Reasons people fail a case study

Hi folks

I recently finished my case study with a L/S MM, the task was to come up with a long/short recommendation for a name they provided. Spent a lot of time on it but was told I did not get through. The HR did not provide any feedback and started ghosting me when I asked for it. Can anyone share your experience or feedback you got or provide insights on some common deadly mistakes?

Just wanted to understand why I failed and how I can improve next time. Thanks all!

 
Most Helpful

I think you'd be surprised how many people present case studies that don't actually have an investment thesis. "Trading at a discount to comps / DCF value" coupled with some business facts is not a thesis. That's one reason why you can see some people fail a case study. Another reason is some get so deep in the weeds with the situation that they hem and haw and can't come up with a convincing buy / sell recommendation. Holds are ok, so long as its backed by a sound thesis, but a lot of holds I see in case studies are really "I can see both sides..." arguments. No need to over complicate things. Even if it was dead wrong I would pass a case thesis of "Consensus is X on EPS but [downstream customer / upstream supplier] commentary suggests incremental GMs likely to lead beat vs. Street" because that is a thesis. 

 

If you tell us the prompt and outline what points you were making, we would be able to be more specific. 

Most often, the reason that case studies fail is because there is a mismatch in investment style. For example, you interview at a pod but then focus on longer term drivers that might be more appropriate for a HF with a longer investment horizon. Or vice versa. Those are usually the immediate deal killers. It's rarely "this guy pitched a long when it is a short. He is a moron." 

 

Maybe you fell into one of the buckets here: 

  • Good business at any price - is it priced in?
  • Not knowing your audience (Tesla to deep-value shop, Ford to hypergrowth shop)
  • Interviewer knows the name really well (that's like standing in front of an oncoming train)

Don't know the prompt so I keep it generic. 

 

One frequent reason is naivety about what is discounted in a stock price and what isn't. Many candidates recommend AAPL because it's "a good company with a strong brand and a loyal customer base". While that is all true, it's well known by everyone, so in an efficient market it's not news and shouldn't make the stock go up on its own. Many HFs are looking for surprises, inflection points and that type of thing. Pitching something based on things that are obvious and consensus often comes across as naive and "this guy doesn't get what makes stocks move".

 

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