Proving that Booth students truly are a force to be reckoned with, Brett Bateman (’18), Wyan Yarbrough (’18), and Jack Zhao (‘18) brought home a win, placing 1st at the Ross Investment Competition. The competition on Oct. 14th was hosted by American Century Investments. This year’s victory marks the third consecutive year that Booth has won this challenge.
The competition was held at the Michigan Ross School of Business and consisted of three-member teams from Tepper (Carnegie Mellon), Columbia, Johnson (Cornell), Sloan (MIT), Kellogg (Northwestern), Booth, Ross (Michigan), and Wharton (UPenn). The panel of judges included investment professionals from American Century Investments, Catalyst Capital, INCORE Capital Management, Thrivent Asset Management, Columbia Wanger Asset Management, and Wells Fargo Asset Management.
The stock pitch event consisted of two rounds: each team presenting during the first round with the top three teams advancing to the final round. Teams were provided a list of companies ten days prior to the competition and were required to prepare two stock pitches, which could be either long or short.
For the competition, the Booth team chose to pitch long Dave & Buster’s (Nasdaq: PLAY) for the First Round and long Dollar Tree (Nasdaq: TREE) for the Final Round.
For Dave & Buster’s (Nasdaq: PLAY) predicted based on market analysis that national unit count can both exceed the Street and management’s expectations. Also, an improvement in same-store-sales (the driver of the Company's valuation) would result in newer, higher performing stores added to the comparable base, which would drive both upwards earnings revisions and multiple expansion.
The team presented that Dollar Tree (Nasdaq: TREE) is a defensive business that, along with the broader brick-and-mortar retail landscape, has come under pressure recently. This sell-off has created an attractive entry point given that the core business continues to grow at a healthy rate while the Family Dollar integration offers a multi-year pathway for upwards revisions to earnings estimates. The team’s thesis continued that the Dollar Tree has a high quality management team and they have a significant opportunity to create shareholder value from the under-managed Family Dollar. Based on the combined points of margin expansion, improving returns on invested capital, and upwards earnings revisions, the team predicted that this stock would out perform.
Jack Zhao told Chibus,“The time spent researching these two businesses was an exceptional learning experience.” Reflecting on the preparation for the competition Zhao added, “Our diligence included store visits, customer surveys, detailed financial modeling, and calls with management / industry professionals.” The team said the experience was very rewarding and they are proud to have brought home a 1st place win for Booth.