Blue Hen Investment Club

2016 ANNUAL REPORT

1/1/2016 – 12/31/2016

Blue Hen Investment Club

INTRODUCTIONS

PresidentJoshua Carruthers

SeniorFinance & Economics

Executive Board

Vice PresidentColin Miller

SeniorFinance & Accounting

Portfolio StrategistTheodore Walker

SeniorFinance

Economic StrategistMichael McCormick

SeniorFinance & Accounting

OperationsJack Benotti

JuniorFinance

INTRODUCTIONS

Organizational Chart

Consumer Discretionary Consumer Staples Energy & Utilities Financials

A.J. Smiley & Joe Schwab Justin Ferrarie & Matthew Gordon Jack Benotti Joshua Stern & Timothy Friedmann

Analysts Analysts Analysts AnalystsCarter Compello Anthony Manno Frank Haendel Tony Liu

Ryan Fante Zachary Weisel Matthew Renzi Alexander FishSamantha Besold Allie Trimble Andrew Tom Amanda Sluzewski

Kristen Rossi Kody Clark James HamoryAndrew Sargent Jack Hoffman

Healthcare Industrials & Materials IT & Telecomm

Jake Fertell & Jake Perrone Rory Smith & Ryan O’Donnell S.J. Desai & Rees Tillotson

Analysts Analysts AnalystsHannah Crismon Fletcher Comrie Colt Armstrong

Luke Malone Brandon Zenick Markus KoenigerRoy Geng Thomas Burkhart Ryan BondWill Visser Alan Concha Trey Brunson

Courtney Zozulia Joe Colontonio

TABLE OF CONTENTS

New Developments

Portfolio Performance

Investment Highlights

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13

22

Future Initiatives 29

Future Initiatives

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New Developments



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NEW DEVELOPMENTS

AMT Financial Modeling• Leading investment banking & private equity training firm

− Provides training programs for Credit Suisse, Deutsche Bank, Mizuho, Goldman Sachs, etc

• Two 8-hour sessions led by former Goldman Sachs banker− Accounting Fundamentals− Integrated Financial Model Standards− Valuation Fundamentals− Trading Comparables− DCF Analysis

NEW DEVELOPMENTS

Portfolio Management Committee• Committee was created to streamline portfolio oversight and performance reporting

− Comprised of an analyst from each sector− Analysts contribute to performance analysis through weekly and quarterly reports

• Performance Reporting:− Quarterly reports discuss trends in the capital markets, sector highlights, and the overall performance

of the portfolio − Introduction of weekly reports to cover recent news, position returns, and an overview of the

portfolio’s performance

• Portfolio Oversight:− An alert system was established for each holding based on price target− Committee analysts update sector heads on position movements relative to established price targets

NEW DEVELOPMENTS

Benchmark-Weighted Strategy• New strategy implemented to focus on generating alpha through stock-selection, rather than

sector asset allocation• Previous allocation strategy was ineffective:

− Sector allocation decisions were conducted with much less research than equity selection− Most sector allocation divergences were too insignificant to provide allocation-based returns − A benchmark-weighted strategy falls in line with the club’s traditional “bottom-up” investment

approach

NEW DEVELOPMENTS

Charitable Grant Committee• Grant Committee established to provide financial backing to University of Delaware

Registered Students Organizations• No more than 2% of the portfolio’s trailing three-year average value can be distributed in a

given year− No minimum amount of capital required to be donated− Grants are to be reassessed each year

• RSO’s and Non-Profits apply and interview through a formalized procedure− Distribution decisions made by the Committee− Semester reporting is mandated and made available to all club members

• 2017 YTD, the Grant Committee has already extended $12,000 in donations− Organizations: UDance, Engineers Without Borders, Honors Engaging in Neighborhood Service

NEW DEVELOPMENTS

Recruitment Success• Increased networking abilities have led to greater job placement

− Club members continue to build a professional network through the use of LinkedIn, cold-emailing, and various other networking mediums

− Use of BHIC resources such as interview guides, email templates, and resume/cover letter guides

• Alumni speakers at club meetings continue to benefit members− Provide insight into different industries and career paths of previous graduates− Speakers this fall included a BlackRock portfolio manager, private derivatives trader for Diamond

Carter Trading, and a partner at Greyrock Capital Group

NEW DEVELOPMENTS

Career & Internship Placement

Position Name Placement Division LocationsPresident Joshua Carruthers Mizuho Securitization New York, NYVice President Colin Miller Mizuho Acquisition Finance New York, NYPortfolio Strategist Theodore Walker Marshall & Stevens Structured Finance New York, NYHealthcare Jake Fertell Hamilton Lane Private Equity Philadelphia, PAEnergy & Utilities Frank Haendel Bank of America Corporate Finance Wilmington, DEFinancials Joshua Stern Franklin Templeton Asset Management New York, NYInformation Technology Colt Armstrong Northwestern Mutual Financial Planning King of Prussia, PAInformation Technology Ryan Bond Morgan Stanley Wealth Management Greenspring, MDInformation Technology Trey Brunson Grant Thornton Advisory Alexandria, VA

Operations Jack Benotti Mizuho Credit Risk New York, NYOperations (hiatus) Hayley TenHoopen KPMG Advisory New York, NYEnergy & Utilities Andrew Tom Deloitte Advisory New York, NYIndustrials & Materials Alan Concha Merril Lynch Wealth Management New York, NYHealthcare Hannah Crismon Vanguard Asset Management Malvern, PAConsumer Discretionary Kristen Rossi J.P Morgan Corporate Finance Newark, DEFinancials Alexander Fish J.P Morgan Asset Management Newark, DEInformation Technology S.J. Desai PwC Advisory New York, NYConsumer Discretionary Andrew Sargent Urban Outfitters Corporate Finance Philadelphia, PAFinancials Jack Hoffman Boston Financial Management Asset Management Boston, MAEnergy & Utilities Matthew Renzi Suntrust Robinson Humphreys Investment Banking Atlanta, GAHealthcare Roy Geng Protiviti Risk New York, NYFinancials Amanda Sluzewski Bloomberg Data Analytics Princeton, NJConsumer Discretionary Samantha Besold J.P Morgan Treasury Services New York, NY

Full Time Placement

Internship Placement

Future Initiatives

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New Developments



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PORTFOLIO PERFORMANCE

BHIC vs. S&P 500

6.3%

11.9%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

Beg Jan January February March April May June July August September October November December

BHIC S&P500


Monthly Returns vs. S&P 500

-6.7%

-0.1%

7.0%

-0.4%

1.0%

-0.7%

3.7%

0.7%

-0.6%

-2.4%

3.5%

1.8%

-5.0%

-0.1%

6.8%

0.4%

1.8%

0.3%

3.7%

0.1% 0.0%

-1.8%

3.7%

2.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

January February March April May June July August September October November December

BHIC S&P 500


Sector Performance vs. S&P 500

2.7%

0.8%

6.2%

21.2%

-9.9%

-3.7%

12.2%

5.9%

5.4%

23.9%

18.2%

-2.8%

18.0%

14.9%

-15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%

Consumer Discretionary

Consumer Staples

Energy & Utilities

Financials & Real Estate

Health Care

Industrials & Materials

IT & Telecomm

S&P 500 BHIC


Annualized Risk & Return vs. S&P 500

6.3%

11.3%11.9%

9.9%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Total Return Standard Deviation

BHIC S&P 500


Sharpe Ratio & Alpha vs. Large Cap Value Fund Peers

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

Sharpe Ratio

BHIC Sharpe: .53

-1.00

-0.80

-0.60

-0.40

-0.20

0.00

0.20

0.40

Alpha

BHIC Alpha: -.56


BHIC Financials vs. S&P 500 Financials

21.2%

21.8%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Beg. Jan January February March April May June July August September October November December

BHIC Financials S&P 500 Financials


BHIC Health Care vs. S&P 500 Health Care

-9.9%

-2.8%

-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

Beg. Jan January February March April May June July August September October November December

BHIC Healthcare S&P 500 Healthcare


Portfolio P/E Ratio & Dividend Yield

20.0

20.9

14.0

15.0

16.0

17.0

18.0

19.0

20.0

21.0

22.0


BHIC S&P 500

2.5%

2.1%2.0%

2.2%

2.4%

2.6%

2.8%

3.0%


BHIC S&P 500

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New Developments



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INVESTMENT HIGHLIGHTS

Strategy & Summary Statistics

MetricsNumber of Holdings 33

Holdings Outside Benchmark 17

Avg. Position Size 3.1%

Avg. Market Capitalization ($B) 79.4

Management Fee 0.0%

• Increase position concentration− Reduction from 43 holdings

• Increased emphasis on competitive advantage

− Story, catalysts, pricing

• Smarter capital allocation

− Attention to position entry and exit


Position Analysis – Largest Holdings

Weight Dividend Yield

Market Cap. ($B) P/E Ratio 3yr. Rev.

GrowthAnnual Return

4.6% 3.3% $1.5 13.6 10.7% 31.6%

4.5% 1.9% $608.7 14.1 9.0% 12.5%

4.2% 3.7% $197.1 16.4 .90% 4.5%


Position Analysis – Top & Bottom Equity Contributions

1.1% 1.1%

0.6%

-0.7%

-0.9%-1.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

Dick's Sporting Goods Maiden Holdings Wal-Mart CVS United Rentals Gilead Sciences


• Sector: Financials

• Company Description: Investment Banking & Advisory Services

• Investment Update:− Purchased in November, 2014 citing accelerating revenue growth, strong management, and a global

environment warming to the usage of M&A and advisory services

− Traded relatively flat since purchase, but speculation over financial services deregulation post election, significantly increased valuation

− Profits realized after a sharp run up in financials following Trump’s election

Top Performers: Evercore Partners +29.5%

40

45

50

55

60

65

70

75


Position Sold: $65.55


• Sector: Health Care• Company Description: Biotechnology• Investment Update:

− Weakening demand for core product segment − Significant future expenses as Myriad builds its molecular diagnostic tests business− Margin contraction resulting from recent acquisitions and new product commercialization;

management expectations of 30% operating margin by 2020 appear unrealistic− Increased pricing pressure on Biotechnology and Health Care in general

Worst Performers: Myriad Genetics -46.2%

10

15

20

25

30

35

40

45


Position Sold: $20.10


ETF Picks: Regional Banking & Information Technology

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35

40

45

50

55

60


Regional Banking ETF

Position Exited: $50.63

Position Entered: $41.16

38

40

42

44

46

48

50


Information Technology ETF

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New Developments



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FUTURE INITIATIVES

Cross Sector & Macroeconomic Workshops• Introduce workshop series in which sectors will present an overview of their sector in front

of the club− Series will educate analysts on macroeconomic drivers and how they apply to particular sectors, key

players, recent news, and valuation highlights − Presentations will include discussions on the effects of macroeconomic shifts on particular sectors

FUTURE INITIATIVES

Sector Head Education• Provide educational training to sector heads covering topics: delegation, communication,

accountability, and various technical skills− Technical skills will be focused on developing strategies to increase analysts’ accounting, research,

and valuation capabilities− Increased sector head education will improve analysts’ ability to participate in the pitch process

• Create a platform from which analysts can provide both formal and informal feedback to their sector heads

CONCLUSION

The fund’s performance in 2016 was disappointing. Goingforward, more attention will be given towards generatingreturns through an selection-based investment strategy. Wehope to generate large selection-based returns in years tocome.

We are very pleased with the changes that have taken placethis year that will greatly enhance the fund experience. Weexpect both performance and quality of analysis to increase.

The fund has evolved so much just in the past year in terms oftalent, structure, and research. We are highly optimistic abouthow these changes will translate into returns in the future.

Fund Performance

OrganizationalDevelopments

Future Outlook

Blue Hen Investment Club

Documents

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