As one of the most anticipated events in the investment industry, the Awards recognized outstanding contributions from local capital market participants.
Accolades were presented across several categories, including the Best Equity Research Report Award and the Best Sector Report Award.
The Best Equity Research Report Award was introduced at the 2013 edition of the CFA Society Sri Lanka Capital Market Awards, while the award for Best Sector Report was first conferred in 2019.
The objective of the awards is to reward and recognize analysts producing best-in-class sector and equity research, whilst promoting best practices in fundamental equity research, thereby ensuring informed and efficient capital markets.
Reflecting on the submissions this year and the evolution of both company research and sector reports, Chairperson of the Best Equity Research Report Award Committee and the Best Sector Research Report Award Committee, Buddhika Fernando, CFA, observes that it is encouraging to witness continuous publications with an increased breadth of coverage.
“As the research industry evolves, CFA Society Sri Lanka is taking into consideration what investors expect from research houses and their analysts, particularly at a time when information dispersion through multiple media is almost instantaneous,” she states.
Whereas reporting styles have evolved from ‘book-style’ reports to PowerPoint presentations, Buddhika maintains that more precise focus is required when it comes to producing actionable and concise reports, whilst also maintaining the breadth and depth of coverage.
As for company research, she notes that “analysts must focus on the ‘why invest now?’ question, providing context, as well as a strong emphasis on valuation and financial analysis.”
She continues:
“Sector reports need to be actionable, provide investors with insights as to why a sector is important at this point in time, and identify the top picks within the sector with clear reasoning.”
Buddhika commends the addition of a section on environmental and social aspects and governance concerns in a majority of reports, but advises analysts to view company practices more critically, without simply repeating facts that are provided in annual reports.
Turning to the use of artificial intelligence (AI), she alludes to a lack of human nuance and deep industry context:
“Analytical thinking, sector knowledge, and first-hand insights from industry sources remain irreplaceable, particularly in a market such as Sri Lanka, where information is not readily available for many industries.
AI can certainly be used effectively in equity research but what differentiates the top analysts is the layer of relevant and insightful human input they bring in.”
This year, the Gold Award for Best Equity Research Report and the Bronze Award for Best Sector Report were not presented.
Buddhika explains the reasoning behind this decision:
“CFA Society Sri Lanka is committed to holding the capital markets industry to high standards.
A Gold Award indicates that we can uphold a report as an example of great insight, substance, structure and style, whereas a Bronze Award indicates a report with at least a few of these qualities.
The judges team believed that whilst many reports submitted for consideration were of good quality, there was further room to improve to meet these requirements.”
Following the onset of the economic crisis, the industry experienced a significant loss of talent as many professionals migrated.
As a result, the equity research sector is now at a pivotal point and requires a focused effort to rebuild its talent pool.
Buddhika urges research houses to invest in structured training, offer competitive remuneration, and create clear career paths for new analysts entering the field in order to develop the expertise needed to strengthen the industry.
Her message to analysts is that it is insight that is important, not merely information:
“Burying the reader under an onslaught of information without insights into how that information can be interpreted and how it translates to an investment decision results in a pointless research report; so is writing a report that merely repeats what is already well known about a company or an industry.
A report about a mispriced stock, which identifies the divisions of a company adding the most value, speaks of what the market doesn’t already know, and distills down to a concise report with clear writing - that is the report to set you apart.”
“To write such a report, you need to read, talk to people, and continuously gain in-depth knowledge on your coverage universe.
Then comes the butterfly effect, where you need to know everything else that is going on in the world as well.
To ask the right questions from a company, you need to have accurate background knowledge.
You will then be able to provide useful insights to investors and remain relevant as an analyst,” she concludes.
Founded in 2001, CFA Society Sri Lanka is a not-for-profit member society of the global CFA Institute network, dedicated to supporting the professional development and advancement of CFA charterholders and candidates in Sri Lanka.
The Society has a membership of over 250 CFA charterholders residing in the country, including CEOs, CFOs, portfolio managers, equity analysts, banking professionals, investment advisors, and other senior-ranking financial practitioners, along with more than 400 candidates pursuing the CFA Program.
Photo caption Buddhika Fernando, CFA Chairperson of the Best Equity Research Report Award Committee and the Best Sector Research Report Award Committee.