Accounting
The 3 financial statements
Income statement, balance sheet, cash flow statement
The difference between Enterprise Value and Equity Value
Enterprise value is the true value of the company, attributable to all investors. Equity value represents the portion available to shareholders, and is the number the public-at-large sees.
Hedge funds often buy with ___ money in an effort to beat average investment returns for clients
Borrowed
What equity researchers do for a living
Research equity investments (stocks) to help portfolio managers make better-informed investment decisions
This is a short write-up or presentation that argues for or against investing in a public company's stock
A stock pitch
If only given one statement to review the health of the company, you would want this one
If you were given two to assess a company's prospects, you would want these two
Cash Flow Statement
Balance Sheet and Income Statement
The formula for Enterprise Value
EV = Equity Value + Debt + Preferred Stock + Minority Interest - Cash
Hedge funds are usually ___ risk and charge ___ fees
High, Higher
Types of Valuation Equity Researchers Might Use
Discounted Cash Flow
Relative/VS Peers/Comparables
A unique combination of letters and numbers that represent a particular stock or security listed on an exchange
Ticker
The difference between cash-based and accrual accounting
Cash-based recognizes revenue and expenses when cash is actually received or paid out. Accrual accounting recognizes revenue when collection is reasonably certain and recognizes expenses when they are incurred, rather than paid out.
This is why negative Equity Value is not possible
You cannot have a negative share count or share price
Hedge funds invest a portion of assets in the ___ direction of the fund's focus to offset any losses in its core holdings
Opposite
Technical Skills Equity Researchers Need
Financial Literacy
Writing/Reading
Modeling
Passion for Public Markets
The worlds largest stock exchange
New York Stock Exchange
The difference between accounts receivable and deferred revenue
Accounts receivable has not yet been collected in cash from customers, whereas deferred revenue has been. Accounts receivable represents how much revenue the company is waiting on, whereas deferred revenue represents how much it is waiting to record as revenue.
The 3 major valuation methodologies and what they do
Comparable Companies, Precedent Transactions, Discounted Cash Flow Analysis
This hedge fund is a global leader, with more than $235 billion AUM and a rate of return of 32% for the first half of 2022
Bridgewater Associates
Fundamental Tasks of Equity Research Analysts
Analyze Financials
Perform Valuations
Analyze Industry
Identify Trends
Compare Estimates
Recommend Investment Accordingly
A computer software system that enables professionals to monitor and analyze real-time financial market data and place trades on the electronic trading platform
Bloomberg Terminal
This happens when inventory goes up by $10, assuming you paid in cash
No changes to the Income Statement.
On the Cash Flow Statement, Inventory is an asset so that decreases your Cash Flow from Operations – it goes down by $10, as does the Net Change in Cash at the bottom.
On the Balance Sheet under Assets, Inventory is up by $10 but Cash is down by $10, so the changes cancel out and Assets still equals Liabilities & Shareholders’ Equity.
You present Valuation methodologies to a company or its investors using this
Football field chart
Hedge funds typically recruit employees from these careers
Investment banking and equity research
One of the four books we talked about last week
The Psychology of Money
The Intelligent Investor
One Up On Wall Street
You Can Be a Stock Market Genius
This market is defined by a prolonged drop in investment prices
Bear market