How do you nail the "wow factor" in a pitch?

I've never recruited for HFs, but I will be soon and have many friends in the industry. Time and time again, I have heard that including a pitch with your resume/cover letter when applying to HFs is crucial/makes a huge difference. Does anyone have any tips for hitting the wow factor in a pitch?

Personally speaking, I have always found the wow factor to be easy to show in event driven situations -- forced selling created by spin-offs/emergence from restructuring/ETF in-flows or out-flows. In event driven, the mispricing is easy to explain and it just seems like it makes more sense. This makes it sound more impressive, in my opinion. BUT, event driven HFs are a dying breed, and I have my eye on a few L/S shops that are more focused on TMT and consumer stuff. 

If the fund is not event driven, it doesn't really make sense to pitch an event driven name...you should always pitch something in line with the fund's strat. How do you hit the wow factor for something non-event driven, say some SaaS or enterprise software name? I feel like by saying "Company XYZ has only penetrated 5% of a $100bn industry" just doesn't cut it. Sure, that's the kind of shit that has made money over the past 5 years, but let's be honest anything with the word SaaS or enterprise software in public markets over the past 5 years has just skyrocketed, and I feel like that kind of pitch would not impress a PM at whatever HF you're trying to land a seat at. I guess you could use alt data, but how much of that is there for SaaS names anyway?

If someone could please give some tips for how to really wow someone in the TMT/consumer space, or any pitches from the past that A. made sense AND B. made money, that would be HIGHLY appreciated!!! The whole "Secular growth, room to penetrate market" thing just doesn't seem to cut it, in my opinion. 

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Comments (32)

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  • Investment Analyst in HF - EquityHedge
May 2, 2021 - 10:01pm

Listen to Paul Enrights episode of invest like the best. His FB and Nokia examples are good. 

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May 2, 2021 - 10:43pm

As a potential idea to maybe get you started. Maybe this will wow someone. Doesn't really wow me but maybe for someone else.
 

Investing in ETH is like investing in the early days of Amazon and FB combined. Amazon was primed and set up to take advantage of the next generation of major technology change, in its time the internet. FB was led by a young, idealistic, boy genius founder who was on a mission to connect and change the world. ETH is similarly poised, like Amazon was, to take advantage and spur the development of the blockchain, the newest greatest technology set to change this generation. It also, like FB, is led by a boy genuis founder, Vitalik Buterin, who is on a mission to change and connect the world using ethereum technology 

  • Investment Analyst in HF - EquityHedge
May 3, 2021 - 7:30am

The times where I've truly impressed someone with my pitches have been where I've listed something contrarian or not-obvious (very rare) AND the stock dropped/rose over the next 4-5 weeks - just shows clear alpha (although in hindsight more luck lol). I.e. pitching a retailer short because of consensus ignoring weather impact in the quarter; or saying that company XYZ is trading at too cheap a valuation on PF numbers for a merger and there are no regulatory hurdles to the merger.

Since you mentioned sending in case studies, once I impressed someone with a franchise case study since I went through the FDD to pick up on unit economics and apparently very few other people had done so.

You mention you have friends in the industry - best to ask them to review your pitches and they can give you actionable feedback.

May 3, 2021 - 11:01am

Focus on where you are different from consensus and why. A lot of pitches come across as naive because they're "buy XYZ because it's a good company and it's cheap". It doesn't mean the idea won't work, but that pitch is too basic. Everyone knows it's a good co and you can see valuation multiples on yahoo finance, so why is this stock going to move when all that info is out there and widely available.

A real pro will know what the bear thesis is, will address it, and convince you why the bears are wrong. The more supporting evidence you can provide or differentiated analysis you have done, the better. If on top of that you can identify the catalysts that will wake the market up to your prior thesis, you will have hit the jackpot.

  • Intern in IB-M&A
May 3, 2021 - 12:01pm

Completely agree. Cheap + strong business model is weak IMO, which is why things with defined catalysts tend to make more sense + oftentimes work out in your favor. I guess what I'm getting at is, what are some types of catalysts for TMT/Enterprise software/SaaS and Consumer businesses? Not too many spins and reorg equity situations there. And again, I guesses digging for info that others have not found. What are some kinds of alt data sources for those types of business? I appreciate your insights!!

May 3, 2021 - 1:17pm

It is very hard to find that proprietary/differentiated angle. I don't have it in most of my ideas, and that's OK. It's very idyosincratic to each situation. In some cases like FB recently it was about realizing that the threat from Apple's new iOS wasnt such a big deal.  In some, it may be about regulatory overhang also overdone. In others, maybe the Covid one-off impact isn't that much of a one off and is more permanent because of structural changes to consumer habits (AMZN?), etc.

I gave you what the perfect pitch should have, but it's damn hard to find something that checks all the boxes.

May 4, 2021 - 9:00am

Differentiated research. Most of the ER or related sell-side research can be pretty bland and/or formulaic. Let's say you spoke to someone interesting. Or you did some non traditional site visits. Maybe you even got a job at the company or became a loyal customer. Maybe you just put together a very long write up of like 30 pages. Maybe you even submit it to value investors club. Maybe you get your pitch highly rated in wallstreetbets. Maybe you meet the CEO and/or speak to investor relations in person. Who knows. Something creative and different that gives someone confidence in you and the investment 

May 4, 2021 - 4:51pm

Here's another idea, maybe it's just saying here. I found an undervalued stock. It's currently trading for 10. I think it's worth 11 or whatever. Sounds like that is a good investment because you are buying something for 10 that is worth 11

maybe it's a bit boring though so it might be missing the wow excitement. But hey, if the PM can make some money for himself/herself and his/her/their family and do some good with it at home, hopefully that should get them excited a bit 

  • Analyst 2 in HF - EquityHedge
May 4, 2021 - 9:51pm

i really can't tell whether you're shitposting or not 

May 4, 2021 - 5:19pm

I'll take a stab - for SaaS, there's a substantial amount of PE money chasing this space, providing a cover bid support for anything that trades off meaningfully or is "cheap" by SaaS standards (let's call this sub-5x ARR).  The model lends itself (no pun intended) to creditors very well and thus can be good LBO stories once a sponsor right sizes the cost structure for rational, profitable growth.  There are plenty of SaaS businesses with sub $10bn mkt caps, some of which are profitable or close to EBITDA b/e, that fit the sweet spot for PE on size. Many of them are in correction mode over the L3M.  I think there is a clear take-private catalyst for a good amount of them if you make a good PE thesis - cost-take out, perhaps a vertical specialization that can be further consolidated under this platform or maybe a vertical that was even Covid-disrupted that will self-correct, and identify larger strategics that would buy a more scaled player once it's further scaled under PE.  

  • Associate 1 in PE - LBOs
May 4, 2021 - 6:03pm

Not the OP, but this was exactly the type of response I was hoping to see -- thank you so much & I completely agree w/ your insights. If anyone sees this and has any similar ideas to this guy, please spread the wealth haha. 

May 5, 2021 - 7:33am

Airbnb stock will be added to the SP500 after 4 quarters of positive earnings quarters. Could it undergo the same pump as Tesla did when it was added? It will also be added to many etf funds in the coming quarters. At the same time it's price has gone down about 25% from peak in spite of underlying economic data that consumer spending it popping off. The emergence of work from home/work from anywhere.. yadda yadda

Your welcome

May 5, 2021 - 7:59am

Adding to this- Remote work is about to unlock one of the biggest cost arbitrages in history as people can move to low cost places to live (ie move from Ny to Fl.. or move from US to India/Africa/etc).

Their earning call will be next week so it may go back up... may be good to put a trade in now. So you can show that you acted on your thesis and how it worked out

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