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What It Really Means to Be "Alpha"

Mod note (Andy): throwback Thursday, this originally went up September 2012

I'm fairly new here, and deciding what to write about in a blog entry might seem easy enough, but I'd rather people enjoy what I read than just read it and forget it. So I spent some time this week going through the more popular posts on WSO, and a good chunk of them revolve around this hilarious concept of being "alpha," and that "slaying hotties" is a badge of honor and the end-game for us guys in finance.

Even the posts about finding a way to be happy are all just about making money and getting ass. I'll chalk it up mostly to the college freshmen that post on this site, but I feel the need to set the record straight about what it really means to be an "alpha male." And it's a lot more simple than people think.. you don't need millions of dollars, a stable of women, or pumped up biceps. So for your reading pleasure, and inspired by previous bloggers, WhiteHat presents "The Alpha Checklist."

Guilt by Association Breeds Value

There’s certain industries, ideas, and geographical pairings that can make a business undesirable to the majority of the market. Of course the idea of investing in a Cypriot bank, a low-end big box retailer, or a for-profit education business is going to come with quite a bit of skepticism and concern, but not all companies that fall into these categories should be labeled as toxic. You’d have missed out on amazing discount retailers like Ross Stores (ROST) and TJX (parent of TJ Maxx and Marshall’s, among others) because you were so deathly afraid of JC Penney, for example. Both ROST and TJX, though on the outside appearing to be extremely similar to a JC Penney or Kohl’s, actually operate on a fundamentally different business model. The same can likely be said of some financial institutions in Cyprus or some for-profit education related business. Our idea of the moment falls along this same line of thinking, taking advantage of the market’s hesitation to invest in a company whose description is so ominous on the outside (or at least sounds that way) that it goes unappreciated for being remarkably unique from its peers.

Imagine coming home to tell your family that you’ve invested your savings in a Chilean mining company.

A Perfect Storm

For better or for worse, there’s a very unique feeling when everything goes completely according to plan yet nobody seems to care or notice. Such is the case with our favorite company of the moment, Tesla Motors. For those unaware, TSLA has rocketed upwards since its Q1 earnings release, mostly the result of the auto industry’s biggest short squeeze since the VW/Porsche debacle, and currently sits at about $90 and a $10+ billion valuation. While I wish I could spend all night listing the million and one reasons why nothing has changed with this company except for its obscene price tag, I have no incentive to really do so, but my investors know and can be assured that everything we have predicted for this company has been 100% spot on. So, for their benefit, I will recap and add to the observations that have kept this business from ever really accomplishing anything close to worthy of its current valuation.

With the latest earnings, Tesla seemingly fulfilled its promise that it would achieve “full profitability,” whatever that was supposed to mean, when it reported an approximately $11M net income on the wings of $6M in foreign exchange gains and a $10M non-cash reversal of the liability they were carrying associated with the DOE’s future right to buy shares of the company. Tesla said they delivered approximately 4900 cars in the quarter, which net of credits, put their average price tag in the mid $90K range… still significantly higher than the base price on the higher-capacity battery Model S offering. Tesla said in their news release that they earned about $68M in 100%-margin regulatory credits sold to other car companies, and came away with a total gross margin in the 17% area.

10 Facts/Headscratchers from the Ongoing TSLA Saga

So plenty has happened since my last post on Tesla, and to the untrained eye it seems like only good news coming from the Tesla hype-mobile. Well, despite my own thoughts on these things, this post is going to contain no more color than I’ve already given in the past two sentences (and the title, for that matter). For all my followers, the unadulterated timeline of what we’ve seen over the past few weeks, and I will leave you to think on it as you please. [This will, to the best of my ability, be in chronological order]

TSLA: Taxpayers Stuck with Lifeless Assets

Mod Note: this was originally posted on 3/7/12

Everybody loves a gimmick, whether it’s the novelty of the high-flying social media companies run by twenty-somethings with nothing to lose but their oversize sweatshirts or the possibility of harnessing cold water fusion to create unlimited supplies of clean energy. The more ridiculous the idea, the more the Gen X’ers and the Millennials would love to embrace it. Being a Millennial myself, I naturally blame the Baby Boomers for instilling us all with the false sense of security and accomplishment they never had while growing up because their parents told it like it was.

Anyway, I’ll stop myself from waxing poetic any further and get right to the point: the population of ambitious young men and women entering the workforce has been pushed further and further towards the belief that they’re too special to simply take a job and work their way up the ladder anymore. No matter where they look, they see the Mark Zuckerbergs of the world and think their best bet is to create a job rather than going out and actually finding one. As you know, we’ve run into this before with brilliant pipe-dream businesses such as Zynga and Groupon in the past.

Generous Number Crunching on TSLA Q1 Profitability

Racking my brain to somehow arrive at profitability for Tesla in the first quarter of 2013 has me coming up empty. Some numbers for you, accompanied by my explanations of where they came from.

[Update: Something interesting a bit of field research has come up with is that a decent amount of Model S reservation holders who've chosen the 60kW-hr battery pack with delivery dates in March are getting notifications that their deliveries will be delayed a few months to the April/May time frame. I suspect this is simply a switch to pull forward more 85kW-hr deliveries rather than production issues. I'd actually prefer it be production issues, but either way it could help them bring higher-margin sales forward and higher emissions credits as well. Interesting stuff but simply conjecture at this point.]

Your Safe Questions Won't Get You the Offer

This was originally posted on 10/3/12

For those of you who know my background at all, I'm in the process of full-time recruiting mainly for buy-side positions, and the process is just now picking up into full swing. I've had my fair share of pre-interview dinners, superdays, and all the other bells and whistles that come with the process.

I'm currently on a train so this post will be somewhat brief and to the point, but I wanted to get some of the things I've noticed about FT recruiting down on paper and see if some of the recent grads and people going through recruiting as well can add to this or comment more on the validity of these things. I'll start with the one that's most top-of-mind, and seems likely to be the best advice I have to give at this point...

You'll see the same 5 people at every interview and it's probably a good idea to come in with the attitude that these guys aren't enemies, but should be seen more as brothers in arms. These kids are probably the go-getters, like you, and they'll all end up at top shops whether or not they get the gig you're going for or not. Something tells me that 5 or 10 years down the line, I'm going to want to be in touch with these kids, for professional purposes or even just to bullshit about the days when we actually worried about stupid shit like this.

WH's Interview Stock Pitch Checklist

This was originally posted on 10/26/12

For many positions, the stock 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. And there's plenty of people on this forum who are better resources than I am, and hopefully they'll chime in, but I've pitched the same 5 companies dozens of times and seeing the pitches that succeed and the ones that fail, I'd like to share my experience as to how you should go about pitching a stock in an interview.

Getting right to it, here's my checklist of things you should be sure to include when pitching a stock in an interview.

SAVE without Spirit: Priceline’s Compromise Engine

This was originally posted on 2/11/12

Depending on who you are, the most important factor in making your travel decisions is going to be one of the following: service, convenience, comfort, price, incentive, or some offshoot of one of these. For flights, most people probably agree that price is what matters most since in most situations it’s safe to say people aren’t going to be comfortable on an airplane no matter what.

But for hotels, things are a lot different. You have your 1%’ers, who don’t mind paying the extra $100-200 per night for the Four Seasons or another luxury hotel because their focus in on comfort and amenities. You’ve also got your… let’s call them 47%’ers, who don’t mind the accommodations and simply want the cheapest price around. And then you’ve got everyone else. Price matters, but enjoying a vacation or whatever it may be also matters, so price isn’t everything… but it’s a big thing, and still the main thing. These people are in luck.

Take Your Cash to Workday: Riding the U$$ Enterprise Software Sector

In a year where most high-profile initial public offerings were an absolute disaster, a lesser-known company called Workday, Inc started trading in the public markets in one of the hottest IPOs of 2012. The powers that be, also known as the investment bankers, who oversaw the IPO drastically underestimated demand for the company’s shares, leading to the $28 offering price to nearly double. Shares ended the first day of trading on October 12th at just under $50, and broke about $55 for a short while in the following days. Since then, shares have oscillated between $48 and $56.

Enterprise Resource Planning, “the cloud,” and Software as a Service

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