Structured Investment Analyzer

G
a
t
i
c
k
G
l
o
b
a
l
s
o
l
u
t
i
o
n
s
:
w
w
w
.
g
a
t
i
c
k
.
c
o
m
High
Risk
Yield
Enhancement
Reverse Convertible on GMCR
Investment Terms
Issuer UBS
Notional- $200,000.00
Unit Size-200 notes
CUSIP-90270KBL2
Underlying- Green
Mountain Coffee Roasters,
Inc.
Pricing date- April 1, 2014
Maturity data- July 7, 2014
Max Return-103.2%
Minimum Return- 0%
Issuer Details
Issuer - UBS
S&P Credit Rating. AAA
Market capitalization 100
Bn
CDS 5y spread 150 bps
Investment underlying opportunity: Keurig Green Mountain, Inc. (GMCR) stock has been
performing well over the last few months. Stock has risen from 74.63 at the start of the year to
105.59 by march 31
st
2014 increasing almost 40% with in a span of 3 months. This is due to variety
of new strategic developments that have resulted in the stock price growth. Notable news
pertains to Expansion into cold beverage market with Keurig Cold and Keurig 2.0 will force
competitors to become licensed partners and bring back revenue lost from patent expiration.
This stock might pull back temporarily but has good potential for appreciation. This would
suggest stock has high probability to move with in a narrow range.
Further analysis
G
a
t
i
c
k
G
l
o
b
a
l
s
o
l
u
t
i
o
n
s
:
w
w
w
.
g
a
t
i
c
k
.
c
o
m
Risk Return Dashboard
Expected
Return
12.07 %
Volatility 31.4%
Risk Score 7
Capital
Guaranteed
No
Maximum
Loss
100% of
investment
Performance Measure
Expected
Return
High
Market Risk High
Issuer Risk Low
Complexity Low
GMCR statistics
Beta 0.61
P/E 37.3
RoE 19.7%
Current Ratio 2.5
Leverage Ratio 1.4
Altman's Z-Score 13.10
Dividend Yield 0.4
Total Debt/Equity 0.08
Structured note investment underlying
has beta of 0.61, the Z-score
is 13.10, and it has very low debt
to equity.
Compared to the market GMCRs price per
share is almost four times the industry.
In addition to this is the fact the currently
Nestle is $77.22 and Starbucks is $78.69 per share.
This note has three months to maturity.
The expected return is good. Reverse
convertible has a payoff similar to
a covered strangle position. This
position pays limited amount on
the upside with potential to loss
all of the initial investment . This is a
good investment if the underlying
stock moves with in a narrow range.
Investment Metrics
G
a
t
i
c
k
G
l
o
b
a
l
s
o
l
u
t
i
o
n
s
:
w
w
w
.
g
a
t
i
c
k
.
c
o
m
-100
-80
-60
-40
-20
0
20
-100 -50 0 50 100 150 200 250
Note Return
Note Return
Note Performance
(Historical)
Note Performance
(Future Stress test)
Return 12.07% per annum 12.07 per annum
Note Payoff 102.7 102.7
Probability of Gain 93.7 93.7
Risk Score 7 7
Volatility 31.4% 31.4%
Probability of Loss 6.21 6.21
Expected Maturity 3 months 3 months
History does not Repeat but rhymes. This note has returned 12% per annum historically
with a probability of gain of 93.7. Therefore from a mathematical perspective, this note is most
Certain to deliver the expected return without losing the principal.
Investment Performance
G
a
t
i
c
k
G
l
o
b
a
l
s
o
l
u
t
i
o
n
s
:
w
w
w
.
g
a
t
i
c
k
.
c
o
m
-150
-100
-50
0
50
100
150
200
250
12/20/1996 6/12/2002 12/3/2007 5/25/2013
Historical Analysis
Asset
performance
Note Return
0
1000
2000
3000
4000
5000
6000
-
1
0
0
-
7
0
-
2
0
-
55
2
0
F
r
e
q
u
e
n
c
y
Note Return
Probability of Returns
Frequency
Recommendation: Metrics and historical analysis concludes this investment is a risky one for a
conservative investor. In current market environment for an adventurous investor this investment will
definitely help to obtain 12.07% per annumwith protection up to a 30% decline in the stock price.
Pros Cons
Note provides a coupon of 12.07% as
long as note is above 70% of initial
level
Note offers exciting opportune
exposure to Green mountain stock
Note offers a pre packed approach to
combine a covered call and covered
put strategy.
Note has potential to loss entire
invested principal if markets decline
below 70% of initial level
Historically this note has lost money
many times
If the stock performs extremely well
or bad then note returns are limited
on upside to losing all of the invested
amount
Score Card: Reverse Convertible on GMCR
Market Direction (SP 500):
Market Vol (SP 500):
Underlying Direction:
Underlying Vol:
Issuer Credit (CDS):
Investor Risk Appetite:
Investment Recommendation
G
a
t
i
c
k
G
l
o
b
a
l
s
o
l
u
t
i
o
n
s
:
w
w
w
.
g
a
t
i
c
k
.
c
o
m
Disclaimer: This report is prepared by Gatick Global solutions team. This is
not an investment advise.
Contact information:
Gatick Global Solutions
Millburn NJ, 07041
973 376 8973
mailto: karthik@gatick.com or chandra@gatick.com
By Karthik Misra and Chandra S Khandrika
Bearish Bullish
Low High
Bearish Bullish
Low High
Low High
Low High