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1October 5, 2011
Bender TrustResearch Project
OverviewGreg Francfort
The Bender Trust
Started by alumni David Bender $120,000 principal Currently worth $1,600,000 Used for scholarships
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Greg Francfort
Rutgers undergraduate in engineering Wharton MBA graduate LIBOR co-founder First Boston Corp.
Sell-side analyst, Assoc. Research Director Neuberger Berman
Portfolio Manager, Research Director Securities Analysis at Columbia University
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Part I: Fundamentals
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Summary“There is no such thing as present tense in performance management.”
1980-2005S&P 500 12.5%Average mutual fund 10%Mutual fund investor 7.3%
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Anheuser Busch (BUD) $53.02
52 week range: 49.05 – 64.77 S&P 500: 1,156
2010A 2011E 2012E
EPS $3.13 $3.76 $4.22
P/E 16.9 14.0 12.5
S&P EPS $78 $85 $94
S&P P/E 14.9 11.9 10.9
Relative P/E 113% 118% 115%
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Hewlett Packard (HPQ) $24.72
52 week range: 21.50 – 49.39 S&P 500: 1,156
2010A 2011E 2012E
EPS $3.78 $4.84 $4.76
P/E 5.0 5.1 5.2
S&P EPS $78 $85 $94
S&P P/E 14.9 11.9 10.9
Relative P/E 34% 43% 48%
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Company Description
One paragraph What does the company do to make money? What products / services do they sell? What are the costs of production?
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Competitive Analysis
One page: Porters Five Forces Identify customers / suppliers What are the competitive advantages /
disadvantages? Size, market share? Is the business getting more or less
competitive? Is there a moat around the company? Be succinct!
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Part II: Analysis
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Earnings Outlook
What are the prospects the company can grow it’s business?
Growth from price or volume increases? What is the danger of cost increases? Likelihood of positive or negative earnings
surprise compared to consensus estimate of EPS for 2011?
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Build a Model? Revenue minus expenses = profits Profits / shares outstanding = EPS
Earnings Outlook
Forecast Revenue
Use 2010 as a base to forecast 2011 revenue Project 2011 growth for the industry What factors will drive growth? Try to use units or volume How might your company’s market share
change? Product or service price in 2011 vs. 2010?
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Case Study: BUD
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U.S. Beer Industry Unit Demand
Population Beer consumer specific
population Weather Income Gasoline prices, employment
rate Consumer taste Health issues Mad cow for beer? Low carb/healthier diets
Social trends Price of beer Price of substitutes Advertising by suppliers of
beer Advertising by suppliers of
substitutes Legal issues
Stricter penalties for DWI Changes in legal drinking age
New Products or Market segments
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Expenses
COGS Variable costs: raw materials to make and
deliver beer? Fixed costs: depreciation S,G&A Interest expense Income taxes
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Valuing the Earnings
Calculate P/E on consensus 2011 EPS forecast
Relative P/E to: S&P500 at 1097; S&P500 EPS 2010 est $85 S&P500 P/E on 2010 = 12.9x Does our Company deserve a premium or a
discount? Depends on growth and on risk
Other Valuation Tools
DCF P/Book Value per Share P/Asset value EV/EBITDA
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Recommendation
Convincing case of earnings surprise (positive or negative)
Persuasively assert the stock deserves a larger / smaller relative P/E multiple on 2009 EPS than present level
Possible takeover potential or some other corporate event that unlocks or reduces value
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Summary
Maximum three pages Five minute presentation
Only the important information
More effort = more knowledge
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Resources
Yahoo! Finance EDGAR
10-K, 10-Q, etc. Company websites Customers, employees, competitors,
suppliers Creative intellect!
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Stock List
Marlin Business Svcs. Corp. MRLN Traveler’s Insurance TRV
Oracle Corp. ORCL Fedex FDX
Apple AAPL BP BP
Wal-Mart Stores Inc. WMT Range Resources RRC
Lowe's Companies Inc. LOW Viacom, Inc. VIA-B
The Home Depot, Inc HD Valero Energy Corp. VLO
Comcast Corp. CMCSA Boeing Co. BA
CarMax Inc. KMX KapStone Packaging KS
Occidental Petroleum Corp. OXY Intel INTC
Packaging Corp. of America
AT&T
PKG
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Cedar Fair LP
Mohawk Industries
FUN
MHK
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Deadlines
Part I Late November/Early December
Part II April
