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APM Golf Tournament- Sign up Now! Join us for the 4th Annual APM Golf Tournament on Friday, September 19. Registration is at noon and we'll tee off promptly at 1:00 pm. Again this year we'll More information is available on our webpage or you can download a registration form. Last year was great fun and we expect more of the same. We have two very special items to raffle at this year's tournament - a KU basketball signed by our 2008 National Championship team and a football signed by our winning 2007 Orange Bowl squad. Don't miss your opportunity to own one of these mementos! We also have a great group of sponsors lined up, but it's not too late to add your name or company to the list. See this link for more information.
Portfolio Performance Report
The APM portfolio ended the second quarter valued at $1.2 million, up slightly for the quarter. For the year we've had plenty of losers, but some of the bright spots were Quicksilver Resources (KWK) up 31.5%, Kansas City Southern up 29.7%, and Capitol Federal up 26.7%. In Q2 we sold Zoltec (ZOLT) and Sohu for gains. The class bought Zoltec in April after doing a case with Scott Jones (S95) and Todd Preheim (F94). We sold only one month later with a 23.3% profit after it met expectations! For the first time since January 2001 we are completely out of Sohu. We think that the run-up due to the Olympics advertising story has been too exuberant and the valuation stretched. The holding period compound annual average return for Sohu has been 129.5% since Kent introduced the 2001 class to Sohu! The APM class had many highlights to remember with the company. Just two of them were:
However, the biggest highlight of all was the return!
Of course, not everything went so well this year. Some of the biggest losers were Brooke Corp (BXXX) down 77%, Garmin (GRMN) down 50%, and American Dairy (ADY) down 29%. Despite the current setback on Garmin, we still have a $24,327 profit and 20% compound annual return since buying in 2002. We realized losses of $77 thousand in Brooke and $20K in ADY. Dave Cummings, Tradebot CEO, visits APM Dave Cummings, founder of KC-based trading company Tradebot, visited the APM class on Wednesday, April 23rd. After graduating from Purdue University, Cummings began his career as a software engineer at Cerner and then went on to work as a pit trader at the KC Board of Trade. Mr. Cummings decided to meld his two areas of expertise and create a computer program that acts like a pit trader. Seeing the opportunity, he started with $25,000 in a spare bedroom of his house in After successfully getting Tradebot off the ground, Cummings decided that he could come up with a better trading platform for everyone. He started the Better Alternative Trading System (BATS), raised over $100 million in Wall Street Capital, and put his idea into motion. Today BATS is the third largest exchange by volume in the United States. Mr. Cummings also discussed current APM holding, International Brokers (IBKR). While he agreed that IBKR is well positioned in its industry, he did raise concerns that the CEO plays a large role in the company's success. Because CEO Thomas Peterffy has been so instrumental to the company's success, it is important to factor into the bear case how the stock would react if he were to step down. Several APM alumni work as traders for Tradebot:Jason Mitchell (S05), Daniel Krejci (F06), Ryan VonBevern (F07), Thomas Sanford (S08) and Joe Hall (S08). In addition, Jeremy Kliewer (S07) works for Interactive Brokers. Marc Hensel (S96), Vice President of Acquisitions & Divestments at Plains Exploration and Production Company (PXP) gave an insightful presentation on PXP and the oil industry. PXP identifies, acquires, and exploits oil and gas producing real estate. Operations are in the American Southwest and the Gulf of Mexico. PXP’s fourth quarter 2007 net income was $80 million, down from $384 million in the fourth quarter of 2006. The large difference was profit attributable to sale of properties in Q4 2006. Sales volume increased 58% year over year, and proved reserves increased 64% from the previous year to 577 million barrels. Key drivers of 2007’s results were material discoveries in the Gulf of Mexico; PXP anticipates additional discoveries in the Gulf. In California, PXP operates in the Santa Maria Basin. Despite California’s Venezuela-esque treatment of oil company profits, PXP feels it can be profitable in the state and made developing its resources there a priority in 2007. The company successfully negotiated an off-shore operating agreement with the environmentalists in Santa Barbara, a first for the oil industry. In the late 90’s, previous management hedged with a swap strategy that seriously backfired. Expecting a continuation of rising oil prices, current management decided to close the position at a loss, against the advice of analysts who felt oil prices would level off. Management's move proved prescient and very valuable. The price of oil has risen significantly and PXP would have lost a huge sum of money on the swaps had they not closed the positions. This action has strengthened cash flow and enabled acquisitions. The class is bullish on PXP because of their strong financial position, diverse property base, and record oil prices. We expect PXP’s stock to increase well above this year’s all time high of 67. Matt Heckman, Waddell and Reed Analyst, Speaks with Class On April 9 APM alumnus Matt Heckman (F02) visited the APM class to discuss working at an asset management firm. Currently, Heckman works as an analyst at He discussed what it is really like to work at an asset management firm. A key part of his job at Waddell and Reed is spotting major industry trends and using those trends to identify the best stocks that would benefit from the trend. One recent example that worked was his forecast of high sales growth for fertilizer stocks. He looked at the macro trends of rising wheat prices and demand for biofuels and put buy recommendations on many fertilizer companies before they took off. He completed his recommendation with a an in-depth analysis of the companies in the sector. Heckman also brought some copies of past research projects he worked on to class and discussed in detail how he arrived at the numbers in his models. After class Mr. Heckman discussed over dinner more about his life at Waddell and Reed. He answered more questions about starting a career in the asset management business. Robert Tracy (F98) has accepted a position with Brahman Capital in New York. Megan Wood (S05) accepted a position at Citi in Chicago as an analyst on the Mortgage Sales desk. Daniel Sailors (F05) will be joining Riverston Holdings, an energy focused investment firm in New York. Brent Mason (F06) and Angela Link were married in Kansas City in April. Matt Brunner (S07) began his career as an equity research associate with the Global Corporate and Investment Banking division of Bank of America in New York. Sarah Byrne (F07) began her career as an acquisitions & audit analyst for the Corporate Finance division of INVISTA, a subsidiary of Koch Industries in Wichita. Ryan Ingle (F07) accepted a position with the Investment Banking Division of Citi in New York. Rob Ralston (F07) began his career as an equity research associate with the Global Corporate and Investment Banking division of Bank of America in New York. Brian Seymour (S08) has accepted a position with Prairie Capital Management in Kansas City. He was also recently married to Katie Willoughby (KU 2007). David Wise (S08) accepted a position at Deloitte Consulting in Kansas City. Brian MacPherson (S08) has joined Draxis Energy Master Fund in Houston. Melissa Luiso (S08) has accepted a position with KPMG in New York. Alums send us your news! Thanks to all our Recent Donors!
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play at Lawrence Country Club (LCC). Space is limited so sign up right away to reserve your spot. The course was completely renovated in 2007. If you haven't had a chance to play on this beautiful course, come join us!
1999. Tradebot trades only for its own account and hasn't had a losing day in over 4 years. Cummings also explained that he is much better at forecasting the short-term price of any stock. Tradebot's average holding time for a stock is 11 seconds.
Recently, PXP initiated expansion into Vietnam and New Zealand with the acquisition of Pogo Producing Company.
Waddell and Reed in Kansas City giving him first-hand industry knowledge that he shared with the class.| Copyright 2004,
Applied Portfolio Management Program University of Kansas School of Business |