Interview Prep for "Market" related questions
The title mostly says it all. I'm looking for any guidance on how to prep for "market" related questions that may come up during an interview? I'm currently in a buy-side M&A role, so I don't have daily interactions with the equity/debt financial markets in my current role. I try to read a lot and stay up to date with trends but I'm worried that I may not be doing enough or focusing on the right things.
Would anyone be willing to share a few pointers or key topics that I could begin to research that you think are likely to come up during an interview? Or certain economic trends (interest rates, politics etc.) that you think I should form a view on?
Thanks all!
Hate to be a dick, but if you're not in sync with markets, why are you interviewing for a markets related role? Most people who are gunning for these jobs are fairly passionate about it; have read every investing book, are investing their PA, etc. As such they are fairly glued to daily markets and are forming opinions.
Not saying you don't do that, but you get it. You should follow a couple stocks very closely from an investing and trading standpoint. If you don't I'd consider why you aren't yet.
Now putting me being a dick aside and assuming you do these things, the general questions are going to be targeted based on your background / whatever you tell them. The common beginner question is "what are some things you find interesting about markets/subsector today" or "what stocks do you follow?", but typically it is just "what stocks do you find interesting". Then based on answers they can dig deeper.
Lets say you are TMT focused and did a bunch of deals in media space. They may get into asking your opinion on industry dynamics there, etc.
More generally, no one is looking for you to have a great macro opinion or outlook on interest rates. Thats impossible for everyone already. But you should have enough opinions and be in-sync enough to answer questions about the stuff you pitch/purport to know. If you are interviewing for a L/S equity seat don't try and pitch your view on the Fed.
Ex: I got asked about the trading dynamics for the last 1yr for the peers of a stock I pitched. What was the dynamic that drove how it and peers traded, and why.
Thanks for the response, both when you were & weren't being a dick. Like my post said, I do a lot of reading (daily market debriefs, WSJ, news etc.) to try and stay up to date with the markets and any key trends. I just don't have direct, daily work experience that is market related (for example, picking stocks or assessing how certain economic decisions affect a portfolio etc.) in my current role. So, I will ignore your first paragraph.
A few follow up questions:
1. How many stocks would you suggest I follow closely? I only really feel super comfortable with two and they are both Pharma companies. Would you suggest following stocks in different sectors or does that not matter? Is 2 enough or should I do some more research?
2. I can do some additional digging, but any guidance/recommendations on how to structure my pitch?
I have never been asked to pitch more than 2 companies in a single interview - at most was 1 long and 1 short. Maybe other PMs like to do multiple pitches after you finish one, but my sense is they are usually satisfied or not satisfied fairly quickly. That said, if I said something like "oh I really love semiconductors and follow the space closely" but all I know about is NVDA and AMD, and then we get into the different groups and he asks about what do you think about the memory vs. WFE today? It might be bad.
Pitching is covered here and elsewhere a million times; dig deeper for that stuff but the short answer is keep it short. I think X is a long because 1, 2, 3. Lots of threads and resources that cover it.
Not really about different sectors... although if you are interviewing for an industrials pod and only know 2 healthcare names, it might be tougher. Again, its more about demonstrating that you understand the game being played and have taken the initiative to be prepared for the tasks at hand. Put yourself in a PM's shoes.
1) know how to communicate a pitch succinctly
2) know what a good idea sounds like, ie. not just a "good company trading at decent valuation" (we can't validate if its a good idea in interviews anyways, thats what case studies can be for if they really care about testing a thesis - assuming its not a PM just looking for a model monkey who can pick out key drivers)
3) demonstrate you know what the game is about (partly answered by 1+2); sometimes they will ask "what is your investment process" to get deeper here, etc.
My recommendation is if you only know about 2 stocks, you probably aren't into the markets enough yet - again not being a dick, but 2 pharma companies is fairly specific and you probably would benefit from more reps across different situations. What else is in your PA? Try and size up some more of the fairly common stocks that reflect different idea styles. The classic compounder bros, a cyclical, etc. A lot of this game is taking the table stakes stuff we've all been taught then iterating over and over again. This takes lots of reps until you have enough of a context to start implementing a more defined strategy
Ok so since you are convinced I'm not into the markets enough yet, what else can I do to deepen my understanding? What would you do if you were in my shoes?
Def not saying you aren't! But knowing 2 pharma stocks leaves a lot of stuff off the table - maybe I interpreted it differently. My recommendation above stands. What sector are you interviewing for or most interested about? Do you have other names in your PA with a thesis and that you track closely?
Repetitions of analysis and outcomes and iterations.
short on time - pick 3 stocks you find interesting. You are now forced to make a recommendation on trading them for the next 3M, 6M, 12M. You are not neutral - put on paper portfolio trades. What are the key drivers. How are stocks reacting to macro/sector/individual news?
more time - pick a subsector you like. Do the same, and also have a deeper opinion on winners vs. losers and why. Force rank coverage
Goal is not to manage a market neutral portfolio with expertise; goal is to become more adept at ripping apart set ups, isolating key drivers in a story, figuring out where implied/explicit expectations lay, and catalyst paths around monetizing the shifts in perception across all of this. That is the game. On the job this is usually done with in-depth models across coverage... off the job napkin math can get you most of the way.
Be obsessive about what makes your stocks work and why. Do you have an investment philosophy or process? Is it good or bad? Do you have an opinion on where the market is going to head and how to invest / trade in that environment? How do you form it. Etc. Etc. Etc.
Reading daily news / market info is good - but there is one step further where you need to analyze information and form independent opinions vs. just processing information flow. Building up that muscle is the goal
The role is at a LO asset mgmt. shop, I would be a sector generalist. I currently am exposed to pharma M&A which I why I formed the view on two pharma stocks - and actually find this to also be one of the sectors I'm most interested in. When I said two stocks earlier, I meant I have a very deep understanding on two stocks that I would feel very comfortable answering detailed questions on, meaning these would be stocks I would use to pitch. I would say there are probably ~5 others that I follow closely, but at this point would probably not be able to give a great pitch on. I should've been more clear in my earlier responses.
Your other points are helpful & I think that could be another good exercise to do. You seem to be really knowledgeable about this stuff so out of curiosity, from a purely financial/valuation perspective, what would you look at/what analysis would you complete to be able to provide a recommendation on trading a stock? Let's assume napkin math given it is not actually on the job.
Basically what the guy above said.
I really like asking this question to begin with, or about a sector/industry you’ve been looking at because I can then pretty quickly figure out how much you’re willing to do for my pod and if you can make this your life.
If you understand the industry dynamics, value chain and to an extent the trading dynamics of a specific area, alongside the current debates of some of the names inside, I can get a good sense of whether you’ve actually been tracking your own mini coverage out of interest.
I would want you to understand how cyclical the space is (and generally how different industries react to interest rate shifts etc) but I’m not asking you to form a view on ECB cuts relative to the fed. Just how stuff would trade in diff macro environments.
For technical questions, I used FinPrepAI (can download for free on Apple App Store) and it was pretty incredible. They have a bunch of questions and their AI gives feedback on your responses.
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