Applied Portfolio Management How University of Kansas Students Generate Alpha to Beat the Street

by Shenoy, Catherine; McCarthy, Kent

• ISBN13: 9780470041727
• ISBN10: 0470041722
• Edition: 1st
• Format: Hardcover
• Copyright: 2008-04-04
• Publisher: Wiley

Summary

When investment professional Kent McCarthy returned to teach at his alma mater, the University of Kansas, he planted the seeds for the Applied Portfolio Management (APM) program-a course that allows students to manage a real money portfolio, which has compiled a remarkable record of investment success. Now, with this book, you'll discover how to use the concepts covered in this class-from understanding the fundamental drivers of business success to buying at the right price-to enhance your own investment skills.

Author Biography

Catherine Shenoy, PhD, MBA, is Director of the Applied Portfolio Management program at the University of Kansas School of Business. She has worked for the U.S. State Department as a Foreign Service Officer in Washington, DC, and Tunis, Tunisia. Since 1993, she has taught accounting, statistics, and finance at the University of Kansas. Shenoy's research areas include corporate governance, corporate financial policies, and applications of artificial intelligence to portfolio analysis.

Kent C. McCarthy, MBA, is President and Chief Investment Officer of Jayhawk Capital Management. In 1994, he retired from Goldman Sachs, returned to Kansas, and founded the Applied Portfolio Management class. McCarthy taught the class full-time until 1995, when he founded Jayhawk Capital Management, which manages hedge funds and private equity funds primarily focused on the Chinese equity markets. He continues as an Executive Lecturer in the APM class.

Table of Contents

Preface	p. xi
Acknowledgments	p. xv
Introduction to the Applied Portfolio Management Class	p. 1
APM History	p. 3
In the Beginning	p. 4
How Do Beginning Investors Think?	p. 6
Student Groups: Short-Term Investing and Portfolio Contests	p. 9
Getting Close to the Information	p. 13
Onions, Poker, and Ants	p. 17
What about the Ants?	p. 18
Things to Come	p. 19
APM Guidelines	p. 21
Professional Money Managers	p. 22
Tactical Asset Allocation and Sector Benchmarking	p. 25
APM Approach	p. 32
Wrapping Up	p. 36
Conventional Wisdom	p. 37
Diversification and Risk	p. 38
Efficient Markets	p. 45
Wrapping Up	p. 49
How Students Find an Investment Edge	p. 51
Build Your Own Information Network	p. 51
Neglected Firms	p. 52
Surface Analysis	p. 55
Wrapping Up	p. 62
Alpha, Sigma, Beta: APM's Risk and Reward	p. 63
Risk-Return Trade-off	p. 64
Other Risk Measures	p. 68
Wrapping Up	p. 75
Risk and Return Calculations	p. 75
Building an Investment Case	p. 79
Many Ways to Be a Successful Investor	p. 81
Common Traits of Successful Investors	p. 82
APM's Philosophy	p. 84
LSB Industries	p. 85
Wrapping Up	p. 98
Prepping for a Case	p. 99
Getting Started	p. 100
Understand the Business	p. 118
Ready to Write the Case	p. 122
10-K Requirements	p. 122
Writing a Case	p. 125
Case Format	p. 127
Description	p. 129
Investment Thesis	p. 141
Next Steps	p. 142
Gazing into the Crystal Ball: Pro Forma Statements	p. 143
Pro Forma Financial Statements and Free Cash Flow	p. 145
Building a Pro Forma	p. 153
Next Steps	p. 159
Valuation	p. 161
Relative Valuation	p. 162
Discounted Cash Flow Valuation	p. 171
Investing Is Dynamic	p. 188
Discounted Cash Flow Formulas	p. 189
Class Specials	p. 193
Investing in China	p. 195
Financial Systems in China	p. 196
Raising Equity in China	p. 199
Company Example: China Green	p. 204
Wrapping Up	p. 211
It's a Big World (After All)	p. 213
Interceramic	p. 214
World Commodities	p. 217
Wrapping Up	p. 227
Valero's Numbers	p. 227
Local Biases	p. 229
American Italian Pasta	p. 230
Novastar Financial	p. 233
Inergy, L.P. and Inergy Holdings, L.P.	p. 238
Tortoise Capital Advisors (and More about Inergy)	p. 240
Wrapping Up	p. 244
Making Corporate Governance Pay	p. 247
Board Issues	p. 248
Corporate Activists	p. 254
Wrapping Up	p. 259
It's All about Who You Know	p. 261
APM Students	p. 262
APM Speakers	p. 268
The Last Word	p. 271
Index	p. 273
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