Security Analysis

The course’s objective is to present a rational investment philosophy and process for equity security analysis and capital allocation. The course has three sections: (1) Investment Philosophy and Capital Markets What is the objective of security analysis and investing? Why does a value-based methodology win over time? Does Modern Portfolio Theory explain empirical evidence? What is more instructive for investment analysis – determining value or expected return? What is the difference between “cheap” and “mis-priced”? (2) Investment Process – Valuation and Competitive Strategy What is the difference between a great business, a good business and a bad business? How can we evaluate when a business and/or an industry’s mid-long term economics change? How can we evaluate company specific structural mis-pricings that exist? How can we categorize investment opportunities to improve how we value and define them? How can we define a process to source mis-pricings into investment categories? What are the commonly used valuation methodologies and which are most instructive for certain situations? What is the most effective framework for modeling a business and what are the pitfalls? How can we evaluate management’s history of capital allocation? How important is it and how do we factor this into valuation? (3) Capital Allocation and Global Macro What top-down inputs are instructive for a security analyst? What lessons have we learned from previous bubbles? Can computing and evaluating asset class expected returns help source where a security analyst might find mis-pricings and compounding opportunities? How do we evaluate secular headwinds or tailwinds for industries and businesses? What are the pitfalls of consensus thinking and is there a benefit to seeking the edge of the crowd? What are the key economic data points that truly inform the analyst where we are in certain cycles? The curriculum will seek to answer these questions by first reviewing investing principals and concepts. Thereafter we will bring in company executives and investment practitioners to provide real world evidence of these principles in action and allow for students to participate in a thoughtful, factual dialogue.