Building Your Portfolio:



|Conducting |FIN 356, Investments (Personal Finance) |

|Company Research |Professor Hampsten |

This research project will require you to identify and thoroughly research company for potential investment. We will walk-through the process using JetBlue as an example of how to research a company and create an analysis based on your findings. We will then discuss your findings in class and you will turn in your written assessment. This will also be the formula that you will then apply to investigate companies for inclusion in your portfolio for the class competition and component of your final grade. To complete this process you will need an Internet connection and access to the Business Company Resource Center.

The most important step in investigating and researching a company for an investment opportunity (or any other research assignment) is to conduct a thorough investigation before conducting the analysis. Collecting all the relevant information prior to completing the analysis ensures accurate and valid findings. The process we detail below will help you explore companies for potential investment, research projects, and throughout your career when considering employment possibilities.

What is Your Goal?

You should begin any company or industry research project by clearly articulating your research goal. What is it that you are hoping to find—are you looking for a company with explosive potential? A company that is a steady performer with low risk? Always begin the research process with a clear objective.

Choose an Industry and Company

To start your investigation think about industry’s you believe will perform well (pharmaceutical, insurance, food services, etc), then begin investigating companies within that industry. You can search different industries and review the leading companies within that industry using the BCRC Industry Information Tab. After identifying the industries and companies you would like to target, you can use the following steps and BCRC resources to investigate and evaluate them further in terms of their investment potential and risk. Example: Selected the airline industry and the company JetBlue.

Select a Company

Find out more about the company of interest by searching the BCRC company database using the company’s name. What do they do? How big are they? Is the company privately held or is it publicly owned and traded on the market? It is generally easier to find more information out about publicly traded companies, as they are more likely to be covered in the media and they are required to file with the SEC. The purpose of this assignment is to identify opportunities for investment; therefore the focus should be on public firms.

Overview the Company

You need to be able to summarize the company in terms of their history, strategy, sales, products and services, brands, competition, financial performance, size and locations, etc.  BCRC includes detailed company overviews, histories, and reports for public and numerous private companies. If nothing is available you can utilize additional BCRC resources to build your own profile. Example: Here is the company overview for JetBlue.

Monitor News About the Company and Industry

What is the latest news on your company? You need to constantly monitor the news to keep track of the company’s actions, industry trends, legal issues, and opportunities. If you search for your company on the BCRC and open the Company Profile page, you will notice on the left hand tab that all the articles have been categorized for you. You can also select the News/Magazines Tab. Example: Here is the current news for JetBlue.

Study Company Performance & Financial Information

If you have selected a public company you should be able to locate their quarterly and/or annual earnings reports under the Financials tab on the BCRC. The most important statements to look for are the income statement, balance sheet, and the cash flow statement as they are the source for much of the information you will use to calculate several important ratios. In addition you should keep an eye on their daily stock closing prices to gain insight as to how the market views their performance and environmental conditions. Example: Here is the detailed financial information for JetBlue.

Study Business Analyst Reports

Business analysts from investment firms constantly release research reports for investors on publicly traded U.S and global firms. These reports take into consideration current company performance, market pressures and opportunities, company research and development, political and legal implications, product launches, and more. If these reports are available for your company you can view them by selecting the BCRC’s Investment Reports Tab. Example: JetBlue’s Investment Reports in the BCRC.

Examine the Competition and Industry Analysis

Every analysis needs to include a look at the company’s external environment, namely the industry and the competition. Competitive action (new product launches, pricing strategies, partnerships etc) and industry pressures (new regulations, consumer trends, etc) all have an impact on the company’s performance and opportunities. You can locate detailed industry information on the BCRC’s Industry Overview Tab. Example: Here are the SIC and NAICS industry descriptions for airlines.

Questions to Consider in Analyzing a Company

After gathering and researching your company and industry, answer the following questions in evaluating whether or not this company is a solid investment choice. We will be discussing the advantages and disadvantages in class—be prepared to participate and share your findings on your company.

• Is this a public or private company? Where is it headquartered?

• What are the company's primary business, products, and services?

• Summarize the current and critical news: product launches, industry trends, strategic partnerships, dividend announcements, etc.

• What is the company’s current situation—drawing from the company history, investor reports, company overview, financial performance, etc identify their major strengths and weaknesses of this company.

• Ticker symbol

• SIC code

• NAICS code

• Calculate the:

o Current ratio

o Profit margin

o Total asset turnover

o Return on equity

o Price earning ratio

o Dividend yield

(Review your text on how to calculate and interpret these ratios).

• Compare to industry information. Use the information gathered for the company analysis to compare the company to the appropriate industry norms and averages.

• Compare your findings to your original research goal. Does this company meet your research criteria?

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