This course focuses on helping business managers, investors and analysts appreciate why it is important and how to understand the fundamentals of businesses and companies, in order to make better decisions. We will also consider how financial statements and specific accounting issues help or hurt our ability to understand the company.
We will be drawing on three decades of my own broad experience: advising corporations, analyzing companies as a ranked sell side analyst, creating a new framework and technology based data and valuation system for analysis and investment decisions, and as part of the senior management and finance teams at Morgan Stanley, plus as an academic researcher, auditor and participant in accounting regulation. My objective is to pass on as much of this knowledge to you as is possible in a one semester course. We will also be utilizing the advice and potentially the participation of several practitioners in the investment and corporate community with whom I have worked and who are helping in the development of the course.
As such, one objective is to have each student do the fundamental analysis for at least one company they are interested in e.g. the company they will work for (or a customer, client or competitor). There will be teams of up to 3 people who will choose a sector and 3 companies within that sector as the basis for their assignments. (One of these companies can be the focus of the primary analysis) I will personally spend time with each team to help provide insight into how the issues we consider (and others we might not), apply to the company(ies). The grades will be based on the assignments and a paper analyzing “your” company, but no exams.
The approach will focus on the business but will cover many topics/concepts that are covered in typical financial statement analysis, earnings quality, security analysis and valuation classes. We will focus on understanding how businesses create or destroy value and what it would take to change this, and discuss how and why this is in the price or not.
We will also take up to 20 minutes each week addressing any topics that are in the financial press that bear on the overall theme of fundamental analysis, to understand what the issue is and its potential implications. As this is a new course with all new materials, we will keep some flexibility to ensure we optimize the value of the takeaways for the people in the class.
Every student who puts in effort should walk away with an approach and concepts that they can utilize in many different businesses and positions. It should be a fun journey.