Their advice: Buy! Chipotle Mexican Grill has great growth potential!
But, truth be told, the Cal State Fullerton students on its Titan Capital Management team dove into this high-stakes research project with the utterly opposite hypothesis.
They were assigned to examine the prospects of Newport Beach-based Chipotle — a stock they considered expensive — for what’s essentially the Super Bowl of aspiring financial and investment analysts from universities around the world. Sell, they were thinking. Sell!
But a funny thing happened on the way to dumping Chipotle. They kept finding evidence that undermined their thesis. They dove into data. Compared it to competitors. Plotted the past. Predicted the future.
And changed their minds.
There’s that innovative assembly line service model, they told the judges at the CFA (Chartered Financial Analyst) Institute Research Challenge. High-quality ingredients sourced as much as possible from local farms. Commitment to reducing its carbon footprint. Plans to double the number of stores in North America. Great growth potential overseas. The fully corporate-owned-store model allows it to keep tight control, the internal promotion rate is 90%, and the entrees are priced some 20% lower than the competition.
“Unparalleled value,” they concluded, with “all the ingredients for success.”
Nice one! But there were questions. How, exactly, did you arrive at Conclusions A and B and C? What data is your analysis based on? What about X, Y and Z? Where might you be wrong? Quick on their feet and solidly grounded in their facts, the students answered the judges’ questions with ease.
And they won the local finals. Then the regional finals.
Now the team of seniors — Sam Fedrow, Brandon Leon, Jacquelyn George and Jericho Cezar, under the tutelage of faculty adviser Kelly Ko — is one of only six teams advancing to the global finals on Wednesday, May 3, in Washington, D.C.
The Titans emerged from a field of some 1,300 teams brandishing their analytical chops from the Americas, Asia, Europe, the Middle East and Africa. It’s the fourth year in a row that Cal State Fullerton teams have won the regional Investment Research Challenge, but none have blasted as far as this year’s team. They have bragging rights as among the best in the world regardless of what happens at the global finals.
I mean, no pressure or anything. The CSUF team will be competing against Cal Poly San Luis Obispo, Universitas Indonesia, University of Sydney, Polytechnic University of Milan and University of Neuchatel.
“I don’t see Stanford and the top Ivies at this competition,” said a proud Jeff Van Harte, a 1980 B.A. in business administration and finance, who is now chair and chief investment officer of Jackson Square Partners in San Francisco. Van Harte’s $1.5 million gift has helped make Titan Capital Management a reality, and he has described himself as breathless over the accomplishment.
“These kids have been awesome, and they have so much humility,” he said. ” No matter what happens, I’m super proud of them. For the program, it’s wonderful, and it’s a big deal for the university. We’re doing something right.”
The team was clearly on to something: Since they made the “buy” recommendation, Chipotle’s stock has risen from about $1,700 to more than $2,000.
Not ‘Wall Street’
Finance education has come a long way since the Gordon Gekko “greed is good” days.
“As we continue to deliver the highest standards of excellence, ethics, and education, we seek to look beyond what we do for our constituents today to better meet their current needs and to anticipate what they will need tomorrow – and contributing to ultimately benefitting society,” the CFA Institute says. Its mission is to harness finance in the service of good — “generating value for investment management professionals and engaging with the investment industry to advance ethics, market integrity, and professional standards of practice, which collectively contributes value to society.”
The Research Challenge is meant to cement this sort of thinking. It engages university students with “hands-on mentoring and intensive training in both financial analysis and professional ethics” to tackle long-term challenges such as “economic dislocation, climate change, geopolitical conflicts, inequality and so much more,” it says. “Through our professional standards and advocacy, we bolster a more principled industry.”
CSUF’s program gives students a real-world edge with its hands-on approach to the subject. Through Titan Capital Management, they manage a real investment portfolio that funds student services such as tutoring and career readiness. Their decisions have real consequences.
The team spent hundreds of hours on their research and really learned how to dissect a company. The biggest question to ask is, “What are other people not seeing, either good or bad?’” team member Leon said in a prepared statement.
Team member Cezar’s takeaway applies easily to all areas of life: “I learned that no matter what decision you are trying to make, you must ignore your biases as much as possible and follow the evidence.”
Read the whole report here: CSUF.
Source: Orange County Register