Stock Pitch Sample Template

Stock pitcheshave beena part of finance interviewssince thedawn of man.

Peopletypically underestimate the importanceof pitches in an interview, but think about it this way:

If you're interviewing for a position at any sort of financial institution - hedge fund, private equity firm, investment bank, etc. -你怎么能将执行your job competentlyif you lack a solid pitch?

Even forinvestment banking analysts, whosejob consists less of investment researchandmore of Excel work, it'sintegral to be ready to pitch a stock.

Free Hedge Fund stock Pitch Template

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The Stock Pitch in an Interview

Finance positions, especially on thebuy-side, rely onmind-numbing amounts of preparationanddue diligence, so it'scritical that you demonstrateboth ofthese characteristicswith awell-researched pitch.

Here's @WhiteHat", a hedge fund analyst, on its importance.

WhiteHat – Hedge Fund Analyst:

For many positions, the pitch is the biggest part of the interview. It gives the interviewee the opportunity to explain his or her thought process and the way they evaluate an investment opportunity. It can separate the fakers from the legitimate candidates. In many cases, it can be the difference between being asked back and being sent home. But there's no class you can take that teaches you to properly pitch a stock.

There isno classonhow to pitch a stock, so let this be your learning center.

Included, in addition to our own guide, is a video detailing the pitch and what goes into it, courtesy of theWallStreetOasis Video Libraryand a PDF (attached at the bottom) that includes a visual summary as well as an example.

Interested in Hedge Funds - Breaking In

The股票pitchis justone aspectof landing ajob at a hedge fund.

Check out ourFREE hedge fund interview guideto kickstart your interview preparations, before investing in our full-fledgedhedge fund interview course.

Investment Idea Generation for Stock Pitch

Put yourself in theshoes of ahedge fund: you'venarrowedan open position down totwo candidates. Bothcheck all of the boxes.Excellent qualificationsandfitwith the firm. One comes from atop university with a perfect GPA;另一个从top 25 university with a 3.65.

When you have two candidates like this,do you separate them by academics, or do youlook at their investment evaluations?

Let's assume the second candidatenails the pitchwith an excellent ideabacked up bythorough research, while the first candidate pitches a run-of-the-mill stock with the requisite research but nothing beyond the surface level.

Wetake the candidate who nailed the pitch. Generating ideas for investments isn't easy. Otherwise passive funds wouldn't occupy a third of the market. Here's @BlackHat", a hedge fund partner onwhy you need to be able to generateyour ownoriginal ideas.

BlackHat – Hedge Fund Partner:

Believe it or not, an alarming number of managers (with similar strategies, of course) are looking at the same set of companies at a given time. Put simply, most analysts are incapable of consistently sourcing new ideas on their own. While no idea can be truly original, being one of the first and/or one of the few to discover a drastically mispriced security, impending catalyst, etc., is how an analyst or firm can make a killing in a hurry. By the time your indexers (think asset managers, overly-diversified hedge funds, etc.) and dumb money (momentum, retail investors) are in, the return potential is mostly behind them. What's left is often little more than just a market return.

Sohow do yougo aboutgenerating ideas?

First, according to @BlackHat", a hedge fund partner, there aretwo classesof ideas:abstract methodsandcommon methods.

Below arethree abstract methods. These are themethods you should usetofind a good stock to pitch.

• Management or industry referrals: Obtaining information from an executive beyond the surface level. Effective without a doubt, but far more circumstantial, which is why we will only cover it briefly.
• Thematic investing: Identifying themes that indicate sectors ripe for investing.
• Industry vertical stripping: Findingwhere the marginis going in a value chain from the basic supplier(s) to the supplier(s), to the end-user(s)

The first abstract method of idea generation for pitches,management or industry referrals., goesbeyond asking an executivewhat theythink of competitorsin the industry and the like.

If you simply ask an exec what they think of a competitor, you'll get a prim and proper answer. You have tomine for the information.Diamonds don't come easy. There's an art to it explained by @BlackHat", the hedge fund partner.

BlackHat – Hedge Fund Partner:

If you ask them who scares them the most in the enterprise business and they say it's Microsoft, now you have a free avenue to start talking specifically about what MSFT does well and what advantages they have over everyone else. (At the end of the day, most of this is common sense in social interaction...) Other questions I like to ask: is the industry entirely rational, or is there anyone you think is throwing the industry out of whack? Is there anyone you would consider a good fit for your business, either to acquire or as a strategic partner? Is there a certain manager in the industry you respect (or dislike) most? Who else is taking the share and why?

The next method of idea generation is far less circumstantial:thematic investing.

Think about thehigh-level themesthat point to acertain sectorwithoptimistic projections. From there, yourdue diligencefinds thefew companiesto focus on.

这是@BlackHat", the hedge fund partner, onthematic investing with an exampleand how you go about it.

BlackHat – Hedge Fund Partner:

The most current example I can think of to describe this is the insanity surrounding firearms and ammunition since the beginning of the Obama administration, and accelerated by Sandy Hook and other mass shootings. The theme, in this case, was obvious: certain types of ammunition and "assault rifles" were going to be under heavy scrutiny and began flying off the shelves at any dealer you could think of. The tough part isn't identifying the validity of the theme - this one was actually very easy to validate - but picking apart the sector to find the best way to invest in it.

The last means you should use to find stocks to pitch isindustry vertical stripping.

This is an awesome, readily available, yetrarely used techniqueforidea generation.

Why is that the case?

Because it'seasier to start swinging your axat the tree right awaythan it is to first sharpen your ax.

Vertical strippingis the process ofmapping out, inclear detail, "the value chain of an industryfrom the most basic supplier to the end-user, in order to identify all the companies along the way, with the objective of finding where all the margin is going" (@BlackHat" – Hedge Fund Partner).

这是@BlackHat", the hedge fund partner, with his favorite example of vertical stripping.

BlackHat – Hedge Fund Partner:

Our favorite example is the airline industry: it's been around forever yet is known as being a terribly competitive and unreliable business... despite the fact that we continue to pay higher and higher airfare for basically the exact same service! So where's all the margin going? Well, at the top, there's the aircraft OEMs (BA, EADSY) operating a duopoly, and even above them, the engine manufacturers who are highly consolidated with only three major players (GE, UTX, RR) and a duopoly above that in investment castings (AA, PCP).

Most of these businesses earnsolid returns on capital, and through industryvertical stripping, we've alreadydiscovered some businessesworth researching. Now you have tolook below the plane makersandstart thinking about how aircraftare distributed among airlines.

Once airlines have planes, there are other supportive businesses that come into play. Upon researching, we find acouple of businesseswithabsurd returns on capital. Now you see how industry vertical stripping works and the enchanting results it can produce.

These are thethree techniques of abstract idea generation.

These techniques gobeyond what the majorityis doing, thereforeincreasing your likelihoodof findinggolden geese. We prefer thematic investing and industry vertical stripping to industry management referrals because of availability.

@Simple As...", a hedge fundvice president, gaveinsight on how his idea generation methodologyis a combination of two of the above.

SimpleAs… - Hedge Fund Vice President:

I often find myself combining thematic investing and "industry vertical stripping", too. Say I find a product/trend that I think can be huge. I will usually break down the value chain to determine the best way to monetize this trend. I think you kind of implied this in the write-up, but maybe it wasn't as obvious to some others. Or maybe I'm just way off base and have been doing it wrong, ha ha.

Things to Not Do in The Stock Pitch

These are the most common methods of finding investment ideas.

While you may find it acceptable to utilize these techniques to find stocks,we recommend avoiding themsincecommon methods lead to common investment ideas, and thepitch is somethingthat canmake or break you- especially if you're interviewing for a private equity firm or hedge fund.

The three methods to avoid are as follows.

Quantitative Screening for Stocks

Screening based onquantitative characteristics. There arethree disadvantagesto this approach.

1. They'reeasy to run. (Everyone is already using them. They don't add much value.)
2. Trailing/forward numbersmay be based on somethingcyclical or one-time, making thevaluation less meaningful.
3. Ignores catalysts.

These are used most often tofilter for statistical cheapnesson a P/E, EV/EBITDA,FCFYield, or other valuation metrics, but can also be used to screen for companies of a certain quality based on margins, ROIC,ROE, etc.

Anefficient way to build a watchlist of companies thatappear very cheapwhile still having financial results within your specified parameters.

Warnings About Ideas from the Sell-Side or from Word of Mouth

These arepitches from thesell-sideoranyone elsefor that matter.

Once thepitch is made,cat islikelyout of the bag, and thecurrent price won't benearly asgood, which is akey disadvantageofword-of-mouth ideas.

Most monkeys on WSO have probably heard enough pitches to knowhow common idea generationbyword of mouth / idea sharingis in the industry.

But here's the thing about other people's ideas: mostanalysts share ideaswithmore conviction than they'd have with their own money.

Thesell-sideis anothersource of ideas, albeit anon-BlackHat approved one, since abuy rating isn't exactly worth muchcomingfrom the brokers.

Getting Investment Ideas from Hedge Fund Public Disclosures: 13-Fs

These are as much a goldmine of good ideas as they are of misinformation.

Something to keep in mind when combing through 13-Fs is that plenty of funds like to "window dress" their portfolios at the end of the quarter tomask certain investmentsorappear to be holding namesthrough the quarter thatthey really didn't have.

Also,sinceshort positionsand international equities are not reported, you never quite know what's going on under the hood, even with the longs.

To state the obvious, 13-Fsaren'tgoing to give youany indicationof what theactual reason for holding a securityis.

Again,common techniques generate common pitches. Considering the gravity of the pitch,we can't recommend using the common methodsdetailed above to find investment ideas.

Research for Stock Pitch

While we advocate usingabstract methods to generate atypical investment ideas无论你申请一个投资ment bank, hedge fund, or private equity firm, the research process varies depending on the type of firm.

Thebuy-sideis all aboutinvestment evaluation, so the research process for a stock pick for a buy-side firm will have to befar more thorough and long-windedthan for an investment bank.

Forbob竞技体育游戏pitches, acouple of days of researchstarting out with agood set of investment ideas will suffice.

But for thebuy-side, candidatesoften spend weeks or months finding and researching stocks for pitches.

The reason is often the same reason they want to work for buy-side firms, to begin with; some people enjoy immersing themselves in the markets and identifying exceptional investment opportunities.

We recommend reading all of what @Simple As...", a hedge fund vice president, has to sayas its value is incredible. Most of you will ignore the piece, but the ones who don't are the ones who go the distance, the ones who have the edge come interview. For those of you who don't want to go the distance,here's an incredibly unjust summary of what @Simple As..." had to say.

What to Research for Your Interview?

1. What drives revenue? How does a business make money?
2. Competitive Positioning: Select a universe of competitors with an understanding of what drives the business. Then ask these three questions:
   • How does the market see my target?
   • How do competitors see my target?
   • How do customers see my target?
   • Management: Analyze management's (Board of Directors) compensation and incentives to see if they align with what you want as ashareholder. In addition, judge the merit of their decisions (capital allocations based on realized returns and future positioning).
   • Financials: Tear the company to pieces line-item by line-item as deep as you can, going back usually five to seven years.
   • Speak with management (inapplicable to you)
   • Model and valuation: Create a model from scratch over a long period of time as questions will come up throughout the process. The valuation method in the skeletal form:
     • Derive projections from the thesis.
     • Stress-test projections.
     • Derive range of values for the business.

     Value is defined as a product of growth, returns, andcost of capital(also called thediscount rate or requiredreturn). @Simple As...", a hedge fund vice president: "What's more important – in my opinion – than a scientific and precise valuation is that you understand what is going to cause the market torealize the intrinsic valueof the asset and that you get the timing of the catalyst correct.

   • The pitch: An aspect which we cover extensively below.

What to Include in the Investment Pitch

You've generated some exceptional investment ideas.

Now what? Pitching a stock is a process.

Once you'vefound the ideas, it's time toresearch to find the winner.

Yourresearch forms the greatest part of your pitch, it's the spine of the entire thing. You have toorganize it in a clear mannerthat effectivelydepicts the appeal of your idea.

There arefour facets of your investmentthat must be included:industry overview, company-specific overview, where the market is wrong, and valuation.

Here's what you need to know from @WhiteHat", the hedge fund analyst.

1. Industry Overview:Outline the industry and make the case for why it's an attractive industry for investment. Consider the following questions:
   • What makes this industry economically viable?
   • Whatmakes the barriers to entryhigh enough to keep competition from destroying the viability?
   • What is pricing power like, and why do consumers accept it?
2. Company-Specific Overview:Where the company you're pitching fits into the market.
3. Where the market is wrong:Point out why the security might be underpriced, what the catalyst(s) will be that changes this, and why you think that catalyst will happen.
4. Valuation:What's important to know is the multiples for your company, the industry, and why there is a difference or should be a difference. This will usually relate to whatever it is the street is missing. Be sure to know the basics of your company'scapital structureand what valuation metrics are important. This is a good opportunity to demonstrate that you're not stupid and know when to use EV/EBITDA over P/E or something else. Also important is some notion of a price target post-catalyst, and some estimation of what you think would happen to the stock price if the catalyst worked against you. This gives the interviewer a chance to see that you understand what risk/reward is.

Understanding these four things, you should be able to keep them in mind while researching the ideas you already generated. At that point, you decide which stock you want to pitch and include these four things in your pitch. Here are four more things to include, from @derivstrading", a retired S&T analyst.

derivstrading – S&T Analyst:

1. What is the catalyst for the stock? Why hasn't the catalyst been priced in yet?
2. The trade details (timeframe, stop loss, profit target, any strategies, i.e., tiered buying/selling)
3. What has the stock has done over the past three months/years? What have thekey driversbeen?
4. What has the stock has done relative to the index (drag historical prices and calculate a correlation/beta factor)?

Now you know what to cover in your pitch. Typicallength ranges from five to ten minutes.

Youdon't want to go overthat as you wantto keep the interviewer's attention. In addition, you want to keep aroundat least five minutes, so youcover all your bases.

Written Stock Pitch

Manyhedge fundanalyst job postingsask for a written pitch. The general length of these written pitches isone to two pages, although you can certainlygo over that if you want.

The point isthey don't want an opus explaining every thought you've had;save it for the job.

Hedge funds simply want tosee how you evaluate an investment opportunity.

这种布局由@WhiteHat”,对冲基金提供analyst, covers all of your bases and is an effective way to organize your written pitch.

WhiteHat – Hedge Fund Analyst:

1. Introduction:Briefly explain the business, competitors, major industry metrics, etc.
2. General Recommendation:Are we looking at this as a short or a long? What's our time frame?
3. Why Now:What makes it attractive now? Why does the market love/hate the stock all the sudden?
4. Commentary/Catalysts:Is the market justified in its love/hate? What could happen to make stock rise/fall? What would the metrics look like if each catalyst happened?
5. Explanation:Why is the catalyst most likely in favor of your recommendation? Why is the other unlikely? What research brought you to this conclusion?
6. Valuation:Briefly explain historic valuation, industry multiple, earnings growth potential, and what kind of return you think we can get (and over what time horizon), and the same for if downside catalyst happens.

Stock Pitch Letter Examples

Even with the layout above,starting out might seem overwhelming.

It'snot an easy thingto do, formulating a letterclearly illustrating your beliefswith theunderstanding that you will get critiquedby industry professionals on both your opinion and your writing.

Luckily, we have you covered in terms of identifying good investment ideas and knowing what to research.

In addition to the above layout, which will help immensely in preparing your pitch, here are some real-world examples:AutozoneDoralThere are two overarching factors of your letter you should keep in mind, according to @Gray Fox", a hedge fund analyst.

More Resources:

We hope these templates help you landthat dream buy-sidejob! Please check out the following additional resources to help you advance your career:

• 投资银行ing Interview Questions
• Private Equity Resume Template
• Hedge Fund Resume Template
• Consulting Resume Template
• 投资银行ing Cover Letter Template