The GWII taught four classes this semester, hosted 14 different industry professionals for guest lectures, presented three shows of “Live with Rodney Lake” to discuss market news, released two quarterlyreports, and culminated the semester with four student pitch days. Thank you to all of our students, guest lecturers, alumni, donors, and everyone who helps to make the program a success.
An important part of our program are the stock pitch days – a students final project where they examine their outlook for an industry and research companies using the GWII framework (business, management, price vs. valuation, and balance sheet) ultimately proposing to sell a current holding in the portfolio which will fund the purchase of a different company that the student believes is a better long-term investment.
For Spring 2022, the GWII will be teaching the following classes: Phillips Student Investment Fund, Quant Student Investment Fund, Venture Capital class. Additionally, Professor Lake will be teaching Business Leader Career Strategy course and Undergraduate Research course. We hope everyone has a great break over the holidays and look forward to seeing everyone back on campus in January.
If you have followed the GWII Investment Framework: BMPB blog series, thank you, now it’s time to assemble the components:
analyze the Business,
evaluate the Management,
estimate the Price vs. the Valuation, and
research the Balance Sheet.
Score each BMPB framework component from 1 – 10. To calibrate the scores, a 10 is the best in the category. For example in the business component a score of 10 is the best business you can find, high profit margins, great brand, and has many opportunities to reinvest capital at high rates of return. A score of 5 is an average business, and a 1 is a terrible business. This score is what you the analyst will assign in the open box in the below table. Weight each component of the framework 25% and derive a composite score for the company, i.e., a weighted average. Refine your score as many times as you think necessary (hint more than once). Being consistent with the system is important. After you have scored more than one company you may compare these scores, to be clear a higher score implies a higher degree of confidence.
GWII Investment Framework: BMPB
Component
Score (1-10)
Weight
Brief Description
Business
25%
Analyze: What’s the company’s business model? How do they make money? What products and/or services do they offer? In what geographic regions do they operate? What’s their Return on Equity (ROE), using the Dupont Formula ROE = Profit Margin x Asset Turnover x Equity Multiplier. What’s their revenue growth rate? What’s the change in their profit margin over time? (see GWII Investment Framework, BMPB – Business blog post)
Management
25%
Evaluate:To evaluate management use the acronym CAPITAL – Capital Allocation; Preparedness; Incentives; Track record; Alignment; Long term.(see focus on management blog post)
Research:Work to understand the company’s credit rating and balance sheet structure. What’s the risk level of the company’s capital structure? (see How do you get confidence in a balance sheet? blog post)
Composite Score (weighted average)
100%
Note: Your composite score should reflect all the work you have put into your overall analysis.
This elemental structure, BMPB, provides you with a basic tool to evaluate many different investment opportunities. The BMPB investment framework has served us well since 2005 and continues to do so. We work to consistently refine and improve our process and analysis. Continuous improvement is a core feature of what we do. Thank you for taking the time to read about the GW Investment Institute’s Investment Framework.
To say that the market has been a bit all over the place since the start of 2020 would not quite be descriptive enough. Along with the market the GW Investment Institute (GWII) Student Investment Fund portfolios have risen, fallen, and risen back again, let’s see what’s next. While the investment environment continues to be highly uncertain, principally driven by what impact COVID-19 will have moving forward, we continue to move forward with our work at GWII to educate and train our students as well as research and development. We aim to help our students become better investors and better business people.
Our students have worked diligently and we are proud of their work. Our first official quarterly report is for the period ending June 30, 2020. In the past we have posted GWII data on an ad hoc basis, however, moving forward we look forward to providing you with these quarterly reports.
