Transcript: EQUITY RESEARCH Investment banks Brokerage houses Research companies Hedge funds Portfolio managers Knowledge Process Outsourcing (KPOs) companies 1. Economic Analysis 2. Industry Analysis 3. Company Analysis 4. Financial Statement Analysis 5. Financial and Valuation Modeling 6. Report writing 7. Presentation or recommendation Required Skills Agenda 1. Post graduate in Finance 2. Financial Statement Analysis 3. Analytical skills and logic 4. Right Attitude. (The most important skill) 5. Excel proficiency and basic knowledge of financial modeling 6. Report Writing skills 7. Fluency in English 8. Confidence 1. Investment evaluation 2. In Mutual Fund industry 3. For M&A deals 4. Financial Publications 5. Charitable endowments ER USERs Session One Application Equity research process What is Equity Research? Who provides it and who consumes? Purpose and Process Application Skills required Primary role of RA
Transcript: What recent event is having a similar effect in America? Include details about events that have happened recently that are effected by your event. You may use these resources: http://topics.nytimes.com/top/reference/timestopics/subjects/r/race/index.html http://abcnews.go.com/topics/news/issues/racism.htm http://www.huffingtonpost.com/2015/04/27/freddie-gray-funeral_n_7150750.html?ref=topbar Income inequality - http://www.motherjones.com/politics/2011/02/income-inequality-in-america-chart-graph Research Project How can a novel like To Kill A Mockingbird lead to positive change? How was your event changed by protests and laws after 1960? 2. What were the effects of your event? details Insert a graphic or video to support More information about effects How is the event related to the novel To Kill A Mockingbird? Be specific about events in the novel that are influenced by the real-life event you are researching. You may include a you tube video from the movie of the novel Insert a video from the research Time Place What led to it? Your research presentation must answer five questions: 1. What is your historical event? 2. What were the effects of your event? 3. How is the event related to the novel To Kill A Mockingbird? 4. What recent event is having a similar effect in America? 5. How can a novel like To Kill A Mockingbird lead to positive change? 1. What is your historical event? Information from research about how the event impacted people To Kill A Mockingbird
Transcript: 1. Conclusions- Closing remarks 2.) Recommendations Summary- what to do in the future as a result of the data and research results 3.) Discussion- summarizes in detail the findings of the analysis Start Chapter 2 Mona Hernandez You will need a reference page for your research proposal, this slide serves as the last step in the process and my reference for this assignment References Creswell, J. W. (2012). Educational research planning, conducting and evaluating quantitative and qualitative research (4th ed.). Upper Saddle River, NJ: Pearson 1.) Statement of the Problem- contains the topic of the study, the research problem within the topic, a justification for the problem based on past research & practice, deficiencies or shortcomings of past research or practical knowledge, and the importance of addressing the problem for diverse audiences 2.) Purpose- consists of identifying the major intent or objective for a study and narrowing it into specific research questions or hypothesis 3.) Significance of the Study- the reason the topic is being researched and investigated 4.) Research Questions- interrogative statements that narrow the purpose statement to specific questions that researchers seek to answer in their studies 5.) Hypotheses- declarative statements in quantitative research in which the investigator makes a prediction or conjecture about the outcome of a relationship Chapter 1 1.) Methodology- analyzes the previous methods of studies from previous years 2.) Restate Purpose 3.) Restate Research Questions 4.) Null Hypotheses- makes predictions that there will be no statistically significant difference between the independent & dependent variables 5.) Population- a group of individuals of the same characteristics 6.) Sampling Instrumentation 7.) Procedure- actually carrying out the research 8.) Time Frame- allotted time to conduct and follow the research 9.) Analysis Plan- the way in which the data and information will be viewed and analyzed 10.) Validity- researchers can draw meaningful and justifiable inferences from scores about a sample or population 11.) Reliability- individual scores from an instrument should be nearly the same or stable on repeated administrations of the instrument and thaty thy should be free from sources of measurement error and consistent 12.) Limitations- potential weaknesses or problems in quantitative research that are identified by the researcher Chapter 3 Chapter 4 End Research Process Template 1.) Results- what occurs after the research is conducted, the answers or solutions Chapter 5 1.) Background- give prior information and knowledge in the subject matter that will be researched 2.) Literature Review- written summary of articles, books, and other documents that describe the past and current state of knowledge about the topic 3.) Definition of Terms- defines any words that will be used that may be unfamiliar to the readers
Transcript: This is a couple of sentences combining a rewritten thesis statement and something to think about for the audience. (Think of how your topic affects us today, affected the world, or affected history. BIG PICTURE STUFF. ) Same goes here as for topic 1. :) As for those sources, we have to get them properly cited. Getting them cited can be frustrating, but it's really just plugging what information we have into the formulas. Topic 1 from the Outline You will have three bullet points for each slide. They will each be a brief sentence summing up the evidence you got in your research. You will make a notecard for each bullet point with your quotes, paraphrases, or summaries from your research. Not everything you say will be on the Prezi. Topic 5 from the Outline (THIS IS YOUR LAST SLIDE, SO YOU SHOULD NOW TAKE THE TIME TO "PRESENT" TO YOURSELF TO MAKE SURE THE SLIDES ARE IN THE ORDER YOU INTENDED. IF YOU FIND THEY ARE NOT, EDIT AND THE LEFT OF THE SCREEN ALLOWS YOU TO CLICK AND DRAG SLIDES INTO THE ORDER YOU DESIRE. :) Topic 2 from the Outline The same goes here for Topic 1's slide. :) About those notecards...you want to put the topic number at the top, with the bullet point number in parentheses. Make sure you have a notecard for each bullet point. You need at least one picture for each slide! Be sure that it is relevant to the slide. Be sure to put each picture's link below each picture to show where you got it. Works Cited Topic 3 from the Outline The same goes here as for Topic 1. :) About those quotes, paraphrases, and summaries on your notecards for each bullet point... be sure you mention the source in the sentence. For instance: According to [source], [topic] [evidence]. OR [Source] reports that [topic] [evidence]. Here you will summarize what you found in your research in one strong sentence. (This is your thesis statement.) Thesis Statement Formula: [Topic] is [Research Question Answer] because [sub-question 1 answer], [sub-question 2 answer], [sub-question 3 answer], [sub-question 4 answer], and [sub-question 5 answer]. Conclusion The same goes here as for Topic 1. :) About those paraphrases, quotes, and summaries on your notecards...they should prove the bullet point they are written down for. They are the EVIDENCE. The bullet points are supporting details. :) Your Topic (Research Presentation Template Prezi) [YOUR TITLE!] Topic 4 from the Outline Here you will copy and paste info from your Works Cited Word Document. Be careful that you have a citation for each source you used!
Transcript: Price stock: $117.19 High: $121.69 Low: $118.68 YTD % change: -1.21% 52-week range: $93.20 to $130.36 Trailing P/E: $16.19x P/E 1 year forward: 16.02x Forward PEG: 1.96x Indicated annual dividend: $2.10 Dividend yield: 1.73% Trailing EPS: $7.49 ANALYST RATINGS Joseph Solitro one of the market's top performers in 2014 more than 24% TSX Composite Index's return of about 1.8% Main Competitors proven, consistent leader with a strong brand image reliable performance share increase - 35% over the past 12 months most analyst agree that Canadian Tire is a stock to purchase partnership adds an interesting opportunity solid stock performer a limited growth - high cost 52-week average leaves room for purchase options Leia Kingel over years and across varied economic conditions no reason to suspect this will change RECENT DEVELOPMENT ANALYSIS OF THE ANALYST RATINGS struggling with downward stock market trends and declining sales SUMMARY PRICE PERFORMANCE Hudson's Bay Company Sears Canada Inc. Wal-Mart Canada Corp Target Canadian Tire Corporation Limited is a Family of Companies that includes Canadian Tire, Partsource, Gas+, FGL Sports, Mark's and Canadian Tire Financial Services. ** PURCHASE CANADIAN TIRE'S SHARES TO ROUND OUT YOUR PORTFOLIO ** MONITOR THE STOCK PRICE AND PURCHASE AT THE LOW OR MID RANGE OF ITS 52-WEEK RANGE OF 93.20-130.36 AND RECOMMENDATIONS COMPETITION CANADIAN TIRE CORPORATION LIMITED Scotiabank announced “that it is buying a 20 per cent stake in Canadian Tire's financial services division for $500 million in cash and has agreed to provide up to $2.25 billion in credit card receivables financing to the business.” EQUITY RESEARCH REPORT PRESENTATION CANADIAN TIRE AND SCOTIABANK PARTNERSHIP new customers share products with a new audience expand business and revenue declared bankruptcy and left Canada AND SCOTIABANK PARTNERSHIP
Transcript: Established by Mr. Dilip Shanghvi in 1983 in Kolkata A multinational pharmaceutical company headquartered in Mumbai, Maharashtra Manufactures and sells pharmaceutical formulations and active pharmaceutical ingredients (APIs) primarily in India and the United State India's biggest drugmaker by market value A company gets more than half its sales from the United States, the world's biggest pharmaceuticals market. ABOUT THE COMPANY SUN PHARMACEUTICAL LTD The Indian economy is growing fast, and is valued at US$1.430 trillion in 2010. GDP growth, calculated on a Purchasing Power Parity basis has reached 9.66% in the year 2010 India’s population is currently just over 1.1 billion and is projected to rise to 1.6 billion by 2050 Besides, India has a huge middle class population (households with annual incomes of US$4762 to US$23,810 at 2001-02 prices), which has grown rapidly, from 25 million people in 1996 to 153 million people in 2010. The Indian population spent 7% of its disposable income on healthcare in 2005; this number is expected to nearly double, to 13%, by 2025.(12) 1.The Indian economy is growing strongly, and will continue to provide a conducive macro-environment for the industry to grow in. 2. The government is increasing spend on healthcare; and the Indian population is spending an increased amount of money on healthcare as a percentage of disposable income. 3. The disease profile is changing with an increase in acute diseases along side growth of chronics. 4. Health insurance is growing. ECONOMIC EFFECT EQUITY RESEARCH
Transcript: A Equities Research C 3 -Expected return on a stock given revenue? -Risk Metrics i.e. VAR and investment thresholds Uncertainty in EPS, guidance, Revenue|estimate -What stocks are suseptible to an earnings surprise? -How could we tell if the edge is dissapearing? Questions to Answer Experimental Setup Setup Create a Subtopic Customize the Cover 3 Insert Your Content Questions to Answer Modeling Approaches -Gather features related to a stock (size, price history, fundamentals history, sector, etc.) and use these to predict price given revenue -Cross validate using groups of stocks and groups of time periods as holdout to ensure proper generalization -Predict each quarter for a range of possible revenue values ML Approach ML Approach -Tends to be more theory driven, or particular treatment of a given stock -Time series for each individual equity -Testing Specific hypotheses for a given Time Series Approach Time Series Approach -Loosely based on baseball's PECOTA -Determine similarity metrics based on History of revenue/price Fundamental qualities of the company -Pick KNN to the target equity -Average reaction for target stock based on historical reactions of similar stocks Recommender Approach Recommender Approach Important Factors Past surprises Immediate Reaction vs Drift Other important factors Lit Review Past Studies Stock Prices/ Trade Volumes Yahoo Finance Fundamentals Edgar/Finstr in R Estimize reported actuals Matched to 'ground truth' for 10Qs Expectations EPS- Zacks, Estimize Revenue- Estimize Outlook Earning Reports and Transcripts from Seeking Alpha Data Sources Data Sources Every Equity Currently Listed on AMEX, NASDAQ, or NYSE concerned about survival bias Only included firms in 3 sectors & 20 Industries Market Capitalization >=$100M Stocks Included Stocks Included MySql DB to integtrate sources X% had info from All Sources X% Missing Estimize (fixable with expecation model) X% Missing prices (dropped) X% Missing SEC Filing X% Missing Transcripts X% had truncated time period Data Preparation Data Integration Expectations Estimize where available Time Series Model of Revenue Change in Stock Price Actuals Agreement between sources Accuracy of Expectations Surprise Index Revenue and EPS Revenue and EPS Look at multiple Periods -2 days to +1 day -2 days to +7 days Movement in Stock Price Raw Return Adjusted for Volitility Simple -1,0,+1 for Positive, Negative, Neutral return Total Volume of Trades Prediction Targets Prediction Targets with Clients and Partners Connect Results
Transcript: Equity Research Project Team 10 Ebube, Endalow & Masih Report Overview Industry Analysis Company Analysis Capital Structure WACC Main Investments Valuation Conclusion We will discuss Agenda Overview Report includes Fundamental analysis of 3 US restaurant chains: Cheesecake Factory (CAKE), Chipotle Mexican Grill (CMG) and Dunkin Brands (DNKN) Intrinsic value determined using DCF valuation Cheesecake- $1.94 billion Chipotle- $24.2 billion Dunkin Brands- $8. 7 billion Based on our results, our recommendation for the company's stocks are: Cheesecake - Hold Chipotle - Buy Dunkin Brands - Buy US Resturant Industry Facts Industry Analysis US restaurant industry has multiple segments (fast-food, casual dinning, chain restaurants) Market capitalization for restaurant industry is $351.66 billion (Bloomberg) Restaurant industry represents 1.8% of US GDP Companies within industry do not partcipate in international trade Key economic drivers include household income, healthy eating index and consumer spending. Industry is expected to grow despite saturated state Comparable Company Analysis Capital Structure & WACC Cheesecake Factory Founded in 1978 in Beverly Hills, California. Restaurant menu offers a wide variety of options prepared from scratch in large portions. Company has 210 full-service restaurants both in the U.S and internationally (Canada, Mexico, Saudi Arabia etc.) Payout Policy The company has 2 payout methods ; share repurchases and dividends Conducts dividend payments every quarter and share repurchases annually Major Investment Decisions Mostly involves choosing restaurant locations/sites to invest in Cheesecake uses EBITDAR/(cash investment+capitalized rent (8*annual rent) to measure its ROI on site locations Company Overview • Assumed 5.3% revenue growth for years 1-5, then 6.00% for years 6-8, and then 5.5% for years 9-10 due to industry saturation . • Estimate 5.55% cost growth for years 1-8 and 5.00% for years 9-10 • For CAPEX and NWC, projections based on revenue & cost growth. NWC: -0.2% growth (years 1-5) , 0.2% (years 6-7) and 0.3% (years 8-10) CAPEX: 5.79% growth (years 1-10) • For the tax rate, projected 27% based on effective tax rate. Ignored tax credit in 2017 which may have been brought on by the tax-cut bill • Estimated terminal year revenue rate of 2.00% and 1.9% for costs at maturity state • Depreciation estimated as a % of CAPEX at 70.5% Model Assumptions DCF valuation used to determine firm's intrinsic value. Assumed excess cash policy when calculating net debt. Company has 46 million outstanding shares. Model values Cheesecake at $42.64 which is below its current share price of $47.63 (04/13/19) (overvalued) CAKE stock recommendation-HOLD Valuation Chipotle Founded in July 13, 1993, Denver, Colorado Serves an intensive menu of burritos, tacos, burrito bowls and salads, using fresh ingredients As of December 31, 2017, CMG operated 2,363 Chipotle restaurants throughout the United States, as well as 37 international Chipotle restaurants, and also had eight non-Chipotle restaurants. Payout Policy Chipotle has not declared or paid any cash dividends on its common stock. Chipotle’s payout policy consists mostly of share repurchases. The company has no debt so their capital structure is all equity financed. Major Investment Decisions Mostly involves choosing restaurant locations/sites to invest in Uses analysis and analytical modeling techniques that involve proprietary formulas, CMG projects sales and return on investment for each potential restaurant site. Over the past five years, Chipotle has also invested in innovations like Pizzeria Locale, Tasty Made, and ShopHouse Southeast Asia Kitchen restaurants. Company Overview Assumed revenue growth of 9.93% for years 1-10. Assumed 10% cost growth for years 1-3, then 8 % for years 4-8, and then 7% for years 9-10 due to industry capacity. For CAPEX and NWC, projections based on revenue NWC: 1% growth (years 1-10) CAPEX: 3% growth (years 1-10) For the tax rate, projected 26% based on effective tax rate of 2018. The recent tax bill was taken in account. Estimated terminal year revenue rate of 2.00%. Depreciation estimated as of revenue at 3.27% Model Assumptions DCF valuation used to determine firm's intrinsic value. Assumed excess cash policy when calculating net debt. Company has 28 million outstanding shares. Model values Chipotle at $801.67 which is above its current share price of $712.44 (04/13/19) (undervalued) CMG stock recommendation-BUY! Valuation Dunkin Brands Founded in 1950 in Quincy Massachusetts One of the world leading franchisors of quick service restaurants. Operates over than 60 countries in the world. 20,900 restaurants Payout Policy Pays cash dividend on quarterly basis The amount will be determined on the company performance. Major investment Decisions Company invested a lot in technology DNKN had equity method investment Purchase of single tenants in Los Angeles for $2.6 million Company Overview Revenue growth- average of the
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