For last two years, I have been reading WSJ and Financial Times to learn about economy, industry, and firms. Now that I need to prepare some stock pitches for upcoming interviews, I am having a hard time formulating them. I am planning to pick a company from each of Tech, Financial Services, and Commodity area. It is hard to come up with some original thoughts on these; I end up repeating what is already in some of the existing analysis. How would you try to put some original thinking into these? Where do you get the information? WSJ and Financial Times gives me some idea about the market, business, and some industries, but I find hard to quantity/crystallize them. I know this is kind of broad question. Basically, it would help if you have done stock pitches and you would like to help me out.
buddham I also am wondering how to approach this. I was faced with this issue in a recent interview and had very little idea of how to answer. I read the financial news everyday but it’s unknown to me how one actually picks stocks.
i’d say there’s not a perfect answer. when i interview someone and ask about where you think the market is headed or what sectors do you like or pick a stock, etc, i’m looking for the thought process just as much as i am what actual stock comes out of your mouth. i think you’re doing well by keeping up with newpapers and the broader market, less likely to get thrown a huge curveball. i’d say try to find an investment or sector that you do like and then do some analysis- you tell me… are you a technical player, a fundamentals guy, a contrarian? as long as you can speak coherently and defend your pick with smart reasons, i’d think you’ll do fine for most interviews. i dunno… do you invest in your personal account? how do you pick stocks there? when you read barrons or see an interview on CNBC, what do you see the analysts focus in on when they get little 2 minute segments to pitch names? be able to get your point across well, briefly, but if the interviewer digs in and asks you follow up questions if you for example say you like some gaming stocks down here (i am maybe one of the rare few who has thrown some dinero down recently on a few names in that sector), i better understand what a slowing economy and rising oil prices has to do with my pick and be prepared to defend it. the general discussion section on this forum is pretty good I think for bouncing back and forth ideas on names/sectors. FNM/FRE good chat has been going recently. there was a good thread i want to say on C a little while back. oil, commodities… if you plan to pick stuff in this volatile a sector, be prepared to defend the why and also the duration of your trade/pick. i like asking these sorts of q’s when i interview people. there’s not necessarily a wrong answer, but i can see through some trendy answer with no substance very quickly. just back up your picks, maybe gear your picks a bit towards the sector or sort of interview you’re going for, and i’d say practice this pitch like you should practice all interview questions so you know it cold but can come off smooth sounding and not rehearsed come go time. feel free to tell me if you have some good picks. i’m sitting on the sidelines with a lot of cash presently and wimpy investing is no fun. i’m all ears.
Sector, 10-K, 10-Q. Here’s how I would approach it. I would start by judgmentally determining which sectors would do well in a slowing economy. For example, the railroad industry may have some upward potential given that diesel prices are still high and the roads are only getting more crowded every day. It’s much cheaper to ship goods via rail than via 18-wheelers. Next, I would look at the 10-K of 5-10 companies in the industry and assess their growth via the income statement, the strength of their balance sheets (i.e., you would not want to go long an over-levered firm in this environment), and search for accounting shenanigans with the statement of cash flows (i.e., if they are reporting earnings but don’t have the cash flows to back them up). Then once you narrow it down to 1-3 companies you can look at the footnotes in their 10-k and their most recent 10-qs for ideas to prove or disprove your investment hypothesis. Unfortunately, you will should probably only offer buy recommendations. Even though there are times when stocks should be sold short, the Street likes to crucify analysts that dare rate stocks a sell. If you have an extremely compelling case you can mention it, but only if you have solid proof to back it up. As you probably know, the purpose of this type of interview is to assess your logical thinking skills and see how you would walk through a problem. They ask investment banking candidates similar questions like, “how much orange juice is consumed in the U.S. each year?” The point is not to get the correct number, but to show them that you can logically think through new types of problems in a stressful environment.
pick a non consensus stock and non consensus investment theme, build a model, and sound excited. also, it may help to look at the holdings of the asset firm you are going to interview with. this work wonderfully for me in the past.
Start by thinking like an investor - if you were going to buy a stock, what do you want to know? Give them something material, but different. Qualitative, as well as quantitative. I used to be a financial journalist with a business newspaper in Australia, so I spoke to a lot of fund managers and private equity guys. A lot of the time when I spoke to those guys, they would talk about the fundamentals of a company - but they’d also talk about the personalities behind the company i.e. how would you quantify the affect of Richard Branson’s personality on Virgin’s stock price? Know something personal about the board, what they’re into etc etc. This is an important part of qualitative analysis. It is, in a small way, captured in CFA Level 1 BOK when they talk about the difference between growth company and growth stock - they are completely different things, although they are linked in several ways, particularly if the board has a niche interested from previous experiences and that is driving their strategy. Another thing to consider is who is your audience i.e. who is the investor you are thinking of. A few years ago I wrote a series of articles about a little known technology company in Australia with zero earnings, but they had a compelling product in development in conjuction with a big American tech company. It’s share price was about $0.50, but one particular boutique fund manager owned a swathe of its shares. I interviewed him about the company and asked him why he invested. He explained the whole technology to me - it turned out he was formerly a physicist and knew the technology back to front. So he was basically one of the only fundie who knew the technology and understood it’s potential. I think it’s shares are worth about $8 now, but he got in when they were $0.10. If there was no one in the market that understood that technology, then the price would still be under $1. What investors already know is important.
Thanks for all the tips guys. I have an interview tomorrow and I’ll be doing some research tonight.
You should do what Warren Buffet did…pick stocks you know and then find if they are over/under valued. If you concentrate your efforts on stocks you know than you will have to do 1/2 the research as you already know the qualitative aspect of the stock, which in some cases might play a bigger role than the financial fortitude of a firm, when making a recommendation. For example, I love gadgets. I love how Apple iphone has been able to beat the other guys to the punch to make use of the 3g network, when blackberries still use wi-fi/2g. This gives them a great competitive advantage for the time being. I know this is something rudimentary, but you get the point. Make things easier for yourself, especially for interview purposes.
miker2800 Wrote: ------------------------------------------------------- > For example, I love gadgets. I love how Apple > iphone has been able to beat the other guys to the > punch to make use of the 3g network, when > blackberries still use wi-fi/2g. This gives them a > great competitive advantage for the time being. I > know this is something rudimentary, but you get > the point. Make things easier for yourself, > especially for interview purposes. I am not sure if it is so easy to win half of the battle by picking stocks just with some gut feeling; you still need to know quite a bit about the sector/segment in addition to knowing about the current set of product lines. Even your example of Apple is not very clean if you discount its stock for possible rumored illness of Steve Jobs as too much depends on his vision. I have not studied Apple, but hearing all the “hype”, I am sure it is very inflated compared to its intrinsic value, but it would be fun to do the valuation to see if this hunch is “validated”.
buddham Wrote: ------------------------------------------------------- > miker2800 Wrote: > -------------------------------------------------- > ----- > > For example, I love gadgets. I love how Apple > > iphone has been able to beat the other guys to > the > > punch to make use of the 3g network, when > > blackberries still use wi-fi/2g. This gives them > a > > great competitive advantage for the time being. > I > > know this is something rudimentary, but you get > > the point. Make things easier for yourself, > > especially for interview purposes. > > I am not sure if it is so easy to win half of the > battle by picking stocks just with some gut > feeling; you still need to know quite a bit about > the sector/segment in addition to knowing about > the current set of product lines. Even your > example of Apple is not very clean if you discount > its stock for possible rumored illness of Steve > Jobs as too much depends on his vision. I have not > studied Apple, but hearing all the “hype”, I am > sure it is very inflated compared to its intrinsic > value, but it would be fun to do the valuation to > see if this hunch is “validated”. I don’t do ER, but have read almost all books on my main man Warren B. As I mentioned, this was just an example, but this is the crux of his investment strategy. He says ONLY invest in what you already know. Again, just an example, don’t go buying Apple stock now. Either way you were looking for an idea on which stocks to pick and I think this method is a good start.
thanks miker2800. I recently read some of Warran B.'s letters to the shareholders. Amazing stuff.
If you enjoyed that you will surely enjoy books on his investing strategy -one good book is called “#1 rule” Something like that. There are a lot of books following his success, but more or less they all say the same thing (Doesn’t mean it’s bad, but means it would suffice to just read one of the books). Good luck in your interview, tell us how it goes!