STOCKPRESENTATIONONUNITEDHEALTH.docx

STOCK PRESENTATION ON
UNITED HEALTH

WHY SHOULD YOU INVEST IN
UNITED HEALTH

All students are required to make at least one well-organized and researched presentation on a stock during the semester.  Presentations are limited to a maximum of 10 minutes.  I promise that if you make a sincere effort to analyze your company, that you will have no problems using 10 minutes.  In fact, it will probably seem like an unreasonable time constraint.  I am providing these guidelines to give students a clear idea of the minimum that is required in their presentation to have a chance to earn full credit for this assignment.  
Students may select a stock of their own choosing.  However, students are strongly encouraged to select securities that are relevant to the TVA Portfolio that we are managing, based on the TVA Investment Guidelines which are covered early in the course.  The Recommendation may be to the Stock, Hold the Stock, or Sell the stock.  Since the TVA portfolio guidelines prohibit short sales, any sell recommendation should be for a stock already held in the portfolio – in to make the recommendation relevant to the portfolio.  recommendations can be for any stock that “qualifies” for inclusion in the portfolio according the TVA’s investment guidelines.  In essence, this means US-based companies with a relatively large market capitalization of $1.5 billion or more.  
Be independent and objective in preparing your presentation.  Do not make a presentation that sounds like you are a “cheerleader” for the company. Independence and Objectivity are important in investment research.
At least 50%-75% of the information you will need to make a respectable presentation can be found in the most recently filed 10-K of your subject company. I encourage you to invest considerable effort in analyzing the information in the 10-K. Also, look for information under “Investor Relations” on the company’s web site. Frequently, management presentation slides are available there, as well as recent press releases. For many companies, you may also find a recording of recent conference calls with investors and analysts following recent quarterly
earnings releases. Listening to these conference calls is an excellent way to gain knowledge of what is important to investors in connection with the subject company. 
Do not plagiarize by simply copying and pasting from the 10-K or other internet source. Do your own analysis and put things in to your own words. The 10-K already exists. Anyone can go read it. Your job in making a presentation is to synthesize information gathered from the 10-K and other sources in to focus your audience on what you think is really important from an investment perspective. In your presentation, attempt to provide a reasoned and rational and defendable response to the question “What should an investor contemplating an  investment in the stock of your subject company be paying attention to? What is important about this company from an investment perspective?”
Students should prepare at least (a minimum of) seven presentation slides using PowerPoint or other presentation software of their choice with one each covering / outlining key points on the following topics as they relate to the company they have chosen to present on:
1. Company Overview
2. Management and Corporate Governance
3. Industry Analysis & Competitive Positioning
4. Financial Analysis
5. Valuation
6. Key Risks
7. Summary and Recommendation ( , Sell or Hold)
Additiional slides are allowed.  These topics are the bare minimum that is expected.  Students who do not cover these topics for their stock will receive a penalized score.  I talk about doing a financial analysis and a valuation analysis in the recorded lectures.  But here is a short summary of the bare minimum expected for these two topic areas:
Financial Analysis:
· Prepare a table of the company’s historical financial record over a minimum of the past 5 years.  Include mostly things from the Income statement in an effort to answer the question “Has the company been profitable / successful in the past?  If so, what kind of trends are evident?”  Include for each of the 5 years, at a minimum:
· Revenue
· Operating Income
· Operating Profit Margin
· Net Income
· Net Profit Margin
· Fully Diluted Earnings Per Share (EPS)
· Year-to-year growth rate (or percentage decline) in EPS
· Total Assets
· Total Debt Obligations
· Return on Average Stockholders’ Equity
· Prepare a table showing the company’s capitalization at book value and at market value.  Here is a decent format for such a table:

·

At Book Value

% of Total Capitalization

At Market Value

% of Enterprise Value

Total Debt Obligations

$

%

Total Debt Obligations

$

 –

Stockholders’ Equity

$

%

Less:  Cash

$

 –

Total Capitalization

$

100%

Debt, net of cash

$

%

Equity at Market Value

$

%

Enterprise Value

$

100%

Book Value refers to the amounts shown in the company’s financial Statements.  When looking at a company’s capitalization, investors and analysts are almost always interested in the company’s current capitalization.  That means that you should pick up the book value of debt & equity from the company’s most recent balance sheet, which usually will come from the most recently filed 10-Q (quarterly statement filed with the SEC).  These can be found for most company’s under investor relations / financial information / SEC filings – or something like that on the company’s web page.  To make your presentation clear, show the date of the balance sheet used.  
Most company’s balance sheet also shows how many shares have been issued and how many are held in treasury, as a detailed descriptive item in the equity section of the balance sheet.  To arrive at shares outstanding, subtract shares held in treasury (which are shares that have been previously issued, but then subsequently repurchased in the open market) from shares issued.  Multiply shares outstanding by the current market price of the company’s stock to arrive at “Equity at Market Value”.
I expect at least this much information for your financial analysis.  More analysis is fine, but scores will be penalized if I don’t see at least this much.
Valuation:  
As discussed in my recorded lectures, probably 90% of the time investors and analysts are primarily interested in two valuation multiples:  The P/E ratio, and an Enterprise Value (EV) to EBITDA ratio.  I want you to show these ratios at a bare minimum in your valuation section.  The ratios themselves are not of much value unless they are compared to something.  They typically get compared to either 1) historical valuation multiples of the company, or 2) competitors’ valuation multiples.  That way, at least a conclusion can be drawn as to whether the current valuation multiple is cheap or expensive relative to either a) the company’s historical valuation multiple range, or b) competitor company valuation multiples.  
Basic Finance classes / textbooks typically say that a P/E ratio is the market price per share divided by EPS.  But if you think about it, what EPS should be used in the denominator?  EPS for the most recently completed fiscal year?  EPS for the last 12 months?  Expected EPS for the coming year?  Expected EPS for next year?  In practice, investors pay little attention the P/E multiple on historical EPS.  Instead, they focus on the prevailing P/E multiple on EPS expected for the current year (yet to be completed) and the next year or two.  or example, in the middle of 2021, investors would focus on P/E ratios calculated using EPS expected for 2021, 2022 and perhaps 2023.  It is easy for you to find “consensus” EPS estimates for your stock. (Consensus EPS estimates are the consensus of all the professional stock analysts who are publishing research on the subject company.)  Go to Yahoo Finance, enter the ticker symbol for your stock into the quote lookup box, and then click on “Analysis” in the middle of the page.  The top box on the “Analysis” page shows consensus EPS estimates for the company.  With this information, you can easily produce a table something like this to make your P/E ratio analysis clear:

Stock Price:

$

2020A

2021E

2022E

EPS

$

$

$

P/E 

x

x

x

This example table assumes the analysis is being presented during 2021.  The “A” after 2020 indicates “actual”, and the “E”s after 2021 and 2022 indicate that those EPS are estimates.
I would like you to do the same thing for your EV/EBITDA multiple analysis, but consensus EBITDA estimates are not nearly as easily collectable.  Therefore, all that I require (as a minimum)  is for you to calculate the multiple of EBITDA for the last twelve months that the current Enterprise Value represents.  (EV/ LTM EBITA).
Students who do the work to compare the P/E and/or EV/BITDA multiples to either historical levels or to competitors’ multiples may receive extra points.
Other Report Sections:
This is a brief overview of some primary resources for information related to the remaining sections of the report:
· Company Overview:  the “business” section of the company’s 10-K (annual report filed with the SEC) will most often prove to be an excellent source of information and data related to a company overview section.  Pretend that your audience has no idea what the company does (even if it’s WalMart), and describe what the company’s business is and how they go about doing it.  For many companies (not all), there is good “business segment” information in the footnotes to the financial statements in the 10-K.  This can go a long way to help describe the relative importance of business segments for companies that operate in multiple segments.
· Industry Overview:  Use Google to investigate your industry.  Avoid paying anything for outside research.  Price Waterhouse Coopers has a lot of industry analysis available for free, in connection with their consulting business.  It is not hard to find some basic information on most any industry.  In you industry analysis and competitive positioning, try to answer the question:  “What are the key factors that are important to success in this industry?  Who are the major players?  What kind of market share does the subject company have?  How does it compare with competition?  How big is the industry?  Is it growing, stable, or declining?”
· Management and Corporate Governance:  Look in the 10-K for information on the company’s management, and look on the company’s web page for information about corporate governance.  
· Key risks:  What is needed here is your assessment of what the biggest risks of investing in the subject company are.  Just 3-5 main, key risks.  If you are light on ideas, you can glean a bunch of ideas from the “Risks” section of the 10-K.  Be aware that much of that section is lawyer talk. 
· Summary and Recommendation:  This is just a summary of your analysis and your recommendation to , sell or hold the stock.  I most often would start presentations with such a summary.  e.g.  “I recommend purchase of XYZ stock at current levels based on its defendable positioning in a rapidly expanding industry, a highly skilled shareholder-oriented and proven management team, and attractive valuation levels at current prices.”  
Finally, for students who end up thinking their stock is a “hold” at current levels, an interesting question to ask yourself (and one that I may ask you) is “At what price would you be an interested er?”, or seller of the shares?  This question will make you think, which is what I’m trying to encourage with this exercise!