Curious what ya’lls thoughts are, what’s companies have you found the most difficult to model and understand? Excluding conglomerates like G.E. just because they have so many business lines.
Financial services.
I think you’re right… The way they use debt, deposits, borrowings to run their business and all the other activities seem really difficult to understand.
Not really. Oil and gas would be a bear. A banks business model is generally pretty simple. There is alot going on though
Renewable energy!
As someone who works in oil and gas, my answer is oil and gas. No industry I am aware of has so many variables
I do oil and gas, as well, but there’s also a ton of variables in financials too, as well as a real lack of transparency on their loan/securities portfolio. I’d put Financial Services as the most difficult but I’ve never had to analyze the industry. Vanilla banks are not hard but the large financial companies are very complex.
Oil and gas companies are very good with transparency and I think that helps as long as you’re familiar with industry lingo. It’s definitely an acquired skill with E&P, refining and midstream (all very different), though the services companies aren’t too difficult.
I agree renewable energy is tough. I will put biotech out there, too. I imagine CFA Charterholders with PhD’s in molecular biophysics that really understand asset valuation AND how to do good R&D on these drugs are in very short supply.
Chinese A-shares.
^gtfo ASHR ftw…right?
I’ve worked in Financials for a while. The business model is normally very simple but it’s complexity comes in part from understanding how balance sheet accounts behave, which isn’t important in many other businesses. It’s always frustrating talking to generalists who have no idea what they are talking about and trying to help them out. But I think e&p would be harder, because it’s more technical and closer to a science in terms of chemistry and engineering, but then again a lot of Financials fund e&p activities . Of course some spaces are more technical but they require schooling in those areas or solid experts you rely on. I think e&p and Financials are technical but don’t require a chemistry or biology or a law degree to actually know what is going on
what about life sciences?
Luxury Goods
Banks and life insurers.
Could you elaborate why, I am extremely curious.
Because tastes change and that is difficult to model over any real duration. Witness Coach.
I think there needs to be a distinction between predictability and complexity of the analytical approach.
Airlines, Big Pharma, Tech so many variables
hmmm you have a windmill that costs X your windmill produces Y amount of energy worth Z what else is there - why is this difficult to analyze? government regulations/funding issues? ? I would like to be enlightened - maybe I don’t know enough about this industry.
Coach is no luxury goods.
And you, my friend, do not understand the difference between fashion and luxury.
Agree on that.