Search results

Dick Mayo, one of the most celebrated value investors in America was puzzled by the New Economy's continuous bias toward growth investment strategies. He examines the basics of his philosophy versus that of a growth orientation by evaluating the long-term expected returns of several value and growth stocks. This case can be used to pursue several objectives: (1) to define value and growth investing-where the differences lie and whether one approach is superior to the other or whether both have merit; and (2) to discuss issues related to consistency of one's investment philosophy. Should one stay true to one's philosophy even when the market seems to run counter to it for a prolonged period of time? Can value investing deliver value in this New Economy or is it only an Old Economy concept? The students are instructed to perform basic valuations of Cisco Systems (a growth company), CVS, R.R. Donnelley, and Manor Care (value companies) and compute their long-term expected returns. The case comes with an Excel spreadsheet containing the data and relevant valuation ratios for the above firms. The valuations are straightforward, but they tell an interesting story: the expected returns of glamorous stocks in reality may not be so glamorous.

Alice Monroe, a 30-year-old married mother of two, was an admissions officer at the Kellogg School of Management at Northwestern University. She was just completing her first year of service at Northwestern and qualified for the university's 403(b) retirement plan. It was early October 2017, and she had until the end of the month to decide if and to what extent she would participate in Northwestern's retirement plan–that is, how much of her salary should she put into the retirement plan, and into which mutual fund or funds should she allocate her savings?

The case includes background on defined contribution and benefit plans as well as mutual funds. It goes into detail about Northwestern's retirement plan, including data on the performance of 15 of the plan's core mutual funds. The case also provides each fund's strategy, Morningstar Rating and Morningstar Category, expense ratio, assets under management, turnover rate, and historical performance for the last 10 years.

Using modern portfolio theory (diversification and risk-return trade-off) and with an understanding of mutual fund fees and the tax advantages of retirement savings, students will decide how much Alice should invest and in which mutual funds.

Fred Bocock was examining the performance of the Energy Hedge Fund and the Energy Portfolio, a hedge fund and a mutual fund respectively, which he manages. Bocock had become increasingly aware that absolute returns or relative returns (returns relative to a benchmark) may not adequately capture his performance and some measure of risk-adjusted performance was necessary. The Dynamis Energy Hedge Fund extends the discussion of performance evaluation into the hedge fund arena. (See “Zeus Asset Management,” UVA-F-1232, for an examination of performance evaluation techniques in the mutual funds arena.) More broadly, the case engages students in discussions on what hedge funds are, what investment strategies they use, and who their investors are. Since the portfolio manager of Dynamis manages both an oil sector equity mutual fund and an oil sector hedge fund, the case allows for a comparison between a hedge fund and a mutual fund. Students should consider the pros and cons of evaluating the performance of the oil stock mutual fund against a number of oil sector stock indices as well as against a number of generic indices, such as the S&P 500 Index. The use of futures, options, shorts, and leverage by hedge funds makes it a lot more difficult to measure their performance. The case comes with a spreadsheet that contains data on the energy mutual fund, the Dynamis hedge fund, and several relevant indices.

In January 2008, in the midst of the subprime-mortgage crisis, Warren Buffett is looking for good investment opportunities for his almost $50 billion in cash. As usual, he has been patient and careful in identifying the right opportunities; however, the amount of cash in his company has grown considerably, and with so much cash sitting idle, returns could suffer. This case can be used to pursue several objectives: (1) to showcase Warren Buffett's leadership in the financial markets; (2) to understand his principles and the principles of value investing more broadly; (3) to understand Warren Buffett as both a thinker and a leader in the world of investing and as an agent of stability in a world of capital markets characterized by continuous change; (4) to discuss Buffett's investment decisions (Swiss Re, Burlington Northern, the funding of his own new bond-insurance business, BHAC) and the timing of those decisions in the midst of the subprime crisis and in an environment of increasing energy demand; (5) to discuss his decision not to invest in banks in the current environment as well as his largest investment, the philanthropic Gates Foundation; and (6) to understand some of the new market forces, such as sovereign funds, as providers of capital.

In mid-January 2008, Merrill Lynch announced a $6.6 billion mandatory convertible-preferred share issuance, much of which was placed privately with the Kuwait Investment Authority (KIA), the Korean Investment Corporation (KIC), and the Mizuho Corporate Bank. The case is set during the subprime-mortgage crisis, which plagued banks and depleted their capital. It focuses on the decision of John Thain to issue capital and place it with sovereign wealth funds (SWFs) in an effort to stabilize the company and put it on the road to growth and profitability again. The case describes the various types and origins of SWFs, their orientation, and their recent intensive investment activity in the global financial-services sector. The case also discusses the transparency of SWFs and their role in the global financial system as liquidity-providing long-term players. Finally, Merrill Lynch's decision to issue the specific financial instrument to replenish its capital (mandatory convertible-preferred) and its terms are analyzed.

The case intends to achieve the following objectives with the audience: Apply the knowledge of fundamental analysis to select good companies for investment; analyse companies for investment through the contrarian strategy; and appreciate the need of own research before investing.

This case study provides an insight into the general process around investment for a retail investor. The protagonist of the case, Rajdeep Sharma, is a middle-class, salaried IT consultant from India. He has taken inspiration from Rakesh Jhunjhunwala, a renowned investor in India, and started his journey on the road to generate wealth. He decides to adopt the contrarian strategy and identifies Jaiprakash Associates Limited (JPA) to invest his savings. JPA is a large conglomerate with decades of experience, which has diversified business across multiple sectors. However, JPA’s pursuit of growth and expansion has created financial issues because of a large amount of debt it has amassed over the past few years. The company has been unable to repay its interest and principal obligations to the debt holders, making it consider a restructuring plan to meet these responsibilities. Meanwhile, Rajdeep has been optimistic about his investments but must experience excessive turmoil due to the high volatility in the company’s share prices. The case highlights the value of sound analysis, along with the impact of information on retail investors’ decision-making process. It will help prospective investors appreciate the importance of economic, sectoral and financial statement analysis before making any investments.

Fundamental analysis for MBA students majoring in Finance.

Teaching notes are available for educators only.

CSS 1: Accounting and Finance.

This case reviews the financial performance of the Fidelity Magellan Fund up to mid-1995. In essence, the Magellan Fund has managed to “beat the market” over time under three different fund managers despite its enormous size ($51 billion at the date of the case). The tasks for the student are to assess the adequacy of this performance, evaluate its likely sources, and opine on its sustainability. The case affords the opportunity to consider the appropriateness of various possible benchmarks in a risk-return framework and to assess the reasonableness of the efficient-markets hypothesis. The case can be used in an introductory finance course to present general information about equity markets and the behavior of large, sophisticated money managers.

Entrepreneurship.

This case is suitable for MBA, EMBA and advanced undergraduate students.

Noah Wealth Management was founded by Ms Wang Jingbo, a lady in her mid 30s with a team of less than 20 members in 2005. Exploiting market opportunities offered by a lack of good wealth management products and services, Noah grew rapidly from one branch office in 2005 to 59 branch offices in 2011, reaching a staff size of 1,031. Noah listed its shares on the New York Stock Exchange in November 2010. In 2011, Noah was ranked No. 38 among the 100 Top Potential Enterprises in China. Nonetheless, Noah faced several problems of internal management during the course of its fast expansion. In the first quarter financial report of 2012, Noah suffered a 52.6 percent decrease in net income over the corresponding period in 2011. Faced with a rapidly declining share price, Noah announced on May 22, 2012 a US $30 million share repurchase program.

The case supports a basic lesson on the entrepreneurial cycle, including assessing a business opportunity, resource mobilization, identifying a business model, growth of the venture, listing on the stock market, and subsequent growth challenges. Students can learn about some of the typical dilemmas faced by founders of entrepreneurial ventures, including how to maintain the corporate culture while growing fast and how to prevent members of the founding team from becoming bottlenecks to the development of the organization. The case can also provide management students with an overview of China's wealth management industry.

Teaching notes are available for educators only. Please contact your library to gain login details or email support@emeraldinsight.com to request teaching notes.

In the summer of 2013, Whitney DeSoto had just been hired as managing director for real assets at the Overton Pension Fund (OPF). Her task was to provide recommendations to the board of trustees to introduce real estate into the fund's portfolio, which to date had been invested solely in stocks and bonds. Combining her knowledge of modern portfolio theory with her institutional expertise in real estate, DeSoto needed to decide what fraction of the fund should optimally be invested in real assets. She then faced the task of deciding whether to invest in public or private real estate. If she thought private real estate belonged in the portfolio, she would need to identify the best investment strategy, the best vehicle, and ultimately the specific investments to recommend.

• Apply modern portfolio theory to the investment decision of an institutional investor allocating its assets between stocks, bonds, and real estate

• Understand the limits of portfolio theory in a real estate context

• Analyze the benefits/costs of investments in both public and private real estate

• Understand the various vehicles in which one can invest in private real estate

• Argue for a set of investments that offer individual benefits/costs relative to a theoretically ideal investment

Apply modern portfolio theory to the investment decision of an institutional investor allocating its assets between stocks, bonds, and real estate

Understand the limits of portfolio theory in a real estate context

Analyze the benefits/costs of investments in both public and private real estate

Understand the various vehicles in which one can invest in private real estate

Argue for a set of investments that offer individual benefits/costs relative to a theoretically ideal investment

Financial derivative and risk management.

The case is intended to be used for MBA and BBA programs in the elective courses such as derivatives and risk management, financial engineering, financial risk management and portfolio management, and for executives aspiring for the fund manager position in industry. The case could also be used in management development programs on financial risk management.

The case was based on the real life experience of a portfolio manager who was entrusted with the responsibility of maximizing return of the portfolio. With the backdrop of dismal performance of the portfolio, the portfolio manager is looking for opportunity in the context of declaration of result by Infosys Ltd, one of the constituents of the portfolio. So the team headed by Nirakar Chaulia was thinking of development and application of option strategies to exploit the result day (i.e. January 14, 2016) opportunity to improve the performance of the portfolio and also reduce the potential of stock price risk. Moreover, the case was designed to help the students develop and assess different option strategies based on their market intuitions. Also, students would be able to apply the option contracts for managing price risk associated with the underlying asset.

The case would prepare students to develop different strategies to be exploited in different market conditions and assess their performance. Especially, this case was designed to enable the students to understand options as a special kind of derivative in terms of trading and its payoff, how to initiate directional and volatility trading with options, how to apply options to generate income to enhance the portfolio performance and how to develop option strategies for different market conditions and assess their performance.

Teaching note is available for instructors only.

CSS 1: Accounting and Finance.