Citadel 4hr case study - updated view?
Hello everyone, wants to ask about the Citadel 4 hour case study (used by both surveyor and global equities AFAIK) . It seems like this has been changed vs several years ago - current version provides all historicals in excel (i.e. a sellside model without forecasts), so the advice/guideline from some of the previous WSO posts no longer apply (i.e. taking 1 hour to hard code historicals, only model PnL etc). My question is what do people think of as the most optimal way allocate the 4 hours to tackle this one? Additionally, the sector I will be working on is infamous for releasing very little KPIs (just broad segments, or in some cases just top line by organic/FX). So with just 4 hours, how do I realistically model and build a thesis that I can defend, without the ability to do typical things like collecting macro leading indicators, comparing peer's read throughs, and doing deep dive on product launches/initiatives etc. Is it just as simple as reading the transcripts to get a sense of guide/momentum and modeling based on quarterly cadence and what pass the eye test? TIA.
5 SBs no reply... bump
Bump
Model should be simple and take less than half the time. My experience, don’t need a BS or CFS. Spend rest of the time thinking about the business, what are the key drivers, what are key risks, what are three clear reasons you like the business and three reasons you don’t. Then think about how you would get paid on a name like this. Long/short into print? Are there other catalysts to think about? What other data do you need to make your decision? Talking to mgmt/IR, cc data, bogeys etc…. Model is less important than thought process
Jumping in on OPs question - how do we get detailed on rev/cost build without outside information (if focus is to be on IS, that seems super important). With pre-filled model it seems like they would want you to at least take simple %s for most balance sheet projections and just run that?
I guess what you are saying is it is to be expected mostly incomplete information, but they just want to hear 1) whatever you can glean from current info and 2) how you would properly complete it if you had access to outside sources, and 3) how you would approach investing in this company ("Then think about how you would get paid on a name like this. Long/short into print? Are there other catalysts to think about?")
I guess a bit surprised that fully finishing the model is not that important.
Most important element is to form a view. Revenues don’t need to be super complex, whatever segmentation (divisional, geographic, organic / fx) is fine as long as you can defend your assumptions with conviction (either through macro or micro), important to of course rebase and understand if revenues and earnings are accelerating / decelerating and why. Same with gross margin and operating margin bridge - simple drivers that you can defend
No need for full BS, just need to get down to FCFE to build a view on target price and DCF (I was asked this)
Questions I got asked were:
-rationale behind my q1 sales number
-components of gross margin bridge, any other elements
-understanding of cost structure and how much is fixed vs variable
-long or a short - why? How do you get paid
-valuation and target price (either on comps or on a DCF)
I think spending 2 hours on building the model and 2 hours on really going through building a defendable recommendation is probably wise, and you can expect them to ask you questions on every number (they did for me)
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