Category Archives: Hot Topic Commentary

CFA Institute Research Challenge: Upper Midwest Finals

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Craig Popp, CFA

On February 15, 2018, CFA Society Minnesota hosted a local finals for the CFA Institute Research Challenge at the Thrivent Auditorium in downtown Minneapolis.

If you’re not familiar with the Research Challenge, below is a bit of information courtesy of CFA Institute. Complete details can be found on the CFA Institute site.

The CFA Institute Research Challenge is a global competition that tests the equity research and valuation, investment report writing, and presentation skills of university students. The first Research Challenge competition was hosted by the New York Society of Security Analysts in 2002 and involved just five teams from the New York area. Since then, the competition has grown to involve thousands of students from over 1,000 universities in more than 75 countries.

Prior to the local finals round, 13 university teams submitted written reports as part of our society’s local competition. Those reports were graded by CFA Society Minnesota volunteers based upon the following criteria:

  • Business Description
  • Industry Overview & Competitive Positioning
  • Investment Summary
  • Valuation
  • Financial Analysis
  • Investment Risks
  • Corporate Governance

Out of the papers submitted, five were selected to advance to the local finals. This year’s finalists were Bethel University, University of Minnesota (undergrad), Gustavus Adolphus (team #2), North Dakota State University, and University of Minnesota Duluth. Each team had ten minutes to present their analysis which was followed by ten minutes of question and answer from the judges. Volunteer judges scored the presentation according to the following criteria:

  • Financial Analysis: How thorough was their analysis of the industry, company, and competitors?
  • Valuation: Were the valuation methodologies appropriate and detailed?
  • Presentation: How effective/convincing was their presentation? Was it logical and did the facts support the recommendation?
  • Question & Answer: Were they able to answer the questions effectively and with confidence?
  • Team Involvement: Team involvement in the presentation/questions and answers.
  • Materials: Quality of slides.

Congratulations to University of Minnesota Duluth on their win. They will move onto the Americas Regional competition being held in Boston March 19-20.

This was my first time attending a Research Challenge event. I did so mostly out of curiosity, but was also on a scouting mission as I’ve contemplated volunteering to support this event. Below are a few of my observations.

A Strong Competition

While UMD won, two teams tied for second place. Without the benefit the seeing the final scores, I’m guessing the top three were close. “Keeping score” on my own, I thought two teams were relatively equal. Forced to choose, I would have given the nod to the eventual winner.

Presentation Skills Matter

An area where the UMD students separated themselves was their presentation delivery.

Their stage presence was noticeable—speaking with powerful voices and working the stage. This team conveyed the highest confidence of their analysis. That was particularly apparent during the Q&A when one judge asked about the team’s opinion of company management (a question given to all teams). All teams gave a formidable answer. However, most began with the phrase “We think” or “We believe.” UMD provided the following answer: “They are the perfect management team to run this company, because….”

One might consider this a bit of gamesmanship, or maybe my observation is splitting hairs. With that said, when the difference between competitors is small, it’s the little things that make the difference.

This is your Competition

I’m stealing this line from Patrick O’Shaughnessy’s Invest Like the Best podcast. Each judge noted how much farther ahead these students are compared to when they themselves were undergraduate students. I would echo that comment. Experienced professionals might not be running scared. However, if you are a graduating college student and these individuals are your competition, you should be worried.

Duluth Dynasty

UMD has won the Upper Midwest Finals three of the past four years (2018, 2017, & 2015). If this were football, the term dynasty might get used. Their success seems to have created a sense of pride among alumni as they had a large following from the audience.

If you would like another perspective about the Research Challenge, I would suggest reading Tom Brakke’s Freezing Assets post. He was a judge for the 2017 Americas finals and offers a great synopsis of the experience—and some advice for future competitors. If you would like to get involved with the Research Challenge, there are multiple volunteer opportunities as your society needs help in the form of industry mentors, report graders, and presentation judges.

 

Bio/Disclosures

Craig Popp, CFA is a Financial Advisor with Raymond James Financial Services, Inc. Member FINRA/SIPC located at 115 Litchfield Ave SE, Willmar, MN. Craig Popp can be contacted at 320-235-1416 or craig.popp@raymondjames.com. Any opinions are those of Craig Popp and not necessarily those of RJFS or Raymond James. Expressions of opinion areas of this date and are subject to change without notice. Investment Advisory services offered through Raymond James Financial Services Advisors, Inc. Raymond James is not affiliated with CFA Society Minnesota.

2018 Annual Dinner Recap

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By Elliot Smallidge, a student at the University of Minnesota Carlson School of Management, Class of 2019

I was ecstatic when I heard about the opportunity to see Professor Jeremy Siegel speak. As the highly acclaimed author of Stocks for the Long Run, I knew that Dr. Siegel’s lecture would complement everything I had learned in school. His take on investing would corroborate the conclusions of class after countless class: buy and hold stocks because you can’t beat the market. I arrived at the Minnesota CFA Society Annual Dinner eagerly awaiting his remarks.

Dr. Siegel contracted the flu and was forced to withdraw on short notice. Replacing him would be Doug Ramsey, CIO at Leuthold Weeden Capital. This change of speaker didn’t just shake up my night, but rather my entire perspective on investing.

Every undergraduate portfolio management class teaches that markets are efficient. No amount of fundamental analysis, and especially not technical analysis, could give an investor a sustainable edge. Enter Doug Ramsey, CFA, CMT, and master of market technicals.

His remarks upended everything I had learned in class about investing. Never had I seen anyone seriously attempt to understand markets by examining patterns in the relationships between various economic data in the way that Mr. Ramsey did. His opening comments centered on what he called the eight “Bellweather” indices. Displaying a chart of the S&P 500, Dow Jones Industrial Average, and several sub-sectors, Mr. Ramsey pointed out that every sector (except utilities) had trended upward in unison through January 26; the market was rising broadly across all industries. In a further analysis, we broke the S&P into deciles based on market capitalization and found a similar result: strong stock performance across the board. This pattern, Ramsey explained, has historically indicated not the peak of a bull market, but rather an average of 59 more prosperous weeks.

All my life I learned that there was no science to historical trends, yet here it was so clear before me. I will admit, some of Mr. Ramsey’s further analysis went a bit over my head, but his message has stuck with me. I now know that, however unpredictable the markets are, I cannot discount the value of patterns in historical data.

I was fortunate enough to meet Mr. Ramsey the next week at his office. In a phrase, the theme of our conversation was trust yourself. News outlets and publications are important, but at the end of the day, he cautioned me, your own analysis and critical thinking are the most valuable assets.

Although I did not have the chance to hear Dr. Siegel speak, my experience at the Annual Dinner altered my perspective on investing and opened my eyes to a brand new skill set in a way that I never could have imagined.

Thank you, Doug Ramsey and CFA Society Minnesota, for this wonderful opportunity.

What Do CFA Charterholders Value? Giving Back

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Elizabeth Engel, M.A., CAE

Following up on our last blog post about the member engagement project we’ve been working on for the better part of the past year, some of the key themes that emerged from Spark’s interviews with CFA Charterholders about your member experiences include:

  • Members universally recommend membership: “I would be hard pressed to identify any CFAs who aren’t members. I would be more likely to question anyone who is a CFA and doesn’t belong, particularly if they’re in the Twin Cities. There is so much good to be gained from the programs that not joining is doing your career a disservice.”
  • Volunteering of all types is very popular with those who are able. “I wasn’t sure what to expect, and it’s knocked my socks off.”
  • Members highly value the job board, and that popularity is confirmed by the fact that when you Google “CFA Society MN…,” it’s the first auto-complete option that comes up.
  • Members recognize what a major investment of resources Intellisight is and, although several noted that it is not appropriate for all members, they generally feel it’s a good investment. “[Our firm] supports the CFAMN annual conference. It’s been a great investment for us, and it has raised the profile of both the Society and the larger Minneapolis investment community.”
  • Members are largely aware of CFAMN’s “experimental mindset” and support it.

Looking to the quantitative data, the top benefits members identified include:

  • Networking opportunities, and many specifically called out that CFAMN is only responsible to provide the environment, and it’s up to individuals to take advantage
  • Job board (as noted above, Google analytics support this)
  • Luncheons
  • Participants like the mentoring program, both the formal one-on-one and the informal group mentoring
  • Senior professionals are looking to give back: speak, write, mentor

Volunteering and giving back to the profession are clearly very important to charterholders. As one interview subject said, “I want to be part of the group that takes the Society to the next level, wherever that is.” That is a common sentiment. People who’ve been involved in the CFA Institute Research Challenge are particularly enthusiastic. However, because of schedule concerns, members would like even more one-off or low-commitment options.

Several people also noted that they are aware that CFAMN has a small staff and said they would be okay being asked to volunteer for a specific task, not just come up with ideas. Staff members also know that passionate volunteers are the key to program success, so finding more volunteers – and finding out more about what they’re passionate about – is critical, and “smaller” volunteer opportunities are a good on-ramp for new volunteers.

Several members also noted that community-based volunteering activities should focus on things that use CFA skills, specifically financial literacy training, activities, or programming.

Of course, one doesn’t collect and analyze data as an end unto itself. The next question becomes: What are you going to do about what you learned? Over the next several blog posts, board and committee members will share their thoughts on that question, and the series will conclude with a roadmap post about where the Society and the Institute plan to go from here.

What Keeps CFA Charterholders Up At Night?

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Elizabeth Engel, M.A., CAE

What keeps you up at night? And what can CFA Society Minnesota do to help?

About nine months ago, CFAMN engaged Spark Consulting to try to find out.

The timing of the project was inspired by some technology changes the CFA Institute is making that will help the Societies and the Institute work together and share data better to help members like you achieve your most important goals and solve your most pressing problems.

Society leadership proposed questions we wanted to try to answer such as:

  • What do members need from CFAMN to continue to grow as financial professionals throughout their entire careers?
  • What do members truly value in their relationship with CFAMN? What, if anything, is missing?
  • Are members contributing to CFAMN in ways the Society isn’t aware of or recognizing?
  • What can CFAMN do to intentionally build and strengthen the organization’s relationships with members, and members’ relationships with each other?
  • How can CFAMN work more collaboratively with both the CFA Institute and the other Societies to better serve all charterholders?

Over the course of the summer of 2017, Spark’s CEO Elizabeth Engel interviewed four members of the board of directors, 15 charterholders, and the Institute’s Society Relations staff; and spent two days in Minneapolis meeting with CFAMN’s staff, board of directors, and membership committee in person (she also had the opportunity to attend our summer social and learn about lawn bowling). Engel also reviewed CFAMN data, including the results of several years’ worth of member satisfaction surveys and event evaluations, the Society Data Book provided by the Institute, our current strategic goals, and member program use and other demographics over time.

By the time Labor Day rolled around, she had learned a number of things about our members and your needs:

  • Going into this project, CFAMN had a theory that geographical location (Twin Cities versus the rest of our three-state region) was a strong determinant of members’ sense of connection to the Society. That theory appears to be correct: “Right now, I’m this anonymous person in the woods of northern MN; it’s hard to figure out how to be engaged.”
  • With regards to your needs, we were able to identify two programming gaps: members would like more programming for experienced professionals and more programming that’s accessible to non-Twin Cities members.
  • Members are also concerned about brand awareness: “Friends with both the CFA and a JD say it’s as hard as the bar exam, but the general public doesn’t understand that. While big financial services firms and banks understand the value of the CFA, smaller banks and firms don’t.”
  • Charterholders use financial skills in all aspects of their lives. Many of you, particularly those who pay for membership out of pocket (or out of your own small business revenues), make the actual financial calculation about membership: “Do I plan to attend enough events this coming year so that the total amount I’d save through the member discount equals or exceeds the cost of dues?”
  • Given that, we’re especially pleased to report that the overwhelming majority of you answer that question with a resounding “Yes!” The Society annually retains more than 94% of members, which is above the overall average for all Societies and for the Institute itself, where membership is required in order to continue to use the CFA designation. The Institute considers 95% retention to be “perfect,” so CFAMN is just about perfect on this measure.

What does all that mean?

We’re glad you asked!

We’ll be running a short series of blog posts over the next two months or so, sharing some more findings from the project, allowing board of directors and committee members’ to tell you their thoughts and reactions, and discussing the roadmap of where CFAMN and the Institute plan to go next in helping you continue to advance, personally and professionally.

Event Recap: Technical Analysis Workshop

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By Joseph G. Ogega, a student in Financial Mathematics at the University of Minnesota and CFA level I candidate.

On Tuesday December 5th, the CFA society hosted a technical analysis workshop with Ralph Acampora, a renowned enthusiast of market analytics. Ralph comes with a broad range of experience from Wall Street, not to mention, he’s previously served as the Director of Technical Analysis Studies at New York Institute of Finance, a currently holds the Director of Technical Research at Altaira Capital Partners.

Ralph started by giving a brief intro on how he, in the company of his friend, initiated the idea behind CMT (Chartered Market Technician), in the early days of his career. Up until then, there was no well-known technical analysis library, which he later helped set-up. He defined technical analysis as the study of data generated from demand and supply of price activity. Ralph further believes that a holistic diagnosis of market dynamics should encompass fusion of technical and fundamental analysis. He also put emphasis on trading with movements in price and volume simultaneously. Typically, stocks go through cycles of four phases of price activity: accumulation, momentum, diffusion and consolidation. This perhaps was the highlight of the workshop.

While there could be many ingenious ways of drawing trend lines, Ralph prefers the simplistic approach of connecting ascending lows and declining highs. The decision on how often one would like to trade, whether daily, weekly or monthly, will highly influence the type of time-bounded charts they will find useful. “Always keep your eyes to right of the price chart and draw them slowly to the left, looking out for ‘support’ and ‘resistance’ price-levels,” says Acampora.

In summary, Ralph shared this approach regarding investing in equities:

  1. Choose index
  2. Look at the internal breadth of the market. taking into account the proportion of stock that goes up vs. down
  3. Sentiments: includes market info, company perception and inside activity
  4. Sector analysis
  5. Intermarket analysis

As a parting thought, Ralph spoke about the four-year presidential cycle exhibited in the stock market. Historically, presidential elections year tend not to have any significant effect on the price of stocks. However, in the succeeding year, stock prices have consistently gone down, before the market recovers up until the next election period, which marks the beginning of the next cycle.