Endothelial tight junction proteins Essay

Endothelial tight junction proteins Introduction            The endothelium is situated at the inner side of all kinds of vessels and comprises of a monolayer of endothelial cells. Inter-endothelial junctions comprise junctional complexes, such as adherens junctions (AJ), tight junctions (TJ) and gap junctions (GJ) that play essential roles in tissue integrity, barrier function and intercellular communication respectively. These junctional complexes are related to those found at epithelial junctions with notable changes in terms of certain molecules and structure.            Endothelial junctional proteins play important roles in tissue integrity but also in vascular permeability, leukocyte extravasation and angiogenesis. Dormant endothelium may be exposed to stimuli provoking leukocyte extravasation at seditious sites and propagating angiogenesis. Both activities have an intense impact on endothelial cell-cell junctions.            Tight junctions aid the major functional objective of establishing a barrier inside the membrane, by controlling paracellular permeability and sustaining cell polarity. They achieve this by constricting apical or basolateral transmembrane diffusion of lipids and they have been suggested to contribute in regulating proliferation and differentiation of epithelial cells. However, the components that are involved and the signal routes concerned are unknown (Mitic & Anderson 1998).            Tight junctions are made up of integral membrane proteins claudins, occludin, tricellulin, junctional adhesion molecules (JAMs), including many peripheral membrane proteins such as the scaffold PDZ- domain proteins. This review will however, focus on ZO-1 and ZONAB. Histology of endothelia junctions            The junctional structures situated at the endothelial intercellular fissure are related to those located at the epithelium; however, their formation is more inconsistent and in most vascular beds their topology is less constrained than in epithelial cells. Adherens junctions, tight junctions and gap junctions are in most cases intermingled and create a complex zonular system with disparities in depth and thickness of the sub-membrane plate associated with the junctional structure (Franke et al. 1988; Rhodin 1974). In contrast to epithelial cells, GJs are often found close to the luminal surface. Hence, the term â€Å"Apical junction† used to jointly describe epithelial TJ and AJ may not be applied to the endothelium. The endothelium forms the vascular barrier with controlled permeability properties between the blood and the underlying tissues.            Tight junctions exhibit considerable inconsistency among different segments of the vascular tree (Franke et al. 1988). This disparity composes a major evidence of vascular bed differentiation of endothelial cells and has a strong impact on vascular permeability and leukocyte extravasation. Variations concern the complexity degree of the occluding strands as well as tight junction composition.            Large Artery endothelial cells, which are exposed to high flow rates, display a well-developed system of tight junctions. Within the microvasculature, tight junctions are less complex in capillaries than in arterioles, and even less in venules. It is important to mention that, post-capillary venules are the primary site of leukocyte extravasation, and accordingly, they display a high content of permeability mediator receptors, such as those for histamine, serotonin and bradykinin. On the other hand, blood brain barrier (BBB) and the blood retinal barrier (BRB) are predominantly rich in Tight Junctions and endothelial tight junctions have been principally studied in these sites.            Endothelial intercellular realms differ from those of epithelial cells by the absence of desmosomes (Franke et al. 1988). The transitional filaments, comprised in the endothelium by vimentin molecules, are poorly connected to cell-cell contacts. However, contrary to the situation in epithelia, the vimentin filaments may be associated to endothelial adherens junctions in junctional structures similar to desmosomes, called complexus adherens.            It must be emphasized that interendothelial junctions are vibrant structures, subjected to multiple regulations. Moreover, leukocytes extravasate majorly in postcapillary venules either through transcellular or paracellular methods. Extravasation via the intercellular junction is a rapid and controlled process, through which the leukocyte is squeezed in the fissure (diapedesis), followed by rapid junction reformation.            ZO-1 is a protein located on the cytoplasmic membrane plate of intercellular tight junctions and is engaged in transducing signals at cell-to-cell junctions. ZO-1 links tight junction transmembrane proteins to a cytoplasmic plaque and the actin-based cytoskeleton (Aijaz et al. 2006; Tsukita et al. 2001). In epithelial cells, ZO-1 interrelates with the transcription factor ZONAB to regulate cells proliferation in a cell density related manner (Balda & Matter 2000); however, the functions of ZO-1 and ZONAB in endothelial cells are still not clearly understood.            Unpublished work shows that downregulation of ZO-1 in endothelial cells stimulates redistribution of two transmembrane proteins; claudin-5 and JAM-A, and radical changes in the cytoskeleton affecting the localization of mechanosensor proteins and VE-cadherin role in the control of cell-cell tension.            These observations imply that one function of ZO-1 in endothelial cells is to coordinate components of the tight junction and associate them to the cortical cytoskeleton. However, it is unfamiliar whether the ZO-1 associated transcription factor ZONAB is linked to such ZO-1 effects.            Despite the fact that, ZO-1 explicitly associates with epithelial tight junctions (Stevenson et al. 1986), it has been observed that the protein appears in the nucleus in the process of proliferation (Gottardi et al. 1996). While the functional impact of the nuclear localization is currently not clear, studies reveal that these discrete subcellular distributions of ZO-1 are exquisitely sensitive to the state of cell-to-cell contact.            ZO-1 plays a major role of restraining ZONAB and regulates its accumulation in the nucleus through cytoplasmic sequestration. MDCK cells found in the epithelium exhibit two forms of this Y-box transcription factor (ZONAB) i.e. ZONAB -A and ZONAB -B which vary in a 68-amino acid supplement. Both categories of ZONAB bind to ZO-1 and link with intercellular junctions (Balda & Matter 2000).            ZONAB was initially designated in canine kidney epithelial cells (MDCK) and is a Y-box transcription factor. Y-box transcription factors are multipurpose control mechanisms of gene expression and studies suggest that they play a common role in enhancing proliferation (Bargou et al. 1997). ZONAB is one of the tight junction-associated dual localization protein: it localizes to junctions where it attaches to the SH3 surface of the adaptor protein ZO-1, and to the nucleus where it regulates transcription.            The distribution of ZONAB is controlled by the cell density as it localizes to both junctions and nuclei in low density, proliferating cells, and becomes constrained to the cytoplasm in high density cells (Balda & Matter, 2000). This distribution is also exhibited in its transcription activity, as ZONAB is transcriptionally vigorous in proliferating cells but inactive in non-proliferating cells. In the MDCK cells, ZONAB is necessary for normal rates of proliferation and controls G1/S phase transition (Balda et al. 2003).            ZONAB affects cell cycle development by two distinct processes: it controls the nuclear accumulation of CDK4 through a direct interaction and controls manifestation of genes encoding cell cycle regulators for example, PCNA and cyclin D1 (Balda et al. 2003; Sourisseau et al. 2006 ).            In 3D principles of MDCK cells, regular ZO-1 and ZONAB processes are necessary for epithelial cyst formation, implying that the Y-box transcription factor also controls epithelial differentiation (Sourisseau et al. 2006). Since ZO-1 and ZONAB can also relate with other types of intercellular junctions, for instance the gap junctions, in cells that lack tight junctions, it is possible that ZO-1 or ZONAB signaling is also of useful significance in other cell types other than epithelia (Ciolofan et al. 2006; Giepmans & Moolenaar 1998). Aims of the study            The aim of the study is to understand the functional consequences of downregulation of ZONAB in endothelial cells, and whether and how ZONAB cross-talks with other junctional components to regulate endothelial cell migration, proliferation and angiogenesis. Currently, we are looking at similarities and differences between the phenotype of downregulation of ZO-1 or ZONAB by RNA interference. Changes in expression and localization of a given protein are analysed using specific antibodies for immunoblots and immunofluorescence. Preliminary Results            It is observed that downregulation of ZO-1 or ZONAB resulted in similar redistribution of actin and vinculin from cell-cell junctions to stress fibers and focal adhesions, respectively. However, the localization of transmembrane proteins such as Claudin-5 and JAM-A is affected by downregulation of ZO-1 rather than by downregulation of ZONAB. The localization of the polarity protein PAR-3 is changed in both conditions.            Additionally, downregulation of ZONAB causes changes in ZO-1 by immunofluorescence that needs to be tested for expression by immunoblots. Next, we will characterize other transmembrane proteins (e.g. MD3 and claudin-1), polarity proteins (PKCzeta), Rho regulators and mechanotransducers such as PAK2, Zyxin and YAP.            ZONAB is a DNA and RNA binding factor that it is involved in transcription (e.g. cyclin D1 and PCNA) in the nucleus and translation (e.g. cell cycle inhibitor p21) in the cytosol. Thus, we are also trying to identify new genes regulated. We have identified that expression of fibronectin is regulated by ZONAB. We are evaluating whether the changes in protein expression of fibronectin are due to ZONAB role on transcription or translation, using actinomicin D to inhibit transcription or cyclohexidimide to inhibit translation. Additionally, we are validating new genes identified by cDNA array analysis of endothelial cells with downregulation of ZONAB.            The tight junction localizing protein ZO-1 symptomatically forms a continuous band around the apices of well-differentiated, confluent, polarized epithelial cells in culture. However, under nonconfluent conditions, endogenous ZO-1 can localize to the nucleus in addition to the border of cell-cell contact.            ZONAB manifestation tends to be high in proliferating but low in growth-impeded MDCK cells, implying that high manifestation levels might be a necessity for cell proliferation (Balda & Matter 2000).            ZONAB confines in the nucleus as well as tight junctions in proliferating cells, however, it is not noticeable in the nucleus of nonproliferating high density cells (Balda & Matter 2000), proposing that accumulation of ZONAB in the nucleus might be necessary for efficient proliferation.            ZO-1 quantities are low in proliferating cells and they rise with cell density, and overexpression of ZO-1 hinders accumulation of ZONAB in the nucleus (Balda & Matter 2000); hence, ZO-1 may control proliferation by inhibiting ZONAB from accumulating in the nucleus. Overexpression of ZO-1 in low density cells triggers a redistribution of ZONAB from the nucleus to the cytoplasm and reduced proliferation.            CDK4 is a major regulator of G1/s transition (Sherr 2000; Malumbres & Barbacid 2001). Thus, ZONAB could control proliferation by regulating the process or the localization of CDK4. Since ZONAB binds CDK4, the nuclear pools of the two proteins may diminish in a parallel manner.            Symplekin is combined with ZONAB in the nucleus; hence, it could be argued that Symplekin modulates the transcription activity of ZONAB. Increased expression of Symplekin results in stimulation of the transcriptional suppressor ZONAB. However, it is also noted that Symplekin is absent in endothelial cells (Keon et al. 1996).            ZONAB controls cell cycle entry. ZO-1 overexpression results in a reduction in DNA synthesis, implying that entry into S-phase was distressed.            These experiments will allow understanding the role of ZO-1 and ZONAB in endothelial cells. Depending on the results, we plan to test how these two proteins are involved in endothelial stress conditions such as shear stress and high glucose. Conclusion            The collaboration of ZO-1 with tight junctions can only be significant for the stabilization of ZO-1, as opposed to attaching ZO-1 to the plasma membrane so as to constrain nuclear accumulation of related proteins. This is supported by the opinion that a truncated protein comprising only the HA-tagged SH3 domain accumulated in the Cytosol, but was adequate to decrease proliferation and nuclear accumulation of ZONAB (unpublished data).            ZONAB and ZO-1 control proliferation and the ultimate cell density of MDCK cells. Explanations that ZO-1 accumulates with increasing cell density, and overexpression of ZO-1 in transfected cells lowers the final density proposes a pattern in which ZO-1 serves as a measure for cell density whereby, on reaching the threshold level, provokes growth impediment by cytoplasmic sequestration of ZONAB and the related cell cycle kinase CDK4. It will be essential to control how the ZO-1 or ZONAB pathway associates with the other signaling methods that affect proliferation.            Vascular endothelial stress induces dysfunctions that have been implicated in many diseases such as diabetes and diabetic retinopathy. Therefore, characterization of the role of tight junction molecules in different endothelial cell behavior and functions will help us to understand the molecular mechanisms of disease pathogenesis and these findings may be implicated in prognosis and possibly to develop new treatment strategies. References Balda, MS and Matter, K 2000. The tight junction protein ZO-1 and an interacting transcription factor regulate ErbB-2 expression. EMBO J. 19, pp 2024-2033. Balda MS, Garrett MD and Matter K, 2003. The ZO-1 associated Y-box factor ZONAB regulates epithelial cell proliferation and cell density. J. Cell Biol. 160, pp 423-432. Bargou RC, K Jurchott, C Wagener, S Bergmann, S metzner, K Bommert, MY Mapara, KJ Winzer. M Dietel, B Dorken, and HD Royer, 1997. Nuclear localization and increased levels of transcription factor YB-1 in primary human breast cancers are associated with intrinsic MDR1 gene expression. Nat. Med. 3: pp 447-450. Ciolofan C, Li XB, Olson C, Kamasawa N, Gebhardt BR, Yasumura T, Morita M, Rash JE and Nagy JI, 2006. Association of connexin36 and Zonula occludens-1 with zonula occludens-2 and the transcription factor zonula occludens-1 associated nucleic acid-binding protein at neuronal gap junctions in rodent retina. Neuroscience 140: pp 433-451. Franke WW, P Cowin, C Grund, C Kuhn, HP Kapprell, 1998, The Endothelial Junction: the plaque and its component., in: N. Simionescu, M Simionescu (Eds.), Endothelial cell biology in health and diseases, Plenum publishing corporation, New York. pp 147-166. Giepmans BN and Moolenaar WH, 1998. The gap junction protein connexin43 interacts with the second PDZ domain of the zonal occludens-1 protein. Curr. Biol. 8. Pp 931-934. Gottardi CJ, M Arpin, AS Fanning and D Louvard, 1996. The junction-associated protein, zonular occludens-1, localizes to the nucleus before the maturation and during the remodeling of cell-cell contacts. Proc. Natl. Acad. Sci. USA. 93: pp 10779-10784. Keon BH, S Schafer, C Kuhn, C Grund, WW Franke, Symplekin, a novel type of tight junction plaque protein, J Cell Biol. 134 (1996) 1003-1018.Malumbres M and M Barbacid, 2001. To cycle or not to cycle: a critical decision in cancer. Nat. Rev. Cancer. 1: pp 222-231. Mitic LL and JM Anderson, 1998. Molecular architecture of tight junctions. Annu. Rev. Physiol. 60: pp 121-142. Rhodin, JAG 1974, Histology, Oxford University Press, New York. Sherr, CJ 2000. The Pezcoller lecture: cancer cell cycles revisited. Cancer res. 60: pp 3689-3695. Sourisseau T, Georgiadis A, Tsapara A, Ali RR, Pestell RG, Matter K and Balda MS, 2006. Regulation of PCNA and cyclin D1 expression and epithelial morphogenesis by the ZO-1 regulated transcription factor ZONAB/DbpA. Mol. Cell. Biol. 26, pp 2387-2398.Stevenson, BR, JD Siliciano, MS Mooseker, and DA Goodenough, 1986. Identification of ZO-1: a high molecular weight polypeptide associated with the tight junction (zonula occludens) in a variety of epithelia. J. Cell Biol. 103: pp 755-766. Source document

Dignity in Ivan and the Sound of Waves Essay

In the novels, One Day in the life of Ivan Denisovich by Alexander Solzhenitsyn and The Sound of Waves by Yukio Mishima, the characters value their dignity and take many actions to preserve it. First of all, in One Day in the life of Ivan Denisovich, Shukhov attempts to maintain his human dignity in the face of oppression. As Shukhov begins his daily routine, he â€Å"quickly finished up the job. There’s work and work†¦ If you’re working for human beings, then do a real job of it† (Solzhenitsyn 33). Shukhov is imprisoned in a gulag, one of the worst possible places to be, but he still maintains his human dignity by keeping a good work ethic. Shukhov knows that if he works well he will be treated well, but beyond that, the fact that he is working for another human being gives him reason to maintain a good work ethic, and his self-respect. Furthermore, Shukhov always preforms many small, but meaning full actions in order to maintain his dignity. While eating his rations, Shukhov â€Å"removed his cap from his shaven head—however cold it was, he wouldn’t let himself eat with his cap on† (16). Shukhov still maintains his manners, even when he is forcibly kept in a gulag prison. His manners are very important as they allow him a way to remain human and keep his dignity, rather than deteriorating to the state of an animal, like some of the other prisoners. While the characters in One Day in the life of Ivan Denisovich, attempt to maintain their dignity as a means of refuge in the gulags, the characters of The Sound of Waves, retain their dignity as a means of protecting their status in society. To begin, the characters in the Sound of Waves do not tolerate any embarrassment or loss of respect to their peers. When Shinji’s mother visits Terukichi Miyata’s home he ignores her visit and she replies, â€Å"[s]o you say you won’t see a poor widow†¦Well let me tell you something†¦ never in life will I ever cross [Miyata’s] damned threshold again† (Mishima 128-129). Shinji’s mother vows never to cross paths with Miyata’s home after he insults her by refusing to meet with her. Shinji’s mother takes a hit to her pride and retaliates in a way that would imply her intolerance for disrespect. Moreover, the characters in the novel are virtuous and refrain from committing any acts that would call into question their morals and self-respect. While resting naked with Shinji in the shrine, Hatsue says, â€Å"It’s bad. It’s bad! It’s bad for a girl to do that before she is married† (76-77). Although the urge to engage in a sexual relation with Shinji is strong, Hatsue knows it would hurt not only her self-respect but also defile her father’s reputation in the village. Although characters in both novels take actions to preserve their respective dignities, in One Day in the life of Ivan Denisovich, It is done to maintain their humanity and sanity when they are treated like animals. While in The Sound of Waves, the characters preserve their dignity to uphold the respect of the village and their peers. Overall, the characters in both novels value their dignity and take many actions to uphold it.

IT User NVQ – Communication

Most businesses of a certain site will have a company website to ell and advertise their products and services. These companies will often have a staff intranet run on company servers for employees only. This gives access to company Information, handbooks, procedures, forms and announcements. Paper based Information Is found in newspapers, books, maps and other printed literature and materials. Marketing information takes form in posters, billboards, leaflets, business cards and advertisements. Copyright law applies to all Information that Is available to view and be stored.It applies to music downloads, personal details, medical history, financial records, and retests a company or creator from plagiarism and theft of owned ideas and work. When referencing someone else's work it is important to acknowledging sources such as websites or books used. This also applies to Images taken from Imaging sites unless bought through stock photography. Electronically, access to Information can be restricted and permissions granted to only those chosen by the authority, an example of this is an HRS folder in a company network.Only authorized members of the HRS department would have access to the folder and Its contents as It would contain personal and confidential Information. A person or a business proven to be breaking the Data Protection Act and Copyright laws will be heavily fined and can face a prison sentence. Bal . 2 Describe a minimum of four different features of information. Manuals and training guides provide information on how to use products and appliances Including manufacturing guidelines and warranty information.Training guides are tutorials for the use of hardware and software, these start from a beginner level to more advanced features and functions. These can be supplied both paper and electronic format. Books containing factual Information can be bought from specialist bookstores, queasiness or borrowed from libraries. These can be history and language bo oks or 1 OFF ordinate survey maps contain information about local, national or international areas and countries, whilst reports are created to show information relating to finance, success, stock and inquiry.These can be presented in a written form or a presentation on television or over the radio. Creative work is a vital part of advertising information to attract interest and sales. Companies produce posters, brochures and other marketing materials to appeal to their current customer base and attract curiosity from new ones. Information treated on marketing materials usually relates to discounts, new products, extended sales, company profiles and imagery of goods, ideas and concepts.Live information such as bus / trains times, road traffic news, national news bulletins and weather forecasts are available to provide continuous up to date coverage online, on television and through electronic displays. This is arguably the most widely used and necessary information feature to allow the smooth operation of transport, businesses and increasing public knowledge on local and worldly matters. 82. 1, 82. 2, 82. 3 & 82. 4 Use a minimum of three different examples of access, aviation and search, one from each category. Use a minimum of three different search techniques and evaluate if the outcomes are fit for purpose.Access – entering a password to access a file or folder, creating a database query, entering an exact web address into an internet browser. Navigate – the use of website menu bars, browsing a company intranet, using bookmarks and favorites to store and recall websites and pages of interest. Search – the use of a search engine, using the find tool in Microsoft programs, using a wild card in database systems when a range of results is required or the exact search name unknown. Evaluation: – It is important that the information searched for and the results are relevant and up to date.Some websites are not regularly updated so will contain outdated information, a way to check for this is to check the end date on the copyright notice at the base of most home pages. Other informative sites such as Wisped are contribution based so users all over the world can input information on a topic. This information may not be accurate or be referenced incorrectly. Using a wildcat in databases will result in increased data found; sort through this for the information required will take time. However it is a useful tool if the name or description of what is being searched is unknown.Level of detail required is fundamental to how information is searched and accessed. For more detailed such as books and magazines on a specific topic. Navigation must be a sufficient option on any commercial website so the user can easily find what they are looking for. Poor design and limited functionality will dissuade users from using a site. 83. 1 & 83. 2 – See Using Email evidence 83. 3 A minimum of three different examples of manag ing storage. Managing storage in electronic communication is important to allow for organization ND easy retrieval of information.Creating message folders and suborders with rules attached for incoming mail will help to organize busy infixes into different categories such as department, sender name and importance. Suborders can be included for completed tasks or read and replied to emails. Any important attachments should be downloaded to a specific folder and the email archived or deleted if possible to create more space. Archiving important emails allows them to be saved on an individual computer or on a network. These emails can be retrieved when needed and opened in a compatible email client.Deleting unwanted emails ND regularly clear Junk and deleted items folders will help to increase space and also the running speed of an email program. These folders can be set to auto empty on close of the program or after a certain number of days. 83. 4 & 83. 5 Describe how to, and respond appropriately to, at least two common IT- based communication problems. When communicating through IT some problems can occur which can be rectified by following guidelines set by the network administrator of the manufacturer. Examples of problems that can occur are attempting to send or receive an email with an attachment that is too large or unreadable.Many businesses set size restrictions on incoming and outgoing mail for security and space management. Decreasing the size of the file or finding an alternative method of delivery such as a USB stick will allow the recipient to receive without further issues. Sometimes an attachment cannot be opened as it has been created in a program not installed on the recipient's computer. Appropriate programs, or the sender and resave in a different format. Emails from unknown senders can be problematic. These can be SPAM or fishing emails attempting to trick the recipient into entering personal or banking details ender the guise of a legitimat e company.They can also be innocent messages that can contain a virus attachment which is intended to damage the recipient's computer. Ways to prevent this are to install antivirus software and update it regularly. Increase firewall settings and if possible install spare prevention software also. Be wary of emails from unknown senders, if an email address does not appear legitimate most email clients have a block feature to stop further emails being received from the address. Any emails that appear to be genuine such as from a bank are often not so contacting the company by phone will clarify what is required.

Roman catholic funeral and burial practices Research Paper

Roman catholic funeral and burial practices - Research Paper Example They are also known as ecclesiastical funerals in the Church. When a member of the family or a loved friend passes away, the others are left grieving and wondering why it had to happen to him. However the truth lies that every person is going to see his end one day or another and thus, instead of feeling tremendous sorrow for the deceased one, people try and hope for the best and thank Jesus for all that he has done and everything he had provided the person with during his lifetime. The Roman Catholic Funeral rites thus help to offer a very profound journey for the dead that helps his family and friends to pass through the beautiful emotions of grief and loss as well as joy that the person is going to a happier place where he is believed to have an everlasting life in heaven or paradise. There are a number of varied beliefs on what happens after death, for all different religions. In the Roman Catholic Church, people are taught that after death, a body begins to decompose into the Ea rth. During this process, the soul however leaves the body and undergoes an immediate evaluation. This is according to the Hebrews 9:27 "And as it is appointed unto men once to die, but after this the judgment." (KJV). They believe that there are very few people who end up going to heaven after their death. They are those people that spend their lives worshipping God and let God show them the way in every aspect of their lives. They are thus glorified and are rewarded by eternal bliss in heaven. Some saints, the Virgin Mary and Apostles qualify for walking on this path after their death. On the other hand, those who commit sins during their lifetime or reject the existence and worship of God are transported to Hell after their death. It is here that they are tortured for the rest of whatever they have left, their souls are not give mercy and they are stuck forever in this position that they are believed to have created for themselves, by inflicting upon them, deeds during the course of their lifetime. Yet another state that many dead people enter into right after their death is the state of purgatory. This takes place when a person loves God ‘imperfectly’ during his lifetime but dies in a state of grace. Purgatory is said to be the state where such people have to suffer for a long time in order o cleanse themselves of whatever imperfections have been accumulated within their souls because of their deeds in their lives. They might have committed certain mortal sins, but after some ablution these are cleansed off and forgiven in the Sacrament of Peace. However, such people are still believed to have some punishments which need to be discharged. (CATHOLIC ENCYCLOPEDIA) The Roman Catholics believe that Purgatory is much like Hell because when people are tortured here in order to cleanse themselves, they are tortured endlessly with fire. This happens till they are perfectly pure again to be able to qualify to enter the gates of Heaven. It is also belie ved that if the friends and family of the deceased pray to God for his soul, then his stay in purgatory is shortened, otherwise he has to endure fighting with fire till he is absolved. The difference from Hell is that one in Purgatory eventually gets to enter Heaven unlike those who already are in Hell. Moving on to the actual funeral rites in the Roman Catholic Church, these have three parts.

The Staggers Act Research Paper Example | Topics and Well Written Essays - 1250 words

The Staggers Act - Research Paper Example The Staggers Act was a Federal ruling that removed restrictions from the American railroad industry. The main aim of the Act was to restore the highly-controlled structure of the US rail transportation system that operated since the enactment of the Interstate Commerce Act (‘87) (Eakin, et al, 2010). The regulation forced private railroad businesses with the adoption of price control and counter the emerging competition in the industry. This meant that the private firms would adjust their operations to other non-profitable routes in order to enhance their survival in the industry. The provisions of the Staggers Act entailed the requirements that rail transporters could inflict any given fee for services. The provision was applicable in situations where the carriers did not experience competition from other sectors. Another stipulation was the removal of the industry-wide rate regulation to facilitate an all-inclusive business environment (Gallamore & Meyer, 2014). The other cha nge was that one railroad would be free to provide access to the others in case of a single railroad in order to avoid rail congestion. The intent of the Act was to ensure that the railway transportation flourished despite the entry of new players in the industry. It is evident that airlines and automobiles provided alternative transport systems to the passengers. As a result, the private railroad firm started to adjust charges in order to fight the emerging competition within the industry (Feldstein, 1994). The Staggers Act’s aim was to protect the public railroad by ensuring that charges favored all players across the industry. It is also prudent that the existence of the Interstate Commerce Commission (ICC) ensured that all transport corporations observed the new ruled imposed on them. This was a noble step towards restoring normalcy

Analyzing Data in a Mixed Methods Research Essay

Analyzing Data in a Mixed Methods Research - Essay Example The study will involve comparing student achievement levels using quantitative analysis of academic results and qualitative survey findings but the qualitative component will in addition seek to identify if there are any underlying differences in student interest and motivation. One hundred participants will be drawn from the student population of Northcentral University School of Education with an equal number of students studying online and studying in classrooms. Online learning as opposed to face-to-face traditional classroom learning became a possibility with the advent of computer networks, most notably the Internet. It usually takes place over a distance, in which case it is a form of ‘distance learning’, or it can be combined with the traditional methods either in-class or remotely, in which case it is known as ‘mixed-mode’ or ‘blended learning’. For this study, the researcher proposes to examine online learning by comparing it to traditional classroom learning with a view to ascertaining whether it leads to any greater achievement among online students. A brief background of the study overviews the rise and growth of online learning pointing out that it is roughly commensurate with the growth of the Internet and online educational technologies. The problem statement highlights the concern among providers of online education and the complications involved in making comparisons between online and traditional learning and justifying the former in the face of counter evidence showing no significant differences. The purpose statement sets out the purpose of the study by detailing the aim, method, control variables and sample characteristics. This is followed by the theoretical framework, which is a prelude to a full literature review and sets the proposed study in context by mentioning other studies that have previously made similar comparisons. The research questions formally define the precise questions that will be

Should workers have the right to strike, and should this right be Essay

Should workers have the right to strike, and should this right be restricted in particular contexts or for particular groups of - Essay Example However, if companies adopt a stakeholder model of corporate governance, the need to strike might be averted. The stakeholder model of corporate governance becomes relevant in the issue of a strike because the structure of the philosophy of governance, when geared towards a shareholder model becomes a microcosm example of survival of the fittest. Each member of a shareholder model is serving his or her own interests because the overall corporate culture is geared towards only protecting the interests of the owners at the expense of all other considerations. Improvements in employment conditions do not occur unless they are of a benefit to the shareholder’s interests. Layoffs and terminations are made liberally with high levels of turnover when the interests of all parties are usurped by an upward flow of actions that are geared solely towards the owners. In a stakeholder model of corporate governance, all parties, including the employees, are taken into consideration when maki ng the decisions that affect the company. Everyone’s concerns and needs are addressed, and most are met, in order for all to receive the benefits of the interests of the company. The Right to Strike The U.K. ... While the Constitution has since been signed, the issues were important enough that it delayed the U.K. in agreeing to all the terms within the document. Part of the regulations that define the right to work in the UK are structures on how a strike must be approached and voted upon. Although, as pointed out by Mr. Hendy during a debate in Parliament in 2009, all governments have restrictions on the right to strike, the British government has set up structures that limit those rights to a point that the international community has voiced objections that have had to be addressed (Great Britain and Dismore 2009, p. 25). Therefore, the debate over the right to strike has been an ongoing issues within the U.K. However, the right to strike extends beyond the laws that currently and previously structured the rights of the employee to protest his or her conditions within the work place. The right to strike is the right to help define how a social group, that group defined by the workers, has the ability to designate boundaries under which they will allow themselves to be used for the purposes of commerce. The right to strike is a legal concept, but it is also a human rights concept that must be considered when there are problems within the work place that are impeding the basic human condition. According to Amnesty International (2010) the right to strike is a human’s right’s issue that can be held as a standard in regard to the level of human rights that are available within a nation. When a country cannot afford its workers the rights to organize and protest conditions that are not conducive to the welfare of their lives. Issues such as fair wages and worker safety can create problems that must be

Working with the New Millenials Essay Example | Topics and Well Written Essays - 500 words

Working with the New Millenials - Essay Example Case facts revealed that new millenials have tendencies to question everything, demand explicitly clear and consistent expectations, are primarily family oriented and earn to consume immediately as their very philosophy embodies living for the moment. Likewise, the facts indicate that new millenials want flexibility and working in a virtual environment where they can wear casual clothes and come at a time they please. Therefore, rather than restricting their movements, organizations can focus on providing flexibility in work, as long as explicitly stated goals and objectives are attained. Organizations should encourage their creativity and innovativeness and evaluate performance using Management By Objectives (MBO) that would determine progress and discuss meritorious increases depending on performance and attainment of goals. As confirmed by Heathfield (2012), there are some guidelines to manage millenials, to wit: (1) effective provision of structure, leadership and guidance; (2) e ncouraging â€Å"the millennial's self-assuredness, "can-do" attitude, and positive personal self-image† (Heathfield, 2012, p. 1);

Sandra Esther Scott, New York City Essay Example | Topics and Well Written Essays - 750 words

Sandra Esther Scott, New York City - Essay Example I am enthusiastic to achieve further professional development. For my future enhancement, I am looking to inculcate skills that will help me in future growth-oriented professional life and also in achieving the desired objectives of life. I am looking forward to developing my career in the Administrative Department and to achieve a higher position. I am willing to grow within the framework of the organization by developing skills which will not only provide a boost to my professional life but also will lead me to a position where I want to see myself within the next few years (the University of Virginia, â€Å"Career Objective Recommended Reading†). I use my scientific and human relation skills as a manager of the New York Office Administrative Department to manage all the affairs internally as well as externally to build positive relations with the clients and co-workers. I ensure the smooth running of operations in the office. I also manage a wide variety of responsibilities irrespective of the work being small or large in the organization. I have the negotiation skills and the aptitude to scrutinize and supervise work performed by other personnel with the intention of it being accomplished on time, within the financial plan and also meeting high excellence standards. I am well versed with the technical aspects in the office and am familiar with various computer software packages as it helps in better result oriented presentation and written proposals. I have acquired a strong written communication skill with effective oral communication skill that helps to cooperate and interact with several diverse individuals in a professional manner (Domkowski, & Saunders, â€Å"Creating a Career Objective†). Presently I am working with Equity Trades Investment Bank as a manager in New York Office Administrative Department with all the responsibilities as a manager.

Evaluate an existing information management system within healthcare Case Study

Evaluate an existing information management system within healthcare organization in the Abudhabi hospitals - Case Study Example It is evident from the argument of research scholars that implementation of IMS in hospitals is a pertinent but hotly debated topic. Hence, the researcher has decided to dig deep in this topic by shedding light on existing IMS in hospitals of UK. Description and Functional Evaluation In UK, majority of hospitals are covered under the supervision of National Health Service Estate hence these hospitals show the common tendency while implementing a new IT application. Puig-Junoy (2000) and Tsai and Molinero (2002) have pointed out that in most of the cases, hospitals implement a new system in order to decrease the patient management cost. However, these researchers have suggested that hospitals should implant those systems which can save money and time of patients and deliver service in profitable manner. E-Prescribing has been selected by the researcher as the IMS to study in this paper. Hospitals like Chelsea and Westminster Healthcare NHS Trust has already been implemented the e-Pres cribing in order to manage cost of servicing patients (European Commission, 2012). Although e-Prescribing might sound like it’s the electronic version of formal prescription but in real scenario it’s much more than prescribing. E-Prescribing is the modified version of patient management facilities which requires active involvement of stakeholders such as doctors, nurses, patients and many others. Generally hospitals such as Chelsea and Westminster Healthcare NHS use e-Prescribing as packaged software but there examples, where hospitals use customized version of e-Prescribing. Now, the study will try to understand what exactly meant by e-Prescribing. NHS Connecting for Health (NHS CFH) (2009) has defined E-Prescribing as the information management system which is created in order to facilitate and enhance the communication of medicine order or prescription, increasing the options for administration of hospitals to provide medicine to patients in accordance with their pr escription, creating decision support and audit support system for the hospital to manage medicines used throughout the treatment of patients. In simple words, objective of e-prescribing is to manage patient information in efficient manner and help the hospital to audit its medicines used per patients. Many of the UK hospitals create the link between e-Prescribing and Enterprise Resource Planning (ERP) in order to help audit section of the hospital to conduct the cost-benefit analysis of its patient service. Implementation of e-Prescribing system is stepwise process which involves the engagement of various clinical stakeholders such as doctors, patient care division in the hospital, Information Management and Technology (IM&T) professionals, senior clinicians, senior managers etc. Specifically, IM&T is responsible for providing technical and infrastructural support to e-Prescribing (NHS CFH, 2009). E-Prescribing cannot be viewed as simple automation of manual task function for presc ribing medicines rather than it should be viewed as transformative process. For example, using e-Prescribing empowers doctor and nurses can change the traditional prescribing process and indicate the

Managerial Accounting Case Essay Example for Free

Managerial Accounting Case Essay In the Seligram case, the existing cost accounting system measured two components of cost: direct labor and burden. All burden cost, which is the overhead, was grouped into a single cost pool and was calculated only by using a burden rate per direct labor dollar. This may cause problems since direct labor and overhead are not consumed by the products in the same proportion. Simply using the same burden rate is obsolescent. First of all, direct labor hours per lot tested had been steadily declining, especially with the increase of dependence on vendor certification. This will result in the change of the burden rate. Besides, this system distorts the price to some extent, making the price for complex parts cheaper while price for elementary testing higher compared with price for outside services. What is more, the consequences brought from the introduction of high -technology components would decrease the direct labor hour. All of this was trending to higher burden rates and overall higher rates. Cost allocation based on current burden rate of 145% is calculated within the Exhibit1. Having noticed of the problems of the existing system, the accounting manager proposed a two-burden-pool method to allocate the burden cost. Under the two-burden-pool method, burden cost has been divided into two pools: one is the burden cost related to the administrative and technical functions and the other is test related burden. The former is calculated based on direct labor dollar, the latter one is calculated by using machine hours. This method takes other factors that cause the burden into account, which makes the cost allocation more accurate than the existing method. The result of two-burden-pool is as the follows. The consultant proposed a more detailed cost allocation method, i.e. separate burden centers from each of each test room and common technical and administrative pool so that a three-burden-pool is formed. Under this method, burden cost in test rooms would be allocated on a machine-hour basis, and technical and administrative costs would continue to be charged on a rate per direct labor dollar. This method is more accurate in allocating the burden cost by providing a cost of each product or job. Through this way, ETO could differentiate client and product and calculate the cost more accurately from direct data such as the machine hour to product a certain product, so that they need not to guess the real cost of that product by allocating cost according to estimation. Besides, due the process of automatic, direct labor dollar amount alone could not reflect the real picture of burden cost as before. So it is necessary to take other related factor into account when allocating burden cost and more detailed analysis of the allocation basis is needed. The allocation result of three-burden-pool is listed below: Since the three-burden-pool system is most accurate in allocating burden cost among those three methods, it is preferable. However, it does not mean the three-burden-pool system is perfect. Because this system provides more accurate and detailed information of the production process, it will cost more than the other two methods. In addition, the redesign of the three-burden-pool system could be expensive too due to the complexity of the system. In order to improve this system, ETO needs to pay attention of the relationship of cost and benefit. Besides, ETO could set up a system that is easy and effective to perform to save the cost of implicating three-burden-pool. Besides the consideration of proposed cost allocation methods, Seligram should also arrange the new equipment into an appropriate cost pool which indicates a more reliable estimation. Assuming that new equipment has a separate cost center, all variable cost, fixed cost and depreciation will be reported separately. The burden rate is only based on the machine hours of new equipment which are 400hr (Year1) and 2400hr (Year2-8). Additionally, we use Double-decline method for depreciation. Balance is shown in Exhibit4. The separate burden rate for Year 1 would be much higher than those in the following years due to set up costs (Exhibit 5). Burden rates combined with main testing room are calculated in Exhibit 6. All combined burden rates are much lower than the separate costing rates. We recommend choosing a separate cost center for new equipment, even though the rates are much higher. Due to the current situation that lower costs for more complex components, which is abnormal, separate method would reflect more accurate and reliable costs of new imported machines. Obviously, combined method would influence the presentation of true costs. The costs are reduced by other factors in main testing room. Higher burden rates are more reasonable that these new machines have higher cost in essence and also they are just for testing components from several specific clients. Higher burden rates are more accurate.

International Water Conflict Essay Example for Free

International Water Conflict Essay Water is one of the most precious commodities for human beings. To some, it is the very lifeblood of the world. From time immemorial, the availability of water has determined the rhythms of daily life in many regions. The critical importance of water to the survival of the human race can be seen in the earliest civilizations whose growth and sustenance were closely tied to its water distribution systems. Many authors have located the importance of water in different religious observances. In Hindu and Buddhist traditions, the rivers of the earth, including the Indus, the Ganges and the Brahmaputra, originate from the mythical Mount Meru, the living place for the gods. In the Christian tradition, the waters originate from the Garden of Eden, and that divides the world into greatest streams: the Nile, the Tigris, the Euphrates, the Indus and the Ganges. Islam also gives water its due importance. The holy book Koran describes that every living thing is made from water. As Caponera points out, it seems that in the Koran, the most precious creation after humankind is water. There is a water crisis today. Water is not only a commodity, it is synonymous with life. All life on earth is dependent on water. If water is life, its possession bestows power. Water has crucial economic value, and it is a subsistence resource. Also, water has an emotional and symbolic value for certain countries and communities. The scarcity of water is increasing worldwide and its quality is continuously deteriorating. Water shortages reduce food production, aggrandize poverty, amplify disease and force people to migrate. The scarcity of water also undermines the states capacity to govern. Nearly half of the worlds population lives in international river basins. Sharing of the international rivers can therefore be a serious object of contention between riparian nations. For the last few years, water war has been a topic of widespread debate. However, wars over river water are likely only under a narrow set of circumstances, as there are also more examples of water cooperation than water conflict among countries. Nevertheless, the increasing scarcity of water raises doubt about the sustainability of these cooperative agreements over the international rivers. Water scarcity is particularly severe in Asia, Africa and the Middle East, owing to population growth, urbanization and industrialization. Whether the water crisis intensifies the dispute over the shared waters or whether it can be turned towards sustainable cooperative management of river resources, depends on many interacting processes. In this book (International conflict over water resources), after analyzing the existing sharing mechanisms of the major international river systems in these regions, argues that the real solution lies in a comprehensive approach to river basin management. The scarcity of water is increasing worldwide and the quality of the water is continually deteriorating. The growing global water stress poses a threat to the survival and prosperity of present and future generations. The gap between the needs of the growing population and the diminishing fresh water resources is widening every day. In the arid and tropical regions, where countries possess a very limited supply of water, it is not difficult to perceive the consequences. Water, a key necessity of life, can also cause friction between communities and countries, particularly in climatic zones where it is hard to come by. The over-exploitation of water resources might result in an acute shortage. From this perspective, it will be impossible for all the social actors to remain comfortable with the present or future prospects of the availability of the resource. These actors will work purposefully and consciously for their own interests. Increasing competition can potentially destroy the existing social arrangements for water distribution in the society. Newly organized actors with conflict behaviors might emerge in the future or the incompatibilities between existing actors might grow in societies with a weak administrative structure and laden with ethnic and social dichotomies. Scarce water resources can potentially trigger conflicts between the state and its internal groups. The development of water resources by the state by building dams, irrigation infrastructures, or industries in a particular region might be perceived by the local population as exploitation for the interest of others. Regional parties may be activated or environmental groups may be formed to challenge the actions of the state. If a particular group is involved in exploiting more than its perceived share of water with the backing of the state, then this inter-group conflict may escalate into conflict between the exploited group and the state itself. As discussed earlier, the construction of large dams for the efficient use of water resources has created tension between the state and a group of its own citizens in the past few years. The growing demand for irrigation and energy activates the state agencies to plan and build mega hydro-projects, which displace large population and inundate vast areas. In many places, the project affected population takes up of the struggle against the state. The list of mega dams that have witnessed this sort of protest is very long. The major ones include: Sanmenxia and Three Gorges in China; Madur Oya and Mahavali Project in Sri Lanka; Mangla, Nanela and Tarbela in Pakistan; Kaptai in Bangladesh; Arun in Nepal; Akasombo in Ghana; Kossou in Ivory Coast; Tana and Athi in Kenya; Itaparica and Tucurui in Brazil; Kainji and Niger Dams in Nigeria; Ataturk and Keban in Turkey; Lam Pao and Nam Pong in Thailand; Kedong Ombo and Batang Ai in Indonesia; Upper Pampanga in Philippines; Manantali in Mali; Savajina in Colombia; Brokopondo in Suriname; Caracol and Netzahualcoyotl in Mexico; and Nam Ngum in Laos. India, currently in the forefront of dam construction, deserves a separate list of its own. The Indian hydro-projects that have recently led to protest movements by the displaced people are: Pong Dam, Subarnarekha Project, Nagarjunsagar Project, Srisailam Project, Lower Manair Dam, Upper Krishna Projects, Tehri Dam, Narmada Projects and Ukai Reservoir Project. Sometimes disagreement over the development and sharing of water resources may begin with competing groups inside a state, but the states perceived favour of a particular group brings the state as a party to the conflict. Similarly, if the water source exploitation is perceived as the states intentional act on a particular region or people, a group identity may form, leading to conflict with the state. The construction of dams for hydropower generations in the northern part of Sweden to provide energy to the industries and factories in the South has become an area of disagreement between the Sami people of the North and the Swedish state. The Samis, who live in the forests in the Arctic Circle, accuse the state of favoring city dwellers at the cost of their livelihood and welfare. Even though this dispute has not transformed into a violent separatist movement, the reactions to similar issues in South Asia have been quite different. Disagreement over the sharing of river water from the Indus river system has been one of the major causes of violent secessionist movement in the Punjab province of India in the 1980s and 1990s. This Sikh-dominated province has been traditionally provided with a water supply from the Beas, Sutlej and Ravi Rivers. The demands of the downstream provinces of Rajasthan and Haryana persuaded the Indian government to construct canals and divert 60 per cent of Punjabs water and energy to those Hindu-majority regions. This became one of the major motivations for the Sikh Party (Akali Dal) to ask for autonomy in the 1970s, which subsequently transformed into an extreme violent secessionist movement in the 1980s and 1990s. On the other side of the border, the dispute over the sharing of the same Indus river system water has also played a critical role in a major separatist movement in Pakistan. The Pakistani part of Punjab, which is economically and politically the most powerful province in the country, takes advantage of its upstream location and consumes most of the waters of the Indus river system through the help of barrages and dams, ignoring the demand of the downstream Sind province. The perceived close tie of the federal government with the Punjab province has escalated this conflict between the Sind province and the Pakistani government. The link between fresh water resources and international conflicts can be investigated at least in two different dimensions. First, in an interstate conflict, the deliberate targeting of water storage facilities may be directly responsible for inducing water scarcity or reducing the water quality of the opponent. Thus, water scarcity becomes part of a military strategy and military behavior. The British Royal Air Force damaged a few German dams in the bombing runs of 1943. Dams and dykes were destroyed during the Korean and Vietnam wars by the US bombing. Iran claimed to have hit a hydroelectric station in Iraq in July 1981, as part of the Iran-Iraq War. Dams, water storage and conveyance systems were targeted by the warring sides during the 1991 Gulf War. Allied forces even had thought of a plan to shut off the flow of water to Iraq by using the Ataturk Dam in Turkey. Armies in Yemen (in the 1994 war) and former Yugoslavia (1991-95) used the water storage facilities as targets to create problems for their adversaries. In January 1993, the Serbian militia seriously damaged the Peruca Dam in Croatia. There are cases where in fact a human population is held hostage to political and military leaders. Manipulation with such basic human supplies in times of war should be an urgent issue for international humanitarian law, and it certainly would be unacceptable under conditions of peace. However, the aim here is to concentrate on a second dimension of the relationship: the likelihood of changes in fresh water resource supply to cause or contribute to the emergence and/or escalation of conflicts among states. As discussed before, there has been a general decline in the quantity and quality of global fresh water resource. This leads us to consider scarcity of resources as a cause of conflict, in conflict theory language: an incompatibility between already existing parties. A common starting point in the analysis of many inter-state conflicts has been sought in the desire of the leaders of states to acquire territory. In the post-Second World War period, it has become unfashionable and immoral to conquer territories of others. Nevertheless this has happened repeatedly, for instance, in the Middle East, in South and Southeast Asia and lately in Europe. Huth characterizes territorial dispute as one of the enduring features of international politics. But, why do states fight for each others territory? As Toset, Gleditsch and Hegre explain, territory can be a symbol of self-determination and national identity, but it can also be a proxy for tangible resources found on the territory. Thus, access to water supply can be a motive of waging war. Under special circumstances it is a possibility that scarcity of fresh water resources may give rise to serious armed conflict. â€Å"Water is not transported across large distances, as is the case with oil or minerals, for instance. In the post-Second World War period, political actions are taking place more in order to satisfy the demands of the majorities of a country. † (Barrett, S. 1994, p. 24) This means that stronger nations might be more in need of natural resources on the territory of other states, to meet the growing needs and desires of the home population. In this way, development might be seen to require the acquisition or exploitation of a larger share of jointly owned fresh water resource. The water on the surface of the earth is naturally organized within river basins. The river basins are the fundamental units of the fresh water world and the central feature of the ecology of the planet. Moreover, the river runoff is the most important source of available fresh water for human consumption. However, the rivers do not follow the political boundaries; nearly 260 rivers flow from one country to another. More than 40 per cent of the worlds population is directly dependent upon the fresh water from these international rivers and about two-thirds of these people live in developing countries. The use or misuse of water in the upstream countries affects its quantity and quality in the downstream countries. Downstream nations can affect the flow of water by building large-scale dams, with effects spilling over the borders. The International Water Management Institute in Colombo projects that in 2025, 3 billion people will be living in countries facing water stress. Water tables are increasingly falling in every continent. Many developing countries already face serious problems in meeting rapidly growing water demands. In order to meet such demands, further pressure is being placed on these blue water resources, this over-exploitation resulting in acute shortages. Faced with such scarcity, water has increasingly become a source of social tension, bringing further competition and creating conflict which, together, have the potential to destroy the existing arrangements for water distribution. Even though such tensions are omnipresent, they tend to be more complex and difficult where international rivers, lakes and aquifers are concerned. The Centre for Natural Resources, Energy and Transport (CNRET), now a defunct UN unit, brought out a Register of International Rivers in 1978. In that it listed 214 internationally shared rivers and lakes: 57 in Africa, 40 in Asia, 48 in Europe, 33 in North America and 36 in South America. The CNRET study has become dated because of significant changes in international geopolitical borders and names of countries and rivers in the last 25 years. The names of some countries and rivers have also changed in this period. The disintegration of the Soviet Union, Yugoslavia, Ethiopia and Czechoslovakia has helped to increase the number of internationally shared rivers and lakes, and also the number of basin countries. For example, the Volga River is now international, and the Aral Sea is shared by at least four independent states. The re-unification of Germany and Yemen has made the Weser basin and the Teban basin national, contributing to a decrease in the number of international fresh water resources.

MSM (Methyl Sulfonyl Methane)

MSM (Methyl Sulfonyl Methane) What is MSM? MSM (Methyl Sulfonyl Methane) is a naturally occurring sulphur compound that is found in all vertebrates (including humans) and is highly effective in not only improving joint health and hair health but also in reducing pain relief significantly. It does this predominantly by reducing inflammation within the body. How sulphur is absorbed into the diet is very interesting. MSM gets into the diet through the sulphur cycle. Plankton from the ocean will release sulphur compounds into the ozone and the ultra violet light will proceed to make MSM and its precursor DMSO. These nutrients will then be returned to the earth’s surface in the form of rain. When we eat the plants or the animals that have absorbed the MSM, the benefits begin to unfold. Why is MSM so good for you? MSM is a potent antioxidant, anti-inflammatory and analgesic (pain reliever) which has been most known for its effect on joint health, pain management, hair health and skin health. As most conditions are caused from inflammation, MSM is highly effective at putting a stop to and/or helping to treat these common issues. Signs of an MSM Deficiency A deficiency in MSM has been shown to result in the following: Low Energy; Chronic Pain; Allergies; Low resistance to Stress; Parasites; Tissue and Organ Malfunction; Unhealthy Hair and Skin; Low Immunity. A deficiency has also been shown to contribute to many conditions (see chapter 2 for further information on each of them), some of which include: Asthma; Arthritis; Candida; Diabetes; and Constipation. Nutritional Sources of MSM As with any nutrient, it is always preferable to get it from naturally occurring food sources before taking supplementation. Unfortunately this is not so easy when it comes to sulphur. The foods richest in sulphur are those which we tend to not consume very much of in today’s society, such as collagen or keratin. However, Paleo is possibly one plan that would promote enough sulphur in the diet, as long as it is a paleo diet that emphasises the quality of the foods as opposed to just the type of food. Bone Broth If you ever sat in the kitchen while your grandmother was making homemade chicken soup (as I did) or you remember your mum coming in with a nice pot of homemade chicken soup when you were sick (which I also did) then you would have been exposed to bone broth at some point in your life. Bone broth is basically as the name implies. It is the boiling down of bones until all of the collagen and minerals seep into the water and then you drink it. It is absolutely delicious and so good for you. One of the best sources of sulphur in our diet would be from the connective tissues in the bones of grass fed and free range animals and therefore boiling down some bones into a bone broth and drinking the broth regularly could provide you with almost enough sulphur to promote optimal health. The sulphur in the bones, as well as the amino acids proline and glycine are some of the components that make bone broth so great†¦ So to get you started with implementing MSM into your diet, how about I give you a bone broth recipe that you can get started using today†¦ Bone Broth Recipe Ingredients: 1 kg or more of beef bones from grass fed cows; 2 chicken feet if possible (just gives that extra bit of gelatin); 2 onions; 3 carrots; 3 stalks of celery and any celery leaves you have; 2 tbsp. Apple Cider Vinegar; 1 tbsp. Celtic Sea Salt; Any herbs of choice. Methods: Roast the beef bones in the oven for about 30 minutes at 200 degrees Celsius. Place the bones in a large stock pot and pour filtered water over the bones and add the vinegar. Let this solution sit for about 30 minutes or so as the acid from the vinegar will help to make the nutrients more available. Roughly chop and add the vegetables to the pot and add any herbs and spices you are going to use. Bring this broth to a boil. Once it has come to a vigorous boil bring it back down to a simmer. To simmer beef broth leave it for 48 hours and for chicken broth leave it for 24 hours. Remove from the heat and allow it to cool slightly. With a metal strainer, strain out all of the bones and vegetables. When cool enough, store in a large glass jar in the fridge for up to 5 days or freeze until needed. Raw Foods MSM is in virtually all raw foods and is found in decent quantities in green leafy vegetables such as Brussel sprouts and kale. It is also found in garlic, onions and asparagus. However, although vegetables can contain a significant amount of MSM, it should not be your primary source due to the poor amounts of sulphur in the soil that these vegetables are grown in. Animal Sources Eggs, Meat, Poultry, Fish and Milk are all a much more reliable source of MSM than Raw Foods. Why Don’t We Get Enough Sulphur in Our Diet? There are a couple of reasons for this. Firstly, as mentioned above, the richest source of sulphur is found in collagen and keratin and in modern society we seem to not consume too much of these. However, thanks to more real food advocates they are becoming much better known, especially in the form of bone broths. Secondly, MSM is lost significantly when the food is processed. Cooking, drying and steaming food depletes the MSM content, as does washing our food and storing it for a long period of time. So, as you can see it is very difficult to get a sufficient quantity of MSM into your diet without a little additional supplementation, especially if you are wanting to receive therapeutic doses. Supplemental Forms of MSM MSM is able to be found in capsules, crystals, flakes, powders, tablets, lotions and gels. I prefer to use the crystals or flakes when I take it internally as it gets absorbed a lot quicker than tablets and capsules. I use lotions and gels when I require it to be absorbed through the skin (as is the case with muscle pains). If you would like to learn how to make your own lotions and gels you can go to the recipes section at the back of the book. Beneficial Supplements to take with MSM Vitamin C (Overall Health, Cell Regeneration) The number one nutrient that has been shown to work extremely well alongside MSM is that of Vitamin C. In fact by combining MSM and Vitamin C together, they work synergistically to provide the benefits listed in the upcoming chapters. When MSM is taken alongside Vitamin C you will notice particular benefits: o helps the body to build new cells; o helps reduce scar tissue and wrinkles, and helps keep the skin more elastic. o helps the hair and nails grow stronger and faster. Glutamine (Athletic Performance, Antioxidant Capabilities) When used alongside MSM this nutrient is a great recovery workout combination. L-Glutamine is the most prevalent amino acid found in skeletal muscle tissue and blood and may significantly aid in muscle recuperation as well as overall immune function. Just like MSM, Glutamine (when taken orally or intravenously) has been shown to raise the body’s natural antioxidant glutathione. Glucosamine (Arthritis and Joint Health) When taken with MSM, this supplement has been shown to provide double the joint comfort relief than either of them alone. Previously you would find most arthritis supplements would contain Glucosamine and Chondroitin alone. However, since MSM has now been recognised as essential for joint health they have started adding that too. Because of the fact that Chondroitin is so expensive studies have actually been done to test Glucosamine and MSM alone and have found some amazing results. This makes the supplement a lot cheaper for the user. To read up on this study, check out the section on â€Å"Arthritis†. Optimal Intakes of MSM As MSM is not stored in the body, a fresh supply is needed to prevent any further deficiencies developing. As you age your MSM concentrations also decrease so your requirement for it will be a lot higher. It is important to start off slowly when taking MSM and gradually increase your dosage, so as to minimise any digestive complaints that might appear. So as to minimise the chance of heartburn, take MSM with your meals. A single dose of MSM will not be a cure all but taken over time on a daily basis you will be able to start experiencing the amazing benefits of this nutrient. A good way of increasing your supplementation is by incorporating the following tiers – although everybody is different so you will just have to experiment yourself. Tier #1 Start off by taking 500mg per day and take this dosage for a week. Tier #2 Increase the dosage to 1000mg (1g) per day and take this dosage for a week. Tier #3 Every day add on another 500mg per day until you reach 10000mg (10g). Tier #4 Once you have been taking 10g per day for a couple of weeks and have made up for the years of deficiency then start to reduce it to a maintenance level. Tier #5 For most people the maintenance level will be about 4-8g per day. Note: Make sure you drink plenty of water when starting on MSM and/or when increasing your dosage of MSM. Also ensure that you do not use tap water with the MSM as the chlorine in it can cancel the effectiveness of the MSM. Toxicity of MSM MSM has been found to be safe with minimal reported adverse effects, even at very large doses. The only effects that have been reported (on minimal occasions) are loose stools, stomach upset or skin rashes, which could indicate a slight allergy to the product but these symptoms will disappear once you have stopped taking the MSM. In fact there have been numerous studies done showing that MSM is Non Toxic even at very large doses. Research (1) – Non Toxic for Pregnant Females even at extremely high amounts of 1000mg/kg/day (Animal Study) This study split the pregnant rats into 4 separate groups and were administered a variety of different dosages. There was no evidence of maternal toxicity and no significant differences in the litter viability, litter size or litter body weight upon testing. There were no foetal abnormalities seen in the MSM treated group or in any of the foetuses. Therefore the non-observed adverse effect level for both maternal and developmental toxicity was 1000mg/day. Please note that this study was done in rats and although the animal studies are generally very accurate and MSM is seen as extremely non-toxic for both the pregnant female and the foetus, it is still wise to either administer it at reasonably low doses (1-3g per day) and/or do it under the supervision of a practitioner. Research (2) – MSM has very low toxicity (Animal Study) In this study they split the mice up into separate groups. One group was given a single dose of 2.5g per kg body weight, one group was given a single dose of 5.0g per kg body weight and the other group was given up to 10g/kg body weight over a period of 90 days. They found that with these numbers there was no toxic effects. Detox Symptoms When you first start taking MSM you may experience some detox symptoms which may make you want to stop taking it. But that could be a big mistake. The symptoms you experience can range from mild flu-like symptoms to more severe symptoms. If the symptoms are not too severe try to tough it out for a few days and make sure you drink plenty of water. However, if you find the symptoms are too severe, try tiering the dosage down and take some hot baths to make you sweat more and therefore make the detoxification process go a lot quicker. Soaking in some Epsom salts is also a good idea. More information on how MSM can help with detoxification can be found here†¦ People who should be cautious when taking MSM MSM is extremely safe for most individuals and is actually about as toxic as water. However if you have kidney issues or kidney disease it may be an idea to check with your practitioner prior to taking this supplementation. Medications that are contraindicated with MSM If you are taking high doses of aspirin or blood thinning medications such as heparin or dicumarol it is advisable to check with your physician prior to taking MSM. This is because it has been observed in some clinical settings that it may have a blood thinning aspirin like effect on platelet aggregation.

I, Too, Am America :: essays research papers

I, Too, Am America by kooshla America, the melting pot of the world, and yet its different races have so much trouble melding together. According to statistics, in all probability, I have a higher chance than any other race teenager of not graduating from high school. By stereotype, all I do is eat fried chicken, sell drugs, and play basketball. In society, I might work twice as hard as the next man and not get the promotion. I am a part of the percentage who chooses to defy the probability, break the stereotype, and change society. I, Too, Am America. Unfortunately, in my experience through junior and senior high, the common black attitude towards education has been one of neglect. Not caring about one "F," or the other, careening through high school with a gpa of 1.5. However, there are those who really care about their grades, earning the respect of their peers and friends. I strive to be in the latter group, so that I can better myself. For every black student who makes that extra effort, that better grade, there will be another person who becomes more enlightened to the facts and not the fiction of black life in America. In the act of improving my mind, I am not only helping myself but furthering the cause for complete equality throughout the nation. As part of America's black youth, I must grow up in a world of racism, no matter what supposed "huge steps" have been made. It is up to me not to use this as an excuse but as an obstacle to surmount. In my lifetime I will be faced with prejudice which may hinder my progress. This opposition must not be met with excuses for substandard work, or inadequate job qualification. It must be met with a serious work ethic, justly qualified applicants, and intelligence so not to be denied for any reason. Through this procedure black people will gain equality and vanquish the racist mentality. I will be one of those people to meet the adversary with full force of mind. I am a black teenager who plays soccer and tennis. Sometimes I am ridiculed for playing these sports by other blacks. I also face ridicule when I make good grades and care about my school work. There will be times when I will have to fight against my own race to get where I want to be in life. My high school career is one of those times. I am and will continue to be myself. I will not stray from my path.

Literature Focus Unit :: essays papers

Literature Focus Unit Day One, Session One: Materials: The True Story of the 3 Little Pigs, by Jon Scieszka, Literary Report Cards worksheet, student journals, pencil Introduce story: 1. A grand conversation about different versions of well known fairytales (Ashpet and Cinderella etc.)-Prepare 2. Show students the cover of the book and read the title and then ask for predictions about the book- Prepare, Read Read the story aloud to the students cover to cover- Read After finishing the book: 1. Have students write their initial responses to the story in a journal. Ask them to think about how this story was different and similar to the traditional story of the Three Little Pigs. –Respond, Explore 2. Have a grand conversation about the book and what the students first thought of it. Recap what they have written in their journals. Have volunteers summarize what they have written. Ask students to look through the book and point out similarities and differences between the two versions of The Three Little Pigs. –Respond, Explore 3. Hand out the Report Card book review. Have students complete the book review as in class homework- Respond Day One, Session Two: Materials: The True Story of the 3 Little Pigs, by Jon Scieszka, paper for a word wall, markers, Continuation of the lesson: 1. Review the day’s previous activities. Review what the students have completed with their literary report cards. - Prepare 2. Tell the students that they will be reading the book again. Have them listen carefully to the words in the story and write down any words that they don’t already know or understand. – Prepare Students buddy read with a partner- Read After the story: 1. Ask students to share their found words with a partner. –Respond 2. Have students compare their words in their groups and narrow their lists down to 5 words total. -Respond 3. Have students create a word wall with their found words- Explore 4. Discuss the new words on the word wall in class. Define the words, look at how they are used in the book, and create example sentences in which the words could be used.- Explore 5. Ask students to create a found poem using the words on the new word wall. Give them time in class to begin. Have the students share their found poems at the beginning of the next lesson.-Explore Day Two, Session One Materials Review all of the previous lesson’s activites.-Prepare Have students first share their poems with a partner.

Rhetorical Analysis of JFKs Inauguration Speech -- John Fitzgerald Ke

John Fitzgerald Kennedy delivered one of the most important American speeches after being sworn in as president on January 20, 1961. His inauguration speech was so influential that it seized the nation’s attention, and quotes from it are still clearly remembered by people today. It is considered one of the best speeches ever written and ever delivered. It presents a strong appeal to pathos, ethos, and logos and accomplishes what any speaker strives for – it speaks straight to the heart of the audience and inspires people. John F Kennedy was the 35th president of the United States and at 43 years old he was the youngest president to take office. Because of his youth, he stumbled upon much skepticism from his opposition and even a little from his supporters. Kennedy’s inauguration speech was so vital because he needed to make a quick and powerful first impression to America and to the entire world. The address was written to encourage American citizens to get involved with their country and with the issues of the time. This speech reassured the voters that they made the correct choice and informed the country that changes were on there way. The inaugural speech was arranged so that it flowed easily from start to finish. The first paragraph contains many uses of comparison and contrast. For example, â€Å"We observe today not a victory of a party but a celebration of freedom—symbolizing an end as well as a beginning—signifying a renewal as well as change†(Kennedy par 1). There are also examples of cause and effect in the speech. I believe that this is to be expected because of all the deliberations over war. Kennedy used these techniques to make it sound like it was our moral responsibility we should go to war. These are the two basic s... ...commitments and his plan. By reiterating common knowledge, Kennedy has his audience reflect on known fact in order to drive his message home. In conclusion, this speech was structured beautifully. Its use of figurative and expressive language makes it an unforgettable speech. Kennedy does a great job of using pathos, ethos, and logos to reiterate his commitment to the American public as well as discuss expected changes. Given the state of the world at the time of his inauguration, the decision to rely so heavily on pathos and ethos was a wise one which got the job done. His use of the rhetoric triangle effectively conveys Kennedy’s plan for America to not only her citizens, but to the world. Works Cited Kennedy, John F. â€Å"Inaugural Address.† Reading Literature And Writing Argument. Ed. Leah Jewell. Upper Saddle River, NJ: Pearson Education Inc, 2005. 622- 625.

Agatha Christie

Agatha Christie real name was Agatha Mary Clarissa was born in 1890. She was a fictional crime writer with about 80 detective novels credited to her.   Her father was a rich stockbroker; while her mother was British aristocrat; while her sister and brother older than her. Her father died when she was young that lead her mother to resort to Agatha Christieing.Her writing career spanned more than 50 years; where she wrote more than 80 detective works including short stories and plays; such as The Mousetrap that opened in London in 1952 and is still running.   Her first novel was The Mysterious Affair at Styles was published in 1920; where she created the famous detective Poirot.This was her famous character which was depicted in more than 33 novels and 54 short stories. Another of her famous character was Miss Maple that appeared in more than 12 novels and 20 short stories.Agatha Christi has been considered the best selling writer of all times in the Guinness Book of Records. She w as been the only writer that has competed the Shakespeare as her books has reached about one billion sold copies.Her books have also been translated into many languages including French. For example; she is considered all time best seller as over 40 million copies have been sold in France.Due to her enormous success and popularity she was made Dame Commander of the Order of the British Empire. Christi died at the age of 85 on 12 Jan, 1976 of natural causes in her home at Cholsey parish in Oxfords hire (UK).ReferenceKatheen Gregory Klein, Great Women Mystery Writers: Classic to Contemporary. : Greenwood, 1994.Earl F. Bargainnier, The Gentle Art of Murder: The Detective Fiction of Agatha Christie . Bowling Green State University Popular Press, 1980.Patricia D. Maida, Nicholas B. Spornic, Murder She Wrote: A Study of Agatha Christie's Detective Fiction . owling Green State University Popular Press, 1982.â€Å"Queen of Crime.† http://uk.agathachristie.com/site/about_christie/quee n_of_crime.php. 10 Nov 2007

Value Investing: Predicting Long-Term Pro?tability Based on Fundamental Data

Value Investing: Predicting Long-term Pro? tability Based on Fundamental Data An Empirical Study in the Manufacturing Industry by Vital Schwander (05-609-136) Master’s Thesis supervised by Prof. Dr. Andreas Gruner University of St. Gallen May 23, 2011 Master in Law & Economics Abstract Warren Bu? ett (1992) classi? es the discussion about value and growth stocks as fuzzy thinking. With that statement, he argues that value investors must consider growth in their value calculations. This thesis shows in a ? rst step that growth is only valuable if the company enjoys a durable competitive advantage.By examining the fundamental characteristics of companies with a durable competitive advantage, this thesis intends in a second step to assess the predictability of long-term pro? tability. The DuPont Identity serves as framework for that purpose. The objects of this investigation are companies within the manufacturing industry (Primary SIC Code between 2000-3999) that were listed in t he United States between 1979 and 2009. The results show that companies with a durable competitive advantage exhibit speci? c characteristics in operating e? ciency, asset use e? ciency, and in the ability to meet short-term obligations.Furthermore, the thesis shows that long-term pro? tability, based on the investigated characteristics, is predictable to some extent. This thesis concludes by assembling the insights to a value strategy that is applied to manufacturing companies listed in Switzerland. The strategy exhibits an outstanding SMI-adj. compound annual growth rate of 13. 19% over a period of 17. 5 years. ii Acknowledgement I would like to express my gratitude to Prof. Dr. Andreas Gruner for supervising this thesis and his assistant Lucia Ehn for her conceptual advices. I have furthermore to thank Mr.Hans Ulrich Jost for giving me insight into the daily business of a value fund at UBS AG. My sister Daria introduced me to R and Latex. I want to thank her for her help and supp ort. I want to thank my great family who has been always supportive and motivating. Finally, I also would like to thank friends and colleagues for making life such an enjoyable experience. iii Contents 1 Introduction 1. 1 1. 2 Issues, Goals and Limitations . . . . . . . . . . . . . . . . . . . . . . . . . Structure and Empirical Approach . . . . . . . . . . . . . . . . . . . . . . 1 1 2 4 4 5 7 7 8 2 Value Investing—An Investment Paradigm 2. 2. 2 2. 3 The Origin of Value Investing . . . . . . . . . . . . . . . . . . . . . . . . . Value and Other Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . Four Value Strategies by Illustration . . . . . . . . . . . . . . . . . . . . . 2. 3. 1 2. 3. 2 2. 3. 3 2. 3. 4 2. 4 2. 5 Piotroski’s F_Score . . . . . . . . . . . . . . . . . . . . . . . . . . Walter and Edwin Schloss . . . . . . . . . . . . . . . . . . . . . . . Warren Bu? ett . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 UBS EMU Value Focus Fund . . . . . . . . . . . . . . . . . . . . . 12 Value vs Growth—Fuzzy Thinking! . . . . . . . . . . . . . . . . . . . . . 13 Value Anomaly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 2. 5. 1 2. 5. 2 2. 5. 3 Behavioral Approach . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Risk-based Approach . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Competitive Advantage Based Approach . . . . . . . . . . . . . . . 16 17 3 Literature Review 3. 1 3. 2 3. 3 Competitive Advantage . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Pro? tability Measurements . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Research Gap and General Approach . . . . . . . . . . . . . . . . . . . . 21 22 4 Analysis of Long-term Pro? tability 4. 1 4. 2 Data Sample . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Analysis of Return on Equity Measure . . . . . . . . . . . . . . . . . . . . 26 4. 2. 1 Superior Performers . . . . . . . . . . . . . . . . . . . . . . . . . . 26 iv 4. 2. 2 4. 2. 3 4. 3 4. 4 4. 5 4. 6 Analysis of Performance Persistence . . . . . . . . . . . . . . . . . 28 Analysis of SPP Deciles in respect of ROE . . . . . . . . . . . . . . 30 Analysis of SPP Deciles in respect of other Financial Measures . . . . . 33 Predictability of Long-term Pro? tability . . . . . . . . . . . . . . . . . . . 41 Discussion of the Interim Results . . . . . . . . . . . . . . . . . . . . . . . 43 Market Analysis 4. 6. 1 4. 6. 2 4. 6. 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Subdivision-speci? c Market Analysis . . . . . . . . . . . . . . . . . 45 Analysis of SPP Deciles in respect of Market Multiples . . . . . . . 45 Market Performance Analysis . . . . . . . . . . . . . . . . . . . . . 46 48 5 Value Strategy 5. 1 5. 1. 1 5. 1. 2 5. 1. 3 5. 2 Strategy Composition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Sample Descriptives and Strategy Composition . . . . . . . . . . . 48 Portfol io Formation . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Performance Measurement . . . . . . . . . . . . . . . . . . . . . . . 49 Portfolio Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 53 6 Conclusion and Further Research 6. 1 6. 2 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Further Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 56 i v x xv Bibliography A Data Input B Financial Measures C Subdivisions D Market Analysis List of Tables 4. 1 4. 2 4. 3 4. 4 4. 5 4. 6 4. 7 4. 8 4. 9 5. 1 COMPUSTAT Items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Distribution of Firm Years Distribution of Superior Performance Years . . . . . . . . . . . . . . . . . 27 Probability Distribution of Superior Performance Persistence . . . . . . . 29 ROE Distribution for each SPP Decile . . . . . . . . . . . . . . . . . . . . 31 RO E Distribution for each SPP Decile (Subdivision-adjusted) . . . . . . . 32 Financial Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 . . . . . . . . . . . . . . . . . . 47 Predictability of Future Pro? tability . . . . . . . . . . . . . . . . . . . . . 42 Market Performance for each SPP Decile Portfolio Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 . . . . . . . . . . . . . . . . . . . . . . . . i ii v A. 1 Data Input for US Companies A. 2 Data Input for Swiss Companies . . . . . . . . . . . . . . . . . . . . . . . B. 1 Calculation of the Financial Measures . . . . . . . . . . . . . . . . . . . . B. 2 SPP Deciles (Subdivision-adjusted) regarding Financial Measures . . . . vii x xi C. Overview of Subdivision . . . . . . . . . . . . . . . . . . . . . . . . . . . . C. 2 Subdivision Comparison regarding ROE . . . . . . . . . . . . . . . . . . . C. 4 Composition of SPP Deciles regarding Subdivisions C. 3 Subdivision Distribution in respec t of SPP Deciles . . . . . . . . . . . . . xii . . . . . . . . . . . . xiii D. 1 Average Price-Earnings Ratio per Subdivision . . . . . . . . . . . . . . . . xvi D. 2 Average Book-to-Market Ratio per Subdivision . . . . . . . . . . . . . . . xvii D. 3 Average Price-Earning Ratio per SPP Decile D. 4 Average Book-to-Market Ratio per SPP Decile . . . . . . . . . . . . . . . xviii . . . . . . . . . . . . . . . xix vi List of Figures 3. 1 4. 1 4. 2 4. 3 5. 1 Three Slices of Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 . . . . . . . . . . . . . . . . . . . . . . . 33 . . . . . . . . . . . . . . . . . . 47 Mean ROE for each SPP Decile SPP Deciles in terms of Financial Measures . . . . . . . . . . . . . . . . . 40 Market Performance for each SPP Decile Performance of the Value Strategy . . . . . . . . . . . . . . . . . . . . . . 51 . . . . . . . . . . . . . . . . . . . . . . . . . . . xiv C. 1 Subdivision Distribution vii List of Abbreviations vg. B/M CAP CAGR CAPM COG S DA EBITDA etc. e. g. EV FCF IE i. e. IPO LT p. a. P/E ROA ROE SGA SMI ST US average Book-to-Market Competitive Advantage Period Compound Annual Growth Rate Capital Asset Pricing Model Cost of Goods Sold Depreciation and Amortization Earnings before Interest, Taxes, Depreciation and Amortization et cetera exempli gratio – for example Enterprise Value Free Cash Flow Interest Expense id est – that is Initial Public O? ering Long-term per annum Price-Earnings Return on Assets Return on Equity Selling, General, and Administration Swiss Market Index Short-term United States iii Chapter 1 Introduction 1. 1 Issues, Goals and Limitations Every investor is looking to buy low and sell high. This does not yet characterize a value investor. Although value investing has become a widely used term, it has been stamped in particular by a small group of academics. They associate stock-speci? c fundamentals such as a low P/E ratio, low cash-? ow-to-price ratio, and high B/M ratio to va lue stocks. These stock-speci? c fundamentals have become characterizing for value investing and embody the basis for many research studies about value investing (see Damodaran, 2011).For example, Piotroski (2000) developed the F_Score to separate losers from winners among value stocks (i. e. high B/M-stocks). On the other hand, research has been conducted on growth stocks (i. e. high P/E ratio, high cash-? ow-to-price ratio, and low B/M ratio). Mohanram (2005) developed the GSCORE to separate losers from winners among growth stocks, for instance. As a consequence, many investors feel compelled to decide between value and growth stocks. However, in the heated discussion it is often ignored that growth has an impact on the value of a company.This impact of growth varies according to the particular company from negligible to very important, and its impact can be negative as well as positive. Growth is valuable in particular if a company enjoys a durable competitive advantage and remai ns very pro? table over a long period of time. There are many books about the competitive advantage (e. g. Porter, 1998; Shapiro, 1999). However, it has never been discussed related to value investing. Only Mauboussin and Johnson (1997) have raised a discussion about the competitive advantage period within the valuation process of stocks.They point out in their paper „Competitive Advantage Period: The Neglected Value Driver† that the persistence of competitive 1 advantage has a huge impact on the value of a ? rm. Yet there is little literature on this topic (see Fritz, 2008) and the bulk of academics as well as practitioners still rely mainly on the di? erentiation between value and growth stocks. This thesis gives priority to the competitive advantage, though, and intends to lay the groundwork for valuing competitive advantage. It is important to understand how a competitive advantage can be captured and if it is possible to predict long-term pro? ability, before starti ng to value the growth potential of a company. Hence, the aim of the thesis is con? ned to the predictability of long-term pro? tability and does not intend to value the competitive advantage as such. The ? rst question that arises in this context is whether it is possible that a company can exhibit long-term pro? tability. The answer to this question is of interest, as most economists maintain the contrary. According to economic theory, pro? tability is mean reverting in a competitive environment (Chan, Karceski and Lakonishiok, 2003). However, reality teaches us the contrary every day.Mircrosoft’s products, for instance, are everything else but innovative. Nevertheless, the company earns excessive returns for decades, and so do others like The Coca-Cola Company. Thus, this thesis investigates the possibility that a company is able to sustain its competitive advantage over several years. Thereupon, the second issue addresses whether companies with a durable competitive advan tage exhibit stock-speci? c fundamental characteristics. Therefore, the DuPont Identity serves as framework. The companies are classi? ed into deciles in terms of pro? tability (i. e.ROE) and persistence. Upon this, the companies are tested for the characteristics regarding various measures, which are derived mainly from the DuPont Identity. All companies that are objects of the investigation are listed in the United States and constrained to manufacturing companies only. The third question addresses whether it is possible to identify companies with a durable competitive advantage based on the observed characteristics. Finally, a simple strategy is composed that implements the investigated characteristics of companies with a durable competitive advantage.The strategy is conducted on manufacturing companies that are listed on a Swiss stock exchange. 1. 2 Structure and Empirical Approach The present thesis is structured in mainly four parts: Chapter 2 reviews literature on value inves ting and points out the broad range of value strategies by the mean of four examples. The reader shall gain an overview of value investing (i. e. the origin of value investing, dissociation from other investors, and current value discussion). Additionally, 2 this chapter shall point out the link between value investing and the competitive advantage period.Chapter 3 contains a literature review about competitive advantage, pro? tability measures and the persistence of pro? tability. Moreover, chapter 3 shows the research gap as well as the general approach to ? ll this gap. The empirical part in chapter 4 deals mainly with three issues: (1) persistence of superior performance, (2) characteristics of companies with a competitive advantage, and (3) predictability of future long-term pro? tability. Finally, in chapter 5 a value strategy will be composed that builds on the insights of chapter 4. 3 Chapter 2 Value Investing—An Investment Paradigm 2. 1 The Origin of Value InvestingV alue investing is an investment paradigm that derives its origin from the ideas on investment and speculation subsequently developed and re? ned by Benjamin Graham and David Dodd through various editions of their famous book Security Analysis. Starting in 1928, Graham began to teach a course on security analysis at Columbia University. The book emerged from that course, and appeared in 1934. Graham and Dodd mainly summed up lessons learned from the previous economic crisis in 1929 and provided readers with inevitable principles and techniques by focusing on the analysis of fundamental ? gures to estimate the value lying behind securities.By publishing the ? rst professional book about investing, they laid the foundation of value investing. In 1949, Graham published his second book, The Intelligent Investor, which was described by Warren Bu? ett (Graham, 2003) as „by far the best book on investing ever written. † It contains mainly the same ideas as in its predecessor Sec urity Analysis, but focuses more on the emotional aspects of stock markets, rather than on analyzing techniques. The techniques to determine investment opportunities that Graham and Dodd have developed are based on two fundamental assumptions about the market: 1.Market prices of securities are sometimes subject to signi? cant and unforeseeable movements. 2. As opposed to the e? cient market hypothesis, which assumes that all stocks are correctly priced by the market at any one point in time, market prices of some 4 securities deviate from their intrinsic values from time to time despite the fact that their underlying economic values do not justify such signi? cant deviation. Hence, an intelligent investment is characterized as paying less for a security then its intrinsic value. Paying more for a stock than its intrinsic value in the hope that it can be sold for a higher price is speculative.In other words, an intelligent investor should not attempt to forecast future stock market m ovements; instead, such movements provide opportunities to purchase undervalued stocks. Moreover, investors are encouraged to purchase securities only when the market price is su? ciently below its intrinsic value. Graham (2003) referred to this signi? cant gap between price and intrinsic value as the margin of safety, and quali? ed it as central concept of investment. In practice, investors lay down di? erent margins of safety that are appropriate to their fundamental analysis. A super? ial analysis requires a higher margin of safety than a deep and broad analysis. Additionally, market conditions as well as the sizes of funds gives reason for di? erent margins of safety. Bu? ett states in his letters to the shareholders of Berkshire Hathaway, Inc. in 1992: „We have seen cause to make only one change in this creed: Because of both market conditions and our size, we now substitute ,an attractive price’ for ,a very attractive price’ (p. 12). † Yee (2008) sugg ests a margin of safety between 10% and 25% of the share price. Larger margins are justi? ed for especially risky stocks.Accordingly, the margin of safety is not a rigid safety net but rather a ? exible net with meshes, which must be properly adjusted to the speci? c needs and conditions from time to time. 2. 2 Value and Other Investors Classic value investors—in the sense of Graham and Dodd—are rare. Every investor is looking to buy low and sell high, but what exactly di? erentiates a real value investor from all the other investors? According to Greenwald, Kahn, Sonkin, van Biema (2001), investors can be di? erentiated into two main categories. The ? rst category pays no attention to fundamental analysis.Instead, these investors analyze charts; in particular they construct charts to represent trading data (e. g. price movements and volume ? gures). In other words, they intend to predict future price movements referring to previous events regardless of its fundamental value (pp. 5-6). Graham and Dodd qualify these investments as highly speculative. 5 Although the second category focuses admittedly on fundamental analysis, Graham and Dood value investors are still a minuscule minority. Greenwald, Kahn, Sonkin, van Biema (2001) divide these fundamentalists into those who ocus on macroeconomics and those who deal with the microeconomics of securities. Macro-fundamentalists often pursue a top-down approach by considering ? rst broad economic factors such as interest rate, in? ation rate, exchange rate, unemployment rate, and the like. They forecast economic trends on a broad national or even worldwide basis. Upon this, they decide whether a group or even a speci? c security is a? ected by this trend. They do not calculate the value of individual securities, though. In particular, they monitor policy makers, such as the central bank, and try then to determine the impact on a speci? industry or group of securities. As any other investor, they attempt to forecast price movements before other investors recognize them and subsequently buy low and sell high, but they do not calculate the intrinsic value of an individual security directly (pp. 6-7). Graham and Dodd originally established value investing as a comprehensive analysis of securities in order to estimate the intrinsic value as accurately as possible, but in the group of micro-fundamentalists, traditional value investors are still a minority.According to Greenwald, Kahn, Sonkin, van Biema (2001), a more common approach takes the current price of a stock as the point of departure. These investors analyze the history of a security, considering how the stock price was in? uenced by changes in the underlying economic factors. In a second step they then attempt to predict the probability and impact of such changes in order to forecast future development of the speci? c security. These kind of investors often forecast future earnings or free cash ? ows. If they ? d that their pre dictions are more optimistic than the market’s expectation, they buy the security; if they ? nd that the market’s overall expectation is to high compared to their forecast they sell the security (p. 7). Indeed, most value investors—in the sense of Graham and Dodd—start their analysis from the bottom up by calculating ? rst the intrinsic value of a ? rm and subsequently they estimate the macroeconomic exposure of the ? rm—similar to the micro-fundamentalists. Although there are some similarities, Graham and Dodd value investors distinguish themselves from micro-fundamentalists in many ways.Greenwald, Kahn, Sonkin, van Biema (2001) mention two reasons why most micro-fundamentalists are not value investors: First, they focus on prior and anticipated changes in prices, and not on the level of prices relative to underlying values. The second and even more decisive di? erence is the absence of a margin of safety to safeguard investors from unpredictable market movements (pp. 7-8). Accordingly, a true value investor in the classical sense is one whose point of de6 parture is the fundamental data of a company. Although macro-economic factors play a signi? cant role in the analysis, they are of secondary importance.Furthermore, this investor does not predict future developments of key factors that cause price changes. Instead, a classic value investor values a company based on current fundamentals and buys a security at a bargain price. In the following section, four value strategies are outlined in order to give an idea by the way of illustration. 2. 3 Four Value Strategies by Illustration The range of value strategies is broad enough that it makes it impossible to sum up all of them. Thus, the following selection intends to show the large variety of aspects that these strategies characterize. These aspects range from fundamental analysis only (e. . Piotroski) to more sophisticated investigation of companies (e. g. Bu? ett), from con centrated portfolios (e. g. UBS EMU Value Focus Fund) to diversi? ed portfolios (e. g. Schloss). 2. 3. 1 Piotroski’s F_Score Piotroski started his career as a professor at the University of Chicago Graduate School, and since 2007 he has taught accounting at the Stanford University Graduate School of Business. In April 2000, Piotroski published a paper in the Journal of Accounting research titled „Value Investing: The Use of Historical Financial Statement Information to Separate Winners from Losers. In this paper, Piotroski classi? es distressed companies in winners and losers by means of nine fundamental criteria. Four criteria (ROA, ? ROA, CFO, and ACCRUAL) re? ect the pro? tability, three criteria (? LEVER, ? LIQUID, future debt obligations, and two criteria (? MARGIN, and ? TURN) measure changes F_Score is composed as follows: F _Score =F _ROA + F _ ? ROA + F _CF O + F _ACCRU AL + F _ ? LIQU ID + EQ_OF F ER and EQ_OFFER) measure changes in capital structure and the ? rm’s ability to meet in the e? ciency of the ? rm’s operations (Piotroski, 2000, pp. 10-14).The equation of the + F _ ? M ARGIN + F _ ? T U RN + F _ ? LEV ER (2. 1) where a low F_Score signals a ? rm with less recovering potential and a high score indicates the ? rm as having mostly good prospects to recover. If a company ful? lls a criteria, 7 the F_criteria equals 1, otherwise 0. With that, Piotroski translates the criteria into binary signals. The sum of all F_criteria subsequently leads to the F_Score, which can range from a low of 0 to a high of 9. Due to the fact that it is very di? cult to obtain the maximal score, companies with a minimum score of 8 will be classi? d as high F_Score whereas as companies with a score of 0 or 1 are classi? ed as low F_Score (Piotroski, 2000, pp. 14-18). Piotroski (2000) reevaluates the stocks every year and decides whether a stock belongs to the losers or to the winners. Finally, the investment strategy buys high F_Score and sel ls short the low F_Score. This simple strategy generates over two decades an astonishing 23% average annual return. It appears that the strategy is also robust in crisis. In 2008, the American Association of Individual Investors tested the strategy among 50 other investment strategies.With a performance through to the end of 2008 of 32. 6%, it was not only the only stock strategy that would have generated positive returns but has also outperformed the median performance (-41. 7%) of all tested strategies by far (Thorp, 2009). Due to the fact that the portfolio is construed each year on actual data, it is often the case that the portfolio is turning over correspondingly. Once a ? rm is recovering and the market has recognized the improvements the B/M ratio increases and the stock does not appear any more on the screen, although the company has even more growth potential. That is why many ? ms remain no longer than one or two years in the portfolio. Admittedly, buying winners and shor t-selling losers is one big advantage of the strategy. Companies that are classi? ed as losers may transform in a subsequent period from a low F_Score to a high F_Score ? rm. Therefore, the strategy makes double use of a company’s development or business cycle. But the strategy also implies a disadvantage; why should an investor sell an excellent business that bought at a bargain price? Based on a competitive advantage, the business could thrive to a superstar and yield high returns on the initial investment.A top manager also keeps the good business also when others o? er more than its current value because the manager knows that the business will contribute also in the future to the ? rm and its shareholders. 2. 3. 2 Walter and Edwin Schloss Walter Schloss and his son Edwin are very conservative value investors whose motto is to keep things simple and cheap. Walter Schloss attended a course of Graham’s and worked for the Graham-Newman Partnership until 1955. Afterwar d, he ran his own investment ? rm and in 1973 his son Edwin joined the partnership. From the formation of the limited 8 artnership until 2000, the Schloss have provided their investors an annual compound return of 15. 3%. They outperformed the S&P Industrial Index by 4. 2% annually. In other words, they have created a return of 66,200% while the S&P Industrial Index performed 11,800% (Greenwald, Kahn, Sonkin, van Biema, 2001, p. 263). Walter Schloss has been titled by Warren Bu? ett as „superinvestor† (Forbes, 2008). What distinguishes the Schlosses from other value investors is their simple, and almost rudimentary method choosing stocks. They are among the few investors that stick to the principles of the father of value investing.Like Graham, they seek for stocks that are priced lower than their working capital (net assets minus current liabilities). They start their investigation by putting their feelers out to stocks that are unloved, distressed, and unheeded from ot her investors. Most of these stocks are in a downward trend either by a rapid plunge or a continually decreasing price. The longer the company has gone through such hard times, the more they call the Schloss’s attention. Once they have invested in such a unloved stock they hold it on average for four to ? ve years until the stock has recovered. Sometimes they also sell a stock earlier when they ? d a better opportunity (Greenwald, Kahn, Sonkin, van Biema, 2001, pp. 266-269). Edwin Schloss focuses on asset values, but is also willing to buy a company that has a strong earnings power. Greenwald, Kahn, Sonkin, van Biema (2001) describe the investment philosophy of Edwin Schloss as follows: „Edwin Schloss pays attention to asset values, but he is more willing to look at a company’s earnings power. He does want some asset protection. If he ? nds a cheap stock based on normalized earnings power, he generally will not consider it if he has to pay more than three times b ook value. [†¦ Depending on his estimate of what the companies can earn, Edwin may still ? nd the stock cheap enough to buy (p. 268). † Although Edwin pursues a more liberal value approach by taking the earnings power value into account, he is still very conservative. Both father and son do not include in their valuation process other than fundamental data. In their analysis, they rely entirely on annual and quarterly reports—they keep things simple but with a relatively high margin of safety. The diversi? cation of their portfolio also varies. They do not determine a threshold in advance to which they stick.Similar to Warren Bu? ett, their approach leads them to industries, which are not exposed too much to rapid changes that can undermine the value of these stocks (Greenwald, Kahn, Sonkin, van Biema, 2001, p. 269). 9 2. 3. 3 Warren Bu? ett Warren Bu? ett, who is doubtless the most famous student of Graham and one of the most successful investors, too, pursues a s imple strategy, which is complex and di? cult in its execution. Bu? ett started his career in Graham’s investment ? rm. In 1964, he then bought shares of Berkshire, when its book value per share was $19. 46 and its intrinsic value even lower (Bu? tt and Cunningham, 1997, p. 6). In the period from 1964 to 2009, book value per share increased at an annual compound rate of 20. 3% that is an overall gain of 434,057 %. Adjusted by the S&P with dividends included, Berkshire has a compound annual growth rate of 11%. During the period, Berkshire reported only twice a negative change in book value—in 2001 and 2008—compared to the S&P that incurred during the same period eight negative results (Bu? ett, 2009, p. 2). Unlike other investors, Bu? ett feels obliged to share his knowledge that he gained mainly from Graham.Moreover, and opposed to the bulk of successful investors, he teaches his wisdom to the world of investors—and those who are interested in his activit y— by an annual letter to the shareholders of Berkshire Hathaway, Inc. To attain this knowledge it is not necessary to buy a share of Berkshire Hathaway, Inc. —which costs currently over $125,000, nor is it necessary to pay any money for it. Bu? ett gives access to his letter on the Berkshire’s website for free. Additionally, in the book called The Essays Of Warren Bu? ett—Lessons For Corporate America, Cunningham organizes the information in Bu? tt’s letters in a thematic way. This book is also accessible online and can be downloaded for free. Bu? ett is aware that he creates potential investment competitors by passing his wisdom to everyone but imitating Bu? ett’s strategy is everything but simple. His explanations are logical and easy to understand, but the execution requires much experience and a distinctive comprehension of the industry and costumer behavior. In contrast to what Piotroski and other academics and money managers postulate , Bu? ett buys not only high B/M stocks. This amazes readers in many ways. In particular, because Bu? tt refers in several passages of his letters to Graham’s conception. It also contradicts the conceptions of most academics, which assign a high B/M ratio to value stocks. Nonetheless, Bu? ett puts emphasis not only on the book value of a company but more on the competitive advantage that a company enjoys. Like Graham, he is looking primarily for very cheap businesses, which are traded far under their intrinsic values. As opposed to Graham, Bu? ett buys not every stock that Mr. Market o? ers him for a bargain price. Additionally, he seeks for businesses with a high competitive advantage.While most ? rms in Graham’s portfolio are distressed, Graham diversi? es the risk. Bu? ett, on the other hand, holds that an investor should not buy second-class stocks 10 in the hope that they will recover. The awareness of less investment opportunities does not bother Bu? ett; au cont raire, he avoids purchases that he will regret later. According to him, every transaction that is based on a wrong decision is unnecessary, and thus, to be avoided. One could say that transaction costs (e. g. trading costs) are tiny, that they carry no weight. But what most people disregard are taxes.With every transaction, book value is going to be reevaluated and governments levy taxes on the new value. Holding a share does not cause any taxes, as long as the investment will be sold. Therewith, Bu? ett did not pay taxes as much as his colleagues that trade frequently. Either way, Bu? ett’s preferred holding period is forever. This strategy particularly bene? ts private investors that have bought stocks of Berkshire Hathaway. At least in Switzerland, the government does not impose taxes on capital gains. In the shareholder letter from 1992, Bu? tt breaks his strategy down to a few cornerstones of the valuation process: „We select our marketable equity securities in muc h the way we would evaluate a business for acquisition in its entirety. We want the business to be one (a) that we can understand; (b) with favorable long-term prospects; (c) operated by honest and competent people; and (d) available at a very attractive price (p. 12). † First, Bu? ett never buys a business that he does not understand entirely. This requires a full comprehension about the industry such as competitors, value chain, costumers, and so on. For this reason, Bu? tt avoids industries with a high rate of change (e. g. technology industry). The second criterion that a business must live up to is a competitive advantage. Preferably, he is looking for businesses that have potential to improve their competitive positions within the industry. Third, but less important, Buffett is looking for competent management. It is less important, because according to him a company with a durable competitive advantage can even operate with ordinary managers and generate extraordinary r eturns (Bu? ett and Cunningham, 1997, p. 21). Finally, a margin of safety prevents Warren Bu? tt from mistakes or unforeseeable developments. It seems that soft factors play an important role for him in the valuation process. Correspondingly, fundamental analysis is only half the battle. The following quote from Warren Bu? ett in the context of the hostile takeover of RJR Nabisco outlines the kind of business Bu? ett likes: „I’ll tell you why I like the cigarette business. It costs a penny to make. Sell it for a dollar. It’s addictive. And there’s fantastic brand loyalty (Burrough and Helyar, 1991, p. 218). † 11 For this reason, Bu? ett also accepts businesses that do not always have a high B/M ratio.Moreover, he seeks for businesses that have potential for improvements and buys them at a relative bargain price in the hope the business remains its advantage and yields high returns in the future. 2. 3. 4 UBS EMU Value Focus Fund The UBS EMU Value Focu s Fund is a highly concentrated and actively managed European equity fund, which holds maximally ten stocks, where each has an initial weight of 10%. The investment process is divided into seven steps (Screening process; Short list; Pre due diligence; Full due diligence; Watch list; Entry, increase/reduce position; and Exit).First, the stock universe is screened by a quantitative approach (EV/EBITDA, P/E, B/M, FCF yield) and by a qualitative approach. Second, in the due diligence process the team meets the management of the target company, they compare the company within the peer group, and determine the fair value and entry level. The team gives particular importance to the within-industry comparisons and a margin of safety of 30%. After the stock is over the due diligence, the stock is deposited on the watch list until the entry level is reached. The stock remains in the portfolio until the stock has recovered and the calculated air value is reached and the weight of the stock is less than 15% of the portfolio. If there is a more promising investment opportunity, a position will be changed. Based on the high portfolio concentration, a sector limitation makes sure that stocks which are stemming from the same sector do not surpass the threshold of 33%. If a stock’s price plunges after its purchase more than 15%, the management also pulls the trigger for safety reasons and sells the stock (UBS, 2010). The strategy of the UBS EMU Value Focus Fund equals in some aspects Warren Bu? ett’s strategy.Both distinguish themselves from Piotroski’s and Schlosser’s strategy insofar as they include a due diligence process that goes beyond a fundamental analysis (e. g. valuation of the management). Furthermore, both strategies do not strive for diversi? cation, although the UBS EMU Value Focus Fund includes some risk management factors that compel the management to exit in certain circumstances. Warren Bu? ett, on the other hand, restricts himself by avoiding complex businesses. The two strategies also di? er insofar as the UBS EMU Value Focus Fund has a relatively short investment horizon of 18 months, whereas Bu? tt holds a stock over decades. 12 2. 4 Value vs Growth—Fuzzy Thinking! Although there is a broad variety of value strategies, it seems that the discussion about value investing leaves little room for interpretation. Nowadays, the bulk of academics di? erentiate between value and growth (glamour) stocks. They ? nd that stock-speci? c fundamental attributes such as a low P/E ratio (Basu, 1977; Ja? e, Keim, and Wester? eld, 1989), low cash-? ow-to-price ratio (Chan, Hamao, and Lakonishok, 1991), and high B/M ratio (Rosenberg, Reid, and Lanstein, 1985; Fama and French, 1992) earn substantially higher returns than glamour stocks.Hence, often one feels compelled to decide between value investing and growth investing. In particular, academic work has upheld the distinction, and thus, has had a strong impact on inv estment professionals. Furthermore, academic research developed style-speci? c benchmarks (Chan and Lakonishok, 2004, p. 71). In that sense, value stocks are referred to a high B/M ratio, a low P/E ratio and a high dividend yield, whereas opposite characteristics—a low B/M ratio, a high P/E ratio and a low dividend yield—are assigned to growth stocks. Some professional investment managers even see a mix of the two approaches as a smart cross-dressing.Among others, Warren Bu? ett labels this classi? cation as fuzzy thinking. Bu? ett argues that growth is always a component in the calculation of value. Nonetheless, he does not neglect that the importance of the growth component varies from negligible to very important and its impact can be positive as well as negative. Thus, a low B/M ratio, a high P/E ratio, and a low dividend yield is not per se inconsistent with „value† purchases. Business growth has often a positive impact on value but tells us little abo ut the intrinsic value of growth (Bu? ett, 1992, p. 12). All growth is not created equal, and thus must be di? erentiated.There is also value-destroying growth, which is not worth a penny. Bu? ett goes even further and scrutinizes the term value investing as such. According to him, the term is redundant because investing implies to pay less then the value of something (Bu? ett and Cunningham, 1998, p. 85). The origin of this fuzzy thinking constitutes the value anomaly that will be discussed in the following section. 2. 5 Value Anomaly Already Graham and Dodd (2008) hint at the discrepancy between market price and intrinsic value and the fact that the market often underestimates value stocks. This mispricing is called in the literature Value Anomaly.In the following section three explanations are outlined: i) a behavioral approach, ii) a risk-based approach, and iii) a competitive advantage based approach. 13 2. 5. 1 Behavioral Approach According to Graham and Dodd (2008), the irrat ional behavior of market participants can drive the price of a security in the wrong direction. As Graham outlined in his book the Intelligent Investor, emotions take part in the participant’s decisions, thus he rejects the E? cient-Market Hypothesis as well as the assumption of Homo Oeconomicus. Market participants are swayed either by positive emotions pushing up prices, or uncertainty and ? rce emotions cause a decline in prices. In general, both results in ine? cient and undesirable market upshots. De Bondt and Thaler (1985) already ? nd evidence that markets overact to unexpected and dramatic news events. Moreover, contagion ampli? es this process of counter-productive behavior, taking a central part of the game, especially in crisis when panics gain the upper hand and investors disinvest despite of existing reasons to act to the contrary. 1 Not only irrational behavior induces a discrepancy between market prices and intrinsic value. Discrepancies can also result from ? ms of little interest, and thus, small liquidity. In particular, small companies fall through the screening raster of professional investors. Once a professional investor manages a fund of a certain size, small investments are out of range. First, small companies are like gold dust, as a consequence thereof di? cult to ? nd, and second, the monitoring costs come along with the number of investments, which makes such companies unappealing. 2. 5. 2 Risk-based Approach Whereas Graham showed that behavioral aspects distort markets and cause a gap between intrinsic value and market value, many academics hold that the di? rence does not necessarily contradict the e? cient-market hypothesis. Some argue that higher returns simply compensate higher risk (Fama and French, 1994). As basis of this argumentation line served the Capital Asset Pricing Model (CAPM), which was developed independently by Sharpe (1964) and Linter (1965) in the 60’s based on Markovitz’s portfolio theory. The model shows the coherence between the expected return of individual securities and systematic risk (market risk). Whereby ? of a security is a parameter describing the relation of its return with that of the overall market.The equation of the CAPM can be summarized as follows: 1 Cella, Ellul, and Giannetti (2010) write in their paper about „Investors’ Horizon and the Ampli? cation of Market Shocks† that stocks which are held in a large part by short-term investors are more likely to plunge under their intrinsic value. They also instance that fund managers often follow restrictions, which do not lead to optimal purchases or sales. 14 E(Ri ) = Rf + ? i (E(Rm ) ? Rf ) (2. 2) where E(Ri ) is the expected return of a speci? c asset, Rf is the risk-free return rate, and E(Rm ) is the expected return of the market.Already Rosenberg, Reid, and Lanstein (1985) give rise to the assumption that the CAPM can not fully explain the correlation between expected returns and t he risk of an individual security. As a one factor model implies, the CAPM oversimpli? es the complex market. Therefore, Fama and French (1992) introduced a three-factor model that is an extension of the CAPM. Basically, they improved the CAPM by adding two more factors: (i) they distinguished between high and low B/M ratio, and (ii) classi? ed stocks according to market capitalization (price per stock times number of shares outstanding).The equation of the extended CAPM can be summarized as following: r = Rf + (Km ? Rf ) + bs ? SM B + bv ? HM L + ? (2. 3) where Rf is the risk-free return rate, Km is the return of the entire stock market, SM B (small minus big) is the di? erence between small and big ? rms according to their market capitalization, HM L (high minus low) is the di? erence between high and low B/M ? rms, bs is the corresponding coe? cient to SM B, and bv is the corresponding coe? cient to HM L. Based on this, Fama and French (1992) argue that high B/M ? rms’ pr ospects are judged relative poorly to ? ms with low B/M ratios. As already postulated by Chan and Chen (1991), Fama and French also interpret high B/M ? rms as ? nancially distressed (see also Piotroski, 2000). They adduce the explanation that a high B/M ratio inheres in a relatively high ? rm’s market leverage compared to its book leverage. Furthermore, they ? nd that during some periods (at least ? ve years) low B/M ? rms remain more pro? table than high B/M ? rms. Fama and French (1992) argue that more risk is inherent with a higher B/M ratio. In other words, value stocks are riskier than „glamour† stocks. Opposed to this, Gri? and Lemmon (2002) show that large returns of high B/M ? rms are inconsistent with a risk-based explanation. Arshanapalli et al. (1998) show 15 that value stocks generally have a risk-adjusted performance superior to that of growth stocks (p. 23). Thus, the value anomaly can be traced back to a mispricing of stocks due to overly optimisti c valuations of „glamour† ? rms. Once this mispricing is revealed, these ? rms earn negative excess returns. According to Chan and Lakonishok (2004), investors, in particular professional investment managers, focus their attention on apparent „glamour† stocks while stock prices of high B/M ? ms plunge under their fundamental value. Hence, investing in high B/M ? rms is likely to be a rewarded long-term investment strategy (p. 85). Moreover, Anderson and Smith (2006) ? nd that a portfolio of the most admirable companies substantially outperforms the market, and thus contradicts the e? cient market hypothesis. As a consequence, the risk-based explanation has lost many of its supporters over the last years and the value anomaly remained unexplained. 2. 5. 3 Competitive Advantage Based ApproachAlthough it is probably the closest explanation, academics rarely make the competitive advantage of a company accountable for the superior performance and excess returns of a company. According to them, competitive advantages must theoretically fade away. But in reality this is not always the case. New academic research indicates that the risk driver refers more to the riskiness of losing the competitive advantage (Mauboussin and Johnson, 1997; Greenwald, Kahn, Sonkin, and van Biema, 2001). This could be the case if new competitors enter the market and/or in industries where the rate of technology changes is high.On the one hand, new technologies open up new opportunities for existing players, but on the other hand, they also carry the risk that entrants come up with new products and technologies that force existing players to keep up with the changes. This kind of competition is often quite expensive and indicates that excess returns can be wrest away easily. Therefore the risk of businesses, which are exposed to such changes, is higher than of businesses that sell products with marginal changes. Of course, some companies even maintain their competit ive advantages in fast-changing industries over decades (e. g. Microsoft, Inc. r maybe Facebook) due to customer retention and network e? ects, which create switching costs on the demand side and enormous costs to enter the market on the supply side. The mispricing of such companies that exhibit a durable competitive advantage originates from the complexity in identifying such companies in advance. The following chapter elaborates a bit more on this and points out the state of the art as well as the existing research gap. 16 Chapter 3 Literature Review 3. 1 Competitive Advantage Competitive advantage is a central theme in value investing that has often gone forgotten in the heated debate about the value anomaly.Although an immense number of books and papers have been written about competitive advantage, it has not found proper entrance into the value discussion. Nonetheless, it is an essential part in the valuation process of a company. Greenwald, Kahn, Sonkin, and van Biema (2001) break the Graham and Dodd framework down to three main sources of value (see Figure 3. 1): (1) the asset value, (2) the earning power value, and (3) the value of growth. All three elements must be involved in the calculation of value—also growth (pp. 35-47). The asset value equals the reproduction costs of the assets and is therefore the most reliable source of value.The second most reliable measure of a ? rm’s intrinsic value is the value of its current earnings (earning power value). The earning power value equals current earnings divided by the cost of capital, assuming that the growth rate is zero. The deviation between the asset value and the earning power value equals the franchise of a company. What they call Franchise is referring to the competitive advantage and describes the same phenomenon—the ability to earn more on a ? rm’s assets than it is possible under perfect competition (p. 41). The least reliable source of value is growth, because it i s the most di? ult element of value to estimate and therefore obtains last priority in the valuation process. According to Greenwald, Kahn, Sonkin, and van Biema (2001), growth is only valuable if it is within the franchise. Correspondingly, growth that only increases revenues, earnings or the assets of a ? rm does not create additional value. Growth is valuable only if a company can extend its pro? tability by the means of its competitive advantage. 17 Figure 3. 1: Three Slices of Value Nevertheless, excess returns, which exceed the cost of reproducing a ? rm’s assets, are under the assumption of perfect competition not possible (see Mankiw, 2004, pp. 4-65). As soon as a company earns more on its assets than its reproduction cost, it will attract new competitors, and thus, erode the excess returns until the earning power value equals the value of assets. However that may be, economic theory about perfect competition is seldom the case in reality. Some companies have enjoyed a competitive advantage even over decades (e. g. The Coca-Cola Company or Microsoft, Inc). There have been many research studies conducted on competitive advantage and a huge number of drivers have been found. 1 Without going too deeply into the di? rent drivers, it might be worth to mention the most common: searching costs, switching costs, and economies of scale. By the means of switching costs, a company can create a lock-in: once somebody has chosen a technology, switching can be very expensive (Shapiro 1999, pp. 11-13). Microsoft, Inc. is probably the best example to illustrate a lock-in e? ect. Changing from MS O? ce Word to another writing program is costly. It raises the annoying problem that the formats are not compatible, and thus requires much e? ort that is more costly than remaining with MS O? ce Word. Switching costs can hange over time as buyers alter their products Thomas Fritz (2008) has conducted an extensive literature review of over 140 empirical investigations p ublished between 1951 and 2007. He comes to the conclusion that the di? erent drivers for a competitive advantage are as manifold as the number of studies and that there is no such as a universally valid driver as one could assume. 1 18 and processes (Porter, 1998, p. 296). Another kind of lock-in occurs by search costs. Search costs occur as buyers and sellers attempt to ? nd each other and establish a business relationship (Shapiro, 1999, p. 26). Finally, a competitive advantage arises by economies of scale. Porter (1998) describes economies of scale as the ability to produce more e? ciently at a larger volume (p. 70). But one should note that economies of scale by themselves do not constitute a competitive advantage. In addition to economies of scale, it needs a demand advantage, which does not have to be big. Once a demand advantage exists, economies of scale in the cost structure will transform superior market share into lower costs, higher margins, and higher pro? tability (Gr eenwald, Kahn, Sonkin, and van Biema, 2001, p. 0). Correspondingly, products or services that pro? t from high purchase frequency often enjoy a demand advantage that derives from a habit (e. g. the cigarette industry). Still, it is not written in stone that a competitive advantage lasts for an in? nite period if once achieved. Although a vast number of studies examined the attributes of a ? rm with a competitive advantage, considerably less studies have elaborated on the sustainability of a competitive advantage and the reason why some ? rms enjoy a competitive advantage for decades and other only over a short period. The in? ence of the Competitive Advantage Period (CAP) on the valuation of a ? rm’s shares has also been largely ignored by the literature, although the notion derives its origin from Miller and Modigliani (1961). The term itself appeared in the 90’s in numerous writings. The concept that was developed in Miller and Modigliani (1961)’s seminal pape r on valuation can be summarized as follows: V alue = N OP AT I(ROIC ? W ACC)CAP + W ACC (W ACC) (1 + W ACC) (3. 1) where NOPAT represents net operating pro? t after tax, WACC represents weighted average cost of capital, I represents annualized new investment in working and ? ed capital, ROIC represents rate of return on invested capital, and CAP represents the competitive advantage period. The CAP can be identi? ed, as shown in Equation 3. 1, as a fundamental value driver among risk and cash ? ow. In order to get the CAP we can rearrange Equation 3. 1 as follows: CAP = V alue (W ACC ? N OP AT ) (1 + W ACC) I (ROIC ? W ACC) (3. 2) As Mauboussin and Johnson (1997) assert correctly, this equation has some shortcomings that constrain its practical scope, but it illustrates how the CAP can be con19 ceptualized in the valuation process.According to Mauboussin and Johnson, the key determinants of CAP can be captured by a handful of drivers. The ? rst key determinant is ROIC that re? ects the competitive position within an industry, whereas a high ROIC indicates a strong competitive position. Generally, it is costly for competitors to snatch competitive advantage from high-return companies. The second key determinant is equally important, and measures the rate of industry change. High returns in a fastgrowing industry do not have the same signi? cance as returns created in a stagnated or even shrinking industry. The third driver re? cts the barriers to entry, which is essential for sustainable high returns on invested capital (pp. 68-69). 3. 2 Pro? tability Measurements High-return companies, which have returns in excess of the cost of capital, also capture Warren Bu? ett’s attention. As Mauboussin and Johnson (1997) note, a constant CAP is contrary to economic theory, but it might be achieved through outstanding management. However, companies with a stable CAP are everything but simple to ? nd (p. 71). As mentioned above, Equation 3. 2 has limited practical s cope; thus, in order to evade this problem other performance measures have to be found.In practice, there are many di? erent performance measures, but this thesis will focus in particular on ROE. Fritz (2008) shows in his investigation that ROA and ROE are two of the most frequently applied accounting-based performance measures (p. 31) regarding competitive advantage investigations. Both are pro? tability measurements and capture the relation of return on applied capital. ROE measures how much pro? t a company generates for shareholders while ROA states how e? cient the asset management is. The higher the pro? tability, the better is a ? rm’s economy and the stronger its competitive advantage.Nowadays, less attention is paid to the ROE. Sharpe, Alexander and Bailey (1999) mention the ROE only marginally and Spremann (2007) devote less than one page to it. Nonetheless, ROE has not lost its usability entirely, but Spremann sees the reason for the decreasing importance in the fa ct that shareholders orient themselves more toward market values instead of book values. Provided that, market ratios (e. g. P/E ratio) gained increasingly attention. But since superior earnings are generated based on a competitive advantage, it must remain a core theme in the valuation process, in particular for the long-term investor.Pro? tability measurements tend to change over time; thus, forecasting future profitability is a task that many practitioners and academics would label speculative. On 20 the other side, pro? tability is mean reverting in a competitive environment. Thus, nothing is simpler than predicting long-term pro? tability, which must be zero in the long run. Freeman, Ohlson and Penman (1982) already found evidence that ROE follows a mean-reverting process. Almost twenty years later, Fama and French (2000) found strong evidence of mean-reverting process in terms of pro? ability and estimated a rate of mean reversion of 38% per year. Assuming a ? rm’s ROE of 20% above mean will shrink below one percent after ten years and therefore lose its competitive advantage—,this corresponds to 38% reversion rate. This is also in line with Chan, Karceski and Lakonishok (2003)’s expectation that superior operating performance cannot be sustained for more than ten consecutive years. Furthermore, Fama and French (2000) show that mean reversion is faster below its mean and when it is further from its mean in either direction. However, Penman (1991) scrutinizes ROE regarding its su? iency to predict future pro? tability. According to him, ROE indeed exhibits a mean-reverting tendency, but it proves a too-strong persistence over time. Hence, he suggests that B/M multiples are better indicators of future ROE than current ROE, and a combination of both increases persistence in ROE even further. 3. 3 Research Gap and General Approach Some research has been conducted about predicting future pro? tability. Though these studies deal in particu lar with the issue of predicting the near future. Thus, this study claims high expectations by predicting long-term pro? ability, with the notion that „longterm† means in this study a period of ten years. There are several papers that postulate a mean reversion of pro? tability measures (Freeman, Ohlson and Penman, 1982; Penman, 1991; Lipe and Kormendi, 1994; Fama and French, 2000; Nissim and Penman, 2001). Soliman (2008) forecasts out-of-sample future changes in RNOA ? ve years into the future by applying the DuPont analysis. All these studies have in common that they investigate one ? nancial measure (or two) in time. Thus, this study intends to close these two gaps. In the following chapter, ? rst, several ? ancial measures will be considered regarding companies with a durable competitive advantage, and second, it will be hypothesized that predicting long-term pro? tability (up to ten years) is possible. 21 Chapter 4 Analysis of Long-term Pro? tability The following c hapter aims to determine indicators in order to forecast long-term profitability. Thus, the chapter is structured in four sections: Section 4. 1 describes the data sample and the adjustments. Section 4. 2 deals with the classi? cation of superior performers in terms of ROE and analysis of the persistence of superior performance.Subsequently, the analysis of ROE performance deciles according to persistence is centre stage. Section 4. 3 involves the analysis of further ? nancial measures regarding the ROE persistence deciles. The starting point of this section is the DuPont Identity, which breaks the ROE measure down into further ? nancial measures. The aim of this section is to ? nd speci? c characteristics that will serve in Section 4. 4 to separate ? rms in advance according to future superior performance years. Finally, Section 4. 6 investigates the ROE persistence deciles according to market ratios (i. e. B/M ratio and P/E ratio). . 1 Data Sample A reliable analysis depends to a great extent on the size of the data sample. The size, in turn, is determined by company years (i. e. number of companies times number of years) that are considered. All data in this study originates from COMPUSTAT if there is no explicit mention of it. COMPUSTAT provides historical data of US companies with available historical annual data from 1950. For this study, the dataset on COMPUSTAT was screened for all companies that were listed on any stock exchange in the United States (including inactive companies) with a primary SIC classi? ation between 2000 and 3999. The data was selected at the end of each calendar year between 1979 and 2009. Hence, historical data for the following investigation is available for thirty-one years. Similar to McGahan and Porter (2002), all records from the dataset that do not 22 contain a primary SIC designation after extraction or any that were not within the stated range were dropped out of the sample. The restriction to companies containing a prim ary SIC classi? cation between 2000-3999 corresponds to the manufacturing division, which contains twenty subdivisions (see Table C. ). Focusing on one division has the advantage that the ? rms have a similar value chain. All manufacturing ? rms have in common that they purchase raw materials or components and manufacture these materials to more mature products, which will be sold to a seller or for further processing. Seldom, do these companies sell the product directly to the ? nal consumer. Drawing comparisons among ? rms with similarities regarding their value chain is simpler and also more reliable. Given this restriction to manufacturing companies, 3844 companies are available. It is art of a dynamic industry process that listed companies disappear and new companies appear on trading lists of stock exchanges. This fact leads to certain problems, which were not always considered properly in prior studies. For the sake of convenience, some researchers have considered only compan ies with available data for the entire sample period. Thus, they have excluded companies that were passing through either a delisting or an initial public o? ering (IPO). Others have ignored in their investigation only inactive companies. In this category fall two cases, in particular: Either a company did not survive the entire period due to ? ancial distress and subsequent bankruptcy or it was the target of an acquisition by another company. Ignoring inactive companies would distort the relative ? nancial performance of other companies in the same group in the same period. Not least, since pro? tability depends on competition, it is important to include inactive companies to reduce the e? ect of survivorship bias as it is important to take new competitors into consideration. COMPUSTAT provides the option to also include inactive companies into the sample. Many researchers assume that newly-listed companies show high growth rates that are not economically signi? ant for the compari son to other companies, and thus, lead to distortions (see McGahan and Porter, 2002; Rumelt, 1991; Schmalensee, 1985). Hence, they exclude all companies from the data sample that exhibit less than $10 million in sales. Following these researchers, the sample in this study contains only companies with sales of at least $10 million during the entire sample period. All companies that come below this threshold for any year in the sample period were excluded. After these adjustments, the sample comprises 1905 companies.In order to avoid the possibility that companies distort the calculation of growth rates through short-term measurements, companies with less than ? ve years of ? nancial history were excluded. There is evidence that suggests that window-dressing before an IPO a? ects the performance of subsequent years after the IPO. For instance, Jain and 23 Kini (1994) ? nd that IPO ? rms exhibit a decline in post-issue operating performance (see also Degeorge and Zeckhauser, 1993). The refore, only ? rms with at least ? ve years of ? nancial data on COMPUSTAT items listed in Table 4. 1 were included. Table 4. 1: COMPUSTAT Items This table shows all items hat are downloaded from COMPUSTAT. A more detailed description is given in Appendix A. Companies that have missing data on one of these items are excluded fr