Michigan Investment Association Stephen M. Ross School of Business

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Michigan Investment AssociationStephen M. Ross
School of Business

• September 18, 2005
• 600 pm to 700 pm
• Tozzi Finance Center

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Agenda

• How do you develop a story?
• The anatomy of a stock pitch
• Join iMpact Group
• Become a Member
• Investment Association Speaker
• Recruiting Timeline

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How do you develop a story?

• Identify skills that make someone successful in
  the career you are pursuing
• Identify experiences that exhibit those skills
• Discuss not only your passion for the markets,
  but also the fact others recognize this passion
• Discuss your choice of business school and your
  activities since you have arrived
• Finally, discuss why you like the firm

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How do you develop a story?

• Identify skills that make someone successful in
  the career you are pursuing
• Research
• Attention to Detail
• Big Picture Analysis
• Analytical Ability
• Communication skills
• Quest for Knowledge
• Writing Skills
• Ability to take risk ? have an opinion
• Sales Trading
• Good interpersonal skills
• Ability to think quickly on your feet
• Take initiative
• Cope in a stressful environment
• Multi-task
• Take risk and analyze it ? trend analysis
• Critical Reading
• Investment Management
• Risk Taker

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How do you develop a story?

• Example outline for a story ?
• University of Illinois
• Worked at PG
• Packaging Model (quantitative ability)
• Global QcVQ (writing ability)
• Spent outside time doing something finance
  related
• Read a lot about the markets
• Borrowed a friends accounting book and started to
  read it
• Taught JA classes to high school students
• Even developed my own DCF models from what I read
• Even helped co-workers or would get questions
  from co-workers about the markets
• Like companies that have self-inflicted pain in a
  good growth industry
• Management of personal portfolio
• Michigan
• Not only how to model, but what numbers to put in
  it
• My strategy class has been great with helping me
  do this
• Shown initiative through giving the fist stock
  pitch of the year at the Investment Club
• Shown aptitude for stock pitching, by placing 2nd
  in the Investment Club Stock Pitch Competition

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How do you develop a story?

• Final Thoughts
• Your story should be anywhere from
• 30 seconds elevator conversation
• 3 to 5 minutes interview setting
• This is probably one of the most important
  aspects of recruitingyou will say your story
  many times throughout the recruiting process ?
  MAKE SURE YOU PRACTICE IT!!!

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The anatomy of a stock pitch

• In a few weeks or few months you will asked in an
  interviewWhat stocks do you like/follow?
• You need an answer!
• Ideally you should have 3 stocks to pitch for any
  interview
• Pitches can be about stocks you that you think
  will go up (long ideas) or ones you believe will
  go down (short ideas)

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The anatomy of a stock pitch

• Step 1 How to Select a Stock
• The obvious
• A holding in your real (or fictional) portfolio
• You used to work/consult for at the company and
  like their prospects
• You love an industry (e.g., automotive,
  cosmetics) and can talk about it for days
• If you are stuck, there are 10,000 publicly
  traded companies in the U.S. but dont
  necessarily pick the big names such as GE or
  Pfizer
• The company you are interviewing with may hold a
  position (or cover the company)
• Larger, well covered companies tend to elicit
  strong opinions
• Watch CNBC to get ideas and use Tozzi resources
  to find reports on companies and/or industries

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The anatomy of a stock pitch

• Step 2 Decide on Approach
• Top down approach
• General to specific
• Start with the macroeconomic, move to sector,
  then stock specifics
• Bottom up approach
• Start with Stock fundamentals

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The anatomy of a stock pitch

• Step 2 Decide on Approach
• Top down approach
• Example
• Stock I like is
• Revlon Cosmetic companies are defensive in the
  current economic environment, the sector is
  generally trading at a discount and Revlon is the
  best managed firm in the industry with a low
  multiple and high earnings quality
• Dell Technology companies were the hardest hit
  in the recession, but I believe the sector will
  rebound in the next few quarters. Economic data
  indicates that commercial spending has increased
  and recent announcements have suggested a
  turnaround. Dell is currently best positioned to
  take advantage of the rebound as it has shifted
  its business in the past year to the corporate
  customer. The companys negative cash conversion
  cycles. . .

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The anatomy of a stock pitch

• Step 2 Decide on Approach
• Bottom up approach
• Example
• Stock I like is
• Dell Dell is expected to earn X this year and
  Y in CY 0A and is trading at just 2 times sales.
  I think the stock is attractive for 3 reasons. 1.
  Agreement with Lexmark to market printers, 2.
  Negative cash conversion cycle 3. Strong mgmt
  team. I would be a big buyer of the stock below
  XX and it should trade at ZZx FY0A estimates,
  and investors should look at increased corporate
  spending as a catalyst. . .

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The anatomy of a stock pitch

• Financial Measures to Consider
• Current Price and 52 week H/L
• Trailing P/E and Forward P/E estimates
• Consensus EPS estimates and EPS growth
• Financial ratios current ratio, interest
  coverage
• Valuation
• Multiples (EBIT, EBITDA)
• Potentially run a DCF model
• Consider technical screens (moving averages,
  relative strength)

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The anatomy of a stock pitch

• Non Financial Measures to Consider
• Strength of management team and board composition
• Earnings news and consensus opinion of results
• Analyst opinions and recent upgrades/downgrades
• What funds/institutions hold positions? Insider
  buying/selling
• Regulatory changes to industry
• Technological changes/patents
• Current news.if the company was in the WSJ last
  week and you didnt know, that sucks for you

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The anatomy of a stock pitch
Intro
Its a Buy because
The Close

• 1) Name of Stock
• 2) One sentence
• description
• 3) Ticker/Exchange
• 4) Recent close and
• 52 week H/L

• 1) Reason 1
• 2) Reason 2
• 3) Reason 3

1) Target price and why 2) Catalyst
driving Stock (from section 2) 3) Valuation
estimate 4) Risks
Aim for 3 minutes, ideally less
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The anatomy of a stock pitch

• Stocks to Avoid
• Political stocks
• Companies that will have a public presentation
  (earnings, conference call, analyst day) within
  48 hours of your interview
• Issue stocks (ex Delta and Northwest)
• Stocks that require overly-technical explanations

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The anatomy of a stock pitch

• Final Thoughts
• Know your audience (value, growth,
  tech/non-tech) Dont pitch JNPR to a deep value
  investor!
• Be enthusiastic and confident, not arrogant-
  remember that the person across the table has, in
  most cases, years of experience doing this
• Be aware of the sector/industry in which your
  company resides is it under/overvalued?
• Always keep in mind- what is the catalyst driving
  this specific stock? What unique insight am I
  bringing to the table?

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Join iMpact Group

• http//www.bus.umich.edu/MyiMpact/
• Click on My Tools
• Click on My Personal Profile
• Click Edit Profile
• Under iMpact Groups click Add iMpact Group
• Join INVEST06 ? Click Save Changes

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Become a Member!!!

• Either go to Ian McMullin after the meeting and
  pay your membership fee
• OR
• Go to the Investment Club website and pay using
  the Paypal link http//webuser.bus.umich.edu/Orga
  nizations/investmentclub/

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Investment Association Speaker

• We are excited to announce that on OCTOBER 7TH,
  2005, we will have our first set of alumni
  speakers
• PLEASE keep the date open and we will pass on
  more information as the event becomes finalized

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Recruiting Timeline

• http//www.bus.umich.edu/StudentCareerServices/
• The Finance Club breakout sessions will address
  the recruiting timeline in more detail
• Spend some time NOW searching for companies in
  the database, it is not as easy as you think

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Next Meeting

• September 25th, 2005 6-7 pm, Tozzi
• Equity overview