Wednesday, 28 January 2015 02:02

Interested in securities analysis? Let Justin Lowe give you a guided tour:

[from Chapter 18]

Justin scratched his head as he pondered the next challenge. Despite its complexity, securities analysis could be applied to any business, in any environment. All it involved was assigning a value to a particular organization, then dividing that amount by the number of shares outstanding. Assigning the value, though, was the hard part. At its most basic, it involved distilling the sum of the subject company’s cash flows down to a single point in time, usually called time zero and often meaning ‘now’ in plain English. All inflows, as far into the future as could be seen, had to be estimated then discounted back to the present at some assumed interest rate, which could itself be based on many different things. All outflows, which were more predictable yet absolutely not certain, likewise had to be discounted to the present. The difference between the two was a current value representing the company’s future profits. Then he just had to add in the value of the rest of the company’s tangible assets, like office equipment, buildings, real estate and machinery, all the way down to the fuel in the company’s trucks and the soda in its cafeteria.

This too, while daunting, was certainly doable. The only other items to value were a company’s intangible assets including things like goodwill, which is the unseen value of its brand, for instance, or capacity to come up with new patents, intellectual property, and so on. The tools in Justin’s kit included industry-standard ratios, benchmarks, things to enable realistic comparisons to other companies whose values were more-or-less known. This process leaned a great deal on accurate reporting by the subject company and a general air of transparency – transparency enforced in the form of regular financial statements by the authority of the respective country’s government, and audited regularly to ensure compliance. Even when these conditions were met, like in the West, scores of analysts tracking a single company might not foresee the same stock price.

And when none of these conditions are met, it’s necessary to start from scratch. Like how Justin found himself now, looking out the window at the bleak countryside surrounding Moscow.

Justin Lowe, a brilliant young securities analyst specializing in international finance, is searching for purpose in a soulless world of wealth. Despite his uncanny ability to spot lucrative patterns, he is seduced by the prospect of a new career that isn’t what it appears. Between ocean-hopping adventures looking for treasure in the untamed frontier markets of the developing world, he sees hope for personal salvation in the form of a shimmering Iranian political refugee whose past is as complex as his own.

However, his globe-trotting exploits in search of windfall profits end when he is framed by his manager and an ex-colleague. Desperately trying to avoid prison, he races across the world to uncover the truth about his betrayers. Along the way, he unearths a nuclear-exporting scheme that topples a regime and takes away the one person who has given his life new meaning. In order to honor the woman he loves, Justin must forego his unbridled ambition and sacrifice a financial fortune.

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