Case Study Rounds

For background, I have been an analyst in a few LO equity shops (ranging from large to very small) and have been okay with getting interviews and going through the initial rounds. I can talk through my investment approach and process, and reasonably answer questions about that.

Where I am getting stuck is the case study round. It is a situation of either looking at a stock of their choosing (most common) or of my choice (much less common) and a submission deadline that is typically 1 or 2 weeks away. Models have not been required but if they are optional, I include one. Post submission is a presentation or talking through of my thesis followed by Q&A. I use the CSIMA newsletter pitch layout though opt for full paragraphs instead of dot points; I think these reports (of 5-10 pages including appendix) can be a way to assess a candidate's writing ability. A couple of analyst friends go through my drafts and provide edits and suggestions.

So my question for those on the other side of the table or anyone really: what are the key elements are you looking for in a case study to assess a candidate? What separates a good case study from an okay one?

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Comments (10)

Oct 13, 2021 - 6:48am

One lesson I learned after pouring 40 hours into a case study and getting rejected is that they want actionable ideas and ideas that are outside of the box. If you are matching sell side expectations then your work is useless, no matter how much you believe it is justified. My recommendation was to not invest because it was fairly priced and apparently that is one of the worst things you can do... So a big recommendation from me is don't even sneak a look at sellside expectations until you have your model and assumptions done and defended.

  • Investment Analyst in AM - Equities
Oct 13, 2021 - 7:16am

You make a good point. It's the so-called 'variant perception' that is going to drive your thesis and hopefully be a differentiator.

I learnt to make either a buy or sell call; neutral is a big fat yawn. And as in shorting, never say sell based solely on valuation - there should be other supportive factors.

Thanks for your reply.

Oct 13, 2021 - 10:11am

And as in shorting, never say sell based solely on valuation - there should be other supportive factors.

Should also be the case with going long. Valuation is an absolutely horrendous timing tool; should be considered a condition, not a catalyst, that you use as a favorable or unfavorable backdrop for catalysts on the horizon. Good luck.

Most Helpful
Oct 13, 2021 - 11:46am

This isn't fair but picking the right name to pitch is half the battle. And it's very difficult if you're not already in the loop. Most stocks are correctly priced most of the time. So you have to find one where 1) you have a differentiated view and 2) there are upcoming catalysts to validate that view (investor days, earnings, new product launch, new mgmt team, etc.). 

As far as the actual pitch, keep it short and focus on your key points. Chances are if you need more than 1 page you either don't understand the thesis well enough or it sucks. PM's want to quickly read a pitch, understand it, and spend 2 hours asking questions vs having to read 5 or 10 pages.  BTW that doesn't mean do less work and you should definitely come with an appendix of charts or other information to support your answers during Q&A. 90%+ of the pitch should be spent on your points of differentiation and supporting evidence. Your bullet points should look something like this:

  • New product launch is being underestimated by street and gives us 10% upside to street
    • XYZ channel checks in test markets show a 15% lift, and industry experts believe...
  • XYZ commodity costs will be lower in FY22, causing gross margins to be 50bps better than consensus
    • New factory is being opened which will increase capacity in XYZ commodity and reduce prices...
  • New management team is placing a greater focus on returning capital to shareholders, and with the cash on their balance sheet we believe street is undermodeling repurchase by $10bn over next 3 years
    • mgmt messaged on last EPS call that/talked to them at a recent conference and they said..

Leave valuation for last unless there is a catalyst you can point to that will change it. Companies can stay cheap/expensive for a lot longer than you can have a job. Also have some kind of risk reward framework (e.g. if you're right there is 50% upside and if we're wrong there is 25% downside). Hopefully you can see what I did with the bullets above. Have concise theses with numbers showing difference vs street followed by sub-bullets with supporting evidence.

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  • Investment Analyst in AM - Equities
Oct 13, 2021 - 4:21pm

Thanks for the reply.

I intuitively think about the thesis in terms of the 3-4 key points and will not deny there is a temptation to use up the word/page limit if there is one. But your points of differentiation is a good one (if you have access to consensus numbers).

On catalysts, would you say that depends on the PM or that manager's investment process? For example, a LO may not care so much for catalysts compared to a HF.

Oct 13, 2021 - 6:00pm

RE catalysts: maybe...and just to preface I've sat in both LO and HF seats.  I think there are a lot of problems when investing without catalysts (invites laziness, thesis creep, etc.) but I won't expand here. Also how do you have points of differentiation without a catalyst? I think they're two sides of the same coin. If the market is thinking A, then there needs to be some event to change their mind and think B right? To your point, a LO catalyst will probably be much further out, but I think when you boil down the analyst job at either LO or HF, it's about figuring out where numbers should be relative to consensus. So when a LO says AMZN will beat numbers in 2025, or the top line CAGR of company X between now and 2030 is 15% and street is modeling 10%, I still view that as a catalyst. 

As it relates to an interview, presenting the pitch in terms of catalysts is an easy way to show that you can think like an analyst and the idea is actionable. Put yourself in the shoes of a PM. Assuming they have a team of good analysts who can be trusted to pick stocks, their main focus becomes timing, sizing, and risk mgmt. It becomes 100x harder to do those things when you have no idea what you're playing for on names and you have no idea what the investment timeline is. 

Oct 15, 2021 - 3:09pm

Agree with the above on keeping things simple. Some case studies try to throw the kitchen sink at the issue to show depth. I think having a few key points that drive the investment is critical. For example, say 85% of ebitda is from one segment; don't focus on the segment that only contributes 15% its relatively irreverent in the big picture, especially for a case study. I've seem too many case studies that are too complex for such a short conversation. I've also found it surprising how many people with great resumes and experience produce just horrible case studies - sloppy, too much time on the wrong areas, too much time focused on the company not analysis. Company overview should be short and sweet not some long and complex thing. 

Also, of note, I don't think a case study is the end all be all for an offer - I think its just a hurdle and box to check. A bad one loses you the job but a good one does not get you the job. That is my opinion/experience. 

  • Investment Analyst in AM - Equities
Oct 15, 2021 - 10:47pm

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