More Stock Picks: Bon-Ton Stores BONT

Before I put this pick out there, I should note my last pick done for the Securities Analysis class was a concrete manufacturer which took some damage from the whole housing crisis. I was right on my view for the next quarter's earnings and its impact on share price but was very, very wrong on the longer horizon.

This pick is one I did for the Seminar In Value Investing class. Its a great book and done from the Value Investing viewpoint as taught by Professor Bruce Greenwald at CBS.

They tell you in Value Investing to write down your views and track them to protect yourself from hubris. Releasing them to cyberspace should be even more effective. My pick:

http://docs.google.com/Doc?id=df9wrf5s_52g8sktfg5

The Yahoo Finance link (for your own research):

http://finance.yahoo.com/q?s=bont

Working One Day A Week; Why No School-Run Fund?

I was chatting to a friend active in CIMA and I got a question answered that I used to wonder about during admissions. Schools like Cornell and Wharton have student run investment funds. Columbia which is the Value Investing school, doesn't. Apparently the reason why it doesn't happen, is that a fund like that requires a faculty sponsor. If they set up a fund it would be $10 million or so. At Columbia, the faculty who have the skills to sponsor it, don't consider something like that worth their time. Its New York! They are way more likely to take a paid role in a hedge fund of some kind if they wish to manage money.

Students have the same attitude in some ways. We are in New York and plenty of students headed to private equity, venture capital, buy side or hedge funds took jobs taking up 1-2 days per week.

This is something that you probably wouldn't put in an application essay because admissions thinks it detracts from the overall experience. However, it is a good move if you can find the right firm. I do have to say though, that everyone I know taking that route seems to be a little distracted from the academic experience.

Final Term

I have now started my final term at b-school. I have been negligent in my blogging. I basically took the whole term off. There was a lot going on. There was a credit crisis and a market crash to watch. My wife is working now and I am now spending more Daddy time. The first term of my second year has been the best part of the MBA for me. We got to do some family holidays. Careerwise, I knew where I was going.

I finally got to go home at the end of the second term. A cousin had a kid. That's 4 great-grandkids for one of my grandma's. The other has 6. Family was asking me "how was the MBA?” I didn't even know where to start. So much has happened.

I thought that I had got a lot of done in clubs, job hunting and in academics but the thing that they were most impressed was a picture of me and CBS's distinguished alumni Warren Buffet. I got to go to Omaha last year and he was very kind about taking photos with MBA's he meets. Mr. Buffet is a serious contrast to the tycoons you see in Singapore and Malaysia. He's 10 times richer and far more humble. He's amazingly generous with his time and a testament to the character of Americans from the central regions.

Malaysia was a little bit down. Tensions between the Malay (Bumiputra) and non-Malay populations have got pretty bad. Non-Malays in Malaysia are genuinely wondering if they will have any role in 20 years time. Me and a friend who had reached a senior role in the Malaysia office of a multinational insurer were joking that there wasn't much of a story for the Malaysian economy. There are links to the Middle East (which wouldn't help non-Muslim Malaysians) and ASEAN. Unfortunately an ASEAN Free Trade Zone would take 10 years and talented Malaysians need to know what to do with themselves in the meantime.

If I were an educated young Malaysian, I would be taking a good hard look at Singapore, HK or Shanghai. It might require a 3-9 month investment to studying Mandarin in China for Shanghai but going regional seems to make a lot of sense. One of my MBA colleagues who is joining a bulge bracket bank in Equity Research in HK is using the June-August period between graduating and starting work to do an intensive Mandarin class in Shanghai.

Securities Analysis: Outcome

What do you know? A good call. I called a buy at $46 with a target of $52. And I picked the earnings call as a potential catalyst which is probably proof of a genuine learning experience.
Getting the direction right is no big deal. A stopped clock is always right twice a day....
Thanks to my cluster's Geezie Master of Financial Statements (cluster award!) for suggesting the name for further research way back when.

Securities Analysis

This is a stock pitch I did for an elective called securities analysis. I called a buy on a stock in the same industry as USG, a recent Bershire Hathaway investment. I gave this presentation and made a price target on April 17th. There's a 2nd May earnings call that I expect to be a potential catalyst so I am likely to be proven wrong or right shortly. I don't have page for my full valuation report but it was a 20 pager! As usual, the formatting is compromised by the technology used to publish it. It looks better on powerpoint.

http://docs.google.com/Doc?id=df9wrf5s_40d77fkt

This was a great course and apparently a direct descendent of Securities Analysis as taught by Graham and Dodd. We hit Securities Analysis by Graham & Dodd quite a bit and also the idea of Expectations investing (reverse engineering what the market thinks on some assumptions with a DCF model). The course is though by adjunct professors who are real world stock-pickers. The best aspect is a stock pitch as a group and a second pitch as an individual in place of an exam.

The academic aspect doesn't give you a lot more than you could pick up yourself with access to the books cited in the course and some time on the job as a sell-side analyst during an internship . You can learn a lot from the harsh marking, from the rest of your group (especially if you make sure a guy with pre-MBA buy-side experience is in your team) and watching people's pitches. If you are willing to spend significant numbers of bid points you can take the course with Michael Maubossin at Legg Mason.

Subjects: What I Took, What I Want To Take

So what subjects would someone headed for Global Markets do at Columbia? I am putting my subjects done to date up on the web and listing what I intend to take. I was hoping to achieve some knowledge of Derivatives, Securitization and Fundamental Equity Analysis. Improve on my quantitative skills a little but have at least a few Strategy and Leadership courses.
The system is more flexible than you think and you can overload from the typical 15 credits a semester.

I like the exemption system, it gives you a way to demonstrate your knowledge if you want flexibility. Basically, a day of revision and passing an exam lets you avoid taking CORE subjects if you know 75% of the material before coming to b-school. In some cases I made sure I got copies of the lecture notes for courses I exempted as reference material (Decision models, Statistics, Capital Markets). A CFA in Columbia should take advantage of it.

It seems possible to be going into your internship with a lot done. While sticking with your cluster is great, some electives under your belt going into your internship seemed very valuable to me. Deferring some CORE to second year is also an option to get more electives in year 1.

By End Of Year 1:

CORE
Macroeconomics, Accounting, Corporate Finance (By the end of this course, you can do a Free Cash Flow based valuation of a company under exam conditions. Good course but I didn't get a 'H'. I got the mechanics right but missed the subtleties of the growth assumption under exam conditions). Marketing Strategy, Strategy, Marketing Techniques, Leadership (I'm in trouble for this half semester course. It just seems to be less the "command & control" leadership I am used to. Will learn but big chance of bombing my grade), Accounting II (Management Accounting), Creating Effective Organizations (The best CORE subject around).

EXEMPTED FROM CORE
Capital Markets (Passed exemption , although this course is good enough I got someone in it to send me the lecture ppt's and have read through them), Statistics (Passed exemption, did statistics in undergrad), Decision Models (Passed exemption, I'm a former actuary!), Operations (Passed exemption, I was also in consulting), Microeconomics (Passed exemption).

ELECTIVES
Education Leadership Consulting Lab (Very practical education project with lots of non-MBA students), Venture Seminar (Fun course, great guest speakers, taught by a pair of lawyers), Option Markets, Securities Analysis, Security Pricing (joint with Fin. Eng. people).

My second year plans (hoping I bid well):

ELECTIVES
Advanced Applications of Credit Derivatives, Fixed Income Derivatives, Advanced Derivatives, Financial Markets and the Economy, Seminar in Value Investing, Economics of Strategic Behaviour, High Performance Leadership, Applied Equities Analysis, Advanced Corporate Finance, Decision Models II, Entrepreneurial Selling.

POSSIBLES
Hoping to get permission to take Introduction to Econometrics. If I miss High Performance Leadership, I 'll be picking from Money Markets, Negotiations or Equity Derivatives. If I miss Applied Equities, I'll go for Valuation/Financial Statements.

Looking at my electives the mix, if all goes well is-
Stock picking - 3
Strategic economics - 1
Soft Skills- 2.5
Venture- 1
Derivatives and quant subjects- 6.5
Macro economics- 1
Corporate Finance- 1

Lighter on soft skills than planned but some variety. If I had ducked on the exemptions I would have only 10 electives in total...but had more time to enjoy the first year experience. In hindsight, not a bad call. I'll have to make it a point to attend leadership guest speakers a lot in second year. Possibly take mandarin as an extra-curricular..

So is b-school making a difference? Yes.

Is it worth two years out of the workforce and the loan? I'll know for sure in 5 years time from a financial viewpoint. From a personal achievement point, I was sure in the first 3 months.