9/18/2017 0 Comments Diamonds in the RoughFor this week’s research assessment, the focus was on finding my weaknesses in investment terminology and valuation. To do this, I read the 2013 annual report of Progressive Waste Management, a multinational non-hazardous waste company. Although waste management definitely is not the most flashy or exciting industry, there are some misvalued “diamonds” in the industry that could produce extraordinary profits. Because of the potential profitable companies that lie within the industry and my lack of exposure to waste companies, Progressive was the best company to research.
From the experience of reading through their 2013 annual report, I was able to determine that foreign exchange (FX) is my weakest area of knowledge. In terms of Progressive, foreign exchange was mainly carried out through interest rates on their revolving lines of credit and balance sheet adjustments. Even though they are only working with one exchange rate (CAD to USD), these adjustments sometimes went up into the hundreds of millions of dollars, resulting in the need for a little extra math to be done to find the pre-adjustment numbers. Although I understood what FX affected, I was not sure exactly how or why it changed the company’s financials. With the rapidly expanding world of multinational companies today, FX will become even more of a factor when considering a company’s financial stability, so understanding the effects of FX will allow me to get a clearer look at a company’s valuation and subsequently make better investment decisions. Overall, this week was successful because it allowed me to become more familiar with the first half of a annual report as well as find topics that I need to become more familiar with. The skills that I developed this week as well as next week (when I will be writing the financial analysis of Progressive Waste) will set the foundation for the way I read annual reports for the rest of this year and provide me with a means to work my way to a wider circle of competence.
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