Investment Banking
Internship Class
The Company Write-up
Or Getting
your best ideas on paper
Or You have to know it--to do it!
Objectives
A. Know the importance of the company
write-up process
B. Understand the process on how to write a
good company report
C. Understand the format that I require for this
internship
A. The Importance
of the Company Report
 What is the company report write-up?
• It is the final document that will be read by your
readers
• It may be your only chance to convince your reader
of the validity of your recommendation. Do it
well!
 Will it differ depending on your audience?
• Yes. Write accordingly!
The Company Report (continued)
 How much will most portfolio managers
actually read of a normal report?
• Generally only the first paragraph or page, and the
rest only if you can pique their interest. Keep it
clear and succinct!
 How important is a good summary?
• Very important. Your summary must stand out to
get read!
Questions
 Any questions as to the importance of the
company write-up process?
B. Know How to Write up a Good
Company Report?
 Follow the process
 Understand the global and country economic
framework in which the company operates
 Understand the global and country industrial
framework in which the company operates
 Understand the type of company and the key factors
which drive value or profitability
Use the Global Analysis Framework
Global Economic and Political Analysis
(You know what is the world doing!)
Country Economic and Political Analysis
(You know what’s happening in your main markets!)
Global Industry Analysis
(You know what the global industry is doing!)
Country Industry Analysis
(You know what’s happening in your main industry!)
Company Analysis
(Here’s where you should be now!)
Find your key information
 Economic information
• Multilateral institutions, global publications, general
financial and economic magazines (I will provide
this!)
 Industry information
• Key data providers (Bloomberg, Reuters, etc.)
• Company and competitor reports
 Company information
• Discussions with management, suppliers, etc. This
is the really valuable work comes in!
• Financial press and industry and related sources
• Financial reports (10-K, 10-Q, and other reports)
Categorize your company
• Each of these general types of firms possess different
characteristics, so investors need to focus on different
firm attributes to determine if the firm is attractive or
not. We will use Peter Lynch’s same six categories
that we used with the industry reports (review the
Industry PowerPoint's for details):
Slow Growers
Stalwarts
Fast Growers
Cyclicals
Turnarounds
Asset Plays
Gather Your Information
 Do your homework
 Know the company like you owned it. You may.
 Document major positive and negative factors
 Keep these in a specific place as you read and
study the company. That way you will not forget
anything
 Prioritize your positive and negative factors
 Emphasize those that support your
recommendation
Write up the Report
 Finalize your analysis and make a
recommendation
 Come to a conclusion as soon as possible.
Support it!
 Update, review, and finalize your report
 Update your financials, review your
recommendations after any market moves, and
finalize your report the day before you turn it in.
Update your Report
 Finally, just before you present to company
management, update your report a final time:
• Update your:
• Stock Price
• Market Index Price
• Industry Index Price
• Company Earnings Estimates and date
• Reprint your relative return graphs, and
• Review your major recommendations and
intrinsic value
Note:
 When you present to company management,
they are not just concerned about your
financials, but everything that has happened
with your company. You must know:
• Any recent announcements that would impact your
company, i.e.:
• Changes in the company: purchases,
management changes, earnings reports,
profitability
• Changes in the industry: technology,
consolidation/acquisitions, leadership changes
 Prepare accordingly
Questions
 Any questions on how to write up a good
company report?
C. How to Write your Company
Report in “My” Report Format
 Remember:
•
Note that every analyst, portfolio manager, or
director of research will have their own preferred
way of writing up a company
• Learn to do it their way, but don’t hesitate to
add the key areas you think are important after
you have put it in “their” format!
Why this Framework?
• Efficient
• There is lots of information in one place
• Effective (but more difficult)
• It is harder to write a one-page report than a 20
page report, but it is easier to get others to read
it
• Consistent
• We will be sending out your research to asset
management/buy-side companies as examples
of BYU students analysis
• Up-to-date
• We are seeing more of this type of research in
industry
Key Areas of the Framework
 Key areas of information
1. Company and Market related information
2. Summary
3. Background
4. Positive Factors
5. Negative Factors
6. Things to Watch
7. Earnings Estimates
Investments Write-up Format
7. Earnings
Estimates
6. Things
to Watch
1. Key Stock/
Market Information
2. Summary
The Company
Report
4-5. Positive/Negative Factors
3. Background
1. Key Stock and Market Information
 Key general pieces of information
• Company, country, industry
 Key specifics (and source of the data) for the forecast
year
• Current Price (from Exhibit 4 section 5, i.e.,E4-5)
• Current Market value (from E4-2)
• Prospective Price earnings (from E4-2)
• Prospective Market PE (from E4-17)
• Company type (discussed earlier)
• Relative fair value (from Intrinsic Value section 8)
• Intrinsic value (from IV-7)
• Recommendation (your view, but consistent with
your Intrinsic Value-8)
2.
Summary
 What is the summary?
 This is the key piece of information for the analysis
If you have no recommendation, you are just
learning about the company
 The purpose of financial analysis is to make a
decision about the company that can make the
reader money
 Write it well. It may be the only part read by
your audience
 It should be a summary of your most important key
points supporting your decision
3. Background
 Why is the background important?
• This gives the historical framework on which your
analysis is built
• It includes specific information that is important
to the analysis, including when founded, listed,
key divisions, sales/profits by division,
sales/profits by region, major
shareholders/groups, percentage float, etc.
• Help the reader to understand which
divisions are most important and profitable
• Include those areas which you think most
relevant to the investment decision
4. Positive Factors
 What are positive factors?
• These are factors which will enhance the
profitability of the company to the investor. These
could relate to:
• Valuation
• Earnings growth
• Financial condition
• Economic positioning
• Market/industry competitiveness
• Management
• Cost structures
• Asset utilization (PP&E)
• Accounting aspects
5.
Negative Factors
• What are negative factors?
• These are factors which detract from the
attractiveness of the company to the investor. These
could include the same factors discussed before
• Key caution:
• Regardless of your recommendation, your positive
and negative factors should overall support that
recommendation, i.e. don’t have all positives and a
sell recommendation
• You want to show you have analyzed the key areas
for analysis, yet your key goal is to support our
recommendation
6. Things to Watch
 Why a Things to Watch area?
• Portfolio managers/analysts cannot spend all their
time watching a single stock when they have 20-80
stocks in their portfolios
• Here you are stating the most important areas for
the Portfolio Manager to watch.
• Pick 2-3 critical items to watch
• That way, if these events or items
happen, it’s a flag for the portfolio
manager to go back and re-evaluate what
is going on
7.
•
Earnings Per Share Estimates
Why Earnings per Share estimates?
• 1. It shows you the forecasts and directions that
the other analysts are going
• 2. It gives a mean and standard deviation to tell
you how close or how far away you are from the
mean forecast of the other analysts
• 3. It lets you know if, perhaps, others are seeing
things you aren’t, or perhaps, you are seeing
things others aren’t
•
Note: You will rarely make money on forecasts where your
forecasts are in line with what everyone else is saying. You
make money when your forecasts are different from others-and when you are right!
Suggestion
• As you finalize your report, I would
recommend that you go to the HBL Library
and read a couple of Wall Street reports on
your company to get a sense of the things other
analysts are writing.
• Read what they are saying
• Read what items they find most critical
• See if you have included all pertinent data
Review of Objectives
A. Do you recognize the the importance of the
company write-up?
B. Do you understand the process on how to
write up a good company report?
C. Do you understand the format that I require
for this class for the company write-up?