15.493  Practice of Finance: Perspectives on Investment Management (H2)

First, I apologize for not getting to the analysis of Walmart today. Hopefully we will get to it next week.

For the Priceline reading, I have posted an Analyst Report from 2007, when Paul was deciding if he should invest in PCLN. I have also posted a current S&P report. Please read both.

I have also posted the slides from today's class and also the stocks for your final papers and a brief description of the second one page paper.

For the second one page paper, give your 4-7 factors that would be part of your investment philosophy and explain why you believe each one is important in valuing stocks.

Here are the seven stocks that you can pick from for your final paper:

Mosaic (MOS)  Intuitive Surgical (ISRG)   SAP (SAP)  Coach (COH)   Lulumelon (LULU)  3D Systems (DDD)   China Mobile (CHL)

Suggestions for what the paper should include:
• 1 page describing the company, interesting facts about the company, the company's competitors broadly defined and then the 3-4 key competitors.
• 1-2 pages on the company's 3 or more competitive strengths, their 3 or more competitive weaknesses and explain why for each one.
• 1-2 pages of what you think will be the 1-2 key issues that will determine the near term and long term stock price (they could be different for each time frame).
• 1-2 pages creating an estimated Income Statement for 2014-2016 (the next 3 years).
• 1-2 pages- examine the income statement, cash flow statement, and balance sheet- explain one or two interesting financial details for each statement that is relevant in analyzing the stock and why. (it could be a ratio, a percentage, an absolute number, or some footnote, etc)
• 1-2 pages- use two different valuation metrics that you think are appropriate for the company and explain why they are appropriate. Then determine if the stock is a BUY or SELL and explain why you made that decision.

These are just suggestions. Feel free to include any additional material that you think would be valuable. You are on your own for this assignment. We will not be posting any Wall Street Reports for the assignment. Look forward to your papers.

I thought it may be helpful for the Walmart discussion this week to think about valuing Walmart using the following framework.

How does WMT's current P/E ratio compare to its historical P/E multiple?

It is near the lower end of its historical P/E. Should it be?

How does its P/E and P/S ratios compare to its competitors, most notably Target and Costco? Does it make sense that both are  higher?

How does its P/E ratio compare to the market (S&P 500)?

It is similar, slightly less. Should it be?

How does its P/E ratio compare to other large fairly mature consumer companies, like Coke, Proctor and Gamble, McDonalds, Macy's? Should it be valued similarly? What would be some reasons that it should be or should not be?

These questions also may be helpful in your remaining 2 Page Papers in putting a framework together for a lower and upper bound for the stocks you are writing about.

The second one page Buffett paper will be due on May 7th.

For those of you writing a company report on Priceline, it is also be due on May 7th.

If you have not already written a company report on Wal-Mart and you would like to, you can turn it in this week, April 30th.