1. Case Studies /Valuation SMIF Meeting #2

2. Intuitive Surgical (ISRG)

3. ISRG

5. Questcor Pharmaceuticals (QCOR)

6. QCOR

7. Lessons Learned What was the difference between the two stocks? Why did one bounce back while the other still can’t dig itself out of a hole? What does this tell us about markets in general? What can we learn?

8. Valuation

9. What is meant by valuation? Ratios / indicators that reflect what the market is currently willing to pay for a stock.

10. Types of Valuation Ratios Price to Earnings (P/E) Price to Earnings Growth (PEG) NTM P/E, FY1 / FY2 P/E

11. Different Valuation Perspectives Current valuation relative to historical valuation Why is it over/undervalued at this particular time? How might my perspective be different? Current valuation relative to industry competitors Why might AAPL be over/undervalued relative to MSFT? Current valuation relative to historical overall market Why might AAPL be over/undervalued relative to the S&P 500 price to earnings?

12. Expectations Expectations are what drive stocks up or down in the short- term But, consistent company performance will win out as the main driving force in price movements in the long-term. Buying opportunities arise when markets undervalue stocks and you believe it is unjustified (for whatever reason). It is certainly possible to find a stock / company that you really like, but valuation metrics signal that it is simply too expensive at the moment. It can be put on a watch list so that when it is getting undervalued, it can be considered for purchase. Don’t let short term noise deter you from your original thesis. Take time to digest the news and think about whether it will have a significant material affect on the company’s profile.

13. Wrapping Things Up The market doesn’t price everything perfectly. Valuation metrics can help guide smart investment decisions. A strong understanding of a particular company, combined with a sense for that company’s relative valuation in the market, will make you a value-oriented investor who can achieve consistent returns over long periods of time.