CFA Institute Research Challenge 2015

A few words from our representatives at the CFA Insititute Research Challenge 2015!

We are finally done! After more than four months, the CFA Institute Research Challenge 2015 ended for us with the place of “Runner-Up” in the EMEA finals of the best five teams out of an initial number of more than 300 in this region. It turned out to be a great challenge to each and every one of us and we would not want to miss it. The challenge started with a kickoff meeting at CD Projekt SA, the Polish game developer of the famous role-playing game franchise “The Witcher”, just across the street from our university. Having been invited by the Co-CEO and the CFO of the company in November ‘14, all teams enjoyed a 3h investor presentation with everything from topline information to deep financial information on the different business segments and historical development. We must say, the company really took this cooperation seriously and offered a great experience for all of us students. Having finished the “fun part”, we had to get things done, which meant writing an equity report on the company with a recommendation of “BUY”, “HOLD” or “SELL” and justifying it by analyzing the market, the competition and any other publicly available aspect – the monster turned out to be 63 pages long, 53 of which were appendices and written with blood and tears ;-).

The deadline was February 10^th. After having had submitted the report, the waiting period began. 14 teams entered the competition and we did not know who would be invited to the Warsaw Stock Exchange to present their analysis to a panel of judges, professionals from different asset management companies. This meant that we had to work “into the blue”, setting up slide by slide for a presentation that might never be presented – a frustrating two weeks that finally ended with the relieving invitation to the GPW on March 4^th. Invited were, including us, five teams from Poland based on their written report including Krakow, Wroclaw, Katowice and two teams from Warsaw. A stressful day ended with a demanding Q&A session between the judges and us and suddenly we were announced “Winner of the Local Level”. Keeping in mind the very strong competition, this was the first tremendous milestone in the whole challenge. So we would go to Amsterdam to compete with 28 other teams from around Europe, the Middle East and Africa – 29 “local” winners of their national stage. This is quite a tough revelation when thinking about the fact that only five of them would advance to the final and only one team would have the chance to fly to the global final, held in Atlanta, USA.

The EMEA event would take place on April 1^st and 2^nd in Amsterdam, NL. Everything was planned meticulously and we arrived despite of the nasty storms over Western Europe. Finally, the “day of truth” approached and we were facing four other teams in the EMEA semi-finals. In a small, living room-like room we had to present and defend our analysis in front of three judges. When we heard the announcement that we would advance to the final, we could not really believe it and it took us quite a while to digest the fact. However, the EMEA final itself would be held on the same day, just a few hours away. The final itself was a great experience: presenting our valuation, our thoughts on this company that we talked so much about to the poor people that wanted and did not want to listen ;-), the countless hours invested, and now we would stand on a large stage talking to an audience as well as a global live-stream. This was something different from the usual presentations, something special.

In the end, even the global final seemed to be very close but even though we did not manage to advance to the global final, we can only and truly speak positively of this experience and thank everyone who helped organizing the event, advising the students and generally took part in pushing it to this level.

Did you enjoy this challenge? What are the best and worst parts about it?

The CFA Institute Research Challenge has easily been the longest extracurricular challenge that we participated in, demanded an endless amount of time and was a quite stressful endeavor. Nonetheless, we all agree that it was all worth it and the rewards outweigh the sacrifices by miles. It is not only about the things “on paper” such as the certificates and so on but also the lessons along the way – which sounds awfully cliché but has proven to be the case: not only did every group member have to deepen his understanding of the valuation techniques of a company and its industry but the challenge also demanded to work hundreds of hours with a small number of people. Everybody had to coordinate, discuss, defend his point of view and openly disagree with one another to form a functional team while still being able to look each other in the eyes. Especially this aspect, to keep up the motivation over such a long period of more than four months without any immediate feedback, investing more and more and not knowing whether it pays off or not, has proven to be a new experience for us and is one of the most important “soft factors” in this challenge. We are proud that we can still meet afterwards and have the feeling that this task brought us closer together rather than splitting a group of friends ;-).

To pick a “best” and “worst” is a very tough task and also subjective to each of us. Some team members initially did not feel comfortable with talking to a larger crowd on a professional stage while others preferred this much more to the small room in the semi-final, which rather seemed like talking to judges in their living room. Therefore a “worst” is tough – one aspect might be the very long time-horizon of the project that every team has to adapt to and deal with while still balancing the challenge with “everyday” university tasks. A “best” is tough to point out due to different reasons: there were many “bests”. The challenge is extraordinarily managed – everything is planned, the organizing team is unbelievably nice and open to discuss almost any questions while making the administrative issues as small as possible for every participant. This was outstanding and helped us a lot. Another “best” was the work with the company: we had the chance (and luck) to talk to the CFO and the investor relations team of CD Projekt SA, who helped us wherever they could and engaged in detailed discussions instead of treating us like “the kids from school”. This was one of the major “bests”. The same is true about our faculty advisor and industry advisor. Our faculty advisor, Paweł Mielcarz, together with our industry advisor, Michał Szemraj from Bank Pekao, have given invaluable input by questioning our assumptions, the model, the way of presenting it and underlying aspects in order to make us aware of weak spots, optimally fix them or address the issue and gain as deep an understanding of the company as possible. Finally, the reward of having won the national level as well as the EMEA semi-finals was, of course, also a “best” and a great finale of the long journey to Amsterdam (figuratively speaking ;-)).

What was the most difficult about it?

One of the most difficult aspects was definitely the analysis itself – to analyze a company as deep as possible, covering any aspect available on the internet, in annual reports, investor presentations, pamphlets, websites, third party data and so on, while preparing a hopefully bulletproof report and presentation was a task during which we constantly had to question our whole work, delete parts and shift the whole direction – something that does not come easily when knowing how much time went into the passages that were just deleted. Nonetheless, the critical approach towards our own work was an essential aspect and had to be done. Another, probably even more difficult, aspect was the previously mentioned “psychological factor” of the challenge with long time horizons, little to no feedback and tough competition. This, together with the stress factor during each final on every level of the challenge, was tough to control since every team member is different and has a slightly different motivation. That our team consisted of friends helped a lot to cope with these aspects. We also found it very helpful to always use an open communication approach and separate “business” from “personal” to clearly talk about issues and not make somebody feel personally attacked.

Another aspect was the competition. The Polish stage is already on a very high level. The team from Wrocław won the global final two years ago and always performs well with thorough analyses. We were aware that the Polish level would already be very demanding and this proved to be right with four other competing universities on a high level.

What do you take out of this experience?

The famous “lessons learned” is a very long list in this case. Every participant in the challenge, the ones that advanced and the ones that unfortunately did not, had to spend a great amount of time and effort and definitely learned a bunch. This cannot be changed by some certificate or whatever else is handed out. The CFA Institute Research Challenge has been – by far – the best “case study” or hands-on experience in a non-professional environment that we have every seen: to actually do an equity valuation in reality as close as possible to the actual task itself, is an experience that we can only recommend to any student interested in the financial field. In our opinion, the learning curve was incredibly steep and the experience can only enrich anyone who decides to take part in this challenge.

Do you recommend our students to participate next year? If so, why?

Let’s make it short: YES! Do not let this opportunity pass by easily. It is tough, it is an enormous amount of time but it is all worth it. In addition to the “professional” development of each participant, other factors are also not to forget such as the recognition from professionals, an interesting topic to talk about during job or internship interviews and contact to very interesting and open-minded students from your country as well as hopefully internationally during the different stages of the competition. The only thing that you have to ask yourselves is if you are willing to go “all-in” speaking of time and effort invested because only then it makes sense to grasp this awesome opportunity.

Written by: Jan Philip-Pick, Christofer Kosior, Sonja Baranski and Kamil Kukiełka