Students rely heavily on the Financial Services Laboratory to collect financial data for their investments and corporate financial policy courses.
Every semester, finance students get a glimpse of their future when they become buy-side analysts and investment consultants.
It’s a gig that normally takes years to master. Understanding the dynamics of a volatile market is something normally left to those making six-figure salaries who make reading quarterly reports something of a hobby.
For juniors and seniors in Lehigh’s Perella Department of Finance, however, smart investment decisions are a prerequisite for graduation. After all, their grades depend on it.
That’s the challenge facing undergraduates enrolled in the department’s investments and corporate financial policy courses. Offered concurrently, the courses require that students work in groups over the length of the semester to investigate investment opportunities in such industries as diverse as healthcare, foods and chemicals.
The courses make up the finance department’s two-course foundation requirement. These two classes help introduce financial principles and research practices to students enrolled in the major.
It’s a hands-on approach to teaching finance—one that’s intentionally designed to tap into real data and the changing dynamics of a range of industries. Student groups are assigned to one company and are required to analyze the company’s performance, its strengths and weaknesses, and to determine whether or not they would recommend an investment in the firm.
“These two classes take business education outside the traditional realm of the classroom. The only way to succeed in the class—to really learn about corporate finance—is to be put in a situation where you are the analyst,” says Anne Anderson
, assistant professor of finance who co-teaches corporate financial policy with Nandu Nayar, the Hans J. Bär Chair in International Finance.
, chair of the Perella Department of Finance, co-teaches the investments course with David Myers
, director of the FSL and a professor of practice.
No stone left unturned
“In 10 or 11 weeks, they have a responsibility to become experts on their companies,” Anderson says. “It’s something they need to invest their time and energy in. When they give their final presentations and papers, there shouldn’t be one stone left unturned.”
Elizabeth Hirsch, director of investor relations with Praxair, a company that participated in last semester’s class, liked what she saw. “The students demonstrated diligence and thoughtfulness in the preparation of their financial analysis and presentations,” she says. “The opportunity to interact with corporate financial executives gives them insight into how academic analysis is applied and practiced in reality inside a corporation.”
That means that students are thrust into unfamiliar territory usually left to the domain of Wall Street analysts. The students rely heavily on the Financial Services Laboratory, where they collect financial data using Thomson One and securities pricing from CRSP. In addition to those financial databases, the students are also expected to review annual reports, listen in real time to financial conference calls, and, if possible, speak directly with financial analysts with each company before offering their investment recommendations.
Such was the case this past semester, when the two courses focused on Praxair and other chemicals industry standouts like Air Products, Airgas, Cytec Industries and Valspar.
It was a tedious undertaking. Tasked with evaluating the potential investment opportunities of Air Products (APD), a multinational corporation with a diversified product portfolio, Nathan Achezinski ’09, Christa Buckheit ’08, Brian Goldslager ’08 and Jacob Labret ’09 cited the company’s liquidity decrease and fluctuations in its profit margin as areas of concern.
Those negatives were outweighed by the company’s consistent increase in dividends and its stock repurchasing program, just two of the reasons that led the team to rate the APD stock a “buy” in their final report for the corporate financial policy class.
Kish believes the experience is critical to a strong finance education.
“It requires students to apply what they’ve learned in theory in a very real way,” he says. “We’re putting them in a position to make sound decisions with confidence—decisions that will have very big consequences for them and their clients.”
Posted on Tuesday, January 15, 2008