Securities Analyst Reports - The NPO Portfolio
Students should gain familiarity with the following elements of business information literacy and specific information resources.
- Understanding the types of information freely available on Yahoo! Finance, the sources of that information, and the types of information that are offered for a fee or are unavailable.
- Understanding the different sources and methodologies paid services use in providing information.
- Access alternatives after graduation and ethical use of information.
- Yahoo! Finance or similar free service.
- Several paid services from vendors like Morningstar, Value Line, S&P NetAdvantage, or Mergent.
Yahoo! Finance is great, but how does it compare to pay services like Morningstar, Value Line, and S&P's NetAdvantage?
The purpose of this case is to compare sources of information on securities (stocks, bonds, and funds) from a free resource, like Yahoo! Finance, with subscription-based services licensed by the library or available to individual subscribers. While there are many of these to choose from, the case uses Morningstar Library Edition, Value Line Research Center, and S&P NetAdvantage. Switching these for other resources should be easy, though every resource will vary in coverage and in strengths and weaknesses, all of which the librarian should be prepared to discuss.
To give the case structure and establish parameters for students' exploration of the resources, the librarian should select a local non-profit, charitable organization (NPO) with which students will be familiar and suggest a scenario where the NPO has hired the students to manage the organization's endowment. While exploring the resources students must create a portfolio of investments for the NPO.
The librarian can begin with a discussion in which students collectively make assumptions about the ideal characteristics of the portfolio. The librarian can assist with well-placed questions. They will likely conclude that since the portfolio represents an NPO's endowment it should be conservative and risk-averse. One way to reduce risk is through diversification, so stocks, bonds, funds, and cash deposits should all be included. The parameters defined by these assumptions will make the limited time available for exploring the resources more effective. But it should be emphasized that the librarian is not teaching investment strategies or analysis techniques. The librarian is only using these assumptions as a vehicle for exploring information sources.
Many students will be familiar with Yahoo! Finance (http://finance.yahoo.com/). For those who aren't, the librarian can briefly demonstrate how to look up a stock, and point out Yahoo!'s user-friendly real-time and historical data. Mention should also be made of the other kinds of securities information and educational materials Yahoo! provides. The stock screener and the analyst opinions provided by Yahoo! can also be highlighted. When looking at the analyst opinions it should be pointed out that, like all the information on Yahoo! Finance, these are aggregated from a variety of third parties. Further only the bottom-line opinions are provided (buy, sell, hold, etc.). To obtain the actual analyst reports a user would have to purchase them, which Yahoo! facilitates.
This provides an excellent opportunity to discuss the kinds of financial information that are freely available, and the premium content that is typically available by purchase only.
As with Yahoo!, the librarian can demonstrate how to access Value Line, how to bring up a specific stock, including Value Line's proprietary analyst reports and ratings. Some of the ratings, such as the Timeliness and Technical ratings, may require some explanation. Value Line's unique strengths and coverage of options and convertibles should be highlighted. The librarian can then demonstrate the stock screener, calling special attention to Value Line's ability to screen on social responsibility indicators.
Students can now be given a few minutes to perform their own screening, defining parameters that they believe will produce stocks that fit the desired characteristics of the NPO's portfolio. They may, for instance, select large, slow growing but reliable stocks. They may also make selections based on social responsibility. For instance, the NPO may not wish to invest in stocks that are related to the adult entertainment industry or companies involved in labor disputes.
A couple students should be invited to share with the group the parameters they set and some of the stocks that resulted from the screening. Note should be made of these tickers for later use.
The librarian can now introduce NetAdvantage, discussing the many kinds of information S&P provides through this database and its unique strengths. Students should be shown how to access S&P's analyst reports on stocks and industries, and how to find the stock screener. However, the librarian may choose instead to demonstrate the bond screener in order to address a different class of security. A discussion of the characteristics of bonds that would be desirable for the NPO's portfolio may result in factors like a high credit rating, a high yield to maturity, and a willingness to invest in bonds that will not mature for many years.
Students can then take a few minutes to experiment with the bond screener, after which several students can explain the parameters they set and some of the bonds that resulted.
The librarian can follow the same pattern in demonstrating Morningstar, describing its unique strengths, and demonstrating how to find Morningstar's analyst reports and stock screener. In this instance the librarian may choose to demonstrate the fund screener in order to introduce yet another type of security. After a discussion of desirable characteristics for funds in the NPOs portfolio, students can take several minutes to experiment, after which one or two students can report the settings they used and the funds that resulted.
After this discussion the librarian can turn attention to the Portfolio X-Ray tool. By inserting the tickers for the stocks and funds (unfortunately bonds cannot be included) identified during the course of the case by students, the librarian can demonstrate how the Portfolio X-Ray tool can be used to assess a portfolio's diversity. Most likely, this will effectively demonstrate that crafting a well-balanced portfolio is not a simple task, but that the screeners and other tools the students have experienced can assist in accomplishing such a task.
While creating a portfolio is not a job that can be done during a 50-minute library instruction session--at least not a portfolio any sane person would invest in--the assumptions made in this case should allow students to explore sources for data and analyst reports and recommendations on securities. A review of some of the key differences between the various resources, including their strengths, weaknesses, and areas of coverage, can be useful. The librarian can also review the earlier discussion of the kinds of information available from free resources, verses those available from paid services, emphasizing the aggregations and actual analysis.
Students may inquire about access after graduation, creating an opportunity to discuss that issue and describe public library resources and access models available for individuals.
Originally Submitted: February 9, 2009
- A copy of the handout created to accompany this case as conducted at Brigham Young University in February 2009 can be downloaded here.