1. SNOWBALLER’S INVESTMENT & CONSULTING MARIA SEMENCKA (B201400000) SUNG MOON BAE (201203608) JUHEON JUN (2012021010) HYE YEOM PARK (2013033412) HYUN MAN KIM (2014035432) INVESTMENT (CLASS: 1, TEAM: 6)

2. INTRODUCTION “Snowball” Our name is taken from Warren Buffett’s idea of snowball. When you roll a small snowball in the snowfield, it grows bigger and bigger soon. In investment, same logic applies. Rather than paying attention on short term market price changes, if we hold or roll stocks that have fundamental values consistently, we will be successful investors.

3. TEAM MEMBERS __________: Business Administration, Focus on POSCO and steel industry. Pay attention to raw materials and oil price changes. __________: Economics and Trade, Focus on Hyundai Motors. Looking for companies with sustainable growth. Consider the details of the price changes __________ : Business Administration, Focus on NHN and IT industry. Pay attention to trends and changes in IT industry. __________: English Literature, Analyze historical data and figures. Work on the technical side of investment such as hedging and leveraging. __________: Electrical Power Engineering, Focus on power industry and follow most actual trends in technology development and identify potential opportunities for investments.

4. INVESTMENT SCENARIO General Electrics (NASDAQ)$300,000 Hyundai Motors (KOSPI)$250,000 POSCO (KOSPI)$250,000 NHN (KOSPI)$200,000 Total$1,000,000 Selected Stocks and Allocation of money

5. INVESTMENT SCENARIO The first and expected to bring the highest return is General Electric Company which operates in energy industry. It is anticipated that renewable energy in near future, due to restrictions on producing CO 2 and constantly growing demand for more electrical power, is going to become one of the most important part of energy generation industry. Thus, we anticipate this investment to be the most profitable and at the same time relatively safe. Therefore we decided to invest the biggest amount of money in GE company, which is highly recognized among other similar firms and has the greatest experience in that field. Hyundai Motors is one of the fastest growing companies in global automobile industry. Stock price of a company is ultimately affected by a value of a company. Thus, we can believe that Hyundai Motors’ stock price will increase in the long term. Also, FTA with USA and E.U. give Hyundai Motors a big chance to grow even more.

6. INVESTMENT SCENARIO POSCO is a company that operates one of the largest steel making companies in the world. We chose POSCO because we thought we need to have a manufacturing company with world class competitiveness. Its profits are growing each year in steel industry. Also, they are stretching their business to green energy, construction and etc. NHN is a company that operates the most popular web site in Korea, naver.com. We chose NHN because we thought we need an IT company in our portfolio for diversity. Also, we believe NHN will have its momentum this summer because of sports events such as Korean baseball league and London Olympics. Naver provides streaming service for free. So many internet users will visit Naver and NHN can benefit from increased advertising fees.

7. EXPECTED RETURNS & RISKS & VARIANCES POSCO State of EconomyProbability of State of EconomyReturn If State OccursProduct (2) X (3)Variance Recession0.5-7%-0.0350.0028125 Boom0.515%0.0750.0006125 1E(Rs)=0.040.003425 HMC State of EconomyProbability of State of EconomyReturn If State OccursProduct (2) X (3)Variance Recession0.5-10%-0.050.005 Boom0.520%0.10.00125 1E(Rs)=0.050.00625

8. EXPECTED RETURNS & RISKS & VARIANCES NHN State of EconomyProbability of State of EconomyReturn If State OccursProduct (2) X (3)Variance Recession0.5-15%-0.0750.0066125 Boom0.523%0.1150.0028125 1E(Rs)=0.040.009425 GE State of EconomyProbability of State of EconomyReturn If State OccursProduct (2) X (3)Variance Recession0.5-5%-0.0250.00125 Boom0.510%0.050.0003125 1E(Rs)=0.0250.0015625

9. COVARIANCES State of EconmyCovariance Recession0.000021562500 Boom0.000001640625 Total0.000023203125

10. C0RELATIONS POSCO and NHN : -0.1246227 HMC and GE: -0.2667808

11. PORTFOLIO RETURNS AND RISKS InvestmentMarket ValueWEIGHTRETURNWEIGHTED RETURNSTANDARD DEVIATION GE3000000.3-0.04733433-0.0142002990.039528471 HMC2500000.250.00211420.000528550.079056942 POSCO2500000.25-0.052980132-0.0132450330.0585235 NHN200000.02-0.0966469-0.0019329380.097082439 TOTAL1000000 PORTFOLIO RETU RN -0.02884972 PORTFOLIO VARIANCERISK 0.0007490830.027369

12. MINIMUM VARIANCE PORTFOLIOS WE SHOULD CHANGE WEIGT AS THE FOLLOWING TABLE… MVP WEIGHT FOR PORTFOLIOPERCENTAGE POSCO0.355146164 GE0.373617071 HMC0.126382929 NHN0.144853836

13. EFFICIENT PORTFOLIO FRONTIER Sorry^^ we spent two hours to find a way to draw but we could not find the way and enough data ^^

14. CML AND SML E(R P )= R F + [E(R M )- R F ] δMδM * δ p = 0.04+ [0.03875 – 0.04 ] 0.005 * δ p E(R P ) δpδp 0.04 0.16 ※ R F 는 3 년 만기국고채 수익률을 이용하였으며 6 월 1 일 현재 국고채 수익률은 3.64% 임. E(R J )= R F + [E(R M )- R F ] * β J = 0.04+ [0.03875- 0.04 ] * β J = 0.04-0.00125 * β J E(R J ) βJβJ 0.04 32

15. EVALUATION & RESULTS Even Though KOSPI went down 10% and Dow Jones went down 5 %, we only lost 2 %. It is true that we did not make money in the stock markets, but compared to other indexes, we did very well. We believe it is because of our well-developed portfolio. Our portfolio will generate profits very soon when the stock markets recover from economic downturn.

16. THINGS TO IMPROVE AND AVOID When we decided to buy the stocks, the stock market was not in a good mood. That’s why we lost some money. Next time we have a chance to invest, we would rather buy bonds when the stock market is unstable.

17. LAST WORDS THANKS YOU AND HAPPY SUMMER !