resources to teach fundamental models for L/S at pods
Can folks please suggest good resources for teaching the following concepts around building out from scratch 3-statement models. Mostly focused on L/S pod shop investing:
- topline drivers
- revenue/cost builds
- revenue segments
- modeling out individual line items
- restatements
- d&a/capex
- share repurchase/dividends
- corporate actions
- comparables
If there are any good books, blogs, study examples it would be appreciated.
Honestly don’t think there’s much out there that really tackles this, can really vary between coverages too. Usually you get a seat and pick up what your PM has done/try various things out yourself.
I know there’s Brett’s course, but I wasn’t a fan of his modelling frameworks as he doesn’t teach some of the key frameworks pod shop PMs like to use.
WallstreetPrep can cover some of these, especially if you’re wanting to cover buybacks, D&A waterfalls etc.
Thanks! I saw Brett's course, its good for an introduction doesn't go into enough detail. I've worked in the industry but wanted something more pod shop specific. I'll have a look at wallstreetprep but it strikes me as landing on the beginner side too. I've tried taking apart sell side models though its hard to learn from these.
Bump — any other resources?
What sector
Financial services
I think people over-dramatize pod shop models like they are some different being than how other people do it. Are they more detailed than others, some times but there are plenty of SM's that are heavy modeling focused (but certainly some that are going to be very simple / rudimentary). I think it would be hard to have a course that teaches some of the topics you discussed (eg topline drivers / revenue / cost builds) because its either industry or even company specific. In general, i would say the 'secret sauce' is more putting in the work to understand / put numbers around the drivers vs some magical modeling
To give you some framework for say revenue build, you are asking "where does water come from". The initial answer is "the faucet" but your goal is the travel up the pipe as close to the source as you can go, and still reasonably model it. Put another way, what are the underlying drivers that lead to the outputted revenue line a company will report in their quarterly financials. In terms of how you model it, this is where its going to depend on the industry. I don't cover financials but would imagine some thing like say FactSet is going to be driven by some combination of seats, pricing, and mix. You could build out each of these further by trying to find the underlying drivers for those items too (etc etc). If its a bank you are looking at, revenue (net interest margin_ is largely going to be an output of projecting the balance sheet (loans, deposit flows) so that's a different ballgame altogether.
Good SS analysts will sometimes have decent rev builds (esp if you are just trying to get inspiration / learn) but typically are very lazy on the cost build (just hard coding a growth rate or margin). You are going to be going through a similar exercise on this side of the P&L but a key thematic concept is going to be fixed vs. variable costs so you can understand what your incrementals / decrementals are. Within financials, i imagine your biggest cost buckets are going to be people and technology (banks will have real estate, provisioning, and funding costs).
Thanks for the feedback! I was actually interested in healthcare- which is quite specialized. Different verticals have quite different approaches : smid biotech, pharma, medtech, services, etc and was curious if there are any resources that have good examples for each?
As someone who’s been doing this a while, I always struggle with the best setup for allocating the different opex lines in many cases where you get stuff like:
GAAP segment op margins quarterly, capex/D&A annually but only COGA/S&M etc breakout for consolidated.
I get how to do it, but it’s a pain in the ass. Anyone have thoughts on a nice way to set up and allocate?
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