CFA INSTITUTE
RESEARCH CHALLENGE
HOSTED BY: CFA SOCIETY CHICAGO
SEPTEMBER 23, 2022
CFA SOCIETY CHICAGO: HISTORY
World’s first
investment
analyst’s club
founded in
1925
• 6th largest society under the CFA Institute and the world’s
oldest investment analyst's society
• Hortense Friedman is one of the sixteen founding members
and one of three women among its founding members. CFA
Society Chicago’s leadership award is named after her.
• Initial members - focused on bond analysis, ratings
• Formed forerunner of CFA Institute in 1947 with other societies
The Society
celebrated its
97th
anniversary in
2022
• Boston
• New York
• Philadelphia
• Providence
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CFA INSTITUTE: UNIQUE ORGANIZATION
• A global not-for-profit organization
• The world’s largest association of investment
professionals
• Industry leader promoting the highest standards of
ethics, education, and professional excellence
• A vast global network of members, societies, and
relationships with key financial organizations around the
world
• Neutral – multi-stakeholder members; focused on
investor outcomes
Source: CFA Institute
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CFA INSTITUTE: GLOBAL NETWORK
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CFA Institute: 190K+ Members
CFA Charterholders : 96% of Members
Global Reach :160+ Markets
CFA Society Community :150+ Local Societies
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2022 RESEARCH CHALLENGE NETWORK
6,400+ STUDENTS
3,000+ INDUSTRY VOLUNTEERS
1,000+ UNIVERSITIES
150+ LOCAL SOCIETIES
119 CFA LOCAL LEVEL CHALLENGES
Global Final & Americas Regional
Champions
Northern Illinois University
90 COUNTRIES
Representing CFA Society Chicago
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WHAT IS THE CFA INSTITUTE RESEARCH CHALLENGE?
HOW IS IT ORGANIZED?
• Worldwide intercollegiate competition between teams of students
• Organized by local CFA Institute volunteers – usually through CFA member societies
• CFA Society Chicago works with Universities to assemble teams consisting of three to five students per team
• Each university team may consist of undergraduate, graduate, or a combination of both
WHAT DOES IT INVOLVE?
• Analysis of a publicly-traded company
• Interviews with company management
• Mentoring by a CFA charterholder
• Research report writing
• Presentation of investment recommendation to a panel
of industry experts
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BENEFITS FOR STUDENTS
Experience with best practices in
In-depth analysis of a
company, including Q+A
research report writing and
presentation skills
Access and exposure to leading
investment industry professionals
with senior management,
competitive industry
dynamics, company
strategy, financial
forecasting and valuation
CFA Society Chicago
Opportunity to improve teamwork
and time management skills
Student Membership for
October 2022 - June 2023
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RULES OVERVIEW
• Students, mentors & faculty advisors must all agree to abide by CFA institute code of ethics and standards of
professional conduct
• Use of material non-public information is prohibited
• All research must be the original work of students; label charts and cite all sources; proprietary research is
encouraged but must be precleared by CFA Society Chicago staff
• “All forms of plagiarism are prohibited”
• Conflicts of interest must be disclosed to CFA Society Chicago
• CFA Society Chicago will provide forms for all participant signatures
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RULES OVERVIEW - CONTINUED
•
3-5 students per team; no alternates allowed; cannot participate with < 3 members; no repeat registrations allowed
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No contact with company management or board members is allowed
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Teams can bring their own industry mentor
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No help from professional investors is allowed
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Technical help with slides using college resources is allowed
•
Public speaking coaches can be used to prepare for the presentation
•
Slide changes are allowed up until the due date
•
No props are allowed in the presentation
•
Teams will be sequestered on the day of the competition
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If watching competing teams, no communication between teams and faculty advisors / mentors is allowed
•
Faculty advisors are allowed to tape the team’s presentation (if live)
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Faculty advisors can spend up to 10 hours prior to report submission / additional 3 hours on the presentation for every competition level
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Industry mentors can spend up to 6 hours up to report submission / additional 2 hours on the presentation for every competition level
•
Please read the Official 2022-2023 rules for details
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COMPETITION SCORING – LOCAL LEVEL
6 – 12 TEAMS
RESEARCH REPORT
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50% of total score (average ranking for each
team)
Company analysis including industry position,
earnings estimates, price target and
buy/hold/sell recommendation
Each team will be given Grader comments prior
to the presentation
PRESENTATION
•
50% of total score (average ranking for each team)
•
10 minute “stock pitch” presentation of investment
recommendation / 15 minutes Q+A
•
Judging panel is made up of senior industry
professionals with experience in equity analysis and
portfolio management
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COMPETITION SCORING – ADVANCED LEVELS
SUB-REGIONAL VIRTUAL ROUND:
REGIONAL ROUNDS:
•
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Teams randomly assigned to semi-final groups
•
Scoring based 100% on presentations & average team
ranking
•
Will include live Q+A with judges
•
Winners advance to Regional Final
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Two Regional winners advance to Global final
Based on based 100% recorded presentations &
average team ranking
GLOBAL ROUND:
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Scoring based 100% on presentations & average
team ranking
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Will include live Q+A with judges
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Global winner receives $10,000 scholarship for their
university
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RESEARCH REPORT
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The research report is limited to 10 pages, with a 10-page Appendix containing supporting models, charts and graphs
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We require a font size of at least 9 NO EXCEPTIONS
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All research must be the original work of students
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Use section headings listed on the Research Challenge Report Scorecard
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Label all charts and cite all sources
•
Proprietary research is encouraged but must be precleared by CFA Society Chicago staff
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Examples: FORMER employee / supplier / competitor interviews
•
Teams must identify themselves as participants in the CFA Research Challenge
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Highlight findings in text of report where applicable, with details in the appendix
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Submit original research questions to faculty advisor or industry mentor, and get pre-clearance from CFA Society Chicago
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The Research Report Appendix should include the details of the financial analysis; the text of the report should summarize the findings,
highlight key information with charts or tables, and refer to specific information in the appendix for details
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SEE APPENDIX FOR DETAILS ON REPORT FORMAT AND SAMPLE REPORT SCORESHEET
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REPORT WRITING TIPS
The goal is to convince the reader to act on the investment recommendation: BUY,
HOLD OR SELL – based on:
NOTE: DO NOT
•
AMOUNT OF TIME THIS
An analysis of the featured company’s competitive advantages vs. their industry;
UNDERESTIMATE THE
RESEARCH REPORT WILL
•
•
•
•
The company’s financial profile and future earnings potential, based on the
identification of key drivers of revenue growth and profit margins; free cash flow;
and balance sheet
TAKE. DEVELOP A TIMELINE
A forecast of future earnings and free cash flow, with an explanation of growth
and margin assumptions, including how your view compares to consensus
forecasts
WITH PLENTY OF EXTRA
The featured company’s management presentation and response to Q+A will
include their strategy and outlook, which should help to inform your assumptions
A target stock price including an explanation of the various relevant valuation
methods used in your analysis
AND ASSIGN SECTIONS TO
TEAM MEMBERS EARLY,
TIME AHEAD OF OFFICIAL
DUE DATES.
Past examples of winning
research reports can be
accessed via the CFA Society
Chicago website
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RESEARCH REPORT SECTION
Teams can choose their report format, but they must use the Headings that are listed on the Written Report
Scorecard.
Business Description (5 points): A detailed description of the company, its products and services, and its business model, with key drivers of revenue and
expenses.
Industry Overview & Competitive Positioning (10 points): An overview of the industry dynamics and a review of competition and market share. This should set
the context for the company analysis and provide a point of reference for the financial analysis section.
Investment Summary (15 points): A brief description of the company, significant recent developments that have had / will have an impact the on the stock, an
earnings forecast, a valuation summary and the recommended investment action. It should explain why the stock is rated Buy/Hold/Sell.
Valuation (20 points): A thorough valuation analysis using conventional valuation metrics (PE, DCF, sum of the parts, comps, scenario analysis) and formulas. In
discussing valuation, financial forecasts and assumptions should be addressed
Financial Analysis (20 points): A detailed analysis of the company’s historical financial performance and a forecast of future estimates. This should be the basis of
the valuation section. It should tie in with the company’s strategy and key financial drivers. Growth and margin assumptions should be explained, as well as any
difference vs. consensus expectations. Poor earnings quality (GAAP vs. nongaap) should also be noted and adjusted for
Investment Risks (15 points): Address potentially negative industry and company developments that could present a risk to the investment rating. Risks can also be
referenced and tested in a scenario valuation analysis
SEE APPENDIX FOR GRADER SCORE SHEET
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RESEARCH REPORT SECTIONS – CONTINUED
Environmental, Social & Governance (15 points):
•
ESG metrics are standards used by socially
conscious investors to measure a company’s impact
on the world. Environmental factors include limiting
greenhouse emissions, water and energy usage,
sustainability efforts, and actions on climate control
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Social factors relate to a company’s relationships
with employees, customers, suppliers and the
communities it operates in, including labor policies,
diversity, and health and safety measures
•
Governance applies to the company’s leadership in
management and the board of directors, and
includes policies on executive compensation,
internal controls, audits, and financial transparency
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PRESENTATION TIPS
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Every team member should be equally engaged in the presentation and the Q+A
•
Be prepared to explain key assumptions in forecasts and valuation methods,
including how they compare to historic trends and consensus expectations
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Too much information on a slide can be distracting to the judges; de-clutter as
much as possible
•
Link slides to details in the appendix so you can pull up supporting data in the
Q+A quickly
•
Keep answers in the Q+A brief and succinct to get in as many questions as
possible
•
Teams advancing are allowed to utilize college presentation resources not
associated with finance or business in preparing for the oral competition.
SEE APPENDIX FOR A SAMPLE PRESENTATION SCORE SHEET
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PARTICIPATING UNIVERSITIES 2022
AUGUSTANA COLLEGE
DEPAUL UNIVERSITY
ILLINOIS INSTITUTE OF TECHNOLOGY
NORTHERN ILLINOIS UNIVERSITY
NORTHWESTERN UNIVERSITY
UNIVERSITY OF ILLINOIS SPRINGFIELD
UNIVERSITY OF ILLINOIS URBANA CHAMPAIGN
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COMPETITION TIMELINE
TODAY
KICK-OFF
October 1, 2022 – January 21,
2023
Preliminary Research
Time with Industry Mentor (6 hours maximum)
October 7, 2022
Featured Company Presentation
October 21, 2022
Teams Finalized, Students and Faculty Advisors Register with CFA Institute
November 4, 2022
Valuation Expert Webinar
December 9, 2022
Teams’ Follow Up Questions for Company Due to CFA Society Chicago
January 20, 2023
Teams’ Finalized Equity Research Reports Due to CFA Society Chicago by 5:00 pm
(NO LATE REPORTS ACCEPTED AFTER 15 MIN GRACE PERIOD – NO
EXCEPTION)
February 13, 2023
Advancing Teams Announced
March 3, 2023
In-Person Oral Competition
March 2023
TBD
TBD
Virtual Sub-Regional (pre-recorded presentation only)
Virtual Regional Semifinals
Regional / Global Final
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FEATURED COMPANY
NYSE: SCS
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BUDD BUGATCH - CONSUMER SECTOR EXPERT
Consumer Sector at Water Tower Research- WTR
Budd Bugatch
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Welcome 2021-22 Global Champions
NIU College of Business
Nolan O’Rear
Nicholas Stone
Paula Veyhle
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QUESTIONS
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APPENDIX/RESOURCES
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WRITTEN REPORT REQUIREMENTS
Each team must prepare a written research report on the subject company chosen by the local host. Teams may use their industry mentor or faculty advisor
as resources but may not enlist the help of any other professionals in writing the actual report.
The written report must
•
be no longer than 10 pages (not including the front cover page provided by CFA Institute) on A4-sized paper* (210 mm × 297 mm, 8.27” × 11.69”),
although you may include an appendix no longer than 10 A4-sized pages;
•
be properly cited using a generally accepted citation system. Generally accepted citation systems include, but are not limited to, the Chicago Manual of
Style, the Harvard referencing system, and MLA (Modern Language Association) style.
•
include the following information in a header on the first page:
o Company name o Exchange
o Ticker symbol o Sector/Industry
o Recommendation (buy/sell/hold)
o Current price (as of __ date)
o Target price (% increase/decrease)
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contain only publicly available information;
•
be the original work of the team members;
•
be prepared from the perspective of an independent research analyst;
•
be submitted to the local-level host by the deadline established by the host;
•
include the front cover provided by CFA Institute with the information in highlighted text filled in (teams must not alter any other part of the cover page,
including the CFA Institute logo); and
•
contain (but not limited to**) the following sections:
o Business description
o Industry overview and competitive positioning
o Investment summary
o Valuation
o Financial analysis
o Investment risks
o Corporate governance
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SAMPLE REQUIRED REPORT COVER
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REPORT SCORING
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SAMPLE REPORT
VIEW REPORTS FROM PAST WINNERS
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ITEMS OF NOTE
PLAGIARISM - TEAMS MUST NOT:
1. Use excerpts from articles or reports prepared by others either verbatim or with only slight changes in
wording without acknowledgment,
2. Cite specific quotations as attributable to “leading analysts” and “investment experts” without naming
the specific references,
3. Present statistical estimates of forecasts prepared by others and identifying the sources but without
including the qualifying statements or caveats that may have been used,
4. Use charts and graphs without stating their sources, or
5. Copy proprietary computerized spreadsheets or algorithms without seeking the cooperation or
authorization of their creators. The prohibition on plagiarism applies both to a team’s written report and
its presentation.
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PRESENTATION SCORING
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ADVISOR AND MENTOR INVOLVEMENT
FACULTY ADVISOR
INDUSTRY MENTOR
• Guidance and direction on research methods and
tools as taught in academia
• Insight and guidance on industry practice
• 10 hours maximum of productive time for the local
round and 3 hours per presentation in the regionals
/ global finals (Logistical work, such as arranging meeting
space and times and class attendance, does not count
toward the time limit.)
• Access to faculty for other projects unrelated to the
Research Challenge is permitted
• All work must be the original work of the students
• 6 hours maximum of productive time for the local round
and 2 hours per presentation in the regionals / global
finals (Logistical work, such as arranging meeting space and
times and class attendance, does not count toward the time limit.)
• Face to face or virtual
• Company management question development
• Review first draft of research report
• Presentation development assistance
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ETHICS RESOURCES
https://www.cfainstitute.org/community/challenge/prepare/pages/index.aspx
• Ethics Course Module 2: Standard II—Integrity of Capital Markets
• Ethics Course Module 3: Standard III—Duties to Clients
• Ethics Course Module 6: Standard VI—Conflicts of Interest
• Ethics Course Module 7: Standard VII—Responsibilities as a CFA
Institute Member or CFA Candidate
CFA INSTITUTE RESOURCES
https://www.cfainstitute.org/community/challenge/about/pages/past_champions.aspx
PAST RESEARCH CHALLENGE CHAMPIONS
Sample Winning Reports and Presentations
“Keep it Simple: 11 Rules for Equity Valuations” by Paul McCaffrey - http://cfa.is/2jw1u8D
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ADDITIONAL RESOURCES
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OVERVIEW OF FINANCIAL VALUATION MODELS
Prepared For The CFA Society Chicago CFA Research Challenge By: Larry A. Lonis, CFA
View overview slide deck
FINANCIAL ANALYSIS REVIEW GRID
Prepared for the CFA Society Chicago CFA Research Challenge By: Larry A. Lonis, CFA
View Financial Analysis Review Grid
INTRODUCTION TO COMPANY ANALYSIS
Prepared for the CFA Society Chicago CFA Research Challenge By: Larry A. Lonis, CFA
View Introduction to Company Analysis
INDUSTRY & COMPANY ANALYSIS
Prepared For The CFA Society Chicago CFA Research Challenge By: Larry A. Lonis, CFA
View industry & company analysis
ESG – ISSUES IN INVESTING
Prepared By CFA institute
View resource
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COMMERCIAL/CONTRACT FURNITURE INDUSTRY
Prepared For The CFA Society Chicago CFA Research Challenge by Budd Bugatch
View Report
INIATION OF COVERAGE REPORT :STEELCASE INCORPORATED
Prepared For The CFA Society Chicago CFA Research Challenge by Budd Bugatch
View Report
COMMERCIAL/ CONTRACT FURNITURE/ CONSUMER HEADLINES
Prepared For The CFA Society Chicago CFA Research Challenge by Budd Bugatch
View Report
STRATEGIES FOR BUILDING A HYBRID WORKPLACE THAT WORKS
Prepared For The CFA Society Chicago CFA Research Challenge by Jim Keane
View Article
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