Your Assignment

Your role in this assignment is one of a securities analyst.  As an expert in a particular industry, you are eager to show your supervisor (a portfolio manager) the quality of your work.

Your job is to provide the portfolio manager with recommendations based upon your research.  The portfolio manager’s job is to listen to the recommendations of all of the analysts, then to select those stocks that are the most appropriate for the portfolio’s objectives. ( In this case, your fellow students and I are filling the role of the portfolio manager.)

In your written report, you are presenting your findings and recommendations in the hopes that they will be accepted.  (The portfolio manager has the right, indeed the duty, to reject any recommendations based upon shoddy research and logic.)  As such, you need to adopt a somewhat persuasive tone.  If you have confidence in your work, you should be willing to try to persuade someone else through the strength of your arguments (either pro or con).  As always, your arguments should be based upon reliable data and sound logic.

Due diligence requires that you investigate thoroughly all stocks in your area of responsibility, without taking any shortcuts.  This degree of thoroughness is one of the major factors that must be communicated in your paper.

Basis for the Written Report

As you write the paper, keep in mind the dictum of every newspaper reporter: Every good story should have a who, how, when, what, and why.

	Who – the names of the companies and the industry that you investigated
	How – the methodology that you followed (screens, competitive analysis, valuations, ratios, etc.)
	When – your time horizon or the length of time over which you are making estimates
	What – your recommendations
	Why – your logic and basis for the recommendations.

Given our objectives for the portfolio, the what (your recommendations) obviously is the most important part of this process.  However, from an educational perspective, the how (explanation of your work) and the why (your logic) are the most important steps. When I read your paper, I will concentrate on the quality of the process (how and why) and will let time determine the quality of the outcome (what).

A Suggested Outline for Your Written Report

1. Economic Analysis:  A summary of your economic outlook.

2. Industry Analysis:  A discussion of your industry’s characteristics.   Include:

	a short discussion of how the economic outlook above will affect the industry
	the major factors that affect the profitability of the industry
	where future growth in sales will come from (international expansion, etc.)
	a competitive analysis of the industry (Porter’s five factors)
	the competitive strategy of each of your chosen firms (of Porter’s 3 generic strategies)
	a listing and justification of any criteria used in a computer screen on the industry’s stocks (if used)

3. Company Analysis:  You may choose to discuss each company separately followed by a recommendation or to compare the various companies as part of a group.  Provide

	a profile of the companies and their operations (a short paragraph for each company)
	results of your ratio analysis of the companies (a summary comparative table would be desirable – place larger material in an appendix if necessary)
	results of the breakdown of ROE into its operating and financial factors (a comparative table would be helpful here also)
	important and relevant facts discovered during your research which have caused you to recommend (or not recommend) each stock
	the results of your valuation of the companies
	important risks for each stock which the portfolio manager should know about (i.e., what can go wrong with this investment?)
	your recommendation and reasons.

Writing Style

If you want, include some graphs, diagrams, pictures, cartoons . . . anything that will add some style to the paper to help it to stand out.  Don’t force the use of these features but add them if they will make your presentation more interesting.   Humor, writing in the active voice, and use of action words always help.   Style is not more important than substance, but style is very important in the security analysis field.  Use this opportunity to develop your written presentation skills.

Typing the Paper

1. First page: Cover sheet.

2. The paper should be single-spaced, with an extra space between paragraphs (the same as this page).  An extra space (or spaces) should separate the major sections in the paper.

3. Page numbers should appear on each page in the upper right-hand corner of the page.

4. Use headings to separate the major topics of the paper.  Major headings should be centered on the page, minor headings should be flush with the left-hand margin and in bond type (the same format as this guide).

5. Use tables to display numerical comparisons wherever possible.  Tables are easier to construct, require less explanation, and are easy for the reader to interpret.

6. Points will be deducted for misspelled words and poor grammar.   (Allowances will be made for those students who use English as a second language.)   Use the spell checker on your word processor (if spelling is not checked automatically).  Given the widespread availability of word processors, typing errors are not acceptable.

7. No footnotes are necessary, unless you want to add explanatory material.   Similarly, no bibliography is necessary.  You should assume that your reader is a practitioner, not an academic; therefore, an academic style of presentation isn't necessary.  However, you should show major sources, where relevant, in parenthesis in the body of the paper (e.g. Source: Media General’s website).

Length of the Paper

There is no minimum or maximum length required for the paper.  However, I believe that it would be difficult to adequately cover the topic in less than ten pages (single-spaced).  The average length of papers last semester was approximately twenty pages.

Appendices

If you have any material such as graphs, charts, spreadsheet printouts, etc. that you want to include, feel free to place these in an appendix (if they are not integrated into the body of the paper).

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