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.
Interested
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Listen to Paul Enrights episode of invest like the best. His FB and Nokia examples are good.
With Patrick O’Shaughnessy?
Yes
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
As opposed to making fake money?
Yea
Found Vitalik Buterin's burner account.
Vitalik - gain some weight you scrawny fuck
Interested in this as well– following.
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.
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.
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!!
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.
The pitches I’ve most enjoyed hearing/reading are those that have inspired me to invest
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
Maybe you even spoke to suppliers. Maybe you put together a full survey. Maybe you discussed with other buyside people what they want to know and just go do that
Maybe it’s about showing them why investing in this stock will be a win-win-win. Win for them, win for you/the company, and win for the rest of the world and the One upstairs
Maybe check out Value Investors Club for the top ideas there. Those might be a good place to start
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
i really can't tell whether you're shitposting or not
I’m not. I’m trying to be helpful. Maybe I’m not doing well so far
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.
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.
broken growth stories (lookin at you AYX) = prime buyout targets for vista/thoma bravo/etc.
Anyone have any examples of alt data for SaaS/Enterprise Software/TMT stocks?
The timing is the tough part. You can end up sitting around with your dick in your hand for a year while the stock continues to underperform only to get a 30% premium in the end. Not a bad idea and your downside is capped, but it can be frustrating.
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
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
You should take a look at this: http://www.distressed-debt-investing.com/2012/01/where-to-look-for-idea…
Shows a list of forced selling situations for equity & credit (that site as a whole is golden btw). Under the equity section, there's the following events:
1. Merger Arbitrage
2. Index additions and deletions
3. Tax loss harvesting causes irrational selling in the 4th quarter (see Mike Burry)
4. New lows cause irrational selling
5. Spin offs selling effect
6 Dual class A/B arbitrages
7. SPAC investing (warrants, arbitrage)
8. Closed End Fund Discounts
9. Super micro-cap / illiquid stocks
10. Thrift conversions
11. Busted MLPs
Can anyone explain how forced selling comes into play in 1, 6, 7, 8, 9, 10, and 11? Much appreciated!!
I don't think forced selling is applicable to all of the above...but for example on merger arb, if Company B announces a take over bid for Company A at a +15% premium but shares only rise +13% you will have existing shareholders selling out of their position to the arb guys because their reinvestment decision is to either a) hold on to shares for that last 200bps spread over an X period or b) redeploy capital into higher return investments. Most will choose "b" because equity investors are looking for equity-like returns, not a merger arb return.
SPACs experience forced selling events when the VIX spikes because investors can more easily sell SPAC shares to yield investors to raise cash as opposed to more illiquid positions. SPAC arb investors playing the yield to NAV game can bid short dated SPACs at 5-10% which, depending on their duration, may only be a several penny share price difference. Much better deal than trying to get out of a $300 million bond position you'll take a 10pt hit on.
So you're basically being compensated for providing liquidity.
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It's all about having an "earned" view or insight. Everyone has read the 10-k, analyzed the footnotes, and follows the redbook retail index. But how many analysts conduct a private survey, monitor locations in person, or do something outside the realm of traditional (fundamental) research? Not many. Integrating that into your pitch is the real "wow" factor.
Few suggestions:
1) Remember the point of a pitch is to sound smart / interesting, not to actually be the best pitch ever
2) Pitch something the person in front of you is unlikely to have heard of but an industry that they would be semi-familiar with (niche consumer industries are perfect)
3) Pitch a short if you can / the shop isn't long only. People are more intellectually interested in those
4) If pitching a long, stories where there is something that you can argue the market hasn't fully understood (the "aha moment") or a business transition that people haven't understood (market thinks the business is X b/c it's majority of the business but really it's X+Y) tend to be perceived well
I don't think that there needs to be a "wow" factor in your pitch. Most ideas in real life don't have a "wow" factor. And to be honest, many that do don't actually work out despite sounding really intelligent. If you want to wow your interviewer, just have a coherent argument why you think the idea you are pitching will make money. Then know your name really well. If I ask you a question, and I get the impression that you know your name inside an out and have thought about all the angles, you will wow me.
I would tend to agree with this. The 'wow' component typically translates into additional risk; high-risk high-return type ideas. A logically consistent argument is much more impressive in my view given how rare those seem to be. I had this discussion with a colleague the other day. I would actually prefer a biased but logically consistent argument over one where some of the inherent expectations underlying the thesis cannot really coexist. This extends to the Q&A of the pitch. As long as the thought process is logical and consistent, that would be more of a 'wow' for me coming from a junior than building a thesis on some obscure piece of information that no one else knows.
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