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We believe over the last 40 years valuation has suffered from a lack of intellectual thought leadership. Since the advent of the Gordon Growth model, very little has advanced the science and art of valuations as a tool for investment and corporate finance professionals. For the past 25 years Applied Finance has innovated the application of linking economic profit to securities prices globally.

As part of our commitment to give back to the investment community that has been so wonderful to us, Applied Finance created valuation day as a vehicle to foster ongoing research dialog with finance professionals. For this year’s event, we prepared six presentations ranging from technical and theoretical critiques of valuation theory to practical everyday company fundamental analysis.

Most academic research has been focused on book to price, which is a static fundamental measure of cheapness rather than value. While academics have provided exhaustive insight on various price multiples, but an area nearly not exploration is understanding estimates of intrinsic value. For this reason, some investment professionals have moved away from multiples in favor of Discounted Cash Flow (DCF) models. Although they appear more robust than a price multiple, DCF implantation comes with its own set of challenges.

Each presentation will draw from the 20,000,000 live, out of sample valuations Applied Finance has performed during its 25-year history. Any student or financial professional that study or use valuation should participate. The sessions will be led by Applied Finance’s senior research team members offering a unique opportunity to interact with a 5 Star/Gold rated portfolio management team.

Below are the topics that will presented.

 

9am: The Applied Finance Story – Making Valuation Relevant

Rafael Resendes – Applied Finance co-founder

 

Description: This presentation will highlight Applied Finance’s growth and innovations over the past 25 years.  It will cover various aspects of our Economic Margin framework and Valuation Driven investment philosophy as a superior approach to evaluation securities.

 

10am: Economic Margins, Market Multiples, and Intangibles

Daniel J. Obrycki – Applied Finance co-founder

 

Description: The presentation will discuss how Economic Margins relate to market multiples. Afterward, we will review the traditional definition of intangibles and compare it to an alternative view of intangibles through an Economic Margin lens.

 

11am: Valuation Driven Portfolio Decisions

Applied Finance Partners and Sr Analysts Jun Wang, CFA and Dhaval Sanghavi, CFA, CPA

 

Description: A general discussion of how we blend quantitative and qualitative analysis to make

Buy/Hold/Sell decisions for portfolios, with valuation as the key driver and guidance.

 

12pm: Valuation Alpha / Valuation Beta

Derek Bergen, CFA

 

Description:  Factor performance of Applied Finance Intrinsic Value offers compelling out of sample evidence that investors maximize risk-adjusted returns with exposure to a robust valuation metric.  Factors and strategies based on the Applied Finance valuation framework deliver positive alpha against commonly-referenced asset pricing models, while a valuation-based asset pricing model better explains cross-sectional stock returns.

 

1pm: Tactical Allocations for Indices & Styles

John Holt, CFA

 

Description:

John Holt, CFA will discuss how Applied Finance’s Valuation framework can be used to track the relative attractiveness of indices over time. John will look at historical and current Valuations in the Russell 1000 & 2000, as well as value and growth styles. Additionally, the presentation will discuss how Valuation can be used to recommend tactical allocation.

  • The Gross Profitability Trap

    The Gross Profitability Trap “But this time, it’s different!” More foolish words are rarely spoken in the financial industry, but they always seem to find their way back into the stock market lexicon. A firm’s [...more]
  • Intrinsic Value Factor™

    February 4, 2019 Applied Finance

    Valuation Driven™ Investing begins and ends with calculating the intrinsic value of every stock in a benchmark against which a portfolio is constructed, and comparing those values against traded prices. All of Applied Finance’s portfolios are Intrinsic Value Driven™, which differs significantly from a “value” perspective. To gain a better understanding into Applied Finance’s Intrinsic Value Driven™ approach, let’s first review traditional approaches to “Value”.

    The traditional approaches to finding undervalued stocks use a simple ratio such as P/E or P/B, or a mix of them. These common approaches to value come with many shortcomings: […more]

  • Then and Now: Buyers Remorse Versus Sellers Loss

    October 31, 2008 Applied Finance
    Over the past couple months, worsening macro economic conditions, declining corporate profitability and a bottomless stock market have investors longing for the good old days when the economy delivered steady increases in GDP growth with [...more]
  • Economic Margin®

    A corporate performance metric should provide insights into what a firm is worth. Most money managers utilize common earnings-based measures of corporate performance and value, which are suspect and easy to manipulate. Applied Finance developed the Economic Margin (EM) framework to remove the noise inherent in accounting data.

    Traditional accounting-based valuation methods provide an incomplete view of a company’s value by not accounting for the investment needed to generate the earnings, cost of capital, inflation or cash flow. […more]