How to prepare for a securities analysis interview at a hedge fund?

I was told that I will be tested on the concepts of securities analysis. This hedge fund invests in mostly tech stocks. I was also recommended the Securities Analysis book by Graham and Dodd to look over. Any advice?

 

Securities Analysis by Graham and Dodd is a lengthy book so you had better get reading.

Talks about how to analyze financial statements and look for value in tangible assets, working capital, dividends, and earnings.

I would be a bit surprised if a fund that invests in tech would use Securities Analysis as their bible. Buffet and value investors swear by it, tech funds "generally" like revenue growth, high P/Es, and momentum.

 
grosse:
Securities Analysis by Graham and Dodd is a lengthy book so you had better get reading.

Talks about how to analyze financial statements and look for value in tangible assets, working capital, dividends, and earnings.

I would be a bit surprised if a fund that invests in tech would use Securities Analysis as their bible. Buffet and value investors swear by it, tech funds "generally" like revenue growth, high P/Es, and momentum.

Thanks. What concepts should I definitely know prior to the interview and what kind of questions can I expect?

 
Best Response

Hard to know where to start without understanding more about your background and how long you have until the interview -

Short answer: everything. Longer answer: understand what value investors look for - tangible assets, strong / improving cash flow, returns on capital.

Questions could be something like: "How would you value a paper mill?" "Given this set of financials, what do you think about the ROIC the company is generating relative to its cost of capital (economic value add)?" "Does it look like this company has enough liquidity if I think housing starts dramatically improve?"

Or if this is more entry level, they might just test to see if you understand / know the formulas / how to model things like book value, tangible book, ROIC, EVA, change in NWC, replacement value.

Best of luck

 

if its tech, I would get comfortable with some of the basic ratios. PEG is a biggie, and then the closely watched indicators for the large cap tech universe (CPC for ad-supported, maintenance % of revenue for the big B2B guys)

 

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