Monday, February 28, 2011
Sunday, February 27, 2011
Though outliers exists, I can still imagine the rate of return is positively correlated with how much time an individual investor spends on his/her own analysis. Let's assume this is another factor that changes the result of an investment activity, just like beta or other variables we use in calculating expected return. By fixing the total amount of time an investor have for investing, the more he/she spends on reading and chooses to believe everything instead of double checking, the more volatile this factor will be, thus more uncertain the return will be.
Now do you feel wired because the consequences above tells you that bad things could happen to your investing account because you read more? Read it again and think about it, and you will find it DOES make sense.
There's no proof of this theory and it just came out of my random thoughts. Someone will argue that the effectiveness of reports published by large companies should at least have a log-normal distribution instead of normal, which means they won't at least make you loose money. Then why did investment companies who publish analysis reports couldn't prevent their clients loosing money back in a year ago?
Again, just some random thoughts. Welcome to comment.
Friday, February 25, 2011
Conclusion of discussion:
Today we had a informative discussion about what are the most important things to be noticed when reading company filings.
There were discussions about how negative Cash Flow from Financing (CFF) could indicate stock repurchase therefore a price pulled up, as well as how important asset structure and profit growth should be considered during the analysis.
I would also like to point out my vision on this although it's a little bit vague for some people. My idea was that everything "depends". The start point for analysts to read filings, they way we should read, and the focus point should be paid attention to, are all depend on what the company is.
I know what I said doesn't mean anything to someone, maybe not in our team. But there are so many analysts doing the "simple" analysis by applying a minor changed model from a industry such as manufacturing to retail. This is also the reason that I believe the good way to start a analyst career is to focus on one or two industries only.
How do you think?
Let me know.
Wednesday, February 23, 2011
Randy spoke to a room full of graduate student at Johns Hopkins Carey Business School about the investment process at LMCM.
Conclusion of discussion:
Today we went through the basic concepts about Basel standards. The discussion came out about how effective Basel III will be by taking problems such as liquidity risk into account.
Humza pointed out that Basel standards don't solve risks related to the systemic risk. As most of our team members learned from the Financial Institution class, Value at Risk (VaR), which is widely used by banks and other financial institutions and is also included in Basel standards to evaluate market risk exposure, is becoming to be argued about more often than in the past. More detailed information about VaR can be accessed from the following link:
Other articles we discussed can be access from follow links:
I hope our reader will find these information useful. You are also welcome to comment on our discussion.
Monday, February 21, 2011
Conclusion after discussion:
For our 6 financial companies, below is the portion of their Consumer (Retail) banking business:
JPM: Retail banking 19.2%, first
Citi: Consumer banking 30.1%, second after Sales & Trading
HBAN: included in Regional banking
CCBG: included in Retail banking in Capital City Bank
Due to the unavailability of statistical number so far, we couldn't observe the past trend of the sector. But Hamza pointed out that there's a transformation from retail banking to other services such as invest banking, possibly because of the high profit margin and relatively low cost.
We don't think the retail banking sector will disappear given the fact that individuals still need to save and borrow. Thus this business might the largely adopted by many regional banks such as UMBF and EFSC, which creates the opportunity for these small banks to either enter a new business or expand their current one to serve customers locally.
Please comment with your suggestion or whatever you think about this. I hope you will find this threat useful and we will keep posting our morning discussions here.
Saturday, February 19, 2011
The Equity Analyst Team spending our Saturday afternoon talking about the financials of the 6 banking firms which we follow.
We will have the reports published in 3 weeks.
Take a look at our events page on our website to get details about our upcoming event with Randy Befumo, Director of Research at Legg Mason Capital Management.
Randy will be talking about the investment process which the analysts follow at LMCM.
Monday, February 14, 2011
Everyone arrived at the hotel at 6:00AM Saturday, just to realize that Hamza and Chang had left their business suits on the bus! Both ended up borrowing my car and chasing down the bus driver and somehow sweet talked their way into getting the hotel address where the bus driver was staying at (negotiation skills at its finest!).
The Equity Analyst Team met with Cem Ozkaynak of Trefis (www.trefis.com) at 2 PM and had a lengthy conversation about the firm and how they conduct their valuations, their corporate growth strategy, and their training methodology. As much as we wanted to walk around Boston after the meeting, we were on a mission to arrive on time to a restaurant where Hussain reserved seats using his credit card. After we left the restaurant we met up with a few other Johns Hopkins students and called it a relatively early night so we could attend the conference Sunday morning.
Sharing a bathroom with 6 people and still managing to arrive 15 minutes before the conference started Sunday morning was one heck of an accomplishment for us! The conference went very well and had speakers from Highbridge, Centerbridge Partners, Fidelity, BlackRock, Credit Suise, etc.
Now that we're all back in Baltimore we are working towards putting together the Global Investment Conference for this upcoming fall.
More to come soon,
Wednesday, February 9, 2011