From left: Clinton Chang ’11, Eric Hagemann ’11 and Dan Kaskawits ’11 at the 8th Annual Cornell-Fidelity Stock Pitch Competition.
Last month, Clinton Chang ’11, Dan Kaskawits ’11 and I had the privilege of representing Columbia Business School’s Equity Research Club at the 8th Annual Cornell-Fidelity Stock Pitch Competition on November 5-6. We came in third place out of 12 participating MBA programs and the competition pitted us against worthy adversaries, including Booth, Fuqua, Ross, Stern, Tuck, Notre Dame’s Mendoza College of Business and Wharton, among others.
The competition’s design was unusual in that it required condensing what is weeks, if not months, of work into just 12 hours. At the opening of the event, we were assigned one company stock (Caterpillar) and two industries (railroads and casual dining) from which to select one stock each; we were then given from noon to midnight to conduct research and develop pitches (long or short) on the three stocks, to be presented at some cruel hour the following morning in front of a panel of professional investors, no doubt armed with incisive questions and piquant remarks. To do our research, we were given access to Capital IQ, FactSet and other research materials in the very impressive trading room at the Johnson School’s Parker Center for Investment Research.
Without hesitation, I can say that in the first six hours of our allotted research time, we accomplished nothing, at which point we were called to eat dinner — which was mandatory — comprising all manner of sleep aids such as ricotta-filled pasta shells and something like chicken français, followed by cheesecake. Following this nourishing repast, and notwithstanding our rapidly deteriorating physical states — caffeine had long since ceased to be effective due to overuse — we succeeded in assembling presentable pitches on all three stocks by 11:59 p.m., one minute short of the deadline. It was now unarguably time to hit the proverbial hay and regain some strength for the task awaiting us in the morning.
Rosy-fingered dawn swiftly arrived, and before we knew it, Clinton, Dan and I were standing before a panel of judges including a senior Fidelity portfolio manager, a Fidelity managing director of research, analysts from Putnam and Wellington and a private investor. We decided to pitch a long on Norfolk Southern Corporation; a long on Brinker International, owner of Chili’s and other franchises; and, contrary to the noted long-term value investor James Cramer, a short on Caterpillar.
Participating in this contest made me truly proud to attend Columbia. We brought to bear on our presentations certain ideas that are distinct to the heterodox approach to investing taught in some of School’s courses. Specifically, while pitching Caterpillar I believe that we were the only team to deliberately avoid using a discounted cash flow (DCF) or comparable multiples. In this, we followed Professor Bruce Greenwald’s argument that when using a DCF to value stocks, altering the input assumptions even within one’s margin of error produces wildly different output values. Instead, we tried to focus on strategic considerations and returns on incremental capital used to finance growth. Curiously, this decision invited the following written feedback post-competition: “Try to use more traditional approaches like DCF and multiples.”
Here, perhaps the apt quotation would be Bill Cosby’s: “I don’t know the key to success, but the key to failure is trying to please everybody.”
In the end, our team placed into the final four, losing in the last round to esteemed peers at Stern and Wharton. On behalf of all three of us, I would like to express our thanks to the Equity Research Club for trusting us to represent Columbia Business School; Fidelity Investments for their sponsorship of the event; and all the good folks at the Johnson School who were such hospitable and accommodating hosts.
Photo courtesy of Eric Hagemann ’11