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Web Casts: Valuation (Undergraduate) - Spring 2017

 


This 28-session equity valuation class will be recorded starting January 23, 2017, and the lectures are accessible in multiple ways. You can get the supporting lecture notes by clicking on the pdf files below - the pages covered by each lecture are provided next to each lecture. For the syllabus and other details, visit the home page .

Lecture Notes

  1. Introduction to Valuation
  2. Part I: Discounted Cashflow Valuation: This is a pdf file and works well if you have an iPad or tablet to read it on If you have trouble printing this file, download the powerpoint file. You can then choose to print the slides, one to a page, two or a page, in note format or whatever your heart desires. (Updated for Spring 2017 class).
  3. Part II: Relative Valuation and Private Company Valuation : This is a pdf file and works well if you have an iPad or tablet to read it on If you have trouble printing this file, download the powerpoint file. You can then choose to print the slides, one to a page, two or a page, in note format or whatever your heart desires. (Updated for Spring 2017 class).
  4. Part III: Real Options, Acqusition Valuation and Value Enhancement: This is a pdf file and works well if you have an iPad or tablet to read it on If you have trouble printing this file, download the powerpoint file.You can then choose to print the slides, one to a page, two or a page, in note format or whatever your heart desires. (Updated for Spring 2017 class).
  5. Part IV: Closing Presentation

Webcasts
This page will include the webcasts from the current class. The webcasts can be accessed in one of four ways:

  1. Streaming video (The file will be streamed to your computer. This will work only if you have a good internet connection, but should be of the best quality and the most information)
  2. Video podcast (The file will be downloaded to your computer and you can watch the video using Quicktime or video software or on your iPod)
  3. Audio podcast (The .mp3 file will be downloaded as an audio file and can be played on any audio player). The AV system used to record the lectures has changed and I think it is much improved.
  4. YouTube videos (if you have slower internet connection and/or a small device).

Options for following class

You can follow this class in other forums. One is iTunes U, where you can watch the webcasts and follow the class on your tablet or even smartphone. The other is YouTube.

  1. Apple iTunes U: If you would like to watch the sessions on Apple iTunes U on your Apple device, try this link.
  2. YouTube: I have created a playlist for the class, where the sessions will be posted sequentially with links to slides and other material.

Finally, you can read the emails that I send to the class by this link.

Session Webcasts Topics covered Lecture notes
Preview of the class
What is this class about?
 

1 (1/23/17)

  1. Webcast, streamed (need a good internet connection)
  2. Video podcast (downloadable)
  3. Audio podcast (downloadable)
  4. YouTube


Introduction to Class
  1. Syllabus for class
  2. Project Description
Post-class test and solution.
Valuation of the week #1

A Jedi Valuation of Star Wars

  1. A Post on the value of the Star Wars Franchise (December 2015)
  2. Star Wars Franchise Valuation spreadsheet
  3. Star Wars, The Force Awakens - Actual Box Office
  4. Rogue One - Box office as of January 23, 2016
Google Shared Spreadsheet

2 (1/25/17)

  1. Webcast, streamed (need a good internet connection)
  2. Video podcast (downloadable)
  3. Audio podcast (downloadable)
  4. YouTube


Valuation bias: A test and my solutions
  1. Introduction to Valuation

Why bother (with valuation)?
The Bermuda Triangle of Valuation
Intrinsic Valuation: The Big Picture
Relative Valuation: The Big Picture
Real Options: The Big Picture

Post-class test and solution.
Valuation Tools Webcast #1
Getting Data for Valuation
Data collection: The first step
In this webcast, I look at the basics of getting the raw material needed for valuing a business - financial statements, sector information and macro economic data.
  1. SEC website
  2. SEC Live
  3. FRED (Federal Reserve)

3 (1/30/17)

  1. Webcast, streamed (need a good internet connection)
  2. Video podcast (downloadable)
  3. Audio podcast (downloadable)
  4. YouTube
Cash flow consistency: A test (Congoleum)
  1. Lecture note packet 1: Pages 1-33
DCF Big picture
DCF inputs: The Discount Rate
- Setting the table
- Risk and the marginal investor
- The riskfree rate
Post-class test and solution.
Valuation of the week #2

Valuing a Sports Franchise

  1. Ballmer buys Clippers: News story
  2. My blog post on the Clippers
  3. My spreadsheet for valuing the Clippers
  4. Updated numbers on pricing of sports franchises (NFL, NBA, MLB & NHL)
  5. Soccer and IPL cricket Team numbers
Google Shared Spreadsheet

4 (2/1/17)

  1. Webcast, streamed (need a good internet connection)
  2. Video podcast (downloadable)
  3. Audio podcast (downloadable)
  4. YouTube

 

Risk Free Rates: A test
  1. Lecture note packet 1: Pages 33-59
  2. Sovereign Ratings - January 2017
  3. Sovereign CDS Spreads - January 2017
  4. Equity Risk Premiums by Country - January 2017

Risk free Rates
- Across Currencies
- Across time
- Negative Risk free Rates?
The Equity Risk Premium
- Historical Risk Premiums
- Country risk premiums & measuring exposure

Post-class test and solution.
Weekly Challenge #1

Reconciling firm and equity valuation

  1. Weekly challenge #1
  2. Solution
Valuation Tools Webcast #2
Downloadable webcast
YouTube
Much of the raw material (data) that we use for valuation comes from annual reports and financial filings. (10, 10Q). In this presentation, I lay out a template for extracting information from these filings, separating the stuff that matters from the stuff that does not, using P&G in September 2012 as an illustration.
  1. Presentation
  2. P&G: 10K
  3. P&G: Valuation (Excel spreadsheet)

5 (2/6/17)

  1. Webcast, streamed (need a good internet connection)
  2. Video podcast (downloadable)
  3. Audio podcast (downloadable)
  4. YouTube

 

Risk Premiums: A test
  1. Lecture note packet 1: 60-77
  2. Implied ERP: February 2017
Implied Equity Risk Premiums
- More on estimation
- Interaction with other "risk" premiums
First steps on betas
Post class test and solution
Valuation of the week #3

Apple, The Greatest Cash Machine in History?

  1. Setting the table
  2. Narrative Resets: Revisiting a Tech Trio (August 2015)
  3. Race to the top: The Duel between Apple and Alphabet (February 2016)
  4. Icahn exits, Buffet enters: Whither Apple? (May 2016)
  5. Apple latest 10K (thru Sept 2016) and latest 10Q (thru Decembet 2016)
  6. My latest valuation of Apple (February 2017)
Google Shared Spreadsheet

6 (2/8/17)

  1. Webcast, streamed (need a good internet connection)
  2. Video podcast (downloadable)
  3. Audio podcast (downloadable)
  4. YouTube


Betas and cost of capital: A test (just page 2) Lecture note packet 1: 80-107
Measuring Relative Risk (Betas & Alternatives)
The cost of debt
Subsidized Debt
Post class test and solution
Weekly Challenge # 2a

Implied Premium versus Riskfree Rate

Implied premium challenge, data and solution
Valuation Tools Webcast #3
Estimating a risk free rate

Estimating a risk free rate

Estimating a risk free rate should be simple but it is often not. In some currencies, where there are no default free entities, it may take some work getting to a risk free rate. In this webcast, I look at the mechanics of this adjustment.

  1. Presentation
  2. Moody's ratings (3/13)
  3. CDS spreads (3/13)
Valuation Tools Webcast #4
Implied Equity Risk Premiums
The logic and the measurement questions behind equity risk premiums are examined in this webcast. Presentation
Spreadsheet
S&P 500 on buybacks
S&P 500 earnings
7 (2/13/17)
  1. Webcast, streamed (need a good internet connection)
  2. Video podcast (downloadable)
  3. Audio podcast (downloadable)
  4. YouTube

Cash flows: A test Lecture Notes 1: 108-129

Earnings and cash flows
- Cleaning up earnings
- Normalizing earnings
- Dealing with negative earnings

Post class test and solution
Valuation of the week #4

A Valuation of PZ Cussons Nigeria

  1. PZ Cussons Nigerian: Background (their web site)
  2. Financial History for PZ Cussons (Cap IQ)
  3. My valuation narrative for PZ Cussons
  4. My valuation of PZ Cussons (Spreadsheet)
Google Shared Spreadsheet

8 (2/15/17)

  1. Webcast, streamed (need a good internet connection)
  2. Video podcast (downloadable)
  3. Audio podcast (downloadable)
  4. YouTube


Growth rates I: A test Packet 1: Page 130-158

Accounting Fraud & Negative Earnings
Tax Rates
Reinvestment
From FCFF to FCFE
Leverage and FCFE
Growth rates
- Historical growth rates

Post class test and solution
Weekly Challenge # 3

Adjusting Operating Earnings

Weekly challenge #3
Solution & Synthetic rating
Valuation Tools Webcast #5
Trailing 12 month earnings
How to use financial statements to create trailing 12 month numbers
  1. Apple: 10K
  2. Apple: 10Q
  3. Apple Trailing 12-month (spreadsheet)
Valuation Tools Webcast #6
Converting leases to debt
The process of converting operating lease commitments to debt
  1. Disney Annual Report
  2. Converting leases to debt (spreadsheet)
Valuation Tools Webcast #7
Capitalizing R&D expenses
The process of converting R&D (and like expenses) from operating to capital expenses
  1. Microsoft: 10K for 2012
  2. Microsoft: 10K for 2011
  3. Converting R&D to capital (spreadsheet)
Valuation of the week #5

A Camera Company? The Snap IPO

  1. Snap: Prospectus
  2. My blog post on Snap IPO
  3. My Snap Valuation
Google Shared Spreadsheet

9 (2/22/17)

  1. Webcast, streamed (need a good internet connection)
  2. Video podcast (downloadable)
  3. Audio podcast (downloadable)
  4. YouTube
Growth Rates II: A Test Packet 1: Pages 159-183
Historical Growth Rates
Analyst Estimates of growth
Fundamental growth rates
- Growth in earnings per share
- Growth in non-cash net income
- Growth in operating income
- Efficiency growth
- Growth when margins are changing
Post class test and solution
Review session for Quiz 1
Webcast
Review session for the first quiz
  1. Review presentation
  2. Past Quiz 1s
  3. Solution to Past Quiz 1s
Weekly Challenge # 4

Estimating fundamental growth

Weekly challenge
Solution
Valuation Tools Webcast #8
Estimating accounting returns (ROE, ROIC)
In assessing whether a company's existing investments are good or not, we draw on accounting return measures: return on invested capital and return on equity. However, navigating what should be in invested capital and what should not, and how to adjust for accounting inconsistencies is tricky.
  1. Walmart 10K (2013)
  2. Walmart 10K (2012)
  3. Spreadsheet

10 (2/27/17)

(First 30 minutes for quiz)

  1. Webcast, streamed (need a good internet connection)
  2. Video podcast (downloadable)
  3. Audio podcast (downloadable)
  4. YouTube
Take the first quiz (a or b) and check out the solution (a or b) as well as the distribution of grades for the class. Packet 1: Pages 184-195

Fundamental growth rates
- Efficiency growth
- Growth when margins are changing
Terminal Value: First steps
Post class test and solution
Valuation of the week #6

Tesla: The Story Stock

  1. My blog post on Tesla
  2. Tesla's most earnings release and last year's 10K
  3. My Tesla Valuation (July 2016)
Google Shared Spreadsheet

11 (3/1/17)

  1. Webcast, streamed (need a good internet connection)
  2. Video podcast (downloadable)
  3. Audio podcast (downloadable)
  4. YouTube


Terminal Value Packet 1: Pages 196-220

Terminal Value
Choosing the Right DCF Model
Valuing Cash
Dealing with cross holdings

Post class test and solution
Weekly Challenge #4a
Terminal Value Weekly challenge
Solution
Valuation Tools Webcast #9 (Checking Terminal Value)
The terminal value is a "big" number in DCF valuation, but it is subject to misuse and manipuluation. In this session, I take a look at how you can detect problems with a terminal value computation (in both your own DCFs and in other people's DCFs) Sample DCF valuation
Terminal value analyzer

12(3/6/17)

  1. Webcast, streamed (need a good internet connection)
  2. Video podcast (downloadable)
  3. Audio podcast (downloadable)
  4. YouTube


More Loose Ends: A Test Packet 1: 221-248
Cross Holdings
Other Assets
Complexity
Debt & Legal Jeopardy
Dealing with Employee Options& Restricted Stock
Post class test and solution
Valuation of the week #7

Deutsche Bank: A German Bank in Crisis!

  1. My blog post on Deutsche Bank (October 2016)
  2. My valuation of Deutsche Bank (October 2016)
  3. News story about Deutsche (March 5, 2017)
Google Shared Spreadsheet

13 (10/26/16)

  1. Webcast, streamed (need a good internet connection)
  2. Video podcast (downloadable)
  3. Audio podcast (downloadable)
  4. YouTube


Story Telling and Number Crunching

Packet 1: 249-265
Narrative & Numbers: Changing your story
Valuing a stable growth, dividend paying company
Valuing the market
Post class test and solution
Valuation Tools Webcast #10: Dealing with Employee Options
When companies compensate employees with options, they create a second claim on equity. When valuing common shares in these companies, you have to incorporate the effect of options outstanding on equity value and I try to look at how in this webcast. Cisco 10K
Option spreadsheet

14 (3/20/17)

  1. Webcast, streamed (need a good internet connection)
  2. Video podcast (downloadable)
  3. Audio podcast (downloadable)
  4. YouTube


DCF Valuation Introduction: A test Packet 1: 266-285
Valuing a stable growth, dividend paying company
Valuing the market
First steps into the dark side
Post class test and solution
Valuation of the week #8

Valeant: From Star to Cash Cow to Dog to Damaged Goods

  1. Checkmate or Stalemate: Valeant's Fall from Grace (November 2015)
  2. Valeant: Information Vaccuums, Management Credibiity and Investment Value (April 2016)
  3. Faith, Feedback and Fear: Ready for the Valeant Test?
  4. Valeant: Damaged Goods or Dirt Cheap Stock?
  5. My Valuation of Valeant in March 2017
Google Shared Spreadsheet

15 (3/22/17)

  1. Webcast, streamed (need a good internet connection)
  2. Video podcast (downloadable)
  3. Audio podcast (downloadable)
  4. YouTube


DCF Valuation II: A test

Packet 1: 286-310
Valuing young companies & start-ups
Valuing mature companies in transition
Valuing declining & distressed companies
Post class test and solution

16 (3/27/17)

  1. Webcast, streamed (need a good internet connection)
  2. Video podcast (downloadable)
  3. Audio podcast (downloadable)
  4. YouTube



DCF Valuation III: A test

Packet 1: 311-347

Valuing Emerging Market Companies
Valuing financial service companies
Valuing pharmaceutical companies
Valuing Cyclical & Commodity Companies
Price versus Value

Post class test and solution
Review session for Quiz 2
Webcast
Review session for the second quiz
  1. Review presentation
  2. Past Quiz 2s
  3. Solution to Past Quiz 2s
17 (3/29/17)
  1. Webcast, streamed (need a good internet connection)
  2. Video podcast (downloadable)
  3. Audio podcast (downloadable)
  4. YouTube



Price and Value: A Test
  1. Packet 1: 348-End
  2. Packet 2: 1-23

Value and Price
- The Gap
- The Investor Challenge
Relative Valuation
- First steps
- Four steps in deconstructing multiples

Post class test and solution
Weekly Challenge #5
Management Options and Equity Value

Weekly challenge
Solution & Option value