Mod Note (Andy) - this Q&A originally went up last August but Gray Fox wrote and said he could still answer questions I've posted here for about five years, but with much less frequency the past year and a half. @xqtrack" @Kenny_Powers_CFA" @BlackHat" and others did similar threads. Earnings season is over and it is relatively quiet, I figured I would do something similar. I've been an analyst at fundamental l/s equity manager for some time now. I'm happy to answer questions on any of the following topics: -Fundamental L/S equity investing (with a much heavier emphasis on the L) -HF recruiting -CFA -GMAT (took the test but did not go to business school)
No investing advice, I can't help you find a job, and I was never an investment banker - can't address that topic. Mods- please don't front page.
Are you Frank Jaeger?
I'm like you, I have no name.
-Quality of Earnings, Intelligent Investor, Buffett letters, The Most Important Thing, You Can be a Stock Market Genius, Fooling some of the people all of the time, Accounting for Value, Financial Shenanigans, Inside the House of Money. Blue Ridge has a good reading list that can be found via Google.
-Zero technical analysis. I realize Paul Tudor Jones and Stanley Druckenmiller have utilized it and are billionaires, but it is not for me. To be honest, 9/10 times an interview at a fundamental equity fund where the candidate includes technical analysis as a part of a pitch will get him dinged or at least chided.
-I haven’t read Value Investor Insight in a while, but there are definitely great interviews in there. Graham and Doddsville is the same. They aren’t going to help with building models or be instructive on how to pick through footnotes, but it is a good way to see how successful investors frame their thinking. VIC is great – I would advise going through some of the write-ups that were intensely debated. A lot can be learned from the back and forth.
-I think the only minor regrets were when I was 2-3 years out of school and my friends who did banking had seemingly endless options and I had kind of pigeon-holed myself as a fundamental equity investor. Now that I am past that stage I don’t really have any regrets, but still advise people in college to do banking. It preserves the most optionality, very few people at 21 know what they will want to do in 5-10 years, and is still the best pipeline to buy-side jobs. If I really wanted to switch careers (I don’t) I could do b-school.
-In terms of modeling skills, they will probably be less important the more experienced you become. TTS/BIWS/etc have good self-training programs and a lot of it can be picked up on the fly. One of my favorite anecdotes of all time is that Glenn Greenberg does his valuation work on a yellow notepad. I’ve met managers that a lot of people would kill to work for and they couldn’t build a model in Excel to save their lives. In terms of financial analysis, I would suggest the following:
-reading books about in depth accounting reviews (Financial Shenanigans, Quality of Earnings, Accounting for Value) -Going through some of the best pitches on VIC or Ira Sohn pitches. Look at the available 10ks/earnings transcripts/etc that were available at the time and see how the thesis was derived. Would you reach the same conclusion? What did they catch that somebody else missed? -Keep a list of different types of competitive advantages and companies that actually have them in the real world. Compare the relative strength of those advantages, how it ties to earnings growth, and the multiples these businesses trade around. -Keep a list of managers that are great capital allocators.
-Can’t discuss any firm specific positions.