Response paper about what you thought about Gandhi's work and his Essay

Response paper about what you thought about Gandhi's work and his life. Be sure to include citations - Essay Example According to Francis Sejersted, Alfred Nobel is quoted in his will as having stipulated that his wealth was to be devoted to the annual award of five prizes "to those who, during the preceding year, shall have conferred the greatest benefit on mankind." With regard to the Peace Prize, Nobel defined this as having "done the most or the best work for fraternity between nations, for the abolition or reduction of standing armies, and for the holding and promotion of peace congresses." (Sejersted) It is difficult to imagine how a man who dedicated his life not only to the freedom of his people but to abolishing well-established systems of institutionalized racism and religious oppression could have been overlooked for so many years. In my opinion, this oversight is one of the greatest failings of the Nobel committee in its entire history. Despite the failure of the Nobel committee to recognize the work of this great man, his legacy remains a shining example for all who wish to change the world (or even their own small corner of it) through non-violent

Great Filipino Music Artists (80s - Present) Essay Example for Free

Great Filipino Music Artists (80s Present) Essay Basil Valdez Like many Filipino singers in the 1970s, Valdez started solo on his career as a folk singer. In 1972, he joined the Circus Band and after it was disbanded, he released Ngayon at Kailanman, his first solo album. In the Circus Band, he met Ryan Cayabyab, who was then part of other band. When Valdez was preparing his album Ngayon at Kailanman, he asked Cayabyab to give a few songs, he did. Cayabyab stands as Valdezs musical director for 27 years. In the 80s, Valdez republished himself as a singer of movie theme songs; some of them are Paano Ba Ang Mangarap, Muling Buksan Ang Puso and Paraisong Parisukat. A circumstance which sidelined his singing career occurred in 1990, when he found himself as a healer. Valdez then sought the guidance of his Jesuit friends. They explained to him that he has gift of healing. Ryan Cayabyab A great Filipino music artist known as the Executive and Artistic Director of the defunct San Miguel Foundation for the Performing Arts. He was also a resident judge for the solo season of Philippine Idol in 2006. A versatile artist with his works ranging from commissioned full-length ballets, theater musicals, choral pieces, a Mass set to unaccompanied chorus/congregation, and orchestral pieces, to commercial recordings of popular music, film scores and television specials. Cayayabs current project includes the Ryan Cayabyab Singers (RCS), a group of seven young adult singers comparable like his group Smokey Mountain in the early 90s. After FreemantleMedia decided not to renew the Philippine Idol franchise, Cayabyab decided to transfer to rival show Pinoy Dream Academy (Season 2), replacing Jim Paredes as the shows headmaster. PDA 2 started on June 14, 2008. Nonoy Zuà ±iga Nonoy Z’s singing career spans more than 3 decades; as a folksinger from 1971 to 1975 and then as one of the lead singers of the Family Birth Control Band  which performed in the best nightspots and hotels like Philippine Plaza, Holiday Inn and the Manila Hotel from 1975-1980. To hone his skill, he took special voice training from the late Aurelio Estanislao, a well-known tenor singer and music-voice professor at the University of the Philippines. With his clear baritone voice he started to attract the attention of music buffs. His style and rendition of different songs especially love songs made him acquire a number of distinct awards, Bayang Barrios Lumad origin, born on June 12, 1986. A Filipino musician who hails from Bunawan, Agusan del Sur, and is known for her use of indigenous instruments and styles. In 2005, Barrios song Isipin Mo Na Lang was used in end credits of the indie Filipino film Ang Pagdadalaga Ni Maximo Oliveros (The Blossoming of Maximo Oliveros). In September 2008, she launched her fourth album entitled Biyaya. Ramon Jacinto Jacinto has always tried to put music and business together. He started to enter the world of entrepreneurship at the young age of 15. He built up his first enterprise called RJ Enterprises, a company which dealt with producing and release records. RJ Enterprises pioneered multi-track recording in the country and eventually became the primary studio choice for many artists and advertising agencies at that time. Two years later, Jacinto ventured to establish what would become a legendary radio station in the Philippine broadcasting industry – DZRJ. It served as a venue for on-air experiments of radio concepts which were never heard before in Philippine entertainment history. Manned by students, mostly coming from Jacintos high school class, the radio station introduced alternative music to the Filipino youth. It was the first station to play songs from rock legends such as the Beatles, the Ventures and the Beachboys. The radio station also gave emphasis on playing the music of local talent. Apart from DZRJ, Jacinto also established the now defunct, DZUW. Pepe Smith a Filipino singer-songwriter, drummer, and guitarist. More commonly known alternately as Joey Smith and Pepe Smith, he is an icon of original Filipino rock music or Pinoy Rock. Gary Valenciano Born 6 August 1964, better known as Gary Valenciano or Gary V., is a Filipino musician. Also known as Mr. Pure Energy, Valenciano has released 26 albums, and won the Awit Awards for Best Male Performer eleven times. In 1998, he became UNICEF Philippines first National Ambassador. His most notable songs include Di Bale Na Lang (Never mind), Eto Na Naman (Here we go again), Sana Maulit Muli (Hope it repeats again), Natutulog Ba Ang Diyos? (Does God sleep), Gaya ng Dati (Just like before), Pasko Na, Sinta Ko (Its Christmas already, my love), and Narito (Here). He is currently part of ABS-CBN contract actors, and is frequently tapped to sing theme songs for the networks soap operas and films. Fr. Eduardo Hontiveros Fr. Honti, as he is fondly known, was educated at the Capiz Elementary School and the pre-war Ateneo de Manila in Padre Faura, graduating from high school in 1939. From 1939 to 1945 he was at San Jose Seminary. He entered the Society of Jesus after the war in 1945, pronouncing first vows at Sacred Heart Novitiate in Novaliches in June 1947. He finished his studies of philosophy there and then proceeded to Ateneo de Zamboanga for his three-year regency, teaching religion, Latin, and English, and moderating the Choir String Band. In 1951, he traveled to the United States to study theology, and was ordained in 1954 by Francis Cardinal Spellman. After earning a doctorate in theology from the Gregorian University in Rome, he returned to teach in the Philippines in 1958. He pronounced final vows in the Society of Jesus in 1960. Fr. Honti’s initiatives have been recognized with the Ateneo de Manila University’s Tanglaw ng Lahi Award (1976), the Asian Catholic Publishers’ â€Å"Outstanding Catholic Author† (1992), and the Papal award Pro Ecclesia et Pontifice (2000), among many other awards and citations. He suffered another major stroke in early January 2008, and died  on January 15th. At his funeral Mass at the Ateneo’s Church of the Gesu, President Gloria Macapagal-Arroyo was present to honor him with the Presidential Medal of Merit (awarded posthumously). Fr. Manoling Francisco Fr. Manoling Francisco SJ entered the Society of Jesus after second year in college in 1985. As a child he had aspired to be a concert pianist; nevertheless he decided to discontinue his classical piano training at the age of 14 to devote his time to school and socio-civic activities. It was in his First Year High that he composed Hindi Kita Malilimutan. has been popularized by Mr. Basil Valdez. During the past 17 years he has composed more than a hundred and fifty songs such as Tanging Yaman, Sa ‘Yo Lamang are being sung all over the country – indeed, whatever there are Filipinos gathered together in prayer and liturgical celebration. Today, he is easily one of the most gifted musicians in the country.

Mansfield Park’s Fanny Price Essay -- Jane Austens Mansfield Park

Jane Austen’s novels are recognized for their competent heroines. From Elizabeth of Pride and Prejudice to Anne Elliot of Persuasion, Austen’s heroines are independent, indomitable, and intellectual. Mansfield Park’s protagonist Fanny is viewed in the eyes of countless readers as weak, quiet, and even snobbish. Yet when her accomplishments in the Bertram household are taken into account, Fanny reappears as a deeper figure. Fanny Price, though reserved and sullen at times, aptly presents herself as a determined and ethically sound character in a family marked by wanton behavior. Taking Fanny under his guidance to protect and support her since the day of her arrival, Edmund Bertram sought to lift her from the place the Bertram’s drove her to, a menial position of near servitude. Mrs. Norris made it apparent to Fanny that she was subordinate to her cousins Maria and Julia due to her lack of education and the consequence of their noble birthright. Edmund sustained Fanny at her most vulnerable moments – the times she knew she did not fit in, when she missed her brother William, and when she did not understand why people who were supposed to love her treated her so abrasively. At times Fanny became concerned by Edmund’s behavior, particularly related to Mary Crawford because she knew Mary had immoral intentions in her hopes of marrying Edmund. Regardless of how she felt, Fanny persevered in supporting her beloved cousin and eventually succeeded in becoming his virtuous wife. ...

Feminist Criticism of Shakespeares Hamlet Essay -- Shakespeare And Fe

Many literary critics have presented theories on the meaning of William Shakespeare's Hamlet, ranging from claims of Oedipal Complexes to insinuations of homosexuality. Though most such interpretations can be considered true at some level, there seems to be some basic theme - some driving force - that underlies all other interpretations. While most criticisms focus on individual characters, a more insightful criticism of the true nature of Hamlet can be drawn simply by analyzing the key relationships in play. These relationships - especially those dealing with women or issues of femininity - allow a level of interpretation that examines not merely the events of the play, but the true underlying significance of gender both to Shakespeare and to the characters he presents. In order to interpret the significance of the feminine within the relationships in the play, one must first understand precisely the nature of 'feminine.' Though this term is typically associated only with women, Hamlet in many regards breaks down these barriers. While women are almost always feminine in some respect, the male characters in Hamlet are often embodiments of feminine virtues, such as female sexuality, motherhood, or sisterly love. As one author states, "thanks to feminist criticism, gender is not indissolvably fixed in Shakespeare. Male characters can profitably incorporate female characteristics, and women characters can assume masculine ones" (Kolin 5). While the women of Hamlet are the bearers of individual and unique feminine qualities, a feminist interpretation of the work also reveals the broader ideals of femininity within many of the male characters. The first of the truly significant women in Hamlet is Gertrude, Hamlet's mother. ... ...nd Feminist Criticism: An Annotated Bibliography and Commentary. New York: Garland Publishing, Inc., 1991. Erickson, Peter. Patriarchal Structures in Shakespeare's Drama. Paraphrased in Philip Kolin, Shakespeare and Feminist Criticism: An Annotated Bibliography and Commentary. New York: Garland Publishing, Inc., 1991. Klein, Joan Larsen. "'Angels and Ministers of Grace': Hamlet, IV, v-vii." Paraphrased in Philip Kolin, Shakespeare and Feminist Criticism: An Annotated Bibliography and Commentary. New York: Garland Publishing, Inc., 1991. Kolin, Philip C. Shakespeare And Feminist Criticism: An annotated Bibliography and Commentary. New York: Garland Publishing. 1991. Web. 26 May 2015. http://www.tandfonline.com/doi/abs/10.1080/0895769X.1995.10545153 Watts, Cedric. Twayne's New Critical Introductions to Shakespeare. Boston: Twayne Publishers. 1991. Â  

Greed for Money Essay

Today, greed for money, together with greed for power, is one of the chief causes of human misery. No wonder our Lord put as his first beatitudes;† Blessed are the poor in spirit. † Poverty in spirit is the opposite of greed for money, for it means detachment from material things coupled with trust in God as the only Savior. People cheat other people for money. They betray friends for money. Members of the same family – sometimes parents and children quarrel and sue each other in court over money. Jesus was very well aware that money would rival God in the eyes of many people. That is why he warned â€Å"No man can serve two masters, you cannot serve God and money†. He himself was the victim of greed. In the end, He was betrayed for thirty pieces of silver by Judas. It takes real grace to see the seduction of money and the emptiness of its promises. Aspiring politicians have heard of the sad end of Ferdinand Marcos, and other dictators whose billions benefit only the Swiss banks but not those who robbed their own people. And yet given the opportunity, how many will resist the temptation to take advantage of one’s public trust? In the song Hello Dolly, it says â€Å"Money my dear is like manure. It is good for nothing unless it is spread around to make your things grow. † Many of us are rather more fascinated by the manure and love to store it, more than to share it.

Funny Birthday Quotes to Tickle Your Imagination

Funny Birthday Quotes to Tickle Your Imagination A birthday is a joyous occasion. What could be a better birthday gift than the gift of happiness? This birthday, share happiness by spreading laughter using a funny birthday quote. If you enjoy wisecracks, this page has funny birthday quotes to suit your sense of humor. Robert FrostA diplomat is a man who always remembers a womans birthday but never remembers her age.You know you are getting old when the candles cost more than the cake.Sir Norman WisdomAs you get older three things happen. The first is your memory goes, and I cant remember the other two.AnonymousA well-adjusted woman is one who not only knows what she wants for her birthday, but even knows what shes going to exchange it for.AnonymousI never forget my wifes birthday. Its usually the day after she reminds me about it.AnonymousWhen I have a birthday I take the day off. But when my wife has a birthday, she takes a year or two off.AnonymousAge is a number and mine is unlisted.Larry LorenzoniBirthdays are good for you. Statistics show that the people who have the most live the longest.John GlennThere is still no cure for the common birthday.

How to Calculate the Variance of a Poisson Distribution

How to Calculate the Variance of a Poisson Distribution The variance of a distribution of a random variable is an important feature. This number indicates the spread of a distribution, and it is found by squaring the standard deviation. One commonly used discrete distribution is that of the Poisson distribution. We will see how to calculate the variance of the Poisson distribution with parameter ÃŽ ». The Poisson Distribution Poisson distributions are used when we have a continuum of some sort and are counting discrete changes within this continuum. This occurs when we consider the number of people who arrive at a movie ticket counter in the course of an hour, keep track of the number of cars traveling through an intersection with a four-way stop or count the number of flaws occurring in a length of wire. If we make a few clarifying assumptions in these scenarios, then these situations match the conditions for a Poisson process. We then say that the random variable, which counts the number of changes, has a Poisson distribution. The Poisson distribution actually refers to an infinite family of distributions. These distributions come equipped with a single parameter ÃŽ ». The parameter is a positive real number that is closely related to the expected number of changes observed in the continuum. Furthermore, we will see that this parameter is equal to not only the mean of the distribution but also the variance of the distribution. The probability mass function for a Poisson distribution is given by: f(x) (ÃŽ »x e-ÃŽ »)/x! In this expression, the letter e is a number and is the mathematical constant with a value approximately equal to 2.718281828. The variable x can be any nonnegative integer. Calculating the Variance To calculate the mean of a Poisson distribution, we use this distributions moment generating function. We see that: M( t ) E[etX] ÃŽ £ etXf( x) ÃŽ £etX ÃŽ »x e-ÃŽ »)/x! We now recall the Maclaurin series for eu. Since any derivative of the function eu is eu, all of these derivatives evaluated at zero give us 1. The result is the series eu ÃŽ £ un/n!. By use of the Maclaurin series for eu, we can express the moment generating function not as a series, but in a closed form. We combine all terms with the exponent of x. Thus M(t) eÃŽ »(et - 1). We now find the variance by taking the second derivative of M and evaluating this at zero. Since M’(t) ÃŽ »etM(t), we use the product rule to calculate the second derivative: M’’(t)ÃŽ »2e2tM’(t) ÃŽ »etM(t) We evaluate this at zero and find that M’’(0) ÃŽ »2 ÃŽ ». We then use the fact that M’(0) ÃŽ » to calculate the variance. Var(X) ÃŽ »2 ÃŽ » – (ÃŽ »)2 ÃŽ ». This shows that the parameter ÃŽ » is not only the mean of the Poisson distribution but is also its variance.

Virgie Ammons Patents a Fireplace Damper Actuating Tool

Virgie Ammons Patents a Fireplace Damper Actuating Tool Virgie Ammons was an inventor and woman of color who invented a device for dampening fireplaces. She received a patent for a fireplace damper actuating tool on September 30, 1975. Little is known about the life of Virgie Ammons. One source says she was born on Dec. 29, 1908 in Gaithersburg, Maryland and died on July 12, 2000. She lived in West Virginia for most of her life.  Ammons filed her patent on August 6, 1974, at which time she was living in Eglon, West Virginia. There is no information to be found about her education, training or profession. One unverified source says she was a self-employed caretaker and a practicing Muslim who attended services in Temple Hills. Fireplace Damper Actuating Tool - Patent US 3,908,633 A fireplace damper actuating tool is a tool that is used to open and close the damper on a fireplace. It keeps the damper from opening or fluttering in the wind.   If you have a fireplace or stove, you may be familiar with the sound of a fluttering damper. A damper is an adjustable plate that fits in the flue of a stove or the chimney of a fireplace. It helps control the draft into the stove or fireplace. Dampers could be a plate that slides across the air opening, or it could be fixed in place in the pipe or flue and turned so the angle allows more or less air flow. In the days when cooking was done on a stove that was powered by burning wood or coal, adjusting the flue was a way of controlling the temperature. Virgie Ammons may be have been familiar with these stoves, given her date of birth. She may also have lived in an area where electric or gas stoves were not common until later in her life. We have no details as to what her inspiration was for the fireplace damper actuating tool. With a fireplace, opening the damper allows more air to be drawn into the fireplace from the room and convey the heat up the chimney. More air flow can often result in more flames, but also in losing more heat rather than warming the room. Keeping the Damper Closed The patent abstract  says Ammons damper actuating tool addressed the problem of fireplace dampers that flutter and make noise when gusty winds affected the chimney Some dampers do not remain fully shut because they have to be light enough in weight so the operating lever can open them easily. This makes small differences in air pressure between the room and the upper chimney draw them open. She was concerned that even a slightly open damper could cause a significant loss of heat in winter, and could even result in loss of coolness in summer. Both would be a waste of energy. Her actuating tool allowed the damper to be closed and held closed. She noted that when not in use, the tool could be stored next to the fireplace. No information was found as to whether her tool was manufactured and marketed.

How Apple Does It (Time Magazine Oct 24 2005) Essay

How Apple Does It (Time Magazine Oct 24 2005) - Essay Example 1 According to the conventional wisdom, described in the article, the Apple is operating like closed mini economy, and thus the company might be doomed as it attempts to do everything at once. Apple produced hardware, operating system for it and programs; traditional approach would allow Apple to license some of its products to other companies that specialize in the development of the products and then access the products produced by the companies mentioned. However in my opinion, the company would really increase the efficiency and competitiveness of its products if it followed more traditional approach as in this case, new innovations and consequently new products might appear much quicker, then the current policy adopted by the company. Huge diversification in one company might erode specialization, which is the cornerstone of innovations; it certainly does mean that differentiation and strategy adopted by Apple might not be successful in some circumstances, as the example of ipod clearly indicates, yet in my opinion it was rather the exception from the rule rather than the result of it. In order to access the effectiveness of the strategy implemented by the company, one should understand the princ... In spite of the fact that this product is just several years old, none of the competitors of Apple so far has been able to provide its customers with identical products of digital music industry. So the price of the Ipod certainly reflects some unique added features related to this product. Another element of competitive advantage strategy is the differentiation focus, when the company attempts to differentiate within the segment of the targeted audience. In this case the company should provide the customers with the product that matches the needs of the customers in the situation when current products of the competitors may not meet the needs of the targeted customers. All this features are present in this case as ipod has many unique features not available in the products of the competitors. Let us evaluate the this product within five forces model designed by Michael Porter that comprises the threat of new competitors, the threat of entry in the market, the threat of substitutes, the threat of bargaining power of suppliers and buyers.3 The threat of competitors. Not strong. Sony has started providing the customers with its new product- mini version of Walkman at the end of 2004. According to the research conducted by Moseberg, journalist from the Wall Street Journal, new mini player of Sony was thinner and wider, thus design was more convenient in use, as well as the battery life of the product was much longer. 4 However, when the Sony products appeared in the market the ipod was still unbeatable in the speed with which MP3 songs could be transferred to the player; whereas it took 2 hours and 13 minutes to transfer the 416 to the player of Sony, it took less than five minutes to

The Highest Quality of Under Armour Case Study Example | Topics and Well Written Essays - 500 words - 95

The Highest Quality of Under Armour - Case Study Example It is not well established as compared to the established competitors like Nike, Puma, and Adidas, Under Armour is gain, ng lead in the industry. The function is in terms of the products abilities to conform to situations and perform as per the expectations. Since the company concentrates on the American domestic market, the information necessary to pinpoint performance is timely. Domestic sales are an indicator that Under Armour has a small sales volume. Apart from using the function system to pinpoint performance results, the company can use the area and unit system to pinpoint performance results. Benchmarking is essential to any organization (Baiman and Joel pp. 201). While aware of the existing competitors who include Nike, Reebok, Puma, and Adidas among others, the Under Armour, through benchmarking has managed to evaluate its performance. An issue of concern is its high dependence on few third-party suppliers. The competitors rely on a variety of third party providers thus easy to counter pricing and ensure efficient product distribution all over the market segments. Under Armour suffers massive losses because of relying on few suppliers who end up demanding high prices. Should the demand for suppliers’ products exceed what the company supplies, it can end up affecting its operations due to reduced access to supplies and raw materials. A key measure and standard that Under Amour upholds is obeying laws and regulations. It is an important element in its code of ethics. Launching of a new product in market demands Under Armour to observe standards of identifiability, accessibility, substantiality, and measurability. It is an indicator to show the company’s ability to assess response patterns and incorporate marketing mix in its standards. Trough this information, Under Armour can segment its market and strive to attain a competitive advantage. The strategy is in line with its recommended strategic plan, which has a passionate taglineâ€Å".

BUS599 MoD 1 Case Assign Essay Example | Topics and Well Written Essays - 1500 words

BUS599 MoD 1 Case Assign - Essay Example Whole Foods Market tangible resources are categorized into the three dimensions: organizational resources, the financial resources, physical resources, and technological resources. Its core values include selling of the highest organic and natural products, satisfaction of the customers, support of the team member excellence and happiness, caring about the environment and our communities, and creation of wealth through growth and profits. Through the core values, the company has developed aids through core competencies, which give them a competitive advantage among its competitors. Whole Food Market’s strategy goals is based on supply and demand and placement. The company is actively determined to meet supply and demand by investing a great amount of resources into political reform in regard to organic farming, carrying out R&D to provide high quality products & services, & engagement in outsourcing to ensure efficient production of its products and services (Harasta and Hoffman, 2007). On the side, placement acts as a guidance for setting strategic goals such as; development of the supportive nutritional, investment in the sales and financial research, etc. (wholefoodsmarket.com, n.d.: 2011) Based on the financial reports from the fiscal years, 2005 to date, the profit margin for Whole Food Market has been generally decreasing (United Natural Foods, 2011; UNFI, 2011). The decrease has been largely attributed to the rising costs of goods and increased debts. In addition, compared to its competitors, Whole Foods Market has recorded low EPS and extremely low revenues (McLindon, et al., 2012). According to Yahoo Financials, Whole Foods Market capitalization has increased. The marketing of Whole Foods Market is not that effective as compared to its competitors hence necessitating the need for R&D to help it maintain a steady and upward market capitalization, which is essential in

Apple's Balance Sheet Essay Example | Topics and Well Written Essays - 750 words

Apple's Balance Sheet - Essay Example Assets From the provided financial information for Apple for the two six months operating periods taken in 2008 and 2009, it is clear that the company experienced an upward movement in different items regarding assets. Initial cash and its equivalents for the two specified periods represent a significant level of reduction from USD 11.875b in 2008 to USD 4.466b in 2009 (Apple, 2009). Whereas cash and similar cash items growth could not necessarily represent growth in view of liquidity practicality issues, it is appropriate to make the assumption that the materiality of the difference did not affect the overall reflection of business operations as cash flow values indicate. This argument is also supported by the observation of increased short-term marketable securities over the same period by double from USD 10.236b to USD 20.547b which could explain the reflected liquidity difference. Despite the fact that the accounts receivable after relevant reconciliation adjustments give a reduc tion in 2009, the difference does indicate a huge difference in terms of operations. Held inventories also indicate a reduction that would be explained by operations at a time when demand projections would be scaled downwards amidst financial crisis. However, overall liquid assets reflected a growth of USD 1.542b (from USD 32.311b to USD 33.853b), which gives a better reflection that the company grew its liquid assets. Investment in form of long-term securities gives detail of fixed assets and the increase from USD 2.379b to USD 3.865b (37 per cent) confirms the current assets trend as a growth trajectory (Apple, 2009). Other fixed assets elements such as buildings and properties owned increased from USD 2.546b to USD 2.455b, a reflection also reflected in the category of other assets that rose from USD 2.498b to USD 1.935b. To confirm this trend, the overall asset figure was a growth of 9.3 percent (USD 43.237b from USD 39.572b). In support of this information, perhaps the company can consult certain incidental information of cash flow nature to highlight the apparent growth in assets and operation level. The value of income and other operating activities indicate upward movements in net income (USD 2.81b from USD 2.626b) as was the reconciliation movements for income generating activities. Certain operating concepts such as depreciation and amortization illustrate a rise in the charged values, which translates in growth of the associated assets. An increase in the value of these operation costs for instance for depreciation from USD 222m in 2008 to USD 330m a year later reflects a huge hike of related asset base to support operations of the corporation. In other movements, increased stock-based compensations cost by 45 per cent (USD 242m to USD 351m) is an indication of growth in operations that occasion stock-based compensations, translated as growth by the company. It is evident that this information reflects a powerful suitability of Apple as an investmen t destination. Despite the fact that such increase in compensation could also indicate inefficiency in operations at the same operating capacity, the reduction of disposition losses from USD 10m in 2008 to USD 8m in 2009 as well

Research proposal Paper Example | Topics and Well Written Essays - 500 words - 2

Proposal - Research Paper Example This research proposal aims at establishing the impact that the use of social media as a means of communication has had on human conduct and behavior. A number of issues have been presented in favour of continued use of social media as a means of communication. Some of the arguments include quick means of information delivery, promotion of business operations, aiding learning in schools among other views. Arguments against the use of social media include loss of privacy, identity theft, loss of face to face interaction among others. However there is less information that can be used to defend either stand on the impact of social media on human beings and this forms the basis for this research proposal. The methods that will be applied in data collection will be based on both secondary and primary sources. This will include the use of questionnaires with open end questions presented to students who use social media as a means of communication, personal interviews aimed at receiving direct feedback from various categories of people and online research on the topic. The statistical analysis will take into consideration the variation between the qualitative and quantitative data. Quantitative data will be done by computing the mean and standard deviation of all the values. Correlation coefficients between human behavior and usage of social media will be taken into consideration. Linear regression will also be undertaken when analyzing the specific cases where social media influences the behavior of human beings. Analysis of the content from in depth interviews will form part of the qualitative

Apple's Balance Sheet Essay Example | Topics and Well Written Essays - 750 words

Apple's Balance Sheet - Essay Example Assets From the provided financial information for Apple for the two six months operating periods taken in 2008 and 2009, it is clear that the company experienced an upward movement in different items regarding assets. Initial cash and its equivalents for the two specified periods represent a significant level of reduction from USD 11.875b in 2008 to USD 4.466b in 2009 (Apple, 2009). Whereas cash and similar cash items growth could not necessarily represent growth in view of liquidity practicality issues, it is appropriate to make the assumption that the materiality of the difference did not affect the overall reflection of business operations as cash flow values indicate. This argument is also supported by the observation of increased short-term marketable securities over the same period by double from USD 10.236b to USD 20.547b which could explain the reflected liquidity difference. Despite the fact that the accounts receivable after relevant reconciliation adjustments give a reduc tion in 2009, the difference does indicate a huge difference in terms of operations. Held inventories also indicate a reduction that would be explained by operations at a time when demand projections would be scaled downwards amidst financial crisis. However, overall liquid assets reflected a growth of USD 1.542b (from USD 32.311b to USD 33.853b), which gives a better reflection that the company grew its liquid assets. Investment in form of long-term securities gives detail of fixed assets and the increase from USD 2.379b to USD 3.865b (37 per cent) confirms the current assets trend as a growth trajectory (Apple, 2009). Other fixed assets elements such as buildings and properties owned increased from USD 2.546b to USD 2.455b, a reflection also reflected in the category of other assets that rose from USD 2.498b to USD 1.935b. To confirm this trend, the overall asset figure was a growth of 9.3 percent (USD 43.237b from USD 39.572b). In support of this information, perhaps the company can consult certain incidental information of cash flow nature to highlight the apparent growth in assets and operation level. The value of income and other operating activities indicate upward movements in net income (USD 2.81b from USD 2.626b) as was the reconciliation movements for income generating activities. Certain operating concepts such as depreciation and amortization illustrate a rise in the charged values, which translates in growth of the associated assets. An increase in the value of these operation costs for instance for depreciation from USD 222m in 2008 to USD 330m a year later reflects a huge hike of related asset base to support operations of the corporation. In other movements, increased stock-based compensations cost by 45 per cent (USD 242m to USD 351m) is an indication of growth in operations that occasion stock-based compensations, translated as growth by the company. It is evident that this information reflects a powerful suitability of Apple as an investmen t destination. Despite the fact that such increase in compensation could also indicate inefficiency in operations at the same operating capacity, the reduction of disposition losses from USD 10m in 2008 to USD 8m in 2009 as well

Security Essay Example | Topics and Well Written Essays - 1000 words

Security - Essay Example This is majorly done through passwords without strong authentication. Some of the major security concerns related to passwords include phising, reuse and the use of easy to guess passwords. Malware infection is also a major challenge to the use of passwords realized in many situations. In light of these challenges, authentication is therefore very critical and this can be achieved through two-step verification. Google has introduced a verification feature called 2sv. In using the verification, one logs into the Google account and after the normal username and password process they are required to submit a six digit verification which might be sent to them through a phone text message. This feature also allows for revocation of the trusted computers. The major strength of the paper lies in the fact that it vividly provides much lucid information on the kind of security threats realized on Google and how users should identify them. In the same way, it presents a solution to this challe nge while providing its benefits effectively. However, the paper does not provide clarity on the aspect of Service Accounts and Delegation. In addition, the paper is weak on the aspect of Service –Side technology especially in relation to certificate transparency. 2) The credit card fraud seen in the notice is a typical example of a cybercrime. Conventionally, cybercrime takes many forms and many of these criminals seek ways and means of illegally obtaining money online. Considering that credit cards are normally used online in making payments, they are certainly vulnerable to cyber criminals. As seen in the case, many of the criminals usually create a series of false identities through which they create several credit cards. Such credit cards are the pumped up with money from credit bureaus. Others create sham companies which are then used to provide the credit bureaus with false information on the credit worthiness of the credit card owners who are actually false identities . The fraudsters also use a tradelines which are black market businesses used in committing fraud. It is therefore realized that the credit card fraud seen in the notice is indeed an aspect of cybercrime. On the other hand, the nature of the frauds as realized in the case might raise several questions on the aspect of general security and not just cyber security. It is seen that it was not only the virtual world that mattered in the commission of the crime but even real organizations which were not much protected from such scams. The case can therefore be viewed as a typical case of bank fraud as opposed to cybercrime. More importantly, the case can be viewed on the perspective of credit card security and can therefore be addressed by increased security from the credit card providers. 3) The Identity Ecosystem as postulated in the report is a kind of online environment where organizations and individuals will work together on trust and follow a set of agreed-upon standards. Each of these parties will be able to authenticate and identify their digital identities. This Ecosystem is basically intended to offer stronger identification while protecting the identity of the parties within. Indeed, it is important to note that such an environment might be a challenge to realize in the actual sense. Considering that it basically relies on trust between the organizations and the individuals, it is almost difficult for every party to follow the

Crisps and Snacks Essay Example for Free

Crisps and Snacks Essay Walker Crisps control the largest part of the crisps market in the United Kingdom, but lost significant market share three years ago when consumers began turning to other forms of snack. Furthermore, as the populace is made increasingly aware of the poor nutrition of some snack foods, the high salt content, and high fat content, they appear to be turning away from brands perceived as less healthy. Unfortunately, despite a revamping of products in 2006, most crisps products are viewed as less healthy and nutritious than alternatives such as cereal bars. . National campaigns designed to improve the quality of school lunches were effective at turning parents away from crisps as a lunchbox staple and adult health campaign have lead people to consider other snack options including fruits, nuts, yogurt and cereal bars. In addition, there is some indication that a declining birth rate has also negatively impacted demand for crisps as they tend to be most popular among the males in their teens and early twenties. Older and more affluent snackers choose other options including specialty, private label crisps, corn-based snacks and gourmet crisps with exotic flavors. It also seems clear from evidenced reported by Mintel analysis of the snack food market that there are some areas in which crisps cannot compete, as some consumers, particularly women seem attached to chocolate and sweet biscuits as a preferred indulgent snack. And, there is a marketing nightmare brewing. While crisps must shed their image as fatty, over-salted snacks with no nutritional value if they are to maintain their market share in a health-conscious environment, evidence suggests that men in particular do not want to eat something labeled as â€Å"diet† or â€Å"healthy†. The key appears to be a serious media campaign to change the way people think about crisps. Evidence suggestions that the three trends most likely to impact the crisps market are: a desire to purchase healthier snacks, a desire for classier snacks, and a desire to eliminate snacking in general. The Move toward Healthier Snacks The evidence is clear that the trend in snacking is to find healthier alternatives. Walker crisps was able to regain some of its lost market share in 2006 with the introduction and promotion of healthier, â€Å"baked† varieties, but still faces an uphill battle. In a recent poll, nearly half of the consumers questioned said they would be willing to spend more to be able to buy foods that were free from chemical additives (Mintel, 2007). Since many so-called â€Å"diet† foods are laden with chemicals ranging from preservatives to artificial sweeteners, this may be a market niche that Walkers could exploit with an all-natural crisp. However, it will take a serious marketing campaign to educate consumers about the â€Å"dangers’ hidden in other snack foods. Mintel’s analysis of Walkers marketing expenditures over the last three years has indicated that they have begun to see the value of print advertising that explains the benefits of their newer, â€Å"healthier† product lines. However, it seems likely that Walkers will have to consider a new multimedia advertising campaign that redirects the way people think about crisps. A strict marketing campaign that shows crisp consumption as part of a healthy diet could also help the company retain market share. Currently, consumers are increasingly turning to other snack options in the belief that they are healthier than crisps. It might be advantageous to do a head to head comparison between crisps and several other snacks demonstrating the relative fat content, calories and other nutritional information. For example, the Mintel study showed that 23 percent of consumers snack on cereal bars, often in the belief that they are a healthy sack. However, reading a product label makes it clear that the average cereal bar has as many calories and carbohydrates as a bag of baked crisps. Walkers also needs to continue with current advertising campaigns which explain the change in oils used to create the crisps and the reduction in salt. All of these combined attacks on accepted nutritional ideas can help to recreate crisps in the minds of the consumer. Furthermore, Mintel analysis shows that consumers are less likely to buy branded products or healthy products when buying for use in entertaining. As part of their overall health campaign, Walkers might want to consider an advertising campaign similar to the ones used by American beer companies. â€Å"Friends don’t let friends drink bad beer† could become something along the lines of â€Å"Show your friends you have great taste, buy walker crisps. † Though the concept is a bit loose, it could be refined and would likely results in increased sales for Walkers. The Move to Classier Snacks Another interesting trend within snack food is the move toward hand-cooked or gourmet crisps. These premium brands tend to be smaller manufacturers instead of multinational corporations like Walkers, which is a division of PepsiCo. These brands are gaining in popularity among more affluent, educated consumers. They have shown a preference for exotic flavors like â€Å"Thai sweet chili† and sea salt and malt vinegar instead of the standard crisps (Mintel, 2007). To that end, it is in the best interest of Walkers to continue to expand their line of premium crisps and to develop new flavors that are likely to appeal to consumers. Within this market, it is also important to appeal to the health conscious consumer, so any effort that can be made to create these new flavors using infused oils and natural spices instead of something cooked up with chemicals is a plus (Mintel, 2007). These consumers are more educated and therefore more likely to be well-informed about the products that they are putting into their bodies. These consumers are in many ways the perfect target for an educational advertising campaign which asks why they are depriving themselves of the textures and flavors they love just so that they can eat a cereal bar that tastes like cardboard. This is also a good market to explore because this demographic is less concerned about the price and more concerned about giving themselves a special treat. Often, hey view everything they eat, drink and wear as a form of status symbol and Walkers would do well to establish their premiums brands within this niche. An advertising campaign that reminds consumers that doing something nice for themselves should also taste good would play well to this demographic. The Move Away from Snacking As part of a health-consciousness campaign, citizens of the United Kingdom are being taught that snacking between meals is leading to the Britain’s obesity problem and should be cut out (Mintel, 2007). According to the Mintel poll, fewer people every year admit to eating between meals. While this may be a factor of people not admitting to themselves what their true behavior patterns are, it can mean that they are not planning ahead for snacking and not purchasing traditional snack foods like crisps. One of the best ways to deal with this would be another form of reeducation for the populace. Though dietary requirements are in an ever-changing state of flux as science learns more and more about how the body works, many diets argue that five or six small meals a day maintain blood sugar levels better than the traditional three meals a day. So, even if the addition is simply mid-morning and afternoon tea, Walkers and other snack providers need to change the way the United Kingdom thinks about snacks. Again, the goal is not to have crisps replace full meals like breakfast, but crisps with tea might be a marketing ploy that Walkers could successfully market especially in terms of their premium, exotic brands. Acknowledging that they are competing with scones and sweet biscuits and everything else for every moment the consumer chooses a snack is imperative to Walkers efforts to maintain their market share. Conclusions The simple truth is that snack foods are facing an increased amount of competition every day with more and more companies looking for alternatives to the standard potato crisp. Therefore, companies which rely on crisps as a major segment of their brand identity must find new ways to market and appeal to consumers. Since we have established that current buying behavior seems to be based on perceived nutritional value, perceived class and the perception that snacking makes you fat, an aggressive marketing campaign designed to challenge these notions and change them is necessary. Walks must change the perception of crisps as an unhealthy waste of calories and a blase snack. They must jazz it up and create a desire for people to incorporate crisps into their daily diet. Otherwise, they will continue to watch their market share slip away. WORKS CITED â€Å"Crisps and Snacks†, Mintel Reports, May, 2007.

Impact of Information Architecture

Impact of Information Architecture In recent years, as the technology is changing to our society, people are more relying on Internet to find out the solutions for their everyday needs. As some instances, online shopping, learning, processing transactions, watching movies and making easy communications are usual activities today for most of the modern people. In between, there is no doubt about that government related issues are important for the residents or locals and foreigners of the country. There is no way to avoid those transactions if the person is visiting or living in a country and those transactions are also time consuming if try to process manually, for the reasons of travel time, waiting time and other unexpected matters (forgetting of important document and etc). So, governments try to provide the most of the transactions to be able to process via online partly for some of the transactions and some completely. But, there are some difficulties for the expect and the persons who are not familiar with internet so, it is really important to be user friendly and having simple layout in order to be able to use easily by both novice and expert user. In this paper, the studies regarding Information Architecture and Design required to consider when we are to going to develop a user-friendly and good-quality website. I chose the Immigration Checkpoints Authority (ICA) e-government website ww.ica.gov.sg and made justification the site according to my studies regarding information architecture and design concepts especially usability views. Literature Review There are many different views on information architecture with many different areas. Information architecture is the practice of structuring information (knowledge or data) which are structured according to their context in user interaction or larger databases. Rosenfeld expresses the basic concept of IA as the interlinking of three major components: users (who they are, what their information-seeking behaviors and needs are), content (metadata, volume, formats, structure, and organization), and context (business value, business model, culture, politics, resources and resource constraints). Most of the website are developed emphasize on the users requirements and goal. It is essential to consider the information architecture concepts in most of the website in order to let the user with usefulness, usability, efficiency and effectiveness when using the site. While designing the portal site, the first things to think about the target user and user groups and should consider what the user needs, what kind of task are user perform. Moreover, the mental/cognitive aspects should think such as attention (structuring information, use of alert mechanisms and colors,), memory (short-term memory, iconic memory, long-term memory), and the behavioral aspects such as information needs should be well thought-out to match with the usability concepts for the portal website. Furthermore, the interaction design are need to consider in order to let the site is attractive and well-designed especially navigation, search system. Case studies based on ICA website The Immigration Checkpoints Authority (ICA), e-government site, provides many services and functions including issuing of travel documents and identity cards to Singapore citizens and issuing various immigration passes and permits to foreigners. In this site, e-appointment, registration the IC online, applying the students pass for the foreign student via electronically and more services can be performed via this site. Figure-1 ICA website 1. Focus user group This ICA website targets different user groups such as citizens, permanent residents and visitors of the country (Singapore) and information are placed under the different user groups. 2. User Mental/ Cognitive Aspects 2.1 Perception and Attention In this site, the developer uses the alert mechanisms to grab reader attention for example; there is a flash image in the middle centre of the home page to be attractive to user. As information is presented with ample spaces, and text is legible and distinguishable from the background, so the website can be perceived easier by user. (According to the type of users, patterns are used with consistent text size and different colors to attract the users focus). 2.2 Memory Iconic memory In this portal, the images and icons are used in terms of improvement of iconic memory. Short term memory (working memory) mental processing Information is well categorized to support the user short-term memory. So, the user can emphasize on relevant information and do not need to confuse with non-related information. Long term memory knowledge The design supports the long term memory by the recognition of user with using consistent menus, navigation. 3. Interaction design 3.1 Navigation The navigation system is consistent and the global navigation system, persistent navigation, is provided in the whole transaction process. In figure-2, it helps the user navigate the site to find the areas of interest to them and shows users where they are within the site and how to get other page. Furthermore, local navigation uses the within a specific site section, for example, visitors service, entry visa, visit pass, students pass and birth pass. This portal support, breadcrumbs, horizontal list of labels which shows current site location and the path the user go through within this site, and helps user where on website they are and enable user to go back previous page throughout the hierarchical navigation. Breadcrumbs Contextual Navigation Local NavigationFigure-2 3.2 Search Figure -3 This site provides the powerful search feature for the user to find the information which is more desired information of the users. In figure-3, there is search box to find the information and also provide advanced search with the drop down list lets the user chooses within this site or within all government site. Choosing the latter option will help the user to be able to search among all of the Singapores government websites such as Ministry of Health and Ministry of Manpower. 3.3 Categorization In ICA site, there are different categorization for user group and the information and services are categorized for each user group. As an example, a permanent resident can find the related information and services under the category of Permanent Residents. 4. Suggestion for improving site Although the ICA website is nice and user-friendly, still there are some features and technologies to comment perfect. I believe the transactions will be more easier if the website support the user account control feature because a user will only need to fill in their personal information for very first time only and will be stored in the database and later the information will be retrieved when the user login and that data will be able to use for the transactions need. Getting updated is really important in the Information Technology. In addition, very latest technologies will not only help the web-site to be looked well but also provides the new and convenient features such as auto-complete function and real-time announcements. Moreover, the network navigation links which are useful other government sites links that may be related to this site should be support in this site. The features described above are not the vital features. However, it is really better to have those features than doesnt have. I believe that implementing those will make the web-site become more and more perfect. Conclusion In conclusion, the government related issues are essential for every country and the government and people turn into use the e-government website for processing their transaction vial online. In between, those websites should have usability and usefulness for both expect and novice user (e.g. ICA website). So, it should be aware to consider the information architecture in designing and developing the website. According to my literature review, I studied a case, ICA website, in the point of usability concepts especially users, the interaction design between user and the system. According to my studies, user can get more satisfaction when using this ICA website than going physically to ICA building and process the transactions manually. I realize that the website will be more usability, effectiveness and efficiency by focusing on my suggestion base on information architecture issues.

Euthanasia Essay - Mercy Killing Not Necessary :: Euthanasia Physician Assisted Suicide

Euthanasia Essay - Mercy Killing Not Necessary "Mercy Killing" as Euthanasia is also known, has been outlawed within the United States. The definition of mercy killing is where someone is terminally ill with a disease, and an accomplice helps to end the misery of that victim's life. In my opinion, this decision should be a live and let live decision. If and only if the victim agrees ahead of time before the pain starts to end it, then they should live their life the way they want to; if that includes ending it the way they want to, so be it. Atop this highly controversial topic are many illnesses which have led to the popularity of Euthanasia. Among those are Cancer, Aids, and Alzheimer's. There is a very slim need for the use of Euthanasia today in my opinion. Supporters to full-fledged euthanasia often point out that they are carrying out the last wishes of the damned. One doctor has said that "Our ability to end pain is more powerful than at any time in the history of human experience" (Hanson). The key word of Euthanasia is "intentional," if death is not intended it is not an act of Euthanasia. The debate rages today about this very controversial idea. Doctors' code of ethics will not allow this practice in general, yet it still remains such a hot topic which no doctor is able to set this conflict aside. By withdrawing treatment that would not provide a benefit to the patient, or withdrawing treatment that has shown to be ineffective, too burdensome, or is unwanted, and giving the high doses of pain killers, that may endanger life when they have shown to be necessary are all part of good medical practice, but only when they are properly carried out. The concept of human rights were derived from considerations of the nature of mankind, originated when a political context. "Natural Rights," as they are called, were developed as a proclamation of liberty to be used to guarantee freedom from attack on one's life, dignity, or property. There were considered to apply equally to each individual, or to equivalent groups, there were unconditional and imposed on others a duty to respect them. These "natural rights" were also joined by welfare rights, even though grounded in nature and reason, these are not universally applicable and many would be thought absurd or unattainable in many cul tures.

King Lear - Power Corrupts Essay -- essays research papers

Power is the ability to manipulate and control whatever one desires; to do what one pleases to do without answering to authority. The power that corrupts the characters plays an extensive role throughout Shakespeare’s play, King Lear. Goneril and Regan are corrupted by the power that Lear offers them. Edmund’s corruption comes from the trust of his father. Absolute power corrupts absolutely with the characters, because once have full control, they are so cold that they will do anything to keep the power – or to gain more. The quest for power corrupts, but when absolute power is attained, treachery and deceit is the only path to take. The power that Lear gives to Goneril and Regan makes them treacherous and deceitful. Lear offers his land to his daughters – Goneril and Regan – but in return they must profess their love for him: â€Å"which of you shall we say doth love us most, that we our largest bounty may extend.† (1, 1, 56-57) By doing this, Lear gives an opportunity for his daughters to take advantage of him. Goneril â€Å"loves [him] more than words can wield the matter’ (1, 1, 60) and the same goes for Regan saying, â€Å"[Goneril] comes too short, that [she] profess [herself] an enemy of all other joys.† (1, 1, 79-80) They don’t really love Lear, but instead they love the power that Lear gives them. Once Lear had given the land to his daughters, the power that they have corrupts them. When Lear needs a place to stay, the daughters are not quick to react; Goneril allows him to stay...

Value Investing: Predicting Long-Term Pro?tability Based on Fundamental Data

Value Investing: Predicting Long-term Pro? tability Based on Fundamental Data An Empirical Study in the Manufacturing Industry by Vital Schwander (05-609-136) Master’s Thesis supervised by Prof. Dr. Andreas Gruner University of St. Gallen May 23, 2011 Master in Law & Economics Abstract Warren Bu? ett (1992) classi? es the discussion about value and growth stocks as fuzzy thinking. With that statement, he argues that value investors must consider growth in their value calculations. This thesis shows in a ? rst step that growth is only valuable if the company enjoys a durable competitive advantage.By examining the fundamental characteristics of companies with a durable competitive advantage, this thesis intends in a second step to assess the predictability of long-term pro? tability. The DuPont Identity serves as framework for that purpose. The objects of this investigation are companies within the manufacturing industry (Primary SIC Code between 2000-3999) that were listed in t he United States between 1979 and 2009. The results show that companies with a durable competitive advantage exhibit speci? c characteristics in operating e? ciency, asset use e? ciency, and in the ability to meet short-term obligations.Furthermore, the thesis shows that long-term pro? tability, based on the investigated characteristics, is predictable to some extent. This thesis concludes by assembling the insights to a value strategy that is applied to manufacturing companies listed in Switzerland. The strategy exhibits an outstanding SMI-adj. compound annual growth rate of 13. 19% over a period of 17. 5 years. ii Acknowledgement I would like to express my gratitude to Prof. Dr. Andreas Gruner for supervising this thesis and his assistant Lucia Ehn for her conceptual advices. I have furthermore to thank Mr.Hans Ulrich Jost for giving me insight into the daily business of a value fund at UBS AG. My sister Daria introduced me to R and Latex. I want to thank her for her help and supp ort. I want to thank my great family who has been always supportive and motivating. Finally, I also would like to thank friends and colleagues for making life such an enjoyable experience. iii Contents 1 Introduction 1. 1 1. 2 Issues, Goals and Limitations . . . . . . . . . . . . . . . . . . . . . . . . . Structure and Empirical Approach . . . . . . . . . . . . . . . . . . . . . . 1 1 2 4 4 5 7 7 8 2 Value Investing—An Investment Paradigm 2. 2. 2 2. 3 The Origin of Value Investing . . . . . . . . . . . . . . . . . . . . . . . . . Value and Other Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . Four Value Strategies by Illustration . . . . . . . . . . . . . . . . . . . . . 2. 3. 1 2. 3. 2 2. 3. 3 2. 3. 4 2. 4 2. 5 Piotroski’s F_Score . . . . . . . . . . . . . . . . . . . . . . . . . . Walter and Edwin Schloss . . . . . . . . . . . . . . . . . . . . . . . Warren Bu? ett . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 UBS EMU Value Focus Fund . . . . . . . . . . . . . . . . . . . . . 12 Value vs Growth—Fuzzy Thinking! . . . . . . . . . . . . . . . . . . . . . 13 Value Anomaly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 2. 5. 1 2. 5. 2 2. 5. 3 Behavioral Approach . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Risk-based Approach . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Competitive Advantage Based Approach . . . . . . . . . . . . . . . 16 17 3 Literature Review 3. 1 3. 2 3. 3 Competitive Advantage . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Pro? tability Measurements . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Research Gap and General Approach . . . . . . . . . . . . . . . . . . . . 21 22 4 Analysis of Long-term Pro? tability 4. 1 4. 2 Data Sample . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Analysis of Return on Equity Measure . . . . . . . . . . . . . . . . . . . . 26 4. 2. 1 Superior Performers . . . . . . . . . . . . . . . . . . . . . . . . . . 26 iv 4. 2. 2 4. 2. 3 4. 3 4. 4 4. 5 4. 6 Analysis of Performance Persistence . . . . . . . . . . . . . . . . . 28 Analysis of SPP Deciles in respect of ROE . . . . . . . . . . . . . . 30 Analysis of SPP Deciles in respect of other Financial Measures . . . . . 33 Predictability of Long-term Pro? tability . . . . . . . . . . . . . . . . . . . 41 Discussion of the Interim Results . . . . . . . . . . . . . . . . . . . . . . . 43 Market Analysis 4. 6. 1 4. 6. 2 4. 6. 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Subdivision-speci? c Market Analysis . . . . . . . . . . . . . . . . . 45 Analysis of SPP Deciles in respect of Market Multiples . . . . . . . 45 Market Performance Analysis . . . . . . . . . . . . . . . . . . . . . 46 48 5 Value Strategy 5. 1 5. 1. 1 5. 1. 2 5. 1. 3 5. 2 Strategy Composition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Sample Descriptives and Strategy Composition . . . . . . . . . . . 48 Portfol io Formation . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Performance Measurement . . . . . . . . . . . . . . . . . . . . . . . 49 Portfolio Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 53 6 Conclusion and Further Research 6. 1 6. 2 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Further Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 56 i v x xv Bibliography A Data Input B Financial Measures C Subdivisions D Market Analysis List of Tables 4. 1 4. 2 4. 3 4. 4 4. 5 4. 6 4. 7 4. 8 4. 9 5. 1 COMPUSTAT Items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Distribution of Firm Years Distribution of Superior Performance Years . . . . . . . . . . . . . . . . . 27 Probability Distribution of Superior Performance Persistence . . . . . . . 29 ROE Distribution for each SPP Decile . . . . . . . . . . . . . . . . . . . . 31 RO E Distribution for each SPP Decile (Subdivision-adjusted) . . . . . . . 32 Financial Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 . . . . . . . . . . . . . . . . . . 47 Predictability of Future Pro? tability . . . . . . . . . . . . . . . . . . . . . 42 Market Performance for each SPP Decile Portfolio Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 . . . . . . . . . . . . . . . . . . . . . . . . i ii v A. 1 Data Input for US Companies A. 2 Data Input for Swiss Companies . . . . . . . . . . . . . . . . . . . . . . . B. 1 Calculation of the Financial Measures . . . . . . . . . . . . . . . . . . . . B. 2 SPP Deciles (Subdivision-adjusted) regarding Financial Measures . . . . vii x xi C. Overview of Subdivision . . . . . . . . . . . . . . . . . . . . . . . . . . . . C. 2 Subdivision Comparison regarding ROE . . . . . . . . . . . . . . . . . . . C. 4 Composition of SPP Deciles regarding Subdivisions C. 3 Subdivision Distribution in respec t of SPP Deciles . . . . . . . . . . . . . xii . . . . . . . . . . . . xiii D. 1 Average Price-Earnings Ratio per Subdivision . . . . . . . . . . . . . . . . xvi D. 2 Average Book-to-Market Ratio per Subdivision . . . . . . . . . . . . . . . xvii D. 3 Average Price-Earning Ratio per SPP Decile D. 4 Average Book-to-Market Ratio per SPP Decile . . . . . . . . . . . . . . . xviii . . . . . . . . . . . . . . . xix vi List of Figures 3. 1 4. 1 4. 2 4. 3 5. 1 Three Slices of Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 . . . . . . . . . . . . . . . . . . . . . . . 33 . . . . . . . . . . . . . . . . . . 47 Mean ROE for each SPP Decile SPP Deciles in terms of Financial Measures . . . . . . . . . . . . . . . . . 40 Market Performance for each SPP Decile Performance of the Value Strategy . . . . . . . . . . . . . . . . . . . . . . 51 . . . . . . . . . . . . . . . . . . . . . . . . . . . xiv C. 1 Subdivision Distribution vii List of Abbreviations vg. B/M CAP CAGR CAPM COG S DA EBITDA etc. e. g. EV FCF IE i. e. IPO LT p. a. P/E ROA ROE SGA SMI ST US average Book-to-Market Competitive Advantage Period Compound Annual Growth Rate Capital Asset Pricing Model Cost of Goods Sold Depreciation and Amortization Earnings before Interest, Taxes, Depreciation and Amortization et cetera exempli gratio – for example Enterprise Value Free Cash Flow Interest Expense id est – that is Initial Public O? ering Long-term per annum Price-Earnings Return on Assets Return on Equity Selling, General, and Administration Swiss Market Index Short-term United States iii Chapter 1 Introduction 1. 1 Issues, Goals and Limitations Every investor is looking to buy low and sell high. This does not yet characterize a value investor. Although value investing has become a widely used term, it has been stamped in particular by a small group of academics. They associate stock-speci? c fundamentals such as a low P/E ratio, low cash-? ow-to-price ratio, and high B/M ratio to va lue stocks. These stock-speci? c fundamentals have become characterizing for value investing and embody the basis for many research studies about value investing (see Damodaran, 2011).For example, Piotroski (2000) developed the F_Score to separate losers from winners among value stocks (i. e. high B/M-stocks). On the other hand, research has been conducted on growth stocks (i. e. high P/E ratio, high cash-? ow-to-price ratio, and low B/M ratio). Mohanram (2005) developed the GSCORE to separate losers from winners among growth stocks, for instance. As a consequence, many investors feel compelled to decide between value and growth stocks. However, in the heated discussion it is often ignored that growth has an impact on the value of a company.This impact of growth varies according to the particular company from negligible to very important, and its impact can be negative as well as positive. Growth is valuable in particular if a company enjoys a durable competitive advantage and remai ns very pro? table over a long period of time. There are many books about the competitive advantage (e. g. Porter, 1998; Shapiro, 1999). However, it has never been discussed related to value investing. Only Mauboussin and Johnson (1997) have raised a discussion about the competitive advantage period within the valuation process of stocks.They point out in their paper „Competitive Advantage Period: The Neglected Value Driver† that the persistence of competitive 1 advantage has a huge impact on the value of a ? rm. Yet there is little literature on this topic (see Fritz, 2008) and the bulk of academics as well as practitioners still rely mainly on the di? erentiation between value and growth stocks. This thesis gives priority to the competitive advantage, though, and intends to lay the groundwork for valuing competitive advantage. It is important to understand how a competitive advantage can be captured and if it is possible to predict long-term pro? ability, before starti ng to value the growth potential of a company. Hence, the aim of the thesis is con? ned to the predictability of long-term pro? tability and does not intend to value the competitive advantage as such. The ? rst question that arises in this context is whether it is possible that a company can exhibit long-term pro? tability. The answer to this question is of interest, as most economists maintain the contrary. According to economic theory, pro? tability is mean reverting in a competitive environment (Chan, Karceski and Lakonishiok, 2003). However, reality teaches us the contrary every day.Mircrosoft’s products, for instance, are everything else but innovative. Nevertheless, the company earns excessive returns for decades, and so do others like The Coca-Cola Company. Thus, this thesis investigates the possibility that a company is able to sustain its competitive advantage over several years. Thereupon, the second issue addresses whether companies with a durable competitive advan tage exhibit stock-speci? c fundamental characteristics. Therefore, the DuPont Identity serves as framework. The companies are classi? ed into deciles in terms of pro? tability (i. e.ROE) and persistence. Upon this, the companies are tested for the characteristics regarding various measures, which are derived mainly from the DuPont Identity. All companies that are objects of the investigation are listed in the United States and constrained to manufacturing companies only. The third question addresses whether it is possible to identify companies with a durable competitive advantage based on the observed characteristics. Finally, a simple strategy is composed that implements the investigated characteristics of companies with a durable competitive advantage.The strategy is conducted on manufacturing companies that are listed on a Swiss stock exchange. 1. 2 Structure and Empirical Approach The present thesis is structured in mainly four parts: Chapter 2 reviews literature on value inves ting and points out the broad range of value strategies by the mean of four examples. The reader shall gain an overview of value investing (i. e. the origin of value investing, dissociation from other investors, and current value discussion). Additionally, 2 this chapter shall point out the link between value investing and the competitive advantage period.Chapter 3 contains a literature review about competitive advantage, pro? tability measures and the persistence of pro? tability. Moreover, chapter 3 shows the research gap as well as the general approach to ? ll this gap. The empirical part in chapter 4 deals mainly with three issues: (1) persistence of superior performance, (2) characteristics of companies with a competitive advantage, and (3) predictability of future long-term pro? tability. Finally, in chapter 5 a value strategy will be composed that builds on the insights of chapter 4. 3 Chapter 2 Value Investing—An Investment Paradigm 2. 1 The Origin of Value InvestingV alue investing is an investment paradigm that derives its origin from the ideas on investment and speculation subsequently developed and re? ned by Benjamin Graham and David Dodd through various editions of their famous book Security Analysis. Starting in 1928, Graham began to teach a course on security analysis at Columbia University. The book emerged from that course, and appeared in 1934. Graham and Dodd mainly summed up lessons learned from the previous economic crisis in 1929 and provided readers with inevitable principles and techniques by focusing on the analysis of fundamental ? gures to estimate the value lying behind securities.By publishing the ? rst professional book about investing, they laid the foundation of value investing. In 1949, Graham published his second book, The Intelligent Investor, which was described by Warren Bu? ett (Graham, 2003) as „by far the best book on investing ever written. † It contains mainly the same ideas as in its predecessor Sec urity Analysis, but focuses more on the emotional aspects of stock markets, rather than on analyzing techniques. The techniques to determine investment opportunities that Graham and Dodd have developed are based on two fundamental assumptions about the market: 1.Market prices of securities are sometimes subject to signi? cant and unforeseeable movements. 2. As opposed to the e? cient market hypothesis, which assumes that all stocks are correctly priced by the market at any one point in time, market prices of some 4 securities deviate from their intrinsic values from time to time despite the fact that their underlying economic values do not justify such signi? cant deviation. Hence, an intelligent investment is characterized as paying less for a security then its intrinsic value. Paying more for a stock than its intrinsic value in the hope that it can be sold for a higher price is speculative.In other words, an intelligent investor should not attempt to forecast future stock market m ovements; instead, such movements provide opportunities to purchase undervalued stocks. Moreover, investors are encouraged to purchase securities only when the market price is su? ciently below its intrinsic value. Graham (2003) referred to this signi? cant gap between price and intrinsic value as the margin of safety, and quali? ed it as central concept of investment. In practice, investors lay down di? erent margins of safety that are appropriate to their fundamental analysis. A super? ial analysis requires a higher margin of safety than a deep and broad analysis. Additionally, market conditions as well as the sizes of funds gives reason for di? erent margins of safety. Bu? ett states in his letters to the shareholders of Berkshire Hathaway, Inc. in 1992: „We have seen cause to make only one change in this creed: Because of both market conditions and our size, we now substitute ,an attractive price’ for ,a very attractive price’ (p. 12). † Yee (2008) sugg ests a margin of safety between 10% and 25% of the share price. Larger margins are justi? ed for especially risky stocks.Accordingly, the margin of safety is not a rigid safety net but rather a ? exible net with meshes, which must be properly adjusted to the speci? c needs and conditions from time to time. 2. 2 Value and Other Investors Classic value investors—in the sense of Graham and Dodd—are rare. Every investor is looking to buy low and sell high, but what exactly di? erentiates a real value investor from all the other investors? According to Greenwald, Kahn, Sonkin, van Biema (2001), investors can be di? erentiated into two main categories. The ? rst category pays no attention to fundamental analysis.Instead, these investors analyze charts; in particular they construct charts to represent trading data (e. g. price movements and volume ? gures). In other words, they intend to predict future price movements referring to previous events regardless of its fundamental value (pp. 5-6). Graham and Dodd qualify these investments as highly speculative. 5 Although the second category focuses admittedly on fundamental analysis, Graham and Dood value investors are still a minuscule minority. Greenwald, Kahn, Sonkin, van Biema (2001) divide these fundamentalists into those who ocus on macroeconomics and those who deal with the microeconomics of securities. Macro-fundamentalists often pursue a top-down approach by considering ? rst broad economic factors such as interest rate, in? ation rate, exchange rate, unemployment rate, and the like. They forecast economic trends on a broad national or even worldwide basis. Upon this, they decide whether a group or even a speci? c security is a? ected by this trend. They do not calculate the value of individual securities, though. In particular, they monitor policy makers, such as the central bank, and try then to determine the impact on a speci? industry or group of securities. As any other investor, they attempt to forecast price movements before other investors recognize them and subsequently buy low and sell high, but they do not calculate the intrinsic value of an individual security directly (pp. 6-7). Graham and Dodd originally established value investing as a comprehensive analysis of securities in order to estimate the intrinsic value as accurately as possible, but in the group of micro-fundamentalists, traditional value investors are still a minority.According to Greenwald, Kahn, Sonkin, van Biema (2001), a more common approach takes the current price of a stock as the point of departure. These investors analyze the history of a security, considering how the stock price was in? uenced by changes in the underlying economic factors. In a second step they then attempt to predict the probability and impact of such changes in order to forecast future development of the speci? c security. These kind of investors often forecast future earnings or free cash ? ows. If they ? d that their pre dictions are more optimistic than the market’s expectation, they buy the security; if they ? nd that the market’s overall expectation is to high compared to their forecast they sell the security (p. 7). Indeed, most value investors—in the sense of Graham and Dodd—start their analysis from the bottom up by calculating ? rst the intrinsic value of a ? rm and subsequently they estimate the macroeconomic exposure of the ? rm—similar to the micro-fundamentalists. Although there are some similarities, Graham and Dodd value investors distinguish themselves from micro-fundamentalists in many ways.Greenwald, Kahn, Sonkin, van Biema (2001) mention two reasons why most micro-fundamentalists are not value investors: First, they focus on prior and anticipated changes in prices, and not on the level of prices relative to underlying values. The second and even more decisive di? erence is the absence of a margin of safety to safeguard investors from unpredictable market movements (pp. 7-8). Accordingly, a true value investor in the classical sense is one whose point of de6 parture is the fundamental data of a company. Although macro-economic factors play a signi? cant role in the analysis, they are of secondary importance.Furthermore, this investor does not predict future developments of key factors that cause price changes. Instead, a classic value investor values a company based on current fundamentals and buys a security at a bargain price. In the following section, four value strategies are outlined in order to give an idea by the way of illustration. 2. 3 Four Value Strategies by Illustration The range of value strategies is broad enough that it makes it impossible to sum up all of them. Thus, the following selection intends to show the large variety of aspects that these strategies characterize. These aspects range from fundamental analysis only (e. . Piotroski) to more sophisticated investigation of companies (e. g. Bu? ett), from con centrated portfolios (e. g. UBS EMU Value Focus Fund) to diversi? ed portfolios (e. g. Schloss). 2. 3. 1 Piotroski’s F_Score Piotroski started his career as a professor at the University of Chicago Graduate School, and since 2007 he has taught accounting at the Stanford University Graduate School of Business. In April 2000, Piotroski published a paper in the Journal of Accounting research titled „Value Investing: The Use of Historical Financial Statement Information to Separate Winners from Losers. In this paper, Piotroski classi? es distressed companies in winners and losers by means of nine fundamental criteria. Four criteria (ROA, ? ROA, CFO, and ACCRUAL) re? ect the pro? tability, three criteria (? LEVER, ? LIQUID, future debt obligations, and two criteria (? MARGIN, and ? TURN) measure changes F_Score is composed as follows: F _Score =F _ROA + F _ ? ROA + F _CF O + F _ACCRU AL + F _ ? LIQU ID + EQ_OF F ER and EQ_OFFER) measure changes in capital structure and the ? rm’s ability to meet in the e? ciency of the ? rm’s operations (Piotroski, 2000, pp. 10-14).The equation of the + F _ ? M ARGIN + F _ ? T U RN + F _ ? LEV ER (2. 1) where a low F_Score signals a ? rm with less recovering potential and a high score indicates the ? rm as having mostly good prospects to recover. If a company ful? lls a criteria, 7 the F_criteria equals 1, otherwise 0. With that, Piotroski translates the criteria into binary signals. The sum of all F_criteria subsequently leads to the F_Score, which can range from a low of 0 to a high of 9. Due to the fact that it is very di? cult to obtain the maximal score, companies with a minimum score of 8 will be classi? d as high F_Score whereas as companies with a score of 0 or 1 are classi? ed as low F_Score (Piotroski, 2000, pp. 14-18). Piotroski (2000) reevaluates the stocks every year and decides whether a stock belongs to the losers or to the winners. Finally, the investment strategy buys high F_Score and sel ls short the low F_Score. This simple strategy generates over two decades an astonishing 23% average annual return. It appears that the strategy is also robust in crisis. In 2008, the American Association of Individual Investors tested the strategy among 50 other investment strategies.With a performance through to the end of 2008 of 32. 6%, it was not only the only stock strategy that would have generated positive returns but has also outperformed the median performance (-41. 7%) of all tested strategies by far (Thorp, 2009). Due to the fact that the portfolio is construed each year on actual data, it is often the case that the portfolio is turning over correspondingly. Once a ? rm is recovering and the market has recognized the improvements the B/M ratio increases and the stock does not appear any more on the screen, although the company has even more growth potential. That is why many ? ms remain no longer than one or two years in the portfolio. Admittedly, buying winners and shor t-selling losers is one big advantage of the strategy. Companies that are classi? ed as losers may transform in a subsequent period from a low F_Score to a high F_Score ? rm. Therefore, the strategy makes double use of a company’s development or business cycle. But the strategy also implies a disadvantage; why should an investor sell an excellent business that bought at a bargain price? Based on a competitive advantage, the business could thrive to a superstar and yield high returns on the initial investment.A top manager also keeps the good business also when others o? er more than its current value because the manager knows that the business will contribute also in the future to the ? rm and its shareholders. 2. 3. 2 Walter and Edwin Schloss Walter Schloss and his son Edwin are very conservative value investors whose motto is to keep things simple and cheap. Walter Schloss attended a course of Graham’s and worked for the Graham-Newman Partnership until 1955. Afterwar d, he ran his own investment ? rm and in 1973 his son Edwin joined the partnership. From the formation of the limited 8 artnership until 2000, the Schloss have provided their investors an annual compound return of 15. 3%. They outperformed the S&P Industrial Index by 4. 2% annually. In other words, they have created a return of 66,200% while the S&P Industrial Index performed 11,800% (Greenwald, Kahn, Sonkin, van Biema, 2001, p. 263). Walter Schloss has been titled by Warren Bu? ett as „superinvestor† (Forbes, 2008). What distinguishes the Schlosses from other value investors is their simple, and almost rudimentary method choosing stocks. They are among the few investors that stick to the principles of the father of value investing.Like Graham, they seek for stocks that are priced lower than their working capital (net assets minus current liabilities). They start their investigation by putting their feelers out to stocks that are unloved, distressed, and unheeded from ot her investors. Most of these stocks are in a downward trend either by a rapid plunge or a continually decreasing price. The longer the company has gone through such hard times, the more they call the Schloss’s attention. Once they have invested in such a unloved stock they hold it on average for four to ? ve years until the stock has recovered. Sometimes they also sell a stock earlier when they ? d a better opportunity (Greenwald, Kahn, Sonkin, van Biema, 2001, pp. 266-269). Edwin Schloss focuses on asset values, but is also willing to buy a company that has a strong earnings power. Greenwald, Kahn, Sonkin, van Biema (2001) describe the investment philosophy of Edwin Schloss as follows: „Edwin Schloss pays attention to asset values, but he is more willing to look at a company’s earnings power. He does want some asset protection. If he ? nds a cheap stock based on normalized earnings power, he generally will not consider it if he has to pay more than three times b ook value. [†¦ Depending on his estimate of what the companies can earn, Edwin may still ? nd the stock cheap enough to buy (p. 268). † Although Edwin pursues a more liberal value approach by taking the earnings power value into account, he is still very conservative. Both father and son do not include in their valuation process other than fundamental data. In their analysis, they rely entirely on annual and quarterly reports—they keep things simple but with a relatively high margin of safety. The diversi? cation of their portfolio also varies. They do not determine a threshold in advance to which they stick.Similar to Warren Bu? ett, their approach leads them to industries, which are not exposed too much to rapid changes that can undermine the value of these stocks (Greenwald, Kahn, Sonkin, van Biema, 2001, p. 269). 9 2. 3. 3 Warren Bu? ett Warren Bu? ett, who is doubtless the most famous student of Graham and one of the most successful investors, too, pursues a s imple strategy, which is complex and di? cult in its execution. Bu? ett started his career in Graham’s investment ? rm. In 1964, he then bought shares of Berkshire, when its book value per share was $19. 46 and its intrinsic value even lower (Bu? tt and Cunningham, 1997, p. 6). In the period from 1964 to 2009, book value per share increased at an annual compound rate of 20. 3% that is an overall gain of 434,057 %. Adjusted by the S&P with dividends included, Berkshire has a compound annual growth rate of 11%. During the period, Berkshire reported only twice a negative change in book value—in 2001 and 2008—compared to the S&P that incurred during the same period eight negative results (Bu? ett, 2009, p. 2). Unlike other investors, Bu? ett feels obliged to share his knowledge that he gained mainly from Graham.Moreover, and opposed to the bulk of successful investors, he teaches his wisdom to the world of investors—and those who are interested in his activit y— by an annual letter to the shareholders of Berkshire Hathaway, Inc. To attain this knowledge it is not necessary to buy a share of Berkshire Hathaway, Inc. —which costs currently over $125,000, nor is it necessary to pay any money for it. Bu? ett gives access to his letter on the Berkshire’s website for free. Additionally, in the book called The Essays Of Warren Bu? ett—Lessons For Corporate America, Cunningham organizes the information in Bu? tt’s letters in a thematic way. This book is also accessible online and can be downloaded for free. Bu? ett is aware that he creates potential investment competitors by passing his wisdom to everyone but imitating Bu? ett’s strategy is everything but simple. His explanations are logical and easy to understand, but the execution requires much experience and a distinctive comprehension of the industry and costumer behavior. In contrast to what Piotroski and other academics and money managers postulate , Bu? ett buys not only high B/M stocks. This amazes readers in many ways. In particular, because Bu? tt refers in several passages of his letters to Graham’s conception. It also contradicts the conceptions of most academics, which assign a high B/M ratio to value stocks. Nonetheless, Bu? ett puts emphasis not only on the book value of a company but more on the competitive advantage that a company enjoys. Like Graham, he is looking primarily for very cheap businesses, which are traded far under their intrinsic values. As opposed to Graham, Bu? ett buys not every stock that Mr. Market o? ers him for a bargain price. Additionally, he seeks for businesses with a high competitive advantage.While most ? rms in Graham’s portfolio are distressed, Graham diversi? es the risk. Bu? ett, on the other hand, holds that an investor should not buy second-class stocks 10 in the hope that they will recover. The awareness of less investment opportunities does not bother Bu? ett; au cont raire, he avoids purchases that he will regret later. According to him, every transaction that is based on a wrong decision is unnecessary, and thus, to be avoided. One could say that transaction costs (e. g. trading costs) are tiny, that they carry no weight. But what most people disregard are taxes.With every transaction, book value is going to be reevaluated and governments levy taxes on the new value. Holding a share does not cause any taxes, as long as the investment will be sold. Therewith, Bu? ett did not pay taxes as much as his colleagues that trade frequently. Either way, Bu? ett’s preferred holding period is forever. This strategy particularly bene? ts private investors that have bought stocks of Berkshire Hathaway. At least in Switzerland, the government does not impose taxes on capital gains. In the shareholder letter from 1992, Bu? tt breaks his strategy down to a few cornerstones of the valuation process: „We select our marketable equity securities in muc h the way we would evaluate a business for acquisition in its entirety. We want the business to be one (a) that we can understand; (b) with favorable long-term prospects; (c) operated by honest and competent people; and (d) available at a very attractive price (p. 12). † First, Bu? ett never buys a business that he does not understand entirely. This requires a full comprehension about the industry such as competitors, value chain, costumers, and so on. For this reason, Bu? tt avoids industries with a high rate of change (e. g. technology industry). The second criterion that a business must live up to is a competitive advantage. Preferably, he is looking for businesses that have potential to improve their competitive positions within the industry. Third, but less important, Buffett is looking for competent management. It is less important, because according to him a company with a durable competitive advantage can even operate with ordinary managers and generate extraordinary r eturns (Bu? ett and Cunningham, 1997, p. 21). Finally, a margin of safety prevents Warren Bu? tt from mistakes or unforeseeable developments. It seems that soft factors play an important role for him in the valuation process. Correspondingly, fundamental analysis is only half the battle. The following quote from Warren Bu? ett in the context of the hostile takeover of RJR Nabisco outlines the kind of business Bu? ett likes: „I’ll tell you why I like the cigarette business. It costs a penny to make. Sell it for a dollar. It’s addictive. And there’s fantastic brand loyalty (Burrough and Helyar, 1991, p. 218). † 11 For this reason, Bu? ett also accepts businesses that do not always have a high B/M ratio.Moreover, he seeks for businesses that have potential for improvements and buys them at a relative bargain price in the hope the business remains its advantage and yields high returns in the future. 2. 3. 4 UBS EMU Value Focus Fund The UBS EMU Value Focu s Fund is a highly concentrated and actively managed European equity fund, which holds maximally ten stocks, where each has an initial weight of 10%. The investment process is divided into seven steps (Screening process; Short list; Pre due diligence; Full due diligence; Watch list; Entry, increase/reduce position; and Exit).First, the stock universe is screened by a quantitative approach (EV/EBITDA, P/E, B/M, FCF yield) and by a qualitative approach. Second, in the due diligence process the team meets the management of the target company, they compare the company within the peer group, and determine the fair value and entry level. The team gives particular importance to the within-industry comparisons and a margin of safety of 30%. After the stock is over the due diligence, the stock is deposited on the watch list until the entry level is reached. The stock remains in the portfolio until the stock has recovered and the calculated air value is reached and the weight of the stock is less than 15% of the portfolio. If there is a more promising investment opportunity, a position will be changed. Based on the high portfolio concentration, a sector limitation makes sure that stocks which are stemming from the same sector do not surpass the threshold of 33%. If a stock’s price plunges after its purchase more than 15%, the management also pulls the trigger for safety reasons and sells the stock (UBS, 2010). The strategy of the UBS EMU Value Focus Fund equals in some aspects Warren Bu? ett’s strategy.Both distinguish themselves from Piotroski’s and Schlosser’s strategy insofar as they include a due diligence process that goes beyond a fundamental analysis (e. g. valuation of the management). Furthermore, both strategies do not strive for diversi? cation, although the UBS EMU Value Focus Fund includes some risk management factors that compel the management to exit in certain circumstances. Warren Bu? ett, on the other hand, restricts himself by avoiding complex businesses. The two strategies also di? er insofar as the UBS EMU Value Focus Fund has a relatively short investment horizon of 18 months, whereas Bu? tt holds a stock over decades. 12 2. 4 Value vs Growth—Fuzzy Thinking! Although there is a broad variety of value strategies, it seems that the discussion about value investing leaves little room for interpretation. Nowadays, the bulk of academics di? erentiate between value and growth (glamour) stocks. They ? nd that stock-speci? c fundamental attributes such as a low P/E ratio (Basu, 1977; Ja? e, Keim, and Wester? eld, 1989), low cash-? ow-to-price ratio (Chan, Hamao, and Lakonishok, 1991), and high B/M ratio (Rosenberg, Reid, and Lanstein, 1985; Fama and French, 1992) earn substantially higher returns than glamour stocks.Hence, often one feels compelled to decide between value investing and growth investing. In particular, academic work has upheld the distinction, and thus, has had a strong impact on inv estment professionals. Furthermore, academic research developed style-speci? c benchmarks (Chan and Lakonishok, 2004, p. 71). In that sense, value stocks are referred to a high B/M ratio, a low P/E ratio and a high dividend yield, whereas opposite characteristics—a low B/M ratio, a high P/E ratio and a low dividend yield—are assigned to growth stocks. Some professional investment managers even see a mix of the two approaches as a smart cross-dressing.Among others, Warren Bu? ett labels this classi? cation as fuzzy thinking. Bu? ett argues that growth is always a component in the calculation of value. Nonetheless, he does not neglect that the importance of the growth component varies from negligible to very important and its impact can be positive as well as negative. Thus, a low B/M ratio, a high P/E ratio, and a low dividend yield is not per se inconsistent with „value† purchases. Business growth has often a positive impact on value but tells us little abo ut the intrinsic value of growth (Bu? ett, 1992, p. 12). All growth is not created equal, and thus must be di? erentiated.There is also value-destroying growth, which is not worth a penny. Bu? ett goes even further and scrutinizes the term value investing as such. According to him, the term is redundant because investing implies to pay less then the value of something (Bu? ett and Cunningham, 1998, p. 85). The origin of this fuzzy thinking constitutes the value anomaly that will be discussed in the following section. 2. 5 Value Anomaly Already Graham and Dodd (2008) hint at the discrepancy between market price and intrinsic value and the fact that the market often underestimates value stocks. This mispricing is called in the literature Value Anomaly.In the following section three explanations are outlined: i) a behavioral approach, ii) a risk-based approach, and iii) a competitive advantage based approach. 13 2. 5. 1 Behavioral Approach According to Graham and Dodd (2008), the irrat ional behavior of market participants can drive the price of a security in the wrong direction. As Graham outlined in his book the Intelligent Investor, emotions take part in the participant’s decisions, thus he rejects the E? cient-Market Hypothesis as well as the assumption of Homo Oeconomicus. Market participants are swayed either by positive emotions pushing up prices, or uncertainty and ? rce emotions cause a decline in prices. In general, both results in ine? cient and undesirable market upshots. De Bondt and Thaler (1985) already ? nd evidence that markets overact to unexpected and dramatic news events. Moreover, contagion ampli? es this process of counter-productive behavior, taking a central part of the game, especially in crisis when panics gain the upper hand and investors disinvest despite of existing reasons to act to the contrary. 1 Not only irrational behavior induces a discrepancy between market prices and intrinsic value. Discrepancies can also result from ? ms of little interest, and thus, small liquidity. In particular, small companies fall through the screening raster of professional investors. Once a professional investor manages a fund of a certain size, small investments are out of range. First, small companies are like gold dust, as a consequence thereof di? cult to ? nd, and second, the monitoring costs come along with the number of investments, which makes such companies unappealing. 2. 5. 2 Risk-based Approach Whereas Graham showed that behavioral aspects distort markets and cause a gap between intrinsic value and market value, many academics hold that the di? rence does not necessarily contradict the e? cient-market hypothesis. Some argue that higher returns simply compensate higher risk (Fama and French, 1994). As basis of this argumentation line served the Capital Asset Pricing Model (CAPM), which was developed independently by Sharpe (1964) and Linter (1965) in the 60’s based on Markovitz’s portfolio theory. The model shows the coherence between the expected return of individual securities and systematic risk (market risk). Whereby ? of a security is a parameter describing the relation of its return with that of the overall market.The equation of the CAPM can be summarized as follows: 1 Cella, Ellul, and Giannetti (2010) write in their paper about „Investors’ Horizon and the Ampli? cation of Market Shocks† that stocks which are held in a large part by short-term investors are more likely to plunge under their intrinsic value. They also instance that fund managers often follow restrictions, which do not lead to optimal purchases or sales. 14 E(Ri ) = Rf + ? i (E(Rm ) ? Rf ) (2. 2) where E(Ri ) is the expected return of a speci? c asset, Rf is the risk-free return rate, and E(Rm ) is the expected return of the market.Already Rosenberg, Reid, and Lanstein (1985) give rise to the assumption that the CAPM can not fully explain the correlation between expected returns and t he risk of an individual security. As a one factor model implies, the CAPM oversimpli? es the complex market. Therefore, Fama and French (1992) introduced a three-factor model that is an extension of the CAPM. Basically, they improved the CAPM by adding two more factors: (i) they distinguished between high and low B/M ratio, and (ii) classi? ed stocks according to market capitalization (price per stock times number of shares outstanding).The equation of the extended CAPM can be summarized as following: r = Rf + (Km ? Rf ) + bs ? SM B + bv ? HM L + ? (2. 3) where Rf is the risk-free return rate, Km is the return of the entire stock market, SM B (small minus big) is the di? erence between small and big ? rms according to their market capitalization, HM L (high minus low) is the di? erence between high and low B/M ? rms, bs is the corresponding coe? cient to SM B, and bv is the corresponding coe? cient to HM L. Based on this, Fama and French (1992) argue that high B/M ? rms’ pr ospects are judged relative poorly to ? ms with low B/M ratios. As already postulated by Chan and Chen (1991), Fama and French also interpret high B/M ? rms as ? nancially distressed (see also Piotroski, 2000). They adduce the explanation that a high B/M ratio inheres in a relatively high ? rm’s market leverage compared to its book leverage. Furthermore, they ? nd that during some periods (at least ? ve years) low B/M ? rms remain more pro? table than high B/M ? rms. Fama and French (1992) argue that more risk is inherent with a higher B/M ratio. In other words, value stocks are riskier than „glamour† stocks. Opposed to this, Gri? and Lemmon (2002) show that large returns of high B/M ? rms are inconsistent with a risk-based explanation. Arshanapalli et al. (1998) show 15 that value stocks generally have a risk-adjusted performance superior to that of growth stocks (p. 23). Thus, the value anomaly can be traced back to a mispricing of stocks due to overly optimisti c valuations of „glamour† ? rms. Once this mispricing is revealed, these ? rms earn negative excess returns. According to Chan and Lakonishok (2004), investors, in particular professional investment managers, focus their attention on apparent „glamour† stocks while stock prices of high B/M ? ms plunge under their fundamental value. Hence, investing in high B/M ? rms is likely to be a rewarded long-term investment strategy (p. 85). Moreover, Anderson and Smith (2006) ? nd that a portfolio of the most admirable companies substantially outperforms the market, and thus contradicts the e? cient market hypothesis. As a consequence, the risk-based explanation has lost many of its supporters over the last years and the value anomaly remained unexplained. 2. 5. 3 Competitive Advantage Based ApproachAlthough it is probably the closest explanation, academics rarely make the competitive advantage of a company accountable for the superior performance and excess returns of a company. According to them, competitive advantages must theoretically fade away. But in reality this is not always the case. New academic research indicates that the risk driver refers more to the riskiness of losing the competitive advantage (Mauboussin and Johnson, 1997; Greenwald, Kahn, Sonkin, and van Biema, 2001). This could be the case if new competitors enter the market and/or in industries where the rate of technology changes is high.On the one hand, new technologies open up new opportunities for existing players, but on the other hand, they also carry the risk that entrants come up with new products and technologies that force existing players to keep up with the changes. This kind of competition is often quite expensive and indicates that excess returns can be wrest away easily. Therefore the risk of businesses, which are exposed to such changes, is higher than of businesses that sell products with marginal changes. Of course, some companies even maintain their competit ive advantages in fast-changing industries over decades (e. g. Microsoft, Inc. r maybe Facebook) due to customer retention and network e? ects, which create switching costs on the demand side and enormous costs to enter the market on the supply side. The mispricing of such companies that exhibit a durable competitive advantage originates from the complexity in identifying such companies in advance. The following chapter elaborates a bit more on this and points out the state of the art as well as the existing research gap. 16 Chapter 3 Literature Review 3. 1 Competitive Advantage Competitive advantage is a central theme in value investing that has often gone forgotten in the heated debate about the value anomaly.Although an immense number of books and papers have been written about competitive advantage, it has not found proper entrance into the value discussion. Nonetheless, it is an essential part in the valuation process of a company. Greenwald, Kahn, Sonkin, and van Biema (2001) break the Graham and Dodd framework down to three main sources of value (see Figure 3. 1): (1) the asset value, (2) the earning power value, and (3) the value of growth. All three elements must be involved in the calculation of value—also growth (pp. 35-47). The asset value equals the reproduction costs of the assets and is therefore the most reliable source of value.The second most reliable measure of a ? rm’s intrinsic value is the value of its current earnings (earning power value). The earning power value equals current earnings divided by the cost of capital, assuming that the growth rate is zero. The deviation between the asset value and the earning power value equals the franchise of a company. What they call Franchise is referring to the competitive advantage and describes the same phenomenon—the ability to earn more on a ? rm’s assets than it is possible under perfect competition (p. 41). The least reliable source of value is growth, because it i s the most di? ult element of value to estimate and therefore obtains last priority in the valuation process. According to Greenwald, Kahn, Sonkin, and van Biema (2001), growth is only valuable if it is within the franchise. Correspondingly, growth that only increases revenues, earnings or the assets of a ? rm does not create additional value. Growth is valuable only if a company can extend its pro? tability by the means of its competitive advantage. 17 Figure 3. 1: Three Slices of Value Nevertheless, excess returns, which exceed the cost of reproducing a ? rm’s assets, are under the assumption of perfect competition not possible (see Mankiw, 2004, pp. 4-65). As soon as a company earns more on its assets than its reproduction cost, it will attract new competitors, and thus, erode the excess returns until the earning power value equals the value of assets. However that may be, economic theory about perfect competition is seldom the case in reality. Some companies have enjoyed a competitive advantage even over decades (e. g. The Coca-Cola Company or Microsoft, Inc). There have been many research studies conducted on competitive advantage and a huge number of drivers have been found. 1 Without going too deeply into the di? rent drivers, it might be worth to mention the most common: searching costs, switching costs, and economies of scale. By the means of switching costs, a company can create a lock-in: once somebody has chosen a technology, switching can be very expensive (Shapiro 1999, pp. 11-13). Microsoft, Inc. is probably the best example to illustrate a lock-in e? ect. Changing from MS O? ce Word to another writing program is costly. It raises the annoying problem that the formats are not compatible, and thus requires much e? ort that is more costly than remaining with MS O? ce Word. Switching costs can hange over time as buyers alter their products Thomas Fritz (2008) has conducted an extensive literature review of over 140 empirical investigations p ublished between 1951 and 2007. He comes to the conclusion that the di? erent drivers for a competitive advantage are as manifold as the number of studies and that there is no such as a universally valid driver as one could assume. 1 18 and processes (Porter, 1998, p. 296). Another kind of lock-in occurs by search costs. Search costs occur as buyers and sellers attempt to ? nd each other and establish a business relationship (Shapiro, 1999, p. 26). Finally, a competitive advantage arises by economies of scale. Porter (1998) describes economies of scale as the ability to produce more e? ciently at a larger volume (p. 70). But one should note that economies of scale by themselves do not constitute a competitive advantage. In addition to economies of scale, it needs a demand advantage, which does not have to be big. Once a demand advantage exists, economies of scale in the cost structure will transform superior market share into lower costs, higher margins, and higher pro? tability (Gr eenwald, Kahn, Sonkin, and van Biema, 2001, p. 0). Correspondingly, products or services that pro? t from high purchase frequency often enjoy a demand advantage that derives from a habit (e. g. the cigarette industry). Still, it is not written in stone that a competitive advantage lasts for an in? nite period if once achieved. Although a vast number of studies examined the attributes of a ? rm with a competitive advantage, considerably less studies have elaborated on the sustainability of a competitive advantage and the reason why some ? rms enjoy a competitive advantage for decades and other only over a short period. The in? ence of the Competitive Advantage Period (CAP) on the valuation of a ? rm’s shares has also been largely ignored by the literature, although the notion derives its origin from Miller and Modigliani (1961). The term itself appeared in the 90’s in numerous writings. The concept that was developed in Miller and Modigliani (1961)’s seminal pape r on valuation can be summarized as follows: V alue = N OP AT I(ROIC ? W ACC)CAP + W ACC (W ACC) (1 + W ACC) (3. 1) where NOPAT represents net operating pro? t after tax, WACC represents weighted average cost of capital, I represents annualized new investment in working and ? ed capital, ROIC represents rate of return on invested capital, and CAP represents the competitive advantage period. The CAP can be identi? ed, as shown in Equation 3. 1, as a fundamental value driver among risk and cash ? ow. In order to get the CAP we can rearrange Equation 3. 1 as follows: CAP = V alue (W ACC ? N OP AT ) (1 + W ACC) I (ROIC ? W ACC) (3. 2) As Mauboussin and Johnson (1997) assert correctly, this equation has some shortcomings that constrain its practical scope, but it illustrates how the CAP can be con19 ceptualized in the valuation process.According to Mauboussin and Johnson, the key determinants of CAP can be captured by a handful of drivers. The ? rst key determinant is ROIC that re? ects the competitive position within an industry, whereas a high ROIC indicates a strong competitive position. Generally, it is costly for competitors to snatch competitive advantage from high-return companies. The second key determinant is equally important, and measures the rate of industry change. High returns in a fastgrowing industry do not have the same signi? cance as returns created in a stagnated or even shrinking industry. The third driver re? cts the barriers to entry, which is essential for sustainable high returns on invested capital (pp. 68-69). 3. 2 Pro? tability Measurements High-return companies, which have returns in excess of the cost of capital, also capture Warren Bu? ett’s attention. As Mauboussin and Johnson (1997) note, a constant CAP is contrary to economic theory, but it might be achieved through outstanding management. However, companies with a stable CAP are everything but simple to ? nd (p. 71). As mentioned above, Equation 3. 2 has limited practical s cope; thus, in order to evade this problem other performance measures have to be found.In practice, there are many di? erent performance measures, but this thesis will focus in particular on ROE. Fritz (2008) shows in his investigation that ROA and ROE are two of the most frequently applied accounting-based performance measures (p. 31) regarding competitive advantage investigations. Both are pro? tability measurements and capture the relation of return on applied capital. ROE measures how much pro? t a company generates for shareholders while ROA states how e? cient the asset management is. The higher the pro? tability, the better is a ? rm’s economy and the stronger its competitive advantage.Nowadays, less attention is paid to the ROE. Sharpe, Alexander and Bailey (1999) mention the ROE only marginally and Spremann (2007) devote less than one page to it. Nonetheless, ROE has not lost its usability entirely, but Spremann sees the reason for the decreasing importance in the fa ct that shareholders orient themselves more toward market values instead of book values. Provided that, market ratios (e. g. P/E ratio) gained increasingly attention. But since superior earnings are generated based on a competitive advantage, it must remain a core theme in the valuation process, in particular for the long-term investor.Pro? tability measurements tend to change over time; thus, forecasting future profitability is a task that many practitioners and academics would label speculative. On 20 the other side, pro? tability is mean reverting in a competitive environment. Thus, nothing is simpler than predicting long-term pro? tability, which must be zero in the long run. Freeman, Ohlson and Penman (1982) already found evidence that ROE follows a mean-reverting process. Almost twenty years later, Fama and French (2000) found strong evidence of mean-reverting process in terms of pro? ability and estimated a rate of mean reversion of 38% per year. Assuming a ? rm’s ROE of 20% above mean will shrink below one percent after ten years and therefore lose its competitive advantage—,this corresponds to 38% reversion rate. This is also in line with Chan, Karceski and Lakonishok (2003)’s expectation that superior operating performance cannot be sustained for more than ten consecutive years. Furthermore, Fama and French (2000) show that mean reversion is faster below its mean and when it is further from its mean in either direction. However, Penman (1991) scrutinizes ROE regarding its su? iency to predict future pro? tability. According to him, ROE indeed exhibits a mean-reverting tendency, but it proves a too-strong persistence over time. Hence, he suggests that B/M multiples are better indicators of future ROE than current ROE, and a combination of both increases persistence in ROE even further. 3. 3 Research Gap and General Approach Some research has been conducted about predicting future pro? tability. Though these studies deal in particu lar with the issue of predicting the near future. Thus, this study claims high expectations by predicting long-term pro? ability, with the notion that „longterm† means in this study a period of ten years. There are several papers that postulate a mean reversion of pro? tability measures (Freeman, Ohlson and Penman, 1982; Penman, 1991; Lipe and Kormendi, 1994; Fama and French, 2000; Nissim and Penman, 2001). Soliman (2008) forecasts out-of-sample future changes in RNOA ? ve years into the future by applying the DuPont analysis. All these studies have in common that they investigate one ? nancial measure (or two) in time. Thus, this study intends to close these two gaps. In the following chapter, ? rst, several ? ancial measures will be considered regarding companies with a durable competitive advantage, and second, it will be hypothesized that predicting long-term pro? tability (up to ten years) is possible. 21 Chapter 4 Analysis of Long-term Pro? tability The following c hapter aims to determine indicators in order to forecast long-term profitability. Thus, the chapter is structured in four sections: Section 4. 1 describes the data sample and the adjustments. Section 4. 2 deals with the classi? cation of superior performers in terms of ROE and analysis of the persistence of superior performance.Subsequently, the analysis of ROE performance deciles according to persistence is centre stage. Section 4. 3 involves the analysis of further ? nancial measures regarding the ROE persistence deciles. The starting point of this section is the DuPont Identity, which breaks the ROE measure down into further ? nancial measures. The aim of this section is to ? nd speci? c characteristics that will serve in Section 4. 4 to separate ? rms in advance according to future superior performance years. Finally, Section 4. 6 investigates the ROE persistence deciles according to market ratios (i. e. B/M ratio and P/E ratio). . 1 Data Sample A reliable analysis depends to a great extent on the size of the data sample. The size, in turn, is determined by company years (i. e. number of companies times number of years) that are considered. All data in this study originates from COMPUSTAT if there is no explicit mention of it. COMPUSTAT provides historical data of US companies with available historical annual data from 1950. For this study, the dataset on COMPUSTAT was screened for all companies that were listed on any stock exchange in the United States (including inactive companies) with a primary SIC classi? ation between 2000 and 3999. The data was selected at the end of each calendar year between 1979 and 2009. Hence, historical data for the following investigation is available for thirty-one years. Similar to McGahan and Porter (2002), all records from the dataset that do not 22 contain a primary SIC designation after extraction or any that were not within the stated range were dropped out of the sample. The restriction to companies containing a prim ary SIC classi? cation between 2000-3999 corresponds to the manufacturing division, which contains twenty subdivisions (see Table C. ). Focusing on one division has the advantage that the ? rms have a similar value chain. All manufacturing ? rms have in common that they purchase raw materials or components and manufacture these materials to more mature products, which will be sold to a seller or for further processing. Seldom, do these companies sell the product directly to the ? nal consumer. Drawing comparisons among ? rms with similarities regarding their value chain is simpler and also more reliable. Given this restriction to manufacturing companies, 3844 companies are available. It is art of a dynamic industry process that listed companies disappear and new companies appear on trading lists of stock exchanges. This fact leads to certain problems, which were not always considered properly in prior studies. For the sake of convenience, some researchers have considered only compan ies with available data for the entire sample period. Thus, they have excluded companies that were passing through either a delisting or an initial public o? ering (IPO). Others have ignored in their investigation only inactive companies. In this category fall two cases, in particular: Either a company did not survive the entire period due to ? ancial distress and subsequent bankruptcy or it was the target of an acquisition by another company. Ignoring inactive companies would distort the relative ? nancial performance of other companies in the same group in the same period. Not least, since pro? tability depends on competition, it is important to include inactive companies to reduce the e? ect of survivorship bias as it is important to take new competitors into consideration. COMPUSTAT provides the option to also include inactive companies into the sample. Many researchers assume that newly-listed companies show high growth rates that are not economically signi? ant for the compari son to other companies, and thus, lead to distortions (see McGahan and Porter, 2002; Rumelt, 1991; Schmalensee, 1985). Hence, they exclude all companies from the data sample that exhibit less than $10 million in sales. Following these researchers, the sample in this study contains only companies with sales of at least $10 million during the entire sample period. All companies that come below this threshold for any year in the sample period were excluded. After these adjustments, the sample comprises 1905 companies.In order to avoid the possibility that companies distort the calculation of growth rates through short-term measurements, companies with less than ? ve years of ? nancial history were excluded. There is evidence that suggests that window-dressing before an IPO a? ects the performance of subsequent years after the IPO. For instance, Jain and 23 Kini (1994) ? nd that IPO ? rms exhibit a decline in post-issue operating performance (see also Degeorge and Zeckhauser, 1993). The refore, only ? rms with at least ? ve years of ? nancial data on COMPUSTAT items listed in Table 4. 1 were included. Table 4. 1: COMPUSTAT Items This table shows all items hat are downloaded from COMPUSTAT. A more detailed description is given in Appendix A. Companies that have missing data on one of these items are excluded fr