Generating Fresh Ideas as a Young Analyst?
I saw a previous post asking if ideas taken from VIC/other sites would fly in an interview (although this isn't really my concern). It got me wondering, how did you guys start putting together your first investment idea(s)? Put a gun to my head, I don't think I could produce anything original, so I'm wondering how you guys approached this. I'm still deciding if the move to public markets is right for me.
You'll learn with experience the best way to learn the process of pitching is to triage potential ideas to see if there is merit to continuing additional work until eventually becoming a fully baked idea. As a young analyst, you'll ideally learn this process with support from a good PM who keeps you on task / efficient. This means you spend twenty minutes looking at something you think could be interesting before reporting back why which leads to spending another hour on it which leads to calling an analyst / the Company and so on. At any time during that process it could be killed and you move on to the next. As you gain experience, you'll figure out how you can get that initial full day's work into just several hours because you'll become more efficient. Eventually, you can spend 2-4 hours looking at something and check those boxes you know are pressure points for your PM and pitch a "real" idea you think is worth more work, or maybe you've done enough to get comfortable with a small tracking position.
One of the tricks is figuring out a good process for identifying the things you think may be interesting. For me, it can be a news report, something that sticks out in some sell side sector piece or desk note, transaction announced by a company, pulling the thread on some piece of information, or just randomly poking around the internet and stumbling across something that sets a light bulb off. However, I'll reiterate that a critical skill set is learning what is worth spending time on vs what is not. There were several times early into my career that I spent too much time on something just so it could be "done" that were written off as an academic exercise, but that wouldn't fly for me now.
This is really helpful - thank you! Could you recommend any books / resources you found helpful in idea generation? Curious to learn more about the approach people use. Also, for interviews, was your angle generally to learn a lot about 1-2 industries, select a company, and defending your l/s view? Many thanks again!
I don't think idea generation can be taught from books, it is experience based. My approach to interviewing was to research whatever I thought was interesting and then seek out funds / managers that invested in a similar way.
What were some of the high level key questions you required answers for in order to pursue an opportunity / dive deeper? Were they primarily quantitative or qualitative in nature? Were there certain questions that were a must on each new idea generation as a screener / filter?
Most of the time it just comes down to understanding what the "thing" going on with the security is and if there is visibility into an event which can address the thing. Anything else is just company-specific questions generally.
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Go get laid, kid.
haha I'm just trying to figure out where did I think wrong like why so many downvotes
This guy is going to either be the next David Shaw, or die a penniless virgin, and I'm not sure which is more likely
I do
probably a penniless virgin
If you're speaking specifically within the context of pitching to a fund during an interview, I'd emphasize that process and clarity of thinking are much more important than the idea being directly actionable. If you are coming into a (good) fund, most senior guys will fully expect that a junior hire isn't going to provide them with a fully baked idea. It's much more about how you think as opposed to what you think - the approach and or idea generation process specific to the fund you join will be taught to you, with the expectation that you'll quickly pick it up. As mentioned beforehand, you should spend time at least thinking about your own personal investing style (at least in terms of how you approach what you think makes a company 'good' vs 'bad') so that you can seek out funds with a similar approach. Based on your post it sounds like you mean fundamental bottom-up and if that's the case I'd spend time getting very familiar with reading through K's/Q's/earnings calls etc., so that you can be more compelling in your argument when presenting to a potential employer. Remember, at the end of the day stock picking is far from science so your ability to establish an argument and defend it will go much farther than regurgitating someone else's ideas that simply seem impressive.
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