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3.  Platform: Wall Street Survivor  League: HawkTrade Competition  Link: http://www.wallstreetsurvivor.com/league/Ha wkTradeCompetition http://www.wallstreetsurvivor.com/league/Ha wkTradeCompetition  $15 fee to join  Ability to win great prizes!!!

4.  League Settings:  Start Date: 9/15/2014  End Date: 12/ 05/2014  Portfolio Size: $100,000  Maximum Trade Position: 25%  Able to trade derivatives and options  If you have any questions, comments, or concerns, contact me: daniel- muggee@uiowa.edu

6.  Juniors and high-achieving sophomores are encouraged to apply.  https://www.harrisassoc.com/HARRIS/WEB/ me.get?web.websections.show&HARRIS_719 https://www.harrisassoc.com/HARRIS/WEB/ me.get?web.websections.show&HARRIS_719  Email will be sent out tomorrow for those who provided me with their email.

7.  Tweet or email your prediction for the number of jobs created during October before Friday.  Closest to reported number wins a Jimmy John’s giftcard.  Twitter – HawktradeUI Email – stuorg- hawktrade@uiowa.edustuorg- hawktrade@uiowa.edu  Consensus range – 200,000 – 282,000

8. http://iowahawktrade.com/ Twitter - @HawktradeUI

9. Fundamental Analysis Applied Case (Vertex Pharmaceuticals Incorporated)

10.  The following slides will describe how to “pick a stock” building on last week’s presentation  Slides will outline the top-down analysis process on Vertex Pharmaceuticals (VRTX)VRTX  The economic, industry and firm cases will be covered follow by an in depth look at financial data  The majority of the information was obtained from the Krause Fund websiteKrause Fund

11.  While searching for a stock it is very important to understand what economic metrics drive stock prices  In the case of VRTX the four factors are:  Demographics  Gross Domestic Product  Interest Rates  Consumer Price Index

12.  Vertex Pharmaceuticals is invested in the development of treatments for Rheumatoid Arthritis  The average age of an RA patient is 61 years old  Due to the “greying” of the baby boomers, the size of the 65+ population is expected to grow exponentially  This population also accounts for 30% of a health care spending

13.  Vertex’s most promising investment prospect is a treatment for Cystic Fibrosis  CF is an inherited diseases that affects children  There are 70,000 adults and children with the disease worldwide 30,000 of which are in the US  100,000,000 Americans are carriers of the disease bearing gene

14.  The healthcare industry accounts for 18.3% US GDP, and is expected to grow by a rate of 6% through 2022  This is driven by government legislation which will make health care more affordable  The demand for VRTX’s very expensive treatments will increase since consumers will be subsidized by the government

15.  Biotechnology is the concept of using biological process to provide technological solutions to a problem Biotechnology  The industry can be divided into three segments  Medical  Agricultural  Industrial  VRTX belongs to the largest segment of the group, medical biotechnology VRTX

16.  There are eight major players in the biotechnology industry, Vertex is one of them  Industry is very concentrated within a couple large companies  Amgen consists of 15% of the market share, Gilead accounts for another 7%

17. Government Regulation  Drug production is scrutinized by the FDA and is highly regulated  The investment companies make to produce treatments is often fruitless  There are incentives in place to encourage drug research and production Consolidation  Large drug manufacturers are acquiring small labs in order to diversify their drug portfolios  Preparing for the eminent “patent cliff”  Recently, companies have been trying to access offshore cash by merging with foreign companies

18.  Companies that have products late in the approval process have the potential for capital gains  Firms developing treatments that are “first- in-class” or treat rare diseases are attractive  Small nimble labs are producing the next generation of treatments and are acquisition targets

19.  “our (Vertex’s) strategy is to reach as many people with CF (cystic fibrosis) as possible and to enhance the benefits for those that we treat.”  VRTX is focused on developing new products to treat and existing market  The firm is creating a duo therapy to treat existing CF patients

20.  Vertex has two treatments for sale and is developing three others  Incivek and Kalydeco are currently for sale, but are expected to bring in decreasing revenues  There is lots of potential in the development of VX-809 as a partner a treatment to CF  Other treatments for Influenza A and RA are being developed

21.  Vertex has products all along the product development spectrum  The majority of their products are in the development phase as their approval awaits  Kalydeco is in the growth phase as its has seen increasing demand and is privy to patent immunity  Incivek is in the decline phase as consumers are purchasing a better, but more expensive treatment by Gilead

22.  Vertex Pharmaceuticals, Inc. has “first mover,” advantage.  The Kalydeco and VX-809 duo therapy will treat 75% of patients with CF.  VRTX has a ripening research pipeline with at least two drugs set to complete development and come to market in the next two years.  VRTX will have a continuing value growth rate of 5%, a percentage point lower than the expected growth in healthcare expenditures forecasted by the Centers for Medicare & Medicaid Services.  The synergies of these factors will drive value for VRTX and is we have placed a BUY rating on the company, which has an intrinsic value of $96.53 per share.

23.  In order to obtain the valuation $96.53 per share, historical financial data was analyzed  Items that were particularly important in deriving the population were:  Net Income  Sales Revenue  Research and Development  Property, Plant and Equipment  The value the firm will continue to grow after the model horizon is very important

24.  VRTX is trading at $112.64, compared to the $96.53 valuation and $67.53 spot price at time of writing  Vertex reported 3 rd quarter earnings on October 29 th  Earnings were better than expected  Loss per share was $.56 vs. the $.57 consensus  3 rd quarter revenues were $165 million, better than the $145 million consensus  Yearly revenues adjusted down to $525 million from $535 million (model predicted $1,103.37 million)

25.  There is no magic formula for “stock picking”  Research and modeling can improve the odds of picking a peach, but there are no guarantees  Understand your investment style and risk appetite

28.  Real GDP was 3.5% for the third quarter of 2014. Real GDP  Beat consensus of 3.0%, top end of consensus range 2.1%-3.5%.  Primarily driven from increased consumer discretionary spending.  Should put pressure on Fed regarding interest rates.

29.  Fed Funds Rate will remain at.25%.  Announced this month was the last month of bond buying program (QE3). bond buying program  However, plans for the Fed’s balance sheet have not been announced.  Expect continued strengthening in the labor market and inflation around 2%.

31.  Revenue grew 10% to $4.18 Billion, analysts expected $4.23 Billion. Revenue  Earnings $.74 per share, analysts expected $.74 per share.  19 th consecutive quarter with at least 5% of sales growth.  Guided earnings for current quarter lower than street expectation.

33.  Consumer Confidence Index reached its highest levels since October 2007.  Actual was 94.5 versus consensus of 86.8.  Expectation of future recovery lead to a revision of 5.5 points.

35.  Revenue for Q3 was $3.2 Billion, beating consensus of $3.12. Revenue  Reported earnings of $.43 per share, beating consensus of $.40.  Lower guidance for Q4 and full-year due to rising costs.