Friday, September 30, 2011

Chips that might help with your view of China's rocketing GDP

Empty buildings, empty cities... We need to think twice of China's 8% some GDP when these governmental construction projects do not benefit people's daily life.  Now Greek fails, the whole contiental bails it out.  One day if China fails, is there a Germany to help it out?


Wednesday, September 28, 2011

Brown Capital Mgmt Event, September 28th 2011

Topic: Investment Analysis Process
Speaker: Mr. Daman Blakeney, Director / Portfolio Manager, Brown Capital Management

Host: Equity Analyst Team
Location: Carey Business School Room 201

--Lorena Li

Monday, September 26, 2011

Sept. 24 Saturday Meeting

When the rest of the team were crunching numbers for the ratios on Saturday meeting, Hussain found them easily from Bloomberg terminal...

Then he mocked at us...

Wednesday, September 21, 2011

As an owner of the business you are better off with a share buyback than dividends giving that your stock is undervalued. This will be a super good option when the stock is undervalued.
A lot of research shows that shareholders are better off with share buyback. As simple as this, if the company P/E ratio is 12 and it dose share buyback, the shares outstanding will be lowered after the buyback and hence will increase the P/E. As a result, you, and investor, make more money through stock appreciation than you would do through the dividends payout, because you are dealing with P/E multiple of 12. In addition to the tax advantage and the perception of the market toward your undervalued stock.
Share buyback is showing under the name "Treasury Stock" at the Owner's Equity in the Balance Sheet. And they are negative in the Balance Sheet. And in many cases companies list them as they describe how much dividend they paid right after the balance sheet or somewhere in the 10-k report.  

Hussain Jubail

Monday, September 19, 2011

Migration Paths to New Technology

September 19, 2011

After receiving several friends’ proposal to order the Windows 7 system, recently I am starting my trip to explore the IT business and strategies for technology/information products.

What is the hidden engine behind improving technology and information product innovation? New technology can win the market eventually and create more benefits for producers. So how can producers persuade/attract customers switching to new/improved technology? Offer customers an attractive migration path to a new technology. What obstacles need overcome? Is there any strategy they use to smooth user migration paths to new technology?

The primary technical obstacle for technology innovators must have to do with the need to develop a technology that is at the same time compatible with and yet superior to existing product. Only in this way can producers keep customers’ switching costs low, by offering backward compatibility, and still offer improved performance. The obstacles to the compatibility and performance trade-off are not unique to upstart companies which are trying to survive in the competition with market leaders. Those leaders in the market face these challenges as well. Microsoft held back the performance of Windows XP so that users could run old application temporally only compatible in the XP environment, and left enough time for software producers to upgrade their products for Windows 7. And although Microsoft has clearly indicated that Windows Vista is a transition operating system and that its eventual goal is to move us to windows 7, there are still a bunch of people using Windows Vista (and I am one of them).

One popular way to deal with the compatibility/performance trade-off is to offer one-way compatibility. When Microsoft offered Office 2010 as an upgrade to Office 2007, it designed a part of the file formats used by Office 2010 incompatible with the Office 2007 formats. Word 2010 could read the complete files from Word 2007, but not the other way around. With this tactic, Microsoft could introduce product improvements while making it easy for Word 2010 users to import files they had created using older versions. This one-way compatibility could create an interesting dynamic: early adopters have a hard time sharing files with their slower-to-adopt fellows. Something has to give. Microsoft surely is hoping that organizations would shift everyone over to the latest version of Office to ensure full interoperability. However, when potential users see the costs of an inconvenient environment for sharing, they would begin to delay deployment of the latest version. I am thinking that could probably be the reason for Microsoft to offer users the option to save files in either the new or the old version!

So the key for the strategy with respect to selling upgrades seems to give users a reason to upgrade (such as desirable new features or the desire to be compatible with others) and also to make the process of upgrading as easy/smooth as possible. The difficulty with the tough incompatibility strategy is that users may decide not to upgrade at all, which is why Microsoft today has already softened its incompatibility strategy – Office 98 even cannot open files under Office 2003 format.  

Lorena Li

Monday, September 12, 2011

Modern Portfolio Theory vs. Value Investing

In my Capstone portion of my masters degree at Johns Hopkins I am learning that an optimal portfolio can be constructed by looking at the beta of the firm.  This I already knew....

After being a member of the Equity Analyst Team and looking at how the two of the greatest investors of all time (Benjamin Graham and Warren Buffett) construct their investment portfolio's I'm not so sure if MPT is the best course of route.  I calculated beta for 10 stocks using regression analysis, diversified the portfolio, confirmed using a correlation matrix I constructed, and most importantly I made sure that the firms I picked were within the realm of how the MPT is supposed to be utilized. 

With that being said, I also looked at the various investment funds which follow the MPT and needless to say I wasn't impressed.  The Equity Analyst Team and I will drill into this further this coming weekend and see why many funds who follow the MPT tend to under perform the market.
Note: This was first posted on:


Sunday, September 4, 2011

First Weekend Equity Analyst Team Meeting

At the first weekend group meeting for the Equity Analyst Team and Hussain and I are bombarding Lorena with information about company valuations!

Note: This was first posted on: