Cornell Equity Research Publication Fall 2020

Fall 2020

RYAN MULLOY

AYESHA CHOWDURY

PRESIDENT

VICE PRESIDENT

Club Update

Cornell Equity Research continued to have a strong semester, even in the current environment with the COVID-19 pandemic.

This fall we were able to recruit 18 new members for the club, from a large pool of very qualified applicants. In addition, we were able to complete a full course of new member education for both returning members and the new associates. Members were able to participate in resume workshops and information sessions with both alumni of the club and firms on Wall Street.

Cornell Equity Research looks forward to the new year and the opportunities, and challenges, that lie ahead.

Vikas Reddy

Jefferson Yin Vice President of Education

Vice President of Public Relations

Gracelyn Goodridge

Declan Beran

Vice President of Membership

Vice President of Publishing

CONSUMER DISCRETIONARY

Sector Analysis

Consumer Discretionary has long been hailed as one of the more cyclical sectors, seeing larger gains during times of market success and greater losses during recessions. According to the Standard and Poor performance reports, consumer discretionary does not sustain itself, and has historically done very poorly during recessions, and periods where consumers have lower disposable income, as shown in 2008, when growth was (-33%). Therefore, whereas at the onset of the COVID-19 pandemic, the sector suffered more than others, its ongoing recovery in Q3 2020 has been stronger as consumer sentiment has grown following decreasing restrictions. At the end of the quarter, Consumer Discretionary had performed the highest by posting a 15.1% gain.

The sector can be broken down into retail and e-commerce components. Over the past few years, consumer discretionary companies have targeted concentration on increased reliance on technology and e-commerce. The COVID-19 pandemic has forced companies to accelerate this shift, as overall foot traffic in retail stores remains significantly below last year’s numbers even after the lifting of lockdowns and restrictions. Nevertheless, companies are showing promise in making the digital transition, with some like Under Armour showing a 50% increase in e-commerce revenue in 2020.

On the negative side, many companies have continued to receive lower ratings given high debt burdens, faltering operating performance, and further debt increases to shore up operating expenses and shore up liquidity during this time of economic uncertainty. The COVID-19 pandemic has undoubtedly contributed to the worsening of these conditions, and a potential second wave of the virus could further financially burden these companies should restrictions limit retail store activity. Additionally, with unemployment numbers taking their time to return to pre-pandemic levels and with the failure on the part of Congress to pass another stimulus bill, consumer spending may remain low and focused on essential needs rather than the goods and services offered by consumer discretionary.

With Joe Biden seemingly elected as the new president of the United States, Source: Yahoo Finance

larger firms in the sector could see further increases in costs due to Biden’s stated desire to increase the corporate tax rate. The likely potential for a Republican-controlled Senate could mitigate this risk for struggling companies, but regardless, Biden’s shift away from a more open and lower-taxed market could force many companies still reeling from the pandemic into bankruptcy. Stricter environmental policies advocated by the Democratic party won’t have as significant an effect on consumer discretionary as other sectors, but may play a factor in the production processes of some companies.

Furthermore, consumers are moving towards preferences of consumer goods that are more eco-friendly.They are increasingly preferring products made with sustainable methods and have the least environmental impact possible. For example, in the footwear industry, consumers are demanding more sustainable products such as shoes made with organic cotton and recycled rubber. Companies like Adidas and Nike are shifting production towards products that reduce the environmental effects from their products.

Overall, this shift in sentiment places pressure on companies to adopt more costly production methods in order to cater to the demand.

Overall, the outlook for consumer discretionary appears bleak. It certainly still holds a spot in the culture of consumerism prevalent in the United States, but is facing the most restrictions against it in recent memory with a forced transition to digital sales, potential tax increases, and increased corporate social responsibility (CSR). As the market continues to climb with the promise of a vaccine coming, the consumer discretionary stocks may climb with it, but in the longterm many obstacles exist in the way of the sector’s growth.

S&P 500 Consumer Discretionary Index

Published 11/16/2020

Nike (NKE)

coming in the near future. The first nationwide lockdown drew many people into working out and running Prepared by: in their homes and neighborhood. Nike saw immense Jack Vaughan, 2022 sales in personal training equipment and attire right as Stock Price at Market Close, Oct 30: $120.08 the lockdowns began for this reason. As similar events Rating: BUY seem to be occurring, Nike will once again benefit Company Update: from people’s desires to work out while remaining at

The world’s largest sports shoemaker, Nike, home. posted amazing quarterly reports on September 23rd,

The stock is currently up 26.35% YTD and has sending shares up 12.6% to $131.60 during the premade great climbs in the past few months. Accordmarket ing to NKE’s 10-K, the earnings per share rose 10%

North American digital sales helped offset the to 95 cents in the fiscal first quarter. This benefited burden COVID-19 had on retail stores. due to revenue only being down 1% to $10.6 billion,

Reported $39,117 M in revenue last year, up when during the COVID recession it was down 38%.

7.5% Analysts had believed EPS would be down 47%, and

Nike announced they would stop selling a Nike’s numbers blew theirs out of the water. Gross limited product assortment to Amazon to drive its own margin declined 90 basis points to 44.8%, in attempts digital marketplace. to reduce inventory and higher supply-chain costs.

Investment Thesis: As for Nike’s outlook, analysts expect Nike to rebound

According to the current standing of Nike 58% in the fiscal 2021 year, with a 28% fiscal gain in Inc. at the end of October 2020, it is evident that the 2022. Nike’s digital sales are fastly growing and mancompany is undervalued and should be bought immeagement is accelerating. Also, Nike has set goals to diately. Nike has hit new highs after rallying hard after reshape their image in the digital marketplace, which the economic recession caused by the novel Coronavi- has greatly risen with the coronavirus outbreak. Along rus. During this period, the company has been focused with this, the Nike Training app has seen record downon innovation and boosting margins. Along with this, load and revenue growth in the subscription aspect.

Nike Direct has caused drastic sales for Nike especial- An emerging market for Nike is China, where Nike is ly in the COVID era. the country’s footwear market leader. This is mainly

One major component to Nike that saw record believed to be due to China’s huge interest in the NBA uses was the Nike Training Club, a virtual training and Nike’s ties with the league in shoes and jerseys. In program to motivate and teach workouts to all ages the most recent quarter, China’s sales rose 6% to $1.78 and genders. In Q1 2020, Nike Training Club saw 30 billion, led by digital sales and factory stores. million female users, a 16% increase from the quarter Risk: prior. Along with it, last quarter, digital sales were up

The most pressing risk for Nike is changes in 82%, where Nike has now set a goal where they plan consumer trends and preferences. This is especially for 30% of all sales to be made digitally. fragile in the footwear industry, which make up 65%

Another huge factor benefitting Nike is the of Nike’s sales. reopening of many sports leagues across the world.

Nike can face heavy losses based on tariffs, Professional leagues will drive more jersey/team attire, taxes, and interest rates, and must adapt to these while the smaller leagues starting will drive sales in changing political demographics. equipment, cleats, and other sportswear.

Counterfeit goods are common with Nike and

Finally, as cases of COVID-19 continue to the company must find ways to erase these producers. spike, city wide shelter in place orders seem to be

Source: Yahoo Finance

Published 11/16/2020

Domino’s Prepared by: JP Spak, 2023

Ratings: SELL $399.85 (as of market close 11/6/2020) Important Updates 2020:

As of the end of 2019, the company continued to refine its delivery system with increased development of GPS tracking for deliveries.

Domino’s performed well during the Covid pandemic, thanks in large part to its strong brand equity and specialization in delivery.

In an attempt to expand its target market, the company introduced new chicken taco and cheeseburger pizzas in late August.

9/14/2020: Domino’s pledges to raise 100 million dollars for St. Jude’s Children’s Research Hospital over the next ten years.

Q3 2020 saw global sales growth of 14.8%, building on the 8.1% increase in Q3 2020. A lower effective tax rate contributed in part to these increases as well as the company’s orientation around delivery.

11/2/2020: Domino’s announced it will be switching agencies of record from Crispin Porter Bogusky to WorkInProgress, marking the end of a previous 13-year long partnership.

Investment Thesis

In the time of a pandemic, Domino’s emphasis on delivery is without a doubt one of its strengths. However, that fact alone does not determine an investment decision. Shifting consumer trends are the first mark against the company’s future success.

The pizza chain drew consumers’ attention during the pandemic as people turned to comfort food as a common tool for dealing with the strange times brought by the pandemic, but overall consumers are transitioning to a more health-aware approach towards diets. Additionally, increased attention on eco-friendly options and popularization of movements such as the Green New Deal is shifting consumers away from meat-heavy diets. Together, these two trends act directly against Domino’s main sources of revenue, as their pizza is designed to be easily deliverable and not necessarily overly healthy.

Domino’s emphasis on delivery has also hurt its overall business model in comparison to other fast food chains. As one of the few companies to not have its regular course of business upended by the pandemic, Domino’s used the opportunity to hire 10,000 new workers. And while revenue rose, operating costs rose to counteract it. More workers needed increased coverage due to Covid-19, in effect negating many of the

gains brought by an increase in revenue. Meanwhile, other fast food chains were able to offer take-out options instead of transitioning to a focus on delivery.

These take-out and in-store pickup options, in comparison, saw much lower operating costs.

Domino’s stock price has shown steady growth over the last year, showing 46.19% growth over the last twelve months. However, earnings and investment have not increased to a degree nearly this high, leading to my conclusion that the stock is currently drastically overpriced.

With the release of its 10-K on 2/20/20, Domino’s stock saw an immediate spike thanks to beating revenue and earnings expectations (although not by a large margin). These revenue and increases have continued, but, once again, fail to account for the shifting trends in the consumer market away from unhealthy food options.

Domino’s low EBITDA margin in comparison to its competitors in the fast food industry highlights the high operating costs it incurs. Despite the ability to cater towards higher demand for delivery due to the pandemic, a much larger portion of their revenue will be lost from reinvestment opportunities than with their competitors.

Risk:

A growing trend among consumers towards more health conscious and eco-friendly food options could suppress Domino’s target market.

The election of Joe Biden as the next president could see further increases in expenses as Biden plans to raise corporate tax levels.

A potential rise in Covid-19 cases in the coming winter could force consumers into lockdown, perhaps reigniting the same sentiment that allowed the pizza chain to be so successful during the second quarter.

The passage of another stimulus bill could spark an economic upturn. Consumer discretionary stocks historically outperform the market during times of economic success.

Published 11/16/2020

Under Armour

tail stores. In North America, revenue fell 5% to $963 million. There is an optimistic trend in sales abroad Prepared by: with international sales having increased 18% to $433 Siddhant Dahiya, 2024 million. This is likely due to the pandemic haven’t less Ratings: HOLD impacts on countries like China (where UA attains Market price of $12.33 as of October 31st, 2020 most of its international sales from) whose economy One year target price of $15 has really recovered from COVID-19 impacts. This is Company Update: also a key strategy that the brand has utilised to grow

Total revenue fell by 22.85 percent from the 1st to 2nd quarter of 2020. Gross profit decreased from its market share and customer base. It has expanded its market to several nations outside US. The Asian mar2,470.5 in the first quarter to 2151.6 in the second. kets and particularly the Chinese market has grown UA’s 3rd quarter beat recent earning estimates, of EPS: 26 cents, adjusted, vs. 3 cents expected and Rev- highly important for Under Armour. The international enue: $1.43 billion vs. $1.16 billion expected. Apparel sales are now a significant part of its overall revenue.

UA has also raised convertible notes totalling sales dropped 6% to $927 million while footwear 498 million, this is helping them to create more lirevenue surged 19% to $299 million, and accessories quidity for their business because they are currently revenue jumped 23% to $145 million. burning through cash to sustain themselves from the

UA agreed to sell MyFitnessPal workout platclosure of most of there stores. form to PE firm Francisco Partners The deal is valued

UA is focusing on building on commerce a $345 million. instead of retail, Under Armour’s direct-to-consumer

UA’s e-commerce business globally grew to business, which includes sales from its website and 50% during the quarter. UA’s strategy is now to sell stores, grew 17% year over year. It said its e-commore directly to customers. Its wholesale revenue merce business globally grew more than 50% during decreased 7% to $830 million during the third quarter. the quarter.

UA’s strategic decision’s to move toward Over the next few years, Under Armour said, it extechnology has helped it become industry leader in pects to remove its brand from 2,000 to 3,000 wholemarketing innovation. sale stores in North America.

UA’s long-term future is bright as they have Investment Thesis: spent substantial money on acquiring, mobile technol As of October 2020, I believe that Under Arogy companies such as MyFitnessPal to get into the mour is overvalued. Utilising a comparative analysis tech space, to better engage with their consumers and and a DCF, I was able to calculate an intrinsic value, create a notable brand name. using multiples from the enterprise value divided by UA’s revenue and also through a DCF. According Nike vs. Under Armour Stock Performance 2018-Present to my DCF, Under Armour’s intrinsic share price should be around $0.68 whilst its current share price is $12. UA is doing relatively worse and has a drastically different ratios compared to its competitor. For this reason I am putting less emphasis on using the comparative analysis as a true measure UA’s intrinsic price. With this given, I attained 25th percentile multiple attained to attain a share price of $7.00. As of now, Under Armours share price lies at $12.00. Under Armours share price in the coming months is dependent on COVID-19 (due to relying on Risk: sales from retail stores in North America). Economic Highly dependent on consumer demand in uncertainty and consumer demand is highly volatile as North-America - direct correlation to whether a vacof now and therefore I believe Under Armour should cine is released and whether consumer demand recovbe rated as a hold. If consumer demand and disposable ers at a reasonable rate. income continues to increase then I believe Under

Under Armours new strategic methodologies Armour may recover and may reach its maximum are not indicators of future success, moving more topercentile implied share price of $15.41. wards direct to consumer has to actually translate into

Whilst true, Under Armour has a bright future results. due to its competitive advantages. Under Armour

Margins may be severely impacted by lack of has identified their weakness’s which are potential operating leverage, increased promotional activity, and growth opportunities. These include an over reliance significant restructuring charges, of which the majority retail sector sales and an over-concentration in sales in will be non-cash.of economic success.

North-America. The pandemic has hit North-America the most which has led to UA shutting down their rePublished 11/16/2020

INDUSTRIALS

Sector Analysis

With our team’s individual analysis of FedEx, General Electric, Southwest Airlines, and 3M within the industrial sector, we expect for the industrial sector to underperform compared to the rest of the market and to fluctuate as the country gradually approaches a solid recovery. While we are seeing harsh ebbs-andflows within the industrial sector, we believe that, based on the historical sensitivity of industrial stocks in relation to the economy, many industrial companies are committed to increased spending for employee safety and investing in long-term investments to ultimately generate greater investor returns once an upturn occurs in the economy.

Increased Spending to meet Safety Guidelines

Many manufacturing companies are increasing their spending to ensure they are meeting the protocols that are keeping workers safe in the frontlines of their organizations. Logistics costs can make up as much as 25% of a developing country’s GDP and 6-8% of the average OECD country’s GDP. This means that a well-functioning and efficient logistics sector can act as a stimulant for the growth of other sectors. This point becomes ever more relevant when considering the growth of e-commerce over the past two decades (1.3% retail sales online in 2000 compared to 14.2% in 2019). For that reason, and for reasons concerning the pandemic, manufacturing and shipping companies have been shoring up cash, increasing their workforce, and ensuring safety. Industrial companies have ensured that their work environments are up to all safety standards and guidelines and that they are monitoring COVID-19 hotspots carefully.

Investing in the Future

For instance, General Electric has historically earned its revenues from the airline industry. In the past years, GE has made significant strides to cut down on its excess debts and increase its cash flow. By cutting costs and having layoffs at the beginning of the year, they lowered cost during the worst parts of the pandemic. As of now, GE plans to invest into renewable energy and into its longer term power projects.

For airlines with strong balance sheets, the pandemic posts an opportunity for the airline to acquire high fuel efficiency airplanes at marked down prices. Southwest Airlines will be looking to expand their fleet with Airbus aircrafts in the coming years. This will be a large milestone, considering Southwest has always relied on operating Boeing 737 aircrafts for cost efficiency purposes.

To sustain their balance sheet, 3M has plans to sell two businesses in two separate deals worth a combined $4.5 billion. The two businesses are its food safety business, and its drug deliv-

ery business. This will benefit 3M in that it will greatly increase cash on hand. This will allow it to cover any losses incurred during the covid recovery period.

Lastly, FedEx was sure to note that heavy spending in 7 day ground deliveries services as well as the coalignment of synergies in Europe would mean that FedEx was on track to expand its service and pass Amazon in the area of shipping reach (following FedEx’s termination of its shipping contract with Amazon earlier this year).

Conclusion and Outlook on Industrials

Our industrials team believes that the future performance of the industrials sector will be heavily dependent on a COVID-19 vaccine. The pandemic caused weak supply chains and volatile consumer demand. Some industrial companies were able to meet these changing demands, while others could not. If the sector is to see a steady recovery, two things need to happen. First, a vaccine and safety precautions must be prevalent to restore stability to demand. Second, manufacturers must consider digitization of their supply chains to analyze this volatile demand. This will yield a flexible, stable supply chain. Shareholders of industrials have placed strong value in environmental, social, and corporate governance factors (ESG).

Companies who prioritize this and make achievements in sustainability are expected to see stronger recoveries. The current market is propped up in large by government stimulus. Continuation of this stimulus will guide a strong recovery, while its discontinuation would result in a fluctuating W-shaped recovery.

Risks with Globalization and Trade

Going forward, diversified industrial companies will have to deal with fluctuating costs and uncertain tax policy. Many supply chains are still disrupted due to COVID and a timeframe for a complete recovery is still largely undetermined. Additionally, the results of the 2020 presidential election will have significant impacts on international trade policy. Considering the amount of international deals that occur in this sub industry, changing trade policy can influence sales and profit margins.

Industrials iShares Index vs. S&P500

Published 11/16/2020

3M

Prepared by: Anthony Lopardo, 2023

Stock price at market close, Nov 2nd : $162.94 Rating : HOLD Price Target(High) : $197 Price Target(Low) : $157 Important Updates in 2020: MMM exceeded earnings expectations in Q3.

Earnings increased by 41.09% from Q2 to Q3.

MMM is considering selling its food safety business for an estimated $3.5 billion. This is nearly 10x the business’ yearly revenue(which has been decreasing in recent years). This deal would be extremely beneficial to 3M and would likely result in an increased trading price (Lots of cash on the balance sheet).

- In May of 2020, 3M sold its drug delivery business for $650 million. This, followed by plans to sell the food safety business, indicates a possible restructure and a focus on higher margin products.

Investment Thesis

Our 2019 analysis of the industrials sector indicated a negative outlook following the coronavirus pandemic. Nearly ten months after the onset of this pandemic, the performance of the industrials sector shows that we may have been pessimistic in this prediction. The market has already seen performance at levels higher than pre-covid according to the cumulative S&P 500 index for the industrials sector. It is important to note that there have been vast differences in the performance of industrials subsectors. For example, on Nov 1st, airlines were down 46.19% YTD, while air freight and logistics were up 40.30% YTD. 3M, a multinational producer of worker safety products, healthcare, and consumer goods, is operating in the middle of these two extremes.

3M is a leading producer of personal protective equipment(PPE), specifically N95 masks. These masks are a fundamental factor in the United States coronavirus response plan. Most states in the US mandated mask wearing in public spaces to prevent the spread of COVID-19. This yielded a significant surge in demand for PPE, which 3M was able to fill. As mask wearing became normalized, consumers’ tastes shifted to more stylish and custom masks, opposed to the surgical style produced by 3M. This indicates that outside of the medical field, 3M is likely to see a decline in PPE sales within a year.

3M demonstrated strong earnings reports in 2020, which were largely driven by increased sales in the health care segment, and the demand surges previously described. This operating segment saw 25.5% year on year growth in 3rd quarter reports.

Looking at overall performance, 3M reported a Q3 EPS of 2.43, exceeding its expected EPS of 2.27.

Since the onset of the pandemic, 3M has not missed expectations; it matched expected earnings for Q2, and exceeded them in both Q1, according to NASDAQ reports. 3M’s consolidated balance sheet shows that it has nearly doubled its cash and cash equivalents since December 2019. Additionally, it decreased total liabilities, indicating strong cash flows. These cash flows could be enhanced with the sale of the food safety business, putting it in a strong financial position as it awaits the end of the pandemic.

Despite these earnings, 3M’s stock is down 9.3% YTD on November 1st. This could be the result of its transportation and electronics segment, which saw a 7.4% decline in total sales in its most recent earnings report. This segment’s future performance will be greatly influenced by the outcome of the 2020 presidential election. If the Democratic party wins, there will be increased infrastructure and environmental protection, which would drive demand for transportation products. This would be pivotal to seeing a full recovery, especially if it can continue to see growth in its other three operating segments.

With the looming presidential election, the economically sensitive industrials sector faces some uncertainty. A Republican win would mean lower taxes and deregulation, policies which would benefit large corporations, but demand drivers in the transportation operating segment would not be present. It is safe to say that 3M has a positive outlook, regardless of the outcome of the election, but the same cannot be said for the whole industrials sector, which, along with other sectors, have demonstrated some dependency on the implementation of expansionary fiscal policy from the US government. Overall, 3M’s unique ability to full demand for personal protective equipment, and a large amount of cash on hand can ensure growth and a steady recovery from the COVID-19 pandemic.

COVID-19 recovery patterns of four industrials companies, including MMM

Source: Yahoo Finance Risk:

Some of 3M’s operating segments have seen declining performance. This risk is mitigated by restructuring efforts and generating strong cash flows to cover potential losses.

Published 5/11/2020

FedEx Corporation Prepared by: Rory Sheppard, 2023

Ratings $266.98 (11/03/2020) BUY, one-year target price: $283 Impotant Updates 2020:

FDX plans to hire as much as 70,000 new workers in order to be ready for a surge of holiday shopping orders that will be in greater volume than past years due to the rise of Ecommerce in the COVID-19 pandemic.

New partnerships have geared FDX for a more frictionless shipping process FDX has recently demonstrated positive price momentum and has a positive outlook

Significant increase in capacity to reach over 95% of U.S. population through enhancements in residential deliveries facilities Investment Thesis

This has been particularly true for the Industrial Sector. After a particularly tumultuous decline in the second quarter (generally across the board), there have been upshots as of late, with even some stalwarts in certain subsectors making strategic gains. In mind specifically is the Air Freight and Logistics subsector, which has outpaced the S&P 500 considerably since early August. Companies in this industry include UPS, FedEx, C.H. Robinson Worldwide, and Hub Group, to name a few. The benefit of COVID-19 to these companies, despite some volatility, has been a surge in E-commerce. Consumers are less likely to participate in in-person shopping than they have been in the past due to fears of virus contraction. Likewise, retailers and online sellers have been sure to stock their inventories for the upcoming holiday shopping season in order to match this new type of demand (Lahiff 2020).

FedEx is a promising investment for a number of reasons, by the numbers and by a coalignment of forces that are sure to drive the stock. Industry analysts expect an increase in E-commerce shopping of anywhere between 2535%, compared to a 15% bump in fiscal year 2019 (Rivas and Root 2020).

FedEx has mobilized for these expectations: hiring 70,000 new employees for the upcoming months in order to increase flexibility and capacity (Rivas and Root 2020). Additionally, FedEx has partnered with private start-up Happy Returns, a company that reduces the usual friction and

inefficiencies that comes with the returning of goods to sellers (Debtor 2020). These moves demonstrate that FedEx is primed for not only the short term but also the long term. Pre-pandemic, FedEx had projected they would be shipping 100 million items daily by 2026. Now, the freight giant expects to reach that figure by 2023 (Rivas and Root 2020). This expectation indicates that FedEx is prepared for the increases in volume it will have to handle in the coming years.

The numbers also paint a positive picture.

With a revenue as of August 2020 of over $71 million, FedEx has proven itself as a company with a steady trend of growth over the years. The fact that FedEx reports its financials periodically in May makes it so that we can see how it responds to events in the beginning of the year, which is especially relevant for 2020. As a result, FedEx’s capital expenditures reached a three year high of $5,868,000 and its assets made a $20 million jump to $73,537,000 from May 2019 to May 2020. This would suggest that FedEx has and will continue to shore up its methods of handling possible volatility in the future as well as ease investor concerns or doubts in the company. The concerns are arguably general, how will FedEx and the rest of the market respond to the future surprises the pandemic will begin? The answer is unclear, however, FedEx’s recent actions should make investors feel comfortable buying the stock.

From this, I conclude that the equity is undervalued and is expected to increase from ~$267 to ~$283 within the next year. I calculated this through a Comps Analysis and used the 25th percentile EV/ Revenue multiple and 75th percentile P/E. The EV/ Revenue helps us identify the value of a stock, which is especially insightful with the increase in revenue over the last reporting periods Air and Freight Logistics Sub Sector vs. S&P 500

Source: Yahoo Finance Risk:

If FDX is unable to maneuver the “peak” in shipping that usually happens towards the end of the year, there may be delays in delivery and returns that could have cascading effects.

Published 11/16/2020

Southwest Airlines Prepared by: Jefferson Yin, 2022

Ratings $39.57 (as of market close November 2, 2020) BUY, One-year target price: $43 Important Updates 2020: - For Q3 2020, LUV revenues fell by 68% to $1.79 billion, expenses fell by 34% to $3.2 billion.

Southwest Airlines experienced a record net loss of $1.16 billion and an average of $16 million in cash burn daily for the third quarter. Numbers fared better than what most analysts have predicted.

- The company also recently warned employees that it will need to furlough some workers in early 2021 unless its labor unions agree to temporary pay cuts, or the federal government provides additional stimulus funds.

- LUV continues to expand its routes to 9 hubs.

Their new destinations are meant to further attract leisure travelers, given a recent spike of domestic leisure travel across the U.S. - Southwest Airlines is coming under fire after announcing the company will unblock the middle seats on flights, starting December 1st.

Investment Thesis

Southwest Airlines (LUV) was the fourth largest U.S. airline in 2019 by revenue. In 2019, 97% of the airline’s revenue was generated on U.S. domestic flights, with 3% on international flights. LUV operates routes to over 103 destinations across USA, Central America, Mexico, and Caribbean.

As of September 30th, LUV has $14.6 billion of cash and investments, compared to just $12.6 billion of debt and lease liabilities. I believe the equity is undervalued and is expected to increase from ~$39 to $43 within the next year. I calculated this by designing a Comps Analysis and used the 75th percentile EV/ Revenue multiple. Much better positioned financially than its competitors, I chose the 75th percentile metric to represent Southwest. The EV/Revenue helps us identify the value of a stock compared to a company’s enterprise value to its revenue (as we see a growth in airline revenues the past quarter due to improved air traffic).

The largest expense for airlines is typically employee compensation, which ran to 37% of LUV’s 2019 revenue. In addition, aircraft orders and high fixed costs make industry capacity relatively unresponsive to short-term demand fluctuations, which can occur abruptly when a recession or contagious disease outbreak occurs. Still, LUV has an extremely conservative balance sheet relative to peers.

Since the start of the pandemic, LUV fell less than other airline stocks. American Airlines and Spirit Airlines were the most leveraged carriers. Southwest was down 29% so far this year. United Airlines was

down 59%. American was down 55%, and Delta Air Lines (DAL) down 45%. JetBlue (JBLU) had lost 35% of its value.

Fortunately, LUV operates with several competitive advantages. The first advantage LUV holds is a low cost structure, which allows LUV to gain market share over time by maintaining profitable flights at lower prices for customers. It accomplishes this mission by having a point-to-point service model that is 20-30% cheaper than the “hub-and-spoke” model and a uniform aircraft fleet of smaller and fuel-efficient Boeing 737s aircraft, which are 20% cheaper to maintain and train crew on. Furthermore, LUV’s extensive domestic network has built a monopoly on affordable seats in the sky. The 3 legacy carriers (United, AA, and Delta) cannot compete on this basis once fare, reservation, baggage, and other fees are added up. With Southwest’s plans to add nine new routes, the management is working on future strategic initiatives rather than focusing on squeezing by during COVID-19. This could pave the way for Southwest Airlines stock to reach new all-time highs as air travel demand recovers over the next few years.

In terms of COVID-related service changes, Southwest will resume selling its jets to full capacity. By analyzing future bookings and selling middle seats again, Southwest expects average daily core cash burn to slow from $16 million this quarter to $11 million next quarter, possibly increasing profit margins.

With cash burn continuing to moderate, plentiful cash on the balance sheet, and ample borrowing capacity, the company does not have to worry about running low on cash as it waits for the end of the pandemic and the beginning of a recovery. That makes Southwest Airlines (NYSE: LUV) stock a solid choice for investors looking to bet on an eventual airline industry turnaround within the next year.

Risk:

There’s air traffic demand recovery concerns, but LUV mitigates risk with a conservative balance sheet. With low interest rates, Southwest has been raising liquidity through private markets alongside government assistance.

Hedge LUV through the U.S. Global Jets (NYSEMKT: JETS) is focused specifically on airlines, iShares Transportation (NYSEMKT: IYT), and SPDR S&P Transportation (NYSEMKT: XTN), all of which count airlines as more than 25% of their holdings.

Published 5/11/2020

General Electric Prepared by: Daniel Nieto, 2023

Ratings: $7.42 (as of market close November 2, 2020) BUY, One-year target price: $9.50 Company Update:

For Q3 2020, GE revenues came in at $19.4 billion, exceeding expectations and crushing the market. More importantly, the company’s free cash flow is finally improving, with the company turning in a $514 million positive in Q3 after a negative $2.1 billion in Q2.

GE is still trying to get out of its legacy insurance business, with the company receiving a Welles notice in October. This coupled with a large amount of long term debt still means the turnaround is still a couple of years away.

GE posted strong organic revenue in 3 of its major industries, with only Renewables and Aviation performing poorly. Aviation is due to the worldwide impact of the pandemic and Renewables is troubling that it only earned $5 million.

The company’s cost cutting actions earlier in the year in response to the pandemic is finally paying off in Q3, with management’s plan for a turnaround appearing to come to fruition.

Investment Thesis/Analysis

General Electric (GE) was the fourth largest industrial conglomerate in 2019 by revenue and was the largest US industrial conglomerate by revenue. Its main source of revenue in 2019 was its Aviation division in the airlines industry.

GE operates worldwide, with the majority of its revenues coming from the US and Asia.

During the pandemic, GE’s stock price has fallen 42% from its high at $13.16 to $7.52 as of November 2, 2020. Other industrial competitors, such as Emerson Electric Co, 3M Company and Siemens Aktiengesellschaft fell initially in the beginning of the pandemic, they have mostly recovered to prepandemic numbers. This suggests GE’s stock price will eventually follow suit.

GE has several competitive advantages that bode well for its recovery in the coming year. First off, GE has stayed committed to the growing field of renewable energy, seeing it as a viable path forward and an integral part of its future business. Even with the low amount of revenue in Q3, GE has stuck by investing in renewable energy that will allow it to reap the benefits in the future when the technology comes

out. Additionally, GE has a large amount of its current revenue in the airlines industry, an industry that will assuredly bounce back next year. Boeing just completed safety upgrades on the 737 MAX, that will mean an additional source of revenue for GE when those planes take flight. This allows Aviation to make up for its poor performance in Q3. GE also owns hundreds of jets and is a large lender of airplanes, which will help GE bounce back after the pandemic. Finally, GE made cost cutting and layoffs helped it weather the storm of the pandemic. This foresight helped GE offset the losses brought on by the pandemic in its aviation division, and also helped position itself for the future by becoming a leaner company. This cost cutting has helped GE stay ahead of its competitors and post a strong Q3.

As GE turns to next year with a positive free cash flow along with a positive trend, a new airplane from Boeing set to hit the markets in the coming year along with a strong outlook in revenue, the company is poised for a strong 2021. The conservative approach adopted by the management under CEO Larry Culp Jr. appears to finally be working, with GE’s slow and methodical return to relevance. The problems of GE’s past seem to be coming to end, with the legacy insurance business being the only thorn in the side of what has been a strong Q3 with a strong outlook. This is what makes General Electric Company (NYSE: GE) a good choice for investors looking to see returns from the inevitable bounce back from industrials and airlines.

GE vs. Competitors during the Pandemic

Risk Potential GE is still embroiled in legal issues with the SEC and the United States government, most notably receiving a Welles notice from the SEC in early October regarding their accounting for their reserves in a legacy insurance business.

Following the COVID-19 pandemic, GE still has a large amount of long term debt that stems from its darkest days that needs to be addressed.

Published 11/16/2020

TECHNOLOGY

Sector Analysis

Current State of the Industry

There are some positives and negatives that have impacted the sector during this pandemic. The events of 2020 have taken a strong effect on hardware and software, IT services, semiconductors, and network equipment. We have seen many companies fall, yet others skyrocket. A great example would be the likes of Amazon and Apple. Some of the setbacks include the decrease in supply of raw materials, and causing inflationary risk on the products. The launch of new smartphones, such as the iphone 12, were delayed by at least a month.

There are a few things that leaders in this sector should take into consideration as their next steps: They should evaluate the value chain and how disruptions can be mitigated and minimized in future events, as well as drive tech adoption as we find “the future of…” certain products or services. A lot of companies will be looking for, if they haven’t already, opportunities for mergers and acquisitions to grow their capabilities. Despite the difficulties the sector is going through, it has outperformed major indices through the pandemic, as well as fairly outperformed the other market sector significantly.

Capacity and Demand

Although the Information Technology(IT) sector’s valuation has been consistently increasing in the last two decades, IT stocks tanked around September of 2018. This change points to a key factor that causes the IT sector’s valuation to decrease: interest rates. At that time, the Federal Reserve increased interest rates to tighten policy, causing investors to worry. A surge in interest rates often indicates diminishing profits for companies because the cost of debt financing increases. Individuals end up taking money out of the stock market, especially out of technology companies, to invest in more secure, low-risk bonds. Additionally, during periods of recession, IT companies tend to outperform other industries. Since technology is at the forefront of helping the world through new problems that arise, disruptions like the COVID-19 pandemic, escalate the reliance on new technologies, more so than products and services in other sectors. Currently, customer relationship management cloud-based services, specifically in healthcare, are on the rise.

Qualitative Sector Analysis

The COVID outbreak has affected the infotech sector by lowering spending rates by 2.7% for all 2020. When the sector reaches a halt or drop, the sector turns to layoffs, which happened greaty as we saw this year following the outbreak of the pandemic. Another trend during economic recessions is the decline in sector spending on hardware, software, and services due to cuts in consumerism. In regards to positive changes, one driving factor for infotech companies during growth would be the adaptation

and implementation of AI technology. Another step for companies would be to withdraw from the public cloud and instead invest in low-code development tools to build out solutions in-house, which could save a significant amount of money. There was a recent increase in P/E ratio in Q3 of 2020. We saw a P/E of 22.36 in Q3 2019, followed by 24.6, 23.37, to 27.64 in Q2 of 2020. Then a huge jump to 47.77 in Q3 this year. In the last 4 quarters before Q3 2020, the EBITDA Margin averaged around 22%, while then jumping to 29.9% in Q3.

Sector Outlook

The long-term prospects of the Information Technology industry remains optimistic as it has led the bull market historically and remains resilient throughout the pandemic -- outperforming major indices and other industries. According to Gartner, the global Info tech market is expected to grow 4% and reach $3.754 trillion in 2021. Although growth rates are curtailed by the pandemic and valuations in the sector are quite elevated, the sector overall has strong fundamentals (earnings and revenues) that will likely spearhead continued growth. Additionally, most companies in the sector are insulated from downturns by leveraging a recurring business model, such as subscriptions, and having a strong balance sheet reflecting large cash reserves and minimal debt. Nevertheless, there are short-term concerns in regards to consumer confidence with spending and political uncertainty that may adversely impact trade relations -- resulting in depressed sales and margins as supply chain concerns persist. While traditional mega cap companies (FAANG) and tech hardware companies have been able to capitalize on the temporary but unsustainable increase in demand during the pandemic, we project SasS companies and those that cater to cyclical-depressed industries or markets (ie: semiconductors, companies with SMB clientele, etc) will experience strong rebounds and growth as the business environment returns to normal. We believe that SaaS companies, in particular, are able to leverage the accelerated changes in the work environment for sustainable growth even after the pandemic.

Performance of Sector VS Major Indices

Published 11/16/2020

HP Inc. Prepared by: Nandan Aggarwal, 2023

Ratings $17.96 (as of market close November 2, 2020) HOLD, One-year target price: $20 Important Updates 2020 - Worldwide PC shipments grew 13% year-overyear in the third quarter of 2020, according to Canalys.

- HP’s printing hardware and supply businesses are both stuck in secular declines.

- Total revenue fell 2% year-over-year for the quarter.

Investment Thesis

HP Inc. generated 72% of its third-quarter (2020) revenue from its Personal Systems business, which entails its notebooks, desktops, and workstations. The other 28% of revenue came from its Printing business. Due to the coronavirus pandemic, HP Inc. saw a 7% increase in revenue (YOY) in the personal systems division. As much of the world was forced to transition from the office to working at home, many individuals were forced to either upgrade their existing home office or create a brand new one. Within the personal systems sector, HP Inc. saw a 30% decrease in desktop shipments (computers designed for regular use at a single location) but this was offset by a 32% boost in notebook shipments (laptops).

COVID-19 was not as impactful for HP Inc.’s printing division. Revenue fell 20% (YOY) even though there was single-digit growth in the consumer hardware business, due to commercial hardware and supplies facing a double-digit revenue decline.

Consumers were purchasing printers for their home offices but most large offices and factories were shut down during the pandemic and therefore did not purchase paper, ink, and other printer hardware.

For roughly the last ten years, HP Inc.’s printing business has been in a ‘secular decline.’

As consumers become more environmentally conscious, digital documents become easier to manipulate and distribute, and the availability of cheaper generic ink rises, printer sales will continue to decline, and accordingly, HP Inc. must recover this loss in revenue. They attempted to counter the rise of generic ink by creating ‘Instant Ink,’ a subscription-based model that sends consumers fresh ink cartridges before their current ones run out. Unfortunately, many customers may not print on a regular basis and therefore have no purpose of signing up.

Under former CEO Dion Weisler, HP Inc. expanded its printing sector by purchasing Samsung’s printing business and Apogee (Europe’s largest managed print service provider). These moves inorganically caused

a jump in revenue, but in the long-term, only gave HP Inc. a greater market share. Current CEO Enrique Lores, who assumed the roll in November 2019, is focusing his efforts on ‘cutting costs, buying back shares, and paying out dividends.’

International Data Corp. (a technology market research company) expects the compounded annual growth rate, as measured in PC unit sales, to be only 1.3% between now and 2024. Although this figure may seem discouraging, HP Inc. is poised to dominate the PC market in the future. Ultraslims (less than three pounds) and 2-in-1 devices are becoming even more popular and HP Inc. has already entered this space with their ENVY and EliteBook lines. HP Inc. has also made a concerted effort to expand its gaming device line, Omen.

HP Inc.’s largest competitors are Lenovo, Dell, and Apple. HP Inc. differentiates itself from the rest of its competitors by offering printers and similar products. During this past summer, HP Inc. saw the largest increase in deliveries among PC manufacturers (17.7%); this reinforces the fact that they have a strong supply chain and their legacy makes them a trusted choice for buyers.

In conclusion, HP Inc. may not have the growth potential of other tech giants but they balance this with their years of experience, strong leadership, and ethical approach to technology. In the future, HP Inc. could consider breaking the printing sector off into its own entity, a merger with Xerox (the industry leader in photocopying), or transitioning to strictly 3D-printing hardware. Although HP Inc. may be tempting to sell due to its ailing printing business, the potential for new innovation and its established position in the market makes it a stock to hold.

PC vendors global shipments, Q3 2020 vs. Q3 2019 Risk:

Diminishing printing business poses threat to revenue and growth in future years

Increased competition from Lenovo and Dell who specialize in ultraslim and 2-in-1 computers.

Recovered strong from COVID-19 crash but the outlook is still uncertain, increased business from pandemic will fall off Published 5/11/2020

Paychex, Inc. Prepared by: Steven Dong, 2022

Ratings: Moderate Buy Current Price: 82.25 (11/2/2020) 12 Month Target Price: 91.61 Important Updates 2020:

As of Q1, PAYX revenues fell by 6% to $932.2M, EBIT fell by 19% to $284M, and net income fell by 20% to $211.6M. The decline in revenues was attributed to shrinking employee headcounts from clients and depressed wages as the labor market tightens from the pandemic.

The pandemic has accelerated the launch of a $31.2M cost-saving initiative to reduce brick and mortar presence and optimize headcount while capitalizing on tax windfall benefits related to employee stock-based compensation payments.

In response to the pandemic, PAYX created a Covid-19 health center site and released new product features on its Paychex Plus platform, including Covid-19 screening, leave tracking, and health attestation support. Other features include PPP loan application support and forgiveness calculator.

Investment Thesis

PAYX offers payroll processing and HCM solutions for 680,000+ small to medium sized businesses. Consisting of 75% of revenues, its Management Solutions service through its SaaS platform, PayChex Flex, provides payroll processing integrated with HR functionalities, such as PTO tracking, time & attendance, and more. Contributing to the remaining 25% of revenues is its Professional Employer Organization (PEO) and Insurance services that handles funds and outsourcing of HR from clients.

Since the pandemic, most mega-cap stock prices have recovered from the dip and risen beyond pre-covid level, but PAYX is only trading at $82.25 as of Nov. 2nd -- below pre-covid prices of ~$90. This indicates a critical difference between traditional InfoTech companies and PAYX; Paychex’s performance is cyclical and closely tied to the broader economic environment as its SMB clientele and business function in HR and payroll reflect current labor market conditions. Hence, macro market metrics like employment rates are good indicators of PAYX performance as revenues are directly related to the client’s employee headcount. With the Federal Reserve projecting falling unemployment rates of 7.6% EOY and 5.5% EOY 2021, PAYX has an optimistic outlook once economic activity resumes for the SMB segment.

As of May 2020, PAYX has a strong liquidity position to operate throughout the pandemic with cash and investments of $1,013.7M and debt of $801.9M. The majority of its fixed-rate and long-term debt ($800M) was used to fund the acquisition of Oasis

Outsourcing, which contributed 8,400 clients and a 4% of total revenue growth in FY2020. As a legacy brand, Paychex has a strong track record of expanding into new domestic and international markets through acquisitions of smaller tech and PEO companies to create new streams of revenue while diversifying the cyclical risk in markets of operation. Its core SaaS platform has also driven revenue growth with an increase of 8% CAGR from FY16-20. Diluted EPS also grew at 10% CAGR in the same period and ROE remains strong at 39%.

A projected PAYX fair price would be $91.61 as determined by a comp analysis using EV/EBITDA to account for differences in capital structures of competitors. A 50th multiple percentile was used to account for PAYX competitive positioning in the industry. PAYX P/E ratio has also stayed consistent, growing from 20-25 over the past 6 years and in line with similar companies like ADP, but it’s well below the software industry average of 43.59. PAYX historical P/E trend does not reflect undervaluation but rather indicates steady but minimal increase in value within the context of the overall software industry.

Overall, PAYX long-term positioning is optimistic and its recurring revenue business model from clients in binding contracts allows for some insulation from short-term systematic influence. PAYX managed to maintain a client retention rate of over 80% throughout the pandemic despite pricing pressure from competitors, suggesting resilience and ability to remain competitive. However, weak employment trends coupled with a fall in demand for HCM solutions as companies engage in cost-cutting measures in the near future suggest that a moderate buy recommendation is appropriate until further catalyst, such as additional government stimulus, occurs, then which PAYX may realize a more favorable valuation.

Risk:

Prolonged adverse economic conditions and regulations from the pandemic could result in client bankruptcy, workforce downsizing, or pricing pressure to keep HR functions in-house -- resulting in an adverse impact on PAYX revenues.

Changes in government regulations and policies around tax and healthcare could potentially reduce demand for services. Compliance with ACA laws and financial regulations in international operations are also a concern.

Published 11/16/2020

Salesforce Prepared by: Lavanya Pinnepalli, 2024

Ratings:BUY* $232.37 (as of market close November 2, 2020 Two-year target price: $398.03 Important Updates 2020:

For Q3 2020, Salesforce revenue increased by 33% year-over-year to $4.5 billion, compared to the $4.45 billion that was expected by analysts. Similarly, Salesforce reported adjusted earning per share of $0.75, 13.6% greater than the $0.66 that Wall Street estimated.

After laying off a total of 1,000 employees after Q2 2020, Salesforce recently announced on September 17, 2020 that they will be adding 12,000 new jobs over the next 12 months Investment Thesis

Salesforce(CRM), a pioneer in the softwareas-a-service model, has used cloud computing technology for customer relationship management. CRM is the world’s #1 customer relationship management provider, claiming over 19% of its market share, its closest rival being SAP SE, at 8.3% share, licensing custom built clouds to individual companies in healthcare, financial services, education, etc.

From October 12, 2020 to November 2, 2020, CRM share price has been steadily decreasing from $267.07 to $232.37. From a micro lens, this fall in value could be a result of investors questioning the rapid growth of large-cap technology companies since the pandemic, and consequently selling. In a macro lens, these losses are not as staggering as they might appear. As of March 16, 2020, the start of the pandemic, CRM’s stock price was $124.30, hitting its peak on September 2, 2020 at $276.69. Aside from the technological shift in healthcare which boosted the usage of customer relationship management platforms, CRM’s astute strategy in adapting to the necessities that arose from the pandemic could be the reason for the highgrowth stock. For example, the company launched a tool on Work.com to manage vaccine delivery programs at scale.

Given its future plans and the current market climate, I believe CRM is undervalued and could increase from ~$232 to $368.02 by the end of 2022.

I calculated this equity valuation using the median value multiple of the enterprise value to revenue(EV/ Revenue) ratio in a Comps Analysis. Although CRM does have a much better growth potential and greater client reach than its competitors, I opted for the median multiple rather than the 75th percentile multiple because choosing the latter would imply exponential growth over the next two years. With the increasing debt CRM is taking on to fund new projects, we should expect a steady growth rate of ~23%, as these investments slowly come to fruition. In the

same Comps Analysis, CRM’s price-to-earnings(P/E) ratio of 91 is more than four times that of its competitors like SAP SE and Oracle Corporation, and three times that of Microsoft. High P/E ratios are sometimes suggestive of an overvaluation. However, in this case, the consistently high P/E ratio is actually a reflection of consistent investor interest due to a positive outlook on the company’s future undertakings.

These quantitative analyses are further backed

by CRM’s two main competitive advantages in the customer relationship management sector. Firstly, CRM’s research spending increased to $2.77 billion between 2015-2020, or 14.5% of its revenue. In the past 5 years, the company’s research and development(R&D) expense has rapidly increased, with plans to continue the trend while expanding to new industries by 2022. Secondly, Salesforce has always boasted an aggressive acquisition strategy, unlike any of its competitors, completing 60 mergers and acquisitions to date. Salesforce’s proficiency in integrating several businesses with different cultures, operational models, and executive plans, has supplemented its core offerings.

CRM is also expanding its reach into industry-specific cloud services. On February 25, 2020, CRM signed a definitive agreement to acquire Vlocity to build out this new kind of platform. By September 30, 2020, CRM released industry-specific clouds in energy & utilities, media, and communication for telecommunications companies. With this new venture, CRM will garner more investment interest, generate more profits, and broaden its targeted client base, making its stock a good long term investment for investors.

Risks:

C3.ai, Microsoft, and Adobe, CRM’s major competitors, have partnered to reinvent customer relationship management. By integrating each of their platforms, they can heavily target and price match each vertical that CRM operates in, while using their extremely high cash balances to target companies globally.

-Broadvoice, which provides a popular business communication platform that includes CRM integration, leaked more than 350 million customer records, causing concern amongst CRM’s customers.

Published 11/16/2020

General Electric Prepared by: Daniel Nieto, 2023

Ratings: $7.42 (as of market close November 2, 2020) BUY, One-year target price: $9.50 Company Update

For Q3 2020, GE revenues came in at $19.4 billion, exceeding expectations and crushing the market. More importantly, the company’s free cash flow is finally improving, with the company turning in a $514 million positive in Q3 after a negative $2.1 billion in Q2.

GE is still trying to get out of its legacy insurance business, with the company receiving a Welles notice in October. This coupled with a large amount of long term debt still means the turnaround is still a couple of years away.

GE posted strong organic revenue in 3 of its major industries, with only Renewables and Aviation performing poorly. Aviation is due to the worldwide impact of the pandemic and Renewables is troubling that it only earned $5 million.

The company’s cost cutting actions earlier in the year in response to the pandemic is finally paying off in Q3, with management’s plan for a turnaround appearing to come to fruition.

Investment Thesis/Analysis

General Electric (GE) was the fourth largest industrial conglomerate in 2019 by revenue and was the largest US industrial conglomerate by revenue. Its main source of revenue in 2019 was its Aviation division in the airlines industry. GE operates worldwide, with the majority of its revenues coming from the US and Asia.

During the pandemic, GE’s stock price has fallen 42% from its high at $13.16 to $7.52 as of November 2, 2020. Other industrial competitors, such as Emerson Electric Co, 3M Company and Siemens Aktiengesellschaft fell initially in the beginning of the pandemic, they have mostly recovered to prepandemic numbers. This suggests GE’s stock price will eventually follow suit.

GE has several competitive advantages that bode well for its recovery in the coming year. First off, GE has stayed committed to the growing field of renewable energy, seeing it as a viable path forward and an integral part of its future business. Even with the low amount of revenue in Q3, GE has stuck by investing in renewable energy that will allow it to reap the benefits in the future when the technology comes out. Additionally, GE has a large amount of its current

revenue in the airlines industry, an industry that will assuredly bounce back next year. Boeing just completed safety upgrades on the 737 MAX, that will mean an additional source of revenue for GE when those planes take flight. This allows Aviation to make up for its poor performance in Q3. GE also owns hundreds of jets and is a large lender of airplanes, which will help GE bounce back after the pandemic. Finally, GE made cost cutting and layoffs helped it weather the storm of the pandemic. This foresight helped GE offset the losses brought on by the pandemic in its aviation division, and also helped position itself for the future by becoming a leaner company. This cost cutting has helped GE stay ahead of its competitors and post a strong Q3.

As GE turns to next year with a positive free cash flow along with a positive trend, a new airplane from Boeing set to hit the markets in the coming year along with a strong outlook in revenue, the company is poised for a strong 2021. The conservative approach adopted by the management under CEO Larry Culp Jr. appears to finally be working, with GE’s slow and methodical return to relevance. The problems of GE’s past seem to be coming to end, with the legacy insurance business being the only thorn in the side of what has been a strong Q3 with a strong outlook. This is what makes General Electric Company (NYSE: GE) a good choice for investors looking to see returns from the inevitable bounce back from industrials and airlines.

GE vs. Competitors During Current Recession

Source: Yahoo Finance Risk Potential

GE is still embroiled in legal issues with the SEC and the United States government, most notably receiving a Welles notice from the SEC in early October regarding their accounting for their reserves in a legacy insurance business.

Following the COVID-19 pandemic, GE still has a large amount of long term debt that stems from its darkest days that needs to be addressed.

Published 11/16/2020

FINANCIALS

Sector Analysis

Finance Sector Outlook

While COVID-19 has ravaged the United States and the global economy since the initial outbreak in 1Q20, large financial institutions have emerged relatively unscathed thus far. In response to the pandemic crippling local economies across broad swathes of the country, the Federal government has injected over $4 trillion to help spur growth and mitigate unemployment. In addition to the stimulus plan, the Fed has slashed interest rates to 0.25% and Fed Chairman Jerome Powell has indicated that they will remain low for the foreseeable future. The capital markets industry has responded positively as a result.

Other potential catalysts that could upset the market are continued trade disputes with China and the second wave resurgence of COVID this coming winter.

New lockdowns as a result of the second wave could slow down the overall resurgence of the American economy.

IB Outlook

After the pandemic recession, investment banks have been increasing their profitability significantly in comparison to other companies. Although wealth management and consumer has decreased, trading, M&A, asset management, equity underwriting, and debt investment revenues have increased in the last quarter. Goldman Sachs’ stock specifically is on an upward trend and will soon be returning profit at the same rate it was prior to the pandemic. The stock price is currently undervalued, and it would be a profitable period to buy or hold stocks currently. Like its competitors, Citigroup’s stock dropped significantly in March 2020; since the fall in stock price, Citigroup’s stock price has been steadily increasing. The main driver for revenue has been within Citigroup’s Treasury and Trade Solutions, as this division experienced strong client engagement due to low interest rates.

Citigroup stock is currently undervalued, therefore, a soft buy is advised at this time. Houlihan Lokey is currently an overvalued stock. However, due to the extreme growth they have achieved with their various divisions, I believe that the share price is representative of their current value. Due to these outlooks, the investment banking sub-sector is projected to outperform other industries.

Financial Exchanges & Data Providers

Financial Exchanges & Data Providers benefited from the initial volatility following the COVID outbreak in 1Q20 with average daily volume and revenue from Trading & Clearing segments skyrocketing.

However, as the market has become more accustomed

to the current economic environment hamstrung by the global health crisis, volatility has since subsided.

The resumption of Libyian oil production has lowered oil benchmarks and, in turn, energy derivatives speculation. On a similar note, with the Fed signaling that interest rates will remain low for the foreseeable future, ADV for interest rate futures have declined in the past two quarters. Exchange operators continue to rely more heavily on their data product offerings as they seek to leverage proprietary data sets. Pricing, analytics, data feeds, and desktop solutions all provide a more stable cash flow that is subscription based and reoccurring by nature. While the low interest environment proves to be a damper for interest rate derivatives, financial exchanges continue to post high margins and are posed to continue returning positive returns over the next year.

Sector Thesis

The financial industry overall is likely to continue its positive outlook. Investment banking and trading are likely to rebound and grow faster, given a low rate environment, higher risk taking by corporates and private equity, and investor participation from wealth management in the capital markets. The news of President-elect Joseph R. Biden becoming the next president of the United States creates a potential impact on the financial sector. The Biden administration plans to toughen regulations on the largest U.S. banks, including raising taxes for large banks and Wall Street.

This will impact the stock market significantly. Goldman Sachs estimates that the increase in corporate taxes and in social security taxes on high earners will reduce earnings of the S&P 500 by 9%. However, the Senate currently has a Republican majority, therefore, there is currently a low probability of this corporate tax increase being implemented in the near future.

Further regulations would further strengthen barriers to entry and cement incumbent positions. The sector as a whole continues to post high margins and is likely to do so for the foreseeable future.

XLF ETF Performance YTD

Source: Yahoo Finance

Published 11/16/2020

CME Group

in nature, the segment’s revenues are less exposed to market volatility and boasts a steady cash flow. While CME does offer a portfolio of data services products, Prepared by: such as their FX Market Profile and Globex platform, Edward Foote, 2021 they have not monetized their data services or pricing Ratings: HOLD, One-year target price: $164 analytics to the same scale as their primary compet$161.01 (as of market close November 12, 2020) itors. CME is the dominant global player for interImportant Updates 2020: est rate futures, such as SOFRS, and money market -For 3Q20, CME revenues fell by 8.64% to $1.08 futures, like their Eurodollar contract. Although CME billion while expenses increased by 2.12% to $553.2 is the premier derivatives exchange in the world, it million. CME Group reported a net income of $411.7 does not operate in the cash equities exchange busimillion, down 18.2% from 2Q20 and a further ness like ICE’s NYSE. When the pandemic hit and 46.3% down from record revenues of $766.2 million volatility took hold, ADV skyrocketed and most firms achieved in 1Q20. in the financial exchanges sub-segment achieved -Average Daily Volume for the firm’s interest rate record revenue. Firms with a greater weight on their products, which have historically been over 50% of the firm’s total volume, fell from 13.8 million in 1Q20 cash equities business have benefited since they earn to 5.3 million. The decrease in volume can be primar- a commission for every trade. While the world faced uncertainty, the Fed slashed interest rates to 0.25% in ily attributed to the Fed signaling interest rates will order to help spur growth. Because most financiers use remain near 0.25% for the foreseeable future.

CME’s interest rate futures to hedge against potential -With global uncertainty surrounding crude oil prorate increases, the Fed’s guidance greatly diminished duction and demand, 3Q20 YTD volume for CME’s the demand for many of the firm’s interest rate prodHenry Hub natural gas futures and options contracts ucts. Furthermore, the firm has also faced downward are up 26% and 56% respectively. price pressure from other firms on its rate per contract Investment Thesis resulting in average RPC declining from $0.731 to

CME Group is the largest derivatives exchange $0.716 in 3Q20. Thus, CME has not nearly benefitted and clearinghouse operator in the world by market from the volatility to the same degree as some of its capitalization. It offers futures and options products rivals. based on interest rates, equity indexes, foreign ex In the face of the pandemic’s challenges and change, agricultural commodities, energy, and metals, the firm’s relative underperformance, CME is taking as well as fixed income products through its electronic action and maintains a number of competitive advantrading platforms, open outcry, and privately negotiat- tages. The firm is the largest derivatives exchange in ed transactions. In addition to its derivative products, the world and is a bedrock institution in the financial CME also provides real time market data and pricing industry. As the globe transitions towards cleaner analytics. I believe the equity is fairly valued at the fuels, CME has a dominant position trading its Henry moment and I expect the price to hover near $164 Hub natural gas futures with Asian open interest in the through the next year. I arrived at this conclusion first product up 116% y/y. In addition, CME is mitigating by designing a Comps Analysis and used the 75th the virus’ immediate financial impact by cutting $110 percentile P/E multiple. As the largest industry incum- million in expenses by the end of the year through bent for derivatives clearinghouses and exchanges, I run rate synergies. While the firm’s stock is not at risk chose to value CME at the 75th percentile because it of nosediving significantly further, the current low has already achieved economies of scale and because interest rate environment puts CME Group at a disadthe firm, along with its competitors, are all profitable. vantage and effectively places a ceiling on the equity’s

Prior to the pandemic, CME’s stock traded at price recovery. over $220. Like most firms however, CME’s stock CME Performance Vs. NASDAQ & S&P 500 dropped precipitously in March, along with its peers such as Intercontinental Exchange (ICE) and Nasdaq (NDAQ). While ICE and NDAQ’s prices have either reached or surpassed their pre-Covid highs in March, CME’s price has actually continued to go down over 27% since then. The reason for CME’s downward price trajectory lies in the differing revenue streams amongst the firm and its competitors. While ICE’s revenues are roughly split evenly between their Trading & Clearing and Data Services segments, clearing and transaction fees accounted for 77.3% of the CME’s revenue in 3Q20. Given that data services are predominantly subscription based and recurring Published 11/16/2020

Visa Inc. Prepared by: Felipe Santamaria, 2023

Ratings: BUY One-year target price: $215 $184.74 (as of market close November 1, 2020) Company Update:

Excelled in ecommerce adaptation by expanding to B2B partnerships as well as Visa Direct during this year’s slow on travel and in person spending.

Visa reported earnings per share to beat the estimates for Q4 at $1.12 per share.

Visa annual revenue for 2020 down 4.9% from 2019

Q4 Visa credit and debit total volume of $3.00T, up 1.9% Y/Y in constant US dollars

VisaNet, V’s global processing network, announced to be capable of handling more than 65,000 transaction messages a second.

Investment Thesis:

Visa plays in the league with tech giants such as Amazon, Alphabet, Apple, Microsoft, Facebook.

Within a very competitive field, Visa comes close to first following these billion market cap companies.

They are currently valued at 412.2 billion, a huge market cap.

Visa Inc. has had a tremendous success story since its IPO back in March of 2008. It has returned incredible gains of over 500% over 12 years, and seems to be on the rise as ecommerce moves from analog to digital. One upside that Visa has on competitors such as American Express and Capital One is that it does not run the risks of losing money that comes from lending, which is the core idea behind credit cards. The company’s role is to facilitate global commerce through the transfer of values and information in the global network. VisaNet allows for authorization, clearing and settlement of payment transactions that allow it to provide a wide range of products, platforms and services.

International transaction revenues are down 38% on Q4 which is a good indicator of future potential. It is so low due to the limit on travel currently, which we can expect to come back up as air travel returns gradually. This is a huge prosperity for the future of Visa, as the economy starts coming back to its full potential, people will start spending more and more, and the gradually increasing volume we have begun to see today will continue to increase to see new heights. Visa has been very consistently increasing its revenues throughout the years before COVID. Annual revenue for 2019 was up 11.49% from 2018, which was up 12.26% from 2017.

Even Visa’s operating income for 2020 has increased

slightly (3.71%) from last year.

Revenue has fallen 17% on the Y/Y, while expenses only dropped 4.9%, leading to a decrease in income of 23.3%. The market price is currently only 1% up from a year ago at this time. Although October has resulted in a drop from a $200 valuation, the important factor to observe for Visa specifically is the volume of US payments, which have been pretty flat throughout the pandemic, but are starting to see a spike in october.

The pandemic also required Visa to become a bit more lenient in fees. For example, in May the company planned to push back increased credit card swipe fees until April 2021, and also reduced interchange fees for supermarket purchases in July. Visa reported, “ We believe this is the right decision to ensure the long-term stability of the digital payments ecosystem.”

Another great indicator of company growth was the outperformance of Visa over American express and Master card at the worst of the pandemic, having not dropped as much as the other two companies.

Another important announcement from the company was that it would delay the deadline for gas station owners in the US to upgrade their automated fuel dispensers to take chip and contactless payments until April 2021 as well. This move was crucial because of the already daunting pressure for convenience stores and small businesses to open as essential businesses received all the attention.

Chairman/ CEO Alfred F. Kelly Jr said the company drove the adoption of ecommerce and tap to pay, thus accelerating cash digitization. They also facilitated client innovation through value added services.

Visa Stock Price YTD

Risk:

There is a high risk of consumerism coming back down with a second wave of COVID-19, which could be impacted by many other factors, including the election, the flu season coming up, and more. This would affect Visa negatively, as it would have to pick up again from its lows of March 2020.

As we can see in the first graphic, Paypal experienced much better returns than did the likes of Visa or Mastercard.

Published 11/16/2020

Citigroup Inc. Prepared by: Darla Andoni, 2023

Ratings: BUY/HOLD Current Stock Price: $43.53 Projected stock price of $66.90 Investment Analysis

Citigroup Inc. is the third-largest, leading global bank that provides a variety of financial services to its clients. Citigroup is comprised of its Global Consumer Banking, Institutional Client’s Group, and Corporate division. The Institutional Client’s Group is made up of five lines of business including Banking, Capital Markets and Advisory (BCMA), Commercial Banking, Markets and Securities Services, Private Banking, and Treasury and Trade Solutions (TTS).

Citigroup’s main sources of revenue are shown in the graphic. The bank’s main competitors are Goldman Sachs, Bank of America, Wells Fargo, Morgan Stanley, and J.P. Morgan.

Like its competitors, Citigroup’s stock dropped significantly in March 2020, reaching a low of $35.39 due to the COVID-19 pandemic and accompanying recession. Since the fall in stock price, Citigroup’s stock price has been steadily increasing. Citigroup’s revenues are up 3% year-to-date. Citigroup saw lower revenues in Global Consumer Banking and the Corporate division. However, these loses were offset by an increase in revenue within the Fixed Income Markets, Investment Banking, Equity Markets, and the Private Bank within the Institutional Clients Group. The main driver for revenue has been within Citigroup’s Treasury and Trade Solutions, as this division experienced strong client engagement due to low interest rates.

Citigroup has made world news as Jane Fraser has been recently appointed as the CEO of Global Consumer Banking and will become the CEO of the Institutional Clients Group, after the retirement of Michael Corbat in February 2021. In addition to Citigroup’s strides

of balancing the gender diversity among the bank, it also commits itself to being socially responsible to its stakeholders, and this is seen in Citigroup’s ESG standards. Citigroup has 17 interrelated sustainable development goals to achieve a sustainable future by 2030. Additionally, Citigroup’s Impact Fund uses Citigroup’s own capital to make investment in companies that will provide solutions to workforce development, physical & social infrastructure, financial inclusion, and sustainability. All of Citigroup’s efforts have been reflected in its strong performance as a bank over the years.

However, Citigroup has recently faced some troubled waters, as news of the bank’s chief risk offer having to depart the bank by the end of 2020, as Citigroup was fined for $400 million due to deficient risk-management systems. Regardless of this news, Citigroup is still projected to perform well, as these concerns call for improvement of internal operations and did not distress stakeholders in any way. Citigroup has a leading global institution networking serving corporate treasuries, it is more diversified than any other large U.S. bank, and it is reviewing its business units to invest in regulatory controls and systems for 2021. Due to this, I advise a soft buy of Citigroup stock because it is currently undervalued by 54%. The company comparable analysis showcased a projected stock price of $66.97, as Citigroup stock is currently trading at $43.53. This would be an appealing time to buy Citigroup’s stock or to hold the stock, as it is likely that the stock price will increase in the future years.

The CFRA concurs with this rating, as it states that it has a strong buy opinion on Citigroup stock.

Published 5/11/2020

The Goldman Sachs Group, Inc. Prepared by: Radhe Melwani, 2022

produce a return on tangible common shareholders’ equity (ROTE) of 14%. This would be a 32% increase from its 2019 ROTE. Unfortunately, due the COVID-19 recession Goldman Sachs is predicted to have an efficiency rate of 63.2% by 20204 and a ROTE maximum of 12%. To combat the recession, Goldman Sachs has been automating roles, leading to “modest” job cuts. The firm has also delayed the launch of a digital wealth management initiative and has slowed hiring of private wealth advisors. Currently, CEO David Solomon is continuing the strategy of shaping Goldman Sachs more into a conventional bank. The stock price is at $197.93, a 21% difference from its highest stock price, $249.46, prior to the pandemic. According to Goldman Sachs, most of its revenue comes from deal-advising and trading arms with other Wall Street banks. Goldman Sach’s focus on trading assisted the bank through the quarter throughout the recession and stock volatility and will likely continue to bring significant revenue in the bank as the pandemic continues. Currently, Goldman Sachs is most profitable due to its equity underwriting, which is up 13%, its M&A pipeline, and its asset management revenues, which is up 71% due to equity, lending investments, and debt investments.

According to the company comparable analysis, Goldman Sach’s stock is currently undervalued by 26%. The company comparable analysis values the stock at $250.94 when compared to its competitors whereas the current value of the stock is $197.93.

This would be a valuable time to buy Goldman Sach’s stock or to hold the stock as it is likely the price will soon increase. CFRA concurs with this stating that is has a strong buy opinion on Goldman Sach’s shares.

Ratings: BUY/HOLD $197.93(as of close November 2, 2020) Investment Analysis

The Goldman Sachs Group, Inc. (Goldman Sachs) is a leading multinational investment banking, securities, and investment management firm that provides financial services in investment management, securities, asset management, prime brokerage, and securities underwriting. The firm’s diversified client base is comprised of corporations, governments, financial institutions, and individuals. The firm was founded in 1869 and is headquartered in New York with offices situated globally. Currently the Chief Executive Officer is David M. Solomon, the Chief Operating Officer is John E. Waldron, and the Chief Financial Officer is Stephen M. Scherr. Goldman Sach’s primary competitors are Morgan Stanley, JPMorgan & Chase Co., UBS Group AG, Bank of America Corporation, and Barclays PLC.

Similar to competing banks, Goldman Sachs’ stock dropped significantly in March 2020, reaching a low of $134.97 due to the COVID-19 pandemic and accompanying recession. Additionally, the firm was unable to reach its pre-pandemic targets due to the recession. April 2020 onwards, the stock price began to incline but experts believe that the economy will not reach the same economic status it had prior to the COVID-19 recession at a rate fast enough that Goldman Sachs could still achieve the financial targets it had outlined for the year. Most detrimentally, Goldman Sachs is behind on wealth management and consumer due to pandemic’s impact on its clients and potential clients. Currently, the financial targets include cutting expenses by $1.3 billion Goldman Sachs Stock Performance Compared to S&P500 before 2023. This would produce an efficiency ratio of 60% which is around a 12% lower ratio than what Goldman Sachs had in 2019. Additionally, Goldman Sachs had pledged that by 2023 the firm would Published 11/16/2020

HEALTHCARE

Sector Analysis

older as people live longer and have less children. This phenomenon can be seen in Japan and already in some European nations. This trend is undoubtedly coming to the United States as well and we believe that this is a catalyst that will cause healthcare to outperform. As people get older, the amount they spend on healthcare increases significantly. According to the Center for Medicare & Medicaid Services in 2014, spending on healthcare for adults over 85 years old was 9 times more than that of children. Therefore, as we have an aging population, and older populations need to spend more on healthcare, we believe that healthcare spending in the US will increase quite dramatically over the next couple of years. This increase in demand for healthcare will boost for companies who operate in this sector.

In addition to the longer term trend of increased spending, we believe that a short term boost is also likely. This pandemic has exposed many shortcomings in the preparedness of many nations for a health crisis of this magnitude. Many countries have been criticized for their lack of spending in areas of medical research, but also in providing the best technology possible to our healthcare workers. We believe this is a catalyst to drive increases in government spending in healthcare around the world, which will in return boost healthcare companies.

Risks Although we believe strong healthcare sector performance in the near future, we do acknowledge some risks posed to the sector. We believe that the biggest risk to our analysis is political risk. There is no doubt a trend in the United States towards more government involvement in the healthcare system, mainly in regards to insurance coverage and pharmaceutical pricing. Of course, proposals include more moderate changes to the system such as increased drug pricing regulation to something as extreme as a single payer system. There is much uncertainty on how far politicians are willing to go to change the current system.

However, there is no doubt that such policies will result in margin compression and decreased profits for pharmaceutical companies, hospitals, and private health insurance companies. We advise investors in the industry to closely analyze political developments and trends in order to spot possible risks to the industry.

With our team's individual analysis of several companies within the healthcare sector, as well as our analysis of the sector as a whole, we expect for the healthcare sector to outperform the overall market. There are several reasons why we believe being overweight in the healthcare sector is a strong recommendation. We will focus on two main reasons why: historical outperformance & trends and changing demographics & increased spending.

Historical Outperformance and Trends During the last economic expansion, from the great financial crisis to the economic contraction we have recently seen due to the COVID-19 pandemic, the healthcare sector outperformed the wider market.

From the end of September 2010 to the end of December 2020, the healthcare sector returned 265.51% versus the 207.89% return of the broader S&P 500.

The healthcare sector was only outperformed by two sectors, information technology and consumer discretionary. Given this historically strong performance of this sector, and given that our team sees no reason for this to change, we recommend being overweight healthcare for the next economic expansion.

In addition, we noticed a trend in the healthcare sector which may be playing out again. During much of the early expansion from the financial crisis, healthcare actually underperformed the broader market. In fact, we didn’t see healthcare really outperform until 2013 where it started to really break away from the S&P 500. This is interesting, as it would suggest that early on during the rotation from economic contraction to expansion, healthcare performs less than or on par to the rest of the market and generates minimal if any alpha for investors. But, as the expansion weighs on, these stocks begin to outperform as more money rotates into the healthcare sector. We believe that this is occurring again. So far in 2020, year to date, the S&P has returned 8.63% while healthcare has returned 7.90%, thus underperforming the broader market. We believe that this underperformance will not continue as the economy, and financial markets, enter the recovery from the COVID19 pandemic. If the trend that we discovered plays out again, we believe that healthcare is due to begin to outperform the market.

Changing Demographics and Increased Spending There is no doubt a major demographic change occurring in the United States and developed markets as a whole. This change is mostly related to age, as nations become more developed, their populations become much Performance if the S&P 500 Healthcare Index YTD

Published 11/16/2020

Moderna, Inc. Prepared by: Chris Vaziri, 2022

Stock Price at Market Close, Nov 2nd: $190.03 Rating: BUY Company Update:

Moderna completed enrollment of Phase 3 Study of mR vaccine against COVID two weeks ago.

This study was designed in collaboration with the FDA and NIH to evaluate Americans at the highest risk of severe COVID.

Moderna was granted clinical trial treatment on their COVID vaccine on March 4th. From then they have announced positive Phase 1 data on May 18, positive Phase 2 data on July 28, positive results from the older adult age cohorts, and completed enrollment of their Phase 3 study on October 22.

Moderna has received a plethora of funding and research aid for its COVID vaccine. Two of the biggest include: $483M from BARDA on April 16, $2.48B from the U.S. government. This funding has allowed Moderna to spend excess on R&D and work at a much faster/efficient pace.

Other recent achievements: Moderna and Lonza announced a worldwide strategic collaboration to produce 1B doses of their vaccine per year. Dr. Fauci spoke about Moderna’s amazing progress in an interview with National Geographic on May 6. Moderna received FDA Fast Track designation for their COVID vaccine on May 12. Moderna announced a supply agreement with the U.S. for 100M doses for their COVID vaccine.

Moderna reported Q3 earnings on October 29 with an EPS of $-0.59/share and revenue of $157.9M vs an expected $-0.43/share and $77.52 revenue. Moderna’s huge revenue beat came from grants including a huge one from BARDA for its COVID vaccine. Moderna ended Q3 with $3.97B in cash vs a $3.07B end for Q2. Moderna also has 13 of their 21 mRNA candidates in the clinical development stage as of October 29.

Investment Thesis

Moderna is one of 5 major companies in Phase 3 clinical trials for their COVID vaccines. These companies include Pfizer and BioNTech, Novavax, AstraZeneca, Johnson & Johnson. There is a lot of competition in the COVID vaccine space but Moderna has a completely different approach.

I believe that Moderna is fairly valued at $69.08 because of its upside potential and downside if the vaccine goes wrong. Using a tops down revenue and expense model I was able to project an increase in EPS, if the vaccine is successful, that will yield a $80-140 increase in stock price. Moderna has already signed deals with governments that will have them supplying over $5B of vaccines initially.

In the worst case scenario, if Moderna’s vac-

cine goes wrong they will have a huge downside because their current pipeline does not bring in revenue anywhere near what is currently priced in. Before they started working on the COVID vaccine, Moderna was priced at $19.23 on January 2nd. Their stock price increase was strictly due to their amazing progress and distribution deals for their COVID vaccine. Without the COVID vaccine in their pipeline, they will be priced around $15 which is lower than their Jan. 2 price of $19.23. This is due to Moderna’s decrease in progress on the other drugs in their pipeline. They stopped putting R&D and focus onto the other drugs in their pipeline and are losing traction with the FDA on these.

Moderna’s approach uses mRNA which they have been working on for years. All of the previous drugs in their pipeline use mRNA and this has given them an edge over other companies. They were able to use this edge to get a quick start on their clinical trials and knew where to begin R&D.

Moderna is set to report early data from its Phase 3 COVID vaccine by mid-November. This is the clearest timeline given out of it’s five competitors.

Moderna expects to be able to produce 20M doses by the end of 2020, and between 500M-1B in 2021. Moderna’s deal with the U.S. is for 100 million doses for $25/dose. If Moderna is able to produce good Phase 3 trial data and data afterward that shows that no side effects developed in the participants within 1-2 months following the treatment then they will be able to gain FDA clearance.

If Moderna brings good Phase 3 data and FDA clearance their stock price will squeeze up big. Moderna moved +30% alone on great Phase 2 data and shot up to around $95/share. Moderna is a great opportunity for investors at this price before their Phase 3 data is released and they gain FDA clearance. It is a very risky investment and I would recommend selling after the Phase 3 data and FDA clearance if it occurs.

Because of its risk/reward I recommend a hold for Moderna.

Risk Analysis

Companies such as J&J are seeing unexplained illnesses in their clinical trials. It is extremely hard to not have any unexplained illnesses especially in Phase 3 trials with trial sizes of over 30,000 people. Also, because all of the companies got fast-track designation they do not have as much diligence done as the normal 2 years it would take to be where they are at. Unlike the other big companies, Moderna’s mRNA has been around for over 5 years and has been used successfully in different variations. This brings a lot more safety to Moderna’s vaccine even though the process is sped up and the trial size is huge.

Published: 11/16/2020

Teledoc Health Inc.

Livongo has also seen exceptional growth. Q3 revenue was $106.1 million, a 126% year-over-year increase, Stock Price at Market Close, Nov 2nd: $190.03 exceeding general analysts’ estimates of about $95.6 Rating: BUY million. The company generated an adjusted net inCompany Update: come of $19.2 million. Adjusted earnings per share of

Reported revenue of $289 million, up 109% were $0.16, up from an adjusted loss of $0.05 in the year over year. This is an acceleration from 41% reve- prior-year quarter. nue growth in Q1 and 85% in Q2.

Predictions for $100M in revenue synergies

Loss per share of $0.13, better than the expect- by 2022 and $500M in revenue synergies by 2025. ed loss of $0.30. Net loss was cut to $10.7 million, Customer base is expected to be 70 million following an improvement from $20.3 million in the previous the merger. With Livongo targeting chronic health year’s quarter, excluding one-time acquisition charges. issues and Teladoc providing acute health care, both Finalized merger with Livongo 10/29/20 (which serve to be a comprehensive health system. Those who has been up 126% year over year), for 18.5B. Each use Teladoc for a doctor’s meeting may be referred LVGO share will be exchanged for 0.592 TDOC, plus to use Livongo’s services to manage a chronic health $11.33 for each LVGO share. TDOC shareholders will condition, or those who monitor health symptoms with own 58% of the combined company.

Livongo may use Teladoc for a quick, convenient visit Investment Thesis with a doctor.

Telemedicine is any medical service that uses

The telehealth industry is poised for growth, technology to allow doctors and patients to interact and the companies believe there to be a $121b total with one another even when they’re not physically in addressable market. CAGR for the telehealth market the same location. The COVID-19 pandemic has seen is believed to be 38%+ over the next five years, with a an increase in the use of telemedicine, with a 154% 250%+ year-over-year increase in funding for virtual increase in use of telemedicine occurring during the care businesses. For consumers, 76% have now said last week of March 2020. they are interested in using virtual care, as compared

Teladoc is currently a market leader in the tele- to 11% prior to COVID-19. 33% would leave their medicine field. Given Teladoc’s position within telecurrent physician for a provider who offered telehealth health, the rapid expansion of telehealth and expected access, and nearly 2/3 want a virtual care doctor to continual growth, and the recent acquisition of Livon- partner with an existing in-person doctor. go, I expect Teladoc to continue to be the dominant

Currently, there is only one other publicly tradplayer in a quickly growing field. ed company that focuses on telemedicine provision.

Teladoc’s total revenue for Q3 was $288.8 While Teladoc has been publicly traded since 2015, million, a 109% year-over-year increase from Q3 American Well went public this August. American 2019. This marked an acceleration from the 41% Well charges per visit, while Teladoc offers subscriprevenue growth seen in Q1 and the 85% growth of Q2. tion style pricing in addition to per-visit payments. In There were 2.8 million visits for the quarter, a 206% 2019, Teladoc’s generated revenue was $553.3 milyear-over-year increase, and U. S. paid membership lion, compared to Amwell’s revenue of $148.9 million, was 51.5 million for the quarter, a 47% year-over-year and Teladoc’s market cap is more than three times increase. Teladoc’s net loss was $35.9 million for the larger than Amwell’s. Teladoc also has a more signifquarter, but $25.2 million was related to the one-time icant international presence, making more than $59 acquisitions of InTouch Health and Livongo. This million in revenue in international markets. brings adjusted net losses to $10.7 million, a signifiRisk Analysis cant improvement from the $20.3 million net loss in

Growth in the telemedicine field may slow the prior-year quarter. This resulted in an adjusted loss more than expected with the subside of the COVID-19 per share of $0.13, significantly better than the expect- pandemic, but The CEO highlighted a rise in non-ined loss of $0.30. fectious disease related activity, with more than 50%

Teladoc has spent about $2 billion to date on of visits focused on hypertension, back pain, anxiety, acquisitions. InTouch health, a virtual care company and depression - which together represent more than focused on enterprise offerings, was acquired earlier 50% of the company’s visit volumes. this year, and Teladoc recently completed its merger

Some consider Teladoc to have overpaid for with Livongo, another digital health company. LiLivongo, but this is considered to be an endorsement vongo allows users with chronic health conditions to of expected growth for digital healthcare. manage and monitor their symptoms and illnesses.

The merging of a chronic care company and an acute company will result in a “whole person”, comprehensive health company.

Published: 11/16/2020 Prepared by: Meg O’Leary, 2024

Eli Lilly Prepared by: Jon Pfiffner, 2023

Stock Price at Market Close, Nov 5th: $146.60 Rating: BUY Target Price: 176.44 Company Update:

Eli Lilly has partnered with Amgen to faster produce and faster distribute their Covid-19 antibody therapy drug. Although not yet FDA approved, it has recently been authorized for emergency use and has shown to be effective in limiting the number of virus particles in the body. As of October, the company has partnered with the Bill and Melinda Gates Foundation to distribute its antibody treatments to low and middle-income countries where medical access may be more limited. Additionally, Eli Lilly acquired Disarm Therapeutics which has created new therapeutics for patients suffering from degenerative brain diseases.

This acquisition will aid the company in its ongoing development of several anti-Alzheimers and dementia medications meant to combat the effects of brain axon degeneration.

Investment Thesis:

Faced with the daunting task of Covid and increasingly complex regulations, the modern landscape for pharmaceutical companies is a challenging one.

Pharmaceuticals are a modern necessity and thus as Eli Lilly continues to innovate and outperform competitors, it pauses itself to emerge from the pandemic as a stronger company. Eli Lilly, like most drug companies, is currently focused on Coronavirus treatments and vaccines, with the former being the firm’s focus.

Most pharmaceutical companies in America have seen major setbacks on their vaccine progress including Pfizer, Johnson and Johnson, and Eli Lilly. Where the firm has made strides however is in its antibody treatments. The US government recently signed a deal to purchase 300,000 doses of a Coronavirus antibody drug for $375 million. This drug has proven effective in quickening recovery and reducing the need for ventilators for elderly patients. However, a similar trial for a different antibody treatment just ended for the company with no conclusive results or backing. Outside of just the realm of Covid, Eli Lilly has seen massive success with their diabetes drug Trulicity which beat sales targets across the board. Additionally, in the past quarter, the firm has seen over a half dozen drugs gain FDA approval ranging from cancer treatment drugs to an Alzheimer’s drug that gives researchers a greater look into the brain. The multitude of new product offerings has been a catalyst for Lilly’s growth. In the first quarter of 2020 global revenue increased by 15% whilst US revenue increased by 19%. This was attributed to higher volumes in many of the aforementioned new products which outperformed expectations.

In the second quarter of 2020, the company saw overall revenue declined by 2% due to a myriad of factors.

Coronavirus and the focus on the pandemic have delayed new patient prescription trends as well as funneling much of the R&D money towards looking for treatments. Additionally, the firm saw the expiration of a major patent for Cialis which was the firm’s major ED treating drug. Looking at some financial metrics, the company’s current P/E ratio is at 23.93 which is less than the pharmaceutical industry average at 37.88.

Its sales growth rate for September of 2020 was 4.82% with an increase to EBITDA of 1.74 Billion.

Risks:

Eli Lilly faces a myriad of challenges that could limit the company and challenge the investment thesis. Only having emergency authorization from the FDA for its Covid-19 antibody treatment, limits the market of the drug and does not allow Eli Lilly to turn the drug mass-market to help pay for its development costs. Furthermore, Eli Lilly’s competitors (Pfizer, Moderna, etc.) are already ahead in the process of not only Covid-19 treatments but also Covid-19 vaccines and have larger distribution networks to facilitate these new medicines. Failing to stay on the edge of innovation causes risk for Eli Lilly’s future growth in the sector and the ability to overcome competition.

Lastly, public sentiment towards large pharmaceutical companies is largely negative and thus the public not wanting or accepting medications, even if approved by the FDA, could pose a challenge for the company.

Pharmacuetical Performance Vs. S&P500

Published 11/16/2020

Vertex Pharmaceuticals Prepared by: Lucy Beck, 2024

Stock Price at Market Close, Nov 2nd: $28.36 Rating: BUY Target Price: 276.59 Company Update:

Vertex Pharmaceuticals (VRTX) is a biotechnology company that develops and manufactures small molecule therapeutics for patients with serious diseases. VRTX specializes in treatments for cystic fibrosis (CF) which include Kalydeco, Orkambi, Symdeko/ Symkevi and Trikafta/Kaftrio. Trikafta was approved by the FDA in October of 2019 and has generated a large portion of the company’s revenue since then.

Alone, Trikafta sales grew from $918 million in the second quarter of 2020 to $960 million in the third quarter of 2020. This increase in sales contributed to VRTX’s success in its third quarter earnings. On October 29th, VRTX reported Q3 EPS of $2.64, beating the Zacks Consensus Estimate of $2.39. In addition, Trikafta--known as Kraftrio in Europe--was approved to be sold in European markets in August 2020.

Investment Thesis:

This expansion into European markets is expected to generate revenue in the foreseeable future.

VRTX also announced an exclusive research collaboration and licensing agreement with Moderna in September 2020. The three-year collaboration is aimed at discovering and developing treatments for cystic fibrosis using mRNA technology. A breakthrough in CF using mRNA technology would give VRTX a greater competitive lead in the CF market.

On October 15, 2020, VRTX announced that it was discontinuing its Phase 2 study of VX-814 for the treatment of alpha-1 antitrypsin deficiency (AATD).

This announcement resulted in shares dropping by 21% the next day. While this drop is significant, it is important to note that VRTX is still continuing to advance its research in AATD. VRTX’s other candi-

date, VX-864, is currently in Phase 2 and is expected to produce top-line data sometime in the first half of 2021. VX-864 is a structurally different molecule than VX-814, so there is no reason to believe that VX-864 will encounter the same issues as VX-814. In addition to its efforts in CF and AATD, VRTX is advancing research in areas including pain, sickle cell disease, beta-thalassemia, and type 1 diabetes. Given VRTX’s credible history of discovering new technology in the pharmaceutical industry, it has a lot of potential to generate additional candidates in the future.

The biotechnology industry as a whole is known for its higher volatility largely due to its reliance on developing new drugs. Many of the products being researched and developed today will never make it on the market in the future. The complex number of regulations that products must adhere to only adds to the challenges that biotech firms face. This puts a lot of pressure on biotech firms to get as much research output as possible. When a product falls short of being approved, the stock can fall by a large percentage as seen in the discontinuation of VX-814. In addition, many biotech firms rely on a small number of products to drive their sales. For example, cystic fibrosis products are the main drivers for VRTX. If another company were to move in on CF treatment, VRTX would suffer significantly. However, there are currently no immediate threats to the CF market. VRTX already has a number of lengthy patents in CF, including its patent for Trikafta which does not expire until 2037.

Trikafta is currently the only approved triple combination therapy for treating CF on the market. AbbVie is Trikafta’s closest competitor but by a long stretch.

Abbvie’s CF combo is still in a phase 1 clinical study and would likely take years to be approved if shown to be successful. The outlook looks good for VRTX given its limited competition in the CF market and the long process of drug approval regulations that competitors face.

Published 11/16/20

MATERIALS

Sector Analysis

How has materials come out of previous recessions and expansions? To observe, you look at historical valuations for the materials sector, and observe where the changes were? Which metrics are most important to study when looking at how they recovered or contracted?

The materials sector has historically come out of recessions quicker than the overall market has recovered. This is because companies in basic materials are essential in the production of many essential goods. Recovery tends to happen as businesses open, as companies in basic materials generally rely on the demand of other companies to process their goods into finished products to sell to consumers. The demand for basic materials tends to rise when consumers are demanding more products and outlook for the economy is strong. This leads consumers to want to buy more goods, which would then increase the demand for basic materials. Further, when outlook is strong, companies are more likely to take on projects that require basic materials. Certain areas of the materials sector, such as gold and silver mining companies, tend to come out of recessions earlier and stronger than the overall market in times of uncertainty, because precious metals are seen as a safe alternative to equities.

This helps keep valuations high and increases projected revenues.

Materials is also heavily dependent on interest rates, as companies in this sector tend to borrow heavily to finance large capital projects. Thus, a key indicator of recovery should be: as interest rates decline, capital expenditures increase for the materials sector.

If this is not happening, it would indicate that a declining interest rate is not enough to entice basic materials companies to start investing again. An important metric for the basic materials industry is current ratio, as basic materials companies have to balance funding future projects, paying back its creditors and maintaining capital equipment. A decreasing current ratio for the industry is indicative of a cash strap, while an increasing current ratio suggests that companies are able to pay back their immediate debtors and are also increasing their asset holdings.

The materials sector is also closely tied to the valuation of the US

dollar. As prospects for the overall global economic growth improve, the US dollar trends lower, giving the materials sector a boost in coming out of this recession.

How has materials performed against broader indices? How will recovery of the overall economy affect the sector?

The materials sector experienced many supply chain disruptions during the pandemic. Most companies experienced dips in share value. Companies that operate in niches were able to recover slightly faster than its competitors because of bargaining power over suppliers. These niches are most often necessity products (paper towels, toilet paper, etc). As suppliers recover from the pandemic, materials companies are able to resume normal operations and begin to increase their share values.

The pandemic has shown what factors cause the sector valuation to expand and contract. Expansion depends on the necessity of the product when expendable income for most families decreases. Materials companies producing necessity products experienced an increase in share value. Contraction relies on the stability of suppliers and buyers. Companies that produce necessities have buyers that are constant and stable even through the pandemic.

The Dow Jones Industrial Average mirrors the increasing share value of the material companies that serve as necessities stock this year to date. The Dow Jones Industrial Average is a general indicator of how the market and economy are doing. Materials companies that produce necessity products are matching the increasing trend of the economy. As the economy continues to recover, people’s income rises, and supply chain disruptions get resolved, material companies will once again increase in value.

Published 11/16/2020

International Paper Prepared by: Keertana Talla, 2023

Ratings: BUY: one-year target price: $54.04 $43.75 (as of market close November 2, 2020) Important Updates 2020:

On October 13th, International Paper declared a regular and increased quarterly dividend of $1.00 per share.

International Paper launched sustainable and innovative corrugated dividers to support Covid-19 de-escalation in Europe, Middle East, and Africa. This investment in bolstering sustainability garnered positive media attention.

International Paper completed its previously confidential sale of its Brazilian corrugated packaging business. This sale consisted of three containerboard mills and four box plants.

International Paper is set to invest about $175 million in a South Carolina Mill.

Investment Thesis

International Paper is an international leader in producing fiber-based packaging, pulp, and paper. The company strives to enhance consumer’s lives by transforming renewable sources into day-to-day products.

International Paper competes against Smurfit Kappa Group, WestRock Company, Weyerhaeuser Company, Domtar Corporation, and Mondi, all of which have significant market share in the paper and pulp producing industry. International Paper is differentiated from its competitor’s products primarily made from renewed materials. While this may increase International Paper costs, the expenses decrease because of increased bargaining power with suppliers. Few companies are sourcing from recovered materials sites, waste sites, and other renewable sources. So, when companies like International Paper regularly place large orders, they gain bargaining power over time, whereas other companies might face shortages.

I believe International Paper is undervalued and is expected to increase from $43.75 to $54.04 within the next year. A comparable company analysis demonstrated the need to use the 75th percentile EV/Revenue multiple. The EV/Revenue measures a company’s enterprise value over its revenue. It helps identify the value of a stock compared to a company’s enterprise value to its revenue. The EV/Revenue model confirms suspicions that to investors that the stock is not priced reasonably. International Paper has an EV/Revenue of 0.9x, whereas the competitors have a median of 1.3x. It shows us that International Paper shares are currently undervalued, and it is an excellent time to buy stocks. Furthermore, with the latest investments International Paper has made in mills, decreasing their carbon footprint will increase the company’s value.

Compared to its competitors, International Paper’s equity and enterprise value are greater than the median. International Paper’s equity value and enterprise values are $18,239.85 and $20,069.84, respectively. International Paper’s competitors’ median equity and enterprise values are $10,261.60 and $17,242.40, respectively. A higher enterprise value here indicates a higher bargain value. Currently, International Paper has a debt/equity ratio of 1.5. While this number is typically considered high, with the vast number of investments International Paper is currently making, it is appropriate. This ratio is expected to decrease as the investments bring in more revenue and equity.

International Paper’s reliance on clean and renewable sources gives them an advantage over their competition. As our social climate changes and people increasingly value sustainability, they will continue to turn to International Paper. The dialogue around corporate social responsibility has become a more prevalent factor for stakeholders. When International Paper sold their Brazil arm, it sparked some backlash.

However, International Plans to expand into more regions where they can have a more significant environmental impact. Secondly, International Paper’s made a substantial investment in a South Carolina Mill to increase economic efficiency. This investment was reflected in the total revenues as it decreased from $23,306 to $22,376 (in millions of dollars). However, future projections show that this number should rise over the next few years as the investment brings International Paper more revenue and decreases their carbon footprint further. Customers want to purchase products from companies that produce sustainably, and suppliers are more likely to gravitate towards environmentally responsible producers. International Paper is poised for growth as it continues to grow and innovate, capitalizing on the pandemic to provide customers with stability through staple products every family needs.

International Paper’s share pricing has been increasing steadily since April 2020 with small fluctuations. The share price took a dip in April after International Paper made hefty investments that caused public concern. The volume of shares spiked in midMarch, indicating confidence in International Paper.

Risk:

Some of International Paper’s competitors produce products at a lower cost. With the financial uncertainty surrounding Covid-19, consumers and wholesalers might go to cheaper alternatives.

Published 11/16/2020

Newmont Corporation Prepared by: Joseph Rubinstein, 2022

Ratings: BUY, One-year target price: $77.26 $62.84 (As of close 10/30/2020) Important Updates 2020:

Newmont announced its Q3 earnings on 11/3/2020, posting record EBITDA and FCF figures, helping the company nearly double its cash reserves over the trailing twelve months.

Newmont has increased dividend payments twice already this year after raising dividend payments by 60% in Q3.

The elevated price of gold has offset decreased demand for NEM’s products.

Investment Thesis

The Newmont Corporation (NEM) is the largest gold mining company in the United States, and the only gold producer listed on the S&P 500.

YTD, the company is trading 45% higher at $62.84, as of 10/30/2020, compared to the S&P 500 which has seen an increase of 2% YTD. When compared to VanEck Vectors Gold Miners ETF (GDX), which has seen YTD returns of 32%, it is evident that Newmont has been outpacing the broader market as well as its industry throughout the coronavirus pandemic.

What has made Newmont Corporation so successful during the COVID-19 pandemic as compared to its competitors? For one, NEM’s careful planning. Newmont has had contingency plans ready for countless situations long before this virus began to spread, and has been steadily adapting as this pandemic continues. While the company was forced to close 5 sites in the first quarter of 2020, by working with local authorities they were able to reopen all 5 facilities during the second quarter. Since reopening, 3 of the plants have become fully operational, 1 is still operating at reduced levels and 1 is back to near normal levels of operation. Since battling against the near global shutdown of the economy in March, Newmont has almost fully recovered to normal operation levels, and production over the next few quarters will continue to rise, fueling further growth for NEM.

In the 3rd quarter of 2020, Newmont reported a record third quarter adjusted EBITDA of $1.7 billion and a record free cash flow of $1.3 billion. Compared to Newmont’s cash position at the end of 2019, the company held 160% more cash at the end of the 3rd quarter, at 4.8 billion dollars. These numbers are extremely impressive given the large decline in global demand for gold year over year, down 19%. Further, Newmont raised its dividend payment by 60% for the 3rd quarter and is optimistic that the 4th quarter will be even

better.

Key drivers of growth for Newmont are projects in the company’s pipeline expected to have a significant impact on gold production as well as a sustained above average price of gold. Newmont is currently expanding one of its Australian plants, Tanami, which is expected to increase gold production by 150,000-200,000 ounces per year, a 2-4% increase over current operation levels, beginning in 2023. This project will also extend the life of the plant until 2040.

Further, the sustained high price of gold allowed Newmont to deliver such high revenues despite a drop in gold demand universally. As the pandemic continues to rage and its effects are felt over the next few years, demand for gold from those other than investors will recover, while demand for gold from investors will begin to subside as the economy recovers and reopens.

These two opposing forces will work against each other, however I believe that the decrease in the demand for gold by investors will come after demand for gold from the worldwide population increases, which will lead to steady revenue growth by NEM over the next few years.After performing a comparative company analysis and taking the drivers for growth into consideration, it was determined that NEM is not trading at levels reflective of performance. One of the most important ratios for mining companies is return on equity. When comparing NEM to 5 of its primary competitors, NEM has a return on equity that is 2.5% higher overall, but is relatively about 40% higher when compared against its competitors. Even while being the largest producer of gold in the United States, NEM has still proven that it can successfully balance its budget to deliver returns to investors that are higher than its competitors’. Another important ratio, operating margin, also demonstrates that NEM is outpacing its competitors. NEM has, on average, a 3% higher operating margin than its competitors. Given the range of comparable ratios as well as the qualitative analysis, I believe that NEM should be trading at $77.26.

Newmont has positioned itself as the leading gold mining company in the United States going into 2021 and, with the company’s large cash reserves, a sustained increase in the price of gold and important projects in the company’s pipeline, Newmont is positioned for significant growth over the next year.

NEM vs. GDX Performance in 2020

Published 11/16/2020

Royal Gold Prepared by: Aidan Dixon, 2023

Ratings: Buy, One-year target price of $132.74 $121.55(as of close November 2, 2020) Important Updates 2020:

On September 30, Royal Gold announced the sale of its ownership interest in the Peak Gold project for $49.2 million, as well as the sale of its common share position in Contango Ore for $12.1 million.

Royal Gold also received a 28% increase in royalties on net smelter returns, as well as a 1% increase in net smelter return royalties in certain State of Alaska mining claims.

Royal Gold, on October 1, split the Wassa and Prestea stream agreements into two separate contracts, one with Golden Star resources for the Wassa mine, and one with Future Global Resources for the Prestea mine.

Average realized prices for precious metals rose in the first quarter of Royal Gold’s 2021 fiscal year. Average realized prices for gold, silver, and copper rose by 12.5%, 45.7%, and 24.1% respectively.

Investment Thesis

Royal Gold Inc. is the third largest precious metal streaming company in the world, behind its main competitors Franco-Nevada and Wheaton Precious Medals. Other notable competitors in the precious metals streaming market include Osisko Mining and Sandstorm Gold. Royal Gold mainly engages in the acquisition and management of precious metal streams and royalties on mines and properties located around the world. A precious metal stream is an agreement between a company like Royal Gold and a mining company to purchase a predetermined quantity of precious metals at a predetermined price. This allows mining companies to finance their operations without giving up equity. Royal Gold, on the other hand, is able to acquire large quantities of precious metals without dealing with the operations of the actual mine. This allows Royal Gold to be invested in many operations at once, becoming more diverse and lowering risk.

Diversity plays an important role in Royal Gold’s business model and plays to its advantage over its competitors. In the last twelve years, Royal Gold has internationalized and diversified significantly.

Revenue from within the United States has dropped from 79% of overall revenue to 40%, and in Canada from 27% to just 4%. At the same time, percent of total revenue in the continent of Africa has almost tripled to 30%. It has also seen increases in Central

America and South America. Companies like Franco-Nevada and Wheaton precious metals, on the other hand, have the majority of their holdings and revenue in the United States and Canada. The level of diversity in precious metal streaming is crucial given that the business model is based on mines delivering on the amount of gold and silver that was estimated. When production falls short, the metal streaming companies are the ones that take direct losses on the deal. The importance of diversity is amplified in today’s world given the pandemic and political instability in many areas. One place can easily be affected far worse than another at any given time, so Royal Gold’s diversity gives them a large advantage in stability.

While Royal Gold seems to have a competitive advantage over its main competitors, it has also been doing increasingly well on a more absolute scale. The company has increased net income and revenue four out of the last five years, and cash flow for five out of the last five years. They increased revenue by 17.8% from the 2019 to the 2020 fiscal year alone. This is largely due to multiple mining projects they’ve been invested in for multiple years starting to produce at high levels. Revenue is only likely to increase as more mining projects in Africa become operational. The increase in the prices of precious metals also strongly pushes revenue and cash flow upwards.

Royal Gold(Blue) and Franco-Nevada(Orange) have recovered much quicker than the S&P 500(Grey) Risk:

Royal Gold has positioned itself in a very favorable position for the coming years. As precious metal prices are stable but likely to rise, the odds of a drastic price decrease are extremely slim. The sources of gold and silver under Royal Gold’s management are very diverse and resilient. Their revenue relies heavily on the price of gold, which stays strong in uncertain times as people look for more stable places to put their money. This causes the sector overall to bounce back easily in time of recession and stay strong moving Published 11/16/2020 forward.

ENERGY

Sector Analysis

With our team’s individual analysis of several companies within the energy sector, as well as our analysis of the sector as a whole, we expect for the energy sector to recover and reverse previous downward trends. There are several reasons why we have an overall bullish outlook on the sector as a whole. The two main reasons as to why we are so bullish on the energy sector is because of low elasticity of energy demand and we see the pandemic as pivoting point for many energy companies.

Low Elasticity of Demand

The International Energy Association (IEA) predicts that the Coronavirus Pandemic has decreased the demand of all sources energy by 5% as people are traveling less and less items are being manufactured.

Coal and Crude Oil have seen 7% and 8% decreases in demand respectively. Natural Gas demand is estimated to be down by only 2% this year however and since 2011, natural gas has replaced more than 100 coal-fired power plants. While many sectors have seen overall decreased demand due to the pandemic, the demand decrease has not been as severe as other sectors.

News of a potential vaccine and the coming winter months have us with a bullish outlook on the overall energy industry.

Cooling Outlook on Coal

Coal is seeming to be phased out as a form of energy even under an accommodating Trump administration. As the transition to the Biden Administration begins, we expected increased environmental regulations to expedite the removal of coal from the domestic energy production sphere. Many powerplants that were previously powered by coal have transitioned to being powered by natural gas. We are bearish on resource companies like CONSOL Energy (CEIX).

Natural Gas as the Last Fossil Fuel

Natural Gas has seen the smallest decrease in demand within the energy sector YTD. We maintain a bullish outlook on natural gas companies despite an expected push in an environmental regulations against natural gas. While crude oil and coal are the main targets of this legislation, Bloomberg predicts that natural gas will be the transition fuel, as developed societies transition from fossil fuels to renewable sources of energy.

While the greatest limiting factors for natural gas companies is the price of natural gas and current storage levels, we have confidence that natural gas companies will perform the strongest in the coming year. The price of natural gas is expected to dip below $3.00/BTU if this coming winter is particularly mild due to decreased demand. Current natural gas storage

levels are also near a 5-year high, which also contributes to weakening the price of natural gas.

We are bullish on natural gas companies such as EQT (EQT), Cabot Oil and Gas (COG). We also reccomend investment in the SPDR S&P Oil & Gas Exploration ETF (XOP). Gas-focused Exploration and Production sepcfic firms are currently up 22% this year, as these companies have focused on expanding their operations during the pandemic. Due to decreased demand we are more bearish on upstream energy firms.

The Odd Place of Oil in Today’s Market

Due to decreased demand of crude oil due to the pandemic, the price of oil began to decline in mid-January 2020 and went negative on April 20th, 2020. The price oil went negative as a result of decreased demand and full storage facilities. The price of oil has been recovering since; however, the price oil is down nearly 35% as compared to last year.

The decrease in demand for crude oil is a result of decreased travel due to the Coronavirus pandemic.

Until developed society can return to normal travel and consumption levels, the price of crude oil will not recover which will be damaging for Oil companies.

Oil companies that can work on ESG initiatives and shifting their resources from fossil fuels to renewable energy will be firms that are successful in the long term. We are currently holding many oil stocks due to their uncertain future.

Right Time for Renewables

Due to decreased demand for many sources of energy, companies focused on renewable forms of energy can find ways to take a greater hold of the market. With the phasing out of coal as a source of energy, renewable forms of energy could replace coal power plants. Unfortunatelty, it does not seem if these renewable forms of energy are ready to provide a significant percentage of power to the world’s grid as of right now. We are bullish on these companies; however, these comapneis are better suited for long term growth Published 11/16/2020

Enphase Energy

however Enphase’s growth has been unmatched by most.

Enphase has many competitive advantages.

Prepared by: First is its constantly expanding global partnerships.

Khushi Jain, 2024 In the third quarter, it announced 9 new partnerships Ratings: HOLD, One-year target price: $120.34 and projects.

Notably, it has continued to strengthen $103.83 (as of market close November 2, 2020

its presence in Europe, Australia, and East Asia. Doing Company Update: so has allowed Enphase to expand its customer base

For Q3 2020, ENPH revenues up 42% from in ways its competitors have not yet done and spread $125.5 million to $178.5 million and it reported a its economic exposure across the global. This is key record non-GAAP gross margin of 41%. The industry because many places in the world, such as Europe, average for renewable energy as of June 20, 2020 is are ahead of the U.S. in readiness to adopt renewable 21.03%. The high gross margins and low cost structure energy.

Additionally, many partners, such as Natura positions Enphase for high growth. Most solar producLiving, agree that a differentiating factor of Enphase is ers have high fixed costs which means that margins the ease of implementation of its technology.

Finally, fluctuate based on utilization rates.

Enphase has a cheaper operating structure compared

Operating income up 379% from $10.8 million to its peers which means that its margins are not as reto $51.8 million. liant on utilizations rates. Thus, its high gross margins Investment Thesis: definitely help insulate its earnings during slowdowns

Enphase Energy (ENPH) is the largest solar and give it an earnings leverage during periods of ecopower micro-inverter producer in the U.S. A micro-in- nomic growth. For example, Enphase’s revenues grew verter is beneficial compared to other types of invertby 41.3% over the last year but its operating costs ers because micro-inverters are individually installed were kept low at 21.8%. Thus its operating income into every solar panel such that each one operates was up, even during a pandemic. independently of the rest of the grid. Additionally,

With the increasing interest in renewable enerEnphase Energy is the first solar company in the world gy, and the cost effectiveness of solar energy specifito begin selling a grid-agnostic micro-inverter based cally, Enphase Energy is definitely an attractive comstorage system. This breakthrough means solar power pany for investors in the long term. However, the high can now be harnessed even when the grid is down. stock price, and uncertainty caused by the election and

As of June 30th, Enphase had a P/E ratio of pandemic make Enphase a hold for now. around 75x which is usually indicative of a compaRisk: ny being overvalued. However, I believe that its P/E

Natural Disasters: As the risk of extreme natis not concerning considering its consistent growth ural disasters increases, Enphase should assume some globally and strong financials. Enphase has almost $1 risk in this category. Some examples where natural billion in assets compared to around $627 million in disasters could pose a threat include their headquarliabilities. Due to these factors, I think that Enphase ters in Fremont California which is located near major has the potential to meet the expectations created by earthquake fault lines. Additionally, their facilities in such a high P/E. Petaluma, California are near the site of recent cata Enphase should expect to see an increase in strophic wildfires. stock price from ~$103 to ~120 within the next year.

Trade Relations: Enphase relies heavily on To calculate this number, I used Comps Analysis and third-party manufacturing facilities in China and Mexused the maximum multiple metric for the P/E ratio. ico for final testing of their products.

Since Enphase has outperformed most of its compet Covid-19: The pandemic could decrease the itors on returns this year, and is well on its way to hit demand for solar energy and has generally limited the the $120 benchmark, I thought it would be appropriate movement of people, goods, and services. to use this multiple. The P/E ratio shows the compaEnphase vs. Competitors Returns ny’s current share price in relation to its earnings per share. The highest multiple would indicate a very high growth rate of Enphase’s share price in relation to its earnings per share. It is possible that Enphase will soon beat this price target as its beta is generally higher than 1, indicating greater volatility than the market overall. Possible factors that could cause the price to soar are the presidential election, Covid-19 vaccines, and solar energy breakthroughs.

Enphase has seen tremendous growth in its stock YTD. In March, it fell to around $24 but has consistently grown and is now up 333% at $104. This performance is similar to other renewables companies, Source: Yahoo Finance Published 11/16/2020

NextEra Energy, Inc. Prepared by: Ben Nadon-Enriquez, 2022

Ratings: Price Target: $75.13 Important Updates 2020:

NextEra Energy (NEE) is an American clean energy company based in Juno Beach, Florida. NextEra is one of the largest energy companies in the world by market cap and has a lot of growth potential.

The company also had revenues of over $15 billion in 2009. NextEra owns electric utilities Gulf Power and Florida Power & Light and consistently sees high demand in electricity and other utility sales, with only a single-digit percentage decline in utility sales during the COVID-19 Pandemic. NextEra’s growth focuses on electricity generation and sells its electricity generation to businesses around the country while investing heavily in 14.4 gigawatts of electricity generation projects and other renewable-energy projects.

Investment Thesis

NextEra has proven to be a successful renewable-energy company through its regulated utility operations segment. Its regulated utility segment accounted for 70 percent of its revenue in 2019 and its utility operations segment accounted for 30 percent of its revenue and 40 percent of its adjusted earnings in 2019.

NextEra’s utility operations in a state with a rapidly growing pop-

Source: Yahoo Finance

ulation allows for potential in more revenue growth in years ahead. With these trends, it is likely that an upward trend will continue for NextEra in at least the next few years. Further, policies and programs designed to accelerate the transition to clean energy will bolster NextEra’s performance.

Risk:

Some of NextEra Energy’s biggest risks include business regulations, reductions of government subsidies relating to supporting or incentivizing renewable energy, and increased operating costs.

Another important risk to consider is the liability of NextEra’s nuclear units and its associated hazards.

One significant opportunity for NextEra Energy is its acquisition of South Carolina-based water services company Santee Cooper. NextEra’s acquisition of Santee Cooper’s assets may improve NextEra Energy’s future financial performance. Additionally, Nextera’s focus on clean energy will allow it to remain as one of the strongest renewable energy stocks.

Nextera Energy Growth Analysis

Nextera Energy vs. S&P 500 Percentage Growth

Published 11/16/2020

Exxon Mobil Corp.

Prepared by: Elijah Dubinsky, 2022

Rating: SELL Price Target: $22.48 P/E LTM: 42.4x Industry Mean P/E (source Bloomberg): 26.48x Company Update:

Exxon Mobil is one of the world’s leading oil and gas majors. Its revenues come from three main areas, upstream oil and gas, downstream oil and gas, and petrochemicals. Upstream including exploration and drilling, downstream including refinement and sale, and chemical including plastics and other petrochemicals. Of these, downstream oil and gas is by far the largest, comprising 76% of Exxon’s Q2 revenues in 2020, followed by chemical and finally upstream. The economic crisis in the wake of the Coronavirus pandemic has led to a sharp reduction in revenue across the oil industry, Exxon included.

Investment Thesis:

Exxon Mobil’s dominance in the downstream oil and gas industry has led to their growth into one of the largest integrated oil and gas companies in the world over the last several decades. Over the last few years, however, Exxon has struggled, with its market capitalization falling below competitors in both the renewables industry and the traditional oil and gas industry. With 3 straight quarters of net losses and plans to cut 15% of its workforce and reduce CapEx spending by potentially more than $5 billion in 2021, it is likely that this downward trend will continue for

Exxon. The IEA is also predicting the slowdown in oil demand to continue into next year and political pressures on oil and gas companies could push Exxon into even further decline. Additionally, recent leaked information about management’s insistence on intentionally increasing emissions by 17% by 2025 could cause big problems for the company, depending on the political environment in the US, in 2021 and beyond. With large financial services companies, such as BlackRock, being pulled more and more toward the direction of ESG friendly investments and divestment from carbon intensive companies, it may become harder and harder for Exxon to find friends in both the private financial world and in governments. While a short term resurgence is possible, depending on the health of the economy out of the pandemic, should these trends accelerate, demand for Exxon shares is likely to take a hit over the next 5 years and consequently so will its price.

Risks:

Among the biggest risks facing Exxon are the political climate and pushes for carbon neutrality, competition from other oil and gas companies as well as competition from renewable/alternative energy companies, fluctuations in oil demand, and oil supply decisions of international competitors.

Exxon’s biggest opportunity probably lies in natural gas especially in the Permian basin which has remained cheap enough to compete with renewables, provided regulations surrounding natural gas remain favorable. The global politics of oil and gas is also a major risk as Exxon may be affected by future conflicts within the OPEC cartel, such as those that caused the 2014 oil crash and the negative prices of oil futures in April of this past year.

Published 11/16/2020

TELECOMMUNICATION

Sector Analysis

The most unprecedented year of the 21st century. A pandemic, the shutdown of the global economy, the deepest recession since the 1930s, a global equity market collapse and now, record highs for the U.S. equity market; 2020 continues to surprise. Meanwhile, technology stock valuations are elevated. Our team at Cornell Equity Research believes the telecommunications sector will continue to trend positively as we enter 2021. For the company’s that are world leaders in providing technology, connectivity and entertainment products like Verizon, T-Mobile, AT&T, and Charter Communications, cash flow remains promising while churn rates keep low. In 2018 and 2019, these companies saw generous growth in innovation due to 5G and successful mergers. Before the pandemic, US telecoms were preparing for the launch of 5G networks as a boost for revenue. Gartner predicts that worldwide 5G network infrastructure revenues will touch $4.2 billion in 2020, recording year-over-year growth of 89 percent.Telecoms saw low expectations which was a burden for its stock prices. Now that demand for connectivity from video conferencing and data uploads to in-home entertainment is robust, US telcos are increasingly using unlimited-data plans to attract and retain customers, adding subscribers by the millions.

Furthermore, AT&T has served as an example of both the stability and growth opportunity in the telecommunications industry. Their 3rd Quarter Earnings underscored this, maintaining a $2.8 Billion profit powered by 645,000 new postpaid customers in their wireless division. Additionally, 8.6 million customers in total activated HBO Max subscriptions, generating stable, and consistent cash flow, empowering the company to revise its 2020 Free Cash Flow estimates up to $26 billion, allowing it to continue to pay out its strong dividend, demonstrating the state of the industry at this time. Both Verizon and AT&T posted net gains of wireless and fiber broadband users.

Verizon lifted its earnings per share growth range from between -2 and 2 percent to 0 to 2 percent. The fact that connectivity is key is reflecting in Verizon Communications’s profitability.

New and old customers are expanding their subscriptions through streaming services bundles; anyone can add any Verizon Fios TV plan to

their internet plan.

Currently, the communications services industry (22.97) is outperforming the S&P 500 index (18.26%). This can largely be attributed to the emerging applications of 5G, including telemedicine, retail transportation solutions, and increased IoT. Telecommunications companies have been scrambling to get a hold of wireless spectrum towers to compete for 5G coverage. The Federal Communications Commission has been auctioning off select 24-GHZ and 28-GHz spectrums which have generated around $700 billion in bids, and overall, telecommunications have spent around $25 billion to expand their 5G network.

Overall, there are a plethora of tailwinds for the Telecommunications Industry at this current time. With its ability to thrive in both a growing and recessionary economy, the increased need for connectivity due to COVID-19, the advancement of 5G Technology, and its ability to cross sell with other products such as entertainment, Telecommunications is in pole position to continue to recover and grow at a faster rate than other sectors. Firstly, through the sale of prepaid phone services, companies are hedged from risk in contractionary periods, while postpaid plans afford the opportunity of growth with the overall economy and consumer incomes. Additionally, COVID-19 restrictions have led to increased demand for methods of communication other than in-person. Telecommunications companies can also capitalize on 5G technology and the increased data usage it will generate through IoT and high-bandwidth devices. With recent partnerships and mergers in the space, specifically with entertainment companies, such as AT&T and WarnerMedia, opportunities to bundle services in order to boost profit margins and reduce prices are more possible, leading to further growth for the sector. All in all, this synthesis of factors demonstrates the strength of this sector and what is to come as valuations continue to rise to their true potential.

Communication Sector Performance vrs. S&P 500

Source: Yahoo Finance

Published 11/16/2020

AT&T Telecommunications (T) Prepared by: John Hanna, 2024

Stock Price at Market Close, Nov 2nd: $27.42 Rating: BUY Target Price: $33 Company Update:

Reported Q3 earnings demonstrated a profit of $2.8 billion, down 24% YoY. This translates to an EPS of 39 cents a share, down from 50 cents a share.

The bulk of this came through increased pandemic related costs, which were 21 cents per share. Revenue declined by 5% due primarily to the WarnerMedia division’s declined sales because of theatre closings.

The company expects to maintain its strong dividend, with a consistent payout ratio in the high 50 percent range, with a yield that is currently around 7 percent.

Company currently in process of making cost reductions in WarnerMedia division, with increasing layoffs and redundancy elimination.

AT&T is currently considering the sale of certain divisions to generate cash flow and eliminate cost centers, including a potential sale of DIRECTV to a private equity firm and the Xandr advertising division.

Investment Thesis:

AT&T (T) is situated at the intersection of telecommunications and entertainment, providing the company withunique challenges and opportunities. I believe this equity is currently undervalued for a variety of reasons. While there is increased competition from the newly merged T-Mobile Sprint, integration of varying networks is challenging, costly, and slow, especially with the advent of 5G, necessitates increased stability. AT&T currently has a debt load of $180 billion and $9.7 billion in cash and cash equivalents

This debt is primarily from the $85 billion acquisition of WarnerMedia, and has been reduced through the sale of acquired assets as well as refinancing at current low interest rates. AT&T’s main divisions are their wireless and mobility divisions under the original company, as well as their entertainment divisions under WarnerMedia. Using a comparable company analysis, comparing AT&T to peers in entertainment such as Comcast, and those in wireless such as Verizon and T-Mobile, I estimate based on EV/ EBITDA, EV/Sales, and P/E ratios and taking the median value that AT&T is undervalued with the model pricing it at $33 per share.

There are a variety of tailwinds currently existing to provide future growth for AT&T to propel it to this level. Firstly, as the recent merger with WarnerMedia continues to generate significant synergies, costs will decline as the company shrinks the size of WarnerMedia’s overhead and labor costs. Management currently projects 20% cost reductions in WarnerMedia in the upcoming months. In fact, AT&T has already cut $6 billion so far across divisions so far in

order to shore up their balance sheet. AT&T’s growth prospects however do not only reside in their cost-cutting but also in future revenue growth. The company is pursuing market share growth through bundling of entertainment content packages from their HBO and WarnerMedia divisions in order to gain a low-cost competitive advantage over peers who are expensively teaming up with companies like Netflix and Apple to provide the same service. This in turn helps drive increased phone sales and turnover, one of the highest profit margin businesses for AT&T and one which is expected to rapidly grow with the advent of 5G and the anticipated increase in new phone sales as enabled phones such as the iPhone 12 grow in demand.

Furthermore, the synthesis of all these trends points to strong sustained Free Cash Flow, with the company projecting that to come in at $26 billion this year, above originally anticipated. With recent increased volatility, sustained, stable, and diversified cash flow is imperative and AT&T possessed this from a variety of sources. As HBO becomes a larger proportion of WarnerMedia revenue, powered by its 60 million and growing subscribers, it will generate stable monthly cash flow from direct to consumer content distribution, without theatre companies eating some of the profit margin. Furthermore, AT&T’s core wireless business is inherently stable, generating monthly and annual revenue from a variety of retail and business customers who rely on internet connectivity to survive.

This revenue is also supported by the stability of their mobility division which has had substantial growth in both postpaid and prepaid plans this quarter. Prepaid plans tend to provide a hedge during recessions as they are more affordable for retail consumers. This synthesis of stability and hedging contributed to AT&T’s beta of 0.6, demonstrating that it is not strongly correlated with market results. Furthermore, their stable cash flow and dividend payout ratio of roughly 59% demonstrates their commitment to their dividend which has historically yielded roughly 6% annually.

This combined with the strong tailwinds discussed earlier provide exactly why AT&T is a strong buy for any investor seeking value in today’s market.

Risks and Mitigation:

A potential secular trend away from theatres and towards direct to consumer post-COVID could jeopardize WarnerMedia. With time however, HBO Max should see competitive advantage of exclusive access to Warner content lead to increased streaming market share. However, it is imperative that AT&T improve relations with streaming viewing serivers like Amazon and Roku, so Max platform can be avaliable on their devices

AT&T’s 5G network is geographically and technologically behind competitors T-Mobile and Verizon. This however is a very early point in the process and AT&T has the necessary capital and infrastructure to quickly recover Published 11/16/2020

Charter Communications (CHTR) Prepared by:

Charter Communications Stock Performance vs. Competitors Stock Price at Market Close, Nov 2nd: $644.49 Rating: BUY Target Price: $748.77 Company Update:

Charter Communications Inc. (CHTR) is the second largest cable provider in the United States. Just behind Comcast, Charter Communications provides cable internet, phone, and video services, which seems like a rather static, unexciting company. However, recent developments in the Source: Yahoo Finance American media industry challenge this notion. With market and remain relevant in the modern media the rising trends such as “cord-cutting”—where users environment. Lastly, as mobile technology continues abandon their cable providers and rely on streaming to cement itself in everyday life, Charter created a new services instead—and the advent of 5G, this has made partnership with Verizon in order to further penetrate investors question if Charter Communications will the mobile technology market with the introduction of be able to stay relevant in the modern media indusits service Spectrum Mobile in 2018. Via an MVNO— try. Among analysis, I believe that with its extensive which stands for “mobile virtual network operator”— resources and numerous partnerships, Charter ComCharter leases Verizon’s extensive wireless infrastrucmunications will remain a competitive company in ture to provide mobile phone service to customers of the media industry for the foreseeable future, as few its own, which has led to Charter’s successful entrance companies are able to compete with Charter Commuto the mobile communications market. All of these nications due to its massive scale of operations. factors demonstrate how Charter’s strategic decisions Investment Thesis: in recent times have allowed the company to remain

First considering a qualitative analysis of this competitive in the American media environment in the company, Charter Communications has been a promi- face of sudden and significant changes in both technonent figure in the media industry for quite some time. logical innovation and consumer behavior, affirming Providing consumers with cable services since the its position as a dominant force in the telecommunica1980s, Charter Communications has risen to become tions sector. one of America’s most dominant cable companies

Now moving onto a quantitative analysis, there where it serves over 25 million consumers. Charter’s are several different factors to consider. First regarding most significant growth-driver in recent years has financial ratios, Charter has current and quick ratios been its acquisitions of Time Warner Cable and Bright of 0.2 and 0.1 respectively, which are extremely low.

House Networks in 2016, which has brought Charter This indicates that the company does not have suffito its position as the second largest cable-provider and cient liquid assets to cover its short-term liabilities and the third largest pay TV provider in the United States. therefore there is a threat of default risk for the compaCharter’s management was adamant that cord-cutting ny in the future. However, this low liquidity is rather would not significantly impact their business, and common for the industry, with Comcast Cable havultimately rates of cord-cutting have slowed signifiing similarly low ratios, which dispels most of these cantly over the last year, proving Charter’s capability liquidity concerns. Now moving onto the financial to assess their market and respond to changes appromodeling, since Charter operates on such a large scale priately. However, to hedge the company against this in the United States, there were too few competitors potential threat, Charter has more heavily promoted its of the same size, geographic region, and operations to mobile and broadband services to insulate the comcreate a reliable comparable companies analysis, so I pany from potential revenue losses as a result of its prioritized my DCF model for the company’s valuacustomers cutting the cord in the future. tion. With my DCF model, I determined that Charter

As for 5G, Charter has partnered with SamCommunications should have a target share price of sung in the development of 5G to provide an improved $748.77, which is a 16.2% upside from its current communications experience for consumers by synershare price of $644.49. As a result, this stock should gizing Samsung’s technical prowess with Charter’s have a buy rating, due to the promising projected fuextensive presence in the cable and internet infrastruc- ture cash flows and investment catalysts as discussed ture of households across America. This strategic part- above, which have allowed Charter to reach its prominership is a mutualistic relationship that once again nent position in the telecommunications sector today. establishes Charter’s ability to react to its dynamic Published 11/16/2020

Quinn Montgomery, 2023

T-Mobile (TMUS) Prepared by: Andy Tan, 2023

Stock Price at Market Close, Nov 2nd: $112.40 Rating: BUY Target Price: $131.70 Company Update:

T-Mobile has increased 32 million customers as a result of the recent Sprint/T-Mobile merger

Softbank Group, previous parent company of Sprint, sold up to 198.3 million T-Mobile shares in June worth $21 billion at the time

T-Mobile has had 1.1 million postpaid net adds in 2020 Q2 (best in the industry)

T-Mobile recently unveiled a new TV streaming service Investment Thesis:

Since T-Mobile’s listing in the New York Stock Exchange on May 1, 2013, the stock has grown more than 630%. Since then, T-Mobile has grown to one of the largest 3 cellular networks, providing service to 98.3 million subscribers.

As of November 3rd, T-Mobile (TMUS) is trading at $112.40. I believe that this equity is undervalued and expected to increase to $131.70 within this year. I arrived at this conclusion by conducting a DCF analysis with a 4% growth, 10% operating margin, and a WACC of 3.19% across 5 years. I used these assumptions based off of historical data and an optimistic view given T-Mobile’s performance history.

My buy recommendation reflects a belief that T-Mobile will continue to perform well, given the the rising popularity of 5G and the synergies between the recent merger.

5G

5G is the 5th generation mobile network that is designed to be more reliable, have ultra-low latency, higher performance, and improved efficiency. It offers improved mobile broadband, more critical communiT-Mobile Stock Price Performance as Compared to Competitors

Source: Yahoo Finance

cation, and connected internet of things. Most people have been recently introduced to the concept of 5G through Apple’s recent unveiling of the iPhone 12, the first iPhone to offer 5G.

T-Mobile currently leads as the top 5G network that covers 250 million people, more than AT&T and Verizon combined. Within the next 6 years, T-Mobile expects to increase their capacity 14x to cover 99% of Americans with 5G. Overview

In 2020, T-Mobile saw total assets increase from $86.9 billion to $187.2 billion and total liabilities increase from $12.5 billion to $23.2 billion, reflecting the recent merger between T-Mobile and Sprint, the 3rd and 4th largest mobile networks. T-Mobile also reported a 0.8% postpaid churn rate that shows strong customer loyalty.

On April 29, 2018, the T-Mobile/Sprint exchange ratio was proposed to be 9.75 Sprint stocks (S) to T-Mobile stock (TMUS). Upon closing, T Mobile entered an agreement with SoftBank to make an effective trade ratio of 11.31 S:TMUS. Risk Potential

T-Mobile relaunched its recently acquired cable company, Layer3, into TVision, offering an internet-based TV service to T-Mobile customers for an additional price. In 2021, they plan to open this service to the general public. T-Mobile’s TVision is entering the add-on TV service later than its competitors, namely AT&TTV and Verizon Fios. Additionally, with the growing popularity of streaming services like Netflix and Disney+, traditional TV’s popularity is diminishing.

As a result of Coronavirus, T-Mobile decided to close 80% of their company-owned stores in compliance with social distancing; however, T-Mobile reported being able to convert a lot of its’ employees to work in a virtual retail environment.

Although the Department of Justice has approved the merger of T-Mobile and Sprint, there is increased antitrust backlash against larger companies.

The DOJ and FCC have launched several investigations into the large tech companies in 2020. This may hinder future growth through mergers and acquisitions for the telecommunications industry.

Published 11/16/2020

Verizon Communication Inc. (VZ) Prepared by: Ayesha Chowdhury, 2023

Stock Price at Market Close, Nov 2nd: $59.00 Rating: BUY Target Price: $62.08 Company Update:

Verizon net income for Q3 was $4.357B, a 16.11% decline year-over-year.

Verizon recorded low wireless contract customer churn of 69 and 63 basis points.

Verizon hasn’t laid off any of its 135,000 employees during the pandemic. Instead, the company has retrained around 20,000 workers for new careers.

Verizon continues to provide military families with its best pricing and the best experiences. Verizon’s Head of Military is persistent in this message with the company’s marketing and social impact.

In honor of Veterans Day, Verizon will present a $250,000 donation to Wounded Warrior Project.

Investment Thesis:

As of November 3rd, Verizon Communications Inc. (VZ) is trading at $57.81. I believe that this equity is undervalued and expected to increase to $62.06 within this year. I arrived at this conclusion by conducting a DCF analysis with a 4% growth, 24% operating margin, and a WACC of 8.46% across 5 years. I used these assumptions based off of historical data and an optimistic view given Verizon’s resiliency amongst the COVID-19 Pandemic.

My Buy recommendation reflects a belief that Verizon will continue to perform well. 5G Home Internet will expand to customers across 3 new major cities. The lighting-speed Internet service is in 12 markets and growing. Plus the historic expansion of 5G Wideband(1).

Technological potential like artificial intelligence, machine-learning, mobile-edge computing and 5G will bolster productivity and drive demand up which will increase the price of VZ. Bundles:

Verizon to 200 million Americans launched 5G commercially in time for Apple iPhone 12 which will be the stock’s growth driver in 2020. The Apple Bundle supports both 5G Nationwide and 5G UltraWideband. The

carrier includes subscriptions to Disney+, Hulu, and ESPN+.

Remote Learning:

Verizon expanded its distance learning initiative, signing new agreements in Texas and Massachusetts to make it easier for up to 23.6 million students to access connectivity and tools as the school year starts amid an ongoing pandemic. Adding onto the 38 million students already using the reliable and affordable Internet. Schools could also opt to purchase direct from third parties and use the Verizon 4G TLE plans for connectivity.

Fight Against Fake News:

Verizon is soon to adopt blockchain-verified communication practices which is a full transparency initiative. The blockchain technology is in partnership with Huge, MadNetwork and AdLedger. VZ is a pioneer in the Telecommunication by bringing full transparency to market—a product that can help ensure corporate accountability and trust.

Overview:

In 2020, Verizon saw total assets increase from $291.7 billion to $296.9 billion and total liabilities decrease from $44.8 billion to $36.1 billion, reflecting the annual expense reduction goal. Verizon has attained $8.3 billion of its goal of $10 billion in permanent annual expense reductions by the end of 2021.

That pushed its Q3 EBITDA margin up 100 basis points to 37.6 percent despite the pandemic. Verizon also reported a 0.82% postpaid churn rate that shows strong customer loyalty.

Verizon is America’s top telecom by annual sales. Demand for connectivity from streaming inhome entertainment to video conferences have never been more robust. Hans Vestberg is leading the company successfully though COVID-19.

Source: MacroTrends

Published 11/16/2020

CONSUMER STAPLES

Sector Analysis

Industry Outlook

The Consumer Staples Sector has historically outperformed other sectors during recessions and times of economic downturn. The consumer staples industry consists of essential household products that consumers buy, typically making the industry relatively recession-proof. Due to it not being a highly cyclical industry, the consumer staples industry has either maintained its performance throughout a recession or has seen a minimal impact. This is primarily due to the low beta of the industry, which is typically between 0.65 and 0.7, and because consumers will buy consumer staples products like groceries and cleaning supplies regardless of economic conditions.

Unique compared to historical economic downturns, during the outset of the pandemic, the consumer staples industry saw a growth in revenue due to many people buying supplies in bulk in preparation for the unknown and global panic. However, as consumers recognized that companies will be able to largely maintain production and meet normal demand, consumption and buying of household goods return to normal levels. As a result, we may see a dip in growth in 3Q and 4Q of 2020 compared to 2Q 2020.

Overall, we expect that the sector will outperform other sectors during the Covid-19 pandemic.

Many companies within the industry have focused on cost management and finding ways to cut down costs while meeting increased demand. As Covid-19 cases go down domestically and worldwide, the sector is seeing a return to top-line growth; however, a second wave may be devastating to those companies that have been unable to effectively navigate through the pandemic and the business implications are unknown.

Despite the pandemic, we expect the consumer staples industry to maintain its consistent and stable growth.

Mondelez International

Mondelez International is a global snacking leader. As a market leader, it has maintained its global position as #1 or 2 in four snack categories: biscuits, chocolate, candy, and gum. In the past few years, Mondelez has leveraged its strategic acquisitions and ventures to access high-growth spaces. Furthermore, it has diverse revenue streams and a continued expansion within emerging markets. They generally sell their products to supermarket chains, wholesalers, supercenters, and mass merchandisers. They distribute their products through direct store delivery and distri

Consumer Staples Index vs. S&P500

Source: Yahoo Finance bution centers.

General Mills

General Mills is a global manufacturer and marketer of branded consumer foods such as snacks, cereal, and convenient meals. The company is also a leading supplier of food products for North American foodservice and commercial baking industries. Most recently, the company has introduced a pet food segment. The company manufactures in 13 countries and operates in over 100 countries. The company’s primary customers include grocery stores, mass merchandisers, foodservice distributors, and pet stores.

Coca-Cola Company

The Coca-Cola Company is the world’s largest nonalcoholic beverage company. As a company, they own or license more than 500 nonalcoholic beverage brands. Those brands fall into five categories: sparkling soft drinks; water, enhanced water and sports drinks; juice, dairy and plant-based beverages; tea and coffee; and energy drinks. The Coca-Cola Company sells its products in more than 200 countries. They are able to distribute its products through the world’s largest nonalcoholic beverage distribution system and its network of independent bottling partners, distributors, wholesalers, and retailers.

Costco

Costco Wholesale Corporation is a multinational corporation that operates a chain of membership-only warehouse clubs. Their business model focuses on offering members low prices on a limited selection of nationally branded and private-label products in a wide range of categories. The company buys merchandise directly from manufacturers and sell it directly to customers at its warehouses.

Published 11/16/2020

Coca-Cola (KO)

Value/ Revenue for the last twelve months. Using this multiple and information from the company’s financial Prepared by: statements, I believe the stock price should increase Gracelyn Goodridge, 2023 to at least $51.65 within the next year. However, the Ratings: BUY; Stock is undervalued stock is currently only trading at $48.06; therefore, I Current Price: $48.06 believe the stock is undervalued and that the growth Comparative Analysis Price: $51.65 opportunities described above, I have confidence that Growth Oppurtunities: Coca-Cola has the ability to bounce back after this

Earlier this year, Coca-Cola acquired and pandemic and find ways to be successful in the meanrebranded Briggo, the Austin-based company that sells time. Overall, I would recommend that investors buy coffee at automated kiosks. Briggo is now operating as stock in Coca-Cola.

Costa-Coffee BaristaBot, and aims to Coca-Cola Performance vs. Consumer Discretionary Index accelerate Coca-Cola’s project of fully autonomous, touchless coffee.

With these machines, drinks are made in just minutes and allows the user to select different creams, syrups, and sugars. The financial information regarding this deal was not disclosed.

Coca-Cola is planning to phase out nearly 200 of its underperforming brands such as Odwalla, Tab Diet Soda, and Zico Coconut Water in order to focus on higher profit offerings. Instead, the company introduced Topo Chico Hard Risk: Seltzer in their third quarter.

Decline in carbonated soft drinks: Coca-Cola

Coca-Cola and Burger King are working tois heavily positioned with products that are carbonatgether to offer “Homegating Bundle Meals,” to offer ed soft drinks. In a world, where people are moving to football fans an at-home football game experience. towards healthier options and the scrutiny of the corWith this, fans can order a $20 Ultimate Coke Homerelation between soda and obesity grows, carbonated gating Bundle or a make your own Coke Homegating soft drinks continue to decline. However, the company Bundle for delivery on the Burger King App. This is mitigating this risk by focusing efforts on their Diet offering is a great way for Coca-Cola to reach out to products such as Coke Zero Sugar and introducing all its consumers that were previously attending stadium new drinks such as their hard seltzer. events that no longer can because of the global pan Operational struggles with Coke’s bottlers: demic.

Although Coca-Cola is working hard to develop a

Coca-Cola and Amazon Web Services are more environmentally friendly bottle, Coke owns very teaming up to redesign how people get their drinks at few of its bottling operations. This means the company restaurants. The two companies are creating a way for has to rely heavily on its bottlers for proper execution, consumers to have contactless ordering of fountain which could lead to difficulties and problems. drinks by using the customers’ phone and the already

Global pandemic: Coca-Cola does best when digital fountain drink kiosks. Both companies think consumers are moving around, going to movie thethis is an important way to make the restaurant experi- aters, eating out at restaurants, and attending stadium ence in a pandemic safer and customers more comfort- events. With the pandemic, Coca-Cola is no longer able. getting as much revenue from these consumers. This Investment Thesis poses a risk, but the company is mitigating this by

From the above information, we can see that automating their fountain drink selection process and Coca-Cola has several growth opportunities. From offering bundles such as the one described above with their new coffee kiosk to their hard seltzer to creatBurger King. ing an environmentally friendly bottle, it is clear that

Increasing importance of social media: The Coke is constantly growing and innovating. While risk of possible brand degradation with the increasing every investment has its risks, Coca-Cola is the bigreliance of social media poses a threat to consumgest company in the beverage space with a market er companies in general. Coca-Cola needs to make share of 43.7% (the next closest company is Pepsi sure their marketing team is sending a politically and with a market share of 24.1%), and will not be gosocially aware message to consumers. Otherwise, the ing anywhere any time soon. Additionally, from my media can quickly turn consumers against a company. comparative analysis and using the median Enterprise Published 11/16/2020

Costco Wholesale Corporation Prepared by: Lexi Ding, 2022

Ratings: HOLD, One-year target price: $375.51 $54.42 (as of market close November 2, 2020) Investment Thesis

Costco (Nasdaq: COST) is a leading wholesale retailer currently operating 800 warehouses globally.

Costco operates on a membership-only model. At the end of the company’s fourth quarter in 2020, Costco has 58.1 million active members, up from 42.9 million a year earlier.

High-quality low-price products creating defensible moats: Costco’s consistent corporate strategy creates moats which protects Costco’s competitive position in the industry and makes it a challenge for new entrants to replicate. Costco’s main corporate strategy includes offering bulk-size high-quality products at low price and partnering with brands to cover a limited selection of products. The company’s corporate strategy also dictates that the company produces lower margins than its peers: according to fortune, an average markup at Costco is 11%, 24% at Walmart, and 35% at Home Depot. Although Costco has lower profit margin than its top competitors, the strategy of selling national brand merchandise and selected private-label products produces high sales volume and rapid inventory turnover. Costco also guarantees an optimized bottom line profit by sourcing nearly all its merchandise directly from manufacturing, significantly reducing operating expenses like freight and handling cost.

Costco’s stable and growing membership wholesaler business model: The membership-based business model provided Costco two competitive advantages. First, the membership fee that Costco charges, $60 for regular membership and $120 for premium membership, serves as a main revenue driver for the business, offsetting the low-margin nature of Costco’s products. Second, the membership-based model also helps Costco to maintain a loyal customer base.

Costco’s membership grew 2.17% in 2020 and has been consistently growing in the past years at a similar rate. Costco’s member renewal rate was 91% in the U.S. and Canada and around 88% internationally, earning the company $3.5 billion membership fee income annually, amounting to roughly 87% of the company’s total net income of $4 billion. Together with Costco’s corporate strategy of offering high-quality, low-price products, the membership model is expected to attract a growing number of new members.

Consumer demand during the health crisis: While most businesses postponing operations and struggling with maintaining their revenue inflow since the

COVID-19 outbreak, Costco has had a surge in its same store sales and saw an accelerated increase in its volume and revenue. Given the unpredictability of the COVID-19 pandemic, consumer confidence will likely continue to drive market volatility, and Costco is well positioned to be a top business in profitability for the foreseeable future.

Analysis

The target price is derived from a Discounted Cash Flow Model with a projection period of five years. The key assumption made for Costco’s annual revenue increment is based on the company’s mature business cycle and projected growth rate. Although in 2020, Costco’s revenue growth rate surged to 9.2% due to the panic-buying at the beginning of the outbreak, it is reasonable to assume that the growth rate will return to pre-pandemic level and stabilize at the mid 7% range. As Table 1 suggests, Costco has a higher CAGR than its competitors with traditional retailer models. Costco’s rapid development and increasing popularity of its e-commerce platform also led to a significantly higher valuation at 21x EV/EBITDA, ranked second after the online conglomerate Amazon.

Despite Costco has shown stable growth, defensible moats, and strong potential for its e-commerce business, the company is relatively richly valued by the market, driven by consumers’ unsettling sentiments during COVID-19. Therefore, given Costco’s defensible position, strong balance sheet, and e-commerce growth, it is recommended that investors take a hold position on Costco’s stock.

Costco vs. Consumer Staples Index

Risks:

Rising competition from Walmart’s subscription plan “Walmart +” - However, Costco’s product offering is significantly different from Walmart’s, which reduces the likelihood of Costco’s current members choosing Walmart’s subscription plan as a substitute.

Current Economic Contraction- The consumer staples sector is generally considered less volatile with a sector beta of 0.66 as it provides essential products.

Costco’s beta is 0.69. With the growth of its e-commerce platform, Costco is expected to maintain stable growth in revenue performances in the coming periods.

Published 11/16/2020

General Mills, Inc. Prepared by: Emma Braff, 2024

Ratings:BUY $61.13 (as of market close November 18, 2020) Important Updates 2020: - General Mills is one of the top players in the natural and organic space, and will continue to invest in regeneration and make commitments to sustainability efforts. They are increasingly meeting consumers’ shifting preferences to healthy and organic food options. Their net sales of $17.6 billion represent a 5% increase from the prior year, while their organic net sales for the year are up 4%.

- The diluted EPS of $3.56 increased by 23% over the full year, which speaks to the higher adjusted operating profit and lower tax expenses.

- While the company is prohibited from commenting on specific M&A, they communicated a desire to increase M&A in key categories such as pet food, ice cream, and natural/organic regions that could have accelerated growth.

Investment Thesis

The General Mills organizational model is dedicated to growth and development, as they have acquired a range of growing brands and have plans to investigate additional potential acquisitions. The acquisition of natural pet food brand Blue Buffalo is a strong sign of the company’s growth. Due to the COVID-19 pandemic, pet food is a growing category. People are committed to their pets whether the economy is up or down, and people are increasingly more willing to buy expensive food for animals.

General Mills has an edge over its competitors in a few different ways. The company won more new customers than its competitors during the first months of the pandemic. They have high brand awareness among a loyal customer base. This allows them to focus on brand extension and innovation. The company also has tremendous leverage over shelf-space. They benefit from Walmart’s growth, as many General Mills brands are sold on Walmart shelves. Furthermore, their largely established supply chain helped them to successfully handle the surge in demand during the COVID-19 pandemic, and it equips them with the resources necessary to handle unforeseen challenges in the future. Their strong market research allows the company to prepare for surges and shifts in demand overall.

As a part of the consumer staples sector, General Mills is a slow growth, relatively low risk buy. Its production does not vary based on seasonality, and its brands produce items that consumers desire regard-

less of the state of the economy. Its low beta of about 0.57 speaks to its low volatility. Its P/E ratio of 15.80 also demonstrates that the stock is undervalued given their model of growth, innovation, and sustainability.

Additionally, as markets go up, it becomes more difficult to find high dividend yields. However, General Mills has a dividend yield of 3.45% and has expressed interest in continuing to raise dividends as their profits increase.

That being said, based on General Mills’ growth model, their stock is a good long-term buy. My DCF model reveals that the implied stock price of GIS is $176.35, which when compared to the current price per share of $61.13, conveys that the stock is undervalued.

The line graph is based on a DCF model that I constructed. I accounted for a small dip in the growth rate following the end of the pandemic, as more people will likely resume eating in restaurants and working in-person.

Risk:

A major question facing investors is whether General Mills will be able to maintain the high demand that they have acquired during the COVID-19 pandemic. The company has implemented strategies that work to maintain their loyal customers, while also motivating new customers gained during the pandemic to return. The company plans to keep its new consumers through making renovations to products, improving the taste, and adding value so that consumers will be more pleased. They are improving brand-building and increasing the support behind brands to improve loyalty. This can be seen through their partnerships with celebrities like Lebron James. While the company continues to innovate, customers are repeat-purchasing products that they were introduced to during the pandemic. General Mills is also developing new methods for gaining customer loyalty. They are offering resources to new households about how to cook so that families stay encouraged to buy groceries and cook at home. They are also leveraging e-commerce as a new way of grocery shopping because there is less competition.

Published 11/16/2020

Mondelez International Prepared by: Nicholas Ono, 2024

Ratings:BUY, One-year target price: $68 $54.42 (as of market close November 2, 2020) Important Updates 2020: - Net revenues increased 4.9% to $6.7 billion in the third quarter of 2020 and increased 1.7% to $19.3 billion in the first nine months of 2020 as compared to the same periods in the prior year. In 3Q 2020, the negative impacts of COVID-19 generally lessened compared to the first half of 2020. This led to a return to normal revenue growth - Dividend growth remains strong despite the COVID-19 pandemic. However, share buybacks have been halted since Q1 2020. Analysts expect buybacks to return in late 2020.

Investment Thesis

Mondelez International (MDLZ) is one of the largest snack and food companies since it spun off from Kraft Foods Inc. in 2012. Mondelez International has a diverse portfolio of different snacks and foods which it has continued to grow through strategic acquisitions.

I believe that MDLZ is undervalued because of its return to normal revenue growth. I have come to an implied share price of $59.00 using a DCF analysis. In my analysis, I used conservative revenue growth numbers while acknowledging their expanding emerging markets segment. Mondelez International is better positioned compared to its competitors, due to its diverse revenue streams, geographically.

Mondelez International implements a three-pronged strategy that focuses on accelerating consumer-centric growth, driving operational excellence and creating a winning growth culture. Through these three priorities, Mondelez has been able to focus on marketing its most valued brands, making strategic acquisitions within new, growing snacking segments, and cut operational costs.

Furthermore, as the acquisition of Give & Go, a North American leader in fully-finished sweet baked goods and owners of the famous two-bite® brand of brownies and the Create-A-Treat® brand, was completed in April 2020, we can expect the benefits of this deal to be fully realized into late 2020 and 2021. This strategic acquisition by Mondelez allows the company to continue to develop its vast portfolio and maintain its position as a leader of snacking. Mondelez’s strategic acquisitions in recent years have been extremely successful and we expect Give & Go to do just as well. For example, U.S. refrigerated snacks category overall generated $20 billion in 2018 annual sales and represents one-third of the total U.S. snacking market.

Seeing this expansion in the market, in 2019, Mondelez completed its acquisition of Perfect Snacks, a

company that specializes in refrigerated nutrition bars.

With strong double-digit growth YoY, we expect this acquisition to allow Mondelez to become a leader in this new snack segment.

Mondelez’s main competitive advantages are its vast portfolio and its geographic breadth. Within developed markets, Mondelez has seen a return in revenue growth from Q2 2020 to Q3 2020. However, emerging markets are still seeing a drop in revenue.

This is most likely due to a slower response to the pandemic in these countries and disruptions in the distribution process. However, I expect that Mondelez will be able to focus on maintaining its growth in developed markets as well as fix any issues in its supply-chain by end of 2020. Furthermore, Mondelez has increased its advertising budget which I expect to allow for improvement to their top line. Mondelez has also focused on cost management and evaluating where it can cut costs effectively without heavily disrupting distribution and simplifying its supply chain.

In light of the pandemic, Mondelez has been able to maintain and grow its market share within the snacking industry. Compared to its competitors, Mondelez has been able to outperform leading to them being able to capitalize and gain market share. Whether or not, the company will be able to maintain this gain after the pandemic is unknown; however, if it can, this will lead to gains in the millions of dollars.

Like many other companies, Mondelez has also decided to halt its share buybacks since early 2020. This has allowed them to maintain a significant cash supply which could be vital depending on how the pandemic continues to impact the markets.

Normalized net income growth Risk:

Emerging markets have been slow to recover and there have been disruptions to the supply chain.

However, Mondelez has simplified its supply chain and distribution which may allow it to better meet demand.

Due to its diverse revenue streams, Mondelez is at risk of currency fluctuations and unfavorable currency translations can lead to a decline in sales.

Published 11/16/2020

EXECUTIVE BOARD FALL 2020 Ryan Mulloy

President rmm289@cornell.edu Ayesha Chowdhury

Executive Vice President asc265@cornell.edu Jefferson Yin

Vice President of Education jy763@cornell.edu Declan Beran

Vice President of Publishing djb384@cornell.edu Vikas Reddy

Vice President of Public Relations vkr8@cornell.edu Gracelyn Goodridge

Vice President of Membership gfg36@cornell.edu

SECTOR ANALYSTS FALL 2020 Andy Tan -Telecommunicationsaxt6@cornell.edu Anthony Lopardo -Industrialsal835@cornell.edu Declan Beran -Energydjb384@cornell.edu Edward Foote -Financialsewf26@cornell.edu Jack Vaughan -Consumer Discretionaryjcv67@cornell.edu Joseph Rubinstein -Materialsjir39@cornell.edu Nicholas Ono -Consumer Staplesnko3@cornell.edu Ryan Mulloy -Healthcarermm289@cornell.edu Steven Dong -Information Technologyqd46@cornell.edu

ASSOCIATES FALL 2020 Aansh Hemwani aah258@cornell.edu Aidan Dixon ajd326@cornell.edu Ben Nadon-Enrinquez bkn8@cornell.edu Chris Vaziri csv29@cornell.edu Daniel Nieto djn66@cornell.edu Darla Andoni da467@cornell.edu Elijah Dubinsky ebd45@cornell.edu Emma Braff erb249@cornell.edu Ethan Stoffman es848@cornell.edu Felipe Santamaria fs339@cornell.edu John Hanna jlh462@cornell.edu Jonathan Pffifner jdp284@cornell.edu JP Spak jps434@cornell.edu Keertana Talla kst67@cornell.edu Khushi Jain kj248@cornell.edu Lavanya Pinnepalli lp386@cornell.edu Lexi Ding sd923@cornell.edu Lucy Beck lwb47@cornell.edu Mark Dong bd324@cornell.edu Meghan O'Leary mco56@cornell.edu Nandan Aggarwal nsa52@cornell.edu Radhe Melwani rm967@cornell.edu Rory Sheppard Rps238@cornell.edu Siddhant Dahiya sd542@cornell.edu William Q. Montgomery wqm2@cornell.edu

LEARN MORE cornellequityresearch.com

Logo Credit Allen Luo ajl389@cornell.edu