Saint Michael’s team tops in state as financial analysts

A Saint Michael’s College team of five business/accounting students on February 13 won the 2018 Vermont CFA Institute Research Challenge, a state qualifier for an annual global competition that provides university students with hands-on mentoring and intensive training in financial analysis.

Students winning at the local level advance to one of the three regional competitions, and the winner from each regional competition will advance to the global final held in Kuala Lumpur, Malaysia in April.

The winning Saint Michael’s team members were Zack Maroon, Taylor Stefano, Tony Linderson, Charlie Herbert and Peter Kendall. They will compete against teams from North, South and Central America on March 19-20 in Boston. The CFA Society of Vermont covers reasonable travel and accommodations.

For the Boston competition in March they will be accompanied by Professor Karen Popovich, Saint Michael’s Chair of Business Administration and Accounting, since Professor Joanne Scott, the Department’s chief faculty adviser for the competition, has prior obligations and is unable to attend.  “We are so excited for them!” said Scott, who will be retiring in June after more than 26 years with Saint Michael’s. “They really worked hard to understand the complex process of evaluating a bank and the banking industry. The quality of their presentation and their knowledge and comfort level during the Q&A session was impressive.”

The team’s Vermont competitors on Tuesday were Champlain College and Northern Vermont University (the combined former Johnson State and Lyndon State from the Northeast Kingdom). This recent final round of the CFA Institute Research Challenge was the presentation component, held at the Vermont Center for Emerging Technologies (VCET) at the FairPoint Tech Hub on Main Street in Burlington.

The competition required an investment evaluation of Community Bank (which recently acquired Merchant’s Bank).  The students analyzed the industry and financials and developed financial models to issue a “buy, sell or hold” decision.  Results included a written report, scored by independent CFA judges and a 10 minute presentation with 10 minutes for Q&A by a three-judge panel of investment professionals.

“The questions were tough and our students were a true pleasure to watch,” Popovich said.

CFA stands for Chartered Financial Analyst. The CFA Society Vermont serves its members by providing a regional forum for the discussion of investments, economics and finance. The organization promotes high standards of expertise and conduct among investment managers and analysts.   This is the second competition of this type in Vermont after a successful challenge last year, won by the Champlain College team.

Students work in teams to research and analyze a publicly traded company. This annual educational initiative is designed to promote best practices in research among the next generation of analysts through hands-on mentoring and intensive training in company analysis. Champlain College’s Associate Professor and organizer of the Vermont CFA Research Challenge, Fritz Burkhardt, noted  “It is intended to complement business and finance curriculum by simulating the real world experience of an equity analyst.”

The Challenge spanned September 2017 through February 2018 and consisted of the following components: Analysis of a Public Company; Mentoring by a Professional Research Analyst; Writing an Equity Research Report with a buy, sell, or hold recommendation; Presentation of Research to a High-Profile Panel of Experts.

In October, teams from Saint Michael’s, Champlain and Northern Vermont attended the Community Bank Company Presentation given by Scott Kingsley, Community Bank’s Chief Financial Officer.  A week later, students attended a lecture by Jean Sievert of Rockpoint Advisors on how to analyze a financial institution. The students also were mentored by Arthur P. Wright, Assistant Portfolio Manager at Hanson & Doremus Investment Management in Burlington.

Judges for Tuesday’s competition included John T. Boland, CFA, President & Chief Investment Officer / Principal of Maple Capital Management and Jean I. Sievert, CFA, Director of Research, Rock Point Advisors and Adam Greshin – Commissioner of Finance and Management, State of Vermont. Each’s team’s presentation was limited to 10 minutes. An additional 10 minutes was provided for teams to answer questions posed by the judges. Their presentation was evaluated on: financial analysis of the industry, competitors and company; valuation of the company; presentation quality and skills; and team involvement.

For students, insights and connections

St. Mike’s team member Zack Maroon ’18 of Scarborough, Maine, summarized the Research Challenge project that he and his teammates presented: “The first half of our team report highlights Community Bank System, Inc.’s (CBU) core structure, strategy, management, and industry,” he said. “This section also includes an in-depth industry analysis as well as a summary of the anticipated external driving forces we used to guide our valuation conclusion.

The second half of the report, Maroon said, focuses on the valuation. “Banks are infamously difficult to value, as many of the “go-to” models like discounted cash flow analysis do not apply, so we used an excess return model (with a risk-weighted sensitivity analysis) to assess the intrinsic value of the company.”  This section also includes an analysis of CBU’s financial statements over time, examining asset quality, loan portfolio composition, shareholder returns, and other measures, he said, explaining, “A price to tangible book value vs. return on asset regression suggested CBU stock could be slightly overvalued, while a scorecard relative valuation suggested the stock could be slightly undervalued.”

The team’s 30-page report supported their “HOLD” recommendation for CBU stock with a target price of $52/share.  “Competing in the CFA Research Competition has been without a doubt the most difficult and rewarding experience of my college career. It’s difficult to explain how exciting it was to finally present this report, which has been the culmination of everything we’ve learned and experienced over the past four years, along with four friends and teammates who’ve dedicated months to this project,” Maroon said.

Peter Kendall ’18, Springfield, VT, said being part of the CFA research team “has been one of my best experiences in college thus far. Our team has a really great dynamic and getting to know each and every team member on a deeper level has been a privilege.” He said the experience will directly apply to his post-graduation plans to enter the area banking industry. “I’m extremely appreciative of Professors Popovich and Scott for giving us this opportunity and the CFA Institute of Vermont for putting this together for us,” he said.

Taylor Stefano ’18, Plymouth, MA said she was “honored to be part of such an amazing experience with very dedicated team members. I was really impressed by all of the time and effort our team set forth in this out of class research assignment. We were really able to utilize all of the skills and knowledge that we have learned at Saint Michael’s College and we would not have been able to succeed without the support and guidance from our professors.”

Charles Herbert ’18, Medina NY, said participating in the competition “has really made my resume stand out as I’ve been applying for jobs. It has been amazing to see how each member of our team has their own unique strength which really helped us in putting our report/presentation together.” He said his finance knowledge “has soared since I’ve been involved with this competition,” and he values industry connections made through this process, from the Chief Financial Officer of Community Bank to the team’s Industry Mentor Arthur Wright and the judges. I don’t think our team would be nearly what it is without the support and push from our professors to really do our best and as well apply what we have learned all these years at Saint Mike’s.”

Tony Linderson, whose hometown is Stockholm, Sweden, said that representing Saint Michael’s in the CFA research challenge had been a rewarding experience. “It provided an opportunity to apply what we have learned from our classes, and deepen our knowledge through hands on experience. Whether I stay in the United States or return to Sweden, the skills I have learned and the experience of connecting with financial professionals is something I will bring into my professional career,” he said. “The results show how working with driven individuals and having a good team dynamic is crucial in order to succeed. I have been fortunate to experience this early in my career.” Linderson thanked his team members, professors, industry mentor, and the CFA society of Vermont for providing this opportunity and said “I look forward to continue this journey and represent the school in Boston.”

Popovich specially thanked her department colleague, instructor Steve Doyon and business student Alex Colletta for attending and supporting Saint Michael’s team. “We can be exceptionally proud of our students,” she said.