Friday Night Stocks: NYU Undergrads Team Up to Beat the S&P

The team felt Diageo was an outstanding stock in its field because of strong financials and vision in the executive suite :

"Diageo's CEO, Paul Walsh, has focused on efficiency and product performance. During his tenure, the company has reported lower COGS (cost of goods sold) year over year and allows for a higher bottom line. As for international growth, we see endless opportunities."

Ultimately, though, the Diageo analysis team's thirst for profits didn't translate to the other members of the IAG; the stock was voted out on Friday, Sept. 21.

Week Two. Intel (INTC) was the next company to face the gauntlet of an IAG meeting. Where the Diageo team first looked for an industry that was so-called recession -proof, the Intel analysis team -- Mike DiMeglio, Rachel Nabatian and Arvindh Rao -- decided to parlay their technology know-how into a stock pick. Regarding the team's approach to stock-picking, DiMeglio says, "As Peter Lynch said, 'Invest in what you know.' It's always a lot harder to start from scratch with a company you've never heard of in an industry you know nothing about." DiMeglio says that the approach is "similar to how many analysts at investment banks are segmented into industry groups."

Regarding Intel, specifically, DiMeglio says, "It became clear just how much of an advantage Intel had. Their pipeline is years beyond others, and even their current lineup is much more advanced than what AMD (AMD), their closest competitor, has to offer. Financially, we saw a stock which seemingly was trading well below its fair value ."

With an estimated target price of around $33 (a possible 30% return for the group's portfolios), the team was able to convince the other IAG memebers, and the stock was voted a "go" on Friday, Sept. 28. The impending shake-up in Intel's lineup should make the coming weeks a good test of their pick.

The Weeks Ahead

Regardless of the club's final decisions, each team still stands behind its stock picks. Since Diageo was voted off the investment island its shares have jumped 4.5% in value, a fact that no doubt leaves some group members sorry that they couldn't take part in that action.

The Diageo analysis team says, "We feel that the company's shares will continue to rise in price and should be invested in [the IAG's] portfolios. Given a second chance, we would have tweaked the DCF (discounted cash flow) valuation to reflect individual business segment growth."

Excitement lies ahead for NYU Stern's Investment Analysis Group. Caraustar's (CSAR) investment fate and a showdown over shoe-maker Crocs (CROX) should make for the continuation of an educational and potentially investable school year.

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