Stock Selection Paper (Janus)

By Anonymous

Due date: Early-mid April.

Length: 5-6 pages (double-spaced; standard font and margins)

Point total: 100

Citations: Chicago-style footnotes

Primary objective: find an undervalued stock and describe your rationale for being confident in its growth prospects.

During the Winter Quarter, you will write a “STORY” (in Peter Lynch’s use of the term) about a stock that you would like to invest in. Your paper should reflect Lynch’s philosophy of value investing: finding companies that are poised for growth based on political, cultural, and economic factors.

The STORY is at the heart of the essay. You should consider it carefully and thoughtfully: why do you believe in this stock's potential for growth? As Lynch advises, you should look into companies you are familiar with and like so that you are motivated to do solid research. Your essay should reflect an understanding of this value investing philosophy.

Please consult at least four sources toward making your choice. Those sources might include the annual report of the company (usually available on the company website), Value Line, or financial websites like Morningstar. Additionally, news articles about the company are valuable in assessing future prospects. Consider including some of the material you looked at in your appendices.

You should answer the following questions in your paper:
- Why do you want to invest in the company’s product(s)?
- What is the company’s position in the industry?
- How financially healthy is the company?
- What is the management of the company like?
- Can the company become a dynamic monopoly, in Thiel's sense of the term?

These questions should help you write the STORY of your company that will form the rationale for you buying the stock.

Grading Criteria

Prospectus, due TBD. 20%
The prospectus should address the following:

  • Identify an industry (e.g. airlines, fast casual food, digital music, etc) you are considering and explain why you feel it is poised for growth
  • Identify one or two stocks within that industry you are considering and explain why you feel they are poised for growth
  • Identify one or two stock measurements/metrics you will consider toward your choice and explain how they contribute to your reasoning
  • The prospectus should be two well-developed paragraphs in length.  
Story: company fundamentals. 30%
How is the company doing at the moment? Are its financials healthy? You should be directly citing 2-3 stock metrics in assessing the company. You should also discuss the company's current products/services and their reception on the market.

Story: company outlook. 30%
Does the company have products/services in development that point toward future growth? Is management changing or introducing new policies? Is the industry poised for growth? This section should provide the rationale for the stock being undervalued.
Quality of sources. 20%
Have you provided enough sources to make your STORY credible? Have you looked at the financials of your company? Make sure you have used at least four sources and cited them properly in Chicago style.

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