1 Cincinnati Model Investment Club Agenda May 17, :30 Call to order by President (Don Bunnell) 9:35 Minutes of previous meetings 9:40 Treasurer's Report (Joyce Shinn) 9:50 Old Business 10:10 New Business 10:10 Education Program - "Portfolio Management Guide" 10:30 Stock Study 11:00 Portfolio Review - Orthodontic - D. Bunnell Kohl's - Mary Thomas 11:10 Decide on Months Investment.… 11:15 Discussion (stocks to review for our next meeting) 11:30 Adjourn. The next meeting will be 9:30 A.M. Saturday June 19 in the Greenhills Municipal Building.

2 PMG - Portfolio Management Guide Cincinnati Model Investment Club May 17, 2003 James Hurt

3 What Is Portfolio Management? ● Portfolio Management is the art of continually improving the quality of your portfolio in order to maximize your return.

4 Good Portfolio Management Is – Watching the performance of the company rather than the price of the stock. – Selling a company when you determine that it will not produce the sales and earning growth you expected when you purchased it. – Replacing a company with one of equal or better quality having a better potential for return.

5 Portfolio Management Is Not: ● Selling stocks that perform well while keeping those that don't in the hopes that they will improve their performance. ● Letting price and P/E performance influence you decisions about selling.

6 Portfolio Tracking, Performance Measurement, or Record Keeping, while often misconstrued as portfolio management, are only ways of keeping track of how well you have managed your portfolio.

7 PMG Criteria for Selling ● Price is in the SSG's “Sell” range. ● P/E is at least 150% of the 5- year average P/E (Relative Value over 150%).

8 PMG Criteria for Buying ● Price is in the SSG's “Buy” range. ● P/E is at or below the 5-year average P/E (Relative Value is less than 100).

9 Company PMG ● You Update the Company PMG Yearly when you redo your SSG. Quarterly when new earnings are announced. Monthly with the latest price.

10 PMG was designed for easy manual update. Each year, add average P/Es from your SSG Each quarter, add earnings. Each month, add price and compute P/E. Each month, update graph on back.

11 ● Part 1 of the Company PMG – Each year redo your SSG. – Copy High and Low average P/Es from Section 3. – Compute 5-Year average P/E in Column 5. – Compute 150% of Column 5 in Column 6. PMG for Kohls April 2003

12 ● Part 2 of the Company PMG – Each year, redo your SSG. – Copy top of your “Buy” range to Column 1. – Copy bottom of your “Sell” range to Column 2. – All judgments are on your SSG, not here.

13 ● Part 3 of the PMG – Each Quarter: ● Add Quarterly earnings to column 2. ● Compute TTM earnings in column 3. – Each Month: ● Add price to column 5, 8, or 11. ● Compute P/E in column 6, 9, or 12.

14 Graph on Back Side of PMG ● Plotting seven curves in three scales: 1. Monthly Prices (solid green) 2. Top of “Buy” range (solid green) 3. Bottom of “Sell” range (solid green) 4. Monthly P/E ratios (dotted red) 5. Five Year Average P/E (dashed red) % of Five Year Average P/E (dashed red) 7. Relative Value (black bars)

15 Monthly P/E Top of “Buy” Monthly Price Bottom of “Sell” Average P/E “Sell” P/E Relative Value

16 PMG is indicating Buy when: Stock Price is below the Top of “Buy”. P/E ratio is below 5-year average P/E. And Relative Value bar is down.

17 PMG is indicating a Sell when: Stock Price is above Bottom of “Sell” P/E ratio is above the “Sell P/E And Relative Value bar is over 150%.

18 Monthly Report to Club ● Each month, you should report the following to the club on the stocks you are tracking: – Name of the company. – Any significant news. – Current price. – Is this price in the “Buy”, “Hold” or “Sell” range. – Current P/E. – Is this P/E in the “Buy”, “Hold” or “Sell” range. – Do you recommend any action? ● This should take less than a minute.