stocks. talking about stocks 3 stocks i saw on tv 3 stocks i saw on tv
TRANSCRIPT
STOCKS
Talking about Stocks
3 Stocks I saw on TV
Industry Overview
Venture Capital Oak, Sequoia, Kleiner Perkins
Equity/Debt (stocks/bonds) Citadel, Cerberus (hedge funds); Fidelity,
Vanguard (mutual funds)
Private Equity KKR, Blackstone, TPG
Investment Types and Company Lifecycle
VentureCapital
Equity/Debt
PrivateEquity
Launches Goes Public Growth slows
Start-up Public Company Mature Company
Stage in Company Life Cycle
Typical InvestmentType
Venture Capital
VentureCapital
Equity/Debt
PrivateEquity
Launches Goes Public Growth slows
Start-up Public Company Mature Company
Stage in Company Life Cycle
Typical InvestmentType
Venture Capital
Typical Entry strategy Acquire stake in young, start-up firm
Value added VCs provide funding, networking, and advice to
the companies they invest in Typical Exit strategy
Take portfolio companies public or sell them to other companies
Example Bessemer Venture Partners invested $1-2
million in Skype, and when Skype was acquired by eBay, Bessemer made a 100-fold return on its investment
Angel Investment
Google and Investment
IELTS Card
Describe how a business is financed What are the options How long would it take to finance them What are the risks
What business of yours do you think you want fiannced and how would you do it.
Debt/Equity Investing
VentureCapital
Equity/Debt
PrivateEquity
Launches Goes Public Growth slows
Start-up Public Company Mature Company
Stage in Company Life Cycle
Typical InvestmentType
Latin American Bonds
Case for Latin American Bonds
Debt/Equity Investing
Typical Entry strategy Acquire position in stock or bonds of company
Value added Investors can lobby companies to take measures to raise
stock prices, such as share repurchases or divestitures Typical Exit strategy
Unwind position in stock or bonds of company Example
After doing comprehensive research on AutoZone, ESL, a hedge fund, concludes AutoZone is undervalued and buys shares in the company. In time the market comes to realize that the company is indeed undervalued and ESL sells its AutoZone shares after earning a 30% return.
Top Debt/Equity Investors
Hedge Funds Cerberus Citadel ESL SAC Capital Silverpoint (debt investing)
Mutual Funds Fidelity Vanguard
Hedge Fund
Hedge Fund Manager
Debt/Equity Investing
VentureCapital
Equity/Debt
PrivateEquity
Launches Goes Public Growth slows
Start-up Public Company Mature Company
Stage in Company Life Cycle
Typical InvestmentType
Private Equity
Typical Entry strategy Borrow money to buy of a public company’s shares and
take it private again, in a Leveraged Buyout (LBO) Value added
Improve company’s operations through restructuring, divestitures, or refinancing
Typical Exit strategy Take company public again or sell to other firm
Example Nelson Peltz buys Snapple from Quaker Oats for $300
million, turns company around within a few years, and sells it for $1.5 billion
Top Private Equity Firms
Bain Capital Carlyle Group Kohlberg, Kravis, & Roberts (KKR) Texas Pacific Group (TPG) Thomas H Lee Partners Warburg Pincus
INVESTING BASICSSponsored By Bank of AmericaPresented by WIC & WUFC
What’s the Investment Universe? Stocks Bonds Derivatives Real Estate Commodities Currency
Types of Analysis
Fundamental A method of evaluating a security by attempting to measure its intrinsic value by examining related economic, financial and other qualitative and quantitative factors.
Value of a firm = Discounted value of future cash flows
Technical A method of evaluating securities by analyzing statistics
generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security's intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity.
Where to Begin? Develop a differentiated view
Top Down View on the economy or a sector Drill down into individual stocks, or trade a
basket of companies
Bottom Up Start with a company specific story Investigate the firm’s prospects based upon
micro factors
How to Evaluate a Business
Sustainable competitive advantages Barriers to entry, Substitutes Buyer and Supplier Leverage Technology, Infrastructure, Human Capital
Cost structure Fixed vs. variable Margin Analysis
Management Opportunities for growth
Valuation Methodolgy
Discounted Cash Flows Determine cost of firm’s capital Estimate the firm’s future cash flows Add back value of non-operational assets
Multiples P/E = (EPS/(r-g)) EBITDA/EV (EBITDA-Capex)/EV ROA, ROIC Net Debt/EBITDA
Derivatives
Contract that “Derives” its value from another security
Future - Obligation to exchange cash at some specified date for the underlying
Option - Right but not the obligation to buy/sell (call/put) underlying at specified price
Derivatives often allow for enhanced leverage
Options Continued
A multitude of strategies Understand Greeks (Delta, Gamma,
Theta, Rho, Vega) Basic idea is that payoff is asymmetric