1. Culverhouse Investment Management Group Training Session – Spring 2015 Day 3 – Equity Research Methodologies

2. EQUITY RESEARCH METHODOLOGIES 2

3. Question Everything 3

4. Why do research? 1.The market is erratic 2.People are emotional 3.To render reasons 1&2 obsolete 4

5. What are we trying to avoid Risk – Risk is losing permanent capital – Beta Beta is incorrect – MOS saves risk Pay too much for something you introduce risk (becomes a speculation) Larger discount, higher return, lower risk – Taught that higher return needs higher risk Emotional fervor 5

6. What are we looking for Cheap? Moat Management Money Unreasonable downturn Stable capital structure 6

7. Read Eat Read Sleep Read 7

8. Starting Points Mr. Drunk – Research is key Bottom Up vs. Top Down – Screens – News – Financials – Multiples 8

9. Important Websites http://mycba.ua.edu/cimg Google Drive – Watchlist and Current Holdings http://seekingalpha.com/ http://library.morningstar.com/ http://www.mergersandinquisitions.com/ http://www.investopedia.com/ http://online.wsj.com/home-page http://www.sec.gov/edgar/searchedgar/companysearch.ht ml http://www.sec.gov/edgar/searchedgar/companysearch.ht ml http://www.finance.yahoo.com/ Http://www.ibisworld.com/ 9

10. Identifying Opportunities Value Screens 52-Week Low Lists Value Blogs 13-F Filings – Warren Buffet- Berkshire Hathaway – Seth Klarman- Baupost Group – Mason Hawkins- Longleaf Partners – David Einhorn- Green Light Capital – Mario Gabelli- BAMCO Investors, Inc. 10

11. Evaluating a Company Once you have found a company you need to do an initial evaluation This includes: – Reading the 10-k to learn more about the industry and company as a whole – Looking for competitive advantages – Checking financial health 11

12. Industry Movement Exposures Competition – Size? – Diversification? – Geographic reach? Ratios Advantages 12

13. Company What do the numbers tell us? Growth drivers? – Organic? – Synergies? – Commodity exposure? Highly levered? – Why? What is the market missing? 13

14. 3 M’s Moat Management Money 14