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Bender Trust Research Project

Bender Trust Research Project. Overview Greg Francfort. The Bender Trust. Started by alumni David Bender $120,000 principal Currently worth $1,600,000 Used for scholarships. Greg Francfort . Rutgers undergraduate in engineering Wharton MBA graduate LIBOR co-founder First Boston Corp.

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Bender Trust Research Project

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  1. Bender TrustResearch Project Overview Greg Francfort

  2. The Bender Trust Started by alumni David Bender $120,000 principal Currently worth $1,600,000 Used for scholarships

  3. 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

  4. Part I: Fundamentals

  5. Summary “There is no such thing as present tense in performance management.” 1980-2005 S&P 500 12.5% Average mutual fund 10% Mutual fund investor 7.3%

  6. Anheuser Busch (BUD) $53.02 • 52 week range: 49.05 – 64.77 • S&P 500: 1,156

  7. Hewlett Packard (HPQ) $24.72 • 52 week range: 21.50 – 49.39 • S&P 500: 1,156

  8. Company Description • One paragraph • What does the company do to make money? • What products / services do they sell? • What are the costs of production?

  9. 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!

  10. Part II: Analysis

  11. 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?

  12. Earnings Outlook • Build a Model? • Revenue minus expenses = profits • Profits / shares outstanding = EPS

  13. 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?

  14. Case Study: BUD

  15. 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 U.S. Beer Industry Unit Demand

  16. Expenses • COGS • Variable costs: raw materials to make and deliver beer? • Fixed costs: depreciation • S,G&A • Interest expense • Income taxes

  17. 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

  18. Other Valuation Tools DCF P/Book Value per Share P/Asset value EV/EBITDA

  19. 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

  20. Summary • Maximum three pages • Five minute presentation • Only the important information • More effort = more knowledge

  21. Resources • Yahoo! Finance • EDGAR • 10-K, 10-Q, etc. • Company websites • Customers, employees, competitors, suppliers • Creative intellect!

  22. Stock List

  23. Deadlines • Part I • Late November/Early December • Part II • April

  24. Questions? • gfrancfort@nb.com • rulibor@gmail.com

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