Pitch me a Stock Interview Question for Investment Banking?

During interviews for summer intern and full-time analyst roles, would an interviewer ever ask the question or give the command to pitch a stock to them? It's much more of a sales & trading or private equity kind of question, but could it still pop up during investment banking interviews?

Pitch a Stock: investment banking interview

This question is much more common in sales and trading interviews However, if you have anything listed on your resume that deals with market transactions then you should be prepared to answer this question. However, this question should only call for about half an hour of preparation time. On the other hand, You should be focused on having a working knowledge of DCF, comps, comp transactions, the CAPM, and the WACC. In fact, these concepts are more important for your investment banking interview. Nonetheless, you'll want to prepare a stock pitch just in case it comes up in your interview.

How to Pitch a Stock

When you are pitching a stock for an interview you'll want to emphasize certain aspects of the company in question. If it helps you can think of the stock pitch as a sell side pitch. The pitch gives you an opportunity to show how much you know about the industry (if applying for a coverage group). Further, this will allow you to quickly tailor your response for each individual interview. Below are some key points that you should highlight in your answer. In the end, you should try and illustrate that you know what drives business.

Stock Pitch Structure for IB

  • State why this is a good investment
  • Key drivers of business (revenue and cost)
  • potential opportunities
  • Competitive advantage

Here's a brief iteration from the an interviewer's perspective.

I've done it in a few cases when interviewing intern candidates who had an school investment club on their resume and I didn't have too much else to dig into. It serves a purpose; they'll demonstrate how in depth their research went, which speaks to their interest in and understanding of finance.

Stock Pitch Example

So what does a good stock pitch look like? Below is a good example submitted by one our users.
This was originally posted in 2011

Transocean: Before the spill, RIG was a leader in an industry with great long term prospects, and only traded at a X multiple. The rig it lost was fully insured. It also had insurance for XX dollars for personal claims, and the exxon valdez spill only amounted to a fraction of this. These claims were also paid out 18 years later, drastically reducing the PV. Since it is likely fully insured for damages, the only explanation for loss in market cap is reduction in earnings. Apart from temporary ban (can't go on forever), it only lost one rig, accounting for XX in earnings, so at a pre-spill multiple of X it should have reduced market cap by X. In actuality, it lost XX in market cap, overstating the damage by X times. Huge overreaction. Catalysts are a stopping of the ban and legal results, which are likely to play out favorably for the following reasons, etc. etc

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Comments (87)

Mar 21, 2017

@bell_hk_sig, STRH is the only bank that ever asked me this and dinged me because I did not have one ready. I would personally spend ten minutes putting together a short pitch for "just in case" purposes. Really makes me question interviewers who ask this, though....

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Best Response
Mar 21, 2017

A friend of mine who applied for a summer internship role at CS got this question, to pitch a random stock that he knew. Yes, it's more of a sales&trading kind of question.

Mar 21, 2017

I've had this asked once during a formal interview, and about 3 times during informational interviews. You will probably be asked this if your resume shows any personal trading or trading club experience. You can whip one up in an hour or less, but definitely have one ready.

Oct 1, 2017

Any recommendations on what should be the core touch points in a quick stock pitch if asked in an ib interview?

Mar 21, 2017

I was asked to pitch a stock but trading was also a part of my story. So I guess it varies depends on the candidate?

Mar 21, 2017

I've been asked this before but only but it was always directly related to me currently interning at a wealth management firm on the investment research side of things. "Oh that sounds like a great experience, what's a stock that you or your team liked?" or something like that.

Mar 21, 2017

Never got the question in ib interviews.

Mar 22, 2017

If you have transaction experience and nothing about public markets on your resume, you 99.99% won't get it, but if you have experience at a HF/ER/PWM, I'd prep at least one pitch.

I had transaction experience AND a HF internship, and I very rarely even got asked about the HF internship during recruiting.

Mar 22, 2017

So this IMO this question is completely fair game to ask for IBD roles. So yes, you have to follow the market a little bit but I think the underlying concept they are trying to get out of you is if you actually know what drives a business. What are the key drivers of the business (both revenue and cost)? Why is it a good investment? What are the potential opportunities available? What's their competitive advantage? etc. etc.

Think about a sell-side pitch for a company/investment, not that much different that pitching a stock.

Also, I think it gives the interviewer an idea of how well the candidate knows the industry if applying for a coverage group.

Just my 2 cents.

Dec 6, 2017
BankerC159:

So this IMO this question is completely fair game to ask for IBD roles. So yes, you have to follow the market a little bit but I think the underlying concept they are trying to get out of you is if you actually know what drives a business.** What are the key drivers of the business (both revenue and cost)? Why is it a good investment? What are the potential opportunities available? What's their competitive advantage? etc. etc.**

How would you approach this kind of analysis? I have tried using annual reports and presentations produced by the companies themselves but they are obviously quite biased with respect to the outlooks.

Other research reports seem simplistic or not specific enough.

Thanks!

Mar 22, 2017

I AM THE LIQUOR

Oct 1, 2017

I love that damn show.

Dec 6, 2017

Surely you can find many sites on the net that can help you with this. After your pitch is done, I suggest reading some books, maybe videos or even listen to audios.

Absolute truths don't exist... celebrated opinions do.

Dec 6, 2017

If this is for IB, this really doesn't need to be so in-depth. Spend ten minutes Googling for lists of recommended stocks. I would not pick something "obvious", like Tesla, Apple, etc. This really should be a "check the box" question and not something that opens you to further grilling.

Once you've picked your stock, try to come up with some reasons to invest in the stock from a technical perspective. Maybe the stock is trading at a P/E below its peers, maybe it's at a 52-week low, etc. Then, find some "soft" reasons why the stock should be invested in. Maybe the company just hired a CEO who used to be a BB MD for this company's industry, maybe the company can take advantage of something that happened in the marketplace (e.g. Brexit), maybe the company is a first-mover in some new market, etc.

Your goal should be to give a good-enough answer to avoid follow-up questions, but at the same time show that you can form an educated opinion and have some clue of what is going on in the market right now.

Mar 22, 2017

www.seekingalpha.com - read the best ideas, feel convinced, memorize it, rehearse it, pitch it. Easy. You prepared 100 hours on technicals what is 1 hour more of stock pitch prep?

Dec 6, 2017

It's probably context-dependent.

If you're an undergraduate applying for a general associate role, I'd recommend the latter: pitch a stock in a different sector so that you can avoid getting grilled. In that scenario, nobody should really expect you to have deep industry-specific knowledge, they just want to get a feeling for your thought process.

However, if you're applying as an experienced industry hire or you're applying for a particular industry group, you may want to consider tailoring the pitch to that specific industry. That said, don't do this unless you have a really good grasp of the industry, as is.

Dec 6, 2017

I'm finishing my undergrad this semester but I'm interviewing for a specific sector. I have heard it's best to have 4 pitches (2 buy, 2 short) so I was thinking maybe select one of each for my sector and then selecting the other two elsewhere.

From your experience have you had to give more than one pitch per interview?

Dec 6, 2017

Four is a bit excessive. To be totally honest, I only prepared a single full stock pitch for all of my Asset Management and equity research interviews, plus one somewhat incomplete and crappy backup pitch. It worked out fine.

As general practice, you usually want two buy pitches, and maybe a short (although I was personally never asked for a short - that's more common for hedge funds rather than traditional asset management firms).

Dec 6, 2017

That sounds great, I did some more looking and making a short pitch doesn't really seem necessary. I plan on making one for the industry I'm interviewing for and then one in a separate industry and then decide which one to use based on how they ask for the pitch.

Dec 6, 2017

Risk of pitching a name that the analyst is familiar with is very high. He/she will know exactly where the border of your knowledge is and whether you are just regurgitating sellside research that is out there or actually have done anything proprietary. I'd generally recommend pitching something that is outside of their coverage. I also agree with above that you're unlikely to be asked for more than two pitches. Make sure that at least one is very strong.

Dec 6, 2017

Would like to know more about this.
Im interviewing for a specific group and have no prior experience in the sector. They did not request I come ready with a pitch.

Dec 6, 2017

I'm finishing my undergrad this semester but I'm interviewing for a specific sector. I have heard it's best to have 4 pitches (2 buy, 2 short) so I was thinking maybe select one of each for my sector and then selecting the other two elsewhere.

Very unlikely that they will expect you to pitch anything as an undergrad. It would be better to read up on the general trends in the sector and make sure you know your accounting and finance basics. No reasonable interviewer will expect an undergrad to pitch ideas.

Dec 6, 2017

When I was interviewing most recently as an undergraduate, I was asked to pitch a stock somewhat frequently (probably in a third to half of my interviews?). Then again, I was president of my college's investment club, so maybe I have a skewed perspective on this.

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Mar 22, 2017

I've done it in a few cases when interviewing intern candidates who had an school investment club on their resume and I didn't have too much else to dig into. It serves a purpose; they'll demonstrate how in depth their research went, which speaks to their interest in and understanding of finance.

The first time I asked this was the best. The guy got super bug-eyed and stammered "Y-you mean right now?!"

Dec 6, 2017

Anyone? Would be greatly appreciated :)

Dec 6, 2017
Mar 22, 2017

Yeah, a fairly funny question for anything other than equity research at a bank. As far as S&T goes, in sales you don't need to generate ideas or anything, you just condense the ideas of the researchers. In trading, there's even less of that given there are minimal prop-trading desks left given the restrictions on own capital trading.

Dec 6, 2017

is this an interview or a casual meeting

Dec 6, 2017

Well I got referred by a PM and we are gonna be discussing internships and a job.
It is a casual meeting over coffee.

Dec 6, 2017

if it's not a formal interview, don't expect to have to do a pitch, but certainly be ready to talk about markets if it comes up. another thing I'd be certain of is you understand their fund's strategy. it's one thing to talk about tesla, but if their fund does distressed debt and deep value, you look like an idiot.

Dec 6, 2017

Thank you for the advice.
I think it is likely I will get offered an unpaid opportunity tomorrow.
If I do get offered something, is it OK to ask of it is unpaid or not? And ask if it possible to pay rail fare or a stipend?
The rail fare alone is very expensive

Dec 6, 2017

that depends. did you originally tell the PM you would work for free? if so, don't backpedal on that. but if you do get an offer, before you accept, just ask it lightly, like "typically, what does compensation for interns look like?"

Dec 6, 2017

Yeah good point. He knows I am willing to work for free. That's OK though, it's an investment leading to bigger things .
That's good advice.
I see you are a pm, what sort of things would put you off bringing in someone working unpaid?
And on the flip what sort of things will he be looking for in me?
I have a very interesting background which may help.

Dec 6, 2017

I'm a PM in PWM, not at a hedge fund, just in the spirit of full disclosure. I have nothing against bringing someone in unpaid. In fact, I wish I could, but my firm won't allow it. there isn't enough work for me to pay someone but there's enough for someone to get a great resume builder and maybe do 5-15 hours of work a week for us.

no idea what he'd be looking for in you, that's for you to find out kid

Dec 6, 2017

I understand, thanks for your help.
I invited him to meet up to discuss internships so one would assume I hopefully get something. However I also understand the dangers of assuming lol.

I'll let you know how it goes tomorrow if you're interested.

Dec 6, 2017

Why doesn't your firm let you bring in unpaid interns?

Dec 6, 2017

no idea. BBs used to allow it (especially in PWM) years ago, they ended that practice probably 5 years ago

Dec 6, 2017

Open a charity that helps lost kids (students) manage assets in PWM and have people "volunteer".

Absolute truths don't exist... celebrated opinions do.

Mar 22, 2017

MUST have it prepared. You will look very silly not having one if asked. Even in the 5% chance you are asked, take the hour or two and have a pitch prepared.

Dec 6, 2017

HOTR is the only stock worth buying right now, believe me!

Dec 6, 2017

Googled it just for the fun of it. Wtf happened to that company over the past few days/weeks?

Mar 22, 2017

Going to take an unconventional opinion here and tell you not to stress about it.

Most people tend to take a very rehearsed approach to interviews, like they are auditioning for a play, and just end up reciting a bunch of prepared answers. Interviews are there for a reason, to get to know you and see if you are a good fit and vice versa. There is no reason for an investment banking interviewer to ask you to pitch a stock (since it is not what the job involves), but if it is a personal interest of yours or if you have previous investing experience then it might come up. If you give a canned, rehearsed response you're going to look like an idiot. In other words, just be genuine. If you like stocks/have traded stocks, you should be more than happy to pitch a stock. If you don't and an IB actually asks you, then probably not a place you want to work at anyways if they are doing it just to mess with you.

Dec 6, 2017

Honestly, learn a new stock. No good can come of pitching something the analyst covers. You either disagree with them, or agree with them and in all likelihood offer nothing new, but rather just a less-informed version of what they already think.

Even if you're crunched for time, taking four-five hours to really learn a new company, some of its numbers, its management etc it's going would be better than your current pitch.

Dec 6, 2017

I ended up pitching something that was covered by the analyst(didn't know I would interview with him). Went very well, although he had a different opinion. Granted, this was for SA so it may make a difference if you're going in for a FT position.

Dec 6, 2017

One SA told me it is good to pitch a stock he/she covers. And it's okay to have a different opinion on it. Just don't make up stuff - they'll know.

Dec 6, 2017

I'd recommend delivering a different pitch. As @"marty0729" said, your interviewer will know more about a stock he/she covers than you. You'll either look like a suck-up or a sucker. Look elsewhere and good luck!

"The stock market is filled with individuals who know the price of everything, but the value of nothing." - Phillip Fisher

Dec 6, 2017

Ideally think you'd pitch something outside their sector but if you don't have time to do a good enough job on it is probably in general worth just going with the original stock. If someone pitched a stock in my sector they both 1) have a bigger opportunity to fuck up, but 2) have a bigger opportunity to impress me since I'll know how good your work really is and have higher conviction if you knock the cover off the ball.

Also would just highlight no one thinks you know that much about your stock anyway, so no one is expecting you to have the same knowledge as someone who is in the industry / covering the sector for a few years, etc.

Mar 22, 2017

Just for reference, I got the question in a Goldman Sachs AM interview...

Dec 6, 2017

I'm far from an expert, and this is all just kind of rambling, but... If you want to run a DCF, just run dividend discount model and payout something like all capital above 8% or 9% TCE. That part is pretty straightforward. If you are looking at book multiples, focus on TBV multiples instead of straight BV. One thing that might be interesting to look at is the bank's scarcity value. The industry is consolidating like mad and it isn't exactly rocket science picking out which banks are likely to get bought up next (i.e. mid-size community bank between $1B-$5B in non-shitty market with not terrible asset quality and maybe a slightly less than ideal efficiency ratio). Maybe discuss diversity of the bank's earnings. Lots of banks are focusing on diversifying their income and growing noninterest income in any way possible (equipment financing, trust department, etc.). Size of the bank will matter, if they are closing in $10B they will face increased costs and lower credit card fee income (see Durbin amendment), so that is something to keep in mind. Let me know if I can provide any additional color on things.

Or just read this.

Dec 6, 2017

in the spirit of Cinco De Mayo, muchas gracias mi amigo

Mar 23, 2017

I've gotten asked at a MM IBD interview, so this is definitely something that comes up.

Dec 6, 2017

I'm not too sure what the objective of this exercise is but when valuing a company you can use different approaches and weight them accordingly (obviously the weightings would need to equal up to a 100%). Or you can just use the other methods to validate (multiples to validate dcf etc).

Just make sure (in your case) since you are using an equity multiple that your dcf approach is on an equity level.

Dec 6, 2017
brianklk:

Let's say you use DCF which you give 20% weighting, then a comparable method like P/E which you give 40% weighting, etc. Do you get laughed at if you do this/

Bankers & expert witnesses do this shit all the time. They just give the highest weight to the method that gets them closest to the "answer" they are looking for.

Investors do something like this all the time as well, but almost never use DCF. Depending on the type of asset you are analyzing, you could do something like: give 50% to a NAV approach and 50% to a multiples approach. This is only applicable if you think both valuation approaches are equally rational. If they arent both rational, then only use the method that makes sense.

Dec 6, 2017

I'd say its pretty standard for a stock pitch to put weightings on the various methodologies. Just make sure you're weighting things for a reason, and not just arbitrarily assigning numbers. If there's a Q&A period they'll likely ask how you arrived at your target price, and you'll have to justify that, so make sure the logic is sound.

Mar 23, 2017

It seems to be a standard question to prepare for in Canadian banking interviews. I was lucky enough to get interview prep from an alum and he hits me with the question every time...

Dec 6, 2017

There's no problem with that at all

Dec 6, 2017

Won't help you.

Dec 6, 2017

Unless you said, "buy BofA because a panic global market sell-off on monday will prompt the fed to declare an emergency rate cut of 75bps, sending financials higher" then I doubt he'll give you any credit for the call. A word of advice, avoid recommending financial stocks in interviews. The business models and balance sheets are too complex to make intelligent stock picking suggestions in an interview setting. The best stategy is to pick a small or mid-cap name that they've never heard of and tell them the story.

Dec 6, 2017

ehf: I actually did that too. I had initally recommended a really risky microcap that I'm invested in because of how the question initially was phrased ("what are you invested in?"); but the thing has no earnings at the moment and no real financials to talk about. so i could see that i was losing my interviewer and so i switched to BofA, at which point she actually made some notes on what i was talking about.

Dec 6, 2017

No credit after today's performance? How unfair!

Dec 6, 2017

Most people lose money on stock market, no because they don;t know when to buy or sell, but when to make liquidation.

Oct 2, 2017

Having been on the other side of the table, don't stress too much about this question. This is not a HF interview, so you are not being graded on whether it is is actually a good idea or not. This is a huge difference. Because of that, this is more of an exercise to explain what the company does, who the competitors are, and what the valuation is. No need to pick something really difficult to understand. If you have analyst buddies, ask them to send you an initiation coverage report on a name and then just regurgitate the key points.

Dec 6, 2017

It is usually better to focus on names they don't know, but much more important is how you back up any stock pick. If you have an intimate understanding about how EMC makes money (and can explain it in a couple of sentences), how attractive its valuation is relative to peers/historical, and can tell me the story about what will happen over the next 12-24 months, what the catalyst is for the stock, any risks etc., then go ahead and use EMC. If not, better find something you understand better.

Dec 6, 2017

EMC is by no means "unknown" - the VMW IPO has put them in the spotlight lately and they are up a ton over the past year since the IPO and even since the IPO plans were announced.

Personally, I would pick something less well-known than EMC. In TMT circles especially, EVERYONE knows about it and has an opinion.

Dec 5, 2017

At a BB superday, I was asked very straight-up: "Do you have a stock pitch?"

Pitched, gave my reasoning, and had to defend against some answers regarding why something would have an effect on the stock price as a reflection of other variables. Easy question to prepare for, you just need to be confident in your decision, not back down from the questions that will be asked, and be able to think quick. Know the stock inside/out and it's light work.

Dec 6, 2017

PM me and I will help you.

Dec 6, 2017

What its currently valued at, what you think it should be at, why you think its not there now and what you think will cause a change in price (these may include: potential stock splits, voting rights or other preferences given to certain stock holders, m+a etc.). If any room is left then maybe anything significant re: insider trading, new CEO's or management or other things that wouldnt necessarily cause a change immediately, but over time, would be helpful.

"...all truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident."

  • Schopenhauer
Dec 6, 2017

^ Thats great. Thanks a lot guys!

Dec 6, 2017

You got two solid members helping you out, don't forget you can show your appreciation by giving a Silver Banana.

" A recession is when other people lose their job, a depression is when you lose your job. "

Dec 5, 2017

lmfao who dafuq in banking follows teh stocks.. I pitched a large company that i helped take public as an intern at a BB, then he said okay anything else, then i pitched Bitcoin lmao.. and then he again said anything else? Then i pitched a private company my buddy works for and came up with my own tickr for it. I think he tried searching it up and that is why i did not hear from him again.

What concert costs 45 cents? 50 Cent feat. Nickelback.

Dec 6, 2017

"I am the hero of the story. I don't need to be saved."