UP Diliman team tops 2014 CFA research challenge

DAVE Vincent Borja (faculty coach), left, Dani Salazar (faculty), the CFA Institute Research Challenge Local Champion Team—Nigel Williamson Lee, Geoffrey Archangel Bautista, Corrine Francesca Reyes, Diego Mikhail de Ocampo, Miguel Alfonso Solidum and Virgilio Lapuz III (faculty).

A team of financial wiz kids from the University of the Philippines-Diliman won the 6th CFA (Chartered Financial Analyst) Institute Research Challenge (IRC) which seeks to promote best practices in equity research among the next generation of analysts.

The UP Diliman team called “Hyperion Investments” is composed of Diego Mikhail de Ocampo, Corrine Francesca Reyes, Geoffrey Archangel Bautista, Miguel Alfonso Solidum and Nigel Williamson Lee, all of whom are BS Business Administration and Accountancy students who aspire to be the country’s next technocrats, entrepreneurs or corporate movers and shakers.

Beating entries from six other universities, they won a cash prize of P100,000 and P10,000 worth of gift certificates from Valens Securities during the finals held at the PSE Auditorium in Ortigas, Pasig City last Jan. 24.

The winning team was coached by Daniel Vincent Borja, a faculty member at UP’s Cesar E.A. Virata School of Business. They were also mentored during the competition by Raymund Abarra of Vicsal Investments.

After this national competition, the team will also represent the Philippines in the regional finals to be held in April of this year. If they win the regional competition, they will get to compete in the global finals in April.

Their winning entry is a research report on the country’s largest power distributor Manila Electric Co. (MER). Their paper issued a “buy” recommendation on Meralco with a one-year target price of P397.40 (an upside of 43 percent from the closing price of P278 per share on Nov. 29 when the paper was submitted) using the discounted free cash flow to firm method. This method measures how much cash can be paid to the equity shareholders of the company net of all expenses, reinvestment and debt repayment.

“MER is able to capitalize on its highly defensive core distribution business through solid business performance and strong operating cash flows. This positions Meralco to invest into the lucrative power generation business and further maximize firm value,” the team said in the paper.

April Tan, CFA Society Philippines president, said: “We are very proud of the work of the students. Although it may seem ambitious, we are hopeful that the Philippine team will once again win the regional and the global championship this year. The Philippine team already won the global championship in 2010.”

“Going forward, we will continue to organize the local IRC, targeting local universities, in accordance with our initiatives to enhance financial literacy and to develop globally competitive investment professionals. We are reaching out to future investment professionals in an aim to instill in them a commitment to the highest standards of excellence and ethics in doing investment research,” Tan said.

CFA Society is proud about this investment challenge, which Tan said is very different from other competition because this offers real-world training. “They don’t rely on the books. They get the chance to talk to listed companies..to talk to the top officials and they had mentors who were real practitioners,” she said.

The competition is a lengthy process that started September last year with the submission of a 10-page investment research which included the industry outlook and company analysis. In these papers, participants analyzed financial statements and corporate strategy came up with price targets and discussed risks to their forecasts.

Four teams were handpicked to present their research in front of the judges and were subjected to question and answer (Q&A) portion. This year’s judges were: Deutsche Regis Partners head of research, Giovanni Dela Rosa; MBG Capital chief executive officer and chief investment officer Michael Jack Garcia; ATR KimEng Asset Management president and managing director Mike Ferrer; and BPI Asset Management senior vice president and group head Maria Theresa Marcial-Javier.

Based on her own assessment, Tan said this team won this year’s challenge because “they were able to communicate the story or the reason why they like Meralco effectively,” and had come up with “well-thought of” recommendation that was supported by facts. The winning team likewise fared very well during the Q&A. “They were able to answer everything properly, supported by data. They did not buckle under the pressure of questioning,” she said.

Asked how the team is preparing for the regional competition, team coach Borja said: “The presentation for the regional finals is essentially the same as the team presentation during the national finals. The students will make some minor revisions to add a regional perspective to the presentation. They are also preparing their responses to some possible questions that may be asked by the regional panel.”

So what are the key takeaways of UP Diliman’s financial wiz kids from this competition and where are they likely heading after getting their BSBAA degree?

De Ocampo, 22, aspires to be a managing director in a top investment bank someday. From this competition, he has learned that “success comes with hard work, commitment, and sacrifice. Believe in yourself and your team.”

Bautista, 23, sees himself becoming a future Cabinet member—probably a Finance, Trade or Agriculture Secretary and is also open to going to law school and afterwards taking a post in public office or the judiciary. From this challenge, he has learned that the thirst for knowledge measures grip of reality. “In this competition, stream of information from sources beyond the financial and quantitative realm is crucially essential to value the company (or any company for this undertaking),” he said.

Reyes, 22, wants to be the chief financial officer (CFO) of a multinational corporation in the future. Her takeaway: “Don’t presume that you know everything. You need the knowledge and insights of others to create something excellent.” She also puts a high esteem on teamwork. “One wouldn’t be able to accomplish anything alone. Each member has something valuable to contribute to the team,” she said.

Solidum, 20, also aspires to be the CFO of a multinational corporation someday. From this challenge, he has learned to “pay now, play later.”

Lee, 22, hopes to run a cross-border business someday. “Working together with different people with diverse backgrounds aiming to make a difference in the world is my dream,” he said. From this competition, Lee has learned that there’s no substitute for hardwork. “No matter how talented one may be, patience and perseverance will make a huge difference,” he said.