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Up0
Hi all,
First off, I’d like to thank the 300 Hours staff for their wonderful job at maintaining the blog and the forum interesting and relevant. Well done, guys!
I know it seems mighty selfish to ask for interview advise in my first post, but right now I’m willing to take all the help I can get. Also, I promise I’ll try to contribute to this forum in the future as a way to pay it forward.
So the day after tomorrow I have an interview for an entry level position in equity research, and the recruiter has briefed me on what to expect. I’ll be meeting the HR officer and the VP of a small investment firm, and I hope to get some feedback from you guys on my plan for the interview.
For the first part I’ll be asked to provide examples of public companies to invest in, and the second part is a case study comprising financial statements for two companies which I have to analyse and make investment recommendations on.
For the case study, my plan is to completely master the main market/profitability/solvency ratios and base my recommendations on this ratio analysis, and I’ll also try to identify any significant trends in the statements.
As to the question of “which companies would you invest in” I plan to download some public filings and try to do something similar to the above so that I can offer a recommendation and a justification for it. Additionally, given the rocky start of the year for stock markets, I’m thinking I should focus on defensive, low-beta stocks, like utilities.
What do you guys think of this framework? What would you do different?
I’d really appreciate any input you can provide, as this is my first interview in “finance” proper after several years of schooling and back-office finance jobs. I’m a level I candidate with an economics degree, by the way.
Cheers,
Bob
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Up5
Be aware that if they want to challenge your suggestion to invest in utilities be prepared to answer, what happens if we find ourselves in a rising interest rate environment? Higher yielding, defensive companies like utilities tend to react similarly to bonds as rates rise. Just look at June of 2013. Of course there is an arguement that since Yellen continuing the US’s easy money policies that we won’t see rates rise this year. I know this is very US centric but I just wanted to help. Good luck @bob_loblaw.
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Up4
Hi @Bob_loblaw, good to see your first post! And thanks for the kind words 🙂
I think you have a good plan there. A few questions: for your case study, are you supposed to base your recommendation purely on financial statements (i.e. financial metrics)? I presume you’re presented with 2 companies in the same industry perhaps for this exercise to make sense? Don’t forget to think of the nature of the industry itself when looking at the ratios, e.g. growth firms in tech industry vs. more mature sectors like utilities/insurance/manufacturing would have different norms for the ratios of course.
For public companies that you’d recommend, you could use this opportunity to look into companies/sectors that interests you, as you’d have better background knowledge of them too. If it helps, I’d even do a summary 1 pager for say 2 firms that I’d recommend, as if they are equity research reports 1 pager summary, with headline description, your recommendation (and why), with the relevant ratio analysis etc. I thought that would be professional and impressive if you hand over 2 summary pages (1 A4 side per company) with some charts, numbers and ratio analysis, that you can use it as a guide to talk through your rationale with the VP. It helps show that you’ve done your work and put some thought into this, and also demonstrates that you can present information succinctly – all requirements of your role. Moreover, it guides your thought process during the interview as well as you talk through why you recommend this firm (vs. its competitor for example).
Hope that helps, and good luck Bob!
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Up2
Be aware that if they want to challenge your suggestion to invest in utilities be prepared to answer, what happens if we find ourselves in a rising interest rate environment? Higher yielding, defensive companies like utilities tend to react similarly to bonds as rates rise. Just look at June of 2013. Of course there is an arguement that since Yellen continuing the US’s easy money policies that we won’t see rates rise this year. I know this is very US centric but I just wanted to help. Good luck @bob_loblaw.
That’s helpful, @mattyc. I can’t imagine them not trying to challenge the argument, even if just to see my reaction. And since the company I’m interviewing for invests in the North American markets, that’s a very relevant point you made.
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Up1
Thanks for your feedback, Sophie!
As far as I know, the case study will present only financial statements. The position will entail financial statement analysis mostly, so it makes sense for the company to focus on that. Good point about checking whether the companies operate in the same industries; I’ll make a mental note of it.
Love your tip about bringing the analysis reports. Will definitely do that.
I greatly appreciate your input. I’ll come back and share my experience after the interview.
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