Pitches becoming "priced-in" before interview

I am current IB analyst interviewing with equity l/s value and special situations funds. I have had a few interviews but have held off reaching out to too many firms as I am still working on finalizing my pitches.

I have had a lot of trouble with my pitches becoming overbought/sold approximately 1-2 weeks from when I start analyzing them and no longer being good buys/sells (the reverse has also happened where a news release disproves my thesis). Its been tough going through all the filings, building a model, setting up comps, etc. on top of IB hours, and I was wondering if anyone had any advice on how to handle this kind of situation? Should I expect to have to produce a new long and short pitch every 2 weeks throughout recruitment? Is it alright to pitch a stock that was a good buy/sell 1-2 weeks ago?

To be clear, I have really enjoyed this process but am simply running out of physical time on top of work hours.

Thanks so much for reading this and your responses!

 

I really have no basis for giving advice on this, but if you are worried about your idea's being realized on the market to quickly you just have to focus on undervalued stocks with no catalysts. Haha I know that sounds like a terrible answer but look at it this way, a lot of supposed by value stocks don't become so until an activist investor gets behind it (e.g. Bill Ackman with TGT, JCP, GGP, etc.), so all you have to do is come up with a bullish thesis on a similar company. It seems to me like value can be found by focusing on recaps & macro arguments for large cap, SOTP for mid-caps and misunderstanding/familiarity with small caps (though these are generalizations I have seemed to notice of the top of my head). I can think of plenty of companies you could argue are undervalued from an SOTP view and I can think of several genuine net-nets in the small and micro cap area (RSKIA- I haven't looked at it in years, but it used to be a legitimate net-net because of the lack of clarity of their investment portfolio I believe). Anyways, these types of ideas are unlikely to be realized by the market in the short term, if ever in some cases, but they can at least prove your competent. Maybe value will only be realized when the fund you interview with starts to pitch it. Special situations are a little harder because the market will pick up on any legitimate ones quick, but they are out there... for example maybe you could argue that management for American Greetings will up their bid 2 or 3 points above what it currently is because of .................. meanwhile you can collect a 4% dividend yield with little downside. It's unlikely if you submit such an idea that the event will transpire in the next few months let alone next few weeks.

I think you wanna stay away from stocks with obvious near term catalysts. I had terrible luck with an idea I sent out to several funds about a year ago. I correctly predicted the stock I pitched would be earnings because analysts were not appreciating the lower input costs the company had and did not think they could pass these costs on to customers. I nailed it, but sent the idea to a deep value fund the day before and they could have cared less about me predicting an earnings beat. I later sent it out to funds the idea was more applicable to and it did no good as it was after the event happened. Keep in mind my experience and background is considerably weaker than yours so perhaps you'll have better luck. Just thought I would share my thoughts.

 
subrosa:
I really have no basis for giving advice on this, but if you are worried about your idea's being realized on the market to quickly you just have to focus on undervalued stocks with no catalysts. Haha I know that sounds like a terrible answer but look at it this way, a lot of supposed by value stocks don't become so until an activist investor gets behind it (e.g. Bill Ackman with TGT, JCP, GGP, etc.), so all you have to do is come up with a bullish thesis on a similar company. It seems to me like value can be found by focusing on recaps & macro arguments for large cap, SOTP for mid-caps and misunderstanding/familiarity with small caps (though these are generalizations I have seemed to notice of the top of my head). I can think of plenty of companies you could argue are undervalued from an SOTP view and I can think of several genuine net-nets in the small and micro cap area (RSKIA- I haven't looked at it in years, but it used to be a legitimate net-net because of the lack of clarity of their investment portfolio I believe). Anyways, these types of ideas are unlikely to be realized by the market in the short term, if ever in some cases, but they can at least prove your competent. Maybe value will only be realized when the fund you interview with starts to pitch it. Special situations are a little harder because the market will pick up on any legitimate ones quick, but they are out there... for example maybe you could argue that management for American Greetings will up their bid 2 or 3 points above what it currently is because of .................. meanwhile you can collect a 4% dividend yield with little downside. It's unlikely if you submit such an idea that the event will transpire in the next few months let alone next few weeks.

I think you wanna stay away from stocks with obvious near term catalysts. I had terrible luck with an idea I sent out to several funds about a year ago. I correctly predicted the stock I pitched would be earnings because analysts were not appreciating the lower input costs the company had and did not think they could pass these costs on to customers. I nailed it, but sent the idea to a deep value fund the day before and they could have cared less about me predicting an earnings beat. I later sent it out to funds the idea was more applicable to and it did no good as it was after the event happened. Keep in mind my experience and background is considerably weaker than yours so perhaps you'll have better luck. Just thought I would share my thoughts.

I'm surprised you have enough time to browse the forum with your new job and searching for assistants.

[quote=patternfinder]Of course, I would just buy in scales. [/quote] See my WSO Blog | my AMA
 
Simple As...:
subrosa:
I really have no basis for giving advice on this, but if you are worried about your idea's being realized on the market to quickly you just have to focus on undervalued stocks with no catalysts. Haha I know that sounds like a terrible answer but look at it this way, a lot of supposed by value stocks don't become so until an activist investor gets behind it (e.g. Bill Ackman with TGT, JCP, GGP, etc.), so all you have to do is come up with a bullish thesis on a similar company. It seems to me like value can be found by focusing on recaps & macro arguments for large cap, SOTP for mid-caps and misunderstanding/familiarity with small caps (though these are generalizations I have seemed to notice of the top of my head). I can think of plenty of companies you could argue are undervalued from an SOTP view and I can think of several genuine net-nets in the small and micro cap area (RSKIA- I haven't looked at it in years, but it used to be a legitimate net-net because of the lack of clarity of their investment portfolio I believe). Anyways, these types of ideas are unlikely to be realized by the market in the short term, if ever in some cases, but they can at least prove your competent. Maybe value will only be realized when the fund you interview with starts to pitch it. Special situations are a little harder because the market will pick up on any legitimate ones quick, but they are out there... for example maybe you could argue that management for American Greetings will up their bid 2 or 3 points above what it currently is because of .................. meanwhile you can collect a 4% dividend yield with little downside. It's unlikely if you submit such an idea that the event will transpire in the next few months let alone next few weeks.

I think you wanna stay away from stocks with obvious near term catalysts. I had terrible luck with an idea I sent out to several funds about a year ago. I correctly predicted the stock I pitched would be earnings because analysts were not appreciating the lower input costs the company had and did not think they could pass these costs on to customers. I nailed it, but sent the idea to a deep value fund the day before and they could have cared less about me predicting an earnings beat. I later sent it out to funds the idea was more applicable to and it did no good as it was after the event happened. Keep in mind my experience and background is considerably weaker than yours so perhaps you'll have better luck. Just thought I would share my thoughts.

I'm surprised you have enough time to browse the forum with your new job and searching for assistants.

I basically rocked the house the first week.... you know kind of like when the new guy a prison lays out the toughest dude to let it be known who there's a new sheriff in town..... to sum it up quickly within the first week I had showed up the associate and saved a client all by myself. As a reward I was promoted to MD where I immediately fired all those who I suspected my transgress against me. While amusing these firings eventually bored me and by my second week I had been approached by a $30 B HF. Within days I had produced more alpha than all the other analysts had combined in their careers.... I demanded that the pm pass his secretary along to me (5"10 blonde intern from Vassar) or that I was taking my services else where. Long story short I'm doing most of my work from home and only hitting the office briefly a couple times a week for appearances. As far as assistants, the pm is feverishly searching for one right now if you're still in the market. I on the other hand am quite happy with the help I receive and unfortunately I doubt that you could serve me the same way she does!

 
Best Response

Didn't read the novella above, but I'm curious what you mean, "priced in." Are you talking about your stock being up 5% since last week? Or are you speculating on earnings leading to really material price movements (20%+)? What market cap range are you focused on?

I'm skeptical of the entire premise of your question. Most stocks don't move that fast unless there is a big news announcement. If your pitch is up 10% and it's no longer a buy, then your pitch sucked -- not because the stock moved, but because who cares about a 10% delta from fair value. I hope you realize that any asset being valued on the limited amount of publicly available information will, at best, have a range of value ascribed to it, and in many cases, that range of value is at least 10%. Stocks usually chop around between X and Y across their range until some news hits that clarifies which side of the range (or outside the range in either direction) it should be on.

In short, not enough information to answer the question.

 
Ravenous:
Didn't read the novella above, but I'm curious what you mean, "priced in." Are you talking about your stock being up 5% since last week? Or are you speculating on earnings leading to really material price movements (20%+)? What market cap range are you focused on?

I'm skeptical of the entire premise of your question. Most stocks don't move that fast unless there is a big news announcement. If your pitch is up 10% and it's no longer a buy, then your pitch sucked -- not because the stock moved, but because who cares about a 10% delta from fair value. I hope you realize that any asset being valued on the limited amount of publicly available information will, at best, have a range of value ascribed to it, and in many cases, that range of value is at least 10%. Stocks usually chop around between X and Y across their range until some news hits that clarifies which side of the range (or outside the range in either direction) it should be on.

In short, not enough information to answer the question.

No. They have been pretty large moves ~20%+ and not based on earnings. For my longs, two are still sub $1BN and one is around $2.5BN mkt cap. My issue has been that once these moves take place, my valuation says only 15%-20% value is left on the table, and I would want to have more for the exact reason you state above...

One of my longs was a recent spin off. Traded up ~18% over two weeks from when I stated modeling it. Now 30% up into interviews... My analysis still says there is money on the table but its not enough to warrant a pitch now.

To be clear, I have also had a pretty bad performer that I worked on pretty heavily. They gave terrible 1Q13 expectations that were very unexpected, and it has changed my near-term thesis completely on the stock. I think long-term it still has over 100% upside but just not a good name to pick up for a while. If you think tickers might be helpful, I could PM you.

 

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