任务1讲义cfa二级基础班alternative investments hzj

1、Equity Investments2017年CFA二级培训项目讲师：教育资深培训师工作：教育背景：南京大学外国语学院 主修英语专业、副修国际金融专业 ；特许金融分析师（CFA）、工作背景：会计师（CPA）证券从业资格华明会计师事务所上审计部和普华永道企业并购服务部担任高级审计师和助理经理。负责负责并购投资项目目标公司的财务尽职调查工作即相关市场及行业分析。现在某公司担任投资发展部经理，负责各类并购项目的分析评估，尽职调查、估值、谈判等。累计课时超过2000小时，课程清晰易懂，深受学员欢迎。讲授课程：CFA财报、权益、企业、衍生 CPA会计、财管服务客户：主编新浪：方式：2-237Topic

2、Weightings in CFA Level II3-237Session NO.ContentWeightingsStudy Session 1-2Ethics & Professional Standards10-15Study Session 3Qutative Methods5-10Study Session 4Economic Analysis5-10Study Session 5-6Final Statement Analysis15-20Study Session 7-8Corporate Finance5-15Study Session 9-11Equity Anal

3、ysis15-25Study Session 12-13Fixed Income Analysis10-20Study Session 14Derivative Investments5-15Study Session 15Alternative Investments5-10Study Session 16-17Portfolio Management5-10SS9: Valuation ConceptsØFrameworkEquity InvestmentsR27 Equity Valuation: Applications and ProcessesR28 Return Con

4、ceptsSS10: Industry and Company Analysis and Discounted Dividend Valuation R29 Industry and Company Analysis R30 Discounted Dividend ValuationØSS11:Cash Flow and OtherØValuation M R31sCash Flow Valuation R32 Market-Based Valuation: Priceand Enterprise Value Multiples R33 Residual Income Va

5、luation R34 Private Company Valuation4-237ing27Equity Valuation: Applications and Processes5-2371.2.Valuation processQutative and Qualitative factors invaluationIntrinsic Value and Alpha Types of valuation m3.4.s6-237FrameworkValuation and Intrinsic ValueØ Valuation is the process of estimating

6、 the value of an asset by:l Using a mbased on variables the analysis believes influence thefundamental value of the assetl Comparing it to the observable market value of “similar” assetsØ General steps in the equity valuation process:l Understand the business.l Forecast company performance.l Se

7、lect the appropriate valuation ml Convert the forecasts into a valuation.l Apply the valuations.7-237Different Kinds of Values & ValuationØ Intrinsic value (IV): the valuation of an asset or security by someone who has complete understanding of the characteristics of the asset or issuing fi

8、rm.IVanalyst -price=(IVactual -price)+(IVanalyst -IVactual )Ø Fair market value: the price at which a hypothetical willing, informed, and able seller would trade an asset to a willing, informed, and able buyer.Ø Investment value: value of a stock to a particular buyer.Ø Liquidation va

9、lue: value when company will not continue to operate.8-237Applications of Equity ValuationØ Objectivesl Stock selection: to guide the purchase, holding, or sale of stocks.ing the market: current market prices implicitly contain investors expectations about the future value of the variables that

10、 influence the stocks price.ll Projecting the value of corporate actions: use valuation techniques to determine the value of proposed corporate mergers, acquisitions, divestitures, MBO, and recapitalization efforts.l Fairness opinions: to support professional opinions.l Planning and consulting: to e

11、valuate the effects of proposed corporatestrategies on the firms stock price, pursuing only those that have thegreatest value to shaolders.l Communication with analysts and investors: valuation approach provides a common basis upon which to discuss and evaluate the company.l Valuation of private bus

12、iness: value of the firm or holdings in firms that are not publicly traded.9-237Applications of Equity Valuationl Portfolio managementü planning, execution and feedback 3 steps in the portfoliomanagement process (valuation is most planning and execution steps).ü Planningly associated with

13、theu identification and specification the investment objectives andconstraints writingsecurities selectionon the investment strategy ofu Valuation on individual security is not apply to Indexing strategy but active management.ü Executionu Portfolio selectionu Portfolio implementationü Feed

14、back10-237Valuation ProcessØ Valuation processl Step 1：Understanding the businessü Elements of industry structure (Porters five forces)u Threat of new entrants in the industry;u Threat of substitutes;u Bargaining power of buyers;u Bargaining power ofrs;u Rivalry among existing competitors.

15、ü Three generic strategies:u Cost leadership;u Product differentiation;u Focus.l Step 2：Forecasting company performanceü Top-down forecasting approachü Bottom-up forecasting approach11-237Valuation Processed examination of the footnotes accompanying the fin reports:u Accelerating or p

16、remature recognition of income.u Reclassifying gains and non-operating income.u Expense recognition and losses.u Amortization, depreciation, and discount rates.u Off-balance-sheet issues.alül Step 3：Selecting the appropriate valuation mü Absolution valuation m;u DDM, FCFM, residual income

17、approach, asset-based mü Relative valuation m.u Multiples, such as P/E, P/B, P/CF, etc.l Step 4：Converting forecasts to a valuationl Step 5：Making the investment decision12-237Qutative and Qualitative factors in valuationØ Qultative factorskey source from companysdisclosuresing information

18、 and finalIncluding: balance sheet, income statement, cash flow statement, as well as the footnotesØ Qualitative factorsl Purpose: to measure industry performance, such as legal andregulatory environmentl Including:ü quality of the firms management team;ü the transparency of its perfo

19、rmance;ü the analysts confidence in the firms;lü industrysing practices13-237Quality of inputsØ Quality of inputsl Analysts can forecast firms future economic value basedfactsØ Requirementon currentl The final factors must be disd in sufficientand accuracyl The investigation of i

20、ssues relating to accuracy is often broadly referredto as quality of earnings analysis, namely the scrutiny of all finstatementsal14-237Footnotes and disclosuresØ Indicators of selected quality of earnings15-237CategoryObservationExampleRevenues and gainsØ Recognizing revenue earlyØ A

21、ccelerating or premature recognition of incomeØ Reclassifying gains and non- operating incomeExpenses and LossesØ Delay of Recognition of ExpensesØ Expense recognition and lossesØ Amortization, depreciation, and discount ratesBalance Sheet IssuesØ Off-balance-sheet issues

22、16; SPEsIntrinsic Value and AlphaØ Intrinsic value is the value of an asset give a hypothetically complete understanding of the assets investment characteristics. Valuation is a part of the active managers attempt to production positive excess returnl Alpha, an excess risk-adjusted return, also

23、 called an abnormal returnØ Formula:l Ex ante alpha = expected holding period return required returnl Ex post alpha = actual holding period return contemporaneousrequired returnØ The difference between intrinsic value (V) and market value (P) perceive mispricing becomes part of the manager

24、s forecast of expected return influence the total return on the asset namely influence alpha16-237Going Concern AssumptionØ A company has one value if it is immediately dissolved, and another value if it continues in operation.Ø Going-concern assumptionl It is based on the assumption that

25、the company will maintain itsbusinesivities into the foreseeable future.l going-concern value of the company is the value under a going-concern assumptionØ Non-going-concern assumptionl Non-going-concern value is based on the assumption that the company will finish operating and all assets will

26、 be sold out.l Also called liquidation value due to liquidation should be concerned in this assumptionØ Going-concern value Liquidation value17-237Types of valuation msØ The two board types of going-concern ms of valuation are:l Absolute valuation ml Relative valuation mØ Absolute val

27、uation msssl the mthat specifies an assets intrinsic value which is in order to becompared with the assets market price (does not need consider aboutthe value of other firms).l Two types:ü Present value mu DDMu FCF mor discounted cash flow mu Residual income mü Asset-based m: sometime is u

28、sed to value the company thatown or control natural resources, such as oilfields, coal deposits and other mineral claims18-237Types of valuation msØ Relative valuation ms (method of comparable)l The mthat specifies an assets value relative to that of another asset；l It is typically implemented

29、using price multiples；l For example: P/E firm < P/E market stock is relatively undervalued.19-237Sum-of-the-parts valuationØ Sum-of-the-parts valuationl Sum-of-the-parts valuation (break-up value or private market value): an analyst can value individual parts of the firm and add them up to d

30、etermine the value for the company as a whole.Ø Conglomerate discountl Investors apply a markdown to the value of a company that operates in multiple unrelated industries, compared to the value a company that has a single industry focus. It is the amount by which market value under- represents

31、sum-of-the-parts value.l Three explanations for conglomerate discounts are:ü Internal capital inefficiency: allocation of capital not based on sound decisions.ü Endogenous (internal) factors: pursued unrelated business acquisitions to hide poor operating performance.ü Research measure

32、ment errors: conglomerate discounts are a result of incorrect measurement.20-237Broad CriteriaØ When selecting an approach for valuing a given company, an analyst shouldconsider whether the m:l Fits the characteristics of the company;l Is appropriate based on the quality and availability of inp

33、ut data;l Is suitable given the purpose of the analysis.21-237ing28Return Concepts22-2371.2.3.4.5.6.Return concepts Equity risk premiumRequired return on equity International Consideration WACCDiscount rate selection in relation to cash flow23-237FrameworkReturn conceptsØ Holding period returnl

34、 Holding period return is the return earned from investing an asset over a specified time period.l The formula:r = P1 - P0 + D1 = D1 + P1-1 = dividend yield + price appreciation returnP0l Annualized HPR.P0ü For example: if the return for one month is 1% then the annualized HPR is (1+0.01)12-1=1

35、2.68%Ø Realized & expected returnl Realized return: is the same with HPR. It is backward-looking context.l Expected return: In forward-looking, an investor can form an expectation concerning the dividend and selling price.24-237Return conceptsØ Required return (opportucost)l The minimu

36、m level of expected return that an investor requires in order to invest in the asset over a specific time period, given the assets riskiness.l It represents:ü A threshold value for being fairly compensated for the risk of the asset.ü If investors expected return > required return, the a

37、sset isundervalued; and vice versa.25-237Return conceptsØ Expected returnl When a asset is mispriced, price of assets converges to its intrinsic value in a period time.l The investors expected rate of return comprises:ü Required return; andü A return from convergence of price to value

38、.+ V 0 - P0E(R) » rTP0Where,V0, there intrinsic value of the stock;P0, the current price of the stockrT, required return during the convergence time period26-237Return conceptsØ Discount ratel It is a rate used in finding the PV of future cash flows;l Used to determine the intrinsic value

39、depends on the characteristics ofthe investment rather than that of purchaser;Ø Internal rate of return (IRR)l IRR is a market-determined rate. It is the rate that equates the value ofthe discounted cash flows the current price of the security.l If the markets are efficient, then the IRR repres

40、ents the required return.27-237Equity risk premiumØ The equity risk premium is the incremental return (premium) that investorsrequire for holding equities rather than a risk-asset.l Equity risk premium = Required return on equity index risk-Ø CAPMratel Required return on share i = Current

41、expected risk- (Equity risk premium)Ø Build-up Methodl Required return on share i = Current expected risk-+ Equity risk premiumreturn + ireturn±Other risk premium/discounts28-237Equity risk premiumØ Historical estimatel Equity risk premium: consists of the difference between the histo

42、rical mean return for a broad-based equity-market index and a risk rate over a given time period.l Issues in historical estimateü Select an appropriate index. An index is frequently adjusted. In driving the return, it should be stationary.ü Time period. The longer the period used, the more

43、 precise theestimate.ü Arithmetic mean or geometric mean (lower) in estimating the return;ü Long term bond or short term bill is a proxy for the risk- assets.l Issuesü Survivorship bias. That results the over-estimate return on index and the ERP. Downward adjustment is used to offset

44、the bias.ü Risk premium will be lower when geometric mean is used or used of longer-term bonds rather than shorter-term bonds to estimatethe risk-rate.29-237Equity risk premiumØ Forward-looking (Ex ante) estimate conceptual frameworkl ERP is based on expectations for economic and final var

45、iables fromthe present going forward. It is logical to estimate ERP directly based on current information and expectation.l It is not subject to the issues such as non-stationary or data series inhistorical estimate. But it is subject to potential errors related to m and behavioral bias.l 3 approach

46、essü Gordon growth mü Macroeconomics mü Survey estimate.(GGM) estimate;estimate; and30-237Equity risk premiumØ GGMl GGM equity risk premium estimate = Dividend yield on the index based on year-ahead aggregate forecasted dividends and aggregate market value + Consensus long-term e

47、arnings growth rate Current long-term government bond yieldl A simple way to understand the equation:ERP = r - RFR = D1 + g - RFRP0l The above equation assumes growth rate is constant.l An analyst may make adjustment to reflect P/E boom or bust.l Another method to solve these problems:Equity Index P

48、rice = PVrapid (r)+PVtransition (r)+PVmature (r)31-237Equity risk premiumØ Supply-Side Estimates (Macroeconomic M)Expected risk-rateExpected changes in the P/E ratioExpected inflationExpected real growth in GDPExpected yield on the indexl Expected inflation:i = (YTM of 20-year T-bonds)-(YTM of

49、20-year TIPS)TIPS: Treasury Inflation Protected Securitiesl Expected real growth in GDP:rEG=real GDP growthrEG=labor productivity growth rate + labor supply growth rateØ Forward-looking (Ex ante) estimate surveyl Use the consensus of the opinions from a sample of people.32-237ERP = 1+ i´1+

50、 rEg´1+ PEg -1+ Y - RFEquity risk premiumØ Comparison33-237EstimatesStrengthWeaknessHistorical EstimatesØ A familiar and popular choice (if reliable long-term records are available)Ø Unbiased estimate (if no systematic errors has been)Ø Objective quality (grounded in data)&#

51、216; Precision issues (due to thereduced/divided length of data)Ø Difficult-to-maintain stationary assumption (if the series starting point extended to the distant past)Ø Empirically countercyclical expectedequity risk premiumØ Survivorship bias and positive/negative surprisesForward-

52、 looking EstimatesØ Available (direct based on current info. And expectations concerning such variables)Ø Not subject to the issue of non- stationarity or data biasesØ Often subject to other potential errors related to final/economic ms and behavioral biases in forecasting.Ø Subj

53、ectiveEquity risk premiumØ Comparison34-237EstimatesStrengthWeaknessGGMØ Popular method;Ø Reasonable when applied to developed economies and markets;Ø Typically sample sources.Ø Change through time andneed to be updated;Ø Assumption of a stable growth rate.Supply-Side E

54、stimatesØ Proven ms;Ø Current information;Ø Only appropriate fordeveloped countries;Survey EstimatesØ Easy to obtainØ Wide disparity from different groupsRequired return on equityØ In estimating the required return on equity, the analyst can choosefollowing ml CAPM;s:l Multifactor ms;ü Fama-Fren