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24 Hours with Matěj Turek, CFA
Professional Credo: “Walking forward is a series of cleverly prevented falls.”
Friday Article Pick for CFA Candidates and CFA Charterholders: Daniel Kahneman, Amos Tversky (Econometrica, 1979) – Prospect Theory: An Analysis of Decision under Risk
Czech Scripophily: A Story of Love, Beer and Broken Promises
More
than Just a Pretty Picture!
Scripophily isn’t
the name of some rare disease, but rather a specialised branch of numismatics focused
on the study and collection of old stocks and bonds. The word is derived from
the English word "scrip" which represents an ownership right and the
Greek word "philos" which means to love. At AKRO, we have adorned the walls
of our offices not with photos or paintings but with old stock and bond
certificates. Such furnishings seem particularly fitting for a mutual fund
group whose activities are focused on such investments.
Over the years,
thousands of companies have at one time or another issued share and/or bond
certificates. It is therefore possible to focus on almost any theme to start a
collection. The railway and automotive industries are particular favourites
amongst Scripophilists. Thematic collections can include anything from
corporate scandals (Enron, Global Crossing,) to erotica (Nevada brothels,
Playboy Inc., Beate Uhse). I will confess that my collection at AKRO, and at
home, is rather eclectic in nature; a mixture of the decorative and the
historically interesting. It includes some lavishly illustrated foreign
certificates issued by Louis Bleriot, Claridges Hotels, The Port of Bruges, and
Societe Paris-France S.A. The majority of the collection is however focused on
old Czech certificates.
The Success Equation - Untangling Skill and Luck in Business, Sports, and Investing by Michael J. Mauboussin (CFA Institute, 2013)
This paper is a transcript of Michael's presentation at the Equity Research and
Valuation Conference 2012 held in Philadelphia on 6–7 December 2012 in
partnership with CFA Society Philadelphia.
For more, please see this link: http://www.cfapubs.org/doi/pdf/10.2469/cp.v30.n3.1
McKinsey on Finance Quarterly Magazine - Winter 2016
McKinsey published a new issue of its legendary quarterly "McKinsey on Finance" several weeks ago with the following four thought-provoking articles: Valuing high-tech companies; M&A 2015: New highs, and a new tone; How the best acquirers excel at integration and Pharma M&A: Agile shouldn’t mean ad hoc. It is a superb study source, which can help you integrate your knowledge from the CFA Curriculum to real business world. On top of that, the charts included might be an interesting inspiration source for your own analysis and presentations.http://www.mckinsey.com/
Speculative Half-Cycles Tend To Be Completed Badly by John Hussman, (22 February 2016)
Excerpt from the article: „Last week, the Cleveland Fed Financial Stress Index climbed to 1.92 (measured as standard deviations from the mean); a level associated with severe financial distress, and previously observed only during the 2011 market retreat, the 2008-2009 financial crisis, and the Asian crisis of 1998. This spike has been driven by widening credit spreads and other measures of systemic market-perceived risk. In 1998, a similar spike shortly preceded the collapse of Long Term Capital Management. In 2008, the spike shortly preceded the failure of Bear Stearns and Lehman Brothers. In 2011, the spike was followed by the failure and restructuring of Greek government debt… Presently, a further 40-50% collapse in the S&P 500 over the completion of this market cycle would not represent a worst-case scenario, but rather a run-of-the-mill outcome from current valuations. That prospect is coupled with an expectation of a U.S. recession, and the likelihood that Fed easing will be wholly ineffective in preventing either….
Has the Index Fairy Lost Her Powers?
It is accepted wisdom that the addition of a company in a major index
leads to a rise in its share price and a subsequently higher valuation of the
company on the stock market.
A study of the impact of S&P500 index additions and deletions,
between 1990 and 2005, found average abnormal share price returns of +8.8% for
additions and -15.1% for deletions¹. Another study focusing on the valuation of
premium of S&P500 constituents, found that, in 1997, measured in terms of
Tobin’s q ratio, S&P500 firms enjoyed a whopping 40% higher valuation than
equivalent companies not in the index². As recently as June 2015, a study by
S&P capital IQ, comparing stocks in the Russell2000 index against
non-Russell2000 index members found, when comparing the Price/book valuation of
companies, a large 62% premium valuation for index members versus non-index
members³. It’s as if there’s an Index Fairy whose magic wand has the power to dramatically
increase (or decrease) the value of a company.
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