Stock Pitch Idea Generation: How to pick the best company?

You can rely on resources like Bloomberg, Capital IQ, Factset for researching about the company and may use these factors to identify long and short position ideas:

Long: Underearning, undervalued, sustainable growth, improving market share/ competitive performance/ industry outlook etc.

Short: Market euphoria, bubbles, overvalued, over earning, fraud, overleverage, DOI spikes, DSO spikes

1. Pitch a stock similar to the firm’s strategy. E.g, if they prefer long- only equity within the R&D space, it's a bad call to pitch them a short in the TMT sector  

2. Play to your industry knowledge. Pick a biotech stock if you have a background in life science, simply because you can leverage your knowledge better. It helps to pick a more technical industry with complex accounting/ valuation methodologies (like energy), only if the fund itself specializes in it.

3. Choose mid-sized firms in your industry of choice that still have growth potential, and drop companies with complex financial statements

4: Avoid picking highly diversified businesses, since pure play companies serve niche markets, hence are more attractive investments, plus their analysis is less complicated

5: Pick firms with impactful catalysts, as we discussed in the last article- upcoming M&A, or any key strategic changes etc are good markers

Perform DCF modeling and valuation to go beyond the income statement items, apart from analysing annual statements and equity research reports, try to dig deep by contacting any direct

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