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CFA Research Challenge: Interview with the semi-final winners

20/04/2022

 

We are pleased that even in challenging times, our students continue to take part in  extracurricular activities and show interest in competitions where they can best test their theoretical knowledge in practice and within tough international competition.
It is not only their education, but also their commitment, effectivity, presentation skills, learning from feedback and other skills that regularly bring them well-deserved victories. 

In March 2022, a team of four IES students, Jakub Bobysud, Matej Leško, Peter Palovič and Ondřej Rosický, won the local round of the prestigious international CFA Research Challenge. At the end of March, they also became the winners of the sub-regional (Central and Eastern European) round and at the beginning of April, they achieved a historical success, winning another round and thus making it to the EMEA finals. We are grateful that they also found some time to share their experience with us.

 

Can you tell us where you first heard about the CFA Research Challenge and what were your reasons for participation, what motivated you?  

Jakub: I heard about the CFA Research Challenge three years ago at the Company Valuation course and have been thinking about participating ever since. In general, I was motivated by the opportunity to create an equity research from scratch in a small team and to gain insight into both how our competitors think and how our mentor thinks about the same task. 

Peter: My motivation was to analyze the company from A to Z on our own, to create a model, to write an Equity Research report and to present the results and get recommendations. In addition, working with databases like Reuters or Bloomberg and learning from the faculty advisor and our mentor were a plus. 

Ondřej: I was motivated by the new experience and the potential opportunity to make new contacts.

Matěj: Similarly to my colleagues, I first learned about the competition at the Company Valuation course and I knew from the moment I finished the course that I definitely wanted to join the competition. My primary motivation was to gain more experience in complex company analysis, prepare a summary report and present an investment decision. Plus, the opportunity to gain new insights and feedback from a mentor and faculty advisor is not something I can get every day. 

Did you know each other well before the Challenge or was the competition itself a "team building" event and a test of cooperation skills for you? 

Jakub and Ondřej: The two of us knew each other as we started our studies at IES in the same year, but I am convinced that the amount of time spent together with the other two team members during the analyses and calls was more than sufficient as a team building. 

Matěj and Peter: The two of us have known each other for more than 10 years, we are high school classmates, so we know how to work together effectively. Yet we got to know the other members very well in the meetings and online calls that often lasted until the morning hours, and that can make a team stronger for sure. 

To give the future participants a better idea - can you please summarize what the brief of the whole Challenge looks like and what exactly is the task of each team? 

Jakub: In a nutshell, your task is to prepare an equity research on a publicly traded company that is selected each year by people from the Czech CFA Society. This means all kinds of analyses from examining historical reports, researching the market situation for the given product, predicting the future business of the firm…  based on these analyses the main valuation along with creating a coherent story that will support your results follows.

Ondřej: The task of each team is to provide the valuation of the selected company, but in addition to that, you need to prepare sufficient arguments to support the investment recommendation. The first part involves submitting a report in a similar format to equity research reports, and the second part is a presentation to the judges.

For the 2022 edition, the task was to analyze a relatively young company, but also one that has been much talked about lately, not only in connection with the PX index rebalancing. Were you pleased to learn that you would be analyzing Pilulka.cz? In what ways was it interesting?

Jakub: I hadn't followed Pilulka.cz or the e-commerce pharmacies prior to entering the competition and I think I only fully realized the difficulty of the valuation and the predictions associated with Pilulka.cz after the initial analysis of its business and understanding the transformation it is undergoing. The most interesting and also the most difficult part of the valuation was estimating what Pilulka's business will look like in some 20 years from now, because the company is currently, at least in our opinion, somewhat far from anything that could be called a steady state.

Peter: …however, it is a young company with a lot of products and services. In my opinion, this company was a difficult subject for valuation, especially in terms of its youth. We only had data for this company for the last 3 years. Also, the overall e-commerce sector is one of the younger sectors, not to mention e-commerce in the pharmaceutical environment. In a nutshell, we have all sailed into uncharted waters. The most interesting part was figuring out the story of Pilulka.cz, as well as to decide what direction we thought this company would  take. Once we answered that question, we had to connect it to the numbers in the model. The availability of data in this regard was also interesting. Long story short, equity research at its best.

The competition is known to be quite time-consuming. How did you cope with this aspect and how did you maintain your mental resilience? The 2022 edition was still affected by the limitations of the covid pandemic. On top of that, the presentations in the local finals were taking place in the shadow of the breakout of the Russian invasion of Ukraine…

Jakub: From the time management point of view, the biggest inconvenience for us was the fact that, unlike other teams, we only received the contact for our mentor in December. At the first meeting with him, we found out that we had only half of the story done, and we had two weeks left until the deadline - so even if as IES students we are used to an intense work pace, those two week were quite challenging. In the end, however, the deadline was postponed due to complications related to the pandemic, which we took advantage of to fine-tune the visual aspect of the report. Personally, I drew my mental resilience mainly from the fact that we were all fully engaged in the team, confident in our ability to deliver the report. After all, studying at IES really prepares you for such challenges.  

Matěj: It really needs to be pointed out that the competition itself requires a large number of hours that are dedicated to data collection, analysis and story creation. Meeting each other from the beginning of the competition helped us a lot, despite the many obstacles caused by the covid situation or other circumstances as well. But I think there was a strong and united will in our team to deliver an investment recommendation of a certain quality and to be able to defend our story.

Peter: I think it helped us a lot that we started scheduling our meetings right from the beginning of the competition and didn't leave it to the last minute. Everyone on our team is a student and employed on top of that. In terms of mental toughness, I think we all supported and encouraged each other. We all had the mindset to give everything to this competition, so there was no time to even think about not delivering a report or presentation in the best possible form.

Are there any skills from your studies at the IES that you found helpful for the company valuation task or presenting? Was there a particular course or teacher that helped you? Was a good theoretical background enough? 

Jakub: The Company Valuation and Financial Management courses were definitely the basis for me. I think that Jiří Novák, who both teaches the Company valuation course and acts as a faculty advisor in the competition, was a great replacement for the missing mentor in the initial phase of the challenge. Subsequently he was able to give us extensive and very prompt feedback, but at the same time leaving the decision if we would take his feedback into account upon us.

Matěj: It was the Corporate Finance courses that formed the theoretical basis for our financial analysis. I dare to say that other courses that shape our thinking on economic issues at IES have undoubtedly also had an impact on our result and our team's ability to think "on the same page". Our faculty advisor, Jiří Novák, spent a great number of hours with us, discussing various problems we faced and was equally excellent in helping us on the theoretical level of concepts in the field of corporate finance.

Peter: Financial Accounting, Financial Management, Corporate Finance and Company Valuation… by having every member of our team working in the finance and valuation areas, we were able to combine theoretical knowledge with practical knowledge. Jiri Novak spent no small number of hours with us in both offline and online meetings. We discussed various valuation issues or our story with him, and he always gave us feedback.

Ondřej: The basics are definitely subjects related to corporate finance and company valuation, on the other hand, the ability to describe the "story" of a company is something that, in my opinion, can't be taught much and comes more from experience, which our mentor, Honza Hájek, was very helpful with.  

And vice versa - did this experience - participating in the competition and cooperation with your mentor - bring you something new and useful for your career development or field of interest?

Jakub:  It was amazing to have the opportunity to discuss the valuations and implications of various market phenomena for Pilulka.cz in-depth with everyone involved. For me, the discussions with our mentor, Honza Hájek, were the most interesting. He brought us a completely new perspective on how to construct a story to support our valuation. At the same time, I hope that the mutual cooperation with the guys will not end with this year's competition.

Matěj: The competition fulfilled my expectations and brought me a lot of new experiences and contacts. Apart from our faculty advisor, I would also like to acknowledge our mentor Jan Hájek, who dedicated a lot of his time to us. Not only did he broaden our horizons concerning a stimulating story for the purpose of the competition, but he also discussed other topics with us and gave us a closer look at his way of working and expertise as a fund manager.

Peter: I am very glad that this competition enabled me to get new perspectives on valuation, model building, and story interpretation. I would also like to highlight our collaboration with the mentor, who gave us a completely different perspective on the valuation, and on what the possible scenarios for this company can be.

Ondřej: Working with my teammates, our advisor and mentor definitely showed me different perspectives on how to approach investing and investment decisions, and it taught me which topics should be emphasized and which are marginal.

Can you tell us what your current career paths are? What are you working on these days or where are you headed in the future? 

Jakub: I am currently working in the valuation and financial modeling team at Deloitte, where my main focus is on litigation valuations. I feel in my element there and I definitely plan to continue in this career path.

Matěj: I am currently working as an intern at Erste Bank in Vienna in the Credit Risk Commercial Real Estate area, where I both work with real estate valuators and at the same time I am working on research in this field. I prefer not to predict the future, but I believe that I will have the opportunity to work on topics related to investing in companies, real estate or private equity.

Peter: I work as an Equity Research Intern at Wood & Company, where I assist senior colleagues with company valuations and industry research. I really enjoy this work and hope to have my own list of companies to cover after college. This competition is a test for me to see what it could be like in the near future.

Ondřej: I am currently working on an internship in investment banking at Komerční banka, and I would like to continue my career related to investing and portfolio management after graduation.

 

Thank you very much for the interview!

 

 

 

Autor - Barbora Holková

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