Take home case study for a MM HF. How do I stand out?
Hi all, I have just received a take home case study for a large MM HF and have a 10-day runway.
It’s the classic “here’s a name, build a 3SM and valuation, then put together a memo with a recommendation”
My question is, how do I stand out, specifically in the model? It’s a large HC company with a lot of different segments. Do they expect any creative revenue build? I’m struggling to think about how I would find something like market size, penetration, etc. for each segment. Would it be acceptable to extrapolate a mix of historical and expected market growth, with some company specific drivers and call it a day?
Understand that the most important thing here is my differentiated view / what the market is missing, so I’m focusing on the narrative heavily but want to make sure I can impress when I’m talking through my assumptions.
If anyone has been through this and has any advice or can share any materials, that would be greatly greatly appreciated.
Thank you!
Model - Don't need to be overly creative, you just need to make sure that your model is clear and easy to understand. Chances are that the interviewer will just briefly look through your model (or maybe not at all based on my experience). I think one good practice here is to put notes in your excel to explain your assumptions to show the interviewer your thought process behind the figures
Memo - I think you probably have the right idea. But make sure you clearly define why the opportunity exists (i.e. why is there an opportunity to long/short now? - Is it because we are at a point of inflection? The market is overly concerned about XYZ? etc)
Thanks very much. What do you think about a company section? Ran it past a friend in PE and he harped on about how I need to describe the business in more detail e.g. value chain, industry dynamics, cost base, etc.
I’m of the view that I don’t want to waste real estate with this and the PM won’t really read it anyway. Any thoughts on that point?
You’re right skip all that - assumed knowledge/table stakes, your understanding of those will be communicated implicitly by focusing on the right KPIs and making sound arguments in your pitch
Figuring this out is the job.
No idea why this is getting monkey shit, maybe people just hurt by the truth…if I knew a candidate was asking for help on a case study I set them, I’d absolutely ding them…Not fair on me to spend $$ on someone needing help for a case study
This is so elitist - did you come out of the womb knowing how to analyze stocks? If not, you should recognize that someone being new to the biz does not mean they're a bad fit for the biz.
So you’d rather have the candidate that did not use easy resources at their disposal?
When I recruited from IB for PE forever ago, two things I read on WSO were materially beneficial, one probably extremely so.
With bored anonymous finance people at your disposal you’d be a fool not to try your luck
Although, I also get your point and agree
don't try to stand out. do the basics really well. focus on story, what street expects, and use data-driven and qualititative intel to express a view as to why things will be better or worse than expected in the next 3-6 months. have a catalyst as well that you can discretely identify and track in the future (e.g., don't say AAPL is good company. buy. say something like Street expects #EPS / % growth in 2024/2025. i think company will actually out/under-perform guidance for reasons 1,2,3. here is the data or calls i have made/would like to make as next steps, and here is the catalyst that will cause Street to adjust expecations). good data points are anything that is market-related (idk what verticals are but there will be lots of published hc data) and anything related to volume, px, and incremental margins.
Thanks. This was helpful and I’ve calmed down a bit since getting the case lol. Do you pay attention to a price target and if so what’s reasonable? I’m throwing in a +10% to current px based on NTM P/E
idk. your view doesn't seem much different vs. market. not a bad thing but cases often have an angle that *could* cause bigger change. obvi but PT comes from earnings and multiple. focus on key events over next 18 months. yeah, keep LT in mind, but fundamental ppl don't really price in much beyond that. have a view on where biz/industry is going, implication for earnings, how that compares to expectations, and what the markers will be along the way to say if you're right/wrong. for multiple, look at company's own multiple history, look at comps / RV trading history, and think about changes in macro. if company chugs along, hold steady, if it outperforms, lift multiple a bit, if it stumbles, contract a bit. that said, multiple change should NOT be key return driver unless there's some fundamental change to cause repricing (e.g., sell a low-multiple division and highlight quality of RemainCo in the process)
What subsegment of HC out of curiosity? For most, I think your time would better be served keeping the rev model relatively simple (eg just growth rates for the subsegments) and have more of the work be side tab analysis on what will drive that number (eg TAM / Share, new entrants impact, etc.). If your thesis is on a new product launch in segment x, do some of the above work to show that product ramp (ideally looking at past case studies) will add say 150bps to growth in that segment on top of the MSD growth in the base.
Thank you, it’s industrials . This is indeed how I’ve approached it. Started trying to create a huge bottom up market build and realized it’ll be a lot of BS with my lack of data
Got it. Yeah I mean for medtech that’s the right framework folks use to build it out. If it’s a diversified name (eg bsx, abt, mdt, etc) you’d waste a ton of time trying to market model everything (esp without alt data) but I’d prob try and have it for at least the key growth drivers / products if you can. For new key product launches the companies have more than likely talked about the TAM and you can also get it back googling around for medical journal articles. In your presentation you can obv caveat that one of your todos would be tightening up this market model but the think showing you understand the framework would be a good place to stand out.
Don’t bother with market builds for anything that isn’t a material growth driver. Feel free to DM me. Can discuss product portfolio nuances at the largecap medtechs and point out relevant catalysts
Do MM care about balance sheet ?
Since its agreed that MM pods are fairly PM dependent, I can share my experience that got me into a merger arb / fundamental special sits MM pod during an earlier portion of my career:
The model test had solid instructions. I did everything to the T and then went above and beyond with extra credit. The analyst tasked with hiring mentioned I was the only candidate who actually did the “extra credit” portion which involved modeling almost double the requested amount including some 3rd tier competitor.
The model looked great and was super checked and stress tested and everything. All the bells and whistles. Super easy to use. Ready for prime time to be sent around Wall Street etc
To boot, it was ACCURATE (maybe more luck than skill at that point in my career but it was accurate) and actually market leading. It was for the Amazon Wholesale Foods acquisition (that’s how old this modeling test was). Amazon was in a bidding war with Kroger to buy Whole Foods. Though I don’t remember the specifics, my model showed that Kroger would only bid up to like $41/share. Turns out months or weeks later after I submitted the model, Amazon bid higher and won the auction at $42. (The exact numbers I don’t remember but whatever Amazon ended up buying it for, my model showed the next best competitor would likely only end up bidding a buck lower before bowing out due to current market conditions and investor appetite around EPS acc/dil)
Maybe I was lucky. Who knows. Another industry PM I chatted with later said it was like “I had the ear of management”.
I hope this helps provide some additional color on modeling tests.
Good luck. 🤑
Wow helpful, and congrats on nailing the case
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