23 Han-seo Kwak, CFA, head of research at an equity fund, assigns Mi-ri Kim, CFA, a new junior analyst, to forecast the growth rate of KLE, a small-cap company. Kim performs a thorough analysis using the firm's model. After a quick review of Kim's analysis, Kwak concludes that KLE is overvalued. Based on Kwak's conclusion, the fund does not invest in KLE. After KLE's stock price rises following positive recommendations from other funds, Kwak performs a more in-depth review and identifies two assumptions in Kim's forecast that caused an overly pessimistic valuation.
