I need to fill out this questionaire for an internship @ a hedge fund....advice please

Pick two public companies and explain why you want to buy or sell them:
1:
2:
1) Who would you try to contact? (list)
2) Who might you introduce yourself as to these potential contacts?
3) Where would you look for these contacts?
4) What questions would you ask these contacts?
Given the following statements, what would be some follow-up questions:
1) Sales are going great this quarter
2) That product is doing well because it eliminates the need for three other products
3) We are closing down “X” division
4) We are releasing a new product next quarter

This is my first real internship, and I was asked to fill this questionnaire out, and I was wondering if anyone knew what exactly the other person is trying to get out of me by asking these questions? or any pointers as to what i should include, or not leave out....comments/thoughts/suggestions appreciated

 

Case in point is alright but it is some meager manager's idea to quickly make a few bucks from desperate college kids trying to land consulting or IBanking gigs... on the other hand, WINNING by Jack Welch is a much better book to read about business in general for these questions read chapter 9, 11, 12, 13, 14, if have time maybe 10...

 

do you guys have any suggestions as to what i should put for these questions tho? ill check those books out later, but i really have no idea what would be an appropriate answer for some of the questions...thanks

 

You should really try and take a first stab at it. If you type out the answers with this thread, I'll comment and provide some feedback. Otherwise, what do you expect the associates at your firm to do? Spoon feed you the answers? How else can you learn?

 
Best Response

Buy 1: Florida Rock is a company focusing on construction aggregates, concrete products, and cement and calcium products. Earlier in the year, Vulcan Materials planned a $4.6-billion purchase of Florida Rock Industries. Vulcan announced the deal Feb. 19 and expects to close the deal by mid-year. Statistically Florida Rock has been outperforming the industry average in various categories. Their one-year net profit margin is 15.8% compared to the industry average of 9.1%. Furthermore, the company has excellent financial backing with a very low Debt/equity ratio of 0.02%, versus the industry average of 0.66%. Florida Rock has also done exceptionally well in the past 12 months, as it has outperformed 62% of the stocks in its industry. Historically, Florida Rock has done very well too, as its stock has risen 1,266% over the past 10 years. The only statistic that Florida Rock falls behind in is its sales growth. Its sales growth for the past 12 months is below the average standard for the industry. However, despite the lack of sales growth in the past year, based on its fundamentals, and the planned upcoming purchase of Florida Rock, I recommend this company for a strong buy.

Without calling company management, explain how you would research each of these companies.

1) Who would you try to contact? (list) I would contact the investor relations departments of each company and if possible, contact (CFO's of companies if possible)

2) Who might you introduce yourself as to these potential contacts?

I would introduce myself as a research analyst from New York, who is trying to gain further insights into the company’s future.

3) Where would you look for these contacts?

I would look for these contacts in their company’s website, publications/lists,

4) What questions would you ask these contacts?

What gives your company an edge in its industry When is the upcoming earnings conference call? What new products are planned to be released in the future?

Given the following statements, what would be some follow-up questions:

1) Sales are going great this quarter What are the main reasons behind the growth in sales? How is the company planning to maintain these sales for the next quarter?

2) That product is doing well because it eliminates the need for three other products

???????????

3) We are closing down “X” division How will the closing of this division affect the productivity of the company?
How are the functions of that division to be replaced throughout the company?

4) We are releasing a new product next quarter

How will the new product fair with the top competitors in the same field? How much will the release of the new product increase revenue by?

im curious as to what to put for question 2...i really have no idea what to ask...

 

1: Good start. Break up your answer and use bullet points instead of sentences. How about EV/Ebitda measures? Or since this is an established company, what about LBO metrics like Debt/Ebitda? Focus more on ratios, and don't use P/E (better for FIG), use EV/Ebitda.

Without Calling Company Mgmt, How to Research?

1:Call no one from the target company. Since you're a hedge fund you don't want anyone to know yet that you're making a purchase in the near term. Instead, gather equity research reports, and the respective 10-K filings to do the first steps.

2: If you're calling equity research, you're just calling your own research dept. Say you're a summer analyst interested in learning about X firm and need info. You can get ratios, which is what you're looking for, from I/B/E/S= Institutional Broker Estimates System.

3: Where can you find these contacts? Company phonebook/directory.

4: Questions to ask:

A: I don't know how to answer this one. I know what I'm looking for when valuing a company through making up a sheet of trading comps. You might want to bring up similar transactions so you can begin to write a deal sheet.

Follow-up questions: 1) Sales are great: A: Who's buying the product (demography)? Where is the product doing well, poorly, etc...?

Is this because the product is cheap, or because there's alot of demand out there?

What is the result of raising the price on this popular product, will it improve margins?

2) Product does well bc it eliminates need for three other products.

Ex: Cell phone = internet+phone+music...

How can we capitalize on the synergy between what our product offers and features (ie, how can we put internet+phone together to give ourselves an added advantage).

Are we selling those other 3 products? That means we're acting like a cannibal and eating our own sales. (radical case: can we spin-off the other divisions, what would they be valued at, as pure-plays)?

3) We are closing X division Were sales falling? Because prices were too high? Simply unpopular? Outdated?

Were costs rising? Fixed or variable?

4) Releasing a new product? Can we acquire someone else who has already developed it? Can we work with another firm (joint venture) and develop a distribution plan? Who are the competitors in the market, and how can we be different, leverage our advantage?

 

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