8/3/2019 Anatomy of a Stock Pitch

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The Anatomy of a Stock Pitch

September 29, 2002

How to get through the Interview. . .

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Agenda

Overview and Context

Why is this important?

How to prepare

Two Approaches

What to include

Putting it all together

Q&A

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Why is this Important to You?

In a few weeks or a few months you will besitting beside across the table from. . .

You will be asked

So, what stocks do you like?

What will be your answer?

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How to prepare

Watch the market(WSJ, Bloomberg, CNBC)

Pick a sector you really like

(Automotive, Financial Services, Tech, ConsumerProducts)

Find out what the experts are saying

(4th floor Kresge trading room - Merrill Lynch/UBS

Warburg research etc.)

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Once you have your stock - Two Approaches

1. Top down approach General to specific Start with the macroeconomic, move to sector, then stock specifics

Example:Stock I like is:

Revlon: Cosmetic companies are defensive in the current economicenvironment, the sector is generally trading at a discount andRevlon is the best managed firm in the industry with a lowmultiple and high earnings quality

Dell: Technology companies were the hardest hit in the recession, butI believe the sector will rebound in the next few quarters.Economic data indicates that commercial spending has increasedand recent announcements have suggested a turnaround. Dell iscurrently best positioned to take advantage of the rebound as ithas shifted its business in the past year to the corporatecustomer. The companys negative cash conversion cycles. . .

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Once you have your stock - Two Approaches

2. Bottom up approach Start with Stock fundamentals

Example:

Please note: these stock picks are fictitious

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What to include

Valuation

Consensus earnings estimates, current price

Determine relevant earnings multiples, DCF

with caution, technical screens

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What to include

Be brief 3 minutes is about all you want to talk

Have your facts straight

Memorize details about the firm book value,current price, 52-week range

Earnings/EBITDA Quality

Accruals, goodwill impairment, off-balancesheet financing, recurring revenue, cash flowas % of earnings, charges, interest

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Putting it all together

Organization:

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1) Name of Stock

2) Ticker

3) Latest Closing Price

4) 52-week High and Low

General Organization

$$

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4 Sentences:

Paint a vivid color to bring your stock to life

Its your job to SELLGive them reasons to BUY

Business Summary or Strategy

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Financial Summary

- 2-3 Sentences

- Highlight trends e.g.Recently announced record 4th qtr earnings of $X,which beat Street expectations by y%.

- No Accounting minutiae (lose the sale)

Catalyst

- The hook!- The core why someone should buy the stock NOW!- Should be something catchy, sexy and compelling

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Supporting Data

P/E, EPS, Dividend Yield

Only RELEVANT metrics

(NO P/E for a Startup)

$

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Stick to your story , Defend it.

Don't let them get you rattled

Use data,

evidence,catalysts,enthusiasm to win them over

Prepare to Defend!

- Ideally 3 reasons to buy stock (just in case asked)

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Questions and Answers