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Applied Value Investing

Fall 2016
JEFF GRAMM and TERRENCE KONTOS
Classroom: Uris 328
Professor Office Location: n/a
Office Phone:
Fax:

212-854-1933 (Heilbrunn Center)

212-851-9509 (Heilbrunn Center)

E-mail: jeff@banderapartners.com; tk2121@columbia.edu

REQUIRED COURSE MATERIAL


Required reading throughout the term includes:
1. SEC filings related to companies we are studying, company call transcripts and other available data
2. Financial Publications (e.g. The Wall Street Journal, The Financial Times, Barrons)
3. Additional articles assigned related to speakers or topics of interest as the semester progresses (will be
distributed in class and/or via email)
**There are no good textbooks for this course. We assume because you are in an advanced security analysis class at
Columbia you have read at least parts of the following books:
Greenwald et al, Graham and Dodds Security Analysis, Sixth Addition OR
Cottle, Murray, and Block, Graham and Dodds Security Analysis, Fifth Addition
Greenwald and Kahn, Competition Demystified, A Radically Simplified Approach to Business Strategy
Security Analysis is a must read for anyone interested in value investing.
REQUIRED PREREQUISITES AND CONNECTION TO THE CORE

Prerequisite: Capital Markets


The learning in this course will utilize, build on and extend concepts covered in the following core courses:
Core Course
Corporate Finance

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Connection with Core


1. Cost of Capital
2. Valuation
3. Financing Options
4. Time value of money

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Opportunity cost (of capital)


The Capital Asset Pricing Model (CAPM)
Firm Valuation Model
Financial Accounting
The accounting equation
Revenue and expense recognition
Resources and obligations measurement and disclosure
Global Economic
Risk Management
Environment
What is Gross Domestic Product and how is it measured?
What causes inflation?
What causes changes in exchange rates?
What are the causes of business cycles?
What are the effects of monetary policy?
What are the effects of fiscal policy?
What is the role of financial markets in the economy?
Managerial Economics
Barriers to entry
Moats
Maximization and thinking on the margin
Analyzing complex decision-making under uncertainty
Decision-based cost analysis
Pricing with market power
Market segmentation and other advanced pricing strategies
Understanding market competition and equilibrium thinking (in the
short-run)
9. Market equilibrium thinking (in the long-run) and barriers to entry
10. Strategic interaction among firms and Nash equilibrium
Strategy Formulation
1. Trade-offs, value-added, efficiencies
2. Creation of value vs. value capture
3. Competing firms
4. Co-optition and Complementors
5. Strategic interaction analysis
6. Diversification and scope
7. Ethics & IBS
8. Behavioral and evidence-based strategy
9. Management
Students will be expected to have mastered these concepts and be able to apply them in the course.
COURSE DESCRIPTION & OBJECTIVES
Our goal is to introduce students to the Graham and Dodd value investing framework in an organized manner by training
them as if they were fund analysts. The purpose of the course is to help students develop and deliver compelling
investment ideas, grounded in fundamental research. The course focuses on the practical application of theoretical
concepts and we will spend significant portions of each class presenting, critiquing and refining investment
recommendations. The ability to pitch a stock and convincingly argue that a company is undervalued by the market
will be critical to landing a job in the industry and succeeding there.
The class will be kept small to take advantage of the instructional method. Class discussions will be complemented by
guest discussions from highly regarded investment professionals from the long only and hedge fund community.

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ASSIGNMENTS
Weekly assignments will consist of investment write-ups on one or more companies chosen by the instructors.
Assignments will be due at a designated time before each session. There will be an assignment due before the first class
on February 2. The final presentation will consist of an investment write-up in addition to an oral presentation and Q&A
session.
METHOD OF EVALUATION
Class Participation
Weekly Assignments/Pitches
Final Presentation

40%
30%
30%

CLASSROOM NORMS AND EXPECTATIONS


Class Participation:
Class participation and peer reviews of investment presentations are essential to the success of the class. Please come
prepared to discuss assignments. Attendance is mandatory and absences will adversely affect your overall grade. In
order to respect the confidentiality of our guest speakers, classroom sessions will not be recorded.
Final Company Pitch:
In the second half of the course, students will be assigned a single company to research. They must prepare a detailed
pitch for final submission and presentation to the professors as well as a panel of fund managers.
Guest Speakers:
This course will involve several buy-side guest lectures; class participation will be crucial to the success of the course.

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