Teams competed in the Gates Capital Stock Pitch competition for a share in $10,000 worth of cash prizes for their buy, sell or hold recommendations on specific stocks in the Business Building 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 greater than $5 per share and a market cap of more than $2 billion and analyze them.
Teams were encouraged to research companies they thought were over or undervalued relative to current trading prices and their own independent research.
Teams utilized Bloomberg terminals, Thomson Reuters’ Eikon research software and valuation models taught in class to find a value of the firm. Then, the teams wrote reports no longer than 10 pages focusing on key details of the business, industry, valuations — the estimation of something’s worth — and any other key points worth note.
Judges selected five teams from their analysis of submitted reports focusing on the quantitative and qualitative rationale used.
“Part of the overall criteria was on originality,” said Kendal Clawson, judge and 2013 K-State alumna. “What was new and what might not have been considered in a normal analysis.”
The companies pitched at Friday’s event ranged from electronics manufacturers to gold mining firms.
After judges listened to each team’s 10-minute presentation, an additional 10 minutes were given for judges to ask questions of the teams and their analysis. The four-person panel of judges comprised of finance industry professionals asked contestants about specific assumptions used in valuations and about industry associated risks for each firm.
After all five teams had presented and passed through the question and answer round, the judges deliberated and scored the teams.
In first place was Constellation Brands (STZ) with team members Avery Bolar, junior in finance, and Madison Brown, sophomore in finance. They won the grand prize of $5,000. The group’s presentation focused on the the overall strength of Constellation Brands and their products such as Corona, Modelo and Svedka.
The team completed roughly 40 hours of preparation between primary research, building financial valuation models and writing their report, Bolar and Brown said.
Closing their presentation, Bolar stated his strong belief in hedge fund manager Peter Lynch’s view that one needs to understand the industry that they are in.
“Since Madison is underage, I took on the exhausting task of market research,” Bolar joked about his primary market research.
Bolar and Brown talked about how they each had to become knowledgeable about their industry to accurately assess the strengths and weaknesses of Constellation Brands.
“I did the competition last year,” Bolar said.” I pitched Chegg. A tech stock very different to alcohol. What really kind of helped me were those classes using Excel.”
“So I’m a sophomore so I haven’t had any internship experiences,” Brown said. “But looking more for the qualitative side for me I would say that my classes like management and marketing were really helpful.”
Both Bolar and Brown reiterated their shared belief in Constellation, citing the strengths associated with consumer goods based firms in the alcohol industry. Bolar said micro-breweries have had negative effects on the industry as a whole.
“I was just interested in the growth in a no-growth industry,” Bolar said.
Garrett Hazlett, senior in finance and member of the Nucor team, talked about the total preparation that he and teammates Neel Ganta and Tyler Shwertferger, seniors in finance, had.
“We spent 16 hours on our PowerPoint, 20-plus hours of primary research and 10 hours on the submitted report,” Hazlett said.
Hazlett said as a part of their primary research, they called industry experts, read financial statements and visited steel manufacturing sites.
Scott Hendrix, Gates Capital Management faculty fellow and organizer of the event, talked about how the competition will continue again next year in the spring.
“What we’re going to do moving forward is to have a more streamlined application process,” Hendrix said. “With a more concise three to four page paper executive summary.”
Ansley Chua, finance department head, said students should start thinking about companies for next year’s event early. Chua added that participants have resources available to them that may not be available in other colleges.
“If you do the stock pitch challenge, you get to use the Bloomberg terminals to do your research,” Chua said. “I want to encourage people to use it to come here to do your research and get better at it.”