WIN 2016: The art of the stock pitch
MBA teams “sell” potential investments to prestigious judges
Anyone who hopes to become a professional investment manager must be able to present a thorough, convincing case for investing in a particular stock. The stock pitch is an integral component of an interview for any buy- or sell-side position in investment management. At the Parker Center’s Women in Investing (WIN) conference, the Stock Pitch showcase on November 18 allowed participants to demonstrate their skills to judges from sponsoring firms, who provided feedback on the pitches.
Student teams, each comprising 2-4 women from 10 business schools, gave presentations on the following companies: Zillow, Yelp, Michael Kors, Scripps Network Interactive, Spirit Airlines, Mobileye, Cal-Maine, Dean Foods, John Bean Technologies, and Gilead Sciences. After listening to the teams’ presentations, the judges provided the following tips to the entire group:
While it’s important to tell how the company makes money, cut right to your investment thesis: Specify your target price and investment horizon clearly and immediately. Be sure to address two critical questions: What’s your position relative to the consensus (both in quantitative terms – valuation numbers – and in your qualitative assessment of the stock)? What is your differentiated view on this investment – what makes your argument stand out from others?
You want to get your major points across, not overwhelm your audience with numbers. When you’re giving your presentation, don’t flip quickly through dense slides. Allow your audience time to digest the information. And, if you’re showing lots of numbers, highlight the key points you want listeners to retain.
Your valuation analysis should be as airtight as possible – test your hypotheses in a sensitivity analysis. Find the right context for your stock: Identify the most-appropriate valuation method for the industry, and keep sight of the big picture, rather than trying to cover all approaches. Be able to answer: “Is the stock cheap or expensive relative to its peers, the market, and its historical average? Why?”
Think about risks to your thesis; be ready to name developments on your investment horizon that would make you change your mind. And know the basic metrics: market cap, dividend yield, liquidity, short interest, insider and institutional ownership and activity, cost of financing (if recommending shorting a stock), management history and track record, recent price history, the reasons behind significant movements in price, and key metrics related to financial statements.