Checkout this new value investing idea:
The supporting Valuation can be viewed by clicking on the following PDFs:
Definition of ‘Economic Moat’: The competitive advantage that one company has over other companies in the same industry. This term was coined by renowned investor Warren Buffett. To learn more about Economic Moats, please see the follow article I wrote: http://www.gurufocus.com/news/263062/economic-moats-durable-competitive-advantage-and-wide-moat-investments/affid/127983
How do you build an Economic Moats Model? They say a picture is worth a thousand words. In teaching, a sample is worth a thousand explanations…
Well, instead of doing a lot of explaining I thought I could show you a sample of Apple’s Economic Moats Model I built last year. Please see the following PDF file: Adept-Analyst-Economic-Moats-Sample-Analysis
Investopedia defines Discounted Cash Flow (DCF) as follows: “A valuation method used to estimate the attractiveness of an investment opportunity. Discounted cash flow (DCF) analysis uses future free cash flow projections and discounts them (most often using the weighted average cost of capital) to arrive at a present value, which is used to evaluate the potential for investment. If the value arrived at through DCF analysis is higher than the current cost of the investment, the opportunity may be a good one.”
How do you build a Discounted Cash Flow (DCF) Model? They say a picture is worth a thousand words. In teaching, a sample is worth a thousand explanations…
Well, instead of doing a lot of explaining I thought I could show you a sample of Apple’s DCF Model I built last year. Please see the following PDF file: Sample-DCF-Model
Active return alone is not sufficient in measuring the manager’s performance over a series of measurement periods. For example, if you have Manager A who earns a constant 0.5% active return over each of the last four quarters and Manager B who earned active returns of 8%, 5%, -3%, and -8% over the same four quarters. The average active returns for Manager A and Manager B are both 0.5%, but Manager B experienced much more volatility or less consistency than Manager A.
A better measure of a manager’s ability to consistently generate active returns, we utilize the Information Ratio. We standardize average active return by dividing it by its standard deviation. The Information Ratio equals the portfolio’s average active return divided by the portfolio’s tracking risks.
The higher the Information Ratio, the more active return the manager earned per unit of active risk. The Information Ratio is very similar to the Sharpe Ratio. Their numerators are similar because they both compare the average portfolio return to a benchmark. The Sharpe Ratio uses the risk-free rate as the benchmark and the Information Ratio uses a portfolio benchmark return like the S&P 500, Dow Jones Index or one that best matches the investment style of the managed portfolio. In the denominator, both uses standard deviation to measure dispersion/variability. The Sharpe Ratio uses the standard deviation of portfolio returns over the measurement period, while the Information Ratio uses the standard deviation of the active return over the measurement period.
1) Download the historical monthly price of your mutual fund from websites like Yahoo.
2) Download the historical monthly price of your benchmark like SPY for S&P 500 from websites like Yahoo.
3) Calculate monthly returns for mutual fund and benchmark ((Current Month Price + Dividends)/ Previous Month Price – 1).
4) Calculate mutual fund return less benchmark return.
5) Calculate average monthly returns for both mutual fund and benchmark.
6) Calculate standard deviation of mutual fund return less benchmark.
7) Information Ration = (Average Monthly Mutual Fund Return – Average Monthly Benchmark Return) / (Standard Deviation of Mutual Fund Return less Benchmark).
Words are not always enough, so I provided samples. Attached is an Excel file with calculations for Berkshire Hathaway Inc. (BRK-B) and Oaktree Capital Group, LLC (OAK) Information Ratios (click here for file: Adept-Analyst-Information-Ratio).
The following is an updated ITT Educational Services Inc. (ESI) Better Investing Valuation: ESI
Guru Focus Value Idea Contest: Get on board the earnings train of Express Scripts (ESRX)
The in depth Research for this company can be found at the following:
The supporting Valuations can be viewed by clicking on the following PDFs: