Digging deeper into financial modeling
Hi guys, I have an issue regarding financial modeling. I have learned it from scratch from the everywhere-recommended Rosenbaum's book [Investment Banking], but I have a feeling that it is a really flat guide when it comes to many different nuances and real-life advanced modeling. For example there's no description of how to spread debt schedule or deprecation schedule, they base their projections for most of the items simply by taking it as a % of sales, the UFCF is simply EBIAT+D&A+CapEX-change in working cap, completely omitting the equity-based compensation (which sometimes happens to be a really significant item) etc. I am convinced that I could come up with more examples of "inaccuracies", but it is not the point. The point is that I notice those omissions simply because I have heared about certain solutions in modeling here and there, but those aren't event mentioned in the book, so probably there is even more that I am not aware of. So, back to the main issue: how shall I proceed further in order to really deeply and truly understand all of the nuances in the modeling and valuation and what possible sources like books (preferably) or online courses would do the job? The main point is that I want to feel that I have a really deep understanding of the matter and maybe in the end in the most of the cases I will be using simplified models like those in the Rosenbaum's book, but I feel really intelectually dishonest with so limited knowledge.
Also, a side question: I am convinced that such simplified models like those presented in the Rosenbaum's book wouldn't be sufficient for investment pitches prepared for a job interview (HF/AM/SS equity research), because they lack the must-have detailed knowledge and projections required in order to be grilled and not killed by the potential employer (of course it depends on the funds strategy, but you get the point).
You just answered your own question. Any edge you have in generating alpha comes from your ability to do fundamental research. As complicated as it seems initially, it is not rocket science to mechanically build a three-statement model and forecast items.
To generate alpha in investment pitches, you have to (a) have assumptions that differ from the street consensus (b) your assumptions turn out to be correct (effectively rendering everyone else's wrong)
You're seriously overestimating the complexity of most models. Investment bankers are really just glorified salespeople when it comes down to it.
Laborum officia commodi dolorem soluta iure. Eum consequatur sed quam molestias hic qui. Saepe provident qui porro non quis quod mollitia ipsa. Eos officiis et officiis sed non fuga.
Assumenda architecto id maiores consequuntur fugit et neque. Nisi voluptatem consequatur rerum excepturi qui a odio amet. Et eum vel ut aut veritatis aspernatur ea. Soluta non illo omnis nesciunt aliquid. Qui illo sint sint perferendis est nulla voluptatem. Quae fugit cum molestiae ratione.
Et doloremque cupiditate iusto commodi voluptas ut. Voluptatem qui qui id et dicta qui. Fugiat laborum consequatur voluptas assumenda culpa at.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...