The Academic Works of Joe Calandro Jr
I recently interviewed Joe Calandro Jr (here) , I’m happy by the response from our readers. I’ve done some additional digging here are additional papers by Joe that might clarify his recent book, “Applied Value Investing” Enjoy!
(Via SSRN)
0. Lessons for Strategists in Graham & Dodd’s Security Analysis, 6th Edition – Click Here For The Paper
Purpose – This paper aims to consider how corporate executives in a variety of industries can find important lessons in the recently published sixth edition of Benjamin Graham and David Dodd’s Security Analysis (New York: McGraw-Hill, 2008).Design/methodology/approach – This paper includes an interview with the lead editor of the book, value investor Seth Klarman. He explains key strategic lessons that corporate executives can learn from the value investing methodology.
Findings – The insights contained within Security Analysis can and should be leveraged by business leaders and strategists to create value for their firms.
Practical implications – Graham and Dodd-based valuation and investment is a viable method with which to assess corporate strategic initiatives (such as mergers and acquisitions, share buy-backs, etc.).
Originality/value – This paper, the first in a business strategy journal, explains how business leaders can become adept at using modern applications of Graham and Dodd-based valuation to inform strategic decision-making.
1. The Insurance Performance Measure: Bringing Value to the Insurance Industry – Click Here To Read The Paper
The performance of the property and casualty (P&C) insurance industry has suffered in past years. Part of the industry’s difficulties stems from its focus on premium generation, as measured by the combined or underwriting ratio, at the expense of overall operational performance. In this regard, the underwriting ratio is an incomplete measure of operating performance since it ignores two critical P&C operational functions: the investment return and reinsurance results.In this paper we present the Insurance Performance Measure (IPM), a comprehensive performance metric for the P&C industry. The IPM captures the three critical operational functions mentioned above in an overall performance measure. The measure is versatile in that it can be easily decomposed into critical value drivers in each area of operation. Thus, the IPM framework enables P&C managers to observe the interaction and trade-offs between the operational functions of premium generation, investment return and reinsurance results separately or as a group, and as they relate to the opportunity cost of policyholders’ surplus.
2. Super Cats as Alternative Investments: an Overview – Click Here To Read The Paper
This paper provides an overview of the concept of super catastrophes, or Super Cats, as alternative investment opportunities. By way of the recent Pepsi Play For a Billion sweepstakes case we previously published a methodology for valuing Super Cats with a reasonable margin of safety. This overview summarizes that work.3. Accident Year Development, Bonus Banks & Insurance Incentive Compensation – Click Here For the Paper
Insurance claims can take years to resolve, which makes insurance performance measurement – and incentive compensation based on such measurement – challenging. The insurance industry utilizes a method of analysis called accident year analysis to manage the temporal challenge inherent in insurance claims. Despite the managerial and economic utility of this method of analysis it has generally not been applied to insurance incentive compensation programs. We explain accident year analysis, and then show how it can be merged with the bonus bank concept and the Insurance Performance Measure, which is an insurance economic profit metric, to construct an economically consistent insurance incentive compensation program.Purpose: This paper illustrates the viability of distressed M&A by way of case study utilizing the modern Graham and Dodd valuation approach.
Design/methodology/approach: The paper presents a distressed acquisition case study of the 1996 Marvel Entertainment Group (Marvel) bankruptcy. It draws on previously published Graham and Dodd methodological materials as well as a financial case study of Marvel that was prepared at the time. The valuation presented in this paper is the sole work of the author.
Findings: The case study supports the view that distressed M&A can be a viable corporate strategy alternative. It also demonstrates how a multi-layered valuation approach such as Graham and Dodd can be ideal for identifying value that may be hidden in the confusion and distress of bankruptcy.
Practical and research implications: The case study illustrates, first, the viability of distressed M&A as a corporate strategy alternative, and second, the valuation insights that the modern Graham and Dodd approach can produce in a distressed setting.
Originality and value: This is the first paper that we are aware that applies Graham and Dodd-based distressed M&A valuation to corporate strategy.
5. Assessing the Risk of M&A: Brunner’s Disaster Framework and the Case of the Gen Re Acquisition – Click Here For The Paper
Purpose: The purpose of this paper is to provide commentary on the recently published book “Deals from Hell – M&A Lessons That Rise Above the Ashes” (NY: Wiley, 2005) by Robert Bruner.Design/methodology/approach: This paper is a case study based on a risk assessment framework that was presented in a recently published book. Therefore, the case study is based on that framework, and it is based on previously published research regarding Berkshire Hathaway’s 1998 Gen Re acquisition.
Findings: Our case study supports the findings of Bruner’s research regarding the utility of the M&A risk assessment framework presented in his book.
Practical and research implications: Bruner’s disaster-based M&A risk assessment framework could be practically utilized in M&A. Furthermore, the field of real disasters could be the subject to further strategy-based research.
Originality/value: This article is practically oriented commentary on recently published M&A risk assessment research, which is analyzed via case study.
6. On Financial Strategy - Click Here For The Paper
In today’s rapidly changing business world success is often achieved through simultaneous operations; nevertheless, the critical functions of finance and strategy are frequently practiced in isolation. The approach that we advocate, which we call Financial Strategy, temporally links critical strategic and financial activities throughout a firm thus leading to better executive decision-making, as well as increased understanding and buy-in throughout the firm. Incorporating performance measurement into the Financial Strategy framework reinforces this linkage. The result is a strategy that clearly guides production, resources that are allocated to efficiently execute strategic initiatives and performance measurement that serves as a cohesive management and feedback system rather than simply a method of reward and punishment. As we will show, Financial Strategy is not simply the linkage of three critically important disciplines, but a way of capitalizing on the interaction of each within a comprehensive framework to create value over time.7. Distressed Underwriting – A Vulture Investing Approach To Risk – Click Here For The Paper
When a firm suffers an extreme property and casualty (P&C) loss it frequently finds it difficult to transfer similar P&C risk in the future. This circumstance adds stress to the firm just as it is trying to recover from the effects of the super catastrophic (Super Cat) loss. For example, numerous directors and officers (D&O) claims were filed against firms that engaged in fraudulent “new economy” related accounting practices. The severity of those claims was such that the insurance industry in general pulled back from assuming further D&O risk from those firms. That decision placed the viability of those firms in jeopardy as they could not hire new executives, or re-seat new Boards, without adequate D&O risk transfer. Financiers skilled in evaluating volatile risk have stepped in to assume such risk, but for significantly higher prices. This paper presents an applied method for pricing post-Super Cat or volatile risk with a margin of safety. It also includes guidelines, such as leveraging brokerage/prime brokerage relationships, which could prove useful in future distressed underwriting deals.8. Reflexivity, Business Cycles and the New Economy – Click Here For The Paper
This paper begins by examining George Soros’ theory of reflexivity. Soros’ boom-bust model is then presented which, along with reflexivity theory, is synthesized with Austrian Business Cycle Theory in the development of specific criteria for each of the eight stages of a business or boom-bust cycle. Significant insight into business cycles can be gained by utilizing these criteria, as will be shown in an analysis of the relatively recent new economy business cycle.
