Applied Value Investing: The Practical

Since Benjamin Graham fathered valueinvesting in the 1930s, the method of analysishas spawned a large number of highly successfulinvestors, such as Graham's own formerstudent and employee, Warren Buffett, who isregarded as one of the most successful investorsof modern times.Over the years, numerous books have beenpublished on Benjamin Graham's approach.Most of these books present different interpretationsof value investing and are generallyintroductory based. Until now, there has notbeen an advanced hands-on guide for investorsand executives who may want to applythe powerful value investing discipline outsideof stocks and bonds.Applied Value Investingtakes the same time-provenapproach Graham introduced withDavid Dodd in their 1934 masterpiece,Security Analysis, and extends it in a variety ofunique and practical waysincluding mergersand acquisitions, alternative investments,and financial strategy.This in-depth guide shows financially sophisticatedreaders how to use value investing in amacroinvesting framework and how to applyit to the emerging area of super catastrophevaluation. It illustrates how to put value investingto use with case studies on: Eddie Lampert's acquisition of Sears Warren Buffett's acquisitions of GEICOand General Reinsurance Corporation The recent "new economy" boom andbust, and its aftermath The underwriting of the Pepsi Playfor a Billion sweepstakesApplied Value Investingalso demonstrates howto incorporate the cornerstones of valuationinto an integrated business framework thatcan be used to assess and manage a franchise(or a firm operating with a sustainable competitiveadvantage).In addition to its cutting-edge applicationsof value investing principles, Applied ValueInvesting sets itself apart by drawing on materialpublished in leading academic journals toform the foundation of its presentation. However,value investing is inherently practical, andthis comprehensive resource provides helpfulguidance for successfully implementing valueinvesting strategies in the real world.To profit like the masters you have to thinklike them.Applied Value Investingcan opennew doors to value creating opportunities.

Josph Calandro, Jr. serves as the enterprise.risk manager for a global financial services firm. He is also a.Finance Department faculty member at the University of.Connecticut. Calandro has 20 years experience as a financial.executive and educator..

Preface	p. xi
Acknowledgments	p. xxv
The Basics and Base-Case Value	p. 1
Introduction	p. 1
Base-Case Valuation	p. 7
Conclusion	p. 18
Base-Case Value and the Sears Acquisition	p. 21
Introduction	p. 21
The Rise and Fall of Sears	p. 23
Valuing Sears	p. 25
Postacquisition Performance	p. 37
Franchise Value and the GEICO Acquisition	p. 41
Introduction	p. 42
GEICO	p. 43
Valuing GEICO	p. 45
Postacquisition Performance	p. 57
Appendix: Estimating GEICO's Discount Rate	p. 59
The Gen Re Acquisition and Franchise Risk	p. 65
Introduction	p. 66
Gen Re and the Business of Reinsurance	p. 67
Valuing Gen Re	p. 69
Postacquisition Performance	p. 81
Conclusion	p. 86
Appendix: Assessing the Risk of M&A	p. 90
Macroanalysis, Opportunity Screening, and Value Investing	p. 109
Introduction	p. 110
Business/Boom-Bust Cycles	p. 113
The Eight Stages of a Business Cycle	p. 115
Recovery	p. 121
The "New Economy" Business Cycle	p. 122
New Economy Recovery	p. 133
Post New Economy Business Cycle Activity	p. 138
Conclusion	p. 151
Warren Buffett and Efficient Market Theory	p. 152
A Practical, Reflexive Fundamental Proxy	p. 154
Enron	p. 156
A Graham and Dodd-Based Approach to Catastrophe Valuation	p. 159
Introduction	p. 159
Background	p. 160
Valuation	p. 163
Postmortem and Guidelines	p. 170
Conclusion and a Word on Catastrophe Bonds	p. 176
Financial Strategy and Making Value Happen	p. 179
Introduction	p. 179
Strategy Formulation	p. 183
Resource Allocation	p. 184
Performance Management	p. 189
Risk	p. 190
Financial Strategy	p. 193
Conclusion	p. 197
Conclusion	p. 201
Introduction	p. 201
Screening	p. 202
Initial Valuation	p. 205
NAV Adjustments	p. 213
EPV Assumptions	p. 215
Franchise Validation	p. 215
Growth Valuation	p. 216
Final Valuation	p. 218
Conclusion	p. 219
Resources	p. 223
Endnotes	p. 231
Index	p. 265
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Applied Value Investing: The Practical Application of Benjamin Graham and Warren Buffett's Valuation Principles to Acquisitions, Catastrophe Pricing and Business Execution

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