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					Investing 101

   Presented by

        &
Sponsored by
              Today’s Topics
   Investment Industry Overview
    – Types of Investing
    – Career Paths
    – Sample Investments


   Basics of Investing
            Industry Overview
   Venture Capital
    – Oak, Sequoia, Kleiner Perkins

   Equity/Debt (stocks/bonds)
    – Citadel, Cerberus (hedge funds); Fidelity,
      Vanguard (mutual funds)

   Private Equity
    – KKR, Blackstone, TPG
              Investment Types and
                Company Lifecycle
           Launches       Goes Public        Growth slows
Stage in
Company
Life
Cycle          Start-up     Public Company    Mature Company




Typical
               Venture          Equity/           Private
Investment
               Capital           Debt             Equity
Type
                  Venture Capital

           Launches       Goes Public        Growth slows
Stage in
Company
Life
Cycle          Start-up     Public Company    Mature Company




Typical
              Venture         Equity/            Private
Investment
              Capital          Debt              Equity
Type
                Venture Capital
   Typical Entry strategy
    – Acquire stake in young, start-up firm
   Value added
    – VCs provide funding, networking, and advice to the
      companies they invest in
   Typical Exit strategy
    – Take portfolio companies public or sell them to other
      companies
   Example
    – Bessemer Venture Partners invested $1-2 million in
      Skype, and when Skype was acquired by eBay,
      Bessemer made a 100-fold return on its investment
    Top Venture Capital Firms
Sand Hill Road, Menlo Park, CA
 Accel Partners
 Crosspoint
 Kleiner Perkins Caulfield & Byers
 Oak Investment Partners
 Sequoia
 Softbank
             Debt/Equity Investing

           Launches       Goes Public        Growth slows
Stage in
Company
Life
Cycle          Start-up     Public Company    Mature Company




Typical
              Venture         Equity/            Private
Investment
              Capital          Debt              Equity
Type
           Debt/Equity Investing
   Typical Entry strategy
    – Acquire position in stock or bonds of company
   Value added
    – Investors can lobby companies to take measures to raise stock
      prices, such as share repurchases or divestitures
   Typical Exit strategy
    – Unwind position in stock or bonds of company
   Example
    – After doing comprehensive research on AutoZone, ESL, a hedge
      fund, concludes AutoZone is undervalued and buys shares in the
      company. In time the market comes to realize that the
      company is indeed undervalued and ESL sells its AutoZone
      shares after earning a 30% return.
      Top Debt/Equity Investors
Hedge Funds
   Cerberus
   Citadel
   ESL
   SAC Capital
   Silverpoint (debt investing)

Mutual Funds
   Fidelity
   Vanguard
             Debt/Equity Investing

           Launches       Goes Public        Growth slows
Stage in
Company
Life
Cycle          Start-up     Public Company    Mature Company




Typical
              Venture         Equity/            Private
Investment
              Capital          Debt              Equity
Type
                    Private Equity
   Typical Entry strategy
    – Borrow money to buy of a public company’s shares and take it
      private again, in a Leveraged Buyout (LBO)
   Value added
    – Improve company’s operations through restructuring,
      divestitures, or refinancing
   Typical Exit strategy
    – Take company public again or sell to other firm
   Example
    – Nelson Peltz buys Snapple from Quaker Oats for $300 million,
      turns company around within a few years, and sells it for $1.5
      billion
     Top Private Equity Firms
 Bain Capital
 Carlyle Group
 Kohlberg, Kravis, & Roberts (KKR)
 Texas Pacific Group (TPG)
 Thomas H Lee Partners
 Warburg Pincus
 Investing Basics
Sponsored By Bank of America
 Presented by WIC & WUFC
     What’s the Investment
           Universe?
 Stocks
 Bonds
 Derivatives
 Real Estate
 Commodities
 Currency
                  Types of Analysis
   Fundamental
    – A method of evaluating a security by attempting to measure its
      intrinsic value by examining related economic, financial and other
      qualitative and quantitative factors.

    – Value of a firm = Discounted value of future cash flows


   Technical
    – A method of evaluating securities by analyzing statistics generated by
      market activity, such as past prices and volume. Technical analysts do
      not attempt to measure a security's intrinsic value, but instead use
      charts and other tools to identify patterns that can suggest future
      activity.
               Where to Begin?
   Develop a differentiated view

   Top Down
    – View on the economy or a sector
    – Drill down into individual stocks, or trade a
      basket of companies


   Bottom Up
    – Start with a company specific story
    – Investigate the firm’s prospects based upon
      micro factors
     How to Evaluate a Business
   Sustainable competitive advantages
    – Barriers to entry, Substitutes
    – Buyer and Supplier Leverage
    – Technology, Infrastructure, Human Capital
   Cost structure
    – Fixed vs. variable
    – Margin Analysis
 Management
 Opportunities for growth
           Valuation Methodolgy
   Discounted Cash Flows
    – Determine cost of firm’s capital
    – Estimate the firm’s future cash flows
    – Add back value of non-operational assets

   Multiples
    –   P/E = (EPS/(r-g))
    –   EBITDA/EV
    –   (EBITDA-Capex)/EV
    –   ROA, ROIC
    –   Net Debt/EBITDA
                 Derivatives
 Contract that “Derives” its value from another
  security
 Future - Obligation to exchange cash at some
  specified date for the underlying
 Option - Right but not the obligation to buy/sell
  (call/put) underlying at specified price
 Derivatives often allow for enhanced leverage
        Options Continued
 A multitude of strategies
 Understand Greeks (Delta, Gamma, Theta,
  Rho, Vega)
 Basic idea is that payoff is asymmetric

				
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