CMCnotes

TRAINING SUPPLEMENT

Readings and Video

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We added three new readings to supplement the company analysis training session - found on the For Members>Resource Guide page of the webiste at the LINK TO TRAINING SESSION READINGS.

  • Analyzing a Company – The Basics (Ch. 6) discusses evaluating the growth prospects, profitability, financial health, and risk of companies.
  • The Five Competitive Forces that Shape Strategy reviews how analyzing the structure of an industry can help you understand what’s influencing company profitability and identifying trends in the competitive forces can help you anticipate changes in profitability.
  • What Makes a Moat describes the concept of economic moats (structural barriers that protect companies from competition) and reviews Morningstar’s classification of moat sources: intangible assets, cost advantages, switching costs, network effects, and efficient scale.

Finally, UW-ASAP alum Andrew Lane, a Morningstar strategist recently met with the 1st year ASAP students to discuss the Morningstar Moat framework for analyzing companies. A video of Andrew’s talk is here.

Screening for Ideas

Using Factset

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In an earlier post (Investment Philosophy Matters When Generating Ideas) we highlighted that growth and value investors typically look at different things when identifying new ideas. Growth investors tend to focus on growth in sales and earnings, while value investors focus on price relative to something that proxies for the value of the company like assets, earnings, or cash flows. Professional investors generate ideas in many ways, but one common approach is to use screens that filter a large universe of stocks for the ones with characteristics the investors think likely to yield attractive investments - consistent with their philosophy. Factset has a powerful screening tool you can use to identify your own ideas.

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