How to Pitch a Stock
What is a Stock Pitch?
A stock pitch is essentially a summary of an investment recommendation. It can take multiple forms, but usually it is a brief write-up or presentation that summarizes whether or not an investment in a public company’s shares is likely to be profitable.
A stock pitch should recommend the position an investor should take and why. The defining aspect of an effective stock pitch is extensive research into all aspects of the company, supported by a strong investment thesis, data and analysis, valuation metrics, catalysts, and a risk assessment section.
Stock pitches can be used in buy-side interviews, networking, investment clubs, investment competitions, personal investing, and of course on the job as a professional investor.
Key Learning Points
- A stock pitch summarizes an investment idea, whether long or short.
- Stock pitches can be used for buy-side interviews, networking, investment clubs and competitions, personal investing, and on the job as an investor.
- The classic structure that a stock pitch should follow includes: stock recommendation, company overview, investment thesis, catalyst, valuation and returns, risks, and mitigating factors.
- A good stock pitch will articulate the investment thesis to investors in a concise and convincing manner.
Stock pitch report template
Stocks can be pitched to clients in numerous ways, and it is the job of salespeople to help determine the most effective method for pitching, based on the particular client and their specific objectives. When making a stock pitch, salespeople are advised to follow this classic structure:
Stock Recommendation
The recommendation is also known as the analyst forecast or consensus. This projects the stock price movement based on facts and market knowledge including company value, targeted share price, and estimated share price. It can help salespeople decide whether investing in a particular company is a good idea and if so, whether to go long or short.
Company Overview
A brief description of the company’s business model and its appeal. This mainly includes the company’s position in its industry, its product portfolio, differentiation points, business segments, geographical exposure, competitors, customers, and suppliers.
Investment Thesis
An investment thesis should explain why a stock is a good investment by defining the value of the stock in the portfolio. The thesis should be motivated by the idea that the stock is currently mispriced, usually as a result of the market underappreciating or not yet incorporating certain information into the stock price. While there are many underlying reasons that can support and form the basis of an investment thesis, there are three common factors, including sustainable competitive advantage, macroeconomic and industry tailwinds, and strategy.
Catalysts
Catalysts are any upcoming factors or informational events that the salesperson believes will drive the stock price, thus justifying the investment thesis. Information about the impact of these catalysts is not yet incorporated into the stock price, offering an opportunity for significant gains as stocks can remain undervalued for a long period of time. The catalysts can be almost anything, such as earnings reports, brokerage reports, macroeconomic factors, or other corporate announcements.
Valuation and returns
Stock valuation involves calculating a stock’s fair value in order to determine whether a stock is currently under- or overvalued. In determining the fair price, the investment thesis should inform every assumption made regarding the company’s earnings and risk profile. For a long-term recommendation, the salesperson should demonstrate that the stock is undervalued. For example, if the stock is trading at $25 right now but valuation suggests that the stock is worth $40, it’s undervalued and likely to be a buy. For a short recommendation, the salesperson should show why the stock is overvalued.
Risk Factors and How to Mitigate Them
Investment risks refer to the range of possibilities that could cause an investment to lose some or all of its value. To ensure appropriate risk-return assessments, the stock pitch must identify the underlying types of investment risk. The highest risks to an investment thesis are those that are unknown. Risks must then be assessed against potential returns to allow investors to assess whether the rewards are worth the risk.
Stock Pitch Interview Example
The interview “stock pitch” is usually a 10–15-minute discussion about a specific public company. The first 2-3 minutes should include an introduction and the overall thesis, while the remaining 10 minutes usually include a conversation between you and the interviewer or a Q&A session to discuss the merits of a potential investment.
Whether you’re interested in asset management, capital markets, or investment banking, there is a high likelihood that you will encounter the ‘pitch me a stock’ question in an interview, as stock pitches are important elements of many types of buy-side interviews. It will be difficult to give a substantial, well-researched answer without prior preparation. Even if you do have a company in mind, not having a clear structure is likely to result in failure.
In an interview, the key is to demonstrate a deep understanding of the company and present a thoughtful thesis. Moreover, brevity is also crucial in an interview, where candidates need to spend just a few sentences summarizing all significant information in each section of the pitch.
How to Organize a Mock Stock Competition
Stock pitches in competitions are all about persuasiveness, and are generally long-form pitches with the support of PowerPoint presentations and visual aids. They can last anywhere from a few minutes to half an hour. All knowledge about industry trends, business models, competitive landscape, valuations and calculations, and analysis of risks should be included to convince investors that the idea is sound.
For example, in a stock pitch competition, you will be tasked with analyzing a company and making recommendations to buy, sell, or hold the stock. On the day of the competition, you will be given a list of companies from which to choose one company to research and write a max 2-page investment report.
Conclusion
A stock pitch can take multiple forms but is usually a short memo or presentation recommending investment in a stock. It should discuss why an investment should be made. Stock pitches are effective vehicles for assessing both investment judgment and communication skills. Stock pitches can be used in many scenarios including buy-side interviews, networking, investment clubs, and competitions. They should be concise and follow the classic structure.
Now you have created a successful stock pitch, prepare for a successful interview with the investment banking interview skills course. Learn what to expect, how to prepare, how to make a great first impression, and how to answer the five key question types. Prepare your story, understand how to discuss your fit, demonstrate your knowledge, and answer brainteasers, and technical questions – with live examples.
Additional Resources
Everything You Need to Know about Investment Banking Spring Weeks