This study session consists of five parts. On completion of the video, selected readings and assessment, 2 hours of structured CPD will automatically be entered into your CPD log.
1. Making a Stock Call - Video
This study session discusses the challenges in making a stock recommendation and balancing market momentum with fundamental valuation. Areas covered in the interviews include:
- How do you go about analysing a company?
- Why are great companies great?
- How do you ensure you have a good stock call?
- How can you avoid falling into a mind trap such as following the herd?
2. Making a Stock Call: Ensuring Stock Calls are Differentiated - Video
In this session, James Valentine, CFA, stresses the importance of delivering stock calls that are different from consensus and of value to the fund manager. The video introduces the 'ENTER' framework, which positions the need for research to be Expectational, Novel, Thorough, Examinable, and Revealing. The way in which analysts may differentiate their target price through superior forecasts, superior valuation or superior sentiment indicators is also discussed. This extends some of the discussion from Study Session 1 on the 'Role of an Analyst' and is the third video produced by James Valentine for this programme.
3. Making a Stock Call: Avoiding Psychological Pitfalls - Video
This short video condenses down the mistakes made by analysts into the four core pitfalls they can fall into. This includes fear of failure, costly psychological shortcuts, following the herd, and hopeful thinking. Also included are some signs that analysts might be ignoring traps such as being closed minded about new information, seeing only one side of the trade, and failing to completely analyse and research important facts. This extends some of the discussion from Study Session 1 on the 'Role an an Analyst' and is the fourth video produced by James Valentine for this programme.
4. Making a Stock Call - Selected Readings
One external reading has been selected in this area:
'Best Practices for Equity Research Analysts' (Chapter 20) - Overcome Challenges to Creating Discerning Stock Calls (Valentine, J.)
The science and the art of stock picking are scrutinised in this lively reading. The author identifies qualities which make a great stock picker and shows where stock picking differs from valuation. Details of a framework which helps the analyst to gain greater insight on a stock than that of the market are examined.
A great stock picking insight leading towards a great stock call requires a catalyst which will persuade the market to accept this view. The nature of such catalysts is examined. Valuable insights are offered by considering how sell side analyst stock calls differ from those offered by buy side analysts.
5. Making a Stock Call - 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.