How CommBank stock holds up, in the eyes of student financial analysts

Sahil Arora was part of a USyd team that beat over 1,000 universities worldwide to win the CFA Institute Research Challenge

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This year, the University of Sydney Business School were declared the winners of the CFA Institute Research Challenge, an annual competition featuring more than 6,000 students around the world. The winning team consisted of undergraduate students Jeffrey Brown, Tom Luo, Jessica Wu, Jassis Chen, and Sahil Arora.

“This CFA Research Challenge is a legacy for the University of Sydney. We sent our first team in 2009 and we generally do quite well, but we’ve never gone through to the global final till now,” Sahil Arora told Indian Link.

The annual contest is a platform for university level students to understand the practical aspects of financial analysis and professional ethics. Competing students gain experience in analytical, valuation, report writing and presentation skills as they get their hands dirty with real-world data.

A fourth-year commerce and law student, Arora was always more interested in the financial side of the equation, taking up internships in investment banking, asset management, and private equity across the four years of his degree.

University of Sydney Business School were declared the winners of the CFA Institute Research Challenge

He joined this year’s CFA Research Challenge team through an interview process and a technical component. He describes the actual competition to be quite competitive, facing more than 1,000 university teams from around the world.

“There are two components: an equity research report and a presentation. They are judged in two rounds, the Australian final where we face other Australian universities, and the Asia-Pacific final where we were up against teams from the Philippines, India, China, and Singapore,” he explained.

University of Sydney Business School were declared the winners of the CFA Institute Research Challenge

On successfully completing those rounds, his team represented the Asia-Pacific region on a global stage – and won.

“Our equity research report was on the Commonwealth Bank of Australia. We analysed and valued the stock by pitching a 12-month target price, and whether to buy, sell, or hold the stock,” said Arora.

While the pandemic did not affect their analysis of the bank in the earlier rounds, the situation had drastically changed by March and April. While CBA was trading at around $80-90 in the last few months of 2019, the share price was around $58 by the global finals.

“In a recessionary environment with the global pandemic, banks are expected to be a cushion for the economy, such as helping small businesses and individuals, at the expense of their bottom-line. In terms of how the pandemic affected our analysis, it proved our thesis – that the bank is overvalued,” he said.

The pandemic also changed the way the competition was held, moving from in-person rounds in October 2019 to online presentations by April 2020. Although they expected to attend in the Asia-Pacific finals in South Korea then hopefully the finals in New York City, the team had to make do with Zoom.

University of Sydney Business School were declared the winners of the CFA Institute Research Challenge

The Sydney Uni student acknowledges that there are pros and cons to the competition moving online: “It’s interesting because you can’t really demonstrate your charisma or presentation skills over Zoom, but at the same time, you do feel a bit of comfort and less intimidation in sitting in your own room. Technology these days is pretty good in facilitating large-scale events like this.”

In the past, the finals have held tantalizing prizes for the winners.

“The finalists last year had their pictures up on Times Square and they got to ring the bell at the New York Stock Exchange to start the day of trading. We missed out on that, but that’s life,” Arora said with a laugh.

He believes that the experience taught him a lot about applying financial principles from a classroom to real-life events. Now, the global champion is prepping for the upcoming graduate recruitment season.

“These kinds of competitions are increasingly important for students because in the finance space, or even broadly business students, it’s a competitive market. This gives you the opportunity to apply yourself in a way that’s beyond exams. It really develops you as a person and as a professional,” he signed off.