It also has strategies to invest in value stocks, which have high book-to-market ratio and constantly outperformed growth stocks. DFA considers itself as a passive manager because in general DFA sold shares only if a stock no longer fit the portfolio it was in- if a small stock became large, or a value stock became a growth stock. So the constant change of the portfolio structure can be considered as one passive aspect of its strategy whereas precisely matching the holdings of the index portfolio would require DFA to buy discounted stocks in large blocks in which DFA’s traders took several steps to minimize the likelihood that they were being sold a lemon. 2) Who are DFA’s clients, and what are their concerns? What new clients is DFA trying to serve, and what are some of the new issues DFA will face in meeting these clients’ needs?
In this section I will look more closely at what creates a competitive advantage between market competitors towards customers at the same competitive level. J Sainsbury appears have solid financial position which is reflected in the grew of 7.1% of the sales and the £738m of Underlying operating profit that up raised 10.0% in 2011. (Sainsbury, 2011). However Dave McCarthy, an analyst at Evolution Securities affirm that Sainsbury’s remains the most susceptible supermarket because they have both the weakest cash flow and the weakest margin in the industry of groceries (Financial times, 2011). Considering that the net cash from operating activities is reduced 18% in 2011, which can affect their aims to expand.
Despite scouting for smaller opportunities, a first round of $250 million funding may not be sufficient for Brazos to invest in any more than a few firms which gives them limited scope for diversification. This places greater pressure on a first time fund and in particular, Brazos’ motivation to add value by simply promoting organic growth in cash flow and operational efficiency in the hope of enhancing industry scale. Additionally, the existence of dependable cash flow and management make it easier to acquire debt financing and increase leverage which suits a first time fund. Furthermore, Brazos’ previous relationships and experience in the market allowed it to mitigate aspects of first fund bias which inhibit the entry of many prospective VC firms into the industry. Brazos’ GTT method is one of its points of differentiation which appear limited in its application to a variety of firms outside the ‘family-owned business’ model.
Marriott estimates its equity beta to be 1.11. Based on this information, if Marriott had no debt in their capital structure, I believe their equity beta would be lower, more in line with the S&P 500, because adding debt to a firm increases leverage in their operations. If a firm has more leverage, they have more room to take risks and this reflects a higher beta, which in turn leads to greater returns. This series of events is one of the main factors as to what lead to the immense growth of Marriott throughout the 1980’s. Note: I am not
These RIAs helped DFA offer its high net worth investors the same low cost small and microcap investment vehicles, while making these investments relatively more liquid in the secondary market. Furthermore, in the late 90s, when the tax laws became fairly harsh on individual investors, DFA started offering tax managed funds to lower the overall tax burden on the gains from those funds. However, compared to DFA’s other funds, these tax managed funds were relatively more challenging for DFA to manage, as DFA had to continuously balance the funds while considering tradeoffs between tax benefit and transaction costs to determine net benefit to the portfolio. 5) Explain the DFA small and value
The report concludes with a critical assessment of Buffet’s investment philosophies, looking at the impact it has on Berkshire Hathaway and why it is difficult for other investors to replicate Buffet’s strategy and be as successful. The findings indicate that the market reacted positively to the deal, especially for Berkshire Hathaway, beating the average response to an acquisition being announced by over 4%. The increase in Berkshire’s value represents the stock markets opinion on how much they underpaid. Using the enterprise value multiples method, the report finds that the book value of Pacificorp to be $9.2bn, $200m less than the offer value. This implies there is significant intrinsic value when combined with MidAmerican, the new customer base and economies of scale being the 2 most important factors.
Exhibit 7: By a raising current ratio, we can see that Krispy Kreme is much more able to pay debt within the next year. This is good because even though there are a lot of equity issues going on in the business, they are not going to go bankrupt. Exhibit 9: One thing that really stands out in this exhibit is the miniscule amount of debt Krispy Kreme uses. I think they should leverage themselves to somewhat close to the industry average (around 35% current debt, and 42% long-term debt) to build some organic growth and get away from the business model that is bound to slow down. Financial ratios are a good indicator of a company’s health because they compare certain numbers to other related numbers.
Cash Debt Coverage Ratio - Because it uses cash provided by operating activities, it may provide a better representation of liquidity. Calculate the ratio for Kellogg for 2007 and 2006 Is the coverage adequate? Probably so. Kellogg’s coverage is better than that of General Mills, and it approximates a commonly accepted threshold of .40. Receivables Turnover Ratio – Measures the number of times, on average, a company collects receivables during the period.
In his first section Paul says that “It is universally acknowledged that education is the key to economic success.” He is actually just stating that to make a generalization of most of the worlds thoughts on education and job success, because right after he makes that statement he goes on to say that “what everyone knows is wrong.” Krugman says that the growing technology and use of software is extremely cheaper than the “old fashioned” way of doing things. Such as using armies of lawyers and paralegals to do legal research. Basically, technology is reducing demand for highly educated workers. Another example he uses are engineers. He says technology is eliminating the need for them because you can make chips much simpler with a computer than a human worker.
Ahold can better spread his risk. b) ING has a high equity beta and a low asset beta. They had to have a lower asset beta because they can’t get customers if they have a big risk to fail. A bank has to be reliable. Vraag 4 a) Debt beta measures the sensitivity of the return on debt to the returns of the market.