The University of Iowa
Henry B. Tippie College of Business
Department of Finance
6F:221 – Applied Securities Management I (The Henry Fund)
MW 10:55 a.m. – 12:10 p.m., C435 PC
Instructor: Todd Houge, Ph.D., CFA
Assistant Professor of Finance
Office: S288 PBB
Phone: (319) 335‐3754 – office and voice mail
(319) 335‐0929 – finance department
Faculty Website: http://www.biz.uiowa.edu/faculty/results.cfm?id=546
Course Website: (ICON) http://icon.uiowa.edu
Henry Fund: http://www.henryfund.org
Office Hours: M&W 1:15‐2:15 p.m. and by appointment
I am available to meet with Henry Fund students almost any time during
normal business hours. I teach an undergraduate class on Mondays and
Wednesdays from 2:30‐3:45 p.m. To arrange an alternative meeting
time, please email or talk to me after class. Thank you.
If you have a disability or special condition that may require some modification of the
seating, testing, or other class requirements, please notify me after class, during office
hours, or as soon as possible so that appropriate arrangements may be made. The Office of
Student Disability Services (http://www.uiowa.edu/~sds, 133 Burge Hall, 335‐1462) is also
available to assist you.
This course exposes select University of Iowa MBA students to valuation and modeling
techniques employed by investment professionals. The class is recommended for those
students targeting careers in investment banking, portfolio management, financial analysis,
and corporate finance, as well as anyone interested in gaining a better understanding of
My primary goal is that you gain a solid understanding of basic valuation techniques, the
capability to analyze the primary value drivers of a company’s stock, strong presentation
skills, and the ability to effectively communicate your ideas to potential clients. You should
leave the course with an ability to understand how an economic event might impact the
market price of a firm’s stock, knowledge of how to apply several valuation models, and an
ability to comprehend investment analyst recommendations. In general, I believe you will
leave the Henry Fund program more prepared for a financial career than most of your non‐
Henry Fund peers.
I believe that equity analysis is an art form that takes years to master. You will not become
an expert from one semester or even one year in this course. Valuing a firm’s stock is an
extremely difficult task that requires a variety of macroeconomic, industry, and company‐
specific forecasts. The number of assumptions necessary to develop a realistic financial
model often surprises many students. Because the valuation process is rarely black and
white, two individuals may reach completely different conclusions from the same
information. Although there are no “correct” assumptions, some are more clearly
supported by economic data.
Students in this course serve as portfolio managers of the Henry Fund, an equity portfolio
that is part of the University’s endowment. Founded in the spring of 1994 with an initial
investment of just $50,000, the fund is named for its two benefactors, Henry B. Tippie and
Henry Royer. In January 2008, the portfolio was worth approximately $1,500,000. A portion
of the fund assets are used to support MBA student scholarships and fund activities each
The Henry Fund was founded to create an environment where students learn by doing.
Each manager is responsible for one sector of the portfolio. Analysts analyze current
holdings, identify potential investments, implement control systems, and monitor the
Fund’s performance. All investment decisions and recommendations are subject to
approval of the Fund’s Investment Advisory Committee. This committee must endorse any
and all changes to the Fund or its charter.
In essence, Applied Securities Management is more like a directed readings course. What
you take away is primarily a function of the effort you are willing to put into your research.
Equity analysis is a very firm‐specific process. Although many individuals have tried, there is
no such thing as a “black box” or magical spreadsheet that can be applied to all companies.
You will discover that the uniqueness of every firm extends not only to their operations but
also to their financial statements and reporting standards.
Much of what we discuss in class will be at a more general level. Many of the early classes
this semester will involve lecture material as we build the foundation of the valuation
model. However, I intend to make the day‐to‐day activities student‐focused and student‐
managed. I want to expose the team to a variety of asset management tools and
techniques, integrated with material from other classes. The second half of the semester
involves a number of student‐led presentations, designed to develop communications skills
and provide feedback regarding financial models. Managers are also expected to provide
short descriptions of the current events affecting companies in the fund and their economic
sector. To be successful, this process requires active participation from everyone.
6F:221 Syllabus, Houge - 2
As students, your primary goal for the semester is to build a solid research portfolio that
utilizes a variety of valuation techniques. Everyone will also have several opportunities to
enhance their presentation and writing skills.
The course requires a one‐year commitment. The spring semester focuses on the basics of
valuation and gaining a solid grasp of the primary discounted cash flow (DCF) and economic
profit (EP) models with a goal of preparing fund managers for summer internships. The
second semester of the Applied Securities Management sequence is designed to prepare
students for their career search in investments or corporate finance. This fall we will build
upon our foundation, adding new techniques, more detailed analysis, additional sensitivity
measures, and exploring issues of portfolio composition in greater detail. The objective is to
leverage the knowledge gained from summer internships with additional valuation
techniques and more in‐depth analysis. As you begin your career search next fall, we want
you to have developed a well‐rounded research portfolio to share with recruiters.
Another goal is to develop closer ties with the external investment community. This
objective may require attending symposia, sponsoring and delivering lectures, meeting with
investment professionals when they visit the College, and making field trips to visit area
firms. Interacting with colleagues and clients is an important part of portfolio management,
and as managers of the Henry Fund, you are expected to do the same. The fund has a
reputation of providing outstanding returns and producing excellent analysis with solid
fundamentals. We will strive to uphold that tradition.
The Henry Fund is a very time consuming course, and most work must be completed outside
normal class hours. However, I hope that you will also find it one of the most valuable and
rewarding classes you take. Analysts must manage their time effectively to balance writing
research reports with job interviews and other classes.
While the course has no exams and only a few specific deadlines, avoid the temptation to
put off your research. You will not be able to create a quality analyst report overnight or in
one weekend. The best strategy is to set aside time each week to work on your research
reports and spreadsheet models.
My semester expectations for each member of the class are outlined below. More specific
details regarding the research reports will be discussed in class.
• Produce at least three (3) research reports. (You may complete more than three.)
Due dates are located on the syllabus. Late work is severely penalized.
o The first report will be an industry and economic analysis report. You may
choose to cover any specific sub‐industry from within your assigned sector.
To leverage your time efficiently, I suggest that you choose the industry of
the firm you plan to analyze first.
o The remaining two reports will be company reports. One company should
be an existing holding, preferably one that was not covered last fall. The
6F:221 Syllabus, Houge - 3
second company report may be either a potential new holding or another
existing fund holding. You need not issue any particular rating (buy, sell, or
hold), so let the investment merits of the stock should determine your final
recommendation. Both company reports must be within your assigned
o Upon completion of each report’s final draft, create an Adobe .pdf file to
post on the Henry Fund website (www.henryfund.org).
• Deliver professional presentations of your investment thesis and recommendation
to the class and the investment advisory board. These presentations must be no
longer than the allotted time (to be announced).
• Provide a detailed analysis in your presentations outlining how each company fits
within the portfolio, its risk profile and its interaction within the sector.
• Successfully complete all required administrative tasks professionally and by the
• Promptly reply to all email communications or instructor requests. Throughout
the year, I will communicate to the class by email. These messages may contain
administrative announcements, investment proposals, etc. When voting on a trade
proposal or soliciting feedback from the team, it is very important that you reply to
these messages promptly.
• Provide daily updates and descriptions in class of the latest events affecting your
companies, industries, and the economy in general. Therefore, everyone is
expected to stay current with the latest financial news.
• Attend class, arrive on time, and actively participate. Notify me in advance if you
must miss a class. The reputation of the fund and its analysts is determined by the
actions of the class as a whole. We expect everyone to contribute equally and
provide his or her best effort. We encourage you to critique one another
throughout the semester. Learn from each other and from your mistakes.
• Avoid becoming emotionally attached to the firms you follow or recommend. In the
1987 movie Wall Street, Gordon Gecko advised his protégé Bud Fox to “never get
emotional about stocks.” Investment debates in class often become rather heated.
If the class or advisory board votes down your proposal, do not take it personally.
Rather, use the opportunity to rethink your original assumptions and sales pitch.
Communicating ideas is an extremely integral part of the analyst’s job. A difference
of opinion is what drives financial markets. Lively debate among peers fosters a
more conducive learning environment.
• Develop your own spreadsheet models. As previously noted, there is no such thing
as a “black box” or magical spreadsheet that can be applied to all companies.
Although one can find numerous valuation models on the web (and even course
6F:221 Syllabus, Houge - 4
website), I strongly encourage each of you to create your own models. One
problem with a “canned” model is that you really do not know how everything
works. The best way to truly understand the model and the relationship among
accounting variables is to build your own.
• Finally, acquire a solid internship leading to a lucrative investment position with a
starting salary of $200,000 and a $50,000 signing bonus.
COURSE WRITING CONSULTANT
The financial analyst has two important duties. The first, which is the primary focus of our
time in class, involves financial forecasting and analysis to determine which companies make
good investments. However, the second job is often overlooked in its importance. It
involves communicating your ideas and recommendations to your clients. Analysts
communicate through their written reports and oral presentations. This course provides the
opportunity to develop both skills.
The MBA writing consultant will work with the class to assist with your writing and
communication issues. I strongly encourage everyone to contact Amy throughout the
semester for assistance on your reports, reading rough drafts, etc. Her contact information:
MBA Writing Consultant
Iowa School of Management
Office: E432 Pomerantz Center
Phone: (319) 335‐2686
COURSE WEB SITE (http://icon.uiowa.edu)
This course utilizes the ICON (Iowa Courses Online) course management system. Your Hawk
ID and password are required to access the sites of individual courses for which you are
registered that use the ICON system.
I intend to post class announcements and information on this site. ICON allows you to read
announcements, email class members, download lecture notes, and find links to some
potentially valuable financial research websites. I strive to continually update the site to
add new information and resources designed to assist analysts with their company analysis.
Most class lectures are based on the text listed below. Purchase of this book is optional.
Although one can likely complete this course without purchasing the text, students who
plan to pursue a career in equity analysis may want a copy for future reference. The
book was originally written as a consulting manual for training McKinsey associates on
the value‐based management philosophy used by the firm. The valuation approach
6F:221 Syllabus, Houge - 5
taught in this text is widely used among investment professionals. The book was first
written in 1990 and is probably the most widely referenced text on valuation.
• Valuation: Measuring and Managing the Value of Companies, by Tim Koller, Marc
Goedhart, and David Wessels (McKinsey and Company, Inc.), fourth edition, c. 2005, J.
Wiley & Sons, Inc., New York.
Available on reserve in the business library.
Iowa Book: $93.35 new, $70.01 used, 6% tax
University Book Store: $93.35 new, $70.05 used, 6% tax
Amazon.com: $53.55 new (free shipping), $30.00 & up used
Half.com: $45.89 & up new/used (as of Jan. 19) + shipping
• Security Analysis on Wall Street: A Comprehensive Guide to Today’s Valuation
Methods, by Jeffrey C. Hooke, c. 1998, J. Wiley & Sons, Inc.
Available on reserve in the business library.
Amazon.com: $46.75 new (free shipping), $41.50 & up used
Half.com: $40.00 & up, new/used (as of Jan. 15) + shipping
Despite the name, this text is not necessarily a comprehensive book on valuation, but
it does have some nice features. Mainly, it spends the first several chapters focusing
on how to write an analyst report, something you will spend a lot of time on this
semester. Specifically, I call your attention to chapters 5‐7. The text also has chapters
that discuss valuing firms in special industries such as energy, mining, banks, insurance
companies, and internet stocks. I will not lecture specifically from this text.
• Corporate Valuation: An Easy Guide to Measuring Value, by David Frykman and Jakob
Tolleryd, c. 2003, Prentice Hall Financial Times, London.
Iowa Book: $34.99 new, $26.25 used, 6% tax
University Book Store: $34.99 new, $26.25 used, 6% tax
Amazon.com: $25.89 new (free shipping)
Half.com: $31.00 & up new/used (as of Jan. 19) + shipping
This text is a condensed summary of corporate valuation and uses an approach very
similar to the McKinsey model. The book uses slightly different notation, but the
model is the same. The McKinsey book gives more detail. This book claims it can be
read cover‐to‐cover in about 8 hours. It is also very cheap. The book might be
especially useful to read prior to an investments related interview as a valuation
refresher. I will not specifically lecture based on this text.
• Course materials are available for download via the ICON course website. In addition,
for convenience, a course packet will also be available through the PBB copy center
(C102 PBB) by the end of the first week of class. This packet normally sells for
approximately $10.00‐$12.00 and contains a copy of the syllabus, project
assignments, and lecture materials.
• A daily news source (WSJ, Financial Times, MoneyCentral, etc.)
6F:221 Syllabus, Houge - 6
Other Reference: The following books may also be useful or worthy additions to your
reference shelf if you are interested in learning more about valuation.
• The Psychology of Investing, by John R. Nofsinger, c. 2008, third edition, Pearson
Prentice Hall, Upper Saddle River, NJ.
• Stocks for the Long Run, by Jeremy J. Siegel, c. 2007, fourth edition, McGraw Hill, New
• Applied Equity Analysis: Stock Valuation Techniques for Wall Street Professionals, by
James English, c. 2001, McGraw Hill.
• Analysis of Equity Investments: Valuation, by John D. Stowe, Thomas R. Robinson,
Jerald E. Pinto, and Dennis W. McLeavey, c. 2003, AIMR (CFA curriculum text).
• The Dark Side of Valuation: Valuing Old Tech, New Tech, and New Economy
Companies, by Aswath Damodaran, c. 2001, Financial Times Prentice Hall, Upper
Saddle River, NJ.
• Investment Valuation: Tools and Techniques for Determining the Value of Any Asset,
by Aswath Damodaran, c. 2002, second edition, J. Wiley & Sons, Inc. New York.
• Financial Statement Analysis and Security Valuation, by Stephen H. Penman, 2004,
second edition, McGraw Hill Irwin, New York.
• Real Options: A Practitioner’s Guide, by Tom Copeland and Vladimir Antikarov,
Monitor Group, c. 2001, Texere, New York.
• Applied Corporate Finance: A User’s Manual, by Aswath Damodaran, c. 1999, J. Wiley
& Sons, Inc., New York.
• The Bank Valuation Handbook: A Market‐Based Approach to Valuing a Bank, by Hazel
J. Johnson, c. 1996, Bankline Publication.
Your ultimate success in this program is not judged by the letter grade you receive, but by
the job offer you accept. Nonetheless, the university does require that grades be assigned
for this course. Your involvement in the Henry Fund does not a guarantee of an “A” for the
semester. To earn that designation you must provide quality written reports, in‐depth
analysis, develop your presentation skills, answer questions intelligently, actively participate
in class discussions, and complete all assigned tasks effectively and on time.
Grades will be allocated based on the following breakdown:
Written Research Reports (3) 50%
Class Participation, Peer Reviews, Attendance 30%
Presentations (2 in class, 1 advisory board) 20%
The School of Management and the department of finance independently adopted
recommended grading distributions for elective courses.
C, D, and F as necessary
6F:221 Syllabus, Houge - 7
This policy was established to ensure that the best students have an opportunity to
distinguish themselves and that grades serve as clear signals of class performance to
Historically, students who did not receive an “A” or “A‐” in this course failed to contribute
an acceptable level of effort compared to their peers and/or failed to consistently turn in
required assignments on time. It is possible that everyone or no one will receive an “A” for
To be successful in this class, I expect someone receiving an “A” to:
• Produce quality research reports incorporating a variety of valuation techniques,
sensitivity analysis, and forecasts. The key word is quality. While certainly the
finished product is most important, we will consider the quality and effort placed into
intermediate “rough” drafts as well.
• Effectively communicate your ideas to the class and advisory board through
professional presentations and reports.
• Turn in all reports and drafts by the required date and time.
• Promptly replay to emails and requests from the instructor.
• Complete all assigned administrative tasks as requested and on time.
• Attend class and arrive on time. Notify the instructors in advance when you need to
• Contribute positively to the classroom environment.
• Maintain ongoing knowledge of your assigned sector, economic news, company news,
and current events.
I understand that the definition of a “quality” research report is very subjective. While
quality is difficult to define, it tends to be something that one knows when they see it. I will
initially try to grade reports based on individual effort, considering the background of each
analyst. I also look for evidence that the student did more than the basic level of analysis
needed to complete the assignment. A quality report goes beyond merely reporting
historical facts. It incorporates forward‐looking analysis, providing the reader with new
information and original thought.
I will review your reports and provide feedback on an ongoing basis. Class participation is
more important here than in other classes you may take. Your colleagues serve a critical
role in decision making, simply by acting as a “sounding board.” Because of this, you need
to show up for all classes prepared and ready to contribute. Constructive, lively debate is
the most important part of making wise investment decisions. While participation can be
difficult to measure, you can improve class dialogue by: asking questions, listening carefully
to the comments of others, respecting the opinions of others, adding constructive
comments, helping to identify the key issues for discussion, and presenting an analysis of
6F:221 Syllabus, Houge - 8
ADDITIONAL QUESTIONS AND ANSWERS
What investment style does the fund follow?
Investment style and final portfolio recommendations are determined by the fund
managers. However, the investment committee will require them to be well reasoned,
coherent, and the result of a group consensus. In evaluating the portfolio, you will find that
individual decisions are not independent; what you do affects the decisions of others. The
fund faces limited financial resources. Often, purchasing shares in a new company requires
selling shares in another to raise funds. In the past, managers have focused on a long‐term
value driven strategy to meet their performance objectives. This was the result of
restrictions from the endowment, the modest size of the Fund, and a belief that this
approach would provide the best long‐term returns.
What restrictions does the fund face?
The fund is subject to the investment guidelines of the University of Iowa Foundation’s
Long‐Term Investment Pool Equity Fund. Therefore, the fund’s primary benchmark is the
S&P 500 Index. Our objective is to outperform the index without taking on additional risk.
The Investment Committee has also added additional requirements:
• Investments are restricted to stocks comprising the Value‐Line investment
universe of approximately 1700 firms. Essentially, this rule introduces a size
restriction, but the advisory board has relaxed this rule over the years.
• The Fund’s economic sector weightings can be no greater (lower) than 50% higher
(lower) than the weighting of the S&P 500 GICS weights.
• Firms must be a public company reporting to the SEC for at least five years.
• The Fund must maintain at least a 90% equity mix.
When can the fund make trades?
While portfolio changes historically occur at the end of the semester, we are free to trade at
any time the fund managers feel it is necessary. However, an early trade still requires a
written research report to be distributed to the advisory board for “approval” before trade
execution. To buy or sell a security the fund managers must:
• Provide a detailed write‐up analyzing each security, including industry projections,
detailed corporate valuations, etc.
• Post your analysis to the Henry Fund website and notify the investment advisory
committee of your intention.
• Present your analysis to the class for approval.
• Obtain approval by 2/3‐majority vote (8 of 12) from the current fund managers.
• Gain approval from the investment committee by email or at the end of the
semester presentation to the board.
These requirements are designed to make you work hard and be effective in communicating
your ideas. Most credible strategies are likely to be approved. Less credible strategies will
experience greater difficulty gaining approval. If the fund managers are well prepared, the
investment committee is unlikely to object. The committee may reject your
6F:221 Syllabus, Houge - 9
recommendation if they do not feel that you have provided a well‐reasoned analysis.
Because of the lead‐time involved in making trades, you need to begin research as soon as
Are there additional presentations?
Fund managers are occasionally asked to meet with interested groups and make
presentations to alumni or industry representatives. These presentations are sometimes on
short notice. Although additional work, you will find that these experiences expose you to
excellent networking contacts and business professionals. If we receive such a request, I will
notify the class as soon as possible.
Where can we work and gain access to computers?
The Henry Fund office in W219 is reserved for Henry Fund managers only. This key is due
back in the Dean’s Office at the end of the fall semester. Failure to turn in the key will result
in a $25 fine by the university.
This room has two or three computers with standard software and a printer. Stead
computing services (C240 PBB) upgrades the machines as they new equipment becomes
available, usually following the upgrade of the computer labs. The printers are for Henry
Fund use only. Abuse of the printers may result in elimination of their availability. Paper
for these printers can be obtained from the Finance Department.
Access to W219 is a privilege. All HF analysts will share this room. Please respect one
another’s right to work. Do NOT hold other group meetings in this room. Do NOT allow
non‐Henry Fund student to work in this room. If someone who is not in the class wants to
use a computer (no matter how short the time or how pressing the need) they cannot do so.
In addition, Henry Fund work takes complete precedence over work for other classes in this
room. Your access to W219 may be revoked if you do not adhere to these rules. Everyone
must do their part to make the room a clean and comfortable environment for all fund
When should I begin my job search?
Getting jobs in investments is difficult, but by no means impossible. The earlier you develop
a coherent strategy for contacting employers the better. Use your experiences in the Henry
Fund to lever yourself. Use your research reports to show employers what you can do
(another reason to turn in high quality work). For example, send off your resume and
industry report to Wall Street firms. If an employer sees a portfolio of credible, thoughtful
work, you are a lot less risky to them than other candidates.
Although we cannot conduct your job search for you, I am happy to do whatever I can to
help. If there are key firms that you are targeting, we would be happy to make phone calls
on your behalf. Just provide me with the names, position titles, and phone numbers of
those individuals you wish to have me contact.
6F:221 Syllabus, Houge - 10
Many careers in investments are not formally advertised positions. In addition, the top
investment banks tend to only interview at the top 10‐20 MBA programs in the country.
Therefore, for Iowa students to get their resume noticed, they have to put in a little more
effort. One strategy for finding investment related openings is to search the corporate
websites of mutual funds, insurance companies, brokerages, investment banks, large
commercial banks, etc. Companies often post their openings in less obvious places with the
presumption that those individuals who want to work there will find it. Approach your job
search this year just like you would any class. Schedule time each week to search and set a
goal for the number of resumes you want to send out. Finally, use every available resource
network. We will pass along information regarding potential career opportunities as they
How can we improve upon the work of prior Henry Fund classes?
We can always improve upon the quality, depth, and scope of research produced by the
fund. More detailed projections, quarterly forecasts, sensitivity analysis, additional
valuation techniques, Monte Carlo analysis, and confirmation of key assumptions from a
variety of sources are all areas that can be improved.
We can also improve upon the structure of the fund itself. Avoid the temptation of thinking
that the portfolio composition inherited from the previous class is optimal. Would you
choose to invest in the security if it was not currently held by the fund? Think about how
each security within your sector fits within the fund. Are the securities highly correlated
with one another or other firms in the portfolio? The market conditions over the last few
years have demonstrated what can happen when a portfolio is abnormally concentrated
across a particular industry.
We can also improve our promotion of the Henry Fund name to the business community.
We would like to see us make greater use of guest speakers and field trips. In addition, we
can do a lot more to advertise the primary asset of the fund: our analysts. Next fall, the
fund managers will prepare the FY 2007 Annual Report. This document is an important part
of advertising the fund and our research to employers.
Finally, we want to stress that I am always open to suggestions for improving the course. A
number of the recent changes to the Henry Fund course were the direct result of
suggestions from former students.
CHARTERED FINANCIAL ANALYST (CFA) EXAM
If you desire an investments‐related career (analyst, money manager, etc.), I strongly
recommend taking the CFA exam. The CFA designation is becoming almost as important as
the MBA for placement and advancement in the investment profession. Enrollment in the
CFA program also signals to corporate recruiters that you are serious about a career in
financial services. The exam covers ethics, quantitative analysis, economics, financial
accounting and statement analysis, markets and instruments, asset valuation, and portfolio
management. As finance majors, you will likely be exposed to most of the concepts covered
by the exam. Thus, you may gain an advantage by taking the exam while the material is
fresh in your mind.
6F:221 Syllabus, Houge - 11
To achieve the CFA designation, you must pass three levels of tests in succession. The level I
exam is offered twice per year. The next exam dates are June 7, 2008 and December 6,
2008. Last year only 34% of candidates passed the level I exam, but historically, the pass
rate has been around 35‐45%. Registering for the CFA is relatively expensive, but many
employers reimburse employees for registration fees when they pass. The final registration
deadline for the June exam is March 15 while the deadline for the December exam is
September 15, 2008. Registration fees are significantly cheaper if you enroll early. For
additional information, please refer to the CFA Institute website:
In previous semesters, I have worked with the Schweser Study Program to acquire
discounted Schweser Notes (www.schweser.com) CFA study materials for current University
of Iowa students enrolled in the CFA program. If you register for the exam and want to
order review materials, please let me know.
6F:221 Syllabus, Houge - 12
HENRY FUND INVESTMENT ADVISORY COMMITTEE
Marshall Bridges, CFA (HF Alum ’01) Mihail Dobrinov, CFA (HF Alum '95)
Manager, Mergers & Acquisitions Equity Portfolio Manager
HNI Corporation Principal Global Investors
414 E. Third Street 801 Grand Avenue
Muscatine, IA 52761 Des Moines, IA 50392
email@example.com (515) 362‐0203
John Everhart (HF Alum ’95) Scott Hassenstab, CFA
First Vice President, Senior Analyst Senior Analyst – Special Situations
Baird Investment Management AEGON USA Investment Management
777 East Wisconsin Ave 4333 Edgewood Road NE
Milwaukee, WI 53202‐5391 Cedar Rapids IA 52499
Dirk Laschanzky, CFA (HF Alum ‘97) Kevin Laub, CFA, CPA (HF Alum ’98)
Portfolio Manager Director of Investments
Principal Global Investors C.H. Dean Investment Management
699 Walnut, Suite 1900 3727 West 193rd Street
Des Moines IA 50309 Stilwell KS, 66085
(515) 362‐2366 firstname.lastname@example.org
John F. McClain Keith Mitchell, CFA (HF Alum ’00)
Investment Manager Director of Finance
The University of Iowa Foundation Mobilians International
P.O. Box 4550 520 Herndon Parkway
Iowa City, Iowa 52244‐4550 Suite A
john‐f‐email@example.com Herndon, VA 20170
(816) 679‐2344 (mobile)
Marty Nevshemal (HF Alum ’00) Daniela Spassova, CFA (HF Alum '96)
Director Investor Relations Fixed Income Portfolio Manager
Sprint Nextel Corp Principal Global Investors
6220 Sprint Parkway ‐ Eisenhower C 801 Grand Avenue
KSOPHD0302 ‐ 3C153 Des Moines, IA 50392
Overland Park, KS 66251 (515) 248‐3130
(913) 794‐1020 firstname.lastname@example.org
6F:221 Syllabus, Houge - 13
HENRY FUND ECONOMIC SECTORS AND COMPANY ASSIGNMENTS
ANALYST SECTOR CURRENT HOLDINGS
Chris Nelms Materials Alcoa (AA)
BHP Billiton Ltd (BHP)
Xiaoyi Yuan Consumer Discretionary Walgreen (WAG)
Target Corp. (TGT)
Walt Disney (DIS)
Joseph McSpadden Consumer Staples Central European Dist. (CEDC)
PepsiCo Inc. (PEP)
Procter & Gamble (PG)
Joseph Reed Energy Exxon‐Mobil Corp. (XOM)
Chris Nelms Noble Corp. (NE)
Peabody Energy (BTU)
Yuliya Ivanova Financial Services Amer. Capital Strategies (ACAS)
William Aldridge Bank of America (BAC)
Deutsche Bank (DB)
Franklin Resources (BEN)
Travelers Companies (TRV)
Gabriel Hilmoe Health Care Charles River Labs (CRL)
Anne Thimsen Forest Labs (FRX)
Johnson & Johnson (JNJ)
Pediatrix Medical Group (PDX)
Stryker Corp (SYK)
Venkat Kasthala Technology Akamai Technologies (AKAM)
Meenakshi Ramasamy Intel (INTC)
Hanu Mehrotra Telecommunications None
Utilities FPL Group (FPL)
Sumit Mundhra Industrials Norfolk Southern (NSC)
Hexcel Corp. (HXL)
Sector and industry definitions often vary by source. Sectors are currently defined using the S&P 500
MSCI sector definitions (http://www.spglobal.com). However, recent economic trends have forced many
of the traditional sector breakdowns to be reorganized. At times, the distinction between various sectors
is often fuzzy, and there will inevitably be some overlap of firms. Historically, we have sought to hold no
more than three securities per analyst to make the research load manageable and to avoid
overdiversifying our portfolio.
6F:221 Syllabus, Houge - 14
Henry Fund Charter
Statement of Investment Objectives and Policies
This statement of investment objectives and policies, set forth herein, governs the investment
management of the Henry Fund. The Henry Fund was established in the Spring of 1994 to
provide University of Iowa MBA students (Managers) with a forum to blend academic rigor with
real world portfolio management experience. The Managers, as participants of the Applied
Securities Management Course, recommend various investments and investment strategies, as
well as manage the day‐to‐day operations of the fund. The primary goal of the Henry Fund is to
provide MBA students with the quantitative and interpersonal skills necessary for careers as
successful investment professionals.
Part of the Fund’s management is a committee composed of no less than three (currently five)
investment advisors (Advisors) who review and authorize all investment strategies proposed by
the Management. The Advisors are expected to be investment professionals with significant
It is anticipated that this statement will be effective until further modified by the Henry Fund
upon recommendation of the Advisors. Both Henry Fund Management and Advisors are
expected to propose revisions in the guidelines at any time such as existing guidelines impede
the basic educational goals of the Fund.
The primary objective of the Fund is to facilitate the melding of academic training with the real
world experience of portfolio management, security analysis, and risk management, afforded by
the Applied Securities Management Course.
The secondary and underlying objective is to attain an average annual real return (net of
commissions) of between 5% and 10% per annum. While this real return is consistent with the
S&P 500 index long‐term performance, such returns may be difficult to attain in some periods
and easily attained in others. Hence, this requirement implies a level of risk acceptable to the
B. Investment Management Structure
Investment prospects shall be selected by fund Managers. These prospects, screened by
parameters described in Section D (Guidelines for Equity Selection) are presented to the
Advisors for final approval. No investments shall be made without the final approval of the
6F:221 Syllabus, Houge - 15
C. Portfolio Composition
The Henry Fund shall primarily be invested in equities and short‐term liquid assets. Until further
appended, the Fund’s assets shall be maintained at a target of 90% (± 5%) in equities and 10% (±
5%) in a money market fund. Target industry weights of the equities in the fund shall follow the
current composition of the S&P 500 index industry weightings. Investments in specific equities
shall not exceed 150% of its S&P 500 index weightings. To accommodate investment
opportunities for subsequent classes, the expected holding period for each investment shall be
12 to 36 months.
D. Guidelines for Equity Selection
For a stock to be considered as an investment for the Henry Fund, it must meet each of the
1. The security must be followed in the Value Line Index.
2. The company must have reported to the Securities and Exchange Commission for
the last five consecutive years.
3. The equity must trade on an organized exchange in the United States.
E. Withdrawl of Funds
Until further appended, funds shall not be withdrawn from the Henry Fund without approval of
the Advisors and college of business administration. (This rule was amended in 1995‐1996 to
allow for the Henry Fund Scholarship.)
6F:221 Syllabus, Houge - 16
Spring 2008 Course Outline
6F:221 – Applied Securities Management I
The course outline is tentative and likely to change. The schedule is designed to indicate what
material we will cover in class, but at times we may deviate from this agenda. The initial goal is
to work through the primary model as quickly as possible so that you are able to develop your
own company models. Due dates are final unless noted in class. Guest speakers or field trips
will require modification of the schedule.
Jan. 23 (W) Course Overview and Administration, Course Outline
Introduction: Market Efficiency
Jan. 28 (M) Introduction: Market Efficiency and The Role of Analysts
Jan. 30 (W) Economic Analysis: Getting Started
Chapters 1‐3: Why Value Value?, The Philosophy of Value Creation
Feb. 4 (M) Economic Forecasts Due by Email (10:00 a.m.)
Economic Outlook Discussion
Chapter 3: The Philosophy of Value Creation
Chapter 4: Do Fundamentals Drive the Stock Market?
Feb. 6 (W) Chapter 4: Do Fundamentals Drive the Stock Market?
Chapter 5: Framework for Valuation
Feb. 11 (M) Chapter 5: Framework for Valuation
Feb. 13 (W) Report #1 Due: Economic Analysis and Industry Report
Chapter 7: Analyzing Historical Performance
Measuring Core Value Drivers
Feb. 18 (M) Chapter 7: Measuring Core Value Drivers
Decomposing return on investment: The ROIC tree
Feb. 20 (W) Peer Review of Report #1 Due
Chapter 8: Forecasting Performance
Forecasting the Income Statement
Forecasting the Balance Sheet and CF Statement
Feb. 25 (M) Chapter 8: Forecasting Performance (continued)
Feb. 27 (W) Chapter 8: Forecasting Performance (continued)
Chapter 6: Primary Value Drivers: Growth and ROIC)
Mar. 3 (M) Chapter 10: Estimating the Cost of Capital
Mar. 5 (W) Report #2 Individual Company Models Due
Chapter 10: Estimating the Cost of Capital
6F:221 Syllabus, Houge - 17
Mar. 10 (M) Chapter 9: Estimating Continuing Value
Chapter 11: Calculating the Final Target Price, Interpreting the Results
Valuation of ESOP Plans
Mar. 12 (W) Report #2 Complete Written Report Due
Stock Screening: Identifying Potential Investments
Fundamental Theory of Valuation Multiples
Mar. 15‐23 Spring Break: No Class
Mar. 24 (M) Presentations: Ivanova, Aldridge, Reed, Nelms, Kasthala, Ramasamy
Mar. 26 (W) Peer Review of Report #2 Due
Presentations: Yuan, Mundhra, Mehrotra, Hilmoe, Thimsen, McSpadden
Mar. 31 (M) Presentations (if necessary)
Fundamental Theory of Valuation Multiples
Apr. 2 (W) Report #3 Individual Company Models Due
Chapter 12: Valuation Using Multiples
Relative Valuation & Identifying Comparable Firms
Apr. 7 (M) Economic Forecasts Due by Email (10:00 a.m.)
Chapter 25: Valuing Financial Institutions (Banks & Insurance Cos.)
Apr. 9 (W) Report #3 Complete Written Report Due
Chapter 15‐16: Mergers, Acquisitions, & Diverstures
Apr. 14 (M) Behavioral Finance and Investment Psychology
Apr. 16 (W) Peer Review of Report #3 Due
Behavioral Finance and Investment Psychology
Apr. 21 (M) Final Copies of Reports Due for Advisory Board (8 copies)
Portfolio Construction: Performance, Risk, Benchmarking
Portfolio Characteristics and Potential Changes
Apr. 23 (W) Presentations: McSpadden, Thimsen, Hilmoe, Mehrotra
Apr. 28 (M) Adobe .pdf Copy of Reports Due by Email (10:30 a.m.)
Presentations: Mundhra, Yuan, Ramasamy, Kasthala
Apr. 30 (W) Presentations: Nelms, Reed, Aldridge, Ivanova
May 2 (Friday) Investment Advisory Committee Presentations
10:00 a.m. – 3:00 p.m., S401 PBB
May 5 (M) Final Security Selection, Voting, and Portfolio Rebalancing
May 7 (W) Final Security Selection, Voting, and Portfolio Rebalancing
NO FINAL EXAM
6F:221 Syllabus, Houge - 18