An Introduction to Value Investing
A Practical Workshop Focusing on the Foundations
of Value Investing

November 26, 2007
Marriott East Side - NYC
Agenda

Workshop Materials

1. Welcome and Overview of Value Investing
  • What is value investing?
  • Three steps to evaluating stocks
  • Trembling with greed
  • Focus investing
  • Variant perceptions
  • Gaining an edge
  • Traits of successful money managers
  • See columns: Thoughts on Value Investing, Three Steps to Evaluating Stocks, Trembling With Greed, Focus Investing, Go Against the Grain, Gaining an Investment Edge and Traits of Successful Money Managers

2. Review of the Three Financial Statements
  • Case study: Costco

3. Different Types of Value – Part One
A) Out-of-favor blue-chip stocks
  • Case study: McDonald’s in early 2003
  • See column: CEO of the Year: McDonald’s Cantalupo

B) Overlooked small caps
  • Case study: Weyco Group

4. Valuing Companies
  • Discounted cash flow
  • Public company comps
  • Acquisition comps
  • Historical comps
  • Sum of the parts
  • See columns: A Valuation Rule of Thumb, Valuation Matters and Valuation STILL Matters

5. Finding Investment Ideas
  • Publications
  • Other investors
  • Stock screens
  • See columns: Think Small Companies and The Cocktail Party Test

6. Warning Flags – Part One
A) Cash flow worse than reported profits
  • Case studies: Lucent, Enron
  • See columns: Calculating Lucent’s Cash Flow, Lucent’s Free Cash Flow and Lessons from Lucent’s Cash Flow, Lessons from the Enron Debacle

B) Rising debt
  • Case study:Gander Mountain
  • See excerpt from Value Investor Insight and column: Don’t Forget Debt

7. Common and Costly Mental Mistakes
  • Behavioral finance presentation
  • “Of Sound Mind” excerpts from Value Investor Insight
  • Eight columns on investor irrationality

8. Understanding Strategy & Competitive Advantage
  • Moats
  • Reversion to the mean
  • Roots of sustainable competitive advantage
  • Strategy
  • Strategy vs. operational effectiveness
  • See columns: Sustainable Competitive Advantage, The Importance of Strategy and Strategy Creates Sustainable Competitive Advantage

9. Different Types of Value – Part Two
A) Spin-offs
  • Case study: Imagistics

B) Let someone else do the investing
  • Case studies: Berkshire Hathaway, Leucadia, White Mountains, Alleghany

10. Warning Flags – Part Two
A) Story stock/fad and regulatory risk
  • Case study: PartyGaming
  • See Jim Chanos interview in Value Investor Insight

B) Over-reliance on one customer and patent troll risk
  • Case study: Boston Communications Group
  • See excerpt from T2 Accredited Fund October 2003 letter to investors