Graham&DoddandModern FinancialAnalysis
Joseph Calandro, Jr.
PwC
& the University of ConnecticutDecember13, 2011
www.pwc.com
Agenda
•
Benjamin Graham
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Warren Buffett’s 1995 GEICO acquisition – DDM
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Modern Graham & Dodd Valuation – Overview
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Warren Buffett’s 1995 GEICO acquisition – Graham & Dodd
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“Critical valuation errors to avoid”
PwC
•
Forecast-related errors
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Growth-related errors
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How to avoid errors
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The Graham & Dodd valuation process
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Graham & Dodd and avoiding “Critical valuation errors”
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Recommended reading
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About the presenter
2December 2011
BenjaminGraham
•
BenjaminGrahamfounded“valueinvesting” inthe1920s-1930s
- Heavily influenced by the “
newera
” boom of the 20s & the subsequent bust/Great Depression- Price arbitrage-based strategy: buying firms < liquidation value resulted“ ”
PwC
, , what differentiates an “investment” from a “speculation” for Graham & hisstudents- Bottom-up, investment-by-investment approach- Value investors opposed modern financial economic theory (i.e., efficientmarkets, portfolio theory, capital structure doesn’t matter, asset pricingmodels, option pricing models) from the beginning & thus tend toapproach valuation & investment differently
3December 2011
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