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April 30, 2024
9 Free Financial Modeling Lessons
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Post your resume on the back of the stall doors in the firm's bathrooms
You are a prospective monkey in S&T - Become a monkey in S&T, be a baller at trading - or a baller at executing. If you are a baller at trading or executing, you still have 1 in a 100 chance of getting a job as everyone is unemployed on the hedge fund side, and you pick up great exec traders and PMs on the cheap.
Or more realistically - if you are young and smart just try and wizzle your way into a fund. It's very hard to do as no real hiring going on for them. But be ballsy and you might just get it. You always hear about the unlikely story of the kid who got in via the back door. Be that kid. Be ballin' son!
Not sure if serious? The hiring market is so hot now it's so hard to hire talented people...Definitely vastly better than sell side hiring that's for sure...
always do the hard work first...have 3 strong current investment ideas vetted out by HF analysts...meet a couple wherever socializing or through your network. create a couple models...NOT IB style...this will piss some off.
THEN take those models and the legwork and do some ballsy thing to meet them
What do you mean by not IB style? Can you please elaborate? Should it be with thorough revenue breakdown?
Would be very interested to hear how an "IB model" differs from models used at HFs
one is needlessly complicated
Kidflash, like the level of revenue breakdown or working capital schedule etc?
Jesus christ. HF models are 99% of the time comp based. It depends on the company in question because some will have a detailed revenue breakout if the company has multiple types of revenue streams growing at different rates with different ROEs.
HF's don't use DCF ever since in essence, DCFs are giant piles of shit. You put made up shit assumptions in and made up shit comes out. They are worthless.
LBO is also a waste of the time 99% of the time for HFs. They care about cash flow and earnings growth as the earnings lead to dividend payouts of company growth. EBITDA is a crock of shit to most real investors (read anything buffet related).
Additionally, most IB models are way too complex with bullshit scenarios that nobody cares about. It is more important to get the direction of the price movement right and proper timing than it is to get an exact valuation and poor timing.
I don't think any macro funds use any of those models.... Except for L/S macro overlay
What kind of models do you think a discretionary macro fund like Fortress would use?
Going to disagree on the DCF thing. My fund uses it effectively for specific situations. Say a pure licensing company has predictable, steady cash inflows. The stock price doesn't reflect the company's intrinsic value, calculated using a DCF at a low (8-10%) discount rate (representing the low cash flow risk that should be characteristic of licensing revenue). Why? The answer to that is important.
Also, industry standard valuation for the O&G / mining industries is the NPV10 analysis, which is essentially a DCF at a 10% discount rate.
I agree that going through the whole WACC calculation exercise is akin to using dousing rods, but DCF analyses are far from worthless.
I've noticed your posts are generally pretty abrasive. You seem to know what you're talking about most of the time but maybe talk less smack to other posters about what 'real investors' do if you don't yourself have all the facts.
Thanks guys. But isn't an in-depth knowledge of accounting often necessary to detect value/fraud?
Multiples usually lead to really bad decision making. I guess you can get away with it at a short-term focused fund, but for long-term, intrinsic value is much more important.
I really should of specified that this is pertaining to MACRO funds
Love how this thread got hijacked but the balance sheet geeks
I think main issue with valuation methods like Relative and DCF are that they both largely ignore liquidity and momentum, putting both concepts into the 'too hard' basket because it hints at market timing requirements. At the end of the day though I agree an asset is simply the value of cashflows (proxied by say earnings, 'FCF' calcs, growth etc etc) adjusted for 'risk'. It's the 'risk' part that ends up cutting up a lot of good investment theses, because risk unfortunately is not 'wholly' observable, and to quote zero-hedge, on a long enough time horizon, everything goes to zero (for evidence of the concept, not the difference between 'long-term' investing vs HFT vs perpetuity investing,such as say family fortunes/endowments).
I guess what I'm getting at is to value an instrument, barring the market severely screwing up (and then rectifying itself rather quickly), valuation is simply a sales pitch, and investors are but prudent gamblers.
This thread is hysterical.
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