Kingdom Ridge Capital, LLC

Stock Market Words of Wisdom (II)

admin — Mon, 13 Aug 2012 19:31:27 +0000

“Markets can remain irrational longer than you can remain solvent.”

John Maynard Keynes

Learn How to Build Financial Models

admin — Mon, 13 Aug 2012 19:29:12 +0000

A fundamental equity analyst is expected to be able to build and maintain financial models for the stocks they cover. Therefore, you should create at least an income statement model on companies that you will be pitching in your interviews. If you need examples of how the street lays out a model then look at sell side research notes from Credit Suisse or Morgan Stanley. I choose those two firms as references because:

Credit Suisse and Morgan Stanley tend to put models in most of the notes they publish so examples are relatively easy to find
I find their models tend to be more complete/detailed than those of other firms

Make sure your models isolate the applicable what counts factors for the stocks in question. Also be sure your models allow flexibility to easily change key variables so you can do scenario testing without having to overhaul the model’s construction.

Know the 3 Key “What Counts” Factors for Your Stock Picks
Tips for Preparing a Stock Recommendation

Stock Market Words of Wisdom (I)

admin — Thu, 09 Aug 2012 19:22:54 +0000

It’s not whether you are right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.”

George Soros

Image Courtesy of Wikipedia Commons

Know the 3 Key “What Counts” Factors for Your Stock Picks

admin — Wed, 08 Aug 2012 23:44:09 +0000

When you create your stock pitch, be sure to identify and analyze the “what counts” factors for your stock. What counts factors are the variables that are the key drivers for making the stock work the way you expect. At a high level, these factors tend to be:

Revenue
Gross Margin
Operating Margin

For example, if the stock you are pitching is a high flying growth story, concentrate on revenue growth rate. Should your recommendation hinge on an improvement in product mix then zero in on gross margin expansion. A cost restructuring story? Examine operating margin. If the stock is a roll-up, focus on revenue retention and operating margins.

Other factors may be important for a given stock story. However, to generalize, changes in revenue, gross margin and operating margin are often the hot button items that affect earnings and multiples.

For more thoughts on stock pitches, see: Tips for Preparing a Stock Recommendation

Image credit: blackosaka / 123RF Stock Photo 

Copyright © 2012 Kingdom Ridge Capital, LLC. All Rights Reserved. Not a Public Solicitation.

Do Not Let Your Tweets or Posts Create a Bad Impression

admin — Tue, 07 Aug 2012 16:26:37 +0000

Don’t be naïve…you should assume potential employers will check out your activity on social media sites like Twitter and Facebook. Far before you collect your first paycheck, any well established mutual fund or hedge fund will have hired someone to do a background check on you. Social media can provide a wealth of information for these investigators. Therefore, make sure that what you put out there for public viewing would not cause an employer to have second thoughts about offering you a job. Do not allow your public posts to cause a firm to question your character or judgment.

Image courtesy of Google Images

Copyright © 2012 Kingdom Ridge Capital, LLC. All Rights Reserved. Not a Public Solicitation.

How to Talk About Being a Team Player in Interviews

admin — Mon, 06 Aug 2012 19:58:42 +0000

Many firms want to hire team players. They generally want employees that can work together, that will do what is best for the firm over what is best for the individual, et cetera. What you the candidate need to understand is that while firms want team players, they want their team to be made up of high achieving individuals. This gets back to a previous post where I encourage you to make sure your resume clearly tells a potential employer what you accomplished when you were given an opportunity to perform.

In some interviews you will probably talk about the accomplishments of a team that you were on. When you have that discussion, do not fall into the trap of talking only in terms of what your team (or club or organization) accomplished. When a team achieves something, it can be difficult to know who made things happen and who was merely along for the ride. The potential employer is trying to decide whether to hire you, not everyone on your team.

Make it clear that you have worked successfully on a team. But don’t forget to also make clear what you delivered to help your team accomplish its goals.

Image credit: kjpargeter / 123RF Stock Photo

Know Your Audience’s Investment Time Frame

admin — Fri, 03 Aug 2012 15:56:08 +0000

Image credit: silantiy / 123RF Stock Photo

My colleague Nick Caputo contributes this tip:

When interviewing, try to determine the investment orientation of the firm you are meeting with. Some asset managers are trying to figure out where a stock will be three years from now while others are focused on where the stock price will close at the end of the week. Pitching a value stock to a short term manager will not do you much good. Likewise, recommending a stock that has multiple short term catalysts is not likely to score many points with the long term manager. Be sure to adjust your stock pitch to your audience.

For more thoughts on stock pitches, see:

Tips for Preparing a Stock Recommendation

Stand Out by Going the Extra Mile

Copyright © 2012 Kingdom Ridge Capital, LLC. All Rights Reserved. Not a Public Solicitation.