Investments

FINA 3303
Fall 2016
Professor Vinnie Muscolino
Email:
v.muscolino@northeastern.edu
Cell 617-840-3758
Fax 781-394-6104
Office: 409D Hayden Hall
Office Hours: Mondays 3-4 p.m., after class, and by appointment. Feel free to call my cell.
Course Summary:
This course will familiarize students with financial markets and the securities traded therein. We will
discuss a variety of techniques for valuing financial assets. The course critically analyzes such qualitative
concepts as market efficiency, intrinsic value, and risk. The contents of this course, descriptive, theoretical,
and applied, will provide students with the ability to build unique valuation models to scrutinize investments.
We will bridge an understanding of how investment theory and investment practice relate.
Objectives:
1. Provide a practitioners view of investing, based on our review of real-time, market-moving events in
the marketplace. I have spent over 20 years in the investment industry and look forward to being a
valuable resource for you to learn about investment analysis and portfolio management.
2. Understand and explain the realities of securities analysis, research, valuation and portfolio formation.
3. Develop a general understanding of theories and valuation. But our goal is to come away from our
weeks together having experienced the practical aspects of investing (and the unpredictability).
4. Gain experience by having the opportunity to learn to analyze investment Sectors, Industries and
individual securities. We will work towards understanding buy and sell decisions and securities
recommendations. Be prepared to like or dislike individual companies, their value creation strategies
and business practices. We will critically defend, or object to, stock investment ideas that we talk
about.
5. Gain exposure to the Bloomberg service to facilitate analysis and decision-making. Develop
Bloomberg awareness and knowledge of how portfolio managers and financial analysts use this
Community and other tools to gather data and conduct research.
6. Look at current events for impacts on companies, and also consider the effects of macro events on
investments.
Required:
a. Essentials of Investments, by Bodie, Kane, and Marcus; 10th Edition, McGraw-Hill with Connect
b. Required: Wall Street Journal. Subscription site: WSJ.com/studentoffer . Subscriptions include
print, online and tablet versions.
c. Required: Barron's. Subscription site: Barrons.com/studentoffer .
d. Regular daily reading of The Wall Street Journal. Regular reading of Barrons.
e. Stock-Trak portfolio simulation subscription
f. Stay current with investment programs such as CNBC to develop a feel for the investment bulls and
bears that make markets and affect securities prices. CNBCs Fast Money is a good practitioners
program that should help you come up with questions and concepts to use for class
discussion/participation.
Useful NU Library Resources:
a. Northeastern University LibGuides - Business Research at Northeastern University Libraries Home
http://subjectguides.lib.neu.edu/business
b. S&P Industry Surveys
http://subjectguides.lib.neu.edu/business
c. ValuLine Investment Survey
http://subjectguides.lib.neu.edu/business
d. Bloomberg terminals in the CBA Bloomberg Lab (177 Dodge Hall), Library, 413HA and other locations
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Strongly
Suggested:

Grading:

CNBC.com is an excellent resource for investment analysis and research. CEO Interviews
and Industry Analyst Interviews are archived and available. CNBC is also a convenient
online tool for staying current on investments. Bloomberg and Hoovers are valuable tools
as well. In addition, we will utilize selective Wall Street research.

Midterm
Final Exam
Assignments
Connect and LearnSmart Homework
Bloomberg Certifications (BESS and BMC) and Bloomberg Aptitude Test (BAT)
Class Participation/Daily Market and Security Discussions
Group Investment Project:
Group In-class Presentation
Group Final Report

20%
20%
10%
5%
5%
20%
10%
10%

Additional Requests and Requirements:

Class Participation: Your class participation grade will ultimately be a subjective judgment made by me
based on quality and frequency. Our approach will be a real world industry experience view. Please be
open about asking how its done in the trenches. I am hopeful that we will have lots of back and forth
discussion about the challenges of managing real money in the investment world. Be sure to pay attention
to group presentations and to ask your peers questions on presentation days. Be sure to display your
name card.
Should I do the reading before class? You should do an initial reading of the assigned materials prior to
class. The class will help you to focus on what is relatively important or unimportant. It will be equally
important to follow the current events disseminated daily in the investment universe.
Dont be passive. Take control of your experience in this class. We can have a wonderfully interactive
class if we embrace the unique investment period the world is going through. The 2008 market was a
once in 100 year event, and the impact will be long lasting. The recovery has been equally
interesting. Let me help you better your understanding of investments by sharing your candid
observations, curiosities and experiences about the Stock Market. Find interesting information and bring it
to class. Never forget, we are all allies in the learning process.
Attendance: Many of you have busy schedules. Students have multiple commitments that may
occasionally compete with class. If possible, let me know in advance if you must miss a class. You are
responsible for all materials covered, all information conveyed, all discussions held in each class
whether youre present or not. I am happy to work with you but please do your best to minimize class
absences. Also, please be on time and remember to sign the attendance sheet.
OUTSIDE CLASS PREPARATION:
In classes, it is expected that students will spend up to eight hours per week on outside class preparation
activities, which may include reading, independent research and team meetings. Student groups must
commit to a regular one-hour weekly meeting and keep a record of their activities.
TA help is available in 412A Hayden Hall. The schedule is posted.
Late Assignments: Late assignments receive a one letter grade deduction for each day they are late.

Additional Requests and Requirements (continued):

Laptop, Tablet and Cell Phone Policies: Students are expected to act professionally in the classroom and
during any guest speaker presentations.
1) Class Policy
In class, laptops are permitted for taking notes or to complete group assignments as assigned by the
professor. Any non-class related activity on a personal computer is strictly prohibited. Cell phones should
be stowed during class.
2) Presentation Policy
During presentations NO CELL PHONE, TABLET OR LAP TOP use is permitted. Failure to adhere to these
guidelines will jeopardize a students class participation grade. If there are extenuating circumstances that
prevent traditional note taking, students may speak to me.

Academic Honesty and Integrity Statement:

The University views academic dishonesty as one of the most serious offenses that a student can commit
while in college and imposes appropriate punitive sanctions on violators. Here are some examples of
academic dishonesty. While this is not an all-inclusive list, we hope this will help you to understand some of
the things instructors look for. The following is excerpted from the Universitys policy on academic honesty
and integrity:
- Cheating intentionally using or attempting to use unauthorized materials, information or study aids in an
academic exercise. This may include use of unauthorized aids (notes, texts) or copying from another
students exam, paper, computer disk, etc.
- Fabrication intentional and unauthorized falsification, misrepresentation, or invention of any data, or
citation in an academic exercise. Examples may include making up data for a research paper, altering the
results of a lab experiment or survey, listing a citation for a source not used, or stating an opinion as a
scientifically proven fact.
- Plagiarism intentionally representing the words or ideas of another as ones own in any academic
exercise without providing proper documentation.
-Unauthorized collaboration Students, each claiming sole authorship, submit separate reports, which are
substantially similar to one another. While several students may have the same source material, the
analysis, interpretation and reporting of the data must be each individuals.
- Participation in academically dishonest activities Examples include stealing an exam, using a pre-written
paper through mail order or other services, selling, loaning or otherwise distributing materials for the
purpose of cheating, plagiarism, or other academically dishonest acts; alternation, theft, forgery, or
destruction of the academic work of others.
-Facilitating academic dishonesty Examples may include inaccurately listing someone as coauthor of
paper who did not contribute, sharing a take home exam, taking an exam or writing a paper for another
student.

Lets learn about the MARKETS and have fun doing it !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Week 1
09/09 Introduction:
What do you want to get out of this course student participation?
What I want you to get out of this class a real time immersion in the concepts of investment
management. An ability to understand why valuations may or may not be justified. Why some
investments may appear over or undervalued, but are not. Follow the markets over the term and
interpret/analyze/experience real time analysis.
Each week, we will look at the relative performance of sectors and stocks, and analyze risk/return,
volatility, betas, and valuations in a progressively analytical way
Begin to read earnings releases and other current events that impact markets today, and continue
to do so for the entire term. There is lots of quarterly news, data and other company information
which is released frequently and relevant to in class discussions. Follow market news closely.
Investment Sectors discussion (S&P 500).
Key slides presented in class will be available on Blackboard.
Connect and LearnSmart: Complete the Connect and LearnSmart homework as we cover the
weekly materials. Connect and LearnSmart Chapter Homeworks must be completed within 7 days
after the Chapter Reading is assigned on the Syllabus to receive full credit. You will receive half
credit after 7 days. Connect identifies your assignment completion dates. The end of term due
date shown in Connect is a default date that is set to allow half credit for late assignments. DO
NOT GO BY THIS END of SEMESTER DATE if you want full credit for Connect assignments.
Please access Connect and LearnSmart assignments through Blackboard. This will ensure that
your grades are up to date in Blackboard.
Reading: Regular Current Events reading of the Wall Street Journal and Barrons is required in this
course.
Assignment: Complete the Information Form on Blackboard. E-mail the file to me and hand in a
hard copy.
Assignment: Sign up for the Wall Street Journal and Barrons. E-mail me confirmation that you
have signed up.
Assignment: Form groups. Then each individual will pick stocks that must be followed during the
term. This includes corporate and financial news on the companies. These publicly traded
companies must be different for each group member. They will be used to form a stock portfolio
that the group will build. You will analyze and collect data on the companies throughout the term.
Pick companies you have an interest in to make it more enjoyable. Read the Wall Street Journal
and utilize any online resources to learn about the companies. Be prepared to come to each class
to discuss what you have observed.
Assignment: Begin to get familiar with Bloomberg.
Week 2
09/13 Introduction to Bloomberg
Reconfirm groups before class ends.
Assignment: Visit a Bloomberg terminal and setup a login. Look up one of your companies to get
familiar with this important Investment Industry Financial Research Service.
Asset Classes and Financial Instruments
Reading Ch 1
Key slides presented in class will be available on Blackboard.
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09/16

Asset Classes and Financial Instruments

Reading Ch 2
Assignment: Complete the Bloomberg Certifications (BESS and BMC) by the end of next week.
Submit proof of completion for each by e-mail.

Week 3
09/20 Independent Team Meetings
Assignment: List of Stocks Due. Assemble Group Portfolio, select a Team Portfolio Name and
submit an electronic Excel file and a hard copy using the Group Portfolio form posted on
Blackboard. Make sure you pick a UNIQUE Team name for your portfolio. Have 1 group member
only submit the portfolio.
Assignment: Setup your portfolio in Stock-Trak. Your initial trades must be completed within
trading hours this week. Use the link posted in the Blackboard Assignments section to register.
09/23

Securities Markets
Reading Ch 3
Mutual Funds and Other Investment Companies
Reading Ch 4
Assignment 1 Due at the beginning of this class: Mutual Funds. Complete and submit.

Week 4
09/27 Group Presentations of Portfolio Selections
Submit 1 hard copy of presentation slides per group and also e-mail 1 electronic copy
09/30

Group Presentations of Portfolio Selections

Submit 1 hard copy of presentation slides per group and also e-mail 1 electronic copy

Week 5
10/04 Measuring Risk and Return
Reading: Current events; Ch 5
Relate this weeks materials to your stocks and discuss in class.
10/07

Portfolio Issues I: Efficient Diversification

How do we create an efficient portfolio?
How are the sectors and stocks in our portfolios performing? Is our portfolio efficient?
Reading: Ch 6

Week 6
10/11 Portfolio Issues II: CAPM; Efficient Market Hypothesis
Why should we pay attention to riskless assets such as Treasury Bills? Why is it important to
distinguish between absolute and relative risk? Systematic and unsystematic risk components?
How is our portfolio doing on an absolute, relative and by sector basis attribution
Has our portfolio experienced systematic or market risk?
Beta and how we apply it.
Is new information absorbed into security prices quickly? How can we know this? Should we
care? What do we mean by what are stocks discounting?
Reading: Ch 7
10/14

Efficient Market Hypothesis

Reading: Ch 8
5

Week 7
10/18 In Class Group Workshop. This is a group project check-in and working session for Part A.
and Part B. of the project. Bring your Laptops and group project work to class. Show me
your progress on Part B. items 1., 2., and 3. These are listed in the Syllabus Group Project
section.
Each team will demonstrate to me the work completed thus far on the project. Bring your
questions to class. Include your selected company, initial assumptions on the company,
and your industry research notes. Also include exhibits of your initial historical financial
statement data that has been entered into an Excel spreadsheet.
Assignment 2 Due at the beginning of this class: Regression. Complete and submit.
10/21

Macro & Industry Analysis

Reading: Ch 12

Week 8
10/25 Independent Team Meetings
10/28

Review

Week 9
11/01 Midterm
11/04

Equity Valuation
Reading: Ch 13. Current events and your stocks
Equity Analysis and Valuation. Review Valuation models and Spreadsheet.
What matters in researching an equity investment? Industry dynamics, Addressable
Markets, Market Shares, Valuation, Earnings Model, Cash Flow, Price/Sales, ROIC,
Bloomberg FA page, models and consensus expectation examples.
Where does industry analysis fit in? How do we estimate EPS and earnings multipliers? What do
we do with all this information? Whats the role of qualitative factors?
An example research report to critique.
How are the sectors and stocks in our portfolio performing? Relate this weeks materials to your
stocks.

Week 10
11/08 More Equity Valuation and Market Efficiency:
Reading: Ch 14
Why do analysts focus on EPS? How can you assess a stocks value based on financial
statements and forecasts? The importance of regulatory filings. 10Ks 10Qs. Press Releases
versus detailed SEC filings. What do we learn from the thick documents?
Short term movements versus long term investing. High trailing P/E versus lower forward P/E.
The importance of P/E to Growth Rate. What are stocks discounting?
Assignment 3 Due at the beginning of this class: Complete and submit.
11/11

Options, Futures and Risk Management

Reading: Ch 15, 17

Week 11
11/15 Relative Value: Key Ratios and historical analytical significance. Estimating securities
target prices using ratios.
Bonds
Reading: Ch 10, Ch 11
11/18

Behavioral Finance and Technical Analysis

Reading: Ch 9
Hedge Funds
Reading: Ch 20
Assignment 4 Due at the beginning of this class: Options. Complete and submit.

Week 12
11/22 Independent Team Meetings.
Continue to work on Part A and Part B of the project with your team.
Investors and the Investment Process
Reading: Ch 22
Week 13
11/29 Group Research Presentations
12/02

Group Research Presentations

Week 14
12/06 Group Research Presentations
Review
TRACE
Week 8
12/09-12/16

Final Exam

CONNECT and LEARNSMART

Student Registration to Connect is through Blackboard:

Please make sure you Sign in to your Blackboard account and that you access your Connect and
LearnSmart assignments within Blackboard. This will ensure that your grades are up to date in
Blackboard.

CONNECT is an online supplement from McGraw-Hill, the publisher of our

textbook, Bodie, Essentials of Investments 9/e. We are using CONNECT in this
course for homework assignments. There are additional learning tools in
CONNECT to help you prepare for class and study for exams. Here are your
options for purchase of your textbook and CONNECT:

Regular Textbook Package with CONNECT PLUS (Hardback version);

CONNECT access code provided.

CONNECTPLUS - all e-book version - available for purchase when you click on
your first assignment in Blackboard.
Why is Connect and LearnSmart Important?
You are required to submit graded assignments through Connect
Connect provides feedback on your scores and helps you learn to
solve the assignments
Connect includes an integrated eBook and free student study tools
(with the CONNECTPLUS version included for free in all packages in
the bookstore).
If you have not bought the book/package yet and are not sure if you
will remain in this course, you can still register with CONNECT to do
our first assignment by selecting the free trial option. Click on the
first assignment, then enter your email address and select the Free
Trial option.
To register and/or purchase access to CONNECT you will need to click on the
first assignment in Blackboard and then select Register Now button. (There is
also a video on the left hand side to help answer any questions you may have
when registering if you have a code or if you would need to buy one). Put in
your email address. If you have registered with McGraw-Hill previously they
will recognize you in their system so you can use your old password that you
had previously set up with them. If you have the access code you can enter
this on the left hand side to redeem this. This can only be redeemed once and
must be the code for the required book we are using.

If you have any questions regarding CONNECT please direct these to McGrawHill tech support, either by visiting their website at: www.mhhe.com/support
for helpful FAQs, or by calling 800-331-5094. If you do contact McGraw-Hill
with a question please write down the case number they will give you. They
are open Monday-Thursday 9am- Midnight, Fridays 9am-7pm, as well as
Sundays 7pm-Midnight, so if you have any questions you will be responsible
for following up with them to make sure that you complete the required
homework assignment on time.

GroupInvestmentProjectAssignment
The Full Project has 2 Oral Parts and 2 Written Parts (a Part A and a Part B).

I.GETTINGSTARTED
Form groups of 2-3 members.
Assume that you have $10,000,000. You will use this to form a hypothetical portfolio by investing it in about
30 or more stocks. To determine how much you have invested in any particular stock, multiply the stock
price by the number of shares you buy.
Deliverables:
1. Week 1-2: Complete the Portfolio Project Group Stock Selections spreadsheet posted in
Blackboard. This includes the Team Name you selected for your portfolio, group member names,
each stock symbol, each stocks beta, number of shares you purchased for each stock and total
dollars invested. Again, include the symbol, closing price, beta, your total investment per stock,
the amount held in cash and your total portfolio investment. To get stock price information, go to
www.yahoo.com and click on Finance. Enter the ticker symbol of your stock and click on historical
prices. Use the column that contains closing prices. You can use Bloomberg as well. You must
then setup your portfolio in Stock-Trak and purchase all your initial stocks.
2. Week 2-4: Present your portfolio picks and why you chose these particular stocks. What attracted
you to them? What is your portfolio objective? What is your investment strategy, policy statement
and investment process? Reasons can be growth, aggressive growth, value, deep value, income,
safety, etc. What is your risk tolerance? Prepare a 10 minute PowerPoint presentation.
Submit one hard copy of presentation slides per group and e-mail one electronic copy
Follow your portfolio of stocks throughout the term.
Calculate the weekly returns for your portfolio and for the S&P 500. Track and RECORD the weekly
returns for both in a spreadsheet. Be prepared to talk about your portfolio and stocks in class
(included in class participation grade).
Keep up with the performance of your portfolio and major news about your stocks. Record the prices in a
spreadsheet yourself - this will help later. Bloomberg also has portfolio functions. In class we will
periodically talk about how the portfolios are performing, so check it before you come to class. I will expect
you to talk about your portfolio and I may call on you. This should be fun and these are easy participation
points!

II.LATTERPARTOFTHETERM
Again, The Full Project has 2 Oral (Part A. and Part B.) and 2 Written Parts (Part A. and Part B.)
In the latter part of the semester, make a formal 15 minute presentation to the class reviewing your
portfolio, and then assessing a particular stock in your portfolio. You will pick a firm. Your
recommendation could be buy, sell, or hold. Your report should include (but is not limited to):
PART A.
An oral presentation and written report that expands on and reviews your portfolio, its characteristics,
performance and outlook. The portfolio portion should build upon and expand on your first presentation.
PART B.
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An oral presentation and written stock investment analysis report focused on your 1 selected company.

GroupInvestmentProjectAssignment
(continued)

PART A. of the Project is The Portfolio Review Written Report

Portfolio Review Written Report Guidelines

The Part A. written Portfolio review will be a minimum double spaced 3 page summary and analysis
of the group portfolio.
For the portfolio review, assume that you are preparing a relatively short report for your investment
committee. Do not simply answer the following questions this should be a financial report! The questions
are intended to provide guidance.
1. Introduction - State the portfolio objective, investment strategy, policy statement and investment
process. The investment process should include the investment universe (U.S. only, global, large
cap, small cap), asset allocation, portfolio construction (sector weights), security selection process
(research approach, financial analysis approach), risk control, and sell discipline (i.e. due to
intrinsic value price target attainment, management changes, change in fundamental outlook,
overvalued, etc).
2. Comment on the individual and portfolio returns and on any information/events (market-wide or
firm-specific) that may have contributed to the performance of your stocks. The suggested length is
a short, concise paragraph for the biggest winners and losers - i.e. for the stock highlights and for
the stocks that most represent your investment approach and process.
3. From your calculations, if you held the S&P 500 instead of your stocks, how much money would
you have ended up with? Would you have been better or worse off to hold the index? Analyze the
reasons for any differences.
4. Based on your calculations for standard deviation and beta, how risky was your portfolio compared
to the index? Again analyze the causes of the differences.
5. Finally, what are your plans going forward? That is, if this class continued and you had the chance
to alter your portfolio holdings now, would you choose to sell any of your stocks or would you want
to keep holding them? Explain why.
6. Submit your portfolio report and slides in hard copy and electronically.

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GroupInvestmentProjectAssignment
(continued)
PART B of the Project is The Stock Investment Analysis Written Report
Stock Investment Analysis Written Report Guidelines
Instructions and Requirements
You will pick a firm/stock and perform an Investment Analysis. You will make a recommendation (could be buy, sell,
or hold). Your analysis should include (but is not limited to):
1.

An Executive Summary of your research conclusions and your clear recommendation.

2.
A brief introduction to the company you are analyzing.
COMPANY BACKGROUND
Useful Resources: Bloomberg, CNBC.COM CEO INTERVIEWS, INDUSTRY ANALYST INTERVIEWS, and
Company searches. There are links to these.
Company websites (Investor Relations link), LexisNexis transcripts, and Wall Street research reports.
3.

An analysis of the industry in which the company resides and the total addressable
market, market shares, key facts, etc.
INDUSTRY BACKGROUND
Useful Resources: Bloomberg, S&P, Value Line, CNBC analyst video interviews
An analysis of the industry in which the company resides and the total industry addressable
market, market shares, etc.
MARKET SHARES of YOUR COMPANY AND ITS KEY COMPETITORS
SWOT Analysis
Important industry issues
4.
A valuation analysis of your selected firm versus its peer companies/competitors
This should include historical ratios and forward ratios for the peer companies and the industry.
5.

A detailed financial analysis of the firm that includes:

a. Analysis of annual financial statements for the past 4-5 years, and of quarterly statements for the
most recent 4 quarters. Also, develop detailed complete financial statement forecasts for the next 5
years and analyze the projections with financial ratios.
b. Comparison of your forecasts and analysts' consensus forecasts for the next 5 fiscal years. Include
expected growth rates.
c. A valuation of the company's stock including assumptions used and projections from your forward
year earnings models. Use 3 valuation methods.

Useful Resources for Analysts' consensus forecasts for the next 5 fiscal years: Bloomberg, Yahoo, Value Line, S&P,
LexisNexis and Wall Street research reports.
State clearly your assumptions used for projections in YOUR forward year earnings models for the next 5
years, and, for the long term growth rate.
6.

Your Beta calculations and regression (as exhibits).

7.

A summary and analysis of the firms sector, the sector performance, and the performance of the firm relative to
the sector since the semester began.

8.

An overall wrap up of your recommendation.

9.

The Part B. analysis will be a minimum 3-5 page, double spaced, written narrative explaining your analysis,
plus exhibits. Be sure to include additional issues (strategic, management, risks, etc.) that were not explicitly
addressed in your financial analysis. You should also cite all sources of input.

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10.

You must hand in 1 complete, printed report. In addition, you must submit your files electronically. Include a fully
formatted, electronically scanned complete report as one of your files (.pdf or scanned). Also submit the excel
spreadsheet and word document.

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