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International investor discusses the good, the bad, and the ugly of building proprietary models, and how Canalyst is a key component of LK Advisers’ investment process.

We’re big fans of Invest Like the Best, tuning in each week as Patrick O’Shaughnessy interviews the best and brightest of the investing world. This month, Patrick sat down for a conversation with our client Giuseppe Coco, Senior Analyst at London-based LK Advisers. The full interview covers his experience manually building complex models, and how Canalyst is now a key component of his investment process – automating his modeling workflow and screening across an expanding coverage universe.

The modeling problem

Giuseppe started his career in investment banking, where models “were frequently 20, 30, 40, 50 tabs, thousands of lines long, only to derive a very simple output.” As other analysts and team-members continued to add incremental complexities to these models, they quickly became burdensome, and tracing back any meaningful insight became tedious and inefficient. 

Once on the buyside, Giuseppe encountered the same problem of time intensive and inefficient modeling processes. It would easily take a few hours, potentially even weeks, depending on the degree of complexity, to build a proper, running, and fully integrated model. When he heard about Canalyst on the Invest Like the Best podcast, with fully-built models and automatic updating, Giuseppe was thrilled at the prospect of seeing that process get condensed.

“I was totally amazed by that. That it was even possible…to build such a detailed and sophisticated, yet simple model, in the manner that [Canalyst does].”

Considering the benefits of modeling for the purposes of gaining a fine-tuned understanding of a given name, Giuseppe finds that Canalyst actually enhances understanding of the key drivers of a company. “When opening up a model, there are five tabs and they have this beautiful summary sheet. I almost find it a lot easier to just look at those trends and get a sense for how something has performed, what is driving X, what is driving Y.”

“From all the tools I have been using on the buyside, and what I’m using today, Canalyst reduces friction the most.”

Coverage as leverage

Now in a family office, Giuseppe is looking at more global names across a wider universe. Canalyst’s continually expanding global coverage has already been a huge advantage. 

To evaluate multiple names without the support of a large team, Giuseppe designed a custom screening process to look at 250+ KPIs across a large coverage, and then return a scorecard which assigns scores for each name from 1 to 10. He notes, “This is a process that we have found working very well for us; and that without Canalyst, I mean, it would’ve been virtually impossible. It would’ve taken multiple years.”

By streamlining updates during earnings, and accelerating the idea gen process, Canalyst frees Giuseppe and his team up to spend more time speaking to management teams, attending conferences, and setting up calls. For all of this, Canalyst is extremely helpful “because you always have the single source of truth, which we can refer to the numbers and to get a better sense for what it is, and how that will eventually translate into value.” 

“Canalyst is extremely helpful because you always have the single source of truth”

Data, Data, Data

As Canalyst continues to grow, Giuseppe is excited to leverage the continually expanding coverage, and their data science library, Candas, for new ways to screen even faster. Candas will enable him to expand his analyses, like his current screening process, at a much larger scale: “That could open up very exciting opportunities and use-cases down the line.”

With a roadmap to get to 10,000 companies under coverage, and increasing ways to access the immense fundamental dataset, Canalyst will open up a lot of possibilities for clients like Giuseppe – and all other financial professionals who need to become increasingly efficient with their time and resources.