The Gabelli School of Business offers a three-course secondary concentration in value investing, designed by finance professor James R. Kelly. Students who want to pursue this concentration should take the first course, Introduction to Value Investing, beginning no later than the second semester of junior year.
What is value investing?
Value investing is a time-tested and proven investment methodology that is fundamentally different from conventional security analysis.
It focuses on determining the intrinsic value of a company based on its current and historical balance sheets, income and cash flow statements. The element of future growth is considered a positive characteristic only if it comes from sustainable competitive advantages within the franchise of the company due to the existence of barriers to entry. An investment in a company is worthwhile only if there is a significant margin of safety between the company’s intrinsic value and its market price.
The Discounted Cash Flow (DCF) method, in contrast, is based on discounting future cash flows projected from the current income and cash flow statements back to present value using an appropriate cost of capital. The balance sheet is frequently de-emphasized or ignored in the valuation process.
Structure of the secondary concentration
The value investing secondary concentration for Lincoln Center and Rose Hill students consists of the following three courses:
- Introduction to Value Investing (FNBU 4457)
- Behavioral Finance (FNBU 4458)
- Advanced Topics in Value Investing (FNBU 4459)
Pre-requisite for the introductory course: Financial Management
Co-requisite: Global Financial Statement Analysis
Value investing coursework
FNBU 4457 – Intro to Value Investing (3 credits)
Value investing, developed by Graham & Dodd, is a time-tested and proven investment methodology which is based on a detailed analysis of a company’s current and historical balance sheet, income and cash flow statements. Students will learn how to identify and analyze undervalued securities which provide a significant margin of safety to their intrinsic value. Prerequisite: FNBU 3221
FNBU 4458 – Behavioral Finance (3 credits)
Behavioral Finance suggests that investors can and often do make investment decisions based less upon rational, elaborate modeling techniques and often on heuristics (short cuts) and biases. Behavioral Finance therefore seeks to understand the psychological roots of decision making in order to explain financial and investment anomalies, investor behavior, and asset prices. Prerequisite: FNBU 3221
FNBU 4459 – Advance Topics in Value Investing (3 credits)
Students will study a variety of advanced topics which build on the principles outlined in Introduction to Value Investing and Behavioral Finance. The class will study real-world situations in the current market environment, employ multiple valuation frameworks and improve students' ability to make informed decisions. Among other topics, the class will study business strategy, Mario Gabelli’s Private Market Value with a Catalyst, capital allocation principles, distressed investing and merger arbitrage.
Please note: For the Classes of 2016 onward, FNBU 3441 – Investment and Security Analysis is a prerequisite for FNBU 4459 – Advanced Topics in Value Investing, and therefore must be taken to achieve the secondary concentration in value investing.
For more information about the value investing program at the Gabelli School, students should see their class dean for prerequisite and course registration information.