Security Analysis Series

In 2005, we launched our Security Analysis Series with a round table discussion on the role of fundamental analysis.

Roundtable Discussion

December 2005
Topic: Round Table Security Analysis Series

From Stock Selection to Portfolio Alpha Generation: The Role of Fundamental Analysis

This roundtable was hosted by CEASA and Morgan Stanley . The goal of this meeting was to provide a forum for participants who have or are working in different areas of the investment process. Most of the participants have been in different positions in their careers and were able to incorporate these different perspectives into the discussion.

One often hears from many corporate officers and other market participants that investors have short-term investment horizons, care only about next quarter's earnings, use simple summary measures (like P/E's), and do not focus on core fundamentals. This conversation aimed to confirm or dispel these perceptions.

The conversation commenced by asking the buy-side participants (Steve Galbraith Mike Corasaniti, Andrew Alford and Andrew Lacey) to explain their investment styles and practices, at least in broad terms. Then the sell-side participants commented on their experience with clients and the investment process, and how they approached these from a benchmark (market or sector perspective).

The conversation then moved on to discuss how the participants evaluate companies and investments from a stock (or security) selection perspective, and eventually relate this to portfolios and their risk. Finally, Professor Penman shared insights from research in academia about these issues.

The Round Table is published in the Journal of Applied Corporate Finance in Volume 18, Number 1, Winter 2006, and is now available online.