...The case GMO: The Value versus Growth Dilemma describes Dick Mayo’s puzzlement by the New Economy’s continuous bias toward growth-investment strategies. As one of the most celebrated value investors in the United States, he examines the basics of his philosophy versus that of a growth orientation by evaluating long-term expected returns of several value and growth stocks. The following paper was examined to pursue several objectives: (1) to define value and growth investing – where the differences lie and whether one approach is superior to the other or whether both have merit; (2) to perform basic valuations of Cisco Systems (a growth company), CVS, R.R. Donnelly and Manor Care (value companies) and to compute their long-term expected returns; and (3) to discuss issues concerning the consistency of GMO’s investment philosophy even when the market seems to run counter to it for a prolonged period of time. In this respect we will also consider the issue if value investing can still deliver significance in this New Economy or if is it only an Old Economy concept and if we would invest in GMO. Background GMO was founded in 1977 by Dick Mayo, Jeremy Grantham and Kingsley Durant. From its beginning the company applied a fundamental bottoms-up approach to institutional investing, focusing on out-of-favor, sometimes unexciting domestic companies trading below intrinsic value (U.S. Active). Throughout the 1980s and early 1990s this strategy of identifying and investing in undervalued...
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...Gmo: the Value Versus Growth Dilemma GMO: The Value Versus Growth Dilemma | 1. What is value investing? What is its rationale? What are GMO’s main arguments in favor of value investing? Value investing is a way of investing in company stocks that are considered either undervalued or out-of-favor by the market. In other word, a value investment is one where the intrinsic value of the stock is not accurately reflected in the current market valuation. The underlying reason of too much decreasing in the stock price is that the company may be losing market shares or even in trouble due to market’s panic attributed to negative rumors as well as having management problems. Since the market price has dramatically descended, the book to market ratio of that stock will conversely increase. Consequently, this fraction is an important indicator that value investors will look at in order to justify if a particular stock is value stock or not. The rationale for investing in such value stock is that after the forces that are depressing the stock have diminished, the market price of value stock can only go upward from the bottom position to realize the stock’s hidden potential value at some point in the future. Notably, the key assumption is that once the market finally acknowledges the inefficiency that the price is too low when compared to the expected future returns, it will bump up the price and the value investors will directly benefit from the capital gain on those value stocks. Basing...
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...Hello my name is Emiliya I transferred from Mt. Hood C.C. a year ago right now I’m a sophomore in PSU., and I am majoring in architecture. English is my second language and I apologize for grammar. One of the reasons I choose this major was that I love to design things such as furniture, buildings and clothes. And also I love art and I love painting spatially with oil colors. Every time when I put my effort, time and recourses into my projects, I love seeing people loving my designs and giving me some fees back. Being appreciated might be a little selfish but I enjoying it so much. It expires me to keep doing what I did and every time I finding myself getting better over and over again and this process never stops for me. The idea of bringing new designs and styles into this world makes me feel like I am doing something historically important. Even though it might not be quite true, I know that for closest people to me it means a LOT. As long as they believe in me I will never stop making them be proud of me. Wow I never thought about this cultural divide between people in our days but I suddenly realized that it actually true. Not a long time ago I watched “Ukraine Has a Talents” TV show. There were people with all different types of repertoire. And all people who did well and who passed to another level had this new types of songs and they used this new way of articulation on the stage than those who choose to stick with an old cultural songs. I guess there is no question…...
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...Group Investment Memorandum The RBS Group’s business seems promising and I suggest investing $1 million in the business, exiting in three years, that is, at the end of fiscal year 2000-2001. Milestones While the business seems quite promising, there are certain milestones RBS will need to achieve in the following three years. First, within the next month RBS will have to hire a vice president who will focus on sales since its second phase will focus on increasing sales to secure market share. While the current executives of RBS have done a great job, they will need additional expertise since the sales role will switch over to newly hired sales personnel of their regional offices. Also, RBS will need to find another $1million for its next round. Since Walnut Venture Associates can only raise $1million, it is imperative that RBS find another source of funding to power through its second phase of business. Considering the prospect of RBS and its well-established relationship with big technology firms, this should not be too much of a problem. Next, RBS will have to enter the third phase of expanding its business in foreign countries should begin in the beginning of fiscal year 2000-2001. Two years after phase two, its revenue flow is projected to become more stable and cash flow turns to profit. Therefore, this seems to be the right time to enter phase three and boost up its value one last time before the exit. Finally, in order for RBS to sustainably carry out its...
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...Warren Buffett Case Warren Buffett is the role model to all investors; therefore, I believe what he believed in is right (at least to him). However,we need to understand that not all of his rules work for everyone. Buffett's first rules is not to lose. The second rule is not to forget the first rule. He is absolutely right about this because risk management is always the key to success in investing. I think that valuing a share based on its relative performance to similar shares is a good strategy to make sure the return on your investment. The comparison of an investment against other returns available in the market was an important benchmark of performance is a good point. Moreover, Buffett also said that we should invest based on sound research and a detached emotional state and not to become an emotional slave to day to day price fluctuation. Buffett also has his points when he said that we should not believe in Efficient Market Theory because the market does have efficient sometimes doesn't mean the market always have its efficient. The intrinsic value is another point that inspired me because I agreed with him about we should focus on the firm's future output but not the historical input. However, I slightly disagree that accounting reality is useless. It is because we can't tell a firm's financial health by just looking at the economic reality. I also think that his heavy focus on economic reality relies too heavily on subjective evaluation of intangible assets and sometimes...
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...SIVA SIVANI INSTITUTE OF MANAGEMENT BUSINESS RESEARCH MANAGEMENT LITERATURE REVIEW ON ‘RARE INVESTMENT 4 C’S OF INVESTMENT’ By T. Sandhya Rani 2B2-56 Rare Investment created the ‘Rare Investment 4 C’s of Investment’ to encourage investors to do their homework. We believe that education leads to smart investment decisions. COMPETENCE What is the company’s competence? Who is the company? What’s their background? What do they know about buying and selling diamonds? Established in 1989, Rare Investment is proud to be one of Canada’s leading authentic Rare Jewel Diamond Houses with unrivalled expertise in the sales and service of natural fancy colored diamonds and rare jewel investments. Through our 30-year history in the industry and our long-standing reputation with the industry’s leading mining and polishing companies, we provide investors with direct access to the world’s rarest diamonds with the greatest potential for appreciation. CREDIBILITY In any organization ‘credibility’ is paramount. When looking to invest in diamonds, we encourage investors to learn about a company’s leadership and credibility. Rare Investment's strategic operations are overseen by an executive team with expertise and experience in rare diamond valuation, diamond education, brand management, as well as significant expertise in the diamond trade. Rare Investment is backed by a sophisticated team of industry experts, GIA certified diamond advisors, highly-educated market...
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...order and we assure you that we will take to the necessary measures to resolve these issues as soon as possible. I would like to confirm that one of the issues you addressed in your letter was that we had not shipped you the type of seed you had originally ordered for your farm. Once again, we do apologize and can assure you that it was a mistake on our behalf. To make up for it, we would like to issue you a refund from your last purchase in addition to gifting you a 50% discount on your next purchase. Furthermore, we will also be sending you a variety of seeding that our company offers so that you may sample a few of our other products. We understand the inconvenience this has caused for you and express our sincerest apologies. We value your feedback as it aids us in determining areas for improvement. Once again, our main focus is to keep you as a satisfied customer. With deepest gratitude, we appreciate your communication and hope that we will serve...
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...be worth. This is the implied value. There is no way to know the exact, true intrinsic value, which is why you need to argue why Buffett may want to buy Pacificorp for $9.5bil despite the implied value being ~$9bil. So the question remains where else might Buffett see value? For a person in his position: 1) He could make Pacificorp more profitable but placing better managers in there, 2) He could lobby congress to make laws favourable for his acquisition of utility firms, 3) He could just want any large investment to spend his 40$bil cash reserves instead of earning low returns on cash. 4) there may be synergistic benefits between Mid American & Pacificorp. There are just some basic examples, you need to apply what you've learnt from reading Buffett's investment philosophy and infer where else might he see potential in the acquisition of Pacificorp. Section 1: with the valuation, you don't need to do your own valuation, however you do need to start with a rough estimate of Pacificorps value by either: looking at the comparables or quickly reading what the tax office valuation says the value should be. Then you need to discuss why Buffett might think Pacificorp is a good buy with respect to his value investing methods. In other words, use the Pacificorp case an an example to contrast Buffet's value investment method with traditional CAPM/Markowitz Portfolio theory, and how Buffett, givne his position is able to add value to the companies he...
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...barber shops and then selling them for a profit. Buffett began trading stocks at a young age with success. It was obvious Buffett knew what he was doing as an adolescent and I think this set the foundation’s for his strategies later in life. It also shows that he would not invest something he was not familiar with. Who is not familiar with gum, lemonade and pin ball as a kid?? Warren Buffett was first exposed to formal training in investing at Columbia University, where Buffett studied under Prof. Ben Graham. Graham developed a method that identified undervalued stocks and this was Buffett’s cornerstone approach of what is now called “valued investing”. From 1962 up through the 80’s Buffett really made his mark on the financial institutions across the US. In 1965 Buffett took a risk with Berkshire Hathaway, at first did not pan out but in 1967 with the purchase of stocks in two separate companies it showed how Buffett’s patience has paid off. In 1970 when he became CEO of Berkshire, this was the mark that changed investing for everyone in...
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...Stock Analysis – Cisco Systems Timothy L. Miller FI560 Securities Analysis Miriam Benard December 11, 2011 Abstract The purpose of this paper is to make a buy or sell recommendation for Cisco Systems stock based on technical and fundamental analysis. The technical analysis consists of analysis of the following; * Return on Equity (ROE) * The company’s projected future growth of earnings * Analysis of its required rate of return using the CAPM measurement * The company’s intrinsic value using the discount valuation technique. The fundamental analysis consists of describing the competitive forces in the industry including the company’s relative advantages and disadvantages to its competitors and a discussion on ROE as the basis for growth. Based on the technical analysis, it appears that Cisco’s stock is under priced. Its intrinsic value is $23.55 in 2011 (see calculation in CAPM section) which is quite a bit higher than its current price. Background Cisco designs, manufactures, and sells Internet Protocol (IP)-based networking and other products related to the communications and information technology (IT) industry and provides services associated with these products and their use. They provide a broad line of products for transporting data, voice, and video within buildings, across campuses, and around the world. These products are designed to transform how people connect, communicate, and collaborate. Cisco conducts its business globally...
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...Warren Buffett is Born Warren Edward Buffett was born on August 30, 1930 to his father Howard, a stockbroker-turned-Congressman. The only boy, he was the second of three children, and displayed an amazing aptitude for both money and business at a very early age. Acquaintances recount his uncanny ability to calculate columns of numbers off the top of his head - a feat Warren still amazes business colleagues with today. a fierce critic of the interventionist New Deal domestic and foreign policy, and his wife Leila (née Stahl). Buffett's DNA report revealed that his paternal ancestors hail from northern Scandinavia, while his maternal ancestors hail from Iberia (present-day Spain[15]) or Estonia.[16] It's been also reported that Warren is not related to Jimmy Buffett despite the same surname.[15] Buffett began his education at Rose Hill Elementary School in Omaha. In 1942, his father was elected to the first of four terms in the United States Congress, and after moving with his family to Washington, D.C., Warren finished elementary school, attended Alice Deal Junior High School, and graduated from Woodrow Wilson High School in 1947, where his senior yearbook picture reads: "likes math; a future stockbroker" At only six years old, Buffett purchased 6-packs of Coca Cola from his grandfather's grocery store for twenty five cents and resold each of the bottles for a nickel, pocketing a five cent profit. While other children his age were playing hopscotch and jacks, Warren was making...
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...RSM330 Assignment 2 – Group Work Due: March 20, 2015 in class & online Question 1: Fundamental Analysis (Total 20 Marks) a) i. These two companies are both in the Auto Parts and Equipment industry. ii. The auto industry sells discretionary goods, which consumers can afford to purchase more of in a booming economy. Therefore these companies stocks are cyclical since their price can be affected by ups and downs in the economy. b) |Magma |2012 |2013 |2014 | |Net Profit Margin |4.6% |4.5% |5.1% | |Asset Turnover |1.9x |2.0x |2.0x | |Leverage |1.81 |1.86 |2.09 | |ROE |(4.6%)(1.9x)(1.81) |(4.5%)(2.0x)(1.86) = 16.74% |(5.1%)(2.0x)(2.09) | | |= 15.8% | |= 21.3% | |Linamar |2012 |2013 |2014 | |Net Profit Margin |4.5% ...
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...based on how consumers perceive prices and what they consider the current actual price to be—not on the marketer’s stated price” states Kotler (2012). He further goes on to explain that customers may have a lower price threshold at which prices means inferior or unacceptable quality, while a high price threshold at which prices are refused determine that the product is not worth the money. The price of a gallon of fuel should represent what the money customers could have spent using to buy something else. The price a customer is willing to pay represents the value or worth of that product is to the customer. Customers may use price to determine quality of the product. In this case study, the price of Fuller’s oil is was lower than Bellmore’s cash price of that day, but for 15 cents more per gallon customers could join the guaranteed price program, which would guaranteed the set price regardless of fluctuations. The value of a guaranteed price and a worry-free program was more attractive to customers who decided to be a part of the guaranteed price program. What does the customer get? They get peace of mind for an extra 15 cents per gallon, which to them that partook, it was worth it. What are the benefits and risks to the customer should they elect to participate in the guaranteed price program? Is it a fair program? Why or why not? The benefits to the customers that participated is that, if the price had gone up for oil they were guaranteed only to pay $.749 dollars per gallon...
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...UPS's Values, Mission, and Strategy Vision : In last year’s annual report, I outlined the four transformative strategies that guide our vision of the future: • Deploying technology-enabled operations • Providing unique and industry-specifi c customer solutions • Expanding our global network • Serving the needs of end consumers around the world UPS made measurable progress on each of these fronts. The growth in e-commerce, coupled with our leading position in fast-growing segments like healthcare, enabled us to generate a 3.9 percent increase in total volume, to 4.27 billion packages during 2013. However, higher demand for lightweight, low yielding solutions, led to a 0.6 percent dip in average revenue per package during 2013. UPS continues to invest heavily in our global network. In November, we completed the expansion of our air hub in Cologne, Germany, which increased capacity there by 70 percent. The Cologne project was part of $500 million in scheduled facility expansions across Europe, Latin America and Asia over a two-year period. Our management team is focused on optimizing the performance of our global network. I believe these investments will enable UPS to build on our reputation for reliability and service. Values: Our Enduring Beliefs • Integrity - It is the core of who we are and all we do • Teamwork - Determined people working together can accomplish anything. • Service - Serving the needs of our customers and communities is central to our success...
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...Piotroski Screen on Greenblatt’s Value Stock Introduction There are several methods to pick value stocks, for example FamaFrench model, Hagen model or Greenblatt model. Each model has its own merit and makes sense in its own way. In our last paper, we discussed if FamaFrench model is a good model both in sample and post sample. In this paper, we discuss the consistency between Greenblatt model and Piotroski screen method in picking excellent value stocks. Data We chose 30 stocks from magicformulainvesting.com which get the highest score in value stocks the website gives us. We download the fundamental data of each company from Bloomberg. Methodology First we use Greenblatt’s method to pick the best value stock. We calculate Return On Capital(ROC) using these formulas: ROC = EBIT/(Net Working Capital + Net Fixed Assets) In which, Net Working Capital = Current Assets – Current Liabilities Net Fixed Assets = Long Term Investment +Property Plant & Equipment Then we calculate Enterprise Yield, EY = EBIT/Enterprise Value In which, Enterprise Value = Market Capitalization of Equity + Debt – Cash Then we rank the value of ROC and EY and take the sum of these two ranks, choose the lowest value as our stock pick. Then we do a Piotroski screen. Picking Stock We choose 30 stocks from magicformula website, and rank all the stocks by scores. Ticker | Total Rank | PWER | 6 | ESI | 9 | UIS | 11 | GTAT | 11 | AFAM | 12 | PDLI | 13 | ...
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