Students pitch stock recommendations in annual Gates Capital Stock Pitch competition
Teams entered the Gates Capital Stock Pitch competition for a share of $10,000 in cash prizes for their buy, sell or hold recommendations on specific stocks in the Business Building on Friday.
The competition, which was endowed by K-State alum Jeff Gates of Gates Capital Management, challenged participants to find U.S. listed companies with a trading price above $5 per share and a market capitalization of more than 2 billion dollars and analyze them.
Teams were encouraged to research companies they believed to be overvalued or undervalued relative to current trading prices and their own independent research.
The teams used Bloomberg terminals, Thomson Reuters Eikon research software and classroom-taught valuation models to determine the value of the business. Then the teams wrote reports no longer than 10 pages focusing on key company details, industry, ratings – the estimate of something’s worth – and any other key points to to note.
The judges selected five teams based on their analysis of the submitted reports focusing on the quantitative and qualitative justifications used.
“Part of the general criteria was about originality,” said Kendal Clawson, judge and 2013 K-State alumnus. “What was new and what might not have been taken into account in a normal analysis.”
Companies featured at Friday’s event ranged from electronics makers to gold mining companies.
After the judges listened to each team’s 10-minute presentation, an additional 10 minutes were given to the judges to ask the teams questions and their analysis. The four-judge panel of financial industry professionals questioned the contestants about the specific assumptions used in the ratings and the associated industry risks for each company.
After all five teams showed up and passed the round of questions and answers, the judges deliberated and scored the teams.
Constellation Brands (STZ) won first place with team members Avery Bolar, junior finance student, and Madison Brown, sophomore finance student. They won the grand prize of $5,000. The group’s presentation focused on the overall strength of the Constellation brands and their products such as Corona, Modelo and Svedka.
The team put in about 40 hours of preparation between primary research, building financial valuation models and writing their report, Bolar and Brown said.
Closing their presentation, Bolar said he strongly believes in hedge fund manager Peter Lynch’s view that one needs to understand the industry they are in.
“Since Madison was a minor, I’ve taken on the grueling task of market research,” Bolar joked of his major market research.
Bolar and Brown explained how everyone needed to be familiar with their industry to accurately assess the strengths and weaknesses of Constellation brands.
“I competed last year,” Bolar said. I launched Chegg. A technological stock very different from alcohol. What really helped me were these courses using Excel.
“So I’m a sophomore, so I haven’t had any internship experience,” Brown said. “But looking more for the qualitative side for me, I would say that my courses like management and marketing really helped me.
Bolar and Brown reiterated their shared belief in Constellation, citing the strengths associated with consumer goods-based companies in the alcohol industry. Bolar said microbreweries have had negative effects on the industry as a whole.
“I was just interested in growth in an industry with no growth,” Bolar said.
Additionally, Team Logitech (LOGI) and Team Nucor (NUE) placed second and third, winning $3,000 and $2,000 respectively. Team Barrick (GOLD) and Team Synnex (SNX) each won $500.
Garrett Hazlett, finance senior and member of the Nucor team, spoke about the total preparation that he and his teammates Neel Ganta and Tyler Shwertferger, finance seniors, had.
“We spent 16 hours on our PowerPoint, over 20 hours on primary research and 10 hours on the submitted report,” Hazlett said.
Hazlett said as part of their primary research, they called industry experts, read financial statements and visited steel manufacturing sites.
Gates Capital Management faculty member and event organizer Scott Hendrix explained how the competition will continue next year in the spring.
“What we’re going to do going forward is have a more streamlined application process,” Hendrix said. “With a more concise executive summary of three to four pages.”
Ansley Chua, head of the finance department, said students should start thinking about businesses early for next year’s event. Chua added that participants have resources at their disposal that may not be available at other colleges.
“If you’re up to the pitch challenge, you can use Bloomberg terminals to do your research,” Chua said. “I want to encourage people to use it to come here to do their research and improve.”