EC362 Assignment: Equity Analysis and Investment Recommendation

Scenario

Assume that you are employed as an equity analyst within an Irish investment management firm.

Your team manages a large-cap North American equity portfolio and the lead fund manager has asked you to select a candidate stock for inclusion in the portfolio.

Brief: Select ONE stock listed on the S&P500 or NASDAQ100 and perform ‘sell side’ analysis over a 12-
month horizon.

Conclude whether the stock is a ‘Buy’, ‘Hold’, or ‘Sell’.

You are advised to select ONE stock from one of the two leading US indices:

(a) NASDAQ 100 https://www.nasdaq.com/market-activity/quotes/nasdaq-ndx-index
(b) S&P500 (listed by market cap) https://www.slickcharts.com/sp500

Project Structure:

1. Investment Summary (first page): Write the key investment thesis, share price chart, and key
financial information. List the main reasons for the overall recommendation. You might also
wish to list some of the key investment risks facing the company

2. Company Overview:

Ø Summarise business operations & financial position using both the company’s website,
Annual Report (Investor Relations) and any other relevant sources (e.g. Reuters Finance,
NASDAQ, Bloomberg, Morningstar etc.)

Ø Look at sales/revenue growth (‘top line’); profitability/earnings (‘bottom line’);
sources of growth and competitive advantage; and current financial / trading position.

Ø Segmental analysis – by geographical region or division

Ø Company’s future strategy, brands, innovation, etc. Remember investing is futureoriented

Ø Concentrate on key trends, e.g. changes in profit margins, EPS and other keymetrics.

Ø Discuss any relevant ESG issues relevant for both the company and the industry in which
it operates. Discuss the company’s leadership and ownership structures.

3. Industry Analysis and Competitive Positioning

Ø Explain key factors affecting the firm’s sector (you can bring in a wide range of sources, e.g.
consumer websites or investment bank research on new technologies or key trends).

Ø Overview of any key ‘megatrends’ that might affect the company

Ø Strategic analysis: Porter’s 5 Forces, SWOT analysis, PESTEL etc.

Ø Relevant Industry reports (e.g. Consumer Brands, Airlines) – look for emerging trends.

4. Fundamental and technical valuations:

Ø Analyse at least 2 financial ratios (e.g. profit margins; return on investment; total asset
return) [Depending on your accounting proficiency, perform as much financial
statement analysis as you can!]

Ø Apply at least 2 valuation metrics (e.g. P/E; P/B; dividend yield) to perform relative
valuation analysis between your chosen firm to the relevant stock market index and rival
firm(s). Explain the metrics and analyse what they suggest about the valuation of the
company.

Ø Using StockCharts http://stockcharts.com/charts/ or any other website, pick at least 2
technical indicators. Explain the indicators and analyse what they suggest about the shortterm future direction of the share price. Examine whether the technical indicators have
been a good indicator in the past 12 months.

Ø You should put the key financial statements in an Appendix.

5. News and Investment Risks

Ø Analyse at least 2 significant news events associated with the company (e.g. use Google
Finance’s interactive chart, Reuters or other news sites) to examine whether there was
any evidence of significant abnormal returns around the news.

Ø Summarise at least 3 investment risks facing the firm, including a visual risk matrix.
Discuss any mitigating factors relevant to these risks.

NB: You are NOT required to perform your own valuation analysis. However, for those familiar with
valuation tools and financial accounting, feel free to include additional details in an Appendix or
through Excel.

Using material from other sources

• You can copy across tables and/or graphs from the various websites (label and source
these, however). However, DO NOT merely cut and paste the text word for word from the
Investor Relations and other web pages. Summarise the issues in your own words!

• As each student’s project should be unique, any plagiarism from another student will
be easily spotted and marks will be deducted accordingly.

• Also, recall that ChatGPT / AI tools won’t have updated financial information.
NB: Please submit your report in Word or PDF on Canvas

Examples: You might also find the examples of previous winners of the CFA Institute Research
Challenge useful, as well as all of the examples of past student and professional equity reports.