This study session consists of three parts. On completion of the video, selected readings and structured assessment, 2 hours of structured CPD will automatically be entered into your CPD log.
1. Industry Analysis - Video
This study session considers how understanding the industry is key to being able to understand sector trends and how individual companies are positioned within an industry. This video asks leading practitioners for their views and opinions on:
- Why is it important to understand an industry when attempting company forecasts
- What is the best way for an analyst to think about industry analysis
- How does industry analysis feed into forecasts
- How do you check that your forecasts make sense
- What are the best tips for making accurate and reasonable forecasts
- How do you identify sustainable competitive advantage
2. Industry Analysis - Selected Readings
Three external readings have been selected in this area:'Measuring the Moat' by Michael Mauboussin & Dan Callahan (Credit Suisse 2013)
The idea of a company possessing ‘sustainable value creation’, known as an economic moat is a much sought after factor by equity analysts. This reading looks at the characteristics which can identify companies which exhibit economic moats.
'Living with Noise: Valuation in the Face of Uncertainty' by Aswath Damarodan (CFA Institute 2013)
The author identifies a number of forms of uncertainty which are inherent in the intrinsic valuation of assets. This article begins by reviewing the process of intrinsic valuation and key drivers of value before showing clearly illustrated examples of valuation uncertainty. These examples employ structured numerical illustrations. Healthy and unhealthy responses to uncertainty by analysts are looked at.
'Valuing Tech and Internet Stocks: Do Competitive Advantages Have Expiration Dates?' By Grady Burkett & Rick Summer (CFA Institute 2013)
Competitive advantage, also known as the economic moat, is discussed here as a measure used to identify those companies most likely to be profitable over the long term. This has particular relevance in the fast changing field of tech and internet companies.
3. Industry Analysis - Structured Assessment
The assessment consists of 10 questions and requires a pass score of 70% to be obtained. The test must be passed in the first two attempts in order to successfully complete this study session and for the learning to log as structured learning.