Before returning to Western University, Satveer Gill reflects on his summer role as a Volunteer Equity Analyst
In my first year at Western University, I learned about the wide variety of career opportunities available to business and economics students. Finance, consulting, law; the list seemed endless and navigating my options was challenging. In high school, I was passionate about current events and developed an interest in finance, public equities, and business analysis. As a result, I opened a personal investment account and began investing in equities and exchange-traded-funds. Furthermore, writing equity reports during my first year at Western increased my interest in business analysis and valuation, motivating me to look for a summer position related to investing. After reading about different strategies within equity investing, I resonated with a value-oriented and long-term investment philosophy.
Understanding the value-oriented investing approach at Greenfield Investment Management, I reached out to the Portfolio Manager, Erin Greenfield, regarding a summer position at his firm. Erin offered that I could work with him over the summer and create an equity report on a company that interested me. I began my summer position, completing an in-depth equity report on two companies and attending investor events throughout the summer.
Furthermore, Erin shared some of his past equity reports. Regarding my summer research project, Erin suggested companies in a wide variety of industries, such as airlines, homebuilders, and asset managers. After reading Erin’s report on Loblaw, I was interested in researching the food retail industry further. Understanding Greenfield’s global approach to investing, I decided to research companies that were not traded on North American exchanges for the first time. I chose to research European grocery companies Ahold Delhaize (AMS: AD) and Tesco (LON: TSCO).
For my research report, I researched Ahold Delhaize, Tesco, and several other food retail companies operating in the American and European grocery markets. Completing a report on two companies rather than one allowed for constant comparison and a better evaluation of both Ahold Delhaize and Tesco. Considering the companies’ unique strategies and operations across various geographies, extensive research was necessary. My final report was over 100 pages long, containing qualitative research on company strategies, management, competitors, and industry trends. It also contained a quantitative analysis of historical financial statements, along with three-statement models and valuations for both companies.
From an operational perspective, the food retail industry was relatively simple to understand. However, researching the trends within the industry and the strategic differences between competitors was intriguing. Successful grocers must continually adapt to changes in consumer tastes and preferences, competing primarily on convenience and price. Beyond lower prices and attractive store locations, consumers demand a diverse and high-quality product range, value for money, and an omnichannel shopping experience. Moreover, successful grocers must operate with a differentiated and reliable customer value proposition.
"My summer position at Greenfield solidified my interest in investing and honed my ability to critically analyze businesses both qualitatively and quantitatively".
A key differentiator of food retail is the industry’s lower margins. Compared to other industries offering discretionary products and services, consumers demand food retailers maintain competitive pricing. Price competition is significant and stores that offer lower prices often grow their market share and succeed. Leading grocers constantly strive to reduce supplier and operational costs, passing the savings to customers through lower prices. Ahold Delhaize and Tesco have both understood the importance of offering customers value for money, lowering prices using loyalty and price match programs on select products. Both companies have significant programs related to reducing costs and passing the savings to customers.
Throughout the summer, I used a variety of sources to research Ahold Delhaize, Tesco, key competitors, and industry trends. With a background researching North American equities, I noticed differences while researching companies traded on European exchanges. For example, European annual reports often emphasize visual elements such as infographics and charts, making them more colourful and similar to marketing materials. In contrast, American 10-K’s are typically text-heavy and printed in black and white. In addition, European annual reports place greater emphasis on ESG and sustainability factors, driven by regulatory requirements and a stronger demand for sustainability from European investors and stakeholders. Beyond annual reports, earnings calls, and investor presentations, I found valuable insight in news articles and videos. While I could not visit any store locations due to both companies’ operations being outside of Canada, online forums provided insight into store features and customer perceptions of the brands. Furthermore, reports from consulting companies on the food retail industry were valuable in terms of understanding key industry trends. Meeting with investor relations teams at both Ahold Delhaize and Tesco provided direct insights into their company’s strategies and long-term outlook on the food retail industry.
"Erin encouraged me to build each model myself, allowing me to develop a greater understanding of the key connections across the models".
While completing the report required detailed research and excellent writing skills, building valuation models was an area in which I had less experience before my summer position. Modelling 10 years of historical financial statements for both companies was incredibly informative and allowed me to understand both companies’ performances over time. While completing valuations, Erin encouraged me to build each model myself, rather than using a template, allowing me to develop a greater understanding of the key connections across the models. Developing a deep understanding of the businesses and their competitors was essential to making informed assumptions for both companies. Moreover, adjusting various assumptions allowed me to grasp the critical inputs and drivers for both companies. For example, while the models were not very sensitive to increases in revenue, they were highly sensitive to changes in operating margins. In other words, small increases to operating margins would materially boost the companies’ valuations. Therefore, it was critical to understand that my models were highly sensitive to changes in assumptions. Understanding the sensitivity of the models was important, as my valuation models were estimates rather than facts and needed to be combined with qualitative analysis of the businesses.
After completing a detailed report on Ahold Delhaize and Tesco, Erin organized a meeting in which I was able to present my research to several other value-focused portfolio managers from various firms. Meeting with experienced professionals within asset management allowed me to hear diverse perspectives on the grocery industry. Portfolio managers raised key concerns and risks facing the companies, and their challenging questions forced me to think critically about the assumptions I made. They found the presentation valuable, and some managers were interested in researching Ahold Delhaize further.
Overall, my experience volunteering at Greenfield Investment Management was very valuable. The opportunity to conduct in-depth research on Ahold Delhaize and Tesco provided me with a strong understanding and passion for the food retail industry and consumer staples sector. Furthermore, Erin was an excellent mentor and our meetings throughout the summer provided great insights into investing. My summer position at Greenfield solidified my interest in investing and honed my ability to critically analyze businesses both qualitatively and quantitatively. Moving forward, I am eager to apply these insights while pursuing a career related to business analysis, allowing me to continually challenge myself while dissecting businesses and understanding market dynamics. In the future, I look forward to leveraging this experience while analyzing businesses operating in a variety of industries.
Satveer Gill
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