After academic research documented superior performance by value stocks in a multitude of countries, DFA began to create a variety of international value-stock and small-stock investment funds. The company was highly successful, despite missing out on the great 1990s growth-stock boom. DFA's assets under management grew from $8 billion to $40 billion between 1991 and 2002. With value stocks having performed well in the first two years of the new decade, DFA is experiencing continued growth of its investor base and is now seeking new areas in which it can add value for investors while continuing to claim to have no special "stock-picking" ability. Dimensional Fund Advisors Case 1.
DFA’s investment strategy was based on academic research. When the firm began its business in 1981, its main product was a ‘small-stock’ fund. This means that it invested in stocks whose market capitalization fell below the 20th percentile of all NYSE stocks. One crucial reason that DFA chose small stocks was the findings of academic papers by Rolf Banz, who found that small stocks had consistently outperformed large stocks over the entire history of the stock market from 1926 to late 1970s. It also has strategies to invest in value stocks, which have high book-to-market ratio and constantly outperformed growth stocks.
Everything being equal, the WACC of a firm increases as the beta and rate of return on equity increases, as an increase in WACC means a decrease in valuation and a higher risk. A firms WACC is a very important both to the stock market for stock valuation purposes and to the company's management for capital budgeting purposes. In an analysis of a potential investment by the company, investment projects that have an expected return that is greater than the company's WACC will generate additional free cash flow and create positive NPV for stockholders. Since the WACC is the minimum rate of return required, the managers in the company should invest in the projects that generate returns in excess of the WACC. WACC is set by the investors (or markets), not by managers.
Therefore, in order to stay competitive, Satre has decided to focus on Harrah’s core competency, which is customer loyalty. In this connection, he has worked towards hiring a competent team, which in turn has developed a data-driven marketing strategy. While at the time, Harrah’s seems to be reaping the benefit of these efforts with a 100% growth in stock price and profits; Satre is concerned with determining how much these marketing efforts had actually contributed to increased profitability, and whether these improved results were actually sustainable or simply a one-off occurrence. SWOT Analysis Strengths | Weaknesses | - Investment in Information Technology | - Inability to compete on 'innovation' with the newer casinos (eg. Mirage and MGM) | - Excellent customer service (as recognized by Casino Player Magazine) | - It is an over 50-year-old company, making across-the-board facility upgrades difficult & expensive | - 50% growth in revenue (higher than industry average) | | - 100% growth in stock price and profits | | - Patented integration of IT network across Harrah's properties | | - Data-driven
1. The strategy of DFA company was taking advantages of size effect (small companies outperform the market) and value effect (high book-to-market ratio companies outperform the market). So that they chose small-capital companies and high book value companies to create their portfolio. They primarily believed in efficient market as well as the sound academic researches and ability of skilled trader. They worked with the RIAs (registered investment advisors) to lower the cost.
There are several strengths in Wal-Mart raising capital by selling stock. Selling stock is less risky than debt financing and it allows the company to raise money without giving up the amount of control it would relinquish from merging with another company. Wal-Mart is already a publicly traded company, so it would be easy for them to issue more stock. Despite all the strengths there are to finance projects through selling stock, there are some weaknesses. The first weakness is that as more stocks are outstanding, the amount of dividends payable increases.
Projects which increase shareholder value could be formed with benchmark hurdle rates, the company can ensure a return on projects which results in profitable and competitive advantage. 2) Optimize the use of debt in the capital structure: Marriott invests a lot of money in long term assets that's why it is really necessary for the company to maximize and optimize its debt. And the company has an A rating. It means that Marriott is able to borrow an important amount of money to invest and it could be heavily indebted. Therefore, it is really important to optimize the debt level.
First of all, DFA kept close relationships with outstanding academics through cooperating investment practice and academic research. Then DFA was a passive fund, which had its primary investments in small stocks and value stocks both in U.S. market and international market. Moreover, institutional clients made up the majority of DFA’s business and almost all of its institutional clients were non-for-profit institutions with tax exemptions. Furthermore, DFA provided investment services to individuals through some registered investment advisors (RIAs), which made it a win-win situation where DFA provides RIAs low fees service and educations, in return RIAs brought wealthy clients to DFA and practical problems for DFA to deliver back to further academic research. DFA Investment Approach The cornerstone of the DFA approach is investing based on sound academic research.
All payments went towards the king, this would've also made the Earls not feel powerful enough, especially Harold Godwin who was seen as the most powerful man in England, but theoretically he wasn’t. However the Economy was well governed because the trade increased, which encouraged both the growth of towns and foreign contacts, this demonstrates that England were still involved in trade, which was good for the economy. However the economy was not very well developed especially compared to the Byzantine Empire and Muslim world. Those economies were massive, especially when compared to England’s. Overall I believe that the economy for pre-Conquest England as well- governed to an extent as the King did have large control, he did control this well, but he may have been seen as too powerful where the government is concerned.
On the other hand MI backed mainly by shareholders equity and performing assets and thus would be able to issue new debt increasing value for both shareholders and the corporation. Thus the shareholders would gain at the expense of bond holders and the equity value of the company would increase. b) Bondholders Bondholders had a lot to lose as according to Project Chariot almost all the debt would be assigned to HM. Given the problems in real estate and hotel markets there was a concern of HM’s ability to meet its debt payment and there was a high probability of default. This meant that the risk was issued at investment grade but now was not backed by valuable assets of the companies which were to be spun off to MI which was to be backed by equity.