Hvass Laboratories
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Hvass Labs

Share Buyback Valuation

  • The Basics (Part 1)
    • How to value share buybacks and the intuition behind the formulas.
    • Talk (YouTube Video)
    • Slides (PDF 0.4 MB)

  • Share Buyback or Alternative Investment (Part 2)
    • How to value share buybacks versus alternative investments (e.g. acquisitions, restructurings, etc.) The formulas are demonstrated on Hewlett-Packard.
    • Talk (YouTube Video)
    • Slides (PDF 0.3 MB)

  • Stock Options (Part 3)
    • How to decide whether a company should make a share buyback upon exercising of stock options?
    • Talk (YouTube Video)
    • Slides (PDF 0.2 MB)

  • Uncertainty (Part 4)
    • How to value share buybacks under uncertainty. Requires knowledge of basic probability theory.
    • Talk (YouTube Video)
    • Slides (PDF 0.2 MB)

  • Case Study: JTX (Part 5)
    • Case study of Jackson-Hewitt Tax Service (JTX) which made large share buybacks for borrowed money and went bankrupt. The effect on shareholder value is calculated and the theoretical and practical implications are discussed.
    • Talk (YouTube Video)
    • Slides (PDF 0.3 MB)

  • Relative Value (Part 6)
    • Detailed examples of the relative value of a share buyback compared to a dividend payout.
    • Talk (YouTube Video)
    • Slides (PDF 0.6 MB)

  • Mathematical Analysis of Relative Value (Part 7)
    • Mathematical analysis of the relative value formula for a share buyback compared to a dividend payout.
    • Talk (YouTube Video)
    • Slides (PDF 0.3 MB)

  • Share Buyback Valuation (Excel Demo)
    • Demonstration of share buyback valuation in Microsoft Excel.
    • Talk (YouTube Video)

  • Share Buyback vs. Investment (Excel Demo)
    • Valuation of a share buyback versus an alternative investments. Demonstrated in Microsoft Excel.
    • Talk (YouTube Video)

  • Share Buyback and Stock Options (Excel Demo)
    • Should a company buy back shares when stock options are exercised? Valuation is demonstrated in Microsoft Excel.
    • Talk (YouTube Video)

Valuation

  • Stochastic Present Value & Jensen's Inequality
    • The average present value is underestimated when calculated from the average growth and discount rates. This follows from Jensen's Inequality.
    • Talk (YouTube Video)
    • Slides (PDF 0.3 MB)

  • Valuing Acquisitions Paid in Stock
    • How to value acquisitions paid in stock. The formulas are demonstrated on Facebook's acquisition of WhatsApp.
    • Talk (YouTube Video)
    • Slides (PDF 0.3 MB)

  • Share Issuance to Fund an Investment (Excel Demo)
    • Valuation effects of a share issuance to fund an investment that a company makes. Demonstrated in Microsoft Excel.
    • Talk (YouTube Video)

Portfolio Optimization

  • Portfolio Variance is Not Risk
    • Mean-variance portfolios do NOT minimize risk as commonly believed. This is also known as Markowitz portfolio selection and Modern Portfolio Theory.
    • Talk (YouTube Video)
    • Slides (PDF 0.3 MB)

  • Kelly vs. Markowitz Portfolio Optimization
    • Comparison of portfolio optimization using Markowitz mean-variance and the Kelly Criterion.
    • Talk (YouTube Video)
    • Slides (PDF 0.3 MB)

Monte Carlo Simulation

  • Equity Growth Model
    • Monte Carlo simulation of future equity, earnings, dividends, etc. using historical financial data. Demonstrated on Wal-Mart.
    • Talk (YouTube Video)
    • Slides (PDF 0.4 MB)

S&P 500 Strategies

  • S&P 500 vs. US Government Bonds (Part 1)
    • Comparison of the S&P 500 stock-market index and US Government Bonds.
    • Talk (YouTube Video)
    • Slides (PDF 0.7 MB)

  • Fixed Rebalancing (Part 2)
    • Historical performance of 50/50 rebalancing of the S&P 500 and US Government Bonds.
    • Talk (YouTube Video)
    • Slides (PDF 0.7 MB)

  • Adaptive Rebalancing (Part 3)
    • Adaptive rebalancing between S&P 500 and US Government Bonds using the P/Book of the S&P 500.
    • Talk (YouTube Video)
    • Slides (PDF 0.7 MB)

  • 10-Year Forecasting (Part 4)
    • Forecasting 10-year returns for the S&P 500 using P/Book.
    • Talk (YouTube Video)
    • Slides (PDF 0.7 MB)

  • Stop-Loss Strategies (Part 5)
    • Stop-loss investment strategies for the S&P 500.
    • Talk (YouTube Video)
    • Slides (PDF 0.7 MB)

Financial Data

  • Are P/E Ratios Predictable?
    • The P/E and Earnings Yield ratios are not constant and rarely equal their historical average as demonstrated on Wal-Mart.
    • Talk (YouTube Video)
    • Slides (PDF 0.5 MB)

  • Are P/Book Ratios Predictable?
    • The P/Book ratio is not constant and rarely equals its historical average as demonstrated on Wal-Mart.
    • Talk (YouTube Video)
    • Slides (PDF 0.4 MB)

  • Equity Risk Premium - A Myth
    • The Equity Risk Premium is commonly used to forecast future stock-market returns from the current yield on government bonds and the historical average return of the stock market. But the relation is not that simple as demonstrated on the S&P 500 stock-market index.
    • Talk (YouTube Video)
    • Slides (PDF 0.2 MB)

Currency

  • Forecasting Currency Exchange Rates
    • How to forecast a range for the currency-adjusted returns of investments made in foreign currencies. Demonstrated on USD-GBP.
    • Talk (YouTube Video)
    • Slides (PDF 0.6 MB)

  • Hedging Currency Exchange Rates
    • How to hedge currency exchange rates, the costs and possible malfunctioning.
    • Talk (YouTube Video)
    • Slides (PDF 0.4 MB)

Investing for Laymen

  • Advantages of Monthly Investing
    • Explains the advantages of adding to your investment in the S&P 500 on a monthly basis.
    • Talk (YouTube Video)
    • Slides (PDF 0.3 MB)

  • Expense Ratios for Index Funds
    • Explains the importance of investing in index funds with very low expense ratios.
    • Talk (YouTube Video)
    • Slides (PDF 0.3 MB)

  • Portfolio Rebalancing
    • Explains how to allocate your portfolio between the S&P 500 and US government bonds, and the advantages and disadvantages of doing this.
    • Talk (YouTube Video)
    • Slides (PDF 0.3 MB)

  • Protection Against Inflation
    • Explains how to protect your savings against inflation by investing in US Government Bonds, TIPS and the S&P 500.
    • Talk (YouTube Video)
    • Slides (PDF 0.3 MB)

  • Retirement Planning
    • Calculate how much you need to save and invest each year to have enough money for your retirement.
    • Talk (YouTube Video)
    • Slides (PDF 0.3 MB)

  • What is the S&P 500
    • Explains what the S&P 500 is, its historical performance, and how to invest in it.
    • Talk (YouTube Video)
    • Slides (PDF 0.3 MB)

Hvass Laboratories