value investing emba fall – 2018 syllabus – provisional · you should contact the teaching...
TRANSCRIPT
Page1of7
ValueInvesting
EMBA
Fall–2018
Syllabus–Provisional
TANOSANTOS
ProfessorOfficeLocation:TanoSantos–Uris815
OfficePhone: 212-854-0489
Fax: 212-851-9509(HeilbrunnCenter)
E-mail:[email protected](TanoSantos)Teachingassistant:TBA
Youshouldcontacttheteachingassistantwithanyquestionsthroughoutthecourse.Allemailcommunicationswithherormeshouldhave“ValueInvesting–EMBA–Fall–2018”inthesubjectline.
OfficeHoursandcommunicationwithme:Iwillrespondtoemailswithin24hours(makesurethesubjectlineisasabove,otherwisewerisklosingyouremailintheendlessriverthatismyInbox).Pleasedoletmeknowwhetheryouwanttomeet.Wewilltypicallyarrangetomeetrightbeforeclassorafterit,attheendoftheday.
Questionsaboutanyofthehomeworkshouldbesubmittedtotheteachingassistant.Asbeforeallemailsshouldfeature“ValueInvesting–EMBA–Fall–2018”inthesubjectline.
RECOMMENDEDCOURSEMATERIAL
RequiredTextbooks
Thereisonerequiredtextbook:
• ValueInvesting:FromGrahamtoBuffettandBeyond.BruceC.N.Greenwald,JuddKahn,PaulD.SonkinandMichaelvanBiema,WileyFinance,2004.
Otherimportantreferences
TheIntelligentInvestor:TheDefinitiveBookonValueInvesting.ABookofPracticalCounsel(RevisedEdition)[withcommentsbyJasonZweigandintroductionbyWarrenBuffett].
Page2of7
Otherinterestingbooksthatimmediatelycometomindare:
• TheLittleBookthatStillBeatstheMarket.JoelGreenblatt.JohnWiley&Sons,2010.• AccountingforValue,StephenPenman,ColumbiaBusinessSchoolPublishing,2011.• MarginofSafety:RiskAverseValueInvestingStrategiesfortheThoughtfulInvestor.SethKlarman.Harper
Business,1991.• TheLittleBookofBehavioralInvesting.JamesMontier.JohnWiley&Sons,2010.• ValueInvesting:ABalancedApproach.MartinWhitman.FrontiersinFinanceSeries,JohnWiley&Sons,2000.• BerkshireHathaway,Letterstoshareholders.WarrenBuffett.• TheessaysofWarrenBuffett.EditedbyLawrenceCunningham.CarolinaAcademicPress.
Therearetwobooksintheintersectionofaccountingandvaluationthatareusefulsupportingmaterial
• TheAnalysisandUseofFinancialStatements.GeraldWhite,AshwinpaulC.SondhiandDovFried.J.Wiley,2013,3rdedition
• FinancialStatementAnalysisandSecurityValuation.StephenPenman,5thedition
REQUIREDPREREQUISITESANDCONNECTIONTOTHECORE
Co-requisite:CapitalMarkets
Thelearninginthiscoursewillutilize,buildonandextendconceptscoveredinthefollowingcorecourses:
CoreCourse ConnectionwithCoreCorporateFinance 1. CostofCapital
2. Valuation3. FinancingOptions4. Timevalueofmoney5. Opportunitycost(ofcapital)6. TheCapitalAssetPricingModel(CAPM)7. FirmValuationModel
FinancialAccounting 1. The“accountingequation”2. Revenueandexpenserecognition3. Resourcesandobligations–measurementanddisclosure
GlobalEconomicEnvironment
1. RiskManagement2. WhatisGrossDomesticProductandhowisitmeasured?3. Whatcausesinflation?4. Whatcauseschangesinexchangerates?5. Whatarethecausesofbusinesscycles?6. Whataretheeffectsofmonetarypolicy?7. Whataretheeffectsoffiscalpolicy?8. Whatistheroleoffinancialmarketsintheeconomy?
ManagerialEconomics 1. Barrierstoentry2. Moats3. Maximizationandthinkingonthemargin4. Analyzingcomplexdecision-makingunderuncertainty
Page3of7
5. Decision-basedcostanalysis6. Pricingwithmarketpower7. Marketsegmentationandotheradvancedpricingstrategies8. Understandingmarketcompetitionandequilibriumthinking(inthe
short-run)9. Marketequilibriumthinking(inthelong-run)andbarrierstoentry10. StrategicinteractionamongfirmsandNashequilibrium
StrategyFormulation 1. Trade-offs,value-added,efficiencies2. Creationofvaluevs.valuecapture3. Competingfirms4. CompetitionandComplementors5. Strategicinteractionanalysis6. Diversificationandscope7. Ethics&IBS8. Behavioralandevidence-basedstrategy9. Management
COURSEDESCRIPTION&OBJECTIVES
Thiscourseaimstofamiliarizethestudentwiththeprinciplesandtechniquesofvalueinvesting,theinvestmentphilosophypioneeredbyGraham&DoddduringtheiryearsatColumbiaBusinessSchool.Thiswillbedonethroughacombinationofformallectures,inclassvaluationdiscussions(seebelow)andpresentationsbyleadinginvestors.Theareascoveredwillinclude:
1. Thefundamentalassumptionsandapproachestovalueinvesting2. Designingstrategiesforsearchingefficientlyforvalueinvestingopportunities3. Techniquesforassessingfundamentalvalueinarobustway4. Riskmanagementforthevalueinvestor
Page4of7
CONTENTS
LectureNote1:Introductionandoverview
• Thepremisesofvalueinvesting• Whydoesitwork?• Theframework
LectureNote2:AssetValuesandEarningsPowerValues
A. AssetValueso Thebalancesheeto Thevaluationoftangibleandintangibleassetso Otheradjustments
B. EarningsPowerValueso Theincomestatemento Expensesrelatedtogrowthactivitieso Otheradjustments
C. Comparingassetandearningspowervalueso Threecaseso Managementandbarrierstoentry
LectureNote3:Search
• Theimportanceofknowingwheretolook• Techniques
o 13Fso Screenso Specialsituations
LectureNote4:StrategicAnalysis
• Sourcesofcompetitiveadvantageo Supplybasedo Demandbased
• PerformingStrategicAnalysiso Thefirmo Theindustryo Thevaluechain
LectureNote5:Growthandvalue
Page5of7
• Theproblemofgrowth• Thinkinginthespaceofreturns• Calculatingtheexpectedreturn
o Cash-flowyieldso Futureearningsgrowth
LectureNote6:Value:Evidenceandquantitativestrategies
• Buildingquantitativestrategies• Valuestrategies• Thevaluepremiumandthevaluepremiumpuzzle• Otherquantitativestrategies:momentum
LectureNote7:Assessingmanagementandmanagerialdecisions
• Managementandbarrierstoentry• Thetypesofmanagers• Managementandcapitalallocations:Theimportanceofacquisitions
LectureNote8:Behavioralfoundationsofvalueinvesting
• Twotypesofrsk1. Externalrisks2. Internalrisks:overconfidence,extrapolation,self-attribution,…
• Protectingyourselfagainstbehavioralbiases:Organizationalrepairs
LectureNote9:Riskmanagement
• Managingtherisks:Stockso Permanentimpairmentofcapitalandthemarginofsafety
• Managingtherisks:Portfolios• Managingtherisks:Macro-risks• Takingadvantageofcrises
Cases
• HudsonGeneral–1998• Magna–2008• DollarGeneral–2018• Walmart–2018• Intel–2018• Amazon–2018• Deere–2018• Nestle–2018
Page6of7
• Ferrovial–2011• Nike–2018
METHODOFEVALUATION
Thegradewillbebasedon:
1. Classparticipation:Iwillselectnamesatrandomatthebeginningofclassandthencallonyou.Thisisintendedsimplytoelicitparticipationandattention.
2. Therewillbethreecasesduesinclass.Pleaseemailtheteachingassistantinthemorningofthecorrespondingdaythecaseduethatday.Itisagroupprojectsoonlysendoneemailpergroup.
3. Avaluationexerciseprojecttobeassignedthelastdayofclassandthatwillbetwoweeksaftertheendoftheclass.PleaseemailapdfofyourprojecttotheclassTA.
Page7of7
Casequestions
1) Thefirm• Whatdoesthecompanyunderstudydo?• Whatarethereportingsegments?• Doesthefirmcompetewiththesamefirmsacrossallreportingsegments?• Isthefirmreasonablymanaged?• Suppliers,customers?
2) Theindustry• Whoarethefirm’scompetitors?Complementors?• Doallthefirmsintheindustryhavesimilarreportingsegments?• Istheindustrychanging?• Arethereanybarrierstoentryintheindustryinwhichitoperates?• Werethereanybarrierstoentrythatarenowgettingunderminedbytechnologicaldisruption?
3) Valuation• Assetvalues
o Whatarethecriticalassetsthefirmowns?o Arethemissingintangiblesimportant?o Arethereanyoff-balancesheetliabilitiesthatcompromisetheviabilityofthecompany?
• Earningspowervalueso Isthemeasureofcurrentearningsagoodmeasureofsustainableearnings?o Arethereanyrelevantcorrectionsthatneedtobemadetocurrentearningstoarriveata
reasonablemeasureofsustainableearnings?o Aretherecyclicalcomponentstoearnings?o Whatistheappropriatediscountrate?
• Growtho Isthecompanyreinvesting?o Aretheyreinvestinginsegmentswithhighreturnoninvestedcapital?o Aretheyreturningcashtoinvestorsattheexpenseofprofitablegrowth?
4) Wouldyouinvestinthiscompany?