Applied Value Investing
SPRING, 2014
Applied Value Investing
Eric Almeraz & David Horn
Spring Semester, 2014
Tuesdays 5:45 - 9:00 PM, Room Uris 328
Office Hours & Contact Details TBA
Teaching Assistant TBA
REQUIRED COURSE MATERIAL
Readings will be assigned/handed out over the course of the semester.
REQUIRED PREREQUISITES AND CONNECTION TO THE CORE
The learning in this course will utilize, build on and extend concepts covered in the following core courses:
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Core Course
Corporate Finance
Financial Accounting
Global Economic Environment
Managerial Economics
Strategy Formulation
Connection with Core
1. Cost of Capital
2. Valuation
3. Financing Options
4. Time value of money
5. Opportunity cost (of capital)
6. The Capital Asset Pricing Model (CAPM)
7. Firm Valuation Model
1. The “accounting equation”
2. Revenue and expense recognition
1. Risk Management
2. What is Gross Domestic Product and how is it
measured?
3. What causes inflation?
4. What causes changes in exchange rates?
5. What are the causes of business cycles?
6. What are the effects of monetary policy?
7. What are the effects of fiscal policy?
8. What is the role of financial markets in the economy?
1. Barriers to entry
2. Moats
3. Analyzing complex decision-making under uncertainty
4. Pricing with market power
5. Market segmentation and other advanced pricing
strategies
6. Understanding market competition and equilibrium
thinking (in the short-run)
7. Market equilibrium thinking (in the long-run) and
barriers to entry
1. Trade-offs, value-added, efficiencies
2. Competing firms
3. Ethics & IBS
4. Management
Students will be expected to have mastered these concepts and be able to apply them in the course.
COURSE DESCRIPTION
This course will provide a detailed application of the value investing approach from the perspective of a first year equity
analyst at an investment management company. The course will address many of the issues that typically arise in the real
world. We will explore essential topics such as idea generation, filtering, researching, valuing, financial modeling,
pitching, monitoring, and selling. Students should expect to finish the course with a familiarity and basic understanding
of the demands on a first year analyst, and critically, how to develop one’s own investment process based on the core
tenets of value investing.
COURSE OBJECTIVES
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While valuation mechanics will be the foundation of the course, we will emphasize a real-world application of this skill.
As such, there will be a significant amount of required reading on topics ranging from investment philosophy to
behavioral psychology.
Each class will require a high level of interaction and student participation. Students should be comfortable interacting not
only with the professors but with other students and guests as well. The course will include guest speakers where
appropriate. Feedback is vital to the success of this class and it is important that everyone feel comfortable both giving
and receiving critiques.
Students will be responsible for a final presentation at the end of the semester. The final presentation will be on a security
selected by the student. The final assignment will require deliverables over the course of the semester which will
correspond to class topics.
ASSIGNMENTS
There will be a variety of reading assignments and deliverables. There will be a final presentation, as referenced above.
The course will move quickly and it is assumed that each student has a solid handle on the prerequisite material. The
workload will be significant and intense at times.
METHOD OF EVALUATION
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Class Participation - 35%
Homework & Assigned Readings - 35%
Final Assignment - 30%
CLASSROOM NORMS AND EXPECTATIONS
It is assumed that students will give the class, and their fellow classmates, their full attention. Please reserve use of
electronics for class related activities only.
CLASS TOPICS
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Class 1 - Tuesday, January 29th
○ The Basics Of Value Investing
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Class 2 - Tuesday, February 5th
○ Building A Process Around Value Investing
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Class 3 - Tuesday, February 12th
○ Real Time Case
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Class 4 - Tuesday, February 19th
○ Different Valuation Techniques
○ Types Of Investments
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Class 5 - Tuesday, February 26th
○ What’s Historically Worked & Not Worked In Investing
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Class 6 - Tuesday, March 5th
○ Behavioral Finance
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Class 7 - Tuesday, March 26th
○ Shorting
○ Frauds, “Broken” Companies, Etc
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Class 8 - Tuesday, April 2nd
○ Working With A Portfolio Manager
○ Portfolio Considerations
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Class
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Class 10 - Tuesday, April 16th
○ Foreign Investing
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Class 11 - Tuesday, April 23rd
○ Final Company Presentations
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Class 12 - Tuesday, April 30th
○ Final Company Presentations
○ Closing
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9 - Tuesday, April 9th
Macro - Why A Value Investor Should Care
Key Metrics To Follow
Bubbles