Also, one other point I wish to clarify is that building a model, calculating ratios, or running a DCF is not “analysis.” There seems to be some preoccupation on this forum as well as WallStreetOasis about the tactical nature of the job. It is true that you will eventually need to learn how to calculate all this stuff and build models, as they are absolutely essential to the job. However, where the true analysis comes into play is when you look at the model and try to understand what it’s telling you, looking at where numbers may or may not make sense, and thinking about how and why a certain valuation multiple may or may not be appropriate. Ultimately, I would argue that for interviewing purposes, the “how” and “why” are much more important than “what.” For example, if someone asks you to *analyze* a company’s valuation, it would be wrong to say, “I would build a DCF or calculate a P/E ratio.” In comparison, the correct answer would go something along the lines of, “I would build a DCF to test the robustness of my forecasted assumptions and see what the intrinsic value of the company is relative to its current valuation in the stock market, and I would also look at the P/E ratio to understand where the company fits relative to its peers, while also carefully considering whether its investment merits truly justify it being valued higher than its peers. Based on my assumptions for X, Y, and Z over the coming months as well as risks A, B, and C, I don’t think it should be trading at a premium and believe that a multiple of D would be more appropriate.” Of course, if you’re asked to build a financial model, you just have to know how to do it; but if you’re being asked to analyze a business, what I mentioned above is what they’re looking for. After all, your job isn’t only about building the spreadsheet, but to analyze and make sense out of what all those numbers mean. That’s why these people are called analysts.
bromion Wrote: ------------------------------------------------------- > I think you guys are being too hard on him. The > CFA teaches the theory, which I am sure he knows > or he would not have passed the exams. It does not > teach you the application of the theory, though, > which you can basically only get from hands on > experience. If he has not worked in the industry, > I doubt he is much, if at all, worse off than your > typical MBA grad. Maybe I am giving him too much > credit, but I think his question had more to do > with putting the valuation and FSA concepts he > knows into practice, rather than not knowing > anything about those topics. Thats exactly it. Thanks Bromion. I’m coming from an advisory firm that advises DC and DB clients the pros and cons of adding certain mutual funds to their fund line up to their employees which has nothing to do with the interview and the position which now has me wondering if its even worth pursuing.
I was never a technical guy. I’m more of a generalist with strong slaes and relationship building skills who is knowledgeable about the broad picture. Economy, industry, management where I can interview fund managers and can relay the information to board trustess of large db/dc plans. The most ive analyzed is mutual fund performance relative to other funds/benchmarks , and holdings of these funds, why they underperformed etc… ive never had to do a company valuation.
Now is a good time for you to learn. There is some good advice on this thread.
IH8FSA Wrote: ------------------------------------------------------- > I was never a technical guy. I’m more of a > generalist with strong slaes and relationship > building skills who is knowledgeable about the > broad picture. Economy, industry, management where > I can interview fund managers and can relay the > information to board trustess of large db/dc > plans. > > The most ive analyzed is mutual fund performance > relative to other funds/benchmarks , and holdings > of these funds, why they underperformed etc… ive > never had to do a company valuation. IH8FSA, I am in the same boat as you. I work in asset consulting and advise mostly pension funds on portfolio construction, asset allocation, manager selection etc. issues. We do very little security level work and I have no idea how to value a company. I am hoping to land an ER role soon. I haven’t started applying yet as I want to get my head around it first. Plus I have a feeling that once I start applying some senior consultants at my firm might find out as they know every bloody manager out there. So once I start applying, I want to move quickly. We should stay in touch. Can I have your email ID or please feel free to email me at oldmonk16 at gmail
I kind of doubt that you would have to review some massive spreadsheet based on what they say about “the basics” of company valuation, so my guess is you’re overestimating how difficult this interview will be. Probably you will crush the questions they ask you. And you are right – there is a big difference between doing FCF calculations for the Level 2 exam and constructing a massive spreadsheet model. With the CFA knowledge, you can learn the other, but it doesn’t mean that you can just slip into an analyst job and run with it. There is still a lot to learn. For example, I work in the investment banking division of a large bank and am trying to move into an analyst position, which is not easy and the standards are very tough. People know that I am a Level 3 candidate, but they certainly aren’t blown away by that. They have let me know that they think I have a lot to learn before becoming a full-fledged analyst and they do sweat the whole spreadsheet skill thing. They know that I would need training there. However, I recently had an interview for an analyst job here and I was surprised how simple the questions were. I did not have to look at a computer model at all. They asked very easy questions like “one company has 10 bn in sales and 4 bn in EBIT and another has 10 bn in sales and 3 bn in EBIT, but the second company has a higher market valuation. Why would this be?” They also asked, “if you had to pick a stock to recommend from the XXX sector, what would you pick and why” and “what valuation models do you know and when would you use each of them.” When I mentioned that I knew residual value but admitted that I was uncomfortable using it, they had to ask each other what it was, agreed they didn’t understand it either, threw it out, and went on. So I would expect something along those lines and at Level 3, that isn’t scary at all. You can learn detailed spreadsheet modeling on the job.
IH8FSA Wrote: ------------------------------------------------------- > “Prove to us that you know the basics of how to > analyze companies” > > > Note: I have not analyzed companies before. So > how should I get prepared? > > I hope they dont sit me in front of a comp because > I dont know much about excel. > > Please list qualitative info that can help me > prepare. > > Thanks1 SWOT first taking special consideration for past historical performance over the business cycle and assess the quality of management, then ratio and cash flow analysis in order to gauge risk so i can get a better picture of the assumptions to build into the model, dig deep into the notes and try and build a RI model.
mwvt9 Wrote: ------------------------------------------------------- > Note to IH8FSA…you will have to use FSA to > analyze the company. 
I second this. Are you sure you would enjoy this prospective position if you hate FSA?
I think doing SWOT analysis are pretty interesting…we do those for our company for the region I am in charge of and you really gain a lot to hear the different country manager’s input. Doing a meaningful one as an analyst would really mean you have to have a pretty strong grasp of the business.