J2S HOLDINGS

Jason Radzik, Jason Rawinski, Sarah Healey

Introduction
This group is composed of Jason Rawinski, Jason Radzik, and Sarah Healey. We are all
actively involved in managing our portfolio. Currently we employ a mixed strategy. We have
allocated around 50% of our portfolio into blue chip and large cap securities that have a
prominent market presence and are rather stable. We have specifically focused these securities
in the financial and defense industries. Our logic behind these choices is that with the recent
political atmosphere in regards to the election of Donald Trump as president, these two industries
will flourish. Trump has promised to increase defense spending and reduce Wall Street
regulation. Both of these factors should cause increases in the prices of stocks in these
industries. The stocks we have currently invested long positions in are: Boeing Companies (BA),
Goldman-Sachs (GS), JPMorgan-Chase (JPM), Lockheed-Martin (LMT), Southwest Airlines
(LUV), and Morgan Stanley (MS). The other 50% of our portfolio is allocated to more risky,
small cap securities with higher earning potentials. We have used this 50% for short sales, day
trades, and quick flips. Currently, 39.14% of our profits have occurred from things like day
trades and quick flips.

Economic Conditions
Currently, the economic state of the United States is very strong. Things like the Dow
Jones Industrial Average and the S&P 500 are at record highs. The Dow Jones is hovering right
around $20,800 and the S&P 500 is hovering right around $2,400. The Dow Jones represents 30
blue chip stocks from many different industries throughout the market. The S&P 500 measures
the 500 largest companies on the NYSE and NASDAQ and tracks the movement of these.
Whether a person feels the S&P 500 or the Dow Jones is the true representation of the market,
they are both at record highs and indicate a strong economy in the United States.
The political state of the United States is rather turbulent at this point. The recent election
of Donald Trump as President of the United States has caused a split in the country and protests
and riots to break out. Relating all of this back to the stock market, the market has seen the
political turbulence beneficial. Trump, a very prominent investor and businessman, has
promised to deregulate Wall Street by slowly repealing the Dodd-Frank Act. This has spurred
growth in the market due to freer cash flow.
Interest rates in the United States are very low recently. The average rate for a 30 year
fixed rate mortgage is around 4%. Since the 1970s, interest rates are down around 6%. Interest
rates saw their peak in 1981 at about 17.5% for a 30 year mortgage. This drop in interest rates
has spurred growth in the housing market which is still recovering from the recession which hit
in 2008.

Major Holdings/ Fundamental Analysis

Boeing Company
Boeing Company (BA) makes up 11.51% of our portfolio with a total market value of
$362,010.00. Boeing is a defense company in the aerospace sector. On February 6, 2017 we
purchased 2000 shares for $163.36. They are currently trading at 180.24 and have led to a profit
of $33,760. This industry has steadily grown since the election of Donald Trump. Trump has
promised to increase defense spending and build up the U.S. military, which means lots of
business from government contracts. In the last 9 months, the industry average for growth is
17.37%. Comparatively, Boeing has grown 38.86% over the last 9 months. Being such a well
built and established company, Boeing is at the top of the list when large government contracts
are ordered. This growth, in our opinion, is only going to keep moving up over the next four
years because of Donald Trumps stance on military spending. In fact, since November 9th,
2016, when Donald Trump won the election, Boeing has increased over 25%. Boeing also has a
return on equity of 239.5%. This is almost five times higher than the industrial average of 48%.
With numbers this astronomical, Boeing has proven to make shareholders money when they
invest in the company.
Boeings financial statements are not as stellar as the ratios mentioned above. They are
wildly fluctuating, with results from one quarter posting losses to another quarter posting
massive profits. We think this is due to a large part of their business being government
contracts. Depending on the needs of the country and the political atmosphere, orders can
fluctuate. With the problems in the Middle East, government orders have been steady but the
recent withdrawal from Syria has proven to reduce Boeings revenues in 2016. Nonetheless,
Boeing still has established itself as a company and continues to be profitable.
Dennis Muilenburg is the current President and Chief Executive Officer of Boeing. He
has worked for the company since 1985 and was recently elected as CEO in June of 2015. He
has a Bachelors Degree in Aerospace Engineering from Iowa State and a Masters Degree in
Aeronautics and Astronautics from the University of Washington. Muilenburg is very qualified
for the position and has done a solid job leading the company during his time thus far. Working
for the company for over 30 years has led him to have a deep understanding of all aspects of
operation and keeps the company running efficiently. His compensation for his position is a little
over $13 million dollars annually.

Goldman Sachs Group Inc.

Goldman Sachs (GS) is a banking firm whose primary operations include lending,
financial advisory, and investment banking. On February 6th we purchased 1,500 shares of GS at
the price of $241.62. At the time of writing GS is currently trading at $248.14, marking a 2.7%
price increase and a $9,795 gain for our portfolio. The total market value of our GS holdings is
$372,225 and makes up 12.4% of our portfolio. The financial industry has grown 26.95% over
the last 9 months. Comparatively, Goldman Sachs has grown 55.49%. With growth like this, is
it clear to see Goldman Sachs has been flourishing in these economic and political times and has
been giving shareholders a return on their investment.
As mentioned before one of our reasons we selected this stock for our portfolio is
because of president Trump's plan to dismantle the Dodd-Frank act. If this act were to be
dismantled then banks would be free from regulatory drag and they may very well resort back to
the same reckless behavior that cause the Financial Crisis of 2008. Since his inauguration in
early November last year the S&P 500 grew 14.58% compared to Goldman Sachs' growth of
37.8%. Goldman Sachs is a forerunner in the financial industry. While there numbers are sub-
par compared to industry averages, they are well established with a very large market cap. Their
return on equity is 9.78% compared to the industry average of 10.4%. Although it is not quite up
to par, GS is trading at all-time highs and seems like it has more momentum to keep it going
because of the political atmosphere.
Over the last year GS has experienced a steady increase in revenues in every quarter.
They had a 30% increase in revenues from the Q1 2016 to Q4 2016. These numbers are very
impressive and show Goldman growing quickly. We think this is in part that the market has
experienced rapid growth over the last year and people want to capitalize on that growth before
its too late. Goldman Sachs is an established company in the financial sector and people trust
their investments.
The CEO of the Goldman Sachs Group Inc., Lloyd Blankfein has been at the helm since
June 2006. He is also currently serving as Chairman of GS and he has held numerous
management roles in the past such as President, COO, and Vice chairman of Goldman Sachs.
Blankfein is compensated $8,300,000 from his annual salary and he is further incentivized
thought his $13,909,000 that he is awarded in restricted stock options. He graduated Harvard
Law School in 1978.

Lockheed Martin Corporation

Lockheed Martin (LMT) is an aerospace company that specializes in the research, design,
and development of military equipment. This stock currently makes up 10.66% of our portfolio.
We entered this our position when the stock price was $255.11 since then LMT has gained 4.5%
and has risen to $266.59. Our total market value for this position is $319,908. Our main reason
behind choosing this stock is the election of Donald Trump as President of the United States, like
mentioned above. With big promises of military spending, we feel that this industry will continue
to flourish. Lockheed Martin is the leading supplier of aircrafts for the United States Air Force
with Boeing being a close number two. As recently as February 17, 2017 President Trump has
promised for large orders of F-35 fighter jets and praised Lockheed on their ability to cut costs.
Lockheed Martin has experienced a 12.19% growth over the last 9 months. Although this is
slightly lower than the industry average of 17.37%, we feel that this is due to the decreased military
presence in the Middle East. Lockheed Martin has a return on equity of 151.3%, over three times
higher than the industry average of 48%. This proves that while Lockheed might be experiencing
slower growth, they are not falling short on their job of making shareholders money.
For the past 3 years, Lockheed Martin has experienced positive growth every year on
revenues. Since 2014, they have experienced 18.28% growth in revenues. This is a very solid and
sustainable growth rate that is mirrored by the acquisitions that have taken place, such as Sikorsky
Aircraft in 2015 that expanded the companys market share by entering them into the helicopter
sector. With the current political situation, we feel that the companys revenues will continue to
grow for the 2017 fiscal year as well. With such promises of government contracts, it is hard to
forecast negative growth for this company.
Marilyn Hewson is currently the Chief Executive Officer for Lockheed Martin. She began
working for the company is 1983 and has held many positions within the company, including COO
and Executive Vice President. She was elected to be CEO in 2013 and since her election she has
doubled the market cap of the company. With her experience in the company over the last 34
years, she is very qualified to be CEO of the company. She has employed strategic business deals
that have grown the companys market share and production capabilities. She paid over $20
million dollars a year through a combination of incentive pay and base pay.

Competition
Boeing Company
Aerospace manufacturers tend to be very competitive, especially in the United
States since it is the nations largest and most powerful industry. The U.S. aerospace sector is
considered the largest in the world and is the main supplier of both military and civil aerospace
hardware to the rest of the world. Boeing Company is an American multinational corporation that
designs, manufactures, and sells air planes, rotorcraft, rockets, and satellites all over the world.
This company is among the largest global aircraft manufacturers and the second-largest defense
contractor in the world based on 2015 revenue. Boeing has had great success in this industry and
has been competing against many other companies.
Boeings biggest competition is Airbus, an aerospace company based in Biagnac, France.
This feud has been characterized as a duopoly in the large jet airliner market since the 1990s.
Airbus has production and manufacturing facilities mainly in France, Germany, Spain, China,
United Kingdom, and United States. This company produces and markets the first commercially
viable digital fly-by-wire airliner, the A320, and also the worlds largest passenger airliner, the
A380. From 2004-2014, Airbus received 8,933 orders while delivering 4,824, compared to Boeing
who had received 8,428 orders while delivering 4,458. Airbus and Boeing are almost always neck-
and-neck. Boeing only has a little over 500 orders it would need to receive in order to catch up to
Airbus. The market value of Airbus is 45% and the market value of Boeing is 43%, only 2% less
than Airbus. These companies have not gotten along since the 1990s and it is said that each
company regularly accuses the other of receiving unfair state aid from their respective
governments.
During the 1990s, the Boeing 747 was the largest airliner in operation. Both Airbus and
Boeing researched the feasibility of a passenger aircraft that is larger than the Boeing 747. A
decade later, Airbus launched a full length, double-deck aircraft called A380. Boeing decided the
project would not be commercially viable and developed the third generation 747 called the Boeing
747-8 instead. The Airbus 380 and the Boeing 747-8 are direct competition on long-haul routes.
In 2016, the A330 and the A350 outsold the Boeing 747, 777, and 787 by about 20%. One reason
Airbus outsold Boeing due to lack of availability. Even though the Boeing 787 is a better plane
than the A330, the A330 is available much earlier. Another factor that caused Boeing to fall behind
is pricing. There is a lower exchange rate of the Euro, making the A330 cheaper. Lastly, the
product was also a factor. The Boeing 777 was too large and inflexible, leading to Airbus
outselling Boeing.
On January 13, 2017, an article titled Airbus vs Boeing: Iran Deal the Difference
in Plane Battle. This article was about how Airbus retained the top spot, because of Iran, with
recorded net orders of 731 for 2016, compared to Boeing who had 668. The comeback of Iran
after decades of sanction was great news for Airbus, considering Iran placed billions of dollars in
new orders. Airbus sold 100 aircrafts to Iran last year, while Boeing sold 80 aircrafts. Airbus is
farther along in the sales process compared to Boeing. Iran took delivery of the first Airbus jet on
Wednesday, January 11th. Boeings aircrafts will not be delivered to Iran until 2018.
Goldman Sachs Group Inc.
Goldman Sachs Group Inc. is an American multinational finance company that
engages in global investment banking, investment management, securities, primarily with
institutional clients. This company has a market share of 14.5%. Goldman Sachs biggest
competitor is Morgan Stanley, also an American multinational financial services corporation. Like
Goldman, Morgan Stanley focuses mostly on investment banking. Both companies vie for the top
position as the largest investment bank in the United States. This rivalry dates back over 80 years.
After the 2007-2008 financial crisis, the American banking industry was destroyed, especially
investment banks. Only two investment banks remained after the financial crisis, Goldman Sachs
and Morgan Stanley. Goldman Sachs survived the crisis the best and has had a stronger
performance in recent years, compared to Morgan Stanley. Goldman Sachs posted its largest
profit in the summer of 2009, shortly after the crisis. Although, in 2013 and 2014, Morgan Stanley
performed better and Goldman Sachs. Goldman Sachs return on equity was 11.2% last year was
twice as high compare to Morgan Stanley. It also produced more revenue with 40% fewer
employees.
Both companies are top investment banks whose clientele are wealthy individuals
and corporations. These two companies differ in their fundamentals, especially their business
models. Morgan Stanley is considered to be more conservative and cautious, while Goldman
Sachs is considered to focus on the upside potential in lending, private equity and hedge funds.
Morgan Stanley has started to move away from the high risk and high reward financial sector in
order to focus more of its energy on money management. This strategy is considered to be much
more conservative and dependable with less opportunity for quick profits. Comparing both
companies wealth management practices, Morgan Stanley brought three times more investment
and wealth management funds than Goldman Sachs, in just the first quarter of 2015. Goldman
Sachs tends to focus its business model around trading revenue. Its business model is extremely
similar to the way finance worked before the 2008 financial crisis. Goldman Sachs, compared to
Morgan Stanley, offers a much more precarious investment model that does offer the possibility
of fast earnings. Trading has not been as popular for financial companies in the recent years, but
Goldman Sachs has outperformed Morgan Stanley by most financial measures.
 On January 23, 2017, a news article entitled Goldman Sachs, Morgan Stanley, JPM Execs
Sold Almost $100M in Stock since Election. This article was about how the chief executive of
Morgan Stanley, James Gorman, sold stock for the first time in his six years as chief. He sold
200,000 shares at $37.70 each. He also sold another 100,000 shares as the stock surged in late
November, after Donald Trumps victory. Later that week, he disposed of another 285,000 shares,
all together totaling a profit of $8.4 million. This article also talks about how some options that
were about to expire became valuable due to the postelection run-up. For example, at Goldman
Sachs, the postelection bounce turned at least half a billion dollars worth of stock options into
winners, days before they were set to expire. Another news article from January 13, entitled
Morgan Stanleys layoffs bods badly for Goldman Sachs. George Soros mistake. This article is
about how Morgan Stanley shaved bonuses by 15% due to declining revenue from deal-making
and capital-raising. They also cut many of the senior investment bankers. The cuts are said to
have hit senior investment bankers the hardest, with around 20 bankers going from the IBD
division globally. This article also discussed whether they believed Goldman Sachs will start
making cuts, but concluded that it is not likely.

Lockheed Martin Corporation

Lockheed Martin is an American global aerospace, defense, security and advanced
technologies company with worldwide interests. It is one of the largest companies in the
aerospace, defense, security, and technologies industry. It is the worlds largest defense contractor
based on revenue from 2014. Their market share is 17.4%. Lockheed Martins biggest competitor
is the Boeing Company. This company is an American multinational corporation that designs,
manufactures, and sells air planes, rotorcraft, rockets, and satellites all over the world. This
company is among the largest global aircraft manufacturers and the second-largest defense
contractor in the world based on 2015 revenue. Lockheed Martins year to year results are betting
than Boeings, but Lockheed Martin had to guide low due to the fact that President Trump is having
issues with the price of its F-35 fighter. Lockheed Martin has the advantage in terms of ROA with
a value of 9.43% compared to a 5.49% value for Boeing. Lockheed Martin maintains the
advantage when it comes to ROIC as well with a value of 33.26% versus 27.23% for Boeing. Over
the past five years, Boeing has increased its book value by 50%, while Lockheed Martins book
value per share decreased by a significant amount. Boeing Companys market share is 43%, much
higher than Lockheed Martin.
A third of Lockheed Martins revenue and earnings from its Aeronautics segment, which
overseen the construction of the F-35, a fifth generation military aircraft. Defense is not as
important to Boeing, about 64% of revenue and 92% of operating earnings come from the Chicago-
based companys commercial aircraft segment. Boeing is predicting a market worth of over 5$
trillion in commercial aircraft orders over the next two decades. They will most likely direct most
of their attention toward ensuring the 787, 737 Max, and 777X programs are successful. Recently,
President Trump is suggesting he could use a Boeing Company plane as a substitute for the
Lockheed Martin F-35 combat jet. The Boeing X-32 was a concept demonstrator aircraft that
competed against the F-35, and lost. The plane from Boeing almost replace the F-35.
 In an article from February 17, 2017, entitled Trump let Lockheed Martin rival Boeing
listen in on call about F-35. This phone call was about lowering the cost of the F-35. Trump has
been criticizing the cost of this aircraft and called the costs out of control. He suggested the
Boeing F-18 Super Hornet as a cheaper alternative. The $379 billion F-35 program would be the
Pentagons most expensive weapons acquisition ever, but this aircraft eases Congress on measures
of national security. Trump is being criticized and being called unethical. Another article
entitled The TX battle comes down to Lockheed and Boeing, published on February 27, 2017.
This article was about the T-X program. Many companies are unexpectedly dropping out and
some industry teams are breaking up. The competition has become a face-off between Boeings
clean-sheet T-X design and the Lockheed Martin-Korean Aerospace Industries T-50A, the US
derivative of a trainer flown by the South Korean, Iraqi, Philippine and Indonesian militaries. It
is going to be a challenge for Boeing to clinch the lead before Lockheed gets the contract.

Charts/Portfolio Performance

Industry Boeing Lockheed

Average Company Martin
P/E
Ratio 19.961 24.29 20.76
Beta 1.061 1.08 0.68
Annual
Dividend
Yield 1.162 3.21 2.75
Return
on
Equity 48% 239.5% 151.3%

Industry Goldman
Average Sachs
P/E
Ratio 27.959 15.35
Beta 1.42 1.5
Annual
Dividend
Yield 2.148 1.04
Return
on
Equity 10.4% 9.78%
30
Defense
24.29
25
19.961 20.76
20

15

10

5 3.21 2.75 239.5%

1.061 1.08 0.68 1.162 48% 151.3%
0
P/E Ratio Beta Annual Dividend Yield Return on Equity

Industry Average Boeing Company Lockheed Martin

30 27.959
Financials
25

20
15.35
15

10

5
1.42 1.5 2.148
1.04
10.4% 9.78%
0
P/E Ratio Beta Annual Dividend Yield Return on Equity

Industry Average Goldman Sachs

Portfolio Breakdown (3/1/2017 10:50AM)

11%

12% BA

48% GS
JPM
9%
LMT
LUV
10% MS
Cash
6%
4%