BUS 422: Investments & Por�olio Management; Dr.

Chris�an Koch

Assignment #1: The Search for the Company with a Durable Compe��ve Advantage

(Individual Exercise) (Due October 24, 2023)

Purpose: The purpose of this assignment is to gain some prac�cal understanding on individual company
stock selec�on and research. Write a research report on one individual stock. Apply what you have
learned in BKM Ch.12, 13, 14, and Marks Ch. 3 & 4; Mon�er Ch. 5 and our class discussions. Using the
textbook as a guide, Warren Buffett, and The Interpretation of Financial Statements, iden�fy and select
one publicly traded company that has a market capitaliza�on between $1 billion and $50 billion. The
company must also pay a dividend. As context, use pages 3-21 in the Buffet & Clark text as a star�ng
point. The stock must be within these market cap parameters, or the student will receive a zero.

General Instruc�ons:

• Once you have iden�fied a company, start your fundamental analysis by answering a
ques�on: Does the company have a durable compe��ve advantage? Why?
• Analyze and provide a 5-year �me series Graph on Revenue, ROE and EPS.
• Step-by-step go through each Chapter of the Buffet & Clark textbook and iden�fy and
list via a Table your company’s IS and BS items. For example, Chapter 10 discusses gross
profit margin. Discuss the GPM of your company. What does it mean? Is it high or low in
the context of that specific industry. Where is the company in the profit cycle?
• Make sure you describe each item on the income statement for your company (Buffett &
Clark Chapters 7-22) AND do the same analysis for the balance sheet. Describe each
item on the balance sheet for your company (Buffett & Clark Chapters 21-49). Note:
small tables should be used in terms of presenta�on.
• Finally, answer these 12-specific ques�ons in your research report:
1. Why did you pick this company?
2. Why is this a good business? Research the business to understand the
company’s underlying economics vs the sector.
3. Who are their main compe�tors? What are the barriers to entry?
4. What is their sustainable compe��ve advantage?
5. What was the company’s growth rate in sales and EPS the last 5-years?
6. What are the main drivers of earnings?
7. Does the company have opera�ng or financial leverage?
8. How capital intensive is this business?
9. What is your es�mate of the intrinsic dollar value of the en�re business?
10. Use DDM, price-to-sales, price-to-earnings, and price-to-book value to
determine your fair value es�mate (mul�ples approach)
11. Is there currently a price-to-value gap? How wide or how small is it?
12. Would you buy or sell the stock today? Why?

Turn in your report write-up to me via Moodle as a PDF document with you last name in both the filename
and on the top of the first page inside the file itself. Provide all references at the end of the document so
I know where you got your numbers (data). Your final paper is due on 10/24/2022 by 8:00AM. This is a
hard deadline. No late submissions will be accepted.