Lecture 7: Student Investment Presentations, Magic Formula, and Review

This lecture will give you insights into how a great investor assesses companies and investment problems.

As I mention in the 48-page document below, there is gold here.

http://www.scribd.com/doc/68221298/Lecture-7-Student-Investment-Presentation-Magic-Formula-Review

Your comments, questions and criticisms are always welcome.

Happy Columbus Day!

3 responses to “Lecture 7: Student Investment Presentations, Magic Formula, and Review

  1. This is one of the best lectures of the series. I highly recommend a careful study.

  2. John,
    I have some questions about Lecture #7. I’m not sure if the transcript got garbled here or what, but it doesn’t make such sense to me. Specifically, I am referring to page 4 where Analyst is discussing Footlocker. He said the following:

    Analyst: This applies to both presentations–operating margins are the value investors’ growth number. The scariest thing to get into earnings is that you feel the urge to go to a reversion to the mean thesis or management estimate thesis like FL. Often those are the best answers you can come to, but the best you can do in all cases is to try to get as bottom up to that number as you can. Do what GI suggested which is to separate the businesses. You did that with operating leases and how they made progress at FL.

    I don’t get the connection between separating the businesses and operating leases. Do you know what he is getting at?

    I don’t get the CLE discussion at all. Out of nowhere, Analyst brings up the multiple they used. Was that on a slide or handout of some sort?

    Why no comments on K-Swiss?

    Thanks

  3. Dear Andy:

    Good questions. The main point is to always separate out different business segments from each other; don’t lump businesses together in your analysis.
    In Footlocker, the analyst is describing the different leases that Footlocker will not renew. This is like a hidden asset or future boost to earnings. The company is rolling off some high priced leases that will not be renewed and the company could probably negotiate better terms elsewhere. GI found this out from talking to the CFO.

    The other lesson is the amount of homework you have to do.
    The CLE is from a student presentation/handout. Sorry. I would ignore.

    Regards, John Chew

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