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Ascendere Associates LLC

Innovative Long/Short Equity Research

Model Portfolio Monthly Update: December 31, 2014


There are limitations inherent in our theoretical model results, particularly with the fact that such results do not represent actual trading and
they may not reflect the impact material economic and market factors might have had on our decision making if we were actually managing
client money. Please see additional disclaimers and disclosures at the back of this report.
We highlight stocks that demonstrate solid growth at a reasonable price (GARP). Stocks selected for our model portfolio strategies all rank highly
for the following metrics, with an emphasis on proxies for cash flow growth and ROIC:

Relative Value
Operating Momentum
Analyst Revision Momentum
Fundamental Quality

Page 2 contains rebalancing actions for our long-only model portfolio.


Page 3 contains rebalancing actions for our short-only model portfolio.
Target and stop prices, as well as updated return data, to be provided in our daily reports that will follow.

Ascendere Associates LLC


J. Stephen Castellano

Page 1

December 31, 2014


steve@ascenderellc.com

Commentary
Long model, 1-year holding period
We update the model portfolio on a monthly basis but it also works well for longer holding periods.
A model long portfolio held for one year (updated as of 12/31/13 and held through 12/31/2014) returned 15.67% for the year versus 11.43% for
the S&P 500, excluding dividends. The average dividend yield for the model portfolio averaged approximately 1.58% versus 1.92% for the S&P 500.
17 of the 26 stocks outperformed the S&P 500 (excluding dividends). The best performing stock for the year was American Airlines Group (AAL), up
112%. The worst performing was Nu Skin Enterprises (NUS), down 68.4%.
The Sharpe Ratio for the 1yr long-only model portfolio was 1.05 compared to 1.00 for the S&P 500, indicating a slightly better risk/reward profile
compared to the index. Please see the back of the report for additional return data.
Core long model, rebalanced monthly
The Core long model portfolio that was rebalanced monthly returned 12.81% in 2014 versus 11.43% for the S&P 500, excluding dividends. Since its
3/31/2009 inception, this model has returned 151.5% versus 102.8% for the S&P 500. Sharpe Ratio since inception is 1.04 versus 1.07 for the index.
Opportunistic long model, rebalanced monthly
The Opportunistic long model portfolio is composed of the same stocks of the Core model, but will occasionally move into a 100% cash position at
certain volatility and portfolio return triggers. The purpose of this strategy is to trade return potential for reduced volatility. This model returned
5.81% for the year and 135.6% since its 3/31/2009 inception. The Sharpe Ratio since inception is 1.21.
Dollar Neutral model portfolio, rebalanced monthly
A model portfolio that begins each month at an assumed 100% long position offset by a 100% short portfolio returned 23.78% for the year. This
model benefited greatly by volatility in late 2014, which greatly enhanced short portfolio returns. The Sharpe Ratio for this dollar neutral model is
1.26 since its 3/31/2009 inception.

Ascendere Associates LLC


J. Stephen Castellano

Page 2

December 31, 2014


steve@ascenderellc.com

Long Model Portfolio -- Rebalancing Actions

12/31/2014 Rebalancing
Core and Opportunistic Long Portfolio:
25 stocks in the model portfolio = 4.00% weight per position

Close Position
FMC Technologies, Inc.
FTI
Synchrony Financial
SYF
SunTrust Banks, Inc.
STI
Kirby Corporation
KEX
Manhattan Associates, Inc.
MANH
MAXIMUS, Inc.
MMS
Brocade Communications Systems,
BRCD
Inc.
RF Micro Devices Inc.
CDW
CDW Corporation
CDW
TE Connectivity Ltd.
TEL
Anixter International Inc.
AXE
F5 Networks, Inc.
FFIV
Lam Research Corporation
LRCX

Hold/Rebalance
Cablevision Systems Corporation
CVC
Pilgrim's Pride Corporation
PPC
StanCorp Financial Group Inc. SFG
VCA Inc.
WOOF
Robert Half International Inc. RHI
Southwest Airlines Co.
LUV
Micron Technology, Inc.
MU
Flextronics International Ltd. FLEX
Texas Instruments Inc.
TXN
Skyworks Solutions Inc.
SWKS

Source: Ascendere Associates LLC

Ascendere Associates LLC


J. Stephen Castellano

Page 3

Open Position
Skechers USA Inc.
Intercontinental Hotels Group plc
Lowe's Companies Inc.
Cracker Barrel Old Country Store, Inc.
CVS Health Corporation
PrivateBancorp, Inc.
Omega Healthcare Investors Inc.
HEALTHSOUTH Corp.
Alexion Pharmaceuticals, Inc.
MAXIMUS, Inc.
Union Pacific Corporation
General Dynamics Corporation
Broadridge Financial Solutions, Inc.
Autohome Inc.
YY Inc.

SKX
IHG
LOW
CBRL
CVS
PVTD
OHI
HLS
ALXN
MMS
UNP
GD
BR
ATHM
YY

December 31, 2014


steve@ascenderellc.com

Short Model Portfolio -- Rebalancing Actions


When the market anticipates an improving economy from low price levels, low-quality stocks will at times out-perform high-quality stocks as the
expected improvements in fundamentals are discounted from a relatively more depressed price level.

12/31/2014 Rebalancing
Core and Opportunistic Short Portfolio:
17 stocks in the model portfolio = 5.88% weight per position

Close Position
The Priceline Group Inc.
General Motors Company
Dish Network Corp.
SINA Corporation
Carpenter Technology Corp.
Agrium Inc.

Source: Ascendere Associates LLC

Ascendere Associates LLC


J. Stephen Castellano

PCLN
GM
DISH
SINA
CRS
AGU

Hold/Rebalance
TripAdvisor Inc.
TRIP
Phillips 66
PSX
Golar LNG Ltd.
GLNG
Memorial Resource Development
MRD
Corp.
ING Groep N.V.
ING
Credit Suisse Group AG
CS
Salix Pharmaceuticals Ltd.
SLXP
3D Systems Corporation
DDD
Qlik Technologies, Inc.
QLIK
CRH plc
CRH
Axiall Corporation
AXLL
The Mosaic Company
MOS
Allegheny Technologies Inc.
ATI

Page 4

Open Short Sale


Melco Crown Entertainment Limited
Liberty Broadband Corporation
Medidata Solutions, Inc.
NOW Inc.

MPEL
LBRD.K
MDSO
DNOW

December 31, 2014


steve@ascenderellc.com

Return Data

Core & Opportunistic Long Model

Theoretical Longs
MTD
Stopped Out on 8/4/2011 close for a -12.33% loss

11/30/2014 to 12/31/2014
Sector
Information Technology
Information Technology
Financials
Financials
Information Technology
Information Technology
Health Care
Information Technology
Industrials
Financials
Information Technology
Consumer Discretionary
Consumer Staples
Industrials
Information Technology
Information Technology
Information Technology
Information Technology
Information Technology
Energy
Information Technology
Information Technology
Industrials

Ascendere Associates LLC


J. Stephen Castellano

Company
RF Micro Devices Inc.
Skyworks Solutions Inc.
SunTrust Banks Inc.
StanCorp Financial Group Inc.
Brocade Communications Systems,
MAXIMUS Inc.
VCA Antech Inc.
Manhattan Associates, Inc.
Robert Half International Inc.
Synchrony Financial
Anixter International Inc.
Cablevision Systems Corp.
Pilgrim's Pride Corporation
Southwest Airlines Co.
F5 Networks Inc.
Flextronics International Ltd.
CDW Corp.
Tyco Electronics, Ltd.
Texas Instruments Inc.
FMC Technologies, Inc.
Micron Technology Inc.
LAM Research Corp.
Kirby Corp.

Ticker

RFMD
SWKS
STI
SFG
Inc.
BRCD
MMS
WOOF
MANH
RHI
SYF
AXE
CVC
PPC
LUV
FFIV
FLEX
CDWC
TEL
TXN
FTI
MU
LRCX
KEX

11/30/2014
14.61
67.47
39.29
66.10
11.31
52.39
47.33
39.56
56.79
29.01
86.90
20.32
32.30
41.82
129.19
11.09
35.08
64.20
54.42
47.77
35.95
82.64
96.14

Page 5

12/31/2014
16.59
72.71
41.90
69.86
11.84
54.84
48.77
40.72
58.38
29.75
88.46
20.64
32.79
42.32
130.47
11.18
35.17
63.25
53.47
46.84
35.01
79.34
80.74

Performance
13.55%
7.77%
6.64%
5.69%
4.69%
4.68%
3.04%
2.93%
2.80%
2.55%
1.80%
1.57%
1.52%
1.20%
0.99%
0.81%
0.26%
-1.48%
-1.75%
-1.95%
-2.61%
-3.99%
-16.02%

Target/
Stop Date

Date+1
Sell Price

Return

December 31, 2014


steve@ascenderellc.com

Core & Opportunistic Short Model

Theoretical
MTD shorts hit target 8/4/2011 for 14.84% gain

11/30/2014 to 12/31/2014
Sector
Energy
Energy
Financials
Consumer Discretionary
Information Technology
Financials
Materials
Materials
Materials
Energy
Consumer Discretionary
Information Technology
Materials
Information Technology
Consumer Discretionary
Materials
Materials
Consumer Discretionary
Health Care

Ascendere Associates LLC


J. Stephen Castellano

Company
Ticker
Memorial Resource Development Corp.
MRD
Golar LNG Ltd.
GLNG
ING Groep NV
ING
Dish Network Corp.
DISH
3D Systems Corp.
DDD
Credit Suisse Group
CS
Agrium Inc.
AGU
Carpenter Technology Corp.
CRS
Axiall Corporation
AXLL
Phillips 66
PSX
Priceline.com Inc.
PCLN
Sina Corp.
SINA
Mosaic Co.
MOS
Qlik Technologies, Inc.
QLIK
TripAdvisor LLC
TRIP
CRH plc
CRH
Allegheny Technologies Inc.
ATI
General Motors Company
GM
Salix Pharmaceuticals Ltd.
SLXP

11/30/2014
21.60
41.52
14.60
79.41
35.28
26.67
97.42
50.42
43.28
73.02
1,160.19
37.95
45.77
30.83
73.65
23.41
33.69
33.43
102.69

Page 6

12/31/2014
18.03
36.47
12.97
72.89
32.87
25.08
94.72
49.25
42.47
71.70
1,140.21
37.41
45.65
30.89
74.66
24.01
34.77
34.91
114.94

Performance
-16.53%
-12.16%
-11.16%
-8.21%
-6.83%
-5.96%
-2.77%
-2.32%
-1.87%
-1.81%
-1.72%
-1.42%
-0.26%
0.19%
1.37%
2.56%
3.21%
4.43%
11.93%

Target/
Stop Date
12/4/2014
12/15/2014
12/12/2014
12/8/2014
12/15/2014
12/15/2014

$
$
$
$
$
$

Date+1
Sell Price
18.12
31.44
12.97
71.44
30.05
24.84

Return
-16.11%
-24.28%
-11.16%
-10.04%
-14.82%
-6.86%

12/16/2014 $
12/15/2014 $
12/16/2014 $

38.47
67.04
1,075.34

-11.11%
-8.19%
-7.31%

December 31, 2014


steve@ascenderellc.com

Theoretical Model Portfolio* 12/31/14


Simple Returns (No Compounding)
Stock Targets

MTD

YTD

Since
03/31/09

Sharpe

Core Model
Long
Short
Core Long/Short

-0.44%
0.12%
-0.56%

1.68%
-4.86%
6.53%

12.81%
-12.56%
25.37%

151.5%
73.4%
78.0%

1.04
0.56
0.77

Stock Targets and


Portfolio Targets

Opportunistic Model
Long
Short
Opportunistic Long/Short

-0.44%
0.00%
-0.44%

1.68%
-8.66%
10.33%

5.81%
-17.97%
23.78%

135.6%
19.5%
116.1%

1.21
0.10
1.26

Stock Targets and


Portfolio Targets

Opportunistic Model III


Long Stocks
Long Inverse ETF ^SH
Opportunistic Long/Short III

-0.44%
0.00%
-0.44%

1.68%
0.10%
1.77%

5.81%
-11.55%
-5.74%

135.6%
-77.0%
58.7%

1.21
(1.04)
0.67

S&P 500 Index

-0.60%

-0.32%

11.43%

102.76%

1.07

* Return figures are calculated using cumulative simple returns. This table represents returns of several theoretical portfolios that do not assume any costs. This table is not to
be construed as advertising for any investment service. Real portfolios that attempt to exactly replicate these theoretical strategies will generate lower returns relative to these
models due to slippage, transaction costs, tax expenses and other costs. There are limitations inherent in our theoretical results, particularly with the fact that such results do
not represent actual trading and they may not reflect the impact material economic and market factors might have had on our decision making if we were actually managing
client money. We do our best to provide accurate information, but do not guarantee this. Please see additional disclosures and disclaimers.

Ascendere Associates LLC


J. Stephen Castellano

Page 7

December 31, 2014


steve@ascenderellc.com

Ascendere Associates LLC


J. Stephen Castellano

Page 8

December 31, 2014


steve@ascenderellc.com

Ascendere Associates LLC


J. Stephen Castellano

Page 9

December 31, 2014


steve@ascenderellc.com

Return Data 1-year holding period


Buy-and-hold 1-year portfolio
12/31/2013 to 12/31/2014
Sector
Industrials
Information Technology
Consumer Discretionary
Consumer Discretionary
Health Care
Information Technology
Consumer Discretionary
Financials
Industrials
Information Technology

Industry
Company
Airlines
American Airlines Group Inc.
Semiconductors
NXP Semiconductors NV
Specialty Stores
Signet Jewelers Limited
Apparel, Accessories and Luxury Goods
Hanesbrands Inc.
Healthcare Facilities
VCA Antech Inc.
Computer Storage and Peripherals
SanDisk Corp.
Apparel Retail
Foot Locker Inc.
Specialized REITs
Omega Healthcare Investors Inc.
Aerospace and Defense
Huntington Ingalls Industries, Inc.
Data Processing and Outsourced Services
FleetCor Technologies, Inc.

Ticker

Health Care

Life Sciences Tools and Services

Parexel International Corp.

PRXL

45.18

55.56

23.0%

Consumer Discretionary

Department Stores

Dillard's Inc.

DDS

97.21

125.18

28.8%

Materials

Paper Packaging

Packaging Corp. of America

PKG

63.28

78.05

23.3%

Financials

Specialized REITs

Entertainment Properties Trust

EPR

49.16

57.63

17.2%

Health Care

Biotechnology

United Therapeutics Corp.

UTHR

113.08

129.49

14.5%

Financials

Asset Management and Custody Banks


SEI Investments Co.

SEIC

34.73

40.04

15.3%

Industrials

Building Products

Lennox International Inc.

LII

85.06

95.07

11.8%

Consumer Discretionary

Casinos and Gaming

Bally Technologies, Inc.

BYI

78.45

83.27

6.1%

Information Technology
Healthcare
Energy
Financials
Industrials
Energy
Consumer Discretionary
Consumer Staples

Data Processing and Outsourced Services


Paychex Inc.
Biotechnology
Grifols, S.A.
Oil and Gas Refining and Marketing Western Refining Inc.
Property and Casualty Insurance
Old Republic International Corp.
Industrial Machinery
Flowserve Corp.
Oil and Gas Equipment and Services Oceaneering International, Inc.
Home Improvement Retail
Lumber Liquidators, Inc.
Personal Products
Nu Skin Enterprises Inc.

45.53
36.12
42.41
17.27
78.83
78.88
102.89
138.22

46.17
33.99
37.78
14.63
59.83
58.81
66.31
43.70

1.4%
-5.9%
-10.9%
-15.3%
-24.1%
-25.4%
-35.6%
-68.4%

Ascendere Associates LLC


J. Stephen Castellano

Page 10

AAL
NXPI
SIG
HBI
WOOF
SNDK
FL
OHI
HII
FLT

PAYX
GRFS
WNR
ORI
FLS
OII
LL
NUS

12/31/2013
25.25
45.93
78.70
70.27
31.36
70.54
41.44
29.80
90.01
117.17

12/31/2014 Performance
53.63
112.4%
76.40
66.3%
131.57
67.2%
111.62
58.8%
48.77
55.5%
97.98
38.9%
56.18
35.6%
39.07
31.1%
112.46
24.9%
148.71
26.9%

December 31, 2014


steve@ascenderellc.com

Ascendere Associates LLC


J. Stephen Castellano

Page 11

December 31, 2014


steve@ascenderellc.com

DISCLOSURES
Ascendere is in the business of providing equity research and related consulting services to investors and their advisors. The equity research it provides includes basic
quantitative model portfolios and more detailed fundamental research with respect to individual stocks. In addition, the firm manages stock portfolios for itself and clients.
Ascendere does not rate stocks on any scale, but does offer individual stock commentary and valuation opinions. With regard to Ascendere's portfolio strategies, "long" or
"high-quality" baskets should generally be considered buys, unless otherwise noted. Stocks in our "short" or "low-quality" baskets should generally be considered sells, unless
otherwise noted. While exceptions may occasionally occur, typically stocks in the high-quality basket are expected to outperform the S&P 500 over a month's time and stocks in
the low-quality basket are expected to underperform. A more relevant benchmark would comprise of all stocks and ADRs that trade on major U.S. stock exchanges with a
market cap above $2 billion.
Ascendere adheres to professional standards and abides by codes of ethics that put the interests of clients ahead of its own. The following are specific disclosures made by
Ascendere:
1) Ascendere may have a financial interest in the companies referred to in this report ("the Companies"). The research analyst covering the Companies and members
of the analyst's immediate family have a financial interest in one or more of the Companies.
2) Ascendere generates revenue from research subscription revenue and portfolio management fees. At any given time it may be long or short any of the Companies.
3) Ascendere does not make a market in the securities of any of the Companies.
4) Ascendere has not received compensation from the Companies.
5) Ascendere has not managed or co-managed a public offering for any of the Companies.
6) Neither Ascendere nor any of its officers or any family member of the covering analyst serve as an officer, director or advisory board member of any of the
Companies.
7) Neither Ascendere nor any of its officers or any family member of the covering analyst beneficially own 1% or more of any class of securities of any of the Companies.

DISCLAIMERS
This report is intended for informational purposes only and does not constitute a recommendation, or an offer, to buy or sell any securities or related financial instruments. The
report is not intended to be in furtherance of the specific investment objectives, financial situation, or particular needs of any individual recipient. Investment decisions should
be based on an individual's own goals, time horizon and tolerance for risk. The information contained herein accurately reflects the opinion of Ascendere at the time the report
was released. The opinions of Ascendere are subject to change at any time without notice and without obligation or notification. The officers, affiliates or family members of
Ascendere Associates may hold positions in the securities of the Companies. No warranty is made as to the accuracy of the information contained herein. The views and
opinions expressed in the market commentary reflect the opinions of the author and may be based upon information obtained from third-party sources believed to be reliable
but not guaranteed. These opinions are subject to change at any time based upon market or other conditions. Ascendere disclaims any responsibility to update such views.
This information is intended for the sole use of clients of Ascendere. Any other use, distribution or reproduction is strictly prohibited. Investing in stocks includes a high degree
of risk, including the risk of total loss. This is for informational purposes only and is not intended to constitute a current or past recommendation, investment advice of any kind,
or a solicitation of an offer to buy or sell any securities or investment services. All information, opinions and estimates are current as of original distribution by author and are
subject to change at any time without notice. Any companies, securities and/or markets referenced are solely for illustrative purposes. Past performance is not indicative of
future performance, and no representation or warranty, express or implied, is made regarding future performance.
For Investment Professional use only. NOT FOR FURTHER DISTRIBUTION. Any dissemination or copying of this commentary is strictly prohibited.

Ascendere Associates LLC


J. Stephen Castellano

Page 12

December 31, 2014


steve@ascenderellc.com

J. Stephen Castellano founded Ascendere Associates LLC to provide innovative equity research
and investment advisory services that blends fundamental and quantitative approaches.
In general, our approach is quite simple -- we believe that return on invested capital and long-term
earnings growth are key to stock valuation. More specifically, we use powerful and unique financial
models that combine publicly available data, consensus estimates and our own inputs to generate
consistent and actionable stock recommendations.
Among the services that Ascendere provides are: 1) detailed custom equity research analysis; 2) valuation scenario analysis
studies; 3) supply /demand studies; 4) long and short stock idea generation; 5) portfolio feedback; 6) detailed fundamental
financial modeling services; and 7) additional analytical consulting services. Additional information is available at
www.ascenderellc.com.
Mr. Castellano has over 15 years of experience in equity research and related consulting work. At PaineWebber, Warburg
Dillon Read and Credit Lyonnais Securities he developed fundamental equity valuation models and conducted in-depth
research on the steel and telecom services industries. At Boston Private Value Investors, he developed quantitative models
for stock idea generation and also provided general fundamental equity research coverage. Steve received a MBA from the F.
W. Olin School of Business at Babson College (2005) and a BA from Oberlin College (1993).
Mr. Castellano's career history is highlighted below:

Startup Ecommerce Company (2013-Present)


Ascendere Associates, LLC (2009-Present)
Boston Private Value Investors , Equity Research, Equity Research Analyst (2005-2009)
Pyramid Research, Contract Consultant, Telecom Services (2002-2003)
Credit Lyonnais Securities (USA), Equity Research, Telecom Services, Vice President (2000-2001)
Warburg Dillon Read, Equity Research, Telecom Services, Research Associate (1999-2000)
PaineWebber, Equity Research, Steel and Nonferrous Metals, Research Associate, Editor (1995-1999)

Ascendere Associates LLC


J. Stephen Castellano

Page 13

December 31, 2014


steve@ascenderellc.com

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