The Anatomy of a Stock Pitch

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					                     The Anatomy of a Stock Pitch

                        How to get through the Interview. . .




September 29, 2002
Agenda
  • Overview and Context

  • Why is this important?

  • How to prepare

  • Two Approaches

  • What to include

  • Putting it all together

  • Q&A
                              2
Why is this Important to You?


   In a few weeks or a few months you will be
    sitting beside across the table from. . .

   • You will be asked

     “So, what stocks do you like?”

   • What will be your answer?




                                                3
How to prepare


   Watch the market
    (WSJ, Bloomberg, CNBC)

   Pick a sector you really like
    (Automotive, Financial Services, Tech, Consumer
      Products)
   Find out what the experts are saying
    (4th floor Kresge trading room - Merrill Lynch/UBS
      Warburg research etc.)




                                                         4
Once you have your stock - Two Approaches

1. Top down approach
       General to specific
       Start with the macroeconomic, move to sector, then stock specifics

Example:
Stock I like is:
“Revlon: Cosmetic companies are defensive in the current economic
    environment, the sector is generally trading at a discount and
    Revlon is the best managed firm in the industry with a low
    multiple and high earnings quality”

“Dell: Technology companies were the hardest hit in the recession, but
     I believe the sector will rebound in the next few quarters.
     Economic data indicates that commercial spending has increased
     and recent announcements have suggested a turnaround. Dell is
     currently best positioned to take advantage of the rebound as it
     has shifted its business in the past year to the corporate
     customer. The company’s negative cash conversion cycles. . .”

                                                                             5
Once you have your stock - Two Approaches



    2. Bottom up approach
               Start with Stock fundamentals


    Example:




 Please note: these stock picks are fictitious
                                                 6
What to include


Valuation
 Consensus earnings estimates, current price
 Determine relevant earnings multiples, DCF
  with caution, technical screens




                                                7
What to include


   Be brief
       3 minutes is about all you want to talk
   Have your facts straight
       Memorize details about the firm – book value,
        current price, 52-week range
   Earnings/EBITDA Quality
       Accruals, goodwill impairment, off-balance
        sheet financing, recurring revenue, cash flow
        as % of earnings, charges, interest

                                                        8
Putting it all together




             Organization:




                             9
General Organization



     1) Name of Stock

     2) Ticker      $
     3) Latest Closing Price

     4) 52-week High and Low


                               10
Business Summary or Strategy


  4 Sentences:


 Paint a vivid color to bring your stock to life

 Its your job to SELL…
 Give them reasons to BUY



                                                   11
Financial Summary

- 2-3 Sentences

- Highlight trends e.g.
  Recently announced record 4th qtr earnings of $X,
   which beat Street expectations by y%.
- No Accounting minutiae (lose the sale)



 Catalyst

- The hook!
- The core why someone should buy the stock NOW!
- Should be something catchy, sexy and compelling
                                                      12
Supporting Data




P/E, EPS, Dividend Yield
                           $
Only – RELEVANT metrics

(NO P/E for a Startup)




                               13
Prepare to Defend!

- Ideally 3 reasons to buy stock (just in case asked)


Stick to your story , Defend it.

Don't let them get you rattled

Use data,
    evidence,
    catalysts,
    enthusiasm to win them over

                                                   14
Questions and Answers




                        15

				
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