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Learning Objectives
Value Trust
The Efficient Market Hypothesis
Read about Mutual Funds and Stock Markets Consider Bill Miller’s Investment Philosophy Consider what Value Trust’s success means for Trust s the Efficient Markets Hypothesis? Consider a relationship between risk and return
Financial Analysis and Decisions – SchMgmt-640.
Professor Andrew Hall
Financial Analysis and Decisions – SchMgmt-640.
2
Professor Andrew Hall
Value Trust
Value Trust
Bill Miller’s Investment Miller s Philosophy
A Mutual Fund
• 8,044 of them in 2005 • Owning 20% plus of outstanding stock of U.S. Companies
Outperformed S&P 500 I d O t f d Index 14 years in a row i Average returns of 14.6% Surpassing S&P 500 average returns by 3.67% a year
Financial Analysis and Decisions – SchMgmt-640.
Professor Andrew Hall
Financial Analysis and Decisions – SchMgmt-640.
4
Professor Andrew Hall
Investment Philosophy
Take a long view Look for cyclical and secular mis-pricing
• Cyclical markets are the short-term trends that happen within th long-term secular market. ithi the l t l k t
Investment Philosophy
Buy low-price, high intrinsic-value stocks
• Look for negative emotions influencing stock prices and buy the stocks
Take heart in pessimistic markets Lowest average cost wins
• Buy stocks as they fall in price and your average price will be lower than your highest price
Buy low expectation stocks Take Risks
Beware of Valuation Illusions
• Stocks whose prices are “too high” can be good value
5 Professor Andrew Hall Financial Analysis and Decisions – SchMgmt-640. 6 Professor Andrew Hall
Financial Analysis and Decisions – SchMgmt-640.
1
Bill Miller’s View
He uses fundamentals analysis, with A “contrarian” viewpoint
• Most of the time emotion is in play so bet against the p y g emotions
Types of Analysis
Technical
• Charting trends in:
• • • • • Stock prices Volume of trades Sentiment Using number sequences, Chaos...