Research
I recently dusted off the Moto Guzzi and took a little ride to Alpharetta, Georgia. It was a perfect day for a motorcycle ride, at least for me. It was 60 degrees, sunny, and the wind was to my back. Covered from head to toe in full protective gear that my family calls the “power ranger suit,” I was neither cold nor hot. I was in a state of pure enjoyment.
As I neared Alpharetta the urge to keep heading west all the way to California was so strong I almost gave in, but I reminded myself I had an obligation to the CFA Societies of South Carolina, Georgia, and Alabama. Of course I did the right thing and stopped to fulfill my commitment.
As I had done in years past, I was attending the Southern Classic Research Challenge, the local edition of the CFA Institute’s Research Challenge. It’s a competition between university-sponsored teams composed of both undergrad and graduate students from finance and MBA programs. The teams each research a designated publicly traded company, write up a research report on it which is scored, and then present their findings to a panel of judges. There are three different levels to the competition: Local, Regional, and Global. Teams progress through these three levels until a Champion is declared the ultimate winner of the Global competition.
This year, the Southern Classic had twelve participating teams. Each team’s written report is scored prior to the presentations. On the day of the Southern Classic, the teams present and defend their recommendation to buy, sell, or hold common shares of the designated company to a panel of experts. Three teams with the highest combined score are named as finalists. My job was to judge the finalists and pick the winning team. Of course, I had some help. There were four other experts chosen to judge the finals. I find that most experts have gained a large portion of their expertise by making mistakes. It would be a big disappointment to the students if they were judged by a single expert who could easily make a bad decision unrelated to the presentation. With multiple experts, a single judge’s mistake can be corrected by the others. The good news is, when we tallied our scores, all of us had chosen the same team as the Champion. This is one time I can say that great minds think alike!
I will be taking a little longer ride in April as I head to Chicago to judge the Regional Competition. The Local Competition winners, from universities whose home bases are located in Canada, the US, Central and South America, will be competing for the title of Regional Champion. The following day, the Global Competition finals will also be held in Chicago, so I plan on sticking around to join the celebration.
I enjoy attending these events. The students are exceptional. The majority are the top business or finance students in their class. Without yet accumulating too much baggage of life, they are excited and optimistic about their future. It is good for me to see the excitement in their presentations. Their actions assure me that the future they envision has a higher probability of becoming reality than that of the nay-sayers calling for the doom of the following generations.
It is also a learning experience for me. I find out what they are being taught about finance, business and the capital markets. They are indeed experts of the quantitative requirements of good financial analysis. However, this skill is just the minimum needed in a professional setting. Great analysts and portfolio managers know that relying only on quantitative skills will never produce superior returns. We mentioned the benefit of having multiple judges where the average score produces a more reliable outcome than a single judge. Yet to produce superior portfolio returns, following the crowd, or relying on the average, will not do the job.
