Whether you are applying to an asset management role or not, it is good use of your time to develop an investment idea, be it on listed debt or equity instruments, or an asset or company on Main Street (ie. In real life). I discussed it during my webinars over the past few weeks on how to better use your lock-down time (click to see video of the presentation at Columbia Business School), and even when Western countries start going back to normal, I still keep it as a very valid recommendation to strengthen your candidacy.
It has many benefits:
- Potential economic profit if you invest and you are proved to be right
- You practice your financial analysis and pitching skills in preparing to present it
- It gives you more tools and depth as a candidate.
And relatively little or no downside:
- The opportunity cost of the time spent developing the pitch
- A monetary loss if you put your money where your mouth is, and it doesn’t turn out as expected (in any case, I am not suggesting you should bet the ranch on this)
All in all, it leaves you as a stronger candidate for the next interaction you will have with your target employers, be it formal or informal.
What is the pitch? What shall I prepare?
As in previous entries, let me start by stating what I am NOT suggesting here: I am not implying that you need to develop a super deep industry and company analysis, with a long presentation and a massive valuation model, as if you were a seasoned analyst at a big hedge fund. Also, because I made this mistake in the past: don’t try to overcomplicate the analysis. Do it with a lot of common sense, and very simple. Simple is beautiful when it comes down to investment discussions.
Instead, I am encouraging you, regardless of your previous experience and technical skillset, to use your financial-analysis muscle in an exercise that will be very similar to what you will be doing as a full-time employee in that desired job. And the resulting product of your effort, “your pitch” should be a clean explanation of what is the opportunity analyzed, the reasons for recommending it, the pros and cons of investing at the current price and a number of additional technicalities described below.
- Gather the data set:
- If listed: latest annual and latest quarterly report, plus COVID19 update and any sell-side Research you can get access to;
- If a private opportunity: gather all the information at your disposal (qualitative and quantitative) to make a full assessment
- Write down equity story (why you would invest in this);
- Understand, and state clearly, the COVID19 impact in the short and long term for sector and company (or asset);
- To the best of your possibilities, build a valuation model. If a modeling fan, build a full, all-financial-statements-and-sensitivity-tables kind of model. Otherwise, a good “back of the envelope” model, grasping the basis should suffice to sustain a meaningful conversation on the opportunity.
- Set entry point (recommended acquisition price), catalysts, stop-losses and investment horizon. If a private transaction, replace “stop losses” for how you would think of the biggest risks to the investments, and how you would try and mitigate them.
An additional twist for those of you in the Private Equity track or that might be more senior than entry level, and that are entrepreneurial
If you fit in either the “no matter what the age but entrepreneurial” candidate; or if you are already more advanced in your career that people can start expecting you to “originate” deals (ie. Find new businesses that can bring fees to the firm), then you can use the above suggested check list to find and develop a real business opportunity such as buying out or funding/lending to a private business, which will go very well with networking and interviewing with entrepreneurial places to work where they value junior members capable of bringing in new businesses.
To conclude, even when you are not intending to be the king of private or public investments, and you just want to be the proverbial investment banker, this exercise can:
- Provide you with a variety to your routine practice of networking and interviewing; and in the process of getting out of your comfort zone,
- Equip you with more tools and themes to discuss on your next meeting
- Open the doors to certain entrepreneurial shops that would otherwise be closed to recruiting
- Make you some money along the way
Remember to contact us with any comments you may have on this article, or to visit our services to see our proposed Programs. We are looking forward in working together with you to achieve your recruiting and networking goals. Contact us!