Want Feedback on a Stock Pitch?

Technology company Hewlett Packard will be holding their equity analyst day this Wednesday (October 3).   If you want to get an idea of what happens at an analyst day, listen to the webcast (you can find the webcast information on the Investor Relations page at HP.com).  

In addition, if you decide you want to use Hewlett Packard (Ticker HPQ) as a stock to pitch in your upcoming interviews, feel free to send your pitch to me and I will do my best to give you feedback on it.   If it appears you have not put in a good faith effort to learn from prior postings on this blog before you write up your pitch, I will not provide feedback (I am willing to help those that put in the effort...but I'm not going to do the work for you).  I will not have the ability to provide feedback on any stock pitches except for HPQ.  

All submissions should be sent to: Brian.Thonn at KingdomRidgeCap dot com

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Stock Market Words of Wisdom (XV)

Leave no stone unturned to help your clients realize maximum profits from their investment.

Arthur C. Nielsen

The person that turns over the most rocks wins the game. 
Peter Lynch

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Stock Market Words of Wisdom (XIV)

"I'm only rich because I know when I'm wrong...I basically have survived by recognizing my mistakes." 

George Soros

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Potential Stock to Pitch: Apple (AAPL)

I have laid out some challenging advice on the number of stock pitches you should prepare and the need to try and find stocks your interviewer will know.  Therefore, I figure it is only fair that I give you a stock that might be good to pitch and that stock would be Apple (AAPL).  I think Apple may be good for a student to pitch because:

• Most students are familiar with Apple's product offerings
• AAPL is one of the most widely held stocks so it should be "pitchable" with many firms
• The company and sell side analysts provide a reasonable amount of data that can be used in your analysis

One downside of Apple is that because it is so heavily followed, it may prove tough to come up with novel insights.  Also, Apple's fundamentals are highly dynamic so it could prove challenging to stay on top of the news flow.  While clearly imperfect, I suggest you at least keep it in mind as you work through your list of stocks to pitch.


Related posts:
Tips for Preparing a Stock Recommendation

Stand Out by Going the Extra Mile

Know Your Audience’s Investment Time Frame

Know the 3 Key “What Counts” Factors for Your Stock Picks

Don’t Live in the Past


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Copyright © 2012 Kingdom Ridge Capital, LLC. All Rights Reserved. Not a Public Solicitation.


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Stock Market Words of Wisdom (XIII)

Investing in stocks is an art, not a science.  People who’ve been trained to rigidly quantify everything have a big disadvantage.

Peter Lynch

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The Danger of Cognitive Bias in the Research Process

Wikipedia describes a cognitive bias as a replicable pattern in perceptual distortion, inaccurate judgment, illogical interpretation or what is broadly called irrationality. They are the result of distortions in the human mind that always lead to the same pattern of poor judgment, often triggered by a particular situation.

While there are a multitude of identified cognitive biases, a few tend to be talked about more than others when it comes to investing & trading such as:

• Anchoring: The tendency to avoid options for which missing information makes the probability of an outcome seem unknown and unknowable.
• Bandwagon effect: The tendency to do (or believe) things because many other people do (or believe) the same thing. Related to group think and herd behavior.
• Confirmation bias: The tendency to search for or interpret information in a way that confirms one’s preconceptions.

By staying aware of how these biases can creep into your views on stocks, you can hopefully continue to call things as they are when fundamentals change (and believe me they will change) instead of seeing things as you want them to be.

Related posts:

Tips for Preparing a Stock Recommendation

Stand Out by Going the Extra Mile

Know Your Audience’s Investment Time Frame

Know the 3 Key “What Counts” Factors for Your Stock Picks

Don’t Live in the Past


Image courtesy of Flickr

Copyright © 2012 Kingdom Ridge Capital, LLC. All Rights Reserved. Not a Public Solicitation.

Kingdom Ridge Web Site

Stock Market Words of Wisdom (XII)

"The investment process is only half the battle. The other weighty component is struggling with yourself and immunizing yourself from the psychological effects of the swings of markets, career risk, the pressure of benchmarks, competition, and the loneliness of the long distance runner."

Barton Biggs

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If You Have No Other Options, Consider an Unpaid Internship

When I was in college I heard stories of how hard it was to get into advertising. The supply of qualified candidates far out weighed candidate demand. This meant that besides having to fight like mad to get an advertising job you also had to endure low wages for awhile until you proved you could deliver value.

I struggled with this concept at the time, but I now understand it is purely a function of supply versus demand.  Today the equity research field is somewhat like this…especially when it comes to internships. The supply of qualified intern candidates is much greater than the number of positions available. Therefore, if you are unable to obtain a paid internship and equity research is something you are dead set on trying to break into, I suggest that you consider offering your services to a firm for free.

I fully realize an unpaid internship can be difficult to pull off from a personal finance perspective. However, if you have the means to do it then I ask you to consider it as:

1. getting an equity analyst internship allows you to get some experience on your resume
2. later on, when you are interviewing for a full time equity analyst position, the fact that another firm "hired" you as an intern makes you look like a more proven commodity
3. an internship will give you an idea whether or not you actually like equity research work

Networking with alumni from your school probably offers the best chance for finding leads for an unpaid internship with an asset manager. Alternatively, a resource in your school’s career services office may prove helpful.

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Copyright © 2012 Kingdom Ridge Capital, LLC. All Rights Reserved. Not a Public Solicitation.

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Stock Market Words of Wisdom (XI)

"The four most dangerous words in investing are: 'this time it's different.'"

Sir John Templeton

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If You Have Questions...

If you have any questions about interviewing for an equity research job, what the buy side is like, hedge funds vs. mutual funds, buyside vs. sellside or any other topics just drop me a line and I will do my best to help you out.  If I think the question could be on the minds of multiple readers I will post the response on this blog.  The best way to reach me is my work email which is:

brian.thonn at kingdomridgecap dot com

Prepare to Defend Your Stock Pitch

During your interview you will have to defend your stock pitch as the portfolio manager will be testing your logic, your assumptions, etc. to look for holes in your recommendation.  You should expect the PM to test your knowledge of the stock by asking seemingly unimportant yet highly detailed questions in order to see how well you know your stuff.

If the PM asks you a question you cannot answer, do not make something up. There is a decent chance the portfolio manager knows the answer (or has a good idea what the answer is) and will spot your fib.  Besides, beyond testing how well you know your story, the PM will be testing what you do when you are asked something you don't know.  The portfolio manager doesn't want you to fudge an answer because in the real world a fudge can ultimately cost a great deal of money. 

If you are faced with a situation where the PM catches you unprepared, it is better to say either "I will have to double check this, but given these 1, 2 or 3 facts I do know it is reasonable to think X" or "I don't know for sure but this is what I would do to find out".  Do not try to skate through with something you made up on the spot.  

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Copyright © 2012 Kingdom Ridge Capital, LLC. All Rights Reserved. Not a Public Solicitation.


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Stock Market Words of Wisdom (X)

"You cannot motivate the best people with money. Money is just a way to keep score. The best people in any field are motivated by passion."

Eric S. Raymond

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Adapt, Improvise & Overcome to Get the Interview You Want

Do not give up if a mutual fund or hedge fund you want to interview with is not coming to your school. Instead, figure out how you can make the interview happen. Perhaps you can find a contact at the company in your school’s alumni database who will help connect you to the right contact.  Maybe you can use LinkedIn to get an introduction to the person responsible for recruiting.  Find out if the company is interviewing at another school that is within driving distance and arrange to get time with the recruiter there. Sometimes a firm may be willing to do a first round phone or video interview if you show the initiative to contact them and propose the idea.  Exhaust all acceptable avenues if it is something you really want.

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Copyright © 2012 Kingdom Ridge Capital, LLC. All Rights Reserved. Not a Public Solicitation.

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Stock Market Words of Wisdom (IX)

"You can be positive and wrong on the sell side.  But, if you're negative and wrong you get fired."

Steve Eisman (from The Big Short by Michael Lewis)

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Stock Market Words of Wisdom (VIII)

"The key to making money in stocks is not to get scared out of them".

Peter Lynch

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Prepare Your Two Year Plan to Get Equities Experience

If you lack any professional experience in equities, it could prove challenging to get an investment-related internship and then a full time job. Therefore, if you find yourself in this boat, you should be working on a two year plan that gets you real world experience. In your first year, see if one of your professors will give you independent study credit for working at your school's endowment.  If an endowment assignment isn’t possible, pursue a similar role at a local bank trust department, wealth manager, family office or even at a brokerage. Anywhere you can get your feet wet should be considered as any equities experience is better than none.

If you can’t find something you can do for credit, then pursue a non-paying internship with one of these firms as a way to gain experience.  Even if you start out just doing grunt work, this level of initiative shows potential recruiters your interest and commitment to the field of investments. It also gives you investment related experience to put on your resume.

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Copyright © 2012 Kingdom Ridge Capital, LLC. All Rights Reserved. Not a Public Solicitation.


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Stock Market Words of Wisdom (VII)

"In investing, what is comfortable is rarely profitable."

Robert Arnott

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How to Pitch Your Stock in an Interview

As stated before, the most important part of an equity analyst interview is the stock recommendation (AKA the pitch). The flow of your interview pitch should go something like this:

My first long (or short) is stock ABC. Ask the interviewing portfolio manager if he/she knows stock ABC – if not give a 1-2 minute overview of what they do. Sometimes the PM may not know the stock and ask you to pitch another stock. (see prior post about number of stock pitches to have).
Explain what your differentiated view is on the stock (e.g., ABC should beat Street consensus EPS estimates by at least 20% over the next year because the Street is underestimating a product cycle).　 Know your key stock drivers.
Give a target price – Target price should rely predominantly on improving fundamentals (like EPS). Do not rely heavily on multiple expansion. That may come, but your recommendation should not rely on it.

After these three points, be ready for probing questions and push back from the portfolio manager.  Be ready to defend key assumptions.  Have your model available and be prepared to point our where your expectations are different from consensus expectations.  Expect to answer the question "where could you be wrong?"  (Even great analysts are wrong 1/3 of the time – the key is to make sure you recognize what can cause your stock call to go against you.)  The PM will try to poke holes in your pitch.  Your goal is to be as prepared as possible to make this difficult for the PM to do.

Related posts:
Tips for Preparing a Stock Recommendation

Stand Out by Going the Extra Mile

Know Your Audience’s Investment Time Frame

Know the 3 Key “What Counts” Factors for Your Stock Picks

Don’t Live in the Past


Image credit: iqoncept / 123RF Stock Photo

Copyright © 2012 Kingdom Ridge Capital, LLC. All Rights Reserved. Not a Public Solicitation.


Kingdom Ridge Web Site

Stock Market Words of Wisdom (VI)

"The time to buy is when there's blood in the streets."

Baron Rothschild

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