Best resources to improve modeling for public equities

Based on the most helpful WSO content, here’s what you need to know:

For public equities modeling, particularly for Long-Only (LO) equity and Hedge Funds (HFs), the focus is on building detailed operating models and performing valuation analyses. Here are some key points and resources to consider:

1. Granularity for LO vs. HF:

   • Hedge Funds (HFs): Modeling tends to focus on building operating models with a strong emphasis on valuation analyses. The assumptions are driven by publicly available company and industry-level data. Creativity is often required, especially with alternative data (e.g., satellite images of parking lots). The granularity depends on the strategy, but for long/short equity, the primary driver is parsing out your variant view from consensus.
   • Long-Only (LO) Equity: While still detailed, LO models may not require the same level of creative assumptions as HFs. The focus is more on long-term fundamentals and less on short-term variant views.

2. Key Areas to Improve:

   • Revenue and Cost Drivers: Understand the business model deeply to identify the key drivers of revenue and costs. This could include market share, pricing power, input costs, etc.
   • Share-Based Compensation: Learn how to forecast and adjust for share-based comp in your models, as it can significantly impact valuation metrics.
   • Forecasting PP&E and Intangibles: Develop a strong understanding of how to project capital expenditures, depreciation, and amortization, as well as intangible asset amortization.
   • Alternative Data: For HFs, explore how to incorporate alternative data sources into your assumptions.

3. Resources to Consider:

   • WSO Financial Modeling Training: The DCF Modeling Training and 3-Statement Model guides are excellent starting points for building a strong foundation.
   • Hedge Fund Interview Questions: These can provide insights into what HFs look for in modeling and case studies.
   • Technical Knowledge Articles: WSO’s database includes articles on modeling best practices and valuation techniques.
   • Templates: Use WSO’s financial modeling templates to practice building models from scratch.

4. Practice and Case Studies:

   • Focus on real-world case studies and practice building models for publicly traded companies. Use earnings reports, investor presentations, and industry data to refine your skills.
   • For HFs, practice creating variant views by identifying where your assumptions differ from consensus and how they impact valuation.

By leveraging these resources and focusing on the specific needs of LO equity and HFs, you can significantly improve your modeling skills.

Sources: https://www.wallstreetoasis.com/forum/investment-banking/modeling-in-hf-vs-pe-vs-ib?customgpt=1, Is Long/Short Equity Hedge Fund Dead??, How to have a long career in PE?, Best way into Long/Short Equity: Long only vs IB, Hedge Fund: The Investment Life Cycle