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Accounting and Company Analysis

Training session recap

Dan Pickett 0 164 Article rating: No rating

The slides we used in the latest training session are attached. During the session we discussed some key accounting concepts and reviewed where to find useful financial reports in Factset. We also discussed different types of businesses and how the competitive nature of the industry in which a company operates can be revealed in the company’s financial reports.

Following the accounting discussion, we reviewed the key elements of a stock pitch: a business overview, the investment thesis, and forecasts and valuation. We also outlined the steps in the research process that allow an analyst to put together an effective pitch.

Accounting and Company Analysis

Training session - March 10

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As mentioned at our last meeting, we are pivoting to offer more basic training in accounting and company analysis in the next training session. On March 10th we’ll review the accounting concepts and company analysis techniques reviewed in the attached presentations and in the reading described below. If you review the material in advance of our meeting you will get much more out of the session. The more questions the better. We also created this signup sheet for those interested in participating in the Associate Analyst Pitch Day April 21st. We will discuss this at the March 10th session.

REIT Investing with Tim Pire

Supplemental training session

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UW’s AREIT Director Tim Pire discussed real estate investment trusts with members during a recent session. His attached presentation covers the history of the sector, performance of different property types, and how analysts evaluate the demand drivers in order to assess FFO (funds from operations – the REIT “equivalent” of EPS) and NAV (net asset value – the value of the real estate less debt and preferred stock). There are many commonalities in analyzing REIT securities and other equity securities. The remaining training sessions will be focused on introducing the tools you need to perform your own company and stock analysis in order to develop a pitch and to  evaluate the pitches of other members.

Identifying an Idea

Special training session

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At the last regular CMC meeting, we reviewed the attached slides for identifying ideas. There are many approaches, but often the starting position reflects an investor’s philosophy about how opportunities are created and can be exploited. That philosophy can be related to investment style, i.e. some investors tend toward “value” ideas and others toward “growth” ideas. Academics define value and growth in precise terms, but it is better to think of them more conceptually and reasonable to associate them with behavioral biases. A value investor generally believes the market/investors overreacted to something causing the stocks’ price to deviate from its true intrinsic value. There is an opportunity to buy when research suggests the stock will revert to that intrinsic value as whatever caused the deviation recedes into the past or improves. A growth investor generally believes the market/investors are underreacting to a company’s favorable trends (growth). They believe there is an opportunity to buy and benefit when research suggests the growth will continue.

One way investors look for ideas is by screening for stocks with characteristics associated with growth or value. We briefly discussed the Factset Universal Screening tool. As with many of its applications, Factset includes short tutorials with its Online Assistant and eLearning resource describing how to use its Universal Screening application. You access these resources at the ? in the upper right corner of your menu if you are in the FAL or on the bottom of the left side menu on the web version of Factset. We also created the video Screening for Ideas with Factset to demonstrate how to access a CMC folder with the screens highlighted in the attached slides and to describe how Universal Screening works by walking an example. Let us know what you think.

Valuation with Multiples

Advanced Training Session - 2/11/2020

Dan Pickett 0 128 Article rating: No rating

We had good attendance at the 1st "advanced" training session last week where we focused on valuation and using multiples to develop a target price. The slides used have been added to the Training session folder accessible from the Resource Guide page of the website, but are also attached here. I've also attached the spreadsheet used to download historical fundamental and valuation data for comparable companies with Factset FDS codes. You need to use one of the computers in the FAL to use this sheet.

Many attendees had not particiapted in the 1st semester introductory training sessions. You can view the slides used in those sessions from the cmc-uwmadison.org For Members>Resource Guide page by selecting the LINK TO TRAINING SESSION SLIDES. There are also readings you may find helpful at the LINK TO RESEARCH READINGS. 

The club executive board will be sending a survey to better understand whether you found the training session of value. We have additioanl topics planned, but are prepard to pivot to whatever you collectively think will be most useful. If you participated, your response will be greatly appreciated. 

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