by Group 1: Lili Chen, Nick Holmes, Greg Moore and Qian Shi

Derek Smashey (APM F04) is an assistant portfolio manager with the Scout Mid Cap Equity Strategy and the Mid Cap Funds. He earned his MBA at the University of Kansas, and is a CFA and member of the CFA Institute and the Kansas City Society of Financial Analysts.

The funds focus on domestic mid-cap equity stocks with a long term growth objective. The Mid Cap team begins with a top-down evaluation of the market to identify current economic trends that may impact sector allocations. (Currently the team is overweight on energy stocks.) After the sector analysis, the team begins a bottom-up process to identify individual stocks. They look for growth catalysts, attractive valuation, and strong fundamentals in the mid cap range. Companies must have a history of good cash flow and operating margins, but there must also be a catalyst to make the investment an attractive prospect.

Smashey also discussed the prospects of a small cap stock he holds in his personal portfolio. TravelCenters of America, LLC (ticker: TA) was formed on October 10, 2005 as a wholly owned subsidiary of Hospitality Trust. TravelCenters operates travel centers for long haul truckers and travelers along the nation's interstate system. They operate under either the TravelCenters of America or Petro brands. TA offers products ranging from diesel and gasoline, truck repair and maintenance and full service restaurants. Currently the company is located in 40 states and also operates in Ontario, Canada.

Smashey thinks investors have undervalued the cash value of the company. TA's balance sheet currently has $182M in cash and 16.6M shares outstanding. After reducing the cash by the current deferred rent of $60M, the company still has a balance of $122M in cash, or $7.35 per share in cash with TA trading at $4.90 a share at the time of the visit. Smashey believes a potential catalyst for TA is a share repurchase. Another catalyst is its realized margin in fuel sales. As a commodity based business, margins are key to the long-term success of the business. Currently, TA's gross margin is 6% for fuel and 58% for non-fuel. If the economy returns to normal growth and fuel prices rise in sync with the economy overall margins in both business could increase, as well as volume. Berkshire Hathaway's purchase of Burlington Northern Santa Fe (BNI) is also a positive catalyst for TA. BNI has the most exposure to intermodal shipping among the major rail companies and Berkshire Hathaway has made a bet that all forms of transportation have reached a bottom and will begin to trend upward. The APM class recommended a buy and purchased 3,000 shares @ $5.24.