ARCHIVED SITE -- no longer updated.
I usually have a couple of side projects that I like to investigate in my free time. Here are a few projects that I managed to put down into a reader friendly output.
VOLATILITY INDEXED RISK -- VIXR
August 30 - September 7, 2015
I had recently quit my job after participating in one of the most interesting investing cycle from 2009-2015 and went to India to reflect. One of the ideas the crystallized was pricing of risk in private debt contracts using volatility and benchmarking it to the broader indices.
PERCEIVED COMPETITIVE ANALYSIS
LINK TO ANALYSIS
As I tried to understand the investment thesis for equity/debt investing, I realized that the key was understanding the competitive positioning of the company or more specifically its competitive advantage relative to the industry participants. To help me better understand the sectors, I developed this tool using US public equity data for each of the years from 2004 to 2008, but I reckon that underlying methodology/philosophy is as applicable to any investment.
The difference in profitability (or variation in EBITDA margin) is explained by the value captured due to "barriers-to-entry" for the industry/sector AND the "competitive advantage" possessed at the company level. The assumption is that an aggregation of both these quantities at sector level and industry level illustrate the "barriers-to-entry" that any new entrant has to compete with.
I used Excel, MYSQL, PHP and VBA to generate, analyze and present this data.
INVESTMENT THEMES IN THE LEVERAGED LOAN MARKET
I spent most of my investment banking career advising private equity clients on M&A/LBO activities. Only recently did I realize that though the leveraged buyout boom of the last several years made kings out of private equity players, but the king-makers in this boom were the institutional, leveraged loan investors. Sadly, they are the ones who are ‘left holding the bag’ after the kings abdicated with the treasury.
At the end of 2008, the leveraged loan market offered the best risk adjusted returns.
UNDERLYING VALUE ANALYSIS
2005-2007 were the years of the credit boom - and it took some time before I could visualize the relationship between franchise value, "leverageability" and total enterprise value. I developed this underlying value analysis framework while doing sell-side M&A and use it today when I analyze companies.
STRUCTURING DEBT CONTRACTS
Structuring debt contracts involves understanding all the future states of the world and designing a contractual governance mechanism that protects the lenders in the downside case while minimizing the principal agent problem by balancing flexibility and limitation on the borrower.
INDUSTRY AND COMPANY ANALYSIS OF "COMPETITIVE ADVANTAGE"
The relationship of industry structure and relative, competitive positioning of underlying companies has always been a pet fascination of mine. As an ardent student of Bruce Greenwald's concepts, I tried to empirically test his Earnings Power value concept and expand it to understanding industry structure. Here is the initial Excel analysis that I created.
Please select Industry or the Company that you wish to analyze via the drop down list in Cell A1 on the "Cover" Sheet. Click "Update Chart" and enjoy! It is best if you print out the sheets in color.
Turbo-Charged CapitalIQ Plugin
Here is a "slightly altered" version of the CapitalIQ plugin to enable me to do a little bit more with the data than it was designed for. Note that the latest release of CapitalIQ does not support this.