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Tag Archives: CFA Institute Research Challenge

UMD Shines on the Big Stage

3rd April, 2018 · CFAMNEB · Leave a comment

University of Minnesota Duluth seniors Ryan Woitalla, Reed Leonidas, Nawal Mirza, Frank Takkinen and Ryan Kimbrel earned an opportunity of a lifetime last month by winning one of the two sub-regions of the CFA Institute Research Challenge – Americas competition on March 19-20. The team, all members of UMD’s Financial Markets Program, are led by program director Joe Artim.

After winning the Upper Midwest local competition in Minneapolis in February, the UMD team advanced to the CFA Institute’s version of March Madness, which brought 54 teams and more than 250 students to Boston from countries such as Argentina, Brazil, Chile, Peru, Colombia, Mexico, Barbados, Dominican Republic, and Canada.

The Americas Regional clearly demonstrated to be a very challenging and demanding competition. Every team in Boston advanced out of local competitions collectively besting hundreds of other teams. In speaking with one of the finals judges, it was evident that the margin of victory between teams was very small. Additionally, a 10 minute presentation with 10 minute Q&A certainly leads to a lot of information to communicate and a lot of information for the judges to evaluate. A premium had to be placed favoring those teams that were clear in their recommendation while weaving together facts to support it.

March 20 seemed to be an anxiously long day for the five UMD students who presented their investment recommendation on their subject company Fastenal first in the morning semi-final session before advancing out of the five team pool to the evening finals round. By the time the finals took place that evening, the 54-team field was down to just five for each of the two sub-regions.

On the big stage with the bright lights, the UMD team shined not only in their extensive presentation but perhaps most importantly in the Q&A segment of their “buy” recommendation. My sense was that UMD prevailed not by focusing solely on the 10 minutes of prepared presentation but by spending six months truly grasping a deep knowledge of the company and conducting the proprietary research necessary to excel in the pivotal and unpredictable Q&A.

Faced with advanced questions on the company’s inventory turnover, product mix evolution and future in the face of a growing e-commerce threat, the team seemed to stay in stride. Further, questions on insider trading and short interest could have been easy to overlook or misinterpret.

They now head to Kuala Lumpur, Malaysia for the Global competition on April 27.  Just five teams will compete at this level: two from the Americas Regionals, two from the EMEA Regionals, and one from the Asia Pacific Regionals. It will be a couple more weeks of following the tick-by-tick of FAST for the five students who showed the drive, knowledge and teamwork to continue to break new ground for UMD.

 

Christopher Young, CFA is a Senior Investment Manager for Wells Fargo Wealth Management and a volunteer for our local Research Challenge competition. He traveled to Boston for last month’s Americas Regional and wrote this first-person account of UMD’s success.

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Posted in Hot Topic Commentary | Tags: Americas Regional, CFA Institute Research Challenge, FAST, Fastenal, global competition, UMD, University of Minnesota Duluth |

Volunteerism is Currency that Appreciates

5th March, 2018 · Craig Popp, CFA
Craig Popp, CFA

People choose to volunteer for a variety of reasons. Some want to give back to their community or support a cause they’re passionate about. Others see it as a way to develop a new skill or build real-world experience. Volunteering is an excellent way to boost your career prospects. But for many, it’s because someone asked them.

Don’t believe me? I’ll offer you proof. According to PTO Today, the number one reason people say they don’t volunteer is because no one asked them. It’s worth noting the asking part requires a personal approach. I am the example. My participation on the CFA Society Minnesota (CFAMN) Membership Committee began with an email from your Society Vice President, Chris May, CFA.

Hey Craig,

I hope that you are doing well. I wanted to follow up on something that we talked about a while back – CFAMN participation. Would you still be open to being a little more involved if it could work with your schedule? I lead the Membership Committee which is responsible for a few things, but in reality our main function is to ‘add value to CFAMN members.’ We have plenty of freedom to execute that……..

We lost a committee member due to relocation, but were lucky enough to gain a new member quickly. However, I would like to have one or two more individuals and I thought of you……

In the past, I made false promises to myself about getting involved. First it was “After I pass Level III.” Then “I have to finish grad school.” I easily could have said no to Chris with a valid excuse—given that I live 100 miles west of Minneapolis. You can surmise that I said yes.

The experience has been fulfilling. Witnessing engagement ideas develop is one of the highlights for me. Do you like seeing the Membership Milestones on the monthly email from CFAMN? That was a Membership Committee idea. Personally, I suggested an individual who participated in the Industry Roundtable event held last fall. I was proud to make a contribution to that great event.

Being an outstate volunteer isn’t as difficult as I thought it would be. The committee meets four to six times per year. I have attended half the meetings in-person and the other half via teleconference. When I attend in-person, I typically spend the day in the metro area conducting client meetings or catching up with colleagues. The committee also tries to schedule our meetings to coincide with other society events such as the Society Social or luncheons.

I’ve learned that involvement is a great way to meet people, and I’ve been able to develop relationships with other committee members. Attending society events is also more enjoyable—predominately because I know more people. Have you ever attended a Society Social and felt awkward that you didn’t know anyone? These events are littered with Society volunteers.

Volunteering is good for you—for your health, your career, your self-esteem and enhances your Curriculum Vitae. I’ll simply conclude by following the lead of Chris May and ask you to get involved with CFAMN. Many of your society committees are looking for help. If that’s not for you, CFAMN is always looking for volunteers to help with things such as the mentoring program, CFA Institute Research Challenge, or simply to have coffee with someone who wants to learn more about the CFA Program.

 

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.

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Posted in Hot Topic Commentary | Tags: CFA Institute Research Challenge, CFA Program, CFA Society Minnesota, Committees, luncheon, Membership Committee, mentoring program, outstate volunteer, Society Social, Volunteer |

CFA Institute Research Challenge: Upper Midwest Finals

2nd March, 2018 · Craig Popp, CFA
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.

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Posted in Hot Topic Commentary | Tags: Americas Regional competition, CFA Institute Research Challenge, CFA Society Minnesota, equity research and valuation, global competition, investment report writing, University of Minnesota Duluth, university students, Upper Midwest Finals, Volunteers |

Judging the Research Challenge

10th April, 2017 · Tom Brakke, CFA · Leave a comment
Tom Brakke, CFA

The Americas finals for the CFA Research Challenge were held in Seattle last week.  Out of 53 teams that presented, two advanced to the world competition that will be held in Prague later this month.  The winners were Seton Hall University and Barna Business School.

Now in its eleventh year, the Research Challenge has grown to include more than a thousand schools and five thousand student participants.  At the local level, all teams perform an analysis on a company picked by the CFA society or group of societies that are sponsoring the competition.  They prepare a written report and give an oral presentation.  Each local event yields a winning team that goes on to the regional competition.  (Our local entrant, the University of Minnesota Duluth, lost to Seton Hall in the semifinal round.)

I had the opportunity to serve as a judge for one of the semifinals this year, my first exposure to the Research Challenge.  Separate graders rate the written reports (which count for fifty percent of the final score); I was one of three judges that evaluated the content and delivery of the presentations by five teams.

It is a demanding format, for the students and the judges.  The presentations are limited to ten minutes, followed by a period for questions and answers of the same length.  That is very little time for the students to convey – and the judges to digest – an incredible amount of information.

The judges were given the names of the subject companies in advance, so that we could do some research in preparation, but we had no knowledge of a team’s thesis or recommendation until the start of their presentation.  We had a little time after each presentation to make notes and then finalized our scores (in the categories of financial analysis, valuation, presentation, Q&A, participation among the members of the team, and slides) for compilation.

I also watched the final round of one of the brackets, so between the two parts of the competition, I saw ten presentations.  I was struck by the fact that much of the feedback that I would offer students preparing for the Research Challenge is the same that I give to professionals.

The most important factor is that ten minutes is very little time to tell an effective story.  Given the depth and breadth of the work that has been put into the analysis, the tendency is to try to cram as much information as possible into that amount of time.  I’d recommend a more minimalist approach, focusing on the key issues and just a few important charts, striving to impress upon the listeners the salient aspects of the analysis.

Along with that, slides should be clean and clear.  Too much information on a slide (that goes by quickly because there are too many slides) is difficult to comprehend.  It does give the impression that a lot of work has been done, but there are other ways to do that without sacrificing comprehension.  Simpler is better in most communications settings.  Even experienced professionals have trouble processing information when it is flying by at warp speed.

Like most professional analyst reports, the student evaluations come across as entirely too precise for the real world.  Fair value estimates and/or target prices are quoted to the penny – in the slides, in the presentations, and in the responses to questions.  Each of those is better presented as a fuzzy range than a single point of reference.  The figures to the right side of a decimal point are surely superfluous in the scheme of things.

Speaking of target prices, if they are used a time frame should be attached, as well as an indication of how much of that price change is attributable to the mere passage of time.  Unfortunately, that’s often not the case, so a current fair value range is preferable (at least to me) to a target price, but students are led astray in that regard by the wide use of target prices by professionals (often mostly for marketing purposes).

At the end of a presentation, students and professionals alike like to have a slide that says, “Questions” or “Q&A.”  I think that’s a mistake.  Everyone knows it’s that time.  Instead, it’s better to leave a key concept or chart on the screen for people to ponder upon, not a slide that adds no value.

However, in most cases during the competition that question slide didn’t linger too long.  The teams usually had one student running the computer, selecting exhibits to support their responses to the questions that were asked.  The teams that clicked back and forth looking for them burned up a lot of time, but several of the teams had intricate trees of slides at the ready to support their case (sometimes close to a hundred of them).

The effectiveness of that strategy was mixed, depending on the quality of the particular slide and its pertinence to the question at hand.  Many questions should be answered directly, without referencing a slide.  Doing so is more efficient and shows a command of the material that can impress the judges even more than showing an exhibit.  But sometimes the exhibits help.  Knowing when to use them and when not to use them is an important part of becoming an effective communicator.

As is knowing when to say, “I don’t know” or “we did not look at that specific issue.”  It is hard to do that, thinking that you are admitting weakness, but honesty builds trust.  Answering a question with a tangential thread that happened to have been rehearsed but is off point is likely more damaging to your cause than supportive of it.

In a team format, you have to trust your teammates to provide a good response and not be too eager to add on additional information unless it is very important.  In some cases, it seemed like everyone added their two cents, but only some of the additional comments were necessary or helpful.  Several detracted.

In addition, it’s good to remember that a short answer is best when that is what the question calls for.

In a competition, whether it’s during the Research Challenge or between asset management firms trying to win a piece of business, there is always a question of how much you should stand out from the crowd.  Doing things like everyone else – in your analysis or your communication – is lower risk and provides a level of check-the-box comfort, but it probably lessens your chance of winning.

The presentations by students tend to have many things in common with each other, so I would suggest that teams look for opportunities to be different, picking their spots to surprise the judges with something fresh, even in little ways.

I think every presentation that I saw included a Monte Carlo analysis for the stock price of the company under review.  The number of trials performed seemed to be mentioned every time (with some teams citing an extraordinary number of trials performed, as if that conveyed more power than it really does), but not one gave the kind of context that would have made the analysis mean something more significant.  For example, by citing the key variables and the ranges for them that were used (and why), a team could provide a window into their analytical process and differentiate themselves at the same time.

To reiterate, these quibbles and concerns are just as applicable to professionals, so the students shouldn’t feel like they were particularly deficient in those areas.  But future participants might benefit from stepping apart from the norms that tend to evolve in competitions like this, and take some chances aimed at communicating a story that doesn’t look like that of past winners or other teams that they face.

I appreciated the opportunity to witness a group of impressive young people demonstrate their abilities.  There is no doubt that the Research Challenge presented them with a unique opportunity to polish their skills.  I always say that, at a high level, all investment roles can be evaluated via a simple formula:  analysis plus communication.  This competition helps students to develop each of those capabilities, which will aid them in any investment career that they might have or any other vocation that they choose to pursue.

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Posted in Hot Topic Commentary, Local Charterholders | Tags: analysis, CFA, CFA Institute, CFA Institute Research Challenge, Research Challenge, Tom Brakke |

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