<em><span style=”font-size: 110%;”><span style=”font-weight: 400;”>Hedge fund interviews are mostly about  your stock or other investment pitches. You will be asked to pitch at least 1 long and 1 short in every hedge fund interview. Delivering a good investment pitch is the main key to succeeding your hedge fund interview. Even if it’s not explicitly mentioned as part of the interview, you will be expected to have a couple ideas prepared for them. This goes for both headhunters and for the hedge fund itself. You need to have copies of investment pitches available at all times in PDF form to print and be ready to go for your interviews. The pitch is obviously the most important part of your interview. ~70% of your interview will rely on the quality of your pitch. </span><span style=”font-weight: 400;”>And of course, if you win a position in a hedge fund, you’ll have to research and pitch stocks on the job frequently!</span></span></em>
<h2 style=”text-align: center;”><span style=”color: #ffffff;”><strong>THE DO AND DON’T IN A STOCK PITCH</strong></span></h2>

1. What is a Stock Pitch?

<p style=”text-align: left;”><span style=”font-size: 110%;”><b>Definition:</b> <i><span style=”font-weight: 400;”>A stock pitch is a short report or presentation that argues whether or not the company should invest in a particular stock. A stock pitch is supported by a strong investment thesis, valuation metrics, data, catalysts, and an assessment of the risk factors.</span></i></span></p> <p style=”text-align: left;”><span style=”font-size: 110%;”><span style=”font-weight: 400;”>If you want to win a hedge fund career, or a career in closely related fields, you must have some </span><span style=”font-weight: 400;”>stock pitches. Commonly, interviewers won’t give you a specific company to pitch; so it is your decision to make when doing the research and finding which company you want to pitch. If they do give you a specific company, then it can be a </span><b>time-pressured case study</b><span style=”font-weight: 400;”>. In that case, the interviewer will give you 2 to 4 hours to skim the company’s filings, build a simple model, and make a quick pitch. If it is </span><b>“take-home” stock pitches</b><span style=”font-weight: 400;”>, you will have a few days up to a week to complete the pitches, but the structure is generally similar to the time-pressured pitches.If the interviewer does not give you an exact time limit, </span><b>you must ask</b><span style=”font-weight: 400;”>, along with the other requirements you must include in the pitches. </span></span></p> <p style=”text-align: left;”><span style=”font-size: 110%;”><span style=”font-weight: 400;”>And keep in mind that it is STOCK pitches here – not  global macro pitches distressed debt pitches or involving FX, commodities, or sovereign bonds. Of course, you may use the same structure for those, but </span><b>some particular elements</b><span style=”font-weight: 400;”> of the pitch, such as the valuation, catalysts, and risk factors, are different.</span></span></p>

2. Things you should do in a stock pitch

1. Have conviction
<span style=”font-weight: 400; font-size: 110%;”>It is one of the most significant points in a stock pitch that a candidate should be aware of. Interviewer hate it when an analyst pitches a stock but doesn’t really believe in his or her thesis. On the other hand, if an analyst has lots of conviction around a thesis but the work isn’t there to back it, that is grounds for rejection. The key is to do enough work where you can build strong enough arguments to truly believe in the thesis.</span>
2. Develop a variant view
<span style=”font-weight: 400; font-size: 110%;”>Another key to a strong pitch is to develop a variant view, which means you understand what the consensus is, and you develop a thesis that is different from  the consensus. Crowded trades are extremely risky and portfolio managers don’t like to hear a pitch they have already heard many times before.</span>
3. Ask questions around unit economics
<span style=”font-weight: 400; font-size: 110%;”>When you want to test whether an analyst really understands the business, ask questions around unit economics. If an analyst states that a company is going to grow revenue 10% next year, the first inquiry is how. Does it base on the number of products they are selling or the price or both? The understanding of unit economics is essential to understanding the actual roots of the business.</span>

3. Mistakes To Avoid in a stock pitch

1. Unnecessary Detailed Model
<span style=”font-weight: 400; font-size: 110%;”>Some interviewees spend all their time worrying about minor points on the financial statements rather than the key drivers. You should build a moderately detailed model (100-300 rows for the DCF) and spend a greater amount of your time researching the company, discussing with real people, and sharpening your investment thesis.</span>
2. Inability to Support the Main Assumption
<span style=”font-weight: 400; font-size: 110%;”>Why do you have the assumption that higher revenue growth or margins in a specific year? What supports that assumption?</span>
3. Poor or Non-Existent Catalysts
<span style=”font-size: 110%;”><span style=”font-weight: 400;”>Your catalysts should be </span><b>short-term</b><span style=”font-weight: 400;”> (6-12 months) and represent particular per-share impacts, and 1-2 of them should be “hard” not “soft”. Macro catalysts can work, but only if you explain how they will have an effect on </span><i><span style=”font-weight: 400;”>your firm specifically</span></i><span style=”font-weight: 400;”>.</span></span>
4. Poor or Non-Existent Risk Factors and Mitigants
<span style=”font-weight: 400; font-size: 110%;”>The most common mistake is to miss out the risk factors altogether, or to give risk factors that are too ambiguous. Many interviewees also fail to explain how to mitigate the risks.</span>
5. Lack of Conviction
<span style=”font-weight: 400; font-size: 110%;”>If you are not passionately believed that your idea is great, everyone else will feel the same, and you won’t get the offer.</span>