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REIT Investing with Tim Pire

Supplemental training session

Dan Pickett 0 478 Article rating: 4.0

UW’s AREIT Director Tim Pire discussed real estate investment trusts with members during a recent session. His attached presentation covers the history of the sector, performance of different property types, and how analysts evaluate the demand drivers in order to assess FFO (funds from operations – the REIT “equivalent” of EPS) and NAV (net asset value – the value of the real estate less debt and preferred stock). There are many commonalities in analyzing REIT securities and other equity securities. The remaining training sessions will be focused on introducing the tools you need to perform your own company and stock analysis in order to develop a pitch and to  evaluate the pitches of other members.

Identifying an Idea

Special training session

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At the last regular CMC meeting, we reviewed the attached slides for identifying ideas. There are many approaches, but often the starting position reflects an investor’s philosophy about how opportunities are created and can be exploited. That philosophy can be related to investment style, i.e. some investors tend toward “value” ideas and others toward “growth” ideas. Academics define value and growth in precise terms, but it is better to think of them more conceptually and reasonable to associate them with behavioral biases. A value investor generally believes the market/investors overreacted to something causing the stocks’ price to deviate from its true intrinsic value. There is an opportunity to buy when research suggests the stock will revert to that intrinsic value as whatever caused the deviation recedes into the past or improves. A growth investor generally believes the market/investors are underreacting to a company’s favorable trends (growth). They believe there is an opportunity to buy and benefit when research suggests the growth will continue.

One way investors look for ideas is by screening for stocks with characteristics associated with growth or value. We briefly discussed the Factset Universal Screening tool. As with many of its applications, Factset includes short tutorials with its Online Assistant and eLearning resource describing how to use its Universal Screening application. You access these resources at the ? in the upper right corner of your menu if you are in the FAL or on the bottom of the left side menu on the web version of Factset. We also created the video Screening for Ideas with Factset to demonstrate how to access a CMC folder with the screens highlighted in the attached slides and to describe how Universal Screening works by walking an example. Let us know what you think.

Valuation with Multiples

Advanced Training Session - 2/11/2020

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We had good attendance at the 1st "advanced" training session last week where we focused on valuation and using multiples to develop a target price. The slides used have been added to the Training session folder accessible from the Resource Guide page of the website, but are also attached here. I've also attached the spreadsheet used to download historical fundamental and valuation data for comparable companies with Factset FDS codes. You need to use one of the computers in the FAL to use this sheet.

Many attendees had not particiapted in the 1st semester introductory training sessions. You can view the slides used in those sessions from the cmc-uwmadison.org For Members>Resource Guide page by selecting the LINK TO TRAINING SESSION SLIDES. There are also readings you may find helpful at the LINK TO RESEARCH READINGS. 

The club executive board will be sending a survey to better understand whether you found the training session of value. We have additioanl topics planned, but are prepard to pivot to whatever you collectively think will be most useful. If you participated, your response will be greatly appreciated. 

TRAINING SUPPLEMENT

Readings and Video

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We added three new readings to supplement the company analysis training session - found on the For Members>Resource Guide page of the webiste at the LINK TO TRAINING SESSION READINGS.

  • Analyzing a Company – The Basics (Ch. 6) discusses evaluating the growth prospects, profitability, financial health, and risk of companies.
  • The Five Competitive Forces that Shape Strategy reviews how analyzing the structure of an industry can help you understand what’s influencing company profitability and identifying trends in the competitive forces can help you anticipate changes in profitability.
  • What Makes a Moat describes the concept of economic moats (structural barriers that protect companies from competition) and reviews Morningstar’s classification of moat sources: intangible assets, cost advantages, switching costs, network effects, and efficient scale.

Finally, UW-ASAP alum Andrew Lane, a Morningstar strategist recently met with the 1st year ASAP students to discuss the Morningstar Moat framework for analyzing companies. A video of Andrew’s talk is here.

Screening for Ideas

Using Factset

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In an earlier post (Investment Philosophy Matters When Generating Ideas) we highlighted that growth and value investors typically look at different things when identifying new ideas. Growth investors tend to focus on growth in sales and earnings, while value investors focus on price relative to something that proxies for the value of the company like assets, earnings, or cash flows. Professional investors generate ideas in many ways, but one common approach is to use screens that filter a large universe of stocks for the ones with characteristics the investors think likely to yield attractive investments - consistent with their philosophy. Factset has a powerful screening tool you can use to identify your own ideas.

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