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DESCRIPTION
STOCTRANSCRIPT
Agenda
How to screw up stock pitch interviews?
How makes a good stock pitch?
Where are the resource?
Introduction of Bloomberg Terminal
Ways to Screw up Stock Pitch Interviews
Example 1 : BUY APPLE (AAPL)
[Jan 2007] “AAPL is a BUY because Apple is going to launch IPhone and everyone likes it!”
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IPhone launchedApple announced date to
launch IPhone On Campus Interviews
Problem 1: No Value Added Solution: Avoid Big Cap, “popular stock”
Example 2: SELL Hershey (HSY) [Jan 2008] HSY deserves a SELL because the price for sugar increased, and therefore its near term profit margin will be further squeezed.
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Historical Sugar Price
Problem 2: No Firm-Specific CatalystSolution: Dig deep into the company’s unique strategy:
Porter’s five forces
Recommendation
Example 3: BUY Las Vegas Sands (LVS)
[Jan 2007] LVS is a BUY because it was chosen to build Singapore Casino.
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Problem 3: Past events should have been priced into the stock Solution: Explain the difference between your analysis
and market consensus
LVS won Singapore Casino bid. The casino will open in 2009.
Recommendation
Example 4: BUY Exxon Mobil (XOM)
[Jan 2008] XOM is a BUY because oil price will continue increasing.
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Problem 4: No Catalyst! Why Now? Solution: Always start with a catalyst.
Historical Oil Price
Recommendation
Example 5: BUY Yahoo (YHOO)[Mar 2008] BUY Yahoo. Since Microsoft needs Yahoo’s search share desperately, it will likely increase the price to acquire YHOO.
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Problem 5: Need to consider all possible outcomes Solution: Perform a scenario analysis.
Microsoft proposed acquisition of Yahoo at a price of $31 YHOO sought to restart merger talks with AOL
Recommendation
What makes a good stock pitch?
Step 1: Identify the Target Finding the Catalyst is the key
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Do
▲Top Down approach (screening software)
▲Bottom up approach / Pick the company/industry you are familiar with
▲Look for Catalyst
Don’t
▼Get the stock pitch ideas from sell side reports
▼Pitch a company without catalyst
Step 2: Company Research – What’s ImportantUnderstand the industry and competition. Understand the company’s revenue drivers. Identify the trend and find out the reason.
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▲Understand the industry and competition: what is growth potential?
▲Company’s operation – Major revenue sources? What is its market share? : Whether catalyst is relevant and significant?
▲Company’s competitive advantages - Porter’s five forces (Barriers to Entry/ Bargaining Power with Buyers & Suppliers/ Substitute Products or Services/ Intense Competition from Rivals) : Whether performance is sustainable?
▲Company’s position: new player? Leader? Gaining/Losing market share?
▲Identify the trend and understand why: profit margin decline? Sales drop? Lower free cash flow? Whether the trend will persist?
▲The quality of the management: New or old? Credible?
Step 3: ValuationValuation will make our break your stock pitch. You need to give a target price along with your BUY/SELL recommendation
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▲Comparables analysis - Who are the company’s closest competitors & what are their respective valuations (P/E, EV/Sales, EV/EBITDA, P/B, P/CF)
▲Historical Valuations
▲DCF and/or Earnings Model
Three ways to value a stock
Other things that make a good stock pitch
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Good stock pitch provides new value, tells an interesting story and makes people think.
▲Where are you differentiated from the market view? What is the market focused on that may not be important? What are you focused on that the market may be overlooking?
▲Fundamental valuation has a 12 -18 month focus. But it is also important to understand the how the inefficiency in the short term might influence the stock price.
▲Don’t forget about risks.
Where are the resource?
Where to find information for company/stock?
All Can Be Found on Fuqua Library Website under the “Databases” tab
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▲First Call Historical Database via WRDS (earnings estimates)
▲LexisNexis (news articles)
▲MarketLine (company research)
▲OneSource (company data-segments, financials)
▲Reuters Research on Demand (sell-side reports)
▲Thomson Research (10K, 10Q, Annual Reports)
▲ValueLine (screens to find ideas)
▲Zacks.com (market research, news, screens)
▲Bloomberg Terminal (in Fuqua Library)
Where to find information for sector/industry?
All Can Be Found on Fuqua Library Website under the “Databases” tab
▲MarketLine (Porter’s Five Forces Analysis, industry analysis, historical data)
▲Standard & Poor’s NetAdvantage (BEST source for industry/sector information and data, How to Analyze that Sector, What’s important, What Financial Information is Important, etc.)
▲Mintel Market Intelligence
Where to know more about stock pitch
Past year materials are all kept in the AMC network folder
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▲To access the folder: On Windows, press the Start button, and select Run... and paste the following into the Open: box in the Run window.
\\galaxy.fuqua.duke.edu\AMC-2010$
▲You can also find the link under the fuquaworld team tool
▲Open the folder 2008-2009/Stock Pitches-Where to Start
▲Fundamental Equity Analysis A Primer
▲Industry Analysis A Primer
▲2 folders with Previous Year’s Stock Pitches
Takeaways
Three skills to demonstrate in an equity research interview: Analyzing, Stocking picking and Marketing
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▲Analytical skill: accounting, strategy, marketing, economics, statistics
▲Stock picking skill: think outside the box for the catalyst. Add values to your investors/interviews/listeners
▲Marketing skill: Show you conviction through delivering your stock pitch. Concise and Persuasive.
Bloomberg Demonstration