By Steven Krolak — NEW ALBANY, Ind. — For the third time, the IU Southeast team took top honors at the eighth annual local CFA Institute Research Challenge (IRC) sponsored by CFA Society Louisville. The competition took place on Wed., Feb. 24 at the Pendennis Club in Louisville.
The victorious IU Southeast team was composed of graduate students Keith Lankford, Cory Crowdis and Blake Watson, all of Louisville, Ky. Elizabeth Reisz, lecturer in finance in the School of Business, is the team’s academic advisor and Benjamin Thomas, founder, managing partner and portfolio manager of Louisville, Ky.-based Waycross Partners is the industry mentor.
In winning the challenge, the IU Southeast students bested competition from Ball State University, Bellarmine University, Centre College, Indiana University (Kelley School of Business), the University of Kentucky, the University of Louisville, and Western Kentucky University.
The local challenge is part of an annual global competition that provides tens of thousands of university students at more than 800 institutions in more than 55 countries with hands-on mentoring and intensive training in financial analysis, according to the CFA Institute website.
At this first round of competition, student teams from local universities prepare a complete fundamental analysis of a local publicly traded company. This year, the local company was Brown-Forman Corporation. Each team wrote a detailed research report on the company and its financial health, with a recommendation to buy, sell or hold the stock. The teams then defended their analysis before a panel of local investment professionals.
After an exhaustive breakdown of the company’s strengths and weaknesses, the IU Southeast team advised potential investors to hold with a target price of $110 per share, a level substantially above that recommended by other teams. Their approach took into consideration factors such as steady diversification of the company’s portfolio, new products appealing to a broadening demographic and potential growth in emerging markets in justifying the more aggressive valuation.
Bob Ethier, investment portfolio manager at Louisville, Ky.-based Kentucky Farm Bureau Mutual Insurance Co., past president of CFA Society Louisville and a member of the judging panel, felt that the IU Southeast team performed at a high level throughout the presentation, spoke with poise and confidence, and did not falter when pressed with hard questions.
“It was easy to see they knew their assigned company and the models they used to value that company inside and out,” he said. “One factor that really stood out was their valuation model. Not only was the model robust, but they stress-tested their assumptions to see how that would affect their valuation—a veteran move.”
Team leader Lankford was responsible for valuation, editing the report and presentation and industry sponsor contact. He appreciated the extremely broad demands of the project.
“The most challenging aspect is the depth of exposure to the valuation process, and the exposure to what it really takes to consider, from a wide angle of variables and so many possibilities, what it takes to get to a rational explanation that is supportable and arguable,” he said.
Crowdis was responsible for financial analysis and investment risks, and Watson for business description and industry overview. They commented favorably on the group’s dedication, command of the material and genuine teamwork.
Reisz appreciated the time and effort invested by the team, which for months balanced evening and weekend meetings with for months with the demands of careers, classwork, relationships and families.
“The primary benefits of participating in this competition are real-world analysis of a local company, the opportunity to meet with the company and the challenge of presenting to a prestigious panel of portfolio managers who challenge their thesis, research and assumptions,” said Reisz. “This team was unique, they took every suggestion to the next level.”
IU Southeast, with the highest score in the final round presentation, will now advance to the Americas Regional Challenge in Chicago, Ill. with a chance to face teams from around the world as part of the CFA Institute Research Challenge.
“This is our third victory in this competition. On top of that, we have placed second a number of times and consistently perform strongly,” said Jay White, dean of the IU Southeast School of Business. “This is a testament to the quality and strength of our business programs, and a statement regarding the caliber of students we attract.”