Egpe club 20090424 meeting notes.xls

4/24/09 EGPE CLUB Meeting Notes
STOCKs to Study : AXP / GE / JOYG / NE / EWBC; To Switch Sell: SGP
Club web address: http://egpeclub.home.comcast.net Club Total Value
YTD P&L
360 Switch SELL
Current Cash Balance:
* Economic Leading Indicators & Lagging Indicators
10 Leading indicators: (1) stock prices, (2) interest rate spread (10-yr Treasury note rate - Fed rate), (3) building permits, (4) average weekly initial cla
for unemployment insurance, (5) index of supplier deliveries, (6) manufacturers’ new orders for consumer goods and materials, (7) index of consumer
expectations, (8) average weekly manufacturing hours, (9) manufacturers’ new orders for nondefense capital goods, and (10) real money supply
7 Lagging indicators: (1) commercial and industrial loans outstanding, (2) change in CPI for services, (3) ratio of consumer installment credit to pers
income, (4) average duration of unemployment, (5) average prime rate charged by banks, (6) change in labor cost per unit of output, and (7) the ratio of
manufacturing and trade inventories to sales
Toxic Assets Public-Private Investment Program (Reference: BusinessWeek 4/13/09)
* The Obama administration's Public-Private Investment Program aims to spur purchases of soured loans and real-estate-related securities to remove
them from banks' balance sheets. The plan will use up to $100 billion of bank-rescue funds from the Treasury. Funds will be set up to buy and manage
mortgage securities, The government will provide half the equity, and the partnerships can juice returns by borrowing more funds on attractive terms
from the Federal Reserve or by securing private-sector loans whose repayment is guaranteed by the Federal Deposit Insurance Corp. The way the deals
are structured, the FDIC and Treasury will absorb as much as 93% of any losses, while getting to keep just half of any profits. The private investors will
be responsible for bidding on the assets. Deadline for application to participation extended to 4/24/09
Three criteria the department listed for evaluating private investment: (1) companies have at least $10 billion in capital under management, (2) a
demonstrated ability to raise at least $500 million of new capital and (3) demonstrated experience in investing in mortgage-backed securities.
Five possible tricks: (1) SELLER FINANCING (2) PUMP AND DUMP (3) PASSING OFF THE LOSS (4) PORTFOLIO SWAPPING (5) LAYERS OF LEVERAGE
Mutual funds for toxic assets? The Obama administration is floating a plan that would allow small investors to buy into the bailouts at a relatively low
price. Bond fund companies, e.g. PIMCO, will bid to participate. Individual investors can buy the bailout bond sometime after May.
Risk for small investors depends on if the Treasury deals equally with the big players and small investors
Signs of economic progress:
Canceled government-sector layoffs, new clean-energy industry hires, a spate of refinancings, and signs of increased credit flows
"A dollar of capital in a bank can actually result in eight or ten dollars of loans to families and businesses, a multiplier effect that can ultimately lead to
a faster pace of economic growth," Obama said.
SNY (Sanofi-Aventis) EG Analysis
1970- 2008 sales: $40 billions In August 2004, Sanofi-Synthelabo acquired Aventis Sanofi-Aventis is the fourth-largest drug company in the world and the largest in continental Europe 2008 sales: 90% pharmaceuticals, 10% vaccines. Sales: Europe, 37%; North America, 33%; other, 30%. Six major therapeutic areas: thrombosis (Plavix & Lovenex), cardiovascular diseases (Aprovel), metabolic disorders (Lantus), oncology (Taxotere), central nervous system disorders (Ambien), internal medicine and vaccines. Eight blockbuster drugs2. Is SNY's businesses growing ?? + strong pipeline of over 120 drugs in development (35 in Phase 3) + An FDA advisory committee has approved Sanofi’s atrial fibrillation drug Multaq, and a new sleeping pill could be approved, as well. + rapidly aging populations, rising middle class in emerging markets +The acquisition of the Czech generics manufacturer Zentiva, should contribute to the bottom line next year - Some of the company's most profitable drugs (e.g. Lovenox) face patent challenges or expirations (faces a loss of around 25% of its profits to generics by 2013) - governments are seeking to cut healthcare costs and expand drug availability, which would adversely impact the company's margin. - US Food and Drug Administration refused to approve obesity drug Acomplia, which had been considered key to short term revenue growth Exhibit 1
42500
14%
11.1% /Yr
VL Financial Strength: A+ + Buffett owns this stock + D $1.49 (5.5%) with payout ratio of 55% 6198
1.3
KO (The Coca-Cola Company) EG Analysis
1886- 2008 sales: $32 billions BRKa owns 8.6% The Coca-Cola Company is the world’s largest beverage company KO sells concentrated forms of its beverages to bottlers (partially owned by KO), which produce, package, and sell the finished products to retailers. Operates in over 200 countries and sells over 400 different brands that produce over 3000 different products, e.g. Coca-Cola & Sprite etc. Carbonated soft drinks (CSD) constitutes 78% of KO’s sales. 2. Is KO's businesses growing ?? + Growth engines: (1) international markets are a bright spot, (2) new products will enhance an already diverse portfolio. Received (Generally Recognized As Safe) status from the FDA for an artificial sweetener, Truvia, & to begin distribution of Hansen’s highly popular Monster energy drink. - International: 74% of sales, exposing it to currency fluctuations, which are particularly adverse with a stronger U.S. Dollar (USD) - An increased consumer preference for healthier drinks has resulted in slowing growth rates for sales of carbonated soft drinks+ KO's non-CSD segment (Dasani, Glaceau Vitamin Water, POWERade & Aquarius sports drinks, Minute Maid, Nestea etc.) has been showing higher growth rates than the CSD category3. Can KO increase its market share? Exhibit 1
17545
33900
12%
3979
21.0%
-8%
-1%
3%
6%
43.8
6%
-5%
18%
VL Financial Strength: A++ + Buffett owns this stock + D $1.64 (3.6%) with payout ratio of 50% 7125
0.9

Source: http://egpeclub.home.comcast.net/~egpeclub/NJ_handouts/NJ_Club_handouts_Apr-24-2009.pdf