Rebalancing The Student Managed Investment Fund

1155 words - 5 pages

Question 1:
The company that I was assigned was Exelixis Inc. The organization is a small-cap growth company in the health care sector, and is expected to underperform the market over the next six months with very high risk (http://www.investing.money.msn.com). Based on the value line report for this security, short-term gains are feasible. Having a technical rating of 2, which was raised recently, it is likely that Exelixis Inc. will grow in the short term. However, long-term, this stock scores poorly with a rating of 4 for timeliness. This rating likely has to do with the large abatement the stock took back in 2000. The stock price had a peak of $47.50 and dropped dramatically to approximately $11.00 that same year. Ever since then, the stock price has yet to even come close to reaching the heights that it once had. This lack of augmentation is likely the reason for the low technical and safety ratings. The safety rating itself is a 5, meaning that the stock is as risky as any security can be.
Exelixis Inc. also has a capital structure that is highly weighted on debt. The debt is likely needed based upon their poor financial position, but in ten years it would make sense to have more of the capital structure to be elsewhere. In addition, the cash flow per share has not been consistent. This likely means that Exelsis Inc. is not utilizing the debt to grow and instead to simply upkeep its operational expenses. Revenues and revenues per share have also fluctuated significantly, which could potentially mean that the organization does not have an effective business strategy and/or product line.
There are articles online that discuss the benefits of buying Exelixis Inc. right now, considering how low of a price point the stock is at currently. However, buying something like this is a major risk, as the financial data leads to a negative outlook. I would rather put money in a safer stock that still has risk associated with it, but has a sound business model and a necessary product or product line (such as U.S. Steel).
Question 2:
Over the past several weeks, we have had a few intriguing guest speakers attend our class sessions. They are as follows. Tyler Hendrickson is a Senior International Trading Specialist at Fidelity Investments in Merrimack, New Hampshire. Tyler spent a great amount of his time discussing some of exams that must be taken in order to be a certified financial advisor, broker, etc. Tyler placed a large emphasis on the Sirii 7 and 63 exams, as he claimed they were necessary in order to work at almost all of the financial institutions. He then discussed an additional exam, the Sirii 9, which was for a license to sell options as well as securities, bonds, etc. It was also very cool to see first hand the active trader platform that he uses when making purchases and selling securities. It was very interactive, and had many different types of computerized analysis’ that could be utilized to help make...

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