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Web Casts: Valuation - Fall 2014
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This 26-session equity valuation class will be taped starting September 3, 2014, 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
.
Introduction to Valuation
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 Fall 2014 class).
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 Fall 2014 class).
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 Fall 2014 class).
Part
IV: Closing Presentation
This page will include the webcasts from the current class. The webcasts
can be accessed in one of three ways:
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)
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)
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.
The prior semester's webcasts
can be found here.
If you want to join the Lore page for this class (or just lurk), here is
the
link. For a more active social media presence in the class, try the YellowDig site for the class.
If you would like to watch the sessions on Apple iTunes U on your Apple device, try this link.
Finally, you can read the emails that I send to the class by this link,as well as the newsletters for the class.
| Session Webcasts | Topics covered | Lecture notes |
1 (9/3/14) (Video downloadable file will be posted when ready). Webcast, streamed (need a good internet connection) |
Introduction to Class |
Syllabus
for class |
| Post-class test and solution. | ||
Valuation of the week # 1 |
Alibaba: A Chinese Online Merchandiser (IPO) Alibaba: The Background Story |
Google shared spreadsheet of Alibaba valuations |
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. |
SEC website SEC Live FRED (Federal Reserve) |
2 (9/8/14) Webcast, streamed (need a good internet connection) |
Valuation bias: A test and my solutions | Introduction to Valuation (Pages 5-18) |
Narrative versus Numbers |
||
| Post-class test and solution. | ||
Valuation of the week # 2 |
Arca Continental (A Mexican Beverage Company) The Back Story |
Google shared spreadsheet of Arca Continental valuations |
3 (9/10/14) Webcast, streamed (need a good internet connection) |
Cash flow consistency: A test (Congoleum) | Introduction to valuation: 19-End |
| Contingent Claim Valuation DCF Big picture DCF inputs: The Discount Rate - Setting the table - Risk and the marginal investor - The riskfree rate |
||
| Post-class test and solution. | ||
Weekly Challenge #1 |
Reconciling firm and equity valuation |
Weekly challenge #1 Solution |
| Estimating a Risk free rate |
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4 (9/15/14) Webcast, streamed (need a good internet connection) |
Risk Premiums: A test | Lecture note packet 1: Pages 31-52 The Fed Effect on Interest Rates |
| The Equity Risk Premium - Historical Risk Premiums - Country risk premiums & measuring exposure |
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| Post-class test and solution. | ||
Valuation of the week # 3 |
Valuing the S&P 500 (September 16, 2014) Bubble Warnings |
Google shared spreadsheet of valuations of the S&P 500 |
5 (9/17/14)
Webcast, streamed (need a good internet connection) Video podcast (downloadable) Audio Podcast (downloadable) |
Implied Equity Risk Premiums: A test | Lecture note packet 1: 53-79 |
| Implied Equity Risk Premiums - More on estimation - Interaction with other "risk" premiums First steps on betas |
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| Post class test and solution | ||
| Weekly Challenge # 2a | Implied Premium versus Risfree Rate |
Implied premium challenge, data and solution |
| Valuation Tools Webcast #2 Implied Equity Risk Premiums |
The logic and the measurement questions behind equity risk premiums | Presentation Spreadsheet S&P 500 on buybacks S&P 500 earnings |
6 (9/22/14) |
Betas and cost of capital: A test | Lecture note packet 1: 80-103 |
| Bottom up beta: The approach The cost of debt Debt ratios Cost of capital First steps on cash flows |
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| Post class test and solution | ||
Valuation of the week #4 |
The Krispy Kreme Stock Buyback (and effect on value/price)
|
Google shared spreadsheet on KKD valuation |
7 (9/24/14) Webcast, streamed (need a good internet connection) Video podcast (downloadable) Audio Podcast (downloadable) |
Cash flows: A test | Packet 1: 104-121 |
Earnings and cash flows |
||
| Post class test and solution | ||
| Weekly Challenge # 3 | Adjusting Operating Earnings |
Weekly challenge #3 Solution & Synthetic rating |
| Valuation Tools Webcast #3 Trailing 12 month earnings |
How to use financial statements to create trailing 12 month numbers | |
| Valuation Tools Webcast #4 Converting leases to debt |
The process of converting operating lease commitments to debt | |
| Valuation Tools Webcast #5 Capitalizing R&D expenses |
The process of converting R&D (and like expenses) from operating to capital expenses | |
8 (9/29/14) |
Growth rates I: A test | Packet 1: Page 122-147 |
| Tax Rates Cap ex: Broadening the definition Working capital investments From FCFF to FCFE Leverage and FCFE Growth rates - Historical growth rates - Analyst estimates of growth |
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| Post class test and solution | ||
Valuation of the week #5 |
The Yahoo Puzzle: A Walking Dead Discount? |
Google shared spreadsheet for Yahoo valuations |
9 (10/1/14) |
Growth rates II: A test | Packet 1: Pages 148-173 |
| 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 Terminal value |
||
| Post class test and solution | ||
| Review session for the first quiz | ||
| Weekly Challenge # 4 | Estimating fundamental growth |
Weekly challenge Solution |
| Valuation Tools Webcast #6 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. | |
10 (10/6/14) Webcast, streamed (need a good internet connection) Video podcast (downloadable) Audio Podcast (downloadable) |
Take the first quiz and check out the solution as well as the distribution of grades for the class. | Packet 1: 174-189 |
| Terminal value Choosing the right model |
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| Post class test and solution | ||
Valuation of the week #6 |
Political Investing: The sad, but true, story of Petrobras
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11 (10/8/14) Webcast, streamed (need a good internet connection) Video podcast (downloadable) Audio Podcast (downloadable) |
Loose Ends: A test | Packet 1: 190-209 |
| Valuing Cash Dealing with cross holdings Other assets |
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| Post class test and solution | ||
Weekly Challenge #4a |
Terminal Value | Weekly challenge Solution |
| 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 |
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12 (10/13/14) Webcast, streamed (need a good internet connection) Video podcast (downloadable) Audio Podcast (downloadable) |
DCF valuation: A test | Packet 1: 210-238 |
| Complexity Debt & Legal Jeopardy Dealing with Employee Options Narrative and Numbers |
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| Post class test and solution | ||
Valuation of the week #7 |
Valuing a Momentum Stock: GoPro
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Weekly Challenge #5 |
Management Options and Equity Value | |
13 (10/15/14) Webcast, streamed (need a good internet connection) Video podcast (downloadable) Audio Podcast (downloadable) |
DCF Valuation II: A test | Packet 1: 239-266 |
| Valuing young, growth companies Valuing mature companies Valuing declining and distressed companies Valuing emerging market companies |
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| Post class test and solution | ||
| 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 |
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14 (10/20/14) |
Packet 1: 267-300 | |
| Valuing distressed companies Valuing emerging market companies Valuing financial service companies |
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| Post class test and solution | ||
Valuation of the week #8 |
Breaking up is hard to do: HP
|
Google Shared Spreadsheet |
15 (10/22/14) |
Packet 1: 295-End
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| Valuing Cyclical & Commodity Companies Price versus Value Relative valuation - Description - Ingredients |
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| Post class test and solution | ||
| Review session for the second quiz | ||
Weekly Challenge #6 |
Multiple: Definitional test | Weekly Challenge Solution |
16 (10/27/14) Webcast, streamed (need a good internet connection) Video podcast (downloadable) Audio Podcast (downloadable) |
Relative Valuation IIa: Test | Packet 2: 9-42 |
Analysis of multiples |
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| Post class test and solution | ||
Valuation of the week #9 |
Amazon: The Field of Dreams Company |
Google Shared Spreadsheet |
17 (10/29/14) Webcast, streamed (need a good internet connection) Video podcast (downloadable) Audio Podcast (downloadable) |
Take the second quiz and check out the solution as well as the distribution of grades for the class. | Packet 2: 43-60 |
- More on analyzing multiples |
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| Post class test and solution | ||
Weekly Challenge #7a |
Relative valuation | Weekly challenge Solution |
Valuation Tools Webcast #11: EV, Firm Value and Equity Value |
The "value" embedded in a multiple can be the value of the entire firm, the value of its operating assets (enterprise value) or the value of the equity. In this webcast, we look at the differences between the three and why you may use one over the other. | Blog post on topic Presentation Excel spreadsheet |
Mystery Project (Due November 14 at 5 pm) |
The mystery project | Data for mystery project |
18 (11/3/14) Webcast, streamed (need a good internet connection) Video podcast (downloadable) Audio Podcast (downloadable) |
Relative Valuation IIIa: Test | Packet 2: 61-102 |
| Sector regressions: Unstable or young sectors Market regressions Picking the right multiple Relative versus Intrinsic value Sector versus Market value Picking the right multiple |
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| Post class test and solution | ||
Valuation of the week #10 |
eBay: An Argument for Focus? |
Google Shared Spreadsheet |
19 (11/514) Webcast, streamed (need a good internet connection) Video podcast (downloadable) Audio Podcast (downloadable) |
Private Company Valuation: A test | Packet 2: 103-139 |
Asset based valuation |
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| Post class test and solution | ||
| Weekly Challenge # 8 | Relative Valuation versus DCF valuation | Weekly challenge Solution |
Valuation Tools Webcast #12: Multiples and Fundamentals - Analyzing relationships |
When asked the value a company, relative to other companies, one of the biggest challenges you face is in assessing and analyzing the data. In this presentation, I looks at steps in analysis. | |
20 (11/10/14) Webcast, streamed (need a good internet connection) Video podcast (downloadable) Audio Podcast (downloadable) |
Private Company Valuation II: Test | Packet 2: 140-End Packet 3: 1- 12 |
Valuing an initial public offering (IPO) |
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| Post class test and solution | ||
Valuation of the week #11 |
Valuing a Sports Franchise
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Google shared spreadsheet |
21 (11/12/14) Webcast, streamed (need a good internet connection) Video podcast (downloadable) Audio Podcast (downloadable) |
Real Options: Introduction | Packet 3: 13-44 |
| Options in investment analysis - Tests for making a "real options" argument - The option to delay - A patent as an option |
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| Post class test and solution | ||
Weekly Challenge #9 |
Private company valuation | |
| Review session for the second quiz | ||
22 (11/17/14) |
Take the third quiz and check out the solution as well as the distribution of grades for the class. | Packet 3: 45-62 |
| More on real options - The option to expand - The option to abandon - Financial flexibility as an option |
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| Post class test and solution | ||
Valuation of the week #12 |
Go where it is darkest: The 4C Companies |
Google shared spreadsheet |
| Real Options II: Test | Packet 3: 63-89 | |
Valuing Financial Flexibility as an Option Acquirer's Anonymous: Setting the table |
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| Post class test and solution | ||
Weekly Challenge #10 |
Patent valuation | Weekly Challenge Solution |
| With money-losing companies, with a lot of debt, equity takes on the characteristics of a call option (to liquidate the business). In this webcast, I look at the mechanics of applying this approach to a troubled company. | ||
24 (12/1/14) (Audio stinks. I am sorry but I don't think it is fixable. The problem is in the recording). |
Acquisition tests | Packet 3: 90-122 |
Acquisition Valuation |
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| Post class test and solution | ||
Valuation of the week #13 |
A crowd valuation of Uber |
Google shared spreadsheet |
| Value Enhancement: Test | Packet 3: 123-146 | |
| Value enhancement - Price versus Value Enhancement - Ways of enhancing value - The expected value of control - Implications |
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| Post class test and solution | ||
26 (12/8/14) Webcast, streamed (need a good internet connection) (Sorry, but first 25 minutes were not recorded.) |
Closing presentation - A big picture review - Project findings |
Closing presentation Project summaries |
Review session for the final exam |
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Final Exam (12/12/14) |
Take the final exam & check the solution. |