2017–2018KNOWLDEGE@WHARTON HIGH SCHOOLINVESTMENT COMPETITION

GUIDEBOOK

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INTRODUCTION

Welcome to the 2017-2018 KWHS Investment Competition!

CASE STUDY: You graduated college and now work at an up-and-coming asset management company, Knowledge@Wharton Asset Management (“KWAM”). KWAM specializes in managing investments for young adults. KWAM currently has a $100,000,000 portfolio that is invested across eleven sectors, representing various industries and companies. You are an analyst, but you hope to one day become a portfolio manager who makes the investment decisions for KWAM’s portfolio.

KWAM’s portfolio manager (i.e. the teacher) recently met with a potential client, Jack Abraham, who is a successful entrepreneur. Jack founded Milo.com, which was bought by eBay for a reported $75 million.

Jack told the portfolio manager that KWAM has 10 weeks to put together a detailed portfolio analysis proposal. If you want to learn more about this smart and interesting guy, check out this Business Insider story: http://www.businessinsider.com/explaining-ebays-turnaround-2014-2.

The portfolio manager recognizes that it will not be easy to land Jack as a client because he is talking to other asset management firms (i.e. other classes and teams). It is critical to make the most convincing case to Jack, so everyone on the team must contribute to ensure KWAM creates the best portfolio analysis proposal. The portfolio manager tells you that this is your chance to shine.

Important Note: First-time investors, particularly those who are not competing in a classroom setting or under the guidance of a teacher/advisor, should consider working with a mentor or community member who is familiar with the world of investing. The focus of this competition is education, and we want you to explore all the ways you can deepen your financial knowledge and develop skills that will stay with you long after the judging ends.

STUDENTS: Over the next 10 weeks, your team will develop and test an investment strategy using the industries and companies from the competition’s approved stock list. Your team will conduct a thorough analysis of both the industries and the companies, which will provide support for your portfolio analysis proposal that sets up your potential client for long-term investment success. You will be able to test your investment strategy by using the Wharton School’s Online Trading and Investment Simulator (OTIS).

Your team will start out with a portfolio of $100,000 in virtual cash. Your team will compete against students from all over the world. At the end of the 10 weeks, you will be required to submit a document detailing your recommended investment strategy. K@W judges will review your final investment policies and select top teams. Those teams will be invited to present their strategies, either in person or virtually, to a panel of experts.

ADVISORS: Knowledge@Wharton High School (KWHS) has a mission to create free resources that help high school students and educators gain a deeper understanding of business and finance. Success in our eyes is when students have fun, as well as learn the meaning and application of investment concepts. We want students to emerge from this process with more knowledge about the world of investing.

While KWHS provides somewhat of a structure to the competition, advisors should feel free to use the guidebook and resources as they wish. The only deliverables we require of you are a mid-project team review and a final policy. Feel free to build the competition out in your classrooms or within your investment clubs any way it meets your needs and objectives. Maybe you want teams to give presentations on their strategy development after two weeks, or if your teams don’t make the top 10, then you may want to design your own final presentations and class awards. We encourage you to be creative and to build on the resources that KWHS provides.

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GENERAL OVERVIEW

Important Dates

• December 11, 2017: Registration Begins

• January 5, 2018: Registration will close at 11:59 p.m. EST

• January 8, 2018: OTIS Trading Begins

• February 12, 2018: Mid-Project Team Review Due

• March 16, 2018: Trading Ends

• March 25, 2018: Final Strategies Due

• April 2, 2018: Top Teams Notified

• May 4-5, 2018: Global Finale at the Wharton School, University of Pennsylvania

The duration of competition trading is 10 weeks, with an additional 3 weeks of optional pre-competition activities, and 2 weeks of post-competition activities for teams who are in the top 10.

Judging

Teams are ultimately judged by how well they develop and articulate their investment strategies, not on the percentage gains of their portfolios. Please be sure you are reading your guidebook, accessing learning resources, and using the approved stock list to make trades. Upon submission of the final investment policies, K@W judges will select the top teams and the top analysts will ultimately be selected from those teams. Be sure to check out the KWHS News Page for inspiration from past finale presentations. You can find a write-up of the 2017 South Asia and Middle East Regional Finale HERE and details from the 2017 Global Finale HERE.

*We strongly recommend that each team keeps a non-graded weekly journal to record your new stock purchases, sales, and your rationale. This

will help you capture how your strategy developed in your final investment policies and presentations.

Benefits

Learn about risk, diversification, company analysis, industry analysis and investing

Learn skills relevant to all professions and educational tracks

Develop teamwork, leadership and communication skills

Develop and apply critical thinking and reading skills

Enhance your college and scholarship applications by building your resume

Prizes

The top analysts will have an opportunity to present their strategies either via Skype or in person at The Wharton School, the world renowned business school of the University of Pennsylvania

The top three winners of the competition will receive trophies

Recognition through all KWHS channels

Any additional prizes are at the discretion of competition sponsors, and are subject to change from year to year

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PRE-COMPETITION ACTIVITIES AND ADDITIONAL RESOURCES

Please refer to the Additional Resources guide for a wealth of materials to help guide you through this competition, from pre-competition lessons on leadership, teamwork and communication, to resources that explore a wide variety of investing concepts. You’ll find everything from portfolio management to industry analysis and ethical decision-making. Advisors are encouraged to introduce these lessons, articles, learning outcomes and more into the classroom or club structure throughout the 10-week competition to deepen students’ knowledge every step of the way.

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REGISTRATION STEPS FOR ADVISORS AND STUDENTS

Form a Team

A team is made up of an optional advisor (often a teacher), a student team leader, and student team members. While advisors can work with an unlimited number of teams, students can only participate in one team. Additionally, each team must maintain a minimum of four team members and a maximum of nine.

a. Team advisor: An advisor could be your school teacher, another educator, your parent, or a business professional in the community. The advisor’s role is to help you learn concepts and investment terms (ideally with the help of provided KWHS lesson plans, articles and other resources), navigate trading platforms, analyze your developing investment strategies, and motivate you to complete the competition. Teams are NOT required to have an advisor. If you don’t have a business teacher in your school, we strongly encourage you to seek out volunteer investment expertise in your community.

b. Team leader: The student team leader is the only one in the team who has access to OTIS. The trading log-in will only appear under the team leader’s account. The purpose is to encourage team members to work together and place trades as a team through one account. Communication and collaboration are fundamental to success in the competition. The team leader can share his or her log-in with team members, if necessary.

c. Team members: Each team member is responsible for at least one sector. A sector is an area of the economy in which businesses share the same or a related product or service. Each sector in the approved stock list includes different industries and companies. Each team should maintain a minimum of four team members and a maximum of nine. Teams are required to invest in at least as many sectors as there are team members. For example, a team with five members needs to invest in a minimum of five sectors. That team can invest in more than five sectors if it chooses to.

d. Team email: If you anticipate a change in your team leader, then we strongly recommend that each team create a team email and use that email to register for the competition.

e. Team name: Teams should choose their own names, and have fun with it. Remember that the name you choose will likely stay with you throughout the competition. Past names have ranged from “The Mavericks of Wall Street” to “The Bond Girls,” and everything in between.

f. Students from different schools can register under the same team. When you register for the competition, select the team leader’s school.

g. Teams can add or delete members and students are allowed to switch teams until February 12, 2018, when the mid-project team reviews are due. Before that date, you do NOT need to notify us when a team member is leaving or joining your team. We expect changes to happen. We only ask that you maintain the four to nine team member rule and that the student team leader remain constant, if possible.

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Registration (It starts on DECEMBER 11, 2017)

It is very important that Teachers/Advisors and Students follow the directions for registering.

TEACHERS / ADVISORS

• Advisors must register for the competition first, so they are linked to their teams and can view their portfolios.

• When an advisor registers, he/she will only see the team portfolios when added as an advisor.

• PLEASE DO NOT REGISTER MORE THAN ONCE. If you made an error or aren’t sure if your registration went through, simply email KWHS-Region3@wharton.upenn.edu to confirm.

• You will receive a Welcome email from KWHS the next business day.

• An advisor should NOT enter registration information on behalf of his/her student teams. Trading accounts are tied to each registration email.

STUDENTS

• If your team has an Advisor (recommended, but not a requirement) please make sure they register first.

• ONLY the Student team leader should register his/her team and link to advisor (if any).

• Team members should NOT register. You will submit team member information along with your Mid-project Review in February.

• PLEASE DO NOT REGISTER MORE THAN ONCE. If you made an error or aren’t sure if your registration went through, simply email KWHS-Region3@wharton.upenn.edu to confirm.

• You will receive a Welcome email from KWHS the next business day.

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LOGIN TO OTIS AND START TRADING

What is OTIS?

OTIS is The Wharton School’s Online Trading and Investment Simulator. It tracks a myriad of diverse securities, keeping real-time data on positions, trading histories and dividends. In this competition, students will only be trading equities. OTIS allows students to apply the concepts of investments and portfolio management in a hands-on learning environment while working with real-world data without risking real money.

OTIS is completely U.S.-centric. It operates on Eastern Standard Time and U.S. Dollars. The approved stock list offers a selection of foreign stock in this competition.

Logging into OTIS

Step 1: Visit https://wrds-otis.wharton.upenn.edu/otis/

Step 2: Log in to your competition OTIS account

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Step 3: You will be taken to your team’s OTIS dashboard page.

Step 4: Trading

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Step 5: Rankings

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Step 6: Analytics

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INVESTMENT RULES

You will begin with $100,000 virtual cash to be invested using OTIS

First-time investor? Read this KWHS article first: http://kwhs.wharton.upenn.edu/2015/12/the-top-10-terms-every-new-investor-should-know/

Teams can only invest in stocks that are on the Approved Stock List

• Teams will lose the investment if it is not on the Approved Stock List

• Stocks are categorized by industry and sector

There are eleven sectors, which consist of multiple industries and dozens of stocks:

Sectors>Industries>Individual stocks

Teams can change the sectors that they invest in throughout the competition as long as the minimum number of sectors is represented in their portfolios.

The amount of investment in each sector is determined by the team. For example, a team of five could invest $20,000 equally across five sectors. Alternatively, the team could decide to invest $99,000 in one sector and $250 in each of the four remaining sectors.

• At least one stock must be represented from the minimum number of sectors

• Each team member is responsible for making investments in at least one sector

o For example, in a five-member team, each team member would be responsible for covering at least one distinct sector (i.e. five sectors total). Additionally, in this case, the team members have the option to invest in up to four more sectors for a total of eleven sectors

• Teams can make as many or as few stock trades as their investment strategy determines

• Once trading has begun, teams can make trades at any time during the competition.

1. Consumer Discretionary Sector

2. Consumer Staples Sector

3. Energy Sector

4. Financials Sector

5. Healthcare Sector

6. Industrials Sector

7. Information Technology Sector

8. Materials Sector

9. Real Estate Sector

10. Telecommunication Services Sector

11. Utilities Sector

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MID-PROJECT TEAM REVIEW

DUE MONDAY, FEBRUARY 12, 2018

The mid-project team review will show the judges that each team is developing a strategy and is following it. Our KWHS competition team will take a look at the reviews and provide general feedback about the teams’ strategy development and progress thus far in the competition. You will not get individual feedback on the mid-project team review unless you reach out to KWHS with specific questions. We are always here to offer guidance at KWHS-Region3@wharton.upenn.edu. If your team does not submit a mid-project team review, then you will no longer be considered active in the competition.

Your review should consist of the following three sections:

• Investment strategy – This should cover how your team believes it will receive the highest rate of return

• Team decision-making process – This should cover how the team determines which individual stocks to buy

• Top stock holdings – This will allow the judges to ensure the team is on the correct track

Format:

• Title page: Your team name, school name, finalized team member names.

• Content: 1-2 pages, double spaced, 12 point Times New Roman font

• Submit in doc or pdf format, not exceeding 5MB.

• Name your document as: Region 3-[Team Name]-[High School Name]

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FINAL REPORT

DUE SUNDAY, MARCH 25, 2018

Best Practices• The Final Investment Policy should be a minimum of seven (7) pages, and a maximum of 13 pages

including the cover page. Reports that go over or under this range will be disqualified.

• 12 point Times New Roman font

• Double spaced

• 1 inch margins

• Submit in doc or pdf format, not exceeding 5MB.

• Name your document as: Region 3-[Team Name]-[High School Name]

The following are suggested sections to include in your final team policies in order to convey a clear picture of your team’s competition involvement. Please note, however, that there is no right or wrong approach to your final policy. For instance, you do not have to include information on Porter’s 5 Forces, but if it was critical to your strategy, by all means let us know how. You won’t be penalized for not following this suggested format. We encourage creativity and critical thinking. How can you communicate a compelling story about your trading, teamwork, strategy development and any other critical experiences you have had during the 10 weeks of the competition? What will make your final policy stand out from all the others? Throughout your competition journey, you should be thinking about what you are learning and unique and interesting ways to build and then articulate your knowledge about the investment world. We encourage a narrative format, rather than a list of bullet points, charts and graphs.

Several tips to keep in mind:

• Your strategies should be taking the profile of your client Jack Abraham into account.

• “Buy low and sell high” is NOT an investment strategy.

• Though the trading part for this competition only lasts 10 weeks, your strategy should reflect long-term thinking.

• Overly technical strategies will not necessarily impress us. We want both qualitative and quantitative analysis.

• Remember your reader. Don’t lose us in a sea of technical jargon, but rather weave in story-telling and colorful insight about how your strategy came together.

• We don’t want to read pages of defined terms. Show, don’t tell.

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Cover Page

Team name, team member names and high school

Section 1: Investment Recommendations

• This section should be your final recommendation for Jack Abraham’s portfolio. The recommendations do not have to reflect your team’s actual investment strategy during the competition.

• What is your teams investment strategy and why?

o Did you invest all the money in stocks or did you leave some in cash?

o How does this fit with Jack Abraham position in the life cycle?

o What unique strategy have you developed to invest Jack’s money?

• What sectors does your team recommend KWAM invest in and why?

o How much should be invested in each sector and why?

• What industries does your team recommend KWAM invest in and why?

o How much should be invested in each industry and why?

o Teams should provide supporting evidence for their strategy by using:

Porter’s Five Forces Model

Relative value ratios

• What stocks does your team recommend KWAM invest in and why?

o How much should be invested in each stock and why?

o Teams should provide supporting evidence for their strategy by using:

Analysis of financial statements

Financial ratios

Relative value ratios

SWOT analysis

Section 2: Investment Decision Process

• How did your team make investment decisions at the beginning of the competition?

• How did your team make investment decisions at the end of the competition?

• Did your team use different tools (i.e. SWOT, financial ratios) in the analysis process?

• Did members of your team use different tools?

o What tools did your team find the most effective in its analysis?

o Why were some tools less effective?

• What would your team have done differently in the investment decision process?

• What did you learn about the investment decision making process?

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Section 3: Team dynamics

• What were some of the challenges presented by working in a team?

• How did the team make decisions (e.g., vote, discussions, etc.)?

o How were tasks divided between team members?

• What particular skills made each member valuable?

Section 4: Ethics

• Pretend that someone provided you with inside information on a company that you were potentially going to invest in for Jack Abraham

o What would you do in this situation?

o Would you use the information or would you report it to the proper authorities?

• Why is it important to have high ethical standards?

• What are some other possible ethical situations that might arise if you are a portfolio manager and how would you deal with them?

Section 5: Takeaways

• What did your team learn from this competition?

• What would your team have done differently in hindsight?

• Why was the competition easier or more difficult than your team imagined?

• Did your team enjoy this competition? Why or why not?

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FINAL PRESENTATION

Only the top teams selected on the merits of their final policies will be required to submit official final presentations, which they will deliver during the competition’s finale event. However, teachers and other advisors are encouraged to hold their own classroom presentations and judging, even if their teams do not advance to the finals.

Powerpoint Tips

Creating a PowerPoint presentation is more complicated than making a few bulleted lists. Use your slides wisely, and your audience will have no trouble following your idea. Use them poorly, and your audience will be left thoroughly unimpressed or—even worse—scratching their heads.

Keep this tried-and-true sequence in mind when crafting your slides• Start with an introductory slide: names, company, date, etc

• Grab the audience’s attention with your main idea slide

• State your agenda

• Give your supporting points in a logical order

• Conclude with a one-sentence restatement of your main point

Also be sure to remember these tips to make your presentation more appealing to the audience

• Try using sentences as headers instead of singular words or short phrases

• Limit the amount of text you use on your slides

• Choose images carefully and avoid using clip art

• Use graphs in place of tables

• In a well lit room, use dark text on a light background

• Consistent formatting (fonts, spacing, etc.) implies unity and cohesion