1

2
 TABLE OF CONTENTS

1 Director’s Letter
2 SMIF Team Letter
3 OCSIMSF Letter
4 OCSIM & LASFA
5 Economic Analysis
6 Sector Analysis & Benchmark
7 Fixed Income
8 Coca-Cola Bottling/Time Warner Companies, Inc.
9 Equity
11 Commerce Bancorp (NYSE: CBH)
SMIF
12 Corinthian Colleges (NYSE: COCO) 2003-2004
13 Omnicare Corp. (NYSE: OCR) Annual Report
14 Hovnanian Enterprises (NYSE: HOV)
15 Humana Inc. (NYSE: HUM)
16 Laboratory Corp. of America (NYSE: LH)
17 Nokia Corp. (NYSE: NOK)
18 Overseas Shipholding Group (NYSE: OSG)
19 Texas Instruments Inc. (NYSE: TXN)
20 Winnebago Industries Inc. (NYSE: WGO)
21 Portfolio Performance 2003-2004
23 RISE Symposium
24 Meet the SMIF Team
25 Student Managers
29 Acknowledgements
31 References
32 Appendix A
34 Appendix B
35 Glossary
37 Mission Statement

3
To the Readers of the SMIF Annual Report: May 2004

The 2003-2004 academic year marked the ninth year for the Student-Managed Investment Fund (SMIF) at the
California State University, Long Beach. The year contained many challenges, but it was also a year for many
important firsts for the SMIF program that should serve CSULB and its students well as we head into SMIF’s
decennial year.

The start of the academic year saw interest rates at historic lows, with little uncertainty that they would even-
tually start to head back up. The major question with which the SMIF students were faced was when this
would occur – specifically, would the low interest rates hold out through the end of the academic year, when
the SMIF portfolio is liquidated, or would their ascent begin while the portfolio was still invested? This
question led to spirited and well-researched debates during the fall semester regarding what the SMIF portfo-
lio’s target asset allocation should be and what the average duration of its bond holdings should be.

Moreover, the 2003 – 2004 academic year saw the introduction of a number of initiatives designed to improve
the SMIF program and further augment the educational experiences gained by the SMIF students. A grant
from CSULB’s Instructionally Related Activities (IRA) Committee enabled us to procure the Bloomberg
Professional Service (i.e., a “Bloomberg machine”) for use by the SMIF students in conducting their analysis.
This not only provided them with access to the same information and analytical tools used by real-world
professionals but also gave them the opportunity to work toward the resume-enhancing Bloomberg Product
Certification status. The same grant also enabled a number of the SMIF students to travel to the University of
Dayton’s annual RISE symposium, allowing them to interact with student portfolio managers and investment
professionals from around the continent.

Another new initiative was provided by the Orange County Society of Investment Managers Scholarship
Foundation (OCSIMSF), which developed two new programs that have enabled a much greater level of
interaction between the SMIF students and professionals within the Orange County investment community.
The SMIF students as a team were the inaugural winners of OCSIMSF’s first Annual RFP Competition, for
which they have been managing a virtual portfolio under the supervision of members of the OCSIMSF’s
Investment Policy Committee. Moreover, one of this year’s SMIF students, Vu Chu, was also the recipient of
OCSIMSF’s first-ever educational scholarship.

This year’s SMIF students have certainly fulfilled the expectations of the faculty members of the Department
of Finance and Law in creating the SMIF program, to provide a unique opportunity for students to participate
in the management of a “real dollar” portfolio while still in the relative safety of an academic environment,
and we look forward to seeing what these students can accomplish as they venture forth into the real world!

Best Wishes to the 2003-2004 SMIF Participants!

Dr. L.R. Runyon, Director Dr. Peter A. Ammermann, Co-Director

Student Managed Investment Fund Student Managed Investment Fund

1
Dear Readers of the SMIF Annual Report:

In 2003 and 2004, the Student Managed Investment Fund (SMIF) at California State University Long Beach
(CSULB) has proved that it can perform at an extraordinary level strategically, operationally, and financially.
We made a number of critical decisions with respect to our investment process that guided our approach to
the financial markets, facilitated efficient management of our resources, and demanded absolute excellence
from everyone involved. The result has been transformational. The team has created a dynamic organization
that is committed to disciplined growth and to creating wealth for CSULB in the years to come.

The members of SMIF have worked hard to shape the fund into one capable of performing at the highest
level. We derived our investment philosophy strategically, with realistic monetary growth as an ultimate goal.

With strict adherence to a “Growth at a Reasonable Price” (G.A.R.P.) investment philosophy, the SMIF team
invested the portfolio with great resolve and confidence.after spending much time researching and analyzing
potential holdings to find the diamonds in the rough.

Essentially, the companies that are represented in both the equity the and fixed-income portions of our Fund
have superior growth prospects compared to both their industry and the market as a whole, while maintaining
a price that presents reasonable value over a 3 to 5 year investment horizon.

SMIF is committed to attracting, encouraging, and rewarding talent, providing our people with
opportunities to grow and add ever-increasing value. With that in mind, we have positioned the Fund for
success in the years ahead.

We are delighted to announce that SMIF is the first team ever to manage the Orange County Society of
Investment Managers Scholarship Foundation (OCSIMSF) fund. Against fierce competition, our organization
at CSULB demonstrated an advanced ability and skill set compared to other university participants. This
involvement will certainly perpetuate SMIF’s recognizable presence well into the future.

We are pleased to present to you, in the following pages, the product of combining intelligence,
knowledge, and determination into a clear investment focus.

Sincerely,

The 2003-2004 SMIF Team

2
 OCSIMSF LETTER
ORANGE COUNTY SOCIETY OF INVESTMENT MANAGERS
SCHOLARSHIP FOUNDATION
SCHOLARSHIP FOUNDATION May 2004
Orange County Society To the Readers of the CSULB SMIF 2003-2004 Annual Report:
of Investment Managers
Scholarship Foundation The OCSIM Scholarship Foundation (OCSIMSF) was founded in 2003 by the
Orange County Society of Investment Managers to fulfill an important mission,
PMB 359 namely to foster, promote and encourage the development of professionalism by the
211 S. State College Blvd. Orange County investment community; and to heighten public awareness of this
Anaheim, CA 92806 professionalism by:
Phone: 1. Providing educational scholarships for the study of financial investment practice at
949.400.2190 colleges and universities located in Orange County, California; and
E-mail: 2. Supervision of a select group of students of financial investments in the
info@ocsimsf.org management of all or a portion of the investment portfolio of the corporation.
To fulfill this mission, we drafted a plan for a student-managed fund that is unique
BOARD OF TRUSTEES from other such projects around the country. Each year, a group of students from the
local universities will have to draft a response to the foundation’s RFP and make a
presentation to the foundation board on how they propose to manage the foundation’s
funds and why they are the most qualified team to do so, an experience unique to our
Chair
project.
Krista S. Zipfel, CFA
Advisor Solutions Group During Fall 2003, the Foundation sent out Requests For Proposal to local universities
(949) 400-2190 to allow student teams from around Orange County to compete for the opportunity to
manage the Foundation’s portfolio for one year, and we are pleased to announce that
Vice Chair the inaugural winners of the annual portfolio management Request For Proposal
Russell Murdock, CFA competition are the SMIF students of CSULB, and we congratulate them on their
Seabreeze-Capital successful proposal and presentation. Based on the results of this proposal, the team
Management, LLC
of students from CSULB has been managing a $100,000 virtual portfolio for the 2004
(714) 531-0290
calendar year under the supervision and guidance of the OCSIMSF Investment Policy
Committee, and the results and performance for this portfolio will be presented to the
Treasurer Boards of Trustees for both OCSIM and the OCSIM Scholarship Foundation.
Scott Monroe, CFA
Fidelity Investments The second part of our mission is the provision of educational scholarships to
(949) 437-4219 students who are studying investments at Orange County-area universities. The
recipients of these scholarships are announced each January at our Annual Forecast
Secretary Dinner. For 2004, the inaugural year for this scholarship, a $1,000 scholarship was
Michael Rusinas awarded to Mr. Vu Quang Chu, who not only was the most outstanding applicant out
Financial Management of a field of highly qualified applicants, but is also one of the members of the RFP-
Association competition-winning CSULB SMIF team.
(562) 985-5776
We applaud Mr. Chu and all the other students of the 2003-2004 SMIF Team for all
Investment Policy of their efforts. Not only have their achievements been meritorious, but we believe
Committee Chair that the OCSIM Scholarship Foundation’s first year of operations has been much
Peter A. Ammermann, more successful than it might otherwise have been had we not had the participation of
Ph.D. the CSULB SMIF students.
California State
University, Long Beach So, to the SMIF students, congratulations on your successes over the past year, thank
(562) 985-7526 you very much for your participation in the activities of the OCSIM Scholarship
Foundation, and we wish you all the best of luck in the future!
Fund Raising Chair
Eric Kottke Sincerely,
Sophia Orange Hedge
Fund Advisory Krista S. Zipfel, CFA Peter A. Ammermann, Ph.D.
(949) 480-1858 Chair, OCSIM Scholarship Foundation Chair, OCSIMSF Investment Policy Committee

© 2003 Orange County Society of Investment Managers Scholarship Foundation, Inc. All Rights Reserved.

3
 OCSIM & LASFA
The CFA Institute® and the Chartered
Financial Analyst® Program
The Chartered Financial Analyst (CFA®)program is
a internationally acknowledged standard for
recognizing professional competency and integrity
of financial analysts. It is the preeminent
designation for professionals in the investment-
management industry. The program requires the
successful completion of a sequence of three
examinations spanning a multitude of topics,
including ethics, statistics, accounting, and a vari-
ety of asset valuation and portfolio management
techniques.
The CFA designation is a valuable asset in the job
market. CFA charter-holders command higher-
than-average salaries and are afforded a wider
variety of employment opportunities.
The CFA program is administered and overseen by
the CFA Institute (formerly known as the Associa-
tion for Investment Management and Research, or
AIMR). The two local organizations that are
affiliated with the CFA Institute are Los Angeles
Society of Financial Analysts (LASFA) and the
Orange County Society of Investment Managers
(OCSIM).
Because of the prominence of the CFA program
and the importance of professional networking for
obtaining employment in the investment industry,
the SMIF students are encouraged and required to
participate in the activities of LASFA and OCSIM.
Los Angeles Society of Financial
Analysts
The Los Angeles Society of Financial Analysts,
Inc. (LASFA) is a non-profit organization that
conducts various events in the form of seminars,
presentations, career expositions, dinners, and
luncheons. The topics at these events address
various financial issues such as equity valuation,
fixed-income analysis, tax law, economic analysis,
interest rates, financial strategies, career paths, and
many other aspects of the financial arena.
4
Orange County Society of Investment
Managers
The Orange County Society of Investment
Managers (OCSIM) was founded in 1983 by
investment practitioners in the Orange County area
and has been affiliated since 1997 with what is now
the CFA Institute. In addition to offering programs
similar to those provided by LASFA, a part of the
mission of OCSIM is to foster closer ties within the
local investment community, and CSULB and the
SMIF program has been a major beneficiary of
these efforts. A number of OCSIM executives have
given presentations to CSULB classes and
organizations and also provided internship opportu-
nities to SMIF students. Moreover, a major new
initiative by OCSIM has greatly enhanced the
educational opportunities available to the SMIF
students. This new initiative was the creation of the
OCSIM Scholarship Foundation (OCSIMSF).
SMIF and the OCSIM Scholarship
Foundation
In addition to providing scholarships to local
investment students, the OCSIM Scholarship
Foundation, which was established in 2003,
sponsors an annual Request for Proposal (RFP)
competition for student teams from local
universities. The SMIF students have benefited
from both of these activities. Namely, the SMIF
students collectively were the inaugural winners of
the annual RFP competition, and, as part of their
reward, they will be managing a virtual portfolio
under the supervision of the OCSIMSF Investment
Policy Committee throughout the remainder of the
year. Moreover, one of this year’s SMIF students,
Vu Chu, was the inaugural recipient of OCSIMSF’s
first educational scholarship.
 ECONOMIC ANALYSIS
Economic Outlook
The Congressional Budget Office (CBO) has re-
cently conducted a two-year forward-looking fore-
cast of economic indicators, such as real GDP.
They expect that demand will pick up in the last
quarter of 2003 into 2004, as evidenced by a second
quarter increase in consumer sentiment as well as in
overall demand. A target of 3.8 % growth is ex-
pected in 2004, which is contingent on a rejuve-
nated government spending package along with an
increase in corporate spending. These two factors
will be instrumental in determining whether GDP is
on track for such a drastic increase, up from an esti-
mated 2.2 % in 2003.
Unemployment, the percentage of the workforce
that is involuntarily out of work, is a good measure
of economic health. A decreasing number of unem-
ployed workers indicates that firms are increasing
production. Unemployment Rate forecasts for Q4
2003 through Q3 2004 are 6.2%, 6.1%, 6.0%, and
6.0%, respectively.
Government policy is a strong indicator for the fu-
ture of the economy. The U.S. Government has
been cutting taxes at all levels to stimulate the
economy. The Jobs and Growth Tax Relief Recon-
ciliation Act of 2003 (JGTRRA) has boosted
disposable personal income, which may stimulate
expected consumer spending. Further analysis of
fiscal policy reveals that the federal deficit has in-
creased by $180 billion in 2002 and is projected to
increased by $360 billion and $520 billion in 2003
and 2004, respectively.
The CBO expects that interest rates will be at levels
consistent with those seen in 2002 (1.25%) for the
duration of 2004. Marketvector.com expects this
movement as early as February 2004. As a result,
inflation will remain low. This, coupled with in-
creased productivity, should help sustain the bull
market through 2004.
5
Market Outlook
During the third quarter of 2000, right after the top
of the last bull market, S&P 500 operating earnings
grew by 18.4%. First Call’s research chief Chuck
Hill expects this year’s third quarter S&P 500 earn-
ings to grow by 19% to 20%. This would also
mean that S&P 500 earnings would grow at 15.9%
compared to a year ago. There have been few earn-
ings warnings in the weeks leading up to the earn-
ings season, which makes it more likely that com-
panies will in fact attain these targets. If the earn-
ings season does go as planned, this would justify
the moves of the major indexes this year and per-
haps fuel another rally into next year.
There are numerous possible reasons for earnings
growth moving forward. The bear market and
recession have forced companies to severely cut
costs. With lower costs, any growth in sales would
greatly boost profits. In addition, there is
increasing overall demand in the market, especially
in the tech sector. Companies that have been
hurting over the past three years have been
stretching out their replacement cycle for
technology equipment. When these companies
significantly start buying new replacements, huge
earnings growth in the technology sector will
follow.
Not every sector will show the same earnings
growth, however, in the third quarter. Some lag-
ging sectors in the S&P 500 include utilities, tele-
com, and basic materials, which are expected to see
earnings decreases compared to a year ago of 4%,
5%, and 1%, respectively. Consumer cyclicals are
going to add only 3% to earnings growth. The
leading sectors driving the earnings growth will
probably be tech, energy, and health care, which
analysts feel will grow 20%, 42%, and 14%, re-
spectively.
 SECTOR ANALYSIS & BENCHMARK

Sector and Industry Analysis
Based upon our forecasts of the economy and the
stock market, the Student Managed Investment
Fund (SMIF) decided to implement an industry al-
location strategy that is derived from the research
provided by The Value Line Investment Survey
Timeliness Ranking System.
Based upon least-squares regression analysis, time-
liness is the rank of an industry’s probable relative
market performance in the year ahead. It is com-
puted based upon the long-term price and earnings
history, recent price, and earnings momentum. Any
earnings surprises, positive or negative, are also
taken into account. Accordingly, 98 industries are
ranked for their performance over the next 12
months, with “1” having the most favorable and
“98” the least favorable performance. The rankings
are established on a weekly basis using current
forecasts. This lends reliability to The Value Line
Timeliness Ranking System, as it prevents inves-
tors from using outdated statistics.
Specifically, we will be focusing on the top 20 in-
dustries in the U.S. domestic market, as ranked by
Value Line in terms of timeliness. In order to effec-
tively utilize this method, the investment team will
engage in a continual reevaluation of these rankings
in an effort to place our investment strategy at the
forefront of a rapidly changing market. We feel that
this system will outperform a static, preliminary
overview that does not allow for flexibility or dy-
namic analyses. The selected industries will be di-
vided into appropriate groupings. These will subse-
quently be distributed among four groups in order
to utilize the expertise that is gained by narrowing
each group’s focus.
The Standard & Poor’s 500 Index
Widely regarded as the best single gauge of the
U.S. equities market, this world-renowned index
includes a representative sample of 500 leading
companies in leading industries of the U.S. econ-
omy. Although the S&P 500 focuses on the large-
cap segment of the market, with over 80% coverage
of U.S. equities, it is also an ideal proxy for the to-
tal market. For this reason the portfolio managers
of SMIF chose to use the Standard & Poor’s 500
Index as the benchmark for the equity portion of
the portfolio. The Index measures a broad spectrum
of the overall market, the intent of an overall
benchmark for SMIF.
Lehman US Aggregate Corporate
Total Return Index
For the fixed-income portion of the portfolio, the
SMIF portfolio managers chose the Lehman US
Aggregate Corporate Total Return (LACTR) Index
as the benchmark. The Index is an unmanaged in-
dex often utilized as a benchmark for fixed-income
mutual funds with an average duration of 6 to7
years, comprising of only investment-grade corpo-
rate debt. This Index was chosen principally for its
average duration and credit quality characteristics.
After the SMIF team completed the baseline eco-
nomic and interest-rate-environment analysis we
chose a baseline bond portfolio duration of about
4.5 years with maturities ranging from 5 to 6 years .
The Lehman US Aggregate Corporate Total Return
Index is generally considered to be representative
of intermediate maturity corporate bond market
activity. The Index met our criteria and was chosen
as the best relevant gauge.

6
 FIXED INCOME
Fixed Income: Not Just for Retirees?
With the federal funds rate at a 45-year low of 1%,
and the bond market bracing for falling prices and
higher yields, it did not seem like an opportune
time to enter the fixed-income market. However,
SMIF guidelines require 25% to 50% of the portfo-
lio to be allocated to investment-grade corporate
bonds, a hedge against geopolitical risk. Deter-
mined to learn the skills required for fixed-income
investing, the team endeavored to outperform the
benchmark we set for ourselves, the Lehman US
Aggregate Corporate Total Return (LACTR) Index.
For guidance, the SMIF class invited Mr. Doug
Lopez, Senior Vice President and Portfolio Man-
ager for Bradford and Marzec Inc., to offer his pro-
fessional opinion. Mr. Lopez illustrated some tech-
niques used to find corporate bonds with above-
average appreciation potential. The team later used
this advice to choose specific bond issues from the
inventory available to us at Salomon Smith Barney.
tional risk began to level out. It was also decided
that a relatively high-coupon issue would be more
desirable, as we are only holding the bond for one
coupon payment. Another strategy was to look for
companies in sectors we thought would benefit
from an improving economy, with a less-than-
perfect debt rating from Standard & Poors, allow-
ing us an opportunity for a ratings increase. The
combination low-duration/credit quality approach
was our strategy to outperform the selected bench-
mark over our holding period. After meticulous
analysis of the available fixed-income securities,
SMIF decided to purchase debts of Time Warner
Companies, Inc., and Coca-Cola Enterprises, Inc.
U.S. Treasury Yield Curve
U.S. Treasury Yield Curve
6%
5%

4%
Analyzing the yield curve, and taking into consid- 3%
U.S. Treasury Yield
eration our projected rate increase in summer, 2%
2004, we made the decision to position ourselves
1%
from 5 to 6 years out on the yield curve. At this
point on the curve, the marginal return for the addi- 0%
0 5 10 15 20

Fixed-Income Results:

PURCHASE NET SELL

TICKER SYMBOL NET SALE RETURN GAIN/(LOSS)
DATE PURCHASE DATE

Coca-Cola Bottling Dec-10 $ (5,918.12) Apr-21 $ 5,645.73 -4.60% $ (272.39)

Time-Warner
Dec-15 $ (5,885.83) Apr-21 $ 5,449.93 -4.23% $ (248.90)
Companies, Inc.

TOTAL -4.42% $ (521.29)

LACTR 1420 1440 1.41% 20

7
 Coca-Cola Bottling
Rating Coupon YTM
A2 7.13% 4.05%
Coca-Cola Enterprises is the world's largest
marketer, producer, and distributor of products of
The Coca-Cola Company. The company operates
454 facilities throughout the United States,
Canada, and Western Europe which generate
revenues of approximately $17 billion. The
company currently distributes approximately 4.4
billion cases on an annual basis. This represents
approximately 21% of The Coca-Cola Com-
pany's worldwide volume. Coca-Cola Enterprises
initially offered its stock to the public on
November 21, 1986, and is listed on the New
York Stock Exchange under the symbol CCE.
Time Warner Companies, Inc.
Rating Coupon YTM
BAA1 6.75% 3.75%
Time Warner is a media and entertainment
company whose businesses include interactive
services, cable systems, filmed entertainment,
television networks, music, and publishing. Time
Warner's business interests are classified into six
fundamental areas: America Online, which consists
primarily of interactive services; cable, consisting
principally of interests in cable systems; filmed en-
tertainment, which consists of interests in filmed
entertainment and television production; networks,
which consists of cable television and broadcast
network programming; music, consisting of
recorded music and music publishing; and publish-
ing, which consists of magazine publishing, book
publishing, and direct marketing.
8
Maturity Price
09/30/2009 115.799
New products, as well as the company’s diet line,
should help support volumes. The introduction
last year of Vanilla Coke and Sprite Remix
helped to boost rather lackluster carbonated-soda
volumes. Also, the growing trend of consumers
looking for healthier choices and/or low-carb
products has increased the popularity of Coke’s
diet products.
With the expected interest rate rise of 25 bps by
summer 2004, the SMIF team forecast a realized
horizon yield of 2.10%.
Maturity Price
01/15/2008 114.039
Time Warner had originally aimed to cut its net
debt to $20 billion by the end of 2004. A year ago,
the debt was as high as $30 billion. It successfully
met its2003 target ahead of schedule and got ahead
on next year’s goal. In response to strong FCF and
non-core asset sales, Time Warner was removed
from S&P’s CreditWatch in October 2003. With
the expected interest rate rise of 25 bps by summer
2004, SMIF forecast the price to be 112.746, result-
ing in a 1.43% yield during the four months holding
period.
 EQUITY
Fundamental Equity Tools
The tools used to evaluate prospective equities var-
ied slightly for each proposed company. For all
equity valuations, however, a discounted cash flow
technique was used to determine an intrinsic value
for each common share outstanding. The three
measures of cash flow used were the dividend dis-
count model, operating free cash flow, and free
cash flow to equity. Each firm’s cost of equity was
calculated via the Capital Asset Pricing Model
(CAPM) using Value Line’s beta, the yield on the
10-year note as the risk-free rate, and an equity risk
premium of 6%. Growth rates were determined
using a method relevant to the cash flows and com-
pany under analysis.
In addition to determining an intrinsic value for
each company, relative valuation techniques were
also employed. The two most significant ratios
assessed were price-to-earnings and price-to-book.
These valuation ratios were compared to similar
companies in the same industry to determine how
the market is valuing the stock within its industry.
Price-to-cash-flow and price-to-sales ratios were
also used, although less heavily.
Internal liquidity and operating efficiency ratios
were also used in comparison with similar compa-
nies. The team attempted to look for the most effi-
cient and profitable companies that seemed under-
valued by investors.
SMIF 2003-2004 Strategy
The Student Managed Investment Fund (SMIF)
seeks short-term capital appreciation through in-
vestments in equity and debt securities. To pursue
"In the business world, everyone is paid in two coins: cash
and experience. Take the experience first; the cash will
come later." – Harold S. Geneen (former chair ITT)
9
this goal, the Fund will invest at least 60% of its
assets in equity securities, primarily in the stocks of
small to medium U.S. growth-oriented companies
that the portfolio managers believe are also finan-
cially stable. “Growth-oriented companies” are
those whose earnings are growing at a faster rate
than the market as a whole, or have the potential to
do so. The remaining 40% of the portfolio will
comprise investment-grade bonds and cash.
In general, the portfolio managers may sell a secu-
rity if they determine that the security no longer
presents sufficient appreciation potential; this may
be caused by, or be a result of, changes in the in-
dustry of the issuer, loss by the company of its
competitive position, and/or poor use of resources.
The portfolio manager may also sell a security to
take advantage of more attractive investment oppor-
tunities or to raise cash.
The Student Managed Investment Fund employs a
team-based approach to construct a portfolio of 8 to
10 growth stocks. The Fund is constructed one se-
curity at a time. The team, comprising graduate
and undergraduate finance students at California
State University, Long Beach, will use traditional
sources (e.g., Wall Street analysts, company re-
ports, and trade and technical journals) in order to
form a basis for future forecasts of cash flow gen-
eration. Additionally, the team members will ana-
lyze the durability of a company’s strategic plan,
the quality of its management, and the strength of
its financial foundation, as well as its capital pro-
ductivity. The investment team is responsible for
managing risk, deciding which sectors to weight
more heavily and determining when to sell a posi-
tion.
 EQUITY
Technical Analysis
Technical analysis is a tool used by many investors
to attempt to forecast future price movements by
analyzing past price movements with the use of
price charts and technical indicators. To further
understand this form of analysis, the members of
SMIF researched and back-tested many of the
indicators commonly used. Our goal was to
determine to what degree technical analysis should
be relied upon to help us time our stock selections.
First, we assigned each group certain types of
indicators to research and present to the other SMIF
members. From this we learned how various
indicators are calculated and how they create buy
or sell signals. Next, each group performed back-
test research to see how well an indicator would
have performed over the past three years. The
results did show that many of the indicators, used
on a strict basis, outperformed the S&P 500. We
*See Technical Analysis Terms in the Glossary. Image courtesy of StockCharts.com.
10
concluded, however, that much of the performance
was due to staying out of a security during the
major drops in price that were common during the
preceding bear market. Also, many indicators
showed excessive whiplash, causing the investor to
build up excessive trading costs.
From our research we concluded that technical
indicators should be given some consideration in
the process of managing a portfolio. It provided
information such as to what extent a stock is
overbought or oversold. We also identified
common support and resistance levels that all
technical analysts in the market would note. One
way we used this to our advantage was by setting
our stop losses just below support levels toward the
end of our holding period, thus reducing our
downside risk while allowing room for the stock to
appreciate during the final week of our holding
period.
 Commerce Bancorp (NYSE: CBH)
Sector: Finance Value Line Timeliness Ranking: 1
Industry: Bank Market Cap: $4.5 Billion
Purchase Price: $59.67 Earnings per Share: $2.61

Customer first
Commerce Bancorp (CBH) provides
personal, commercial, and trust services
through its banking subsidiaries, which
include Commerce Bank, Commerce
Bank / Penns ylvani a, Commerce
Bank/North, and Commerce Bank/Shore.
The 224 full- service retail branch offices
are located in the states of New Jersey,
Pennsylvania, Delaware, and New York.
They provide a range of retail and
commercial banking services for small and
midsize companies. Commerce’s services
include checking, savings, money markets, Commerce plans to open 50 new
and CDs. The banks’ lending and branches and expand into Virginia and
investment activities are funded by retail the District of Columbia. Commerce has
deposits gathered through each bank’s been able to beat out some of the larger
retail branch office network. Lending financial institutions because of their
services are focused on commercial real focus on making the relationship with
estate and commercial and consumer loans “Commerce their customers primary. Commerce’s
to local borrowers. Bancorp’s successful retail banking model will
continue to give the company an edge
unique retail over competitors in the year ahead.
Banking on convenience
Commerce Bancorp’s unique retail strategy has
strategy has produced exceptional A penny saved...
financial performance. Commerce banks produced After our analysis of Commerce Bank
market as growth retailers, not bankers. we felt that it would be a good fit with
exceptional our investment strategy. We felt the
Commerce banks are open on Sundays,
and they open earlier and close later than financial stock offered attractive capital
most bank competitors. Outstanding appreciation potential over the coming 3
performance.” to 5 years. Commerce, with a large
customer service is the core of their strong
campaign to build brand awareness and percentage of noninterest-bearing
make fans out of the clients through deposits, will have less trouble
convenience. The bank is continuing with maintaining margins when rates begin to
its aggressive expansion strategy in 2004. rise.

Using the Dividend Discount Model to

value CBH, we found an expected price
Key Statistics of $90.02 at the end of 2004, with a
CBH Industry S&P 500 price of $66.02 at the end of our holding
Beta (BB numbers) 0.96 0.79 1.00 period. With our anticipation of interest
rates rising in the second half of the
P/E (BB numbers) 21.49 16.33 22.02
year, we felt it would be a great
PEG Ratio (Calc. from VL 5-yr) 1.18 1.35 1.61
opportunity to purchase this undervalued
P/B (mrq) (BB Numbers) 3.17 2.49 3.06
stock.
ROE (BB Numbers) 17.70 15.33 14.98%

11
 Corinthian Colleges (NYSE: COCO)
Sector: Consumer Discretionary
Industry: Education
Purchase Price: $30.02
A higher level of education
Corinthian Colleges is among the largest
post-secondary education providers, with
operations in the U.S. and Canada.
Corinthian’s 130 colleges offer Master’s,
Bachelor’s, and Associate’s degrees to
potential students interested in pursuing a
career in allied health, business,
technology and criminal justice. Classes
are offered onsite and via the Internet.
Growth fueled through learning
The educational services industry’s
prospects for growth was one of the
leading forces that drew us to this industry.
The Bureau of Labor Statistics said the
demand for skilled labor in 2000 was 65%
of the total workforce, up considerably
from 45% in 1991.
We feel this demand could rise even
further. With the increasing trend of
outsourcing to lower wage countries,
middle-aged adults will be displaced from
their jobs and will have to be retrained.
Corinthian will benefit the most from this
trend, due to the rate at which students
could complete a degree program.
According to the National Center for
Educational Statistics, college attendance
is expected to rise 15% to 20% from now
until 2012. Corinthian has been
aggressively opening new sites in order to
poise itself in an excellent position to
capitalize on this growth.
Key Statistics
COCO
Beta (BB numbers) 1.04
P/E (BB numbers) 41.45
PEG Ratio (Calc. from VL 5-yr) 1.69
P/B (mrq) (BB numbers) 10.01
ROE (BB numbers) 34.22
Value Line Timeliness Ranking: 2
Market Cap: $2.7 Billion
Earnings per Share: $1.52
Candidate for mean reversion
Corinthian’s P/E (41.45) and PEG (1.6)
ratios are below the industry average of
47.39 and 2.17, which prompted us to
take a more thorough look at the
co mpany’s growth strate gy,
fundamentals, and technical tools.
“The Bureau of
Labor Statistics Upon review of the company’s
fundamentals, we saw sales growth of
said the demand 52%, which was well above the industry
for skilled labor average of 29%. This could be
attributed to the company’s aggressive
in 2000 was internal and external growth strategy.
Internally the company is presenting
65% of the total new curriculum, expanding its course
workforce.” selection, marketing directly to high
schools, and offering competitive
pricing. Externally the company is
acquiring new colleges.
Technically, we ran a regression analysis
which included two standard deviations
from the mean. In this test we found
that Corinthian’s stock price was at the
support level for the preceding year.
This was confirmed with a CCI rising
Industry S&P 500 from oversold territory and an upward
0.96 1.00 trending accumulation/distribution, a
47.39 22.02 volume strength indicator. For more
2.17 1.61 information see Technical Analysis
14.79 3.06 Terms on page 35 of the Glossary.
40.34 14.98%
12
 Omnicare Corp. (NYSE: OCR)
Sector: Health Care
Industry: Pharmacy Services
Purchase Price: $43.39
A multisegment marvel
Omnicare, Inc. is a provider of pharmacy
services to long-term care institutions such
as skilled nursing facilities, assisted living
facilities, and other institutional health
care facilities. The company also provides
comprehensive clinical research for the
pharmaceutical and biotechnology
industries. The company operates in two
business segments. The largest segment,
Pharmacy Services, provides distribution
of pharmaceuticals, related pharmacy
consulting, data management services, and
medical supplies to long-term-care
facilities. The company's other business
segment is contract research organization
services, which is an international provider
of comprehensive product development
and research services to client companies
in the pharmaceutical, biotechnology,
medical device, and diagnostics industries.
An endless supply of demand for
research
The Pharmacy Services industry
encompasses two major segments:
pharmacy services companies, which
includes pharmacy benefits managers and
clinical services providers, and the large
drug chains. Pharmacy Services ranks in
the top five of all industries reviewed by
Value Line. The industry should do well
over the long term, because of the move
toward specialty-disease management and
rising sales of generic drugs.
Key Statistics
OCR
Beta (BB numbers) 0.74
P/E (BB numbers) 17.46
PEG Ratio (Calc. from VL 5-yr) 0.99
P/B (mrq) (BB Numbers) 2.27
ROE (BB Numbers) 13.17
Value Line Timeliness Ranking: 2
Market Cap: $4.39 Billion
Earnings per Share: $1.93
Growing market share in a growing
market
Omnicare has been aggressively making
acquisitions to increase its market share.
In 2003 the number of patients it served
grew over 33%.
“Omnicare has With cash flow per share up 82% to an
estimated $3.12 in 2004, it is ready to
been aggressively capitalize on further acquisitions to fuel
making growth. We also liked its profit margin
which is better than its competitors’.
acquisitions to Some of its margin expansion can be
attributed to the economies of scale that
increase its
resulted from its expansion.
market share.”
Omnicare now serves 40% of the people
at nursing homes and assisted-living
facilities. Omnicare is four times larger
than its nearest rival, NeighborCare,
Inc., and is growing at a much faster
rate. Long term, OCR appears to have
sustainable growth characteristics and
analyst’s estimate that the market that
OCR serves could grow from $10.5
billion in 2002 to $56.8 billion by 2020.
Industry S&P 500 This, coupled with OCR’s growing slice
0.72 1.00 of the market, will ensure that business
21.30 22.02 remains robust for OCR.
1.11 1.61
2.49 3.06
19.53 14.98%
13
 Hovnanian Enterprises (NYSE: HOV)
Sector: Consumer Cyclical Value Line Timeliness Ranking: 1
Industry: Homebuilding Market Cap: $2.29 Billion
Purchase Price: $38.78 Earnings per Share: $4.12

Foundation built on diversification

Hovnanian designs, constructs, and
markets condominiums, apartments,
townhouses, and single-family homes in
planned residential communities. It also
develops and manages income-producing
properties. Founded in 1959, it has risen
to become one of the nation’s premier
homebuilders with operations in 13 states.
Through a series of strategic acquisitions
in 2002 and 2003, Hovnanian was able to
expand its market reach. Hovnanian’s
land has allowed for perfect positioning in
key land locations serving diversified Potential for breakout
housing markets in Florida, Arizona, Ohio, The homebuilding industry was ranked
Texas, and California. “Recently at the coveted #1 position by Value
Line. The Value Line Investment
Homebuilding industry built on solid released housing Survey states, “Recently released
ground housing data indicate that the
data indicate homebuilding industry remains on solid
New-housing-starts data released in
November 2003 broke through the that the footing.” (Jan. 9, 2004) HOV has posted
virtually impenetrable 2M barrier climbing impressive new-order gro wth .
to 2.07M – a 17.6% increase year over
homebuilding Moreover, in January 2004 net contracts
year. A recovering economy and industry remains for new homes were up 57%, and a hefty
somewhat optimistic jobless figures should backlog of contracts for new homes
continue to drive the industry already in on solid footing.” waiting to be built was up 66% over the
the midst of a red-hot booming housing previous year.
market.
(The Value Along with positive growth prospects
The Federal Reserve met on several HOV was traded at a relatively low P/E
Line Investment multiple, which led us to believe that
occasions without raising interest rates.
However, this is not to say that Hovnanian Survey, Jan. 9, this stock was congruent with our
and other homebuilders are not immune or G.A.R.P. investment philosophy. Its
impervious to the market’s anticipation of 2004) lower-than-industry average P.E.G. ratio
the Fed’s raising interest rates. also reaffirmed that HOV fit our
investment strategy.

Building the interest environment into

Key Statistics our models, valuations were still
HOV Industry S&P 500 favorable for our holding period.
Beta (BB numbers) 1.03 1.05 1.00 Technical indicators showed HOV was
P/E (BB numbers) 9.30 9.61 22.02 poised for a price breakout, confirming
our purchase timing.
PEG Ratio (Calc. from VL 5-yr) 0.36 0.62 1.58
P/B (mrq) (BB Numbers) 2.63 2.32 3.06
ROE (BB Numbers) 37.24 28.53 14.98%

14
 Humana, Inc. (NYSE: HUM)
Sector: Health Care
Industry: Medical Services
Purchase Price: $21.17
Servicing commercial and governmental
clients
Humana, Inc., is one of the nation's largest
publicly traded health benefits companies,
with approximately 7 million medical
members located primarily in 19 states and
Puerto Rico. Humana offers coordinated
health insurance coverage and related
services through traditional and Internet-
based plans.
The company manages its business in two
segments, commercial and government.
The commercial segment consists of
members enrolled in products marketed to
employer groups and individuals. The
government segment consists of members
enrolled in government-sponsored
programs.
Operating in a healthy market
The U.S. health care services market, the
world's largest, is worth nearly $1.4
trillion, with 81 listed companies fighting
for a piece of the pie. A problem (and an
opportunity) is the rising demand for
services. People are living longer and need
more care. However, capitalizing on this
opportunity is not for the unfit of heart.
This market will only be growing as baby
boomers reach an age where increased
medical coverage is necessary to maintain
their quality of life.
Key Statistics
HUM Industry
Beta (BB numbers) 0.96 0.75
P/E (BB numbers) 9.97 13.98
PEG Ratio (Calc. from VL 5-yr) 0.76
P/B (mrq) (BB Numbers) 1.33
ROE (BB Numbers) 13.30
Value Line Timeliness Ranking: 1
Market Cap: $2.93 Billion
Earnings per Share: $1.41
Increasing Medicare exposure
The recent Medicare Act has created a
good opportunity for Humana to grow
and become more profitable. The bill
was designed to draw more private plans
into the government’s program. It has a
“The recent large Medicare membership that will
allow them to benefit more from the Act
Medicare Act relative to its competitors. Humana also
plans to add more members through
has created a acquisitions. Recently it acquired
good opportunity Ochsner Health Plan whose plans
include 152,000 commercial medical
for Humana to members and 36,000 members in the
grow and become Medicare+Choice program.
more profitable.” Humana’s growth strategy seemed solid,
and its valuation was favorable. On a
relative valuation basis we valued the
stock at $27.35, taking into account
future earnings and various multipliers.
Our discounted free cash flow model
gave us a value of $39.78. In either case
we felt that the stock was undervalued,
and we were also purchasing the stock
on a dip in price.
S&P 500
1.00 Unfortunately, the short-term downtrend
22.02 continued, and we were stopped out at
our 10% stop loss. It seems that the
0.94 1.61
problem with government
2.98 3.06
reimbursements played a negative role
24.28 14.98% in the performance of Humana.
15
 Laboratory Corp. of America (NYSE: LH)
Sector: Health Care
Industry: Medical Services
Purchase Price: $38.21
Finding a niche in specialized testing
LabCorp is one of the largest clinical
laboratories offering a broad range of
testing services to individual physicians,
managed-care organizations, hospitals,
clinics, and long-term-care facilities.
The company has developed specialty and
niche businesses based on certain types of
specialized testing capabilities and client
requirements, such as oncology testing,
HIV genotyping and phenotyping,
diagnostic genetics, and clinical research
trials. They operate in all 50 states, the
District of Columbia, Puerto Rico, and two
provinces in Canada.
A bright future for hospitals
The medical services industry comprises
81 companies. LH’s main competitors are
Esoterix Inc. (privately held), Quest
Diagnostic, Inc. (DGX), and Specialty
Laboratories, Inc. (SP). The highlight of
the industry is the unfolding impact of the
Medicare Act (with the co-pay clause),
which was passed several months ago. The
Act is expected to have a positive impact
on the industry, but only time will tell.
The long-term picture looks bright for the
medical services industry – an aging
population coupled with a strengthening
economy is just the tonic needed for
vigorous growth.
Key Statistics
LH Industry
Beta (BB numbers) 0.83
P/E (BB numbers) 16.55
PEG Ratio (Calc. from VL 5-yr) 0.97
P/B (mrq) (BB Numbers) 2.84
ROE (BB Numbers) 18.30
Value Line Timeliness Ranking: 2
Market Cap: $5.84 Billion
Earnings per Share: $2.22
A poster company for G.A.R.P.
The demographic trend of population
aging was a major reason for our
portfolio being overweighted in the
“LabCorap’s health care sector. The medical services
industry in particular would greatly
consistent double
benefit from this trend, and also the
digit earnings unfortunate occurrence of new diseases
that are becoming more complicated to
growth along diagnose. One thing that attracted us to
with a lower LabCorp was its specialty-testing
capabilities that allowed it to have
P/E ratio... higher profit margins than its
competition. LabCorp’s consistent
fit well into our
double-digit-earnings growth along with
G.A.R.P. a lower P/E ratio than other companies
in its industry and lower than its rival
investment competitor (Quest Diagnostics) fit well
strategy.” with our G.A.R.P. investment strategy.
Future growth would most likely come
from higher test volumes as the
economy continues to expand and
companies begin to hire more workers,
creating more demand for routine and
esoteric drug tests. In addition, LabCorp
S&P 500 is planning to bring many new
0.87 1.00 innovative tests to market to continue to
21.83 22.02 fuel sales and earnings growth. These
1.26 1.61 tests should provide LabCorp with the
3.49 3.06 momentum needed to sustain long-term
future growth.
18.04 14.98%
16
 Nokia Corp. (NYSE: NOK)
Sector: Technology
Industry: Communications Equipment
Purchase Price: $21.30
Leading mobile technology
Nokia Corporation is a mobile-
communications company primarily
offering voice-centric mobile telephones,
entertainment/gaming devices, and
media/imaging telephones. In January
2004, the company reorganized its
structure and now includes four business
groups: Mobile Phones, Multimedia,
Networks, and Enterprise Solutions. The
Mobile Phones group develops mobile
telephones for all major standards and for
customer segments in over 130 countries.
Multimedia focuses on bringing mobile
multimedia to consumers. Networks is a
provider of network infrastructure, service
delivery platforms, and related services to
mobile operators and service providers.
Enterprise Solutions offers businesses a
range of devices and mobile connectivity
solutions based on end-to-end mobility
architecture.
Adapting to a rapidly changing market
Nokia remains the leading player in the
increasingly competitive mobile-phone
market. Demand for new features, such as
in-phone cameras, in mature markets and
for entry-level models in emerging ones is
keeping volume on the rise. And helped by
gains in various countries and
technologies, including the GSM market in
China, Nokia has been able to sustain its
dominant market position.
Nokia has also recognized that the mobile-
Key Statistics
NOK Industry
Beta (BB numbers) 1.53 1.16
P/E (BB numbers) 17.34 74.64
PEG Ratio (Calc. from VL 5-yr) 1.25 3.95
P/B (mrq) (BB Numbers) 4.27 3.72
ROE (BB Numbers) 23.95 -5.65
Value Line Timeliness Ranking: 1
Market Cap: $71.91 Billion
Earnings per Share: $0.87
communications industry has undergone
significant changes, the result of
advances in technologies that enable a
variety of products and services from
different industries to become connected
with each other. We believe the recent
“Nokia
restructuring efforts will enable Nokia to
remains the take full advantage of this industry
convergence.
leading player
in the Outperforming and undervalued
When compared to the company’s three
increasingly largest competitors (Motorola, Ericsson,
and Siemens), Nokia Corporation had
competitive
the highest profit margin (17.01%) and
mobile-phone the lowest PEG ratio (1.25, compared to
Siemens’ 1.35).
market.”
The company’s relative statistics,
combined with our free-cash-flow-to-
equity valuation, led the team to believe
that Nokia was undervalued by the
market. It was our belief that the
growing demand for new mobile
devices, combined with Nokia’s cost-
cutting restructuring efforts and
S&P 500 industry-leading position, would enable
1.00 Nokia to outperform growth
22.02 expectations. Unfortunately, Nokia
1.61 experienced a decrease in market share
3.06 and saw a dramatic decrease in share
value during our holding period.
14.98%
17
 Overseas Shipholding Group (NYSE: OSG)
Sector: Transportation
Industry: Maritime
Purchase Price: $34.35
Vertically integrated success
Overseas Shipholding Group, Inc., was
incorporated in 1969 and is an independent
bulk shipping company engaged primarily
in the ocean transportation of crude oil and
petroleum products, as well as dry bulk
cargo.
As of December 31, 2003, the company's
modern fleet consisted of 52 oceangoing
vessels, of which 43 vessels operated in
the international market and 9 in the
United States market. OSG charters its
vessels either for specific voyages (voyage
charters) at spot rates or for specific
periods at fixed monthly amounts. OSG
customers include commercial as well as
government agencies.
Coming up for air
The Maritime industry floats in the top
quartile of the Value Line Timeliness
ranking system, having risen from close to
the very bottom 24 months ago. A
strengthening U.S. economy and the
continuing boom in China should have
positive effects on the company’s core
business.
The completion of a pending international
free-trade agreement is expected to spur
pent-up demand for oil abroad.
Meanwhile, strict new vessel regulations
will help keep tanker supply growth from
becoming overwhelming.
Key Statistics
OSG
Beta (BB numbers) 0.86
P/E (BB numbers) 8.31
PEG Ratio (Calc. from VL 5-yr) 0.72
P/B (mrq) (BB Numbers) 1.26
ROE (BB Numbers) 14.26
Value Line Timeliness Ranking: 2
Market Cap: $1.43 Billion
Earnings per Share: $3.54
Charting the course
OSG enjoys an outstanding reputation
for its safety, quality, and reliability.
Moreover, a strong balance sheet,
operating performance, cash flows, and
liquidity over recent years have enabled
to OSG to increase dividends.
“OSG enjoys
Historical trends indicates that every
an outstanding third year OSG achieves a new high in
reputation for free-cash-flow (FCF) levels. FCF for
2004 should continue to grow at a faster
its safety, pace than the company’s growth rate for
each previous year. Accordingly, this
quality, and
was a prime consideration when
reliability." performing our analysis of the
company’s growth prospects and
valuation. To compensate for this
phenomenon, the SMIF team added a
premium to the growth rate used for our
free-cash-flow valuation.
We believed that there was a high
growth potential for the company
because increasing demand for oil was
putting pressure on supply. On a
Industry S&P 500 relative basis, the company was trading
0.81 1.00 at a reasonable price and a low P/E
10.09 22.02 multiple as compared to the industry.
1.06 1.61 Considering this, we felt that OSG
1.49 3.06 would be a valuable addition to our
portfolio.
11.32 14.98%
18
 Texas Instruments Inc. (NYSE: TXN)
Sector: Technology
Industry: Semiconductors
Purchase Price: $31.35
Conducting global leadership
Texas Instruments is a leading global
manufacturer of semiconductors and
electronics. 7 0 % o f Te x a s
Instruments’ profits come from
semiconductor productions, with 18%
from Sensors and Controls and 12%
from Education and Productivity
Solutions. 23% of their revenue is
concentrated in the United States, 17%
in Japan, with 20% in Europe, 35% in
the Asian Pacific, and 5% in other
locals.
Catching a rebound in chipmakers
A sector/industry review indicated that
overall semiconductor manufacturers
are poised for growth. Standard &
Poor’s predicted a rebound in the chip
industry, suggesting that plant
utilization rates will rise and the
pricing environment will improve, due
to shortages expected for certain types
of chips. Value Line ranked the
semiconductor industry at 12, out of
98. Texas Instruments has many
advantages over its main competitors.
Its focus on new equipment, a
commitment to Research and
Development in order to boost
innovation and product development,
along with the completion of a recent
cost-reduction strategy should lead to
increased earnings. Texas Instruments
is in the position to take advantage of
the upswing in the semiconductor
Key Statistics
TXN Industry S&P 500
Beta (BB numbers) 1.32 1.59
P/E (BB numbers) 33.29 49.93
PEG Ratio (Calc. from VL 5-yr) 1.58
P/B (mrq) (BB Numbers) 3.67
ROE (BB Numbers) 10.60
Value Line Timeliness Ranking: 2
Market Cap: $54 Billion
Earnings per Share: $0.82
business cycle.
Potential growth in cash flows
We used Yahoo Finance to narrow our
search for a semiconductor company.
TXN’s PEG Ratio was 1.58 and similar to
“Texas
INTC’s 1.61, but better than MOT’s 3.74.
Instruments is Its prior-year revenue growth was 2.2%,
versus .80% for INTC and -11.10% for
in the position MOT. A free-cash-flow-to-equity (FCFE)
to take analysis suggested a holding period target
price of $33.00 based on recent predicted
advantage of supernormal growth starting in 2004. On
February 18, we purchased 120 shares at
the upswing in
$31.35 for a total of $3,762.00. We were
the stopped out at $28.20 on March 25, for a
loss of 10.05%.
semiconductor
business cycle." Upon reevaluation, we continue to believe
that the underlying fundamentals remain
strong, with an expected earnings growth of
20% over the next five years. A post-sale
technical analysis indicated that our
purchase could have been timed better, with
clear purchase signals occurring towards the
end of our SMIF holding period. However,
considering a long-term hypothetical
investment of three years, we believe that
1.00 our estimated return (during that period)
22.02 could have been realized. A common
2.28 1.61 challenge surfacing in our investment
4.20 3.06 decisions was to maintain a long-term
investment approach while managing in a
-8.76 14.98%
19
 Winnebago Industries, Inc. (NYSE: WGO)
Sector: Consumer Cyclical
Industry: Manufactured Housing/RV
Purchase Price: $34.37
RV industry heats up
Demographic trends and a rebounding
stock market serve as a favorable
environment for the relatively small and
segmented RV industry to flourish.
Baby boomers are approaching the age
where big-ticket items such as RVs
become economically feasible. In
addition, the older community is seeking a
more-active lifestyle, stemming from
improvements in medical practices.
In terms of interest rates, demand can only
be increased by a low financing rate
available to consumers. Rebounding
consumer confidence signals that we may
be in the market cycle stage that will
enhance Winnebago’s sales even further.
A different approach to leadership
2003 marked an interesting year for
Winnebago. As investors winced in
reaction to the bite its competitors took out
of WGO’s market share, Winnebago’s
CEO Bruce Hertzke viewed his company’s
performance in a different light.
The market share stolen by competitors
came with a price. These companies
slashed prices in an effort to fuel sales.
While this approach can work in the short
run, Hertzke is confident that competitors’
squeezed margins will come back to haunt
them in later quarters.
Key Statistics
WGO Industry
Beta (BB numbers) 17.38 1.41
P/E (BB numbers) 17.38 20.46
PEG Ratio (Calc. from VL 5-yr) 0.94
P/B (mrq) (BB Numbers) 4.93
ROE (BB Numbers) 25.6
Value Line Timeliness Ranking: 1
Market Cap: $1.08 Billion
Earnings per Share: $1.54
Valuing with Bloomberg
Valuing a company accurately is an
inexact science. However, valid
conclusions about the direction of a
stock can be attained when using a
"Baby powerful tool, in this case the
Bloomberg Research Machine.
boomers are
approaching For our purposes, we used the Dividend
Discount Model function to get an idea
the age where
of what WGO’s intrinsic value might be.
big-ticket By projecting earnings estimates
forward a year, we were able to calculate
items such as
an intrinsic price of $46.35, which
RVs become should be realized by the end of WGO’s
fiscal year.
economically
feasible." Perhaps the most crucial assumption
with the DDM is a steadily growing
dividend payout ratio. There were some
concerns that the company may not
reach a payout ratio of 45% at its
maturity. However, the company has
taken steps to improve its dividend
policy by upgrading its previously semi-
annual payments to quarterly while
S&P 500 implementing stock buybacks. When
1.00 considering that a 45% payout policy
22.02 would amount to about a 4% to 5%
1.25 1.61 dividend yield, the assumptions
6.82 3.06 associated with our DDM valuation
seemed reasonable.
1.28 14.98%
20
 PORTFOLIO PERFORMANCE
Portfolio Performance 2003-2004
The SMIF team maintained a bullish outlook in a market that saw a remarkable wartime recovery dating back
to March 2003. Unfortunately, our holding period paralleled an unforeseen correction in the market, and our
holdings suffered a substantial amount of volatility. As a result, the 2003-2004 SMIF portfolio underper-
formed the S&P 500 over our investment period due to our increased equity exposure. The fixed-income port-
folio suffered as well. Speculation that the Fed would raise interest rates in the very near future gave the illu-
sion of rising rates, causing capital losses on bonds, in spite of the fact that the Federal Funds Rate remained
unchanged, as we had anticipated.

• The Equity portion of the SMIF portfolio saw five holdings outperforming the index and five underper-
forming. The overall performance of the portfolio returned -3.1%, which underperformed the S&P 500 by
0.5%. After including transaction costs, the equity portfolio lost a total of 6.2%.

• The Fixed-Income portion of the SMIF portfolio lost a total of $521.29, a return of -4.4%. Our benchmark
showed slight growth, returning 1.4%.

• Overall, the SMIF portfolio experienced a loss of $2593 or -5.18%.

WITHOUT NET
TRANSACTIONS TRANSACTIONS
TOTAL FUND -5.18%
BENCHMARK -1.60%

EQUITIES -3.10% -6.20%

BENCHMARK -2.60%

FIXED-INCOME -3.38% -4.42%

BENCHMARK 1.41%

SHORT TERM 0.70% 0.70%

10 %

5%
S&P 500
SMIF Equities
0%

- 5%

- 10 %

18-Feb 28-Feb 9-Mar 19-Mar 29-Mar 8-Apr 18-Apr 28-Apr

21
 PORTFOLIO PERFORMANCE

Portfolio Performance 2003-2004

NET OF
TICKER PURCHASE SELL
PRICE PRICE RETURN TRANSACTION GAIN/(LOSS)
SYMBOL DATE DATE
COSTS
HOV Feb-18 $ 38.78 Mar-23 $ 42.08 8.50% 5.60% $ 218.78
OSG Feb-25 $ 34.35 Apr-28 $ 35.96 4.69% 1.60% $ 62.16
LH Mar-10 $ 38.21 Apr-28 $ 39.99 4.66% 1.60% $ 62.70
COCO Mar-17 $ 30.01 Apr-28 $ 30.06 0.01% -2.70% $ (108.15)
CBH Feb-18 $ 59.67 Apr-28 $ 58.11 -2.60% -4.00% $ (152.40)
OCR Mar-24 $ 42.68 Apr-28 $ 41.35 -3.12% -6.10% $ (227.41)
WGO Mar-03 $ 33.91 Mar-16 $ 30.94 -8.76% -11.60% $ (430.90)
TXN Feb-18 $ 31.35 Mar-25 $ 28.20 -10.05% -12.80% $ (489.87)
HUM Feb-25 $ 21.17 Mar-30 $ 18.90 -10.70% -13.70% $ (587.66)
NOK Mar-17 $ 21.30 Apr-06 $ 17.68 -17.00% -19.60% $ (764.06)
TOTAL -3.10% -6.20% $ (2,416.81)

S&P 500 Feb-18 1,151.82 Apr-28 1,122.25 -2.60% -2.60%

Equity Results:

Winners / Losers
HOV

OSG

10.00%
LH

COCO

5.00%

0.00%
S&P 500*
CBH

OCR

Return -5.00%
WGO

-10.00%
TXN

HUM

-15.00%
NOK

-20.00%

* S&P 500 return between 2/18/2004 and 4/28/2004. Equity returns calculated before transaction costs.

“Not everything that counts can be counted, and not

everything that can be counted, counts.” – Albert Einstein

22
 RISE SYMPOSIUM
This year, a number of the SMIF students
represented California State University, Long
Beach at the Fourth Annual Redefining Investment
Strategy Education (RISE) Symposium at the
University of Dayton’s School of Business
Administration.
RISE is the first symposium of its kind to bring
leading students, faculty, and investment
professionals together in an interactive learning
environment to discuss a range of pertinent issues
facing investment professionals.
RISE 2004 included keynote presentations by
nationally renowned industry leaders; specialized
breakout sessions focusing on a range of
investment, career strategies and academic program
development related issues; security analyst and
portfolio manager workshops; and an optional
portfolio competition. RISE 2004 drew more than
900 students and faculty from approximately 100
colleges and universities from the United States and
Canada.
RISE was co-sponsored by the biggest names in
finance: the New York Stock Exchange, The Wall
Street Journal, CNBC and Deutsche Asset Manage-
ment, along with UD's School of Business Admini-
stration. The event featured 12 keynote speakers,
who spoke about the economy, public policy, cor-
porate governance, and the market. Some of those
speakers included:
Lyle Gramley, Senior Economic Advisor with the
Schwab Washington Research Group and former
member of the Board of Governors of the Federal
Reserve System.
Michael Moskow, President and CEO of the Fed-
eral Reserve Bank of Chicago and a former U.S.
deputy trade representative. The U.S. Senate has
confirmed Mr. Moskow for five U.S. government
positions.
Richard Bernstein, chief U.S. strategist for Merrill
Lynch’s global securities research and economics
group, who was named by Fortune magazine as one
of only 11 “all-star analysts” in 2001 and 2002.
Don Phillips, Managing Director for Morningstar
Inc., the mutual fund industry’s most recognizable
and relied upon independent rating source.
Robert Hormats, Vice Chairman of Goldman
Sachs International and Managing Director of
Goldman, Sachs & Co. Mr. Hormats has served as
a Senior Staff Member for International Economic
Affairs on the National Security Council and as
Senior Deputy Assistant Secretary for Economic
and Business Affairs at the Department of State.

John Bogle, Founder of The Vanguard Group Inc.,

one of the world's two largest mutual fund organi-
zations, and widely considered the "father of the
mutual fund industry.”

Samuel Zell, Chairman of the Board and Founder

of Equity Group Investment, LLC. Mr. Zell re-
cently completed a two-year term as Chairman of
the National Association of Real Estate Investment
Trusts (NAREIT).
SMIF students participate at the RISE Symposium in Dayton, Ohio. From
left: Khai Nguyen, Dr. Peter A. Ammermann, Ryan Smith, Mike Thomas,
Jonas Neubauer, Kristian Baney, and Vu Chu.

“To be a money master, you must first be a self-master.”

– J.P. Morgan

23
 MEET THE SMIF TEAM

1 Vu Chu 9 Mike Thomas

2 Jana Wennstrom 10 Leroy Alveranga
3 Jonas Neubauer 11 Kristine Ikeda
4 Juan Rivas 12 Ryan Smith
5 Julia Dunisch 13 Arisara Kiusasap
6 Jason Moore 14 Khai Nguyen
7 Mark Woerz 15 Cynthia Rafael
8 Kristian Baney 16 Jeff Clausi

24
 STUDENT MANAGERS
Leroy Alveranga
Leroy Alveranga is currently completing a Bachelor’s degree at
CSULB, double majoring in International Business and Finance. He is a
Level Two Certified Tutor in economics, finance, and math. He is a
member of the California Army National Guard with six years of
military experience. He hopes to pursue an MBA in International
Business at the University of California, Berkeley. In addition, he plans
to do research in behavioral finance and ultimately become the Chief
Executive Officer of a global corporation.

Kristian Baney
Kristian Baney is graduating from CSULB with a degree in Finance and
plans to obtain his MBA from a top business school. While attending
college he has been working as the Accounting Manager of Phoenix
Technology, a computer services business. He is currently a Chartered
Financial Analyst (CFA®) Level I candidate and plans to pursue a career
in portfolio management.

Vu Chu
Vu Q. Chu is an undergraduate majoring in Economics and Finance. He
is a member of Beta Gamma Sigma business honor society and is
currently an Assistant Portfolio Manager at an investment management
firm. His responsibilities include evaluating securities and asset
allocation strategies to help meet clients’ objectives, executing trades,
and generating financial models and analysis on prospective
investments. He is also a Chartered Financial Analyst (CFA®) Level I
candidate, and plans to work toward a Ph.D. in Economics or Finance.

Jeff Clausi
Jeff Clausi is a Finance major with a concentration in Investments at
California State University, Long Beach. He is currently employed at
Boise Cascade as Transportation Supervisor. After graduation, Jeff
plans to pursue a career in corporate finance or financial planning as
well as obtain his MBA and CFP® certification.

25
 STUDENT MANAGERS
Julia Dunisch
Julia Dunisch attends California State University, Long Beach, and is
majoring in Business Finance, Real Estate and Law, with concentrations
in both Investments and Financial Management. She plans to attend the
University of California, Irvine, for her post-baccalaureate education.
She will be pursuing a career that will utilize her experience in sales and
education in finance.

Kristine Ikeda
Kristine Ikeda is a second-year MBA student specializing in Finance.
Her scholastic interests include investments, valuation research, and
portfolio management. She is a Chartered Financial Analyst (CFA®)
Level I candidate and is pursuing a career in the Asian financial industry
in corporate valuation and corporate finance strategy consulting. She is
a member of the CSULB chapter for Beta Gamma Sigma, a national
business honor fraternity, and has also been named one of the Dean’s
Top Graduates, ranking in the top 1% of her graduating class.

Arisara Kiusasap
Arisara Kiusasap is currently completing a Bachelor of Science in
Finance with a minor in Business Economics at California State
University, Long Beach. She is on the President’s Honor List. She
intends to pursue a career in corporate finance. She plans to complete
an MBA with a concentration in Finance at the University of Chicago.

Jason Moore
Jason Moore is an undergraduate Finance major with an emphasis in
Investments. He is a member of the Kappa Sigma Fraternity, Long
Beach State Chapter. Jason is also in the College of Business
Administration’s Honors Program, where he is researching the effects of
the 2003 Jobs and Growth Tax Relief Reconciliation Act. He is a
Chartered Financial Analyst (CFA®) Level I candidate and plans to
pursue a career in portfolio management.

26
 STUDENT MANAGERS
Jonas Neubauer
Jonas Neubauer is a published undergraduate at CSULB, where he is
currently working toward a degree in Finance. He hopes to work in the
Portfolio Management field, eventually managing his own hedge fund
based on quantitative modeling of equity markets. His research interests
include statistical aspects of technical analysis as well as applying the
Fibonacci sequence to movements in the S&P 500.

Khai Nguyen
Khai Nguyen is an undergraduate at California State University, Long
Beach, where he is currently working toward his bachelor’s degree in
Finance, with an emphasis in Investments. His research has been
published in several leading refereed journals, including the Journal of
Academy of Business and Economics (JABE). Also an avid investor, he
plans to pursue his career in portfolio management and securities law.
As Chairman of the SMIF Annual Report Committee, he was in charge
of organizing and designing the 2003-2004 SMIF Annual Report.

Cynthia Rafael
Cynthia Rafael is an undergraduate student in the Business Finance
Program at CSULB. She currently is employed at Union Bank as a
Team-Lead in the Commercial Real Estate Loan Administration Group.
Upon graduation she intends to continue her career in the banking
industry.

Juan Rivas
Juan M. Rivas will be completing a Bachelor of Science degree in
Business Administration with an option in Finance. He plans to prepare
himself for the Chartered Financial Analyst (CFA®) Level I exam and
pursue a career in investment management.

27
 STUDENT MANAGERS
Ryan Smith
Ryan Smith will be completing a Bachelor of Science degree in Finance
this year at California State University, Long Beach, with an emphasis
in Investments. He currently directs the national sales activity of Cycle
Support West, Inc., and is a respected figure in the bicycle industry. He
plans to apply his skills and intuition to the world of portfolio
management in the near future.

Mike Thomas
Mike Thomas is a graduating senior studying Finance with a
concentration in Investments. He has been recognized on the President’s
Honor List and was awarded membership in the Golden Key
International Honor Society and CSULB chapter for Beta Gamma
Sigma, a national business honor fraternity. His interests include facets
of technical and relative analysis, derivatives use, and risk management.
Mr. Thomas hopes to one day culminate his efforts into a career as a
sell-side investments broker.

Jana Wennstrom
Jana Wennstrom is currently an undergraduate student at CSULB,
double majoring in Accounting and Finance. She is a member of Beta
Alpha Psi, Alpha Gamma Sigma, and the Golden Key International
Honor Society. Having completed an internship at a local CPA firm, she
will spend the summer as an intern in the tax practice of
PricewaterhouseCoopers’ Los Angeles office. Subsequent to
®
graduation, she plans to become a CPA and obtain a Master of
Business Taxation degree while working in public accounting.

Mark Woerz
Mark Woerz is graduating from CSULB with a degree in Finance. He
has been actively investing in securities for himself and family members
for 15 years. Living in Long Beach with his wife and two children,
Mark is pursuing a career in investments.

28
 ACKNOWLEDGMENTS
The 2003-2004 SMIF managers would like to offer
our whole hearted thanks and appreciation to the
following individuals, whose support and guidance
were instrumental to enhancing and broadening the
SMIF experience:
Fixed-Income Guest Speaker:
Mr. Doug Lopez, CFA, Vice President and
Portfolio Manager, Bradford and Marzec, Inc.
For taking the time out of his busy schedule to be
our fixed-income guest speaker. His words and
advice were integral to our decisions and proved to
be of tremendous value.
Career Panel:
Mr. Jim Burley, Chief Administrative Officer,
Bradford and Marzec, Inc.
Mr. Bob Boyd, Structured Product Specialist,
PIMCO
Mr. Doug Wolf, Portfolio Manager, Wells Fargo
Bank
For sharing their personal and career-related experi-
ences as well as their inside take on the real world
of investments, securities research, and portfolio
management. Their realistic perspectives are in-
valuable to those of us who wish to pursue a career
in the investment industry.
Mr. Joseph Tinervia, The Writing Center
For his professional proofreading of the SMIF
2003-2004 Annual Report. His support has al-
lowed us to reach new levels of excellence.
Mr. Khai Nguyen, SMIF Member
Mr. James Tran, Graphics Artist
For designing the cover and layout of the Annual
Report.
29
Association for Investment Management Research
(AIMR)/CFA Institute:
Ms. Jackie Curran, Administrative Director, Or-
ange County Society of Investment Managers
(OCSIM)
Much appreciation for her assistance and support
throughout the year in helping to coordinate the
attendance of the SMIF students at the monthly
luncheons.
Mr. Jay Tsai, CFA, Associate Vice President and
Financial Advisor, Morgan Stanley
For inviting SMIF students to participate at the
OCSIM Annual Forecast Dinner.
Ms. Linda Cahill, Administrator, Los Angeles So-
ciety of Financial Analysts (LASFA)
For helping the SMIF members register and attend
monthly LASFA luncheons and the LASFA Career
Expo.
OCSIM Scholarship Foundation (OCSIMSF):
Ms. Krista Zipfel, CFA, Chair of the OCSIMSF,
and Principal, Advisors Solutions Group
Mr. Russell Murdock, CFA, Vice Chair of the
OCSIMSF, and Principal, Sea-Breeze Capital Man-
agement, LLC
The Members of the OCSIMSF Investment
Policy Committee
For awarding the SMIF team the honor of being the
inaugural OCSIMSF fund managers, and for taking
time out of their busy schedules to meet on a
quarterly basis to discuss the OCSIMSF investment
portfolio. Their comments and feedback have truly
helped us to grow toward becoming contributing
members of the investment community.
 ACKNOWLEDGMENTS
Global Insight tween director and facilitator, providing insight
where applicable while preserving genuine student
For providing their annual, quarterly, and monthly management. The learning experience that is de-
economic forecast reports. rived is incomparable and irreplaceable.

California State University, Long Beach (CSULB):
Dr. Robert Maxson, President, CSULB
CSULB IRA Board
For providing the funding for the Bloomberg Pro-
fessional Service, LCD projector, and student par-
ticipation at the Redefining Investment Strategy
Education (RISE) Symposium in Dayton, Ohio.
The goal of any investment fund is to add value to
the overall portfolio. With an interminable passion
to acquire, create, and distribute knowledge of fi-
nancial strategy, these fine gentlemen are possibly
the greatest value that could ever be added to the
SMIF Program here at CSULB.

CSULB Investment Committee

For overseeing and supporting the SMIF Program.

Mr. William F. Hendry, Director of Development,

CBA

For his efforts to expand the exposure of the SMIF

Program and to develop additional contacts with
the investment community.

SMIF Advisory Board:

Mr. Norm Coulson, retired, CEO, Glendale Fed-

eral

Mr. Wes Seegers, Senior Vice President, Salomon

Smith Barney

For being our portfolio advisor and securities bro-

ker. Mr. Seegers executed all the financial transac-
tions related to our portfolio.

Special Thanks:

Finally, the 2003-2004 SMIF Team would like to

extend special thanks to the advisors of the fund,
Dr. L.R. Runyon & Dr. Peter A. Ammermann.

The selflessness with which they sacrificed their

time for the sake of academia and student advance-
ment is unparalleled on this or any other campus.
Both are able to skillfully tread the fine line be-

30
 REFERENCES
Professional Services:
• Wieseman, T. & Greelaw, D. (2003). Global
• Bloomberg Professional Service* Economic Forum [Online]. Retrieved
• Global Insight September 29, 2003, from
• 90th Annual Report 2003 – Board of Governors http://www.morganstanley.com/GEFdata/digest
of the Federal Reserve System s/latest-digest.html. MorganStanley.

Books and Periodicals: Internet Resources:

• Economic Indicators. (2003, October 3). • Big Charts

[Online database]. Retrieved October 7, 2003, • Hoover’s Online
from http://www.stat- • Lehman Brothers
sa.gov.coast.library.csulb.edu/online.nsf. • Lexis Nexis
• Mergent Online
• Greenwald, Bruce C. N., Kahn, Judd, Sonkin, • MSN Money CNBC
Paul D., and van Biema, Michael. (2001). • Standard & Poor’s
Value Investing: From Graham to Buffett and • StockCharts.com
Beyond. New York: John Wiley & Sons, Inc. • Value Line Investment Survey
• Value Line Investment Survey Selection &
• Niederhoffer, Victor, and Kenner, Laurel. Opinions
(2003). Practical Speculation. New York: John • Value Line Investment Survey: Summary &
Wiley & Sons, Inc. Index
• Value Line Investment Survey: Ratings &
• Reese, John, and Glassman, Todd. (2002). The Reports
Market Gurus: Stock Investing Strategies You • Value Line Company Reports
Can Use from Wall Street’s Best. New York: • William O’Neill Database – Daily Graphs.com
Dearborn Trade Publishing. • Yahoo! Finance – http://finance.yahoo.com

• Reilly, F. K., & Brown, K. C. (2003).

Investment Analysis and Portfolio
Management. Mason, OH: South-Western.

*Screen grab from Bloomberg Professional Service, illustrating mean reversion timing opportunity of COCO during uptrend.

31
 APPENDIX A
Student Managed Investment Fund Guidelines
Introduction
The College of Business Administration at
California State University, Long Beach (CSULB)
has made the commitment to develop and offer a
student-managed investment fund course for
students majoring in Finance with an option in
Investments. This course is different from other
academic programs at CSULB because it uses a
real-dollar portfolio rather than a virtual portfolio.
The course gives the students real-world
applications to academic programs, fostering
interaction between the University and the security
industry, increasing the prestige of the University
and the College of Business Administration,
attracting better and more qualified students and
professors, and producing better prepared and more
skilled graduating students. Providing a more
meaningful and valuable learning experience for
students with the College of Business
Administration is the primary goal of SMIF.
The SMIF portfolio is managed by a combination
of senior-level undergraduate students
concentrating in investments and second-year MBA
students specializing in finance. Students enrolled
in this “honors level” course have taken a number
of required prerequisite courses and are subject to
approval by the Finance Department Chairman and
the course faculty advisors.
Three levels of security checks and balances will
monitor the integrity of the fund. All trades will be
approved by a majority of students in class and are
subject to veto by any of the three fund advisors.
Quarterly financial statements audited by a major
accounting firm and an Annual Report will be made
available to major fund benefactors.
This overview will outline the overall mechanics of
the course itself, define the general objectives of
the investment fund, explain the types of securities
the fund will invest in and how trades will be
transacted, specify the diversification strategy
guidelines to be observed, describe the various
safeguards and security measures that will be “built
into” the program, and reveal some of the special
32
features of the program that will make it a unique
and invaluable experience for all participants
involved.
Investment Fund Objectives
Preservation of Capital
In the beginning phase of the program, the primary
objective is preservation of the initial fund
endowment so that these assets can be utilized by
future classes.
Rate of Return
The return should be equal to or better than the
Standard & Poor’s 500 Index.
Moderate and Steady Growth
As the assets of the investment fund grow, earnings
may be used to finance scholarships and special
projects and, perhaps, course-related field trips.
Suggested Investment Pool
Students will be allowed to invest in the following
types of securities:
• Common Stocks of companies listed on the
three major exchanges: NASDAQ, NYSE, and
AMEX.
• Value Line Financial Strength rate of “B” of
above will be required (or equities of non-rated
companies with meaningful analytical support).
• Companies with market capitalization of at
least $100 million.
• Government Bonds: Investment-quality
corporate bonds (Moody’s or S&P rating of
‘BBB’ or above).
Students will not be allowed to invest in the
following types of securities and activities:
• Mutual Funds
• Short Sales
• Futures or Derivatives
• Foreign Equities or Debt Investments
• Utilization of Leverage
Suggested Portfolio Diversification Guidelines
 APPENDIX A
• 50% - 75% to be invested in equities Classroom Mechanics
• 25% - 50% to be invested in debt securities
• Portfolio Beta not to exceed 1.5 Graduate and undergraduate students will be
• Equal mix of income (dividends) and growth organized into groups with three or four students.
(capital gains) stocks
Occasional Guest Speakers/Lecturers:
The following 5 / 10 / 15 rules shall apply:
· Portfolio Managers
• Investment in any security shall constitute at · Securities Analysts
least 5% of the value of the portfolio. · Leaders – Economists
• No more than 10% of the portfolio can be · Corporate Vice Presidents of Finance
invested in any one company.
• No more than 15% of the portfolio can be Three Investment Fund Advisors
invested in any one industry.
· Instructor / Faculty Advisor
Suggested Transactions Guidelines · Corporate Advisor
· Securities Industry Advisor
• Round-lot purchases, when possible within the
above guidelines Field Trips
• Purchase decisions supported by majority of
students · CFA Meeting
• Subject to veto by any of the three fund · Orange County Society of Investment
advisors Managers Monthly Events
• Irrevocable 10% stop-loss provision · Los Angeles Society of Financial Analysts
communicated to the broker at the time of Weekly Events
purchase
• Any bond falling below investment grade is to Three Levels of Security
be sold
· Trades subject to veto by any of the fund
Frequency of Trading advisors
· Monthly statements and quarterly audit
Trades are recommended and voted upon by from the brokerage firm
students and approved by the fund advisors. Classes · Annual Report and record of transactions
meet once a week, and trading decisions are made sent to the major fund benefactors
at that time. In emergency situations any of the
fund advisors may make a sell decision without Commissions
student input.
One of the contributors to the fund representing a
Summer Break Fund Activity major brokerage house conducts the fund’s trades
at or below cost.
The investment fund is liquidated at the end of each
spring semester, or directives may be put into place
to assure orderly and timely liquidation. Fund
assets are used to purchase short-term Treasury
bills or money market instruments. This process
allows each new class the opportunity to start from
scratch without the need to justify any prior
holdings.

33
 APPENDIX B
California State University, Long Beach
(CSULB)
CSULB is a large urban comprehensive university
in the California State University (CSU) system.
Los Angeles-Orange County State College opened
its doors on September 28, 1949, to an entering
group of 169 juniors and seniors. The new school
offered 25 courses taught by 13 faculty members in
support of five undergraduate majors. The campus
consisted of two converted apartment buildings at
5381 and 5401 Anaheim Road in Long Beach.
Two decades later the rapidly growing institution
had earned designation as a university and was the
second largest in the CSU system. Today more
than 30,000 undergraduate and graduate students
are pursuing degrees and credentials under the
direction of 1600 faculty members, supported by
1150 full-time and part-time staff. Its mission is
high-quality education leading toward a broad
range of baccalaureate and graduate degrees
spanning the liberal arts and sciences and many
applied and professional fields, with emphasis on
instruction at the upper-division and graduate
levels.
College of Business Administration
The College of Business Administration (CBA) is
one of the seven colleges of CSULB. The largest of
the 23 campuses of the California State University
system, CSULB is a comprehensive four-year
institution that was established as the Los Angeles-
Orange County State College in 1949 to serve the
areas of Orange County and southeastern Los
Angeles County.
Business studies at CSULB began in 1949 with 24
business students and four faculty members,
accounting for one-seventh of the campus
population. Business administration was part of the
Social Science Division from its inception until
1957, when the division was renamed Division of
Business and Social Sciences. In 1958, the two
academic areas split, and Business Administration
became a division in its own right, with Dr. S.
Austen Reep as founding dean. By the mid-1960s,
the business school had close to 3,800 business
students, 29 full-time faculty members, and 13 part-
34
time lecturers. Today, the College of Business
Administration is home to over 5,000 business
majors, including about 400 graduate students—the
largest student population at CSU Long Beach—
and 140 full-time-equivalent faculty and staff.
CBA seeks to prepare its students for entry into
successful careers in business. As each graduate
pursues a successful career, it is anticipated that
personal responsibility will be accepted for
maintaining and enhancing the quality of the
society in which business and the individual
operate. CBA has five departments: Accountancy;
Finance, Real Estate, and Law; Human Resource
Management and Management; Information
Systems; and Marketing.
Department of Finance, Real Estate, and Law
The objective of the finance curriculum is to
prepare students for a successful career in business
with an understanding of the financial decision-
making process and its impact within the overall
framework of the business enterprise. The finance
curriculum offers education in the management
techniques and regulations applicable to financial
management and investments. The curriculum
draws on fundamental knowledge of statistics,
computer logic, and economics to develop
advanced financial concepts. It explores the
historical and current roles of various financial
institutions and regulatory authorities; details the
basic principles, and techniques for valuing
financial instruments, on the basis of fundamental
and/or historical price trends; explores the methods
of managing risk; and examines financial principles
that govern international trade.
 GLOSSARY
GLOSSARY
Relative Valuation Terms:
Beta – The measure of a fund's or a stock's risk in
relation to the market or to an alternative
benchmark. A beta of 1.5 means that a stock's
excess return is expected to move 1.5 times the
market excess returns. E.g., if market excess return
is 10%, then we expect, on average, the stock return
to be 15%. Beta is referred to as an index of the
systematic risk due to general market conditions
that cannot be diversified away.
Forward price/earnings ratio – Estimate using the
current share price divided by the expected
earnings per share in the next year.
Price/book (P/B) ratio – Ratio of the stock’s price
to its book value per share.
Price/earnings ratio (P/E) – Estimate using the
current share price divided by the earnings per
share in the most recent financial year.
Price/earnings/growth (PEG) ratio – The price-
earnings ratio divided by annual earnings per share
growth rate.
Return on Equity (ROE) – An indicator of
profitability. Determined by dividing net income
for the past 12 months by common stockholder
equity (adjusted for stock splits). Result is shown as
a percentage. Investors use ROE as a measure of
how a company is using its money.
Fundamental Analysis Terms:
Dividend Discount Model (DDM) – A formula to
estimate the intrinsic value of a firm by figuring the
present value of all expected future dividends.
Certain parts of this analysis were conducted on the
Bloomberg Machine, and feasibility analyses are
conducted to determine how realistic the intrinsic
values really are.
Free Cash Flow to Equity (FCFE) – Future cash
flows multiplied by discount factors to obtain
present values.
35
Technical Analysis Terms:
Chaikin Money Flow (CMF) – Developed by
Marc Chaikin, the Chaikin Money Flow oscillator
is calculated from the daily readings of the
Accumulation/Distribution Line. The basic premise
behind the Accumulation/Distribution Line is that
the degree of buying or selling pressure can be
determined by the location of the close relative to
the high and low for the corresponding period
(Closing Location Value). There is buying pressure
when a stock closes in the upper half of a period's
range and there is selling pressure when a stock
closes in the lower half of the period's trading
range. The Closing Location Value multiplied by
volume forms the Accumulation/Distribution Value
for each period.
Commodities Channel Index (CCI) – Identifies
cyclical turns in commodities. The assumption
behind the indicator is that commodities (or stocks
or bonds) move in cycles, with highs and lows
coming at periodic intervals. CCI can be used to
identify overbought and oversold levels. A security
would be deemed oversold when the CCI dips
below -100 and overbought when it exceeds +100.
From oversold levels, a buy signal might be given
when the CCI moves back above -100. From
overbought levels, a sell signal might be given
when the CCI moved back below +100.
Exponential Moving Averages (EMA) – In order
to reduce the lag in simple moving averages,
technicians often use exponential moving averages
(also called exponentially weighted moving
averages). EMAs reduce the lag by applying more
weight to recent prices relative to older prices. The
weighting applied to the most recent price depends
on the specified period of the moving average. The
shorter the EMA's period, the more weight will be
applied to the most recent price.
Moving Average Convergence Divergence
(MACD) – One of the simplest and most reliable
indicators available, MACD uses moving averages,
which are lagging indicators, to include some trend-
following characteristics. MACD generates bullish
 GLOSSARY
signals from three main sources: (1) positive
divergence, (2) bullish moving average crossover,
and (3) bullish centerline crossover. MACD
generates bearish signals from three main sources.
These signals are mirror reflections of the bullish
signals. The sources are: (1) negative divergence,
(2) bearish moving average crossover, and (3)
bearish centerline crossover.
On-Balance Volume (OBV) – One of the earliest
and most popular indicators to measure positive
and negative volume flow, OBV is a relatively
simple indicator that adds the corresponding
period's volume when the close is up and subtracts
it when the close is down. A cumulative total of the
positive and negative volume flow (additions and
subtractions) forms the OBV line. This line can
then be compared with the price chart of the
underlying security to look for divergences or
confirmation.
Relative Strength Index (RSI) – Compares the
magnitude of a stock's recent gains to the
magnitude of its recent losses and turns that
information into a number that ranges from 0 to
100. Calculation of this index requires the choice of
the number of time periods to include; 14 periods is
the typical recommendation.
Reversion to the mean – A force that compels a
stock price to a line of best-fit. In our studies, two
standard deviations were used to qualify a
worthwhile buy signal.
Simple Moving Averages (SMA) – A simple
moving average is formed by computing the
average (mean) price of a security over a specified
number of periods.
Stochastic Oscillators – A momentum indicator
that shows the location of the current close relative
to the high/low range over a set number of periods.
Closing levels that are consistently near the top of
the range indicate accumulation (buying pressure),
and those near the bottom of the range indicate
distribution (selling pressure).
William’s %R – A momentum indicator that
works much like the Stochastic Oscillator. It is
especially popular for measuring overbought and
36
oversold levels. The scale ranges from 0 to -100,
with readings from 0 to -20 considered overbought,
and readings from -80 to -100 considered oversold.
*****
Bloomberg Professional Service
About Bloomberg
Bloomberg L.P., founded in 1981 by Michael R.
Bloomberg, is the world’s leading financial
information, news and media company, serving
customers around the globe. Bloomberg leverages
its data and news resources through related media
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programming, Web sites, books and publications,
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professionals and consumers globally.**
About the Product Certification Program
Many financial institutions and corporations
worldwide have adopted the Bloomberg
Professional Service as an essential part of their
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as well as their reliance upon it has shown that a
proficiency benchmark in the use of Bloomberg is
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has developed the Product Certification Program
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Equity, and Foreign Exchange. Each track is
offered at three levels, and each level leads to a
Bloomberg Certificate.**
Benefits
One of the primary benefits is that participants will
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Bloomberg Professional Service. Such recognition
will come from their colleagues, superiors, and
outside organizations. In an increasingly complex
and challenging financial world, this competency
may prove to be a saving grace.
Many of the 2003-2004 SMIF Team members have
completed the Product Certification Program from
levels 1 through 3.
**Excerpts from the Bloomberg Professional
Product Certification Program.
 MISSION STATEMENT

To build an investment portfolio that will out

perform our benchmark while providing a
valuable learning environment that mirrors
the real world of portfolio management.

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