It’s been five years since I volunteered to be an industry mentor for the CFA IRC organized by CFA India Society (formerly IAIP). Over the period, I have felt immense satisfaction from nurturing young minds in the nuances of equity analysis. As was readily apparent to the mentees in our interactions, real world analysis requires a far more in-depth understanding of the various facets of a company before an investment recommendation is disseminated.
The format of the CFA IRC ensures a judicious blend of business school inspired theoretical knowledge and industry established practical application of the same knowledge. The key to being a productive industry mentor is to inculcate a disciplined thought process in data analysis among students. Easy availability of abundant data in various media formats can overwhelm students and can easily cause confusion and loss of focus. This situation is what the industry calls information paralysis. My role as an industry mentor is to guide the students through this maze of copious information and ensure that focus is on actionable matters that have a direct or indirect impact on company operations, its financial statements and resultant analysis. In my experience, this seems to be the toughest challenge for the IRC participants. The hallmark of a successful analyst is the ability to isolate valuable nuggets of information from the noise.
A few of my takeaways from mentoring teams representing some of the Top-20 business programs in the country have been surmised below:
In successive iteration of IRC, participants seem to be better prepared than the prior year.
Participants need to become more proficient in accounting principles and concepts – a very important skill for a research analyst.
Participants should be motivated to conduct some form of primary research on the company to support their investment thesis and provide value add to their recommendation.
Participants spend more time in compiling data than analyzing it!
Participants tend to prepare a glossy report that incorporates a lot of tangential information that does not have a bearing on the outcome i.e. recommendation.
Research Report needs to be written in an active voice rather than a passive voice. Moreover, sentences should be short and precise. Verbosity should be avoided, as attention span of readers is short!
Participants need to become more proficient in presentation skills! (It’s not what you Say but how you Say it!)
Participants should reduce the number of slides in their presentation which will enable them to focus on conveying material information in a timely manner without overkill and time pressure.
Participants need to plan their Q&A session meticulously! A team member should be assigned to display the appendix and/or relevant data pertinent to the question asked.
Mentoring business school teams in the science and art of Equity Research has been a wonderful journey so far and I am enjoying the ride!