The team investment project comprises two exercises, The exercises will be undertaken by the same teams as those assigned for the Investment Game. The purpose of the project is to give students an opportunity to gain some experience with equity research in a real-world setting. The main purpose of equity research is to provide investors with detailed financial analysis and recommendations on whether to buy, hold or sell a particular investment. There is a wealth on information available online about public companies, but you will have to do some digging.
The investment will be a common stock of the studentsâ€™ choosing. The stock must be listed on a Canadian or US stock exchange. Listed investment trusts (e.g., REITs) and American Depositary Receipts (ADRs) for individual offshore companies are permitted as well. Securities based on a portfolio of stocks (eg. ETFs) are not eligible for this project as the purpose is to analyze a particular industry and stock.
Student teams will choose an industry and then, the common stock of a company within the industry (no preferred shares please). The first step will be to analyze the industry. This will involve investigating industry trends and competition. You should ensure that all the dynamics of the industry have been investigated, including the impact of political factors, the state and future of the economy, social trends and technological change. Short to medium-term factors, such as the current Covid-19 crisis, should be considered as well. The industry report (approx. 15 pages plus any supporting tables, graphs, computations, and projections, etc. in appendices) is to be submitted via Avenue no later than Thursday, November 01 at 5:00 pm. All writing must be your own original work. Tables and figures from other sources may be included in the appendices, but the sources should be acknowledged. Do avoid the temptation to cut and paste or otherwise incorporate material from other sources as any evidence of having done so will result in a grade of zero on the assignment. All references used should be cited in a bibliography.Â
The second part of the project will involve choosing a company within the industry chosen for the first part and preparing a report for individual investors on the companyâ€™s prospects, including a recommendation as to the whether the stock is a buy, sell or hold; the type of portfolio for which it is appropriate (income, growth, value, speculative, etc.); and the investment horizon of the investor for whom it is recommended (day-trader, short-term (up to one year), medium-term (up to five years) or long- term (forever if your client is Warren Buffett)). In this part you should consider the quality of the management team (e.g., look at its track record in creating value for investors), You should also look at recent yearsâ€™ financial data for the company. These can be obtained for the companiesâ€™ annual reports, 10- K reports, etc (look at the SEDAR website for Canadian companies and the EDGAR website for US companies). The various sources of information you consult can then be used to make forecasts about the companyâ€™s prospects and arrive at an estimate of the value of the companyâ€™s common stock (using valuation tools introduced in the course; you should consider multiple (at least two) valuation methods). Your consensus estimate (or, more likely, range of estimates) should then be compared with the current price (the current price should be the closing stock price on any date between November 25 and December 15; identify the date chosen in your report) to arrive at your recommendation. Â