COLUMBIA BUSINESS SCHOOL Value Investing Program Part 4 Value Investing JANUARY 14 - 15, 1999 COPYRIGHT © GREENWALD/VAN BIEMA. ALL RIGHTS RESERVED, 1999.asic Elements of Val Strategic Dimension Growth in Franchise Only "Franchise Value Current Competitive Advantage Free Entry No Competitive Advantage Asset Value Eamings Power ‘Total Value Value Reliability * Tangible + Current Eamings — = Includes Growth Dimension * Balance Sheet Based + Extrapolation + Extrapolation + No Extrapolation + No Forecast, + Forecast Part 4, Page 1Total Value Including Growth + Least Reliable - Forecast Change not just Stability (Earnings Power) + Highly Sensitive to Assumptions * Data indicates that Investors Systematically Overpay for Growth * Strict Value Investors want Growth for “Free.” (Mkt Value < EP Value) Part 4, Page 2