Stock Pitch/Interview advice for Citadel CAP recruiting
By way of background: currently an SA at an EB recruiting for MM. Can't exactly say that I have been aiming for a HF spot my entire life - really just went through the motions of IB recruiting with a vague sense of wanting to do investing either PE or HF. Currently in the process of recruiting for Citadel's CAP, and I suspect a stock pitch will be asked of me. Truth is, my investing acumen is not that great (i.e. general frameworks for thinking about businesses, thinking about unit economics), let alone my stock pitching abilities (I've never made one).
I do think I have all the background knowledge to do it in that I am comfortable with basic accounting and the financial statements and concepts like OWC, the various cash flows, etc... Are there any recommendations on book/primers that might help me with understanding how to make a stock pitch? Best resource to learn how to do this quickly since interviews will come up in a week or two?
Also, in general, what books would be great to understand and improve businesses better? Would this exercise even be helpful for a Citadel interview? I have been reading McKinsey's valuation which has opened my eyes to looking at businesses and value, and I think I need to keep learning something along those lines - but I might be completely wrong. Would really appreciate some basic guidance, thanks.
1) Identify drivers that are pushing top line growth. Break them down into forecastable KPIs. Have a look at what the structural shifts are in the sector and quantify it. How you do this is on you - get reasonably granular on the revenue drivers.
Can probably ignore Fx & Scope tbh so focus on %price growth and % volume growth and what’s driving them. How do you think that’s changing. Can use historicals to guide the forecasts.
maybe think about multi year revenue growth rates to get an idea of momentum and what’s causing that. Are their tailwinds/headwinds that are impacting the trends and if so, are they secular or idiosyncratic to the company.
2) Look at costs. Try to break up variable and fixed to get an idea of operating leverage and tie in how you think your forecasted volume delta is going to affect your drop through and the bottom line/whatever line item moves this stock. You can even look into their cost break up and see what you think is going to happen there. If the company is industrial/v seasonal probably need to model out the incremental margin to understand how they’re managing EBIT capture. Leverage third party data to support your views
3) compare your numbers with consensus and understand what the debate in the market is - from there you can compare consensus values to yours and figure out what they’re implying Vs what you are and highlight that as your differentiated view.
then when you pitch outline the outcome/target price and the catalyst path or w/e idk.
this pretty much relies on you being able to model idk how you’d approach event-driven MM stuff without it.
someone else with more xp will tell u what to do I’m sure so ignore what I’ve said then. I’m only an intern. Pitch doesn’t need to be actionable jsut show that you have good ideas and think about the right frameworks
good luck
Hey, also applying to CAP and was wondering if you could share recommendations in terms of how to prep (assuming you’re done interviewing)
Walking to subway so will keep it short but basically avoid these two things: 1) doing a “book report” and just overwhelming the listener with facts about the business and 2) having a thesis that is basically “this company is really high quality because x and it’s P/E ratio is sort of average/ below average so you should go long”
The thesis needs to be: I see this, this and this that is not recognized by the market and this is the catalyst, and these are the main risks (but also here are mitigants) and this is results in a risk reward where we make 50% upside and 10% downside.
I’m just generalizing here but you get the idea. Obviously there is a high degree of nuance in this, time horizons, variances across different situations. Rarely black and white variant view with a true 100p conviction - market tends to reflect the average of all outcomes pretty well- anyways I’m digressing, but this should probably steer you in a good direction and avoid potential pitfalls.
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