Preparing for the HF informational interview
Mod Note (Andy): #TBT Throwback Thursday - this was originally posted on 12/27/09. To see all of our top content from the past, click here.
I got a PM asking how to prepare for an informational interview with a HF manager. Since I don't post often, I'm going to post the bulk of my (stream of consciousness) reply here. This may give you an idea of the "it" factor fund mangers are looking for. Just keep in mind these suggestions are for fundamental value investing fund, and can apply to both undergrads and MBAs (with the bar being higher for MBA candidates). The advice obviously differs with the strategy. The key is to try to replicate the things you would do at a fund on your own.
The advice below was specifically written for someone interested in getting an internship and is going through informational interviews. Before I start, I just want to point out that informational interviews can morph into real interviews very quickly. A lot of the things you end up talking about in an informational interview are the same things that would come up in an interview. I know several people who have had informational interviews that turned into a real interview, and are now working at the funds they had informational interviews at.
Research & What to Cover:
1. Look at past investments the fund has done and think of intelligent questions to ask. Take note if they are overweight a particular position or sector. If the fund has any publicly disclosed positions, try to reverse engineer the position to understand logic of their investment. Stick to big picture and don't spend too much time trying to figure out every detail. If the PM is one of several PMs at this fund, be sure to ask the PM which names are their positions. This becomes a nice talking point to see how your thinking (in terms of explaining why you would or would not own the position at the time they bought) compares to the actual investment thesis at the time of purchase.
2. (See Stock Pitch Advice Below) Come up with a stock you think might be an interesting investment that aligns with the investment style of the fund you're going to talk to. Again, this is an opportunity to get feedback from the PM on your thesis and see how they approach the problem. Look at value investors club to see how people pitch ideas. Also look at the pitches that have been made at various investor conference like Value Investor Congress, Best Ideas, etc.
3. Prepare good questions to ask on their holding period, why they sell, what they look at when they go long/short, do they look at longs and shorts independently or in tandem, how are investments sized/positioned, etc.
During the interview:
I'd start the conversation thanking the PM for their time and briefly laying out what you were hoping to learn during your conversation with this person (i.e. how do they think about investments, walk through a current investment, critique my investment pitch, career advice, etc.). It's good to think about what you want to talk about ahead of time so that you have time to cover all the important stuff (both investments and career advice). Good rule of thumb is 10 to 15 minutes per topic, and add about 10 minutes towards the end for open topics. Some of the advice I have given you is a lot to squeeze in a 30 to 45 minute informational interview so pick your menu carefully. I'm giving you the best case scenario of everything I would want to do in an informational interview. Cut out the stuff that isn't mission critical to you if time is an issue. Early on in the conversation is also a good opportunity to explain your interest in investing and why their strategy interests you.
Most people who grant informational interviews know you're probably looking for work. Don't be afriad to just ask what the PM looks for when hiring people and if there are any internship opportunities at the fund. These things can turn into real interviews if you leave a good impression (and there's an opening).
If you want to really improve your chances, put together a good investment pitch. This includes:
1. Spreading comps. Bring a printout that compares the company you're pitching with a few peers (4-5 is usually good) on various valuation (forward p/e, ev/ebitda, etc.), balance sheet (cash, investments, debt), and spending/profitability (ROE, ROIC, capex, gross, sg&a, and r&d margin) metrics. For the margins, be sure to explain how you adjusted COGS, SG&A, and R&D for one-time charges to determine normalized spending. Don't pick a company/industry that is too messy or you'll spend all your time making adjustments. It doesn't have to be perfect and will be a good opportunity to get good feedback since the PM will ask why you used certain metrics, what you see when comparing companies, what they would do differently, etc.
2. "Proprietary" research - talk to people. Show the PM you were on the phone talking to experts/suppliers/customers, visitng stores, etc. You have a great resource at the university. Feel free to talk to professors if they are experts in certain industries. You should be able to network with all sorts of people at your school. Set up brief phone interviews with alums that work in the industry you're researching. Show some proactiveness. Focus on 2-3 investment insights you want to learn better (i.e. why does a company spend more R&D then peers, are products selling or being marked down in store, etc.) otherwise you'll be on a wild goose chase.
A good example of this is when Lone Pine researched Green Mountain Coffee. They were originally looking at it as a short and ended up going long after doing channel checks on their k-cups.
"Mandel said that Lone Pine had considered shorting it until consumer surveys and trade-channel checks done by the fund convinced him of the company's huge growth prospects. His thesis: Green Mountain's installed base of coffee machines in U.S. homes figures to grow mightily in the years ahead, leading to surging demand for its single-serve, gourmet coffee. He bases his optimism on the penetration rates of espresso machines in European homes."
3. Identify the catalysts that may cause the company you're pitching to change in value.
The key of the investment pitch is to show you're enthusiastic, are willing to do the work, and will not be a complete liability as an intern. Spreading comps, adjusting financials for one-time charges, and doing channel checks are very common intern activities. Show the PM you can do those things and you just might have an opportunity to do similar taks for the fund.
Great post and great timing. I'm actually prepping for an informational interview at a distressed debt fund, so my prep is a bit different but your post is still helpful.
nice post. i used to be good at these but have blown two of them recently.
any more thoughts on getting to the point at which someone might want to help you? how to balance asking about them/asking for advice? also would you say an info meeting and a pitch meeting are two separate things?
This is going to sound like Mr. Miyagi wax on wax off random advice, but talking to as many good looking (the kind you'd be willing to take home sober) girls as you can helps.Keep in mind I'm not talking about trying to pick up every good looking girl you meet. Just talk to them.
You learn how to: 1. Handle the butterflies and think on your feet. 2. Quickly identify things you have in common with a person. 3. Deal with a wide range of personalities and hold a conversation.
4. Tell good stories. 5. Listen. 6. Cut bait and run.
(I can go on, but you get my point)
Mirror the interviewer. People are more inclined to help you when you remind them of themselves. Identify common background/stories, and share similar insights about yourself. There is a reason why people tend to help students from their alma mater over other schools.
Tough to say. Sometimes asking people about their story leads to good advice. People like talking about themselves so just be prepared to ask them follow up questions. (i.e. Would you do anything different? Has that path changed? What is today's path to get to that point?)
I've never done a standalone pitch meeting. If you want to show you've done your homework and are truly interested in the industry, you have to have a pitch ready to go...just in case they ask.
[quote=Mr. Pink Money]This is going to sound like Mr. Miyagi wax on wax off random advice, but talking to as many good looking (the kind you'd be willing to take home sober) girls as you can helps.Keep in mind I'm not talking about trying to pick up every good looking girl you meet. Just talk to them.
no wonder I'm so good at interviews...
hmm come to think of it the decline in my informational interview skills happens to correlate strongly with meeting my current gf... coincidence? lol.
lol. It happens. People get comfortable and start resting on their laurels. Happens all the time in this industry. You start spending more time playing with your money and returns begin to decline.
do you actually bring printout to interviews? thats cheesy.
Great post - also preparing for an interview of similar sort. It's great to have a resource like this to refer to for help.
Trying to use this for the MD of an AM firm.
I am reviving this because I just thought it would be funny to point out Einhorn's "recent" analysis on GMCR at the Value Investor's Conference: http://www.scribd.com/doc/69439536/VIC-2011-Presentation-GMCR.
However, excellent advice. Reviewing this for an informational interview. Thanks. Wish I had an SB to give.
A great case study on the life-cycle of a company from an investment/valuation perspective. To me, Einhorn's presentation had two sides: the rich valuation argument, which was nothing new, and the allegations about shady supply chain management and accounting, which are classic examples of the proprietary research Mr. Pink Money talks about.
Einhorn's various writings on investment ideas of all kind are generally sweet - simple enough for a non-HF guy but complex enough to give you a complete view of his thought process. To anyone who's interested in value investing, you should read "Fooling some of the people all of the time: A long, short story"... it actually drags on a little bit in terms of how much he hates the people at Allied capital, but the first 30-50 pages or however long it is (ipad pages screw me up) when he's explaining the founding of his firm and the logic behind their early investments is extremely awesome.
Nice posting.thanks for sharing your knowledge.
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