/tokyo-olympics-officially-postponed-2021.

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business-weakening-despite-surge-in-usage.

about.fb.com/news/2020/04/coronavirus/.

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FIVE

1.“Five Below Acquires Select Hollar.com Assets.” PJ SOLOMON, 1 Feb. 2020, www.pjsolomon.com/2020/01/13/five-below-acquires-select-hollar-com-assets/.

Graphics

“Hollar - The Online Dollar Store - Apps on Google Play.” Google, Google, play.google.com/store/apps/details?id=com.hollar.android&hl=en_US.

“Let Go & Have Fun.” Five Below, www.fivebelow.com/.

IAC

1.“Announcements.” Match Group Newsroom, 2020, newsroom.mtch.com/press-releases?item=122458.

2.IAC. “IAC Releases Note to Shareholders.” Received by Shareholders, 6 Apr. 2020.

ICUI 1. J.P. Morgan 38th Annual Healthcare Conference. ICU Medical, Inc., January 2020, 2. Utterback, Julie. “ICU Medical’s Stable Third Quarter Provides Relief from Last Quarter’s Miss;

No Change to FVE.” Morningstar, 11 November 2019, https://library-morningstar-com.proxy.lib.utk.edu/v2/quote?id=0P000002RS&typeid=ST

Graphic: Spitzer, Dan. “US Specialized Industry Report OD4107 Intravenous (IV) Solution Manufacturing.”

IBISWorld, Nov. 2019, https://my-ibisworld-com.proxy.lib.utk.edu/us/en/industry-specialized/od4107/majorcompanies#major-players.

Plum 360: Infusion System with Full IV-HER Interoperability. ICU Medical, Inc.

https://www.icumed.com/media/9648/p14-0331-2-r3_jan30_plum360_brochure_web-2.pdf

JOUT

1&2. Humminbird.com, www.humminbird.com/learn/imaging/MEGA-360-imaging.

https://ir.icumed.com/static-files/e1648100-dc91-43bc-a7c2-fcb7d3d421aa

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“MEGA 360 Is HERE.” OutdoorsFIRST, 28 June 2019, www.outdoorsfirst.com/article/mega-360-is-here/.

Humminbird.com, www.humminbird.com/learn/imaging/MEGA-360-imaging.

LH 1. Wang, Debbie. “LabCorp Posts Solid Third Quarter but Expects Muted Diagnostics

Performance in 2020. Morningstar, Oct. 2019, https://library-morningstarcom.proxy.lib.utk.edu/v2/quote?id=0P0000037R&typeid=ST.

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MPC

1.Bloomberg

2.“Crude Oil Prices - 70 Year Historical Chart.” MacroTrends, www.macrotrends.net/1369/crude-oil-

“Marathon Petroleum Corporation Names Michael J. Hennigan Chief Executive Officer | Markets

OC

1.“Q1 2020 Roadshow and Conference Presentation.” Owens Corning - Investors, Owens Corning, 19 Mar. 2020, s21.q4cdn.com/855213745/files/doc_presentations/2020/03/2020-Q1-Presentation-v3.pdf.

2.Motley Fool Transcribers. “Owens Corning Inc (OC) Q4 2019 Earnings Call Transcript.” The Motley Fool, The Motley Fool, 19 Feb. 2020, www.fool.com/earnings/call-transcripts/2020/02/19/owens-corning-inc-oc-q4-2019-earnings-call-transcr.aspx.

3.“Owens Corning Provides Business Update on COVID-19 Response.” Owens Corning, Owens Corning, newsroom.owenscorning.com/press-release/company-news/owens-corning-provides-business-update-covid-19-response.

PYPL

price-history-chart.

Insider.” Business Insider, Business Insider.

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2.Motley Fool Transcribers. “PayPal Holdings Inc (PYPL) Q4 2019 Earnings Call Transcript.” The Motley Fool, The Motley Fool, 30 Jan. 2020, www.fool.com/earnings/call-transcripts/2020/01/29/paypal-holdings-inc-pypl-q4-2019-earnings-call-tra.aspx.

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“PayPal Q4-19 Investor Update.” PayPal, Inc., PayPal Holdings, Inc, 29 Jan. 2020, investor.paypal-corp.com/static-files/0b7b0dda-a4ee-4763-9eee-76c01be0622c.

TAP

1. Duprey, Rich. “Molson Coors Goes National With Vizzy Amid Hard Seltzer Boom.” The Motley Fool, The Motley Fool, 9 Apr. 2020, www.fool.com/investing/2020/04/09/molson-coors-goes-national-with-vizzy-amid-hard-se.aspx.

2.Micallef, Joseph V. “How The COVID-19 Pandemic Is Upending The Alcoholic Beverage Industry.” Forbes, Forbes Magazine, 6 Apr. 2020, www.forbes.com/sites/joemicallef/2020/04/04/how-the-covid-19-pandemic-is-upending-the-alcoholic-beverage-industry/#fcf48bb4b0b9.

3.Micallef, Joseph V. “How The COVID-19 Pandemic Is Upending The Alcoholic Beverage Industry.” Forbes, Forbes Magazine, 6 Apr. 2020, www.forbes.com/sites/joemicallef/2020/04/04/how-the-covid-19-pandemic-is-upending-the-alcoholic-beverage-industry/#fcf48bb4b0b9.

Graphics

Frost, Peter, and Alex Parker. “MillerCoors Plans to Launch Vizzy, a Hard Seltzer with the Antioxidant Vitamin C, in 2020 .” Molson Coors Beer & Beyond, 10 Dec. 2019, www.molsoncoorsblog.com/news/millercoors-plans-launch-vizzy-hard-seltzer-antioxidant-vitamin-c-2020.

Swan, Andy. “Are Hard Sparkling Drinks Really A Threat To Beer?” Forbes, Forbes Magazine, 23 July 2018, www.forbes.com/sites/andyswan/2018/07/23/hard-sparkling-dominating/#26bc0a974ecb.

UVE

1.“Fourth Quarter 2019 Results.” UVE Investors: Universal Insurance Holdings, Universal Insurance Holdings, 3 Mar. 2020, universalinsuranceholdings.com/wp-content/uploads/2020/03/UVE-2019-Q4-Earnings-Presentation.pdf.

Graphics

“Fourth Quarter 2019 Results.” UVE Investors: Universal Insurance Holdings, Universal Insurance Holdings, 3 Mar. 2020, universalinsuranceholdings.com/wp-content/uploads/2020/03/UVE-2019-Q4-Earnings-Presentation.pdf.

V

1.“Visa 2020 Investor Day” Visa Investor Relations, Visa, Inc., 11 Feb. 2020, s1.q4cdn.com/050606653/files/doc_presentations/2020/02/Visa-Inc-2020-Investor-Day-Full-Presentation.pdf.

Graphics

“Visa 2020 Investor Day” Visa Investor Relations, Visa, Inc., 11 Feb. 2020, s1.q4cdn.com/050606653/files/doc_presentations/2020/02/Visa-Inc-2020-Investor-Day-Full-Presentation.pdf.

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