Quick post on my favorite information resources for both finance projects, casual reading, and time wasting. I plan to add to the list as I find more. I apologize in advance for the links not opening in a new tab.
Finance
Data for modeling
Current US Risk Free Rate WSJ
Canadian (Not as user friendly) BoC
Rm & Rf data Global Damodaran
Excel Spreadsheets Pre-coded (Mid Quality) Damodaran & Matt Evans
Multi-Factor Pricing Data (Famma-French) Dr. French
Charts
Day Counter (Weekends included)
Coding help in excel (forum)
League Tables
Money Manager Rankings, IB Rankings, Check Bloomberg for: Global FI , Global M&A, and Global Cap Markets Rankings.
Investment Data
Hedge Fund Performance CS, Barclay Hedge
Economics
Forecast reports BMO, Scotiabank, Euromonitor,
Forecast & Data BER, WEF
'Clean' Macro Data Site NBER
International Monetary Fund IMF
Options
Strategies (Academic) Numa
Pricing & Info on nominal exposure CME
Oil & Gas
Oil Price Forecasts IEA, EIA
Energy Ontario Specific
Agriculture
Commodity Forecasts USDA
Daily Reading
I recommend the WSJ, Bloomberg and The Economist.
Career
Search Canada, Canada General, Vlaad
HSBC, Barclays, BMO, North Leaf, Credit Suisse, GS, Colonial, OMERS, Macquire, PIMCO, RBC, ScotiaCapital, TD Securities, UBS, Brookfield Power
i-Banking & Finance Blogs (for motivation)
The Leveraged Sell-out, Things i-bankers like, DealBreaker, SeekingAlpha, iBankCoin, GuyNance, Living The Dream, The All Nighter (Leads to many more good blogs)
MBA
General & GMAT, Canadian,
As for MSF best resource I've found so far MSF HQ
For Fun
Cartoons (get the igoogle app for real cartoons), More Cartoons, so I like cartoons... Also reddit.com and grooveshark.com
Moral Balancer's (you know you need it)
Ted Talks, New Left Media, Liberal Viewer,
More to come!
Sunday, October 24, 2010
Friday, October 22, 2010
B-School Bell Curve
Although curving grades is nothing new to most university students, there is something special about how the curve works in most graduate business schools. For starters every class is curved, the guaranteed average for any class is a B+, and in my school 8% of the students will be in the C range. Considering a B average is needed to graduate this seems a little harsh. But the law of probabilities works its magic and most b-school have retention rates above 90%.
For students not used to curving it takes a little getting used to. For instance I knew my intro to finance course in the summer would be just short of a cake walk and to top it off, it had a take home midterm. So with some mild studying the day before and a 8pm to 1am writing period I was feeling confident of an A+ test. And that's I got - on paper. On the curve my low 90 was curved to a B+; it looked like I was in the big leagues now (never fear, the final went swimmingly).Of course there was rumors of "team writing", and I did get a crucial fixed income question wrong, but the fact remained, if I was going to be grabbing the grades I wanted, I needed perfection.
But perfection is hard, so lets put our stats hats on and think about strategy!
The B-School Bell Curve
Using some of the metrics that I have heard thrown around I can approximate my schools curve to something similar to below.
For students not used to curving it takes a little getting used to. For instance I knew my intro to finance course in the summer would be just short of a cake walk and to top it off, it had a take home midterm. So with some mild studying the day before and a 8pm to 1am writing period I was feeling confident of an A+ test. And that's I got - on paper. On the curve my low 90 was curved to a B+; it looked like I was in the big leagues now (never fear, the final went swimmingly).Of course there was rumors of "team writing", and I did get a crucial fixed income question wrong, but the fact remained, if I was going to be grabbing the grades I wanted, I needed perfection.
But perfection is hard, so lets put our stats hats on and think about strategy!
The B-School Bell Curve
Using some of the metrics that I have heard thrown around I can approximate my schools curve to something similar to below.
The mean is a B+, it is normally distributed and 8% of the students get a below a B-. There is also a top line percentage quota which I hear is flexible. Regardless because there is a firm tail quota and a fixed mean, the school must have to apply different multipliers to different students grades. In other words if the curve is a bit bi-modal and there is a cluster near the top (as it often is), the penalizer for each grade off perfect would be large to push students down the curve, while weaker scores would receive boosting multipliers. This is where the strategy comes in.
The statistics tell us the curve is going to push you towards the mean whether you are above or below it, so you will be helped in courses you're weak, and hurt in courses your strong (relative to your peers). Thinking about this logically a student who was in 4 courses and got 4 paper grades of 80% would under-perform a student who got 4 paper grades of 60%, 70%, 90%, 100%, assuming their peers performed the same in each class on paper. This is because the 60% and 70% grades are going to receive a curve boost, while all 80% grades will be penalized. The conclusion: be an outlier.
Now we need to drop the assumption that your peers will perform the same in each class, because they won't. With some observation you should still be able to employ the statistical intuition developed above; you need to kill the exams where you think you already have an edge in the class, and this examination-annihilation can occur to some extent at the expense of studying for exams in classes you think you're not top dog.
The other interesting facet of curves is they implicitly discourage peer-to-peer help, as it is in each persons interest for their peers to bomb tests. Thankfully we are all here for jobs at the end of the day, so there is a equal incentive to help out a classmate - they just might be giving you a job in 5 years.
Unfortunately no-where in my stats output does it say anything about the usefulness of blogging in midterm season.
Thursday, October 21, 2010
Kayaking in Ottawa
It can't be all finance all the time, so I'm allowing myself the excuse to ogle past paddling photos by tossing my #1 pastime into the blog.
I haven't been in a kayak in over four months, and it's the middle of October - I've missed the best of the fall run-off. Not to long ago I would be in a boat at least once every two weeks all year round (pools in the winter), and I hope to incorporate at least a quarter of that frequency into my life post-university, but for now let us reminisce.
Why Ottawa
As a western raised, blue blooded, Albertan, I often got this question. Why did you come to Carleton? Time warping back to my 17 year old mind, I moved to Ottawa for this:
and this,
and this.
Ottawa is a bit of a paddling mecca to the world. Big warm rivers that are characterized by lakes between huge waves and rapids. The creeks are all carved out of the Canadian shield, giving them a bit of a roller coaster feel as you ride a carpet of water as it ricochets from huge slab wall, to waterfall, to a big friendly pool that collects both the victorious and the swimmers. Contrast this to the glacier fed freight train like creeks I grew up on, and the pucker factor drops several notches.
How to get into it
If you are still in school many universities have great clubs for those interested. The Carleton Kayak Club has grown a ton in the last 4 years and I would highly recommend them to anyone interested. Although university clubs usually allow the public to attend their lessons as well, as they get popular it's students first. If you are in Ottawa and no longer in school check out the CDB, and Ottawa River Runners. Club's are great for the total beginner but the real learning comes by befriending a kayaker and getting out. Most kayaker's learned this way and will be willing to pay-it-forward and teach a couple beginners the ropes. Some kayaker's can't get enough of teaching and spend their whole time on the river bringing newbs into the sport. It's usually easy to find these kind souls at the informal pool sessions run by clubs or individuals in the winter.
Boating Resources
In Ottawa the king of all boating beta and drama is the boaterboard. For the more core boater I would suggest Liquid Lore as the place to grab beta. Generally the Ottawa area goes through the same paddling cycle ever year. In the spring the ice breaks up and you get some high water play boating and creeking. Bus Eater (see above) comes in around 14-15 on the gauge and is good to the 18ish range. However you can play boat all summer long, this is the time to get out the 8 footer and go creek boating! Quebec and NY State both have really good runs. The Quebec runs get a bit more western boulder flavored as you drive further east, while the NY runs maintain the shield feel, and sport several waterfall filled sections. Check out American Whitewater and Myosis (mind the french). If you are city trapped check out this little diddy that is literally 15 minutes from Parliament. The summer is a good time to play boat The Ottawa, and come fall its time to grab both low water and high water creeks depending on the rain - the Rouge River in particular has a great 7 waterfall set up that's good under 40c.m./s.
Why Kayak?
Play boating is fun but the kayaking I really enjoy is the river adventures you can have on creeks, and I think I can best describe my feelings for the sport by focusing on creeking in particular.
Like most sports, Kayaking takes a fair bit of learning before you are reacting on instinct and get to experience the fringe of what the sport can offer. Bringing it back to finance, think of yourself landing in the middle of the investment universe on you're first day. Going anywhere that has tough water would be really risky, and paddling in the pool is not really that much fun. As you get better you have the opportunity to safely paddle harder water which is more fun. Some people don't get better they only get braver (they move straight up on the graph), some get better and "wiser" they move straight left. When you have the optimal skill set in all forms of kayaking you can use your knowledge in play boating to paddle harder creeks than you could if all you paddled was creeks (enter the capital market line). Here is a picture that explains all this.
Now that I have haphazardly mashed the learning progression in kayaking with some financial efficient market hypothesis framework, lets bring in some psychology. The reason so many people like extreme sports is because in the intensity of the challenge they get to experience flow.
When I'm kayaking down a class V canyon with my friends there is a lot going on. The water is roaring so loud that you communicate with hand signals if your more than a boat length away. To keep yourself and your friends safe you are using the rolling safety technique where every time you clear a feature you "eddy out" and make sure the person behind you makes it through. Not everyone can catch every eddy so your position in the group flips around a lot. When you are going over waterfalls, punching massive holes, ferrying around sieves, and banking off boulders, there is a lot of technique going on. Each moves requires it's own type of stroke and cadence; if you were to just paddle willy nilly down a class V river you would be stuck in a hydraulic and swimming before you could say back-deck roll.
So while you're charging down this stretch of river, your senses are receiving a full on assault. There is water in your eyes, you hear only the roar of the water, and you are constantly re-adjusting and charging through the river to keep yourself upright and moving downstream. Unlike almost any other sport, you can't stop in kayaking, so when you start getting off line things will only go bad to worse if you hesitate to rethink where to go. It is in these moments you get to experience flow; every thought is wiped from your head and you are only thinking about what you need to do in the moment. You are feeling every push on your boat and instantly reacting with a paddle stroke, while you careen down the river. As you boost over 30 foot waterfalls or blast through waves that are twice your standing height a bit of your brain is going "soooo coool" while the rest is going "I'm off line, I'm off line!!!". You finish the stretch and smile as your endorphins cruise through your veins and try to remember what just happened - and this is the coolest part - you can't. You can remember snippets, but generally your brain was under such an assault of receive and respond sensory input, it was firmly on 'play' not 'record'.
You probably have experienced a very watered down version of this when you talk on your cell phone in your car. Next time you end a call that required some real thinking to respond, try to remember the last couple of minutes of road. If you haven't traveled it before, I bet you'll find this quite difficult. That's a little bit of flow, you took your surroundings as insignificant because you are so used to not paying attention to anything when talking on the phone. Times that by 50 and you get the kind of flow that exists in extreme sports.
Sometimes I get this in finance exams, and sometimes I get it in racket sports, but never to the same degree as creek boating. This reality definitely sweetened Calgary as a destination during my job search - back to the cold water creeks of the Rockies. I hope that i-banking leaves some time for a weekend creek excursion, and hopefully my body can take it on a lower fitness baseline. If not maybe I'll have to find flow in golf?
I haven't been in a kayak in over four months, and it's the middle of October - I've missed the best of the fall run-off. Not to long ago I would be in a boat at least once every two weeks all year round (pools in the winter), and I hope to incorporate at least a quarter of that frequency into my life post-university, but for now let us reminisce.
Why Ottawa
As a western raised, blue blooded, Albertan, I often got this question. Why did you come to Carleton? Time warping back to my 17 year old mind, I moved to Ottawa for this:
 |
| Oswegatchie |
 |
| Ottawa River - Britannia Bay |
 |
| Ottawa River - Bus Eater - Roche Fondue Section |
How to get into it
If you are still in school many universities have great clubs for those interested. The Carleton Kayak Club has grown a ton in the last 4 years and I would highly recommend them to anyone interested. Although university clubs usually allow the public to attend their lessons as well, as they get popular it's students first. If you are in Ottawa and no longer in school check out the CDB, and Ottawa River Runners. Club's are great for the total beginner but the real learning comes by befriending a kayaker and getting out. Most kayaker's learned this way and will be willing to pay-it-forward and teach a couple beginners the ropes. Some kayaker's can't get enough of teaching and spend their whole time on the river bringing newbs into the sport. It's usually easy to find these kind souls at the informal pool sessions run by clubs or individuals in the winter.
Boating Resources
In Ottawa the king of all boating beta and drama is the boaterboard. For the more core boater I would suggest Liquid Lore as the place to grab beta. Generally the Ottawa area goes through the same paddling cycle ever year. In the spring the ice breaks up and you get some high water play boating and creeking. Bus Eater (see above) comes in around 14-15 on the gauge and is good to the 18ish range. However you can play boat all summer long, this is the time to get out the 8 footer and go creek boating! Quebec and NY State both have really good runs. The Quebec runs get a bit more western boulder flavored as you drive further east, while the NY runs maintain the shield feel, and sport several waterfall filled sections. Check out American Whitewater and Myosis (mind the french). If you are city trapped check out this little diddy that is literally 15 minutes from Parliament. The summer is a good time to play boat The Ottawa, and come fall its time to grab both low water and high water creeks depending on the rain - the Rouge River in particular has a great 7 waterfall set up that's good under 40c.m./s.
Why Kayak?
Play boating is fun but the kayaking I really enjoy is the river adventures you can have on creeks, and I think I can best describe my feelings for the sport by focusing on creeking in particular.
Like most sports, Kayaking takes a fair bit of learning before you are reacting on instinct and get to experience the fringe of what the sport can offer. Bringing it back to finance, think of yourself landing in the middle of the investment universe on you're first day. Going anywhere that has tough water would be really risky, and paddling in the pool is not really that much fun. As you get better you have the opportunity to safely paddle harder water which is more fun. Some people don't get better they only get braver (they move straight up on the graph), some get better and "wiser" they move straight left. When you have the optimal skill set in all forms of kayaking you can use your knowledge in play boating to paddle harder creeks than you could if all you paddled was creeks (enter the capital market line). Here is a picture that explains all this.
 | ||
| Nirvana/Risk Kayaking Frontier |
When I'm kayaking down a class V canyon with my friends there is a lot going on. The water is roaring so loud that you communicate with hand signals if your more than a boat length away. To keep yourself and your friends safe you are using the rolling safety technique where every time you clear a feature you "eddy out" and make sure the person behind you makes it through. Not everyone can catch every eddy so your position in the group flips around a lot. When you are going over waterfalls, punching massive holes, ferrying around sieves, and banking off boulders, there is a lot of technique going on. Each moves requires it's own type of stroke and cadence; if you were to just paddle willy nilly down a class V river you would be stuck in a hydraulic and swimming before you could say back-deck roll.
So while you're charging down this stretch of river, your senses are receiving a full on assault. There is water in your eyes, you hear only the roar of the water, and you are constantly re-adjusting and charging through the river to keep yourself upright and moving downstream. Unlike almost any other sport, you can't stop in kayaking, so when you start getting off line things will only go bad to worse if you hesitate to rethink where to go. It is in these moments you get to experience flow; every thought is wiped from your head and you are only thinking about what you need to do in the moment. You are feeling every push on your boat and instantly reacting with a paddle stroke, while you careen down the river. As you boost over 30 foot waterfalls or blast through waves that are twice your standing height a bit of your brain is going "soooo coool" while the rest is going "I'm off line, I'm off line!!!". You finish the stretch and smile as your endorphins cruise through your veins and try to remember what just happened - and this is the coolest part - you can't. You can remember snippets, but generally your brain was under such an assault of receive and respond sensory input, it was firmly on 'play' not 'record'.
You probably have experienced a very watered down version of this when you talk on your cell phone in your car. Next time you end a call that required some real thinking to respond, try to remember the last couple of minutes of road. If you haven't traveled it before, I bet you'll find this quite difficult. That's a little bit of flow, you took your surroundings as insignificant because you are so used to not paying attention to anything when talking on the phone. Times that by 50 and you get the kind of flow that exists in extreme sports.
Sometimes I get this in finance exams, and sometimes I get it in racket sports, but never to the same degree as creek boating. This reality definitely sweetened Calgary as a destination during my job search - back to the cold water creeks of the Rockies. I hope that i-banking leaves some time for a weekend creek excursion, and hopefully my body can take it on a lower fitness baseline. If not maybe I'll have to find flow in golf?
 |
| Bobby Burns Creek - BC |
Tuesday, October 19, 2010
The Anatomy of a Case Competition
For keener business students nothing screams high ROI like a case competition. Four hours of work, a captive audience forced to listen to your divine narrative, and a chance to slap some hardware onto your resume. Good performances pay great dividends: you get a success story to spin in a resume, networking contacts at the event, auxiliary recognition from your school if you rocked hard enough, and for the out of town comps - a paid vacation!
Unfortunately students and schools have caught on. Many schools have incorporated dedicated courses for case competitions into their offering, and they ensure enrollment by dictating that any case participant must have taken the case class. For the big competitions students will be hand picked by faculty many months in advance and will run through around 10-15 practices cases (usually Saturday afternoons ~100 hrs prep time) before attending the comp. The competition is tougher, but the prizes are bigger too. Executive level judging panels, cash prizes, and sometimes internship offers.
Here's a break down of how to approach three styles of case comps, the 3 hour case, the live case, and the topic competition.
The Three Hour Case Competition
Most of these cases only allow for teams of four people, and are the most common and competitive. I'll speak case strategy from the viewpoint of a business general case competition (strategic management mostly) but the same usually applies to the concentration specific comps.
Team Make-up
For the general case comp, if you are self forming your team try to have the two major streams accounted for - finance and marketing. Keep it as senior as possible, 3rd year and 4th year students. Be sure to have at least one boy/girl, and generally value speaking skills over technical skills. Of course optimally the team should be top students, but winning a case comp is 60% sales skills and 40% strategy (give or take a %). Generally this is done for you by the school but if not, that's what I suggest.
Roles & Time Strategy
The three hour case comp gives you three hours to read a case, develop a strategy and create a presentation. You have usually around 20 minutes to present and 10 minutes of Q&A.
When you are practicing you need to standardize several things so that on the day of you don't need to talk about them. One person - usually a marketing student - will create the presentation (deck wizard) and assuming you have more than one laptop, one person will pump graphs and pro-forma's (the quant).
The presentation creation will always be the same and it should ALWAYS start at the same time. Typically when you begin you all sit down and start reading the case, if it's a long case the deck wizard skips the company background and focuses on the meat. At the 30 minute mark, it's deck creation time; all the standard stuff, title page, bread crumbs, sign posts (slides that indicate a topic change), graphics. It's usually good to have one or two general solution layouts. For instance one could be your basic 3 alternative 1 solution layout. Cases are like Hollywood action movies - they follow a formula - and because of this you already have a pretty good idea of how you will present the solution, even before you read the case.
At the 45 minute mark everyone is usually finished the case. As people finish they start writing what they think is important on a whiteboard, chalk board, or flip paper. Resist the temptation to write it on a sheet; many people have the same idea's and its much faster to go right to group think. Write under categories: problems, alternatives, solutions, ect. As your writing start talking strategy, you have about another 45 minutes to boil down to your final solution so its time for a healthy debate. This is where the magic happens, everyone (deck wizard included) pitches idea's, and they are adapted, shot down, researched (within the case, internet is almost always blocked in these things). Thinking outside of the box is good, judges come to these things to see fresh ideas, get creative. One classic alternative is the "status quo", if costs of a different path are significant this should probably be in your option tree. Team dynamics count a lot here. If the team has gelled and everyone knows everyone's strengths and weaknesses, the team will know as they read the case who should be tailoring the solution. There is no time for circular argument, every debate needs to pushing the final solution forward, and if you realize you're wrong 30 minutes in, don't back-peddle, just figure out how to sell it.
Once you have figured out how to turn the whole organization around, feed the poor, and establish world peace, it's time to prove your solution. Something everyone should have in mind as they are filling in gaps in the deck is the rubric. Many case comps show you the scorecard the judges mark on, PLAY TO IT. Make sure you put a check mark beside each deliverable, talk to everything they are looking for. The quant will now need to do something that is totally against their academic training - they need to start making things up. The numbers given in the general cases are usually pretty sparse, but judges want to see return on investment, capital outlay, a 5 year budgeting plan, sensitivity analysis, maybe even Value at Risk (VaR), and you need to produce. It's a fine dance as you assume the needed inputs and you have to do it very quickly. Charts and graphs usually enter the deck in the last hour, and they need to look slick, while telling the story.
At the 2.5hr mark its dry run time. In my experience 75% of the time this never actually happens and when it does its a bit off because you're mind knows it isn't 'game time' so you are still thinking of your back story. But when you do get the chance you end up catching all the spelling and formatting errors and the real deal goes off even smoother than it would have.
The Presentation
When your in the room it's game time. Role play to the max, shake hands, and be the consulting team you're pretending to be. This means have a logo on the slides, and a name - go as legit as you can. Just like before everyone has their roles, someone is always presenting the intro, someone else the alternatives, someone the solution, and someone the risks and implementation. Although you might want to shake it up, by keeping it consistent you will naturally think about your pitch when you are reading the case, giving your mind more time to flesh out the soft aspects of the presentation (humor, timing, emphasis, delivery). If you are not presenting, you are "showing the love", smile, nod, and keep your hands 'quiet'. When you are presenting, its all confidence. Only newbs use notes; make eye contact and let your presentation flow. If you see frowns or puzzled looks, expand upon a point, if you see that they get it move forward. You are not presenting, you are selling. It's like having an argument with your parents for more allowance money when you're a kid; you play off their facial expressions as ques to hard sell or back peddle. Hopefully you were receiving the same 50% wage increase YoY I was, if not, make sure your sell skills are up to par for the task at hand.
The Q&A
This is where you win it. These judges get to see the same problem solved four different ways. As they see solutions that differ they will often ask you why the other groups solution wouldn't work. When answering use the step forward approach. If you know you have the answer to a question while it's being asked step forward to signal to your team you're going to take this one. If nobody steps up by the time the question is done, usually through practice you know who is best at BS'ing it and let them take a crack at it. Sometimes someone is missing an angle in their answer and so before they are done somebody else might choose to step forward. If they do, the answering party should wrap up their point and let the other person drive the other angle. This is risky. Never contradict the previous answer, it makes you look like amateurs. If you are going to flesh it out use words like "Also from the cost perspective...", or "Evidence to support Dan's point is...". Make sure you thank the judge for their question, and generally make them feel like they are gods gift to mankind.
The Financial Live Case Competition
I've only done one of these, but I learned some valuable lessons in the process. The biggest thing is that the private sector sells an opinion to an audience, they don't hand out "maybes". Don't get me wrong, there are hold recommendations, but each recommendation has a central investment theme and you play to it.
Homework
Any live case competition will give the group more time. For those used to pounding through 3 hour cases it seems like a blessing, but you quickly realize a)how long it takes to assemble information that is usually given in a case, and b)with more time, expectation only increase. Grab as much data as you can, and really dig into what industry publications have been saying about where the sub-market is going, and the stance of your business. These are things the judges will know, and it is assumed you will know the territory when you value the company, not knowing can result in some embarrassingly inaccurate assumptions.
Valuation
The street could care less about your DCF. Blasphemy I know, along with CAPM it looks like the Royals Royce of valuation tools. The truth is if you're not valuing coca-cola, DCF's just rely too heavily on forecast assumptions - crap in crap out. Put it in, and talk about it, but your valuation meat should come from your relative valuation.
For the relative valuation (aka peer valuation), go to town. If you can value each distinct revenue driver of the firm against direct competitors - do it. For example when peer valuing Disney instead of doing enterprise value (EV) for the whole company, find the EV over cash flow for it's resorts, hotels, entertainment lines and then use the multiple analysis method against firms who specifically operate in these markets. Solve for each individual EV, sum them up, scrape off debt, divide by S/O and you've got what the market should be valuing them at today. I plan to expand on valuation sometime, but I'm debating on waiting till after I enter the private sector so that I can speak to it from the practitioner perspective instead of the academic viewpoint. If not that long I will at least wait until I get all goods from my MSF before I pontificate the 'right' ways to do it.
Risk
Another place to shine. Sensitivity analysis, VaR, Monte-Carlo simulations, debt analysis; grab your stats package, keep your valuations soft coded, and swing for the fences.
Topic Competition
I'm losing gas, and I know I'm not doing these last two justice, but in lieu of the next post on the subject I'll say this. When you have a choice of what to present in a topic based competition, making the right topic selection is the biggest deciding factor in your ability to bring home the "W". These types of comps are all about owning your topic, being extremely well versed in the area you tackle, and presenting your ideas as though you're a 35 year old inventor pitching his last 15 years of work to a PE firm that will either make all his dreams come true, or turn him into a janitor. In other words you need to have drunk your own Kool Aid, and be ready to make the sales pitch of your degree. It's also important to really be able to be passionate about your topic because as with most things, its the person who does the most work that wins. Be careful in choosing a topic that is shallow, or could ever be "complete". You want something that has a lot of depth and will be interesting to you for at least 50 hours, and extremely interesting to a judge for 30 minutes.
In the end case comps are just simulated business problems. Read the problem, solve the problem, present the problem; what's so hard about that?
Unfortunately students and schools have caught on. Many schools have incorporated dedicated courses for case competitions into their offering, and they ensure enrollment by dictating that any case participant must have taken the case class. For the big competitions students will be hand picked by faculty many months in advance and will run through around 10-15 practices cases (usually Saturday afternoons ~100 hrs prep time) before attending the comp. The competition is tougher, but the prizes are bigger too. Executive level judging panels, cash prizes, and sometimes internship offers.
Here's a break down of how to approach three styles of case comps, the 3 hour case, the live case, and the topic competition.
The Three Hour Case Competition
Most of these cases only allow for teams of four people, and are the most common and competitive. I'll speak case strategy from the viewpoint of a business general case competition (strategic management mostly) but the same usually applies to the concentration specific comps.
Team Make-up
For the general case comp, if you are self forming your team try to have the two major streams accounted for - finance and marketing. Keep it as senior as possible, 3rd year and 4th year students. Be sure to have at least one boy/girl, and generally value speaking skills over technical skills. Of course optimally the team should be top students, but winning a case comp is 60% sales skills and 40% strategy (give or take a %). Generally this is done for you by the school but if not, that's what I suggest.
Roles & Time Strategy
The three hour case comp gives you three hours to read a case, develop a strategy and create a presentation. You have usually around 20 minutes to present and 10 minutes of Q&A.
When you are practicing you need to standardize several things so that on the day of you don't need to talk about them. One person - usually a marketing student - will create the presentation (deck wizard) and assuming you have more than one laptop, one person will pump graphs and pro-forma's (the quant).
The presentation creation will always be the same and it should ALWAYS start at the same time. Typically when you begin you all sit down and start reading the case, if it's a long case the deck wizard skips the company background and focuses on the meat. At the 30 minute mark, it's deck creation time; all the standard stuff, title page, bread crumbs, sign posts (slides that indicate a topic change), graphics. It's usually good to have one or two general solution layouts. For instance one could be your basic 3 alternative 1 solution layout. Cases are like Hollywood action movies - they follow a formula - and because of this you already have a pretty good idea of how you will present the solution, even before you read the case.
At the 45 minute mark everyone is usually finished the case. As people finish they start writing what they think is important on a whiteboard, chalk board, or flip paper. Resist the temptation to write it on a sheet; many people have the same idea's and its much faster to go right to group think. Write under categories: problems, alternatives, solutions, ect. As your writing start talking strategy, you have about another 45 minutes to boil down to your final solution so its time for a healthy debate. This is where the magic happens, everyone (deck wizard included) pitches idea's, and they are adapted, shot down, researched (within the case, internet is almost always blocked in these things). Thinking outside of the box is good, judges come to these things to see fresh ideas, get creative. One classic alternative is the "status quo", if costs of a different path are significant this should probably be in your option tree. Team dynamics count a lot here. If the team has gelled and everyone knows everyone's strengths and weaknesses, the team will know as they read the case who should be tailoring the solution. There is no time for circular argument, every debate needs to pushing the final solution forward, and if you realize you're wrong 30 minutes in, don't back-peddle, just figure out how to sell it.
Once you have figured out how to turn the whole organization around, feed the poor, and establish world peace, it's time to prove your solution. Something everyone should have in mind as they are filling in gaps in the deck is the rubric. Many case comps show you the scorecard the judges mark on, PLAY TO IT. Make sure you put a check mark beside each deliverable, talk to everything they are looking for. The quant will now need to do something that is totally against their academic training - they need to start making things up. The numbers given in the general cases are usually pretty sparse, but judges want to see return on investment, capital outlay, a 5 year budgeting plan, sensitivity analysis, maybe even Value at Risk (VaR), and you need to produce. It's a fine dance as you assume the needed inputs and you have to do it very quickly. Charts and graphs usually enter the deck in the last hour, and they need to look slick, while telling the story.
At the 2.5hr mark its dry run time. In my experience 75% of the time this never actually happens and when it does its a bit off because you're mind knows it isn't 'game time' so you are still thinking of your back story. But when you do get the chance you end up catching all the spelling and formatting errors and the real deal goes off even smoother than it would have.
The Presentation
When your in the room it's game time. Role play to the max, shake hands, and be the consulting team you're pretending to be. This means have a logo on the slides, and a name - go as legit as you can. Just like before everyone has their roles, someone is always presenting the intro, someone else the alternatives, someone the solution, and someone the risks and implementation. Although you might want to shake it up, by keeping it consistent you will naturally think about your pitch when you are reading the case, giving your mind more time to flesh out the soft aspects of the presentation (humor, timing, emphasis, delivery). If you are not presenting, you are "showing the love", smile, nod, and keep your hands 'quiet'. When you are presenting, its all confidence. Only newbs use notes; make eye contact and let your presentation flow. If you see frowns or puzzled looks, expand upon a point, if you see that they get it move forward. You are not presenting, you are selling. It's like having an argument with your parents for more allowance money when you're a kid; you play off their facial expressions as ques to hard sell or back peddle. Hopefully you were receiving the same 50% wage increase YoY I was, if not, make sure your sell skills are up to par for the task at hand.
The Q&A
This is where you win it. These judges get to see the same problem solved four different ways. As they see solutions that differ they will often ask you why the other groups solution wouldn't work. When answering use the step forward approach. If you know you have the answer to a question while it's being asked step forward to signal to your team you're going to take this one. If nobody steps up by the time the question is done, usually through practice you know who is best at BS'ing it and let them take a crack at it. Sometimes someone is missing an angle in their answer and so before they are done somebody else might choose to step forward. If they do, the answering party should wrap up their point and let the other person drive the other angle. This is risky. Never contradict the previous answer, it makes you look like amateurs. If you are going to flesh it out use words like "Also from the cost perspective...", or "Evidence to support Dan's point is...". Make sure you thank the judge for their question, and generally make them feel like they are gods gift to mankind.
The Financial Live Case Competition
I've only done one of these, but I learned some valuable lessons in the process. The biggest thing is that the private sector sells an opinion to an audience, they don't hand out "maybes". Don't get me wrong, there are hold recommendations, but each recommendation has a central investment theme and you play to it.
Homework
Any live case competition will give the group more time. For those used to pounding through 3 hour cases it seems like a blessing, but you quickly realize a)how long it takes to assemble information that is usually given in a case, and b)with more time, expectation only increase. Grab as much data as you can, and really dig into what industry publications have been saying about where the sub-market is going, and the stance of your business. These are things the judges will know, and it is assumed you will know the territory when you value the company, not knowing can result in some embarrassingly inaccurate assumptions.
Valuation
The street could care less about your DCF. Blasphemy I know, along with CAPM it looks like the Royals Royce of valuation tools. The truth is if you're not valuing coca-cola, DCF's just rely too heavily on forecast assumptions - crap in crap out. Put it in, and talk about it, but your valuation meat should come from your relative valuation.
For the relative valuation (aka peer valuation), go to town. If you can value each distinct revenue driver of the firm against direct competitors - do it. For example when peer valuing Disney instead of doing enterprise value (EV) for the whole company, find the EV over cash flow for it's resorts, hotels, entertainment lines and then use the multiple analysis method against firms who specifically operate in these markets. Solve for each individual EV, sum them up, scrape off debt, divide by S/O and you've got what the market should be valuing them at today. I plan to expand on valuation sometime, but I'm debating on waiting till after I enter the private sector so that I can speak to it from the practitioner perspective instead of the academic viewpoint. If not that long I will at least wait until I get all goods from my MSF before I pontificate the 'right' ways to do it.
Risk
Another place to shine. Sensitivity analysis, VaR, Monte-Carlo simulations, debt analysis; grab your stats package, keep your valuations soft coded, and swing for the fences.
Topic Competition
I'm losing gas, and I know I'm not doing these last two justice, but in lieu of the next post on the subject I'll say this. When you have a choice of what to present in a topic based competition, making the right topic selection is the biggest deciding factor in your ability to bring home the "W". These types of comps are all about owning your topic, being extremely well versed in the area you tackle, and presenting your ideas as though you're a 35 year old inventor pitching his last 15 years of work to a PE firm that will either make all his dreams come true, or turn him into a janitor. In other words you need to have drunk your own Kool Aid, and be ready to make the sales pitch of your degree. It's also important to really be able to be passionate about your topic because as with most things, its the person who does the most work that wins. Be careful in choosing a topic that is shallow, or could ever be "complete". You want something that has a lot of depth and will be interesting to you for at least 50 hours, and extremely interesting to a judge for 30 minutes.
In the end case comps are just simulated business problems. Read the problem, solve the problem, present the problem; what's so hard about that?
Monday, October 18, 2010
A perspective on applying to MSc Business degrees, right after a business undergrad
40 years ago a relatively small part of the population went on to study after high school, now it is the norm. Because having an undergrad is the norm, firms are having to get pickier on how they select their candidates. They do this by raising the minimum GPA, establishing dedicated recruitment campus, and starting to hire more Masters students for Analyst positions. In another 40 years you might need a Ph.D. to grab those elusive top paying jobs. Here is a road map on how to make the Masters choice today.
Motivation
If you are considering more education after graduating your business degree you need to settle on your motivation. Do you want to get a MSc to break into a top firm? Or do you want to work towards a Ph.D. and teach someday. Each path needs a masters, however each path needs a much different education, and its time to choose which path is right for you.
The GMAT
This was the achilles heal of my applications, I did not prep enough. If you are serious in pushing into a top b-school you need a GMAT score in the 700's with a balanced quant/verbal split. For most of us in North America, we have done the better part of the last 10 years with a calculator in our hands - the GMAT is all by hand. If you've been reading business publications like the economist then you've already prepped for the verbal, but if not, verbal scores are the slowest to improve. Buy a book, take a prep course, allocate 100 hours, do what you need to become 90th+ percentile.
The Search
When you have your GMAT and can ballpark your GPA you can start setting your sights on schools. Generally if you are anywhere in the median 80% you have a real shot at making it in. Use b-school ranking lists, and understand how they are calculated. Most ranking lists incorporate incoming GMAT scores, exit salary, and % students placed 90 days after graduation, but each has their own take.
If you are focusing on getting hired, it's these ranking lists you need to look at, along with asking / looking at who recruits on campus. If you know your dream job, may as well go to the school that they recruit from. If your looking for research heavy programs for a Ph.D. you'll need to follow an entirely different screening method that I don't know anything about.
Quantity or Quality
I chose to focus on only three schools and spend a lot of time tailoring each essay to exactly what the school was looking for. Some choose to do the scatter-shot approach which makes sense statistically but remember you need tailored on-line recommendation letters for all these schools. Make sure to apply to at least one school that is out of your league. When you get into all of your schools, the "what if" thought often nags at you a bit. Of course also have a backup school for the worst case scenario. I strongly recommend applying in the first round because that is where most of the scholarship money is handed out, and it works best with the "eager for success" story you're going to need to tell.
Your Brand
The nice thing about business schools is that they are businesses. When you graduate you are their product, and when you are applying you are their supply. Everything you need to know about how to tell your story to get in, you can get by thinking about what they want from you when you get out. Namely, they want you to get a great job that has a really high pay so that you can boost their rankings, give lots of money back to the school when you make it big, and help following graduates land at the same firm. So in the essay's interview ect, focus a lot on how the education at this school is going to allow you to achieve your dreams. Focus on the particulars of that school, what about it specifically will give you wings ect. Also talk a lot about what you can contribute to the class, b-school is all about team so you can't be to "me me me" when talking about your candidacy. You are already a business student so your landing potential is high, it's just communicating it all and showing the admissions team you're [school name] material.
Interview Prep
Besides the advice above I would practice the common questions a lot with willing profs and friends, especially if your not a great public speaker. A lot of applicants will publish the questions they received on-line, grab what you can, but know all the general ones too. The behavioral questions need to answered genuinely, talk with friends and family to flesh out your real strengths and weaknesses and think about your 'story' around them.
The cut above
Just like dating a real 'catch', getting into b-school is all about going the extra mile. By the time I had my offer I was engaged in about 8 different email conversations with different people in admissions and in the school, asking about different facets of the program and the post graduation opportunities. Don't be annoying, be eager. When the admissions team sits down and opens your file you want positive mind share with as many people as possible before they start going over the quant aspects of the application. I strongly believe that if you can get one person to fight for you, you're in, even if your GMAT and/or GPA was sub median 80%. Networking is really respected at b-school and using it to get into the program will just underline why you will likely score the great job when your actually enrolled.
If you can get a job you are happy with out of undergrad you're setting yourself up for the much more practiced approach of 3 years work experience then MBA. The MSc is a gamble on jumping the que a little bit, delaying real life one more year, and grabbing a top job away from a would be candidate at a top tier undergrad school. But with a CFA you likely won't need an MBA anyways so it's really just compressing the inevitable Masters into one year and getting it out of the way!
Motivation
If you are considering more education after graduating your business degree you need to settle on your motivation. Do you want to get a MSc to break into a top firm? Or do you want to work towards a Ph.D. and teach someday. Each path needs a masters, however each path needs a much different education, and its time to choose which path is right for you.
The GMAT
This was the achilles heal of my applications, I did not prep enough. If you are serious in pushing into a top b-school you need a GMAT score in the 700's with a balanced quant/verbal split. For most of us in North America, we have done the better part of the last 10 years with a calculator in our hands - the GMAT is all by hand. If you've been reading business publications like the economist then you've already prepped for the verbal, but if not, verbal scores are the slowest to improve. Buy a book, take a prep course, allocate 100 hours, do what you need to become 90th+ percentile.
The Search
When you have your GMAT and can ballpark your GPA you can start setting your sights on schools. Generally if you are anywhere in the median 80% you have a real shot at making it in. Use b-school ranking lists, and understand how they are calculated. Most ranking lists incorporate incoming GMAT scores, exit salary, and % students placed 90 days after graduation, but each has their own take.
If you are focusing on getting hired, it's these ranking lists you need to look at, along with asking / looking at who recruits on campus. If you know your dream job, may as well go to the school that they recruit from. If your looking for research heavy programs for a Ph.D. you'll need to follow an entirely different screening method that I don't know anything about.
Quantity or Quality
I chose to focus on only three schools and spend a lot of time tailoring each essay to exactly what the school was looking for. Some choose to do the scatter-shot approach which makes sense statistically but remember you need tailored on-line recommendation letters for all these schools. Make sure to apply to at least one school that is out of your league. When you get into all of your schools, the "what if" thought often nags at you a bit. Of course also have a backup school for the worst case scenario. I strongly recommend applying in the first round because that is where most of the scholarship money is handed out, and it works best with the "eager for success" story you're going to need to tell.
Your Brand
The nice thing about business schools is that they are businesses. When you graduate you are their product, and when you are applying you are their supply. Everything you need to know about how to tell your story to get in, you can get by thinking about what they want from you when you get out. Namely, they want you to get a great job that has a really high pay so that you can boost their rankings, give lots of money back to the school when you make it big, and help following graduates land at the same firm. So in the essay's interview ect, focus a lot on how the education at this school is going to allow you to achieve your dreams. Focus on the particulars of that school, what about it specifically will give you wings ect. Also talk a lot about what you can contribute to the class, b-school is all about team so you can't be to "me me me" when talking about your candidacy. You are already a business student so your landing potential is high, it's just communicating it all and showing the admissions team you're [school name] material.
Interview Prep
Besides the advice above I would practice the common questions a lot with willing profs and friends, especially if your not a great public speaker. A lot of applicants will publish the questions they received on-line, grab what you can, but know all the general ones too. The behavioral questions need to answered genuinely, talk with friends and family to flesh out your real strengths and weaknesses and think about your 'story' around them.
The cut above
Just like dating a real 'catch', getting into b-school is all about going the extra mile. By the time I had my offer I was engaged in about 8 different email conversations with different people in admissions and in the school, asking about different facets of the program and the post graduation opportunities. Don't be annoying, be eager. When the admissions team sits down and opens your file you want positive mind share with as many people as possible before they start going over the quant aspects of the application. I strongly believe that if you can get one person to fight for you, you're in, even if your GMAT and/or GPA was sub median 80%. Networking is really respected at b-school and using it to get into the program will just underline why you will likely score the great job when your actually enrolled.
If you can get a job you are happy with out of undergrad you're setting yourself up for the much more practiced approach of 3 years work experience then MBA. The MSc is a gamble on jumping the que a little bit, delaying real life one more year, and grabbing a top job away from a would be candidate at a top tier undergrad school. But with a CFA you likely won't need an MBA anyways so it's really just compressing the inevitable Masters into one year and getting it out of the way!
Sunday, October 17, 2010
A Typical Interview Process for an Investment Banking Analyst
Investment banks hire their Analysts about 10 months before they start. The exact process varies from bank to bank but generally an applicant should expect the process to begin in the middle of August and end in the middle of September for the top firms. These are the big multinational bulge bracket investment banks like Credit Suisse, Goldman Sachs (although they are a bit later), UBS, Barclays Capital, Morgan Stanley, and so on.
The theory I've heard is that the top firms pay top dollar to get what they think is the best talent coming out of this years business school graduate class at the undergrad (analyst) and grad (associate) level. After this hiring cycle is done the next tranche of banks on the league table grab their candidates for a little less money and it trickles down through the fall and winter as mid-market and boutique firms make their play for graduates. Come spring all the firms open their doors again if they want to fill a spot or two and offer unemployed grads a direct hire position. There are of course on the spot hires for teams that are in heavy need of more hands throughout the year but most graduates are recruited in one of these cycles.
Round One
The first round is the screening round. Resumes flood the firm through online applications, campus recruiting, and in firm recommendations. In my fall push I was 1 for 2 on an in firm push through approach, and 1 for 15 on the only online application approach - even then the 1 that bit was something I don't think I would have taken if it was offered. So if your serious in your landing attempts you need to reach somebody in the firm who can place your resume on the right stack. If you're successful you'll be given a call to line up a behavioral interview; I was given about 12 hour notice, so its good to be on your toes in your interview prep as soon as you are applying.
Round Two
Unbeknownst to me at the time I actually did my behavioral interview before I was screened. My contact in the firm had gathered enough on our 'informational interview' to form an opinion on my fit in the firm that he must have given me a pass on this round. The general questions you can expect here are the classic ones like: "Walk me through your resume", "Why investment banking?", "Why [firm name]", "Why this team?", "Do you think you can take the hours?", "What three of your strengths and weaknesses", "What are some questions you have for me?". The list goes on; generally if you take some time to think about your motivations and skills you will be equipped with genuine answers to give to the interviewer. If you are just memorizing what you think they want to hear because you think they wouldn't like your answer then perhaps you are applying to the wrong line of work?
Round Three
When I was given my 12 hour heads up for my behavioral interview, what I was actually being notified for was my third round technical interview. This became pretty clear after the second question, and I had to lean hard on my undergraduate knowledge and CFA I prep to answer valuation questions on the fly. Keeping in mind that I was applying to an M&A role in a office that deals primarily with large oil and gas firms here are some technical questions you can expect in the third round.
1. Walk me through your resume
2. How do you value a company?
3. How do you value a pure play oil and gas firm?
4. How do you value a firm before it IPO's?
5. Should you expect your DCF value to be higher or lower than your comparable's value?
6. What multiples should you use to value Oil and Gas companies? Be as specific as possible. (He wanted to hear Enterprise Value over Reserves, and I got likely got the next question as a follow up to see if I could incorporate the 'right answer')
7. You have been researching a firm and have a solid grasp of BPD [barrel per day] numbers, and their current and historical reserves. They are a pure play upstream O&G firm. How do you use this information to help you value the company?
8. A firm in the same geographical region and with normal firm activities (no blow ups ect) has a stock that is under-performing peers. What are the possible explanations for this / what would you check for?
9. Talk to me about LBO's. Should the precedent value set by other deals be higher or lower than your DCF valuation?
10. Any questions for me?
Round Four
And now the final round. They usually do this one on-site and so expect to be flown to the location at a moments notice. I learned of my Friday morning interview on a Wednesday afternoon, and had Thursday travel booked by Thursday morning; everything is last minute. You get to see a bit of how the firm values your candidacy at this point, everything is paid for and you are put up in very nice hotels. The day of the interview begins with a gathering of the prospective candidates. I expect each office does this their own way, but for my final round I ended up talking to the other three candidates for about 20 minutes while the team assembled for the rolling interview rounds.
There was four stations, or offices, that had two different people that would test you on different things, except for one office that housed the managing director. All of the interviews would start with "walk me through your resume" and the interviewers would focus in on different things as you made your pitch. I started with the MD and it was a behavioral / interest interview. It was my responsibility to ask most of the questions, and go into a bit of explanation of why I thought I was a good fit and could handle the work. Each interview would last about 40 minutes and then you would immediately transition to the next interview.
My second interview was with two members of the team - the interviewers ranged from the Analyst to VP / Director level. This one went technical quickly and I quickly sensed it was going to take an accounting bent. Like some young financiers I look at accounting like pilots look at radio protocol. Necessary to do the job, but always an unpleasant experience. So after covering as much ground as I could on the more interesting projects I was bringing to the table, it was time to tackle their questions. They went something like this:
1. Walk me though your resume
2. How do you value a company
3. Walk me through a DCF valuation from Revenue.
4. I just bought a piece of equipment for $100, $50 was cash, $50 was debt. Walk me though every accounting transaction that occurs during the year. And fill out the financial statements starting at net income.
This last question in particular is a tricky one and I heard it replicated in a interview prep course I ended up sitting in on after landing so I assume it's industry standard. I asked if I could write things on their white board and I was told no. I got them as far as the depreciation tax shield and change in retained earnings but it was a bit slow and painfully confusing to do all in my head. I solved it on paper on the plane ride home and it is actually a tricky question that looks deceptively simple to do in your head.
My third interview was another fit interview after being a bit shaken from my accounting interview I hit this one as hard as I could. In the moment it felt like it went well, and it was passion filled. It was one of those moments that you realize your dream might be slipping from your finger tips and the adrenalin kicks up yet another gear. It was in that interview that I realized how crushed I would be if I didn't land at this particular firm, and how much I really did want the job. From what I can remember it was a re-hash of the behavioral questions that should have been my round one.
My fourth and final interview was a valuation interview, something I've taken to be a personal strength, but after 2+ hours of grilling I was losing my crispness. Questions I recall being asked were:
1. Quickly walk me through your resume
2. What stock would you buy today?
3. How would you value it?
4. How do you measure investment risk?
5. Why Investment Banking?
6. You experiences lean towards investment management, why not pursue that?
7. Why Canada after studying in the USA?
And that was it. I raced out of the office to catch my flight home and my emotions swung a bit as I re-ran questions in my mind. In particular the accounting questions ate at me, and I felt I had definitely given them enough to say no.
Mercifully the offer call came in the next day on a Saturday afternoon and I worked with HR Sunday evening to iron out all the details - yet another indication that anyone in an investment firm never sleeps.
The theory I've heard is that the top firms pay top dollar to get what they think is the best talent coming out of this years business school graduate class at the undergrad (analyst) and grad (associate) level. After this hiring cycle is done the next tranche of banks on the league table grab their candidates for a little less money and it trickles down through the fall and winter as mid-market and boutique firms make their play for graduates. Come spring all the firms open their doors again if they want to fill a spot or two and offer unemployed grads a direct hire position. There are of course on the spot hires for teams that are in heavy need of more hands throughout the year but most graduates are recruited in one of these cycles.
Round One
The first round is the screening round. Resumes flood the firm through online applications, campus recruiting, and in firm recommendations. In my fall push I was 1 for 2 on an in firm push through approach, and 1 for 15 on the only online application approach - even then the 1 that bit was something I don't think I would have taken if it was offered. So if your serious in your landing attempts you need to reach somebody in the firm who can place your resume on the right stack. If you're successful you'll be given a call to line up a behavioral interview; I was given about 12 hour notice, so its good to be on your toes in your interview prep as soon as you are applying.
Round Two
Unbeknownst to me at the time I actually did my behavioral interview before I was screened. My contact in the firm had gathered enough on our 'informational interview' to form an opinion on my fit in the firm that he must have given me a pass on this round. The general questions you can expect here are the classic ones like: "Walk me through your resume", "Why investment banking?", "Why [firm name]", "Why this team?", "Do you think you can take the hours?", "What three of your strengths and weaknesses", "What are some questions you have for me?". The list goes on; generally if you take some time to think about your motivations and skills you will be equipped with genuine answers to give to the interviewer. If you are just memorizing what you think they want to hear because you think they wouldn't like your answer then perhaps you are applying to the wrong line of work?
Round Three
When I was given my 12 hour heads up for my behavioral interview, what I was actually being notified for was my third round technical interview. This became pretty clear after the second question, and I had to lean hard on my undergraduate knowledge and CFA I prep to answer valuation questions on the fly. Keeping in mind that I was applying to an M&A role in a office that deals primarily with large oil and gas firms here are some technical questions you can expect in the third round.
1. Walk me through your resume
2. How do you value a company?
3. How do you value a pure play oil and gas firm?
4. How do you value a firm before it IPO's?
5. Should you expect your DCF value to be higher or lower than your comparable's value?
6. What multiples should you use to value Oil and Gas companies? Be as specific as possible. (He wanted to hear Enterprise Value over Reserves, and I got likely got the next question as a follow up to see if I could incorporate the 'right answer')
7. You have been researching a firm and have a solid grasp of BPD [barrel per day] numbers, and their current and historical reserves. They are a pure play upstream O&G firm. How do you use this information to help you value the company?
8. A firm in the same geographical region and with normal firm activities (no blow ups ect) has a stock that is under-performing peers. What are the possible explanations for this / what would you check for?
9. Talk to me about LBO's. Should the precedent value set by other deals be higher or lower than your DCF valuation?
10. Any questions for me?
Round Four
And now the final round. They usually do this one on-site and so expect to be flown to the location at a moments notice. I learned of my Friday morning interview on a Wednesday afternoon, and had Thursday travel booked by Thursday morning; everything is last minute. You get to see a bit of how the firm values your candidacy at this point, everything is paid for and you are put up in very nice hotels. The day of the interview begins with a gathering of the prospective candidates. I expect each office does this their own way, but for my final round I ended up talking to the other three candidates for about 20 minutes while the team assembled for the rolling interview rounds.
There was four stations, or offices, that had two different people that would test you on different things, except for one office that housed the managing director. All of the interviews would start with "walk me through your resume" and the interviewers would focus in on different things as you made your pitch. I started with the MD and it was a behavioral / interest interview. It was my responsibility to ask most of the questions, and go into a bit of explanation of why I thought I was a good fit and could handle the work. Each interview would last about 40 minutes and then you would immediately transition to the next interview.
My second interview was with two members of the team - the interviewers ranged from the Analyst to VP / Director level. This one went technical quickly and I quickly sensed it was going to take an accounting bent. Like some young financiers I look at accounting like pilots look at radio protocol. Necessary to do the job, but always an unpleasant experience. So after covering as much ground as I could on the more interesting projects I was bringing to the table, it was time to tackle their questions. They went something like this:
1. Walk me though your resume
2. How do you value a company
3. Walk me through a DCF valuation from Revenue.
4. I just bought a piece of equipment for $100, $50 was cash, $50 was debt. Walk me though every accounting transaction that occurs during the year. And fill out the financial statements starting at net income.
This last question in particular is a tricky one and I heard it replicated in a interview prep course I ended up sitting in on after landing so I assume it's industry standard. I asked if I could write things on their white board and I was told no. I got them as far as the depreciation tax shield and change in retained earnings but it was a bit slow and painfully confusing to do all in my head. I solved it on paper on the plane ride home and it is actually a tricky question that looks deceptively simple to do in your head.
My third interview was another fit interview after being a bit shaken from my accounting interview I hit this one as hard as I could. In the moment it felt like it went well, and it was passion filled. It was one of those moments that you realize your dream might be slipping from your finger tips and the adrenalin kicks up yet another gear. It was in that interview that I realized how crushed I would be if I didn't land at this particular firm, and how much I really did want the job. From what I can remember it was a re-hash of the behavioral questions that should have been my round one.
My fourth and final interview was a valuation interview, something I've taken to be a personal strength, but after 2+ hours of grilling I was losing my crispness. Questions I recall being asked were:
1. Quickly walk me through your resume
2. What stock would you buy today?
3. How would you value it?
4. How do you measure investment risk?
5. Why Investment Banking?
6. You experiences lean towards investment management, why not pursue that?
7. Why Canada after studying in the USA?
And that was it. I raced out of the office to catch my flight home and my emotions swung a bit as I re-ran questions in my mind. In particular the accounting questions ate at me, and I felt I had definitely given them enough to say no.
Mercifully the offer call came in the next day on a Saturday afternoon and I worked with HR Sunday evening to iron out all the details - yet another indication that anyone in an investment firm never sleeps.
How to make your 4th Year in a Finance Undergrad Count
So you've spent 3 years in your BComm and you've just started to get into the exciting stuff. You've cruised through your foundation accounting courses, and finally gotten through the marketing, ops man, and info tech courses that round out your BComm requirements. Now you get to finally get to the meat, advanced investments classes, fixed income, derivatives. Having just graduated, here's what I think makes the most powerful 4th year BComm if you want to move into a i-banking role, or back office investment role.
Lets start at the end of your 3rd year. Hopefully you've been very involved with finance and investment clubs so far, and have taken - and aced - every quant pre-req you could get your hands on. Also (unlike myself) hopefully you have interned at a firm and made a connection that will push your resume forward come September when Analyst recruiting starts. Either way at the end of your third year you need to strongly settle on your goals. What job do you actually want? Can you get it with a BCom education? Do you have a connection that will vouch for you come September - don't be fooled by those online applications, if you're shooting high enough they are merely a facade; all the hiring happens through personal recommendations. So line up your contacts, grab that internship and work your but off.
Even if you think you can get this job with an undergrad I'd hedge your bets. Take kaplans GMAT prep course in the evenings after-work during the summer and plan to write that ungodly demoralizing test sometime in September. Obviously if you've decided you want to be hard-core quant back office you're going to need a masters in financial engineering or financial economics and so you should be looking at either the GMAT or the GRE.
Come August start making your push for that September Analyst hire (they hire in September for a July start the following year). Reach out to your network and try applying to 5-10 of the top firms that hold your job of choice. Enroll in the CFA level one for a June test date and put it on your resume. If you've got the connections and/or the grades you'll get picked up, if not you're preparing for the +1 lap.
So assuming things didn't pan out, pour your heart into GMAT prep and try to grab a 700+ score. Then apply to an MSc program that will give you that added push (see previous post). Don't forget the extracurricular's; for me my GMAT was nothing to brag about but experience I had outside of class opened doors to the right MSc program. Finance specific stuff is a plus, especially research based. Get on a project with a prof, or your schools pension fund, and make it as quant heavy as possible. You want to be talking about modeling in your interview, not how you proof read some technical writing. Case competitions are good to hone public speaking, and they are usually a welcome break from the grind as they often involve travel.
If you can, line yourself up for 4th year Economics courses in modeling - Econometrics classes. These classes are often qualifying courses for Masters degrees in Economics and they are tough but extremely valuable. There is really only a couple of 'good' times to learn about heteroskedasticity, autocorrolation, GARSH models, unit roots parameters, and ridge regressions, and the leisurely pace of an undergrad class is one of them. Obviously knock yourself out with every finance course offered, and if you can stomach it, take intermediate accounting as well.
As the year trickles on apply for the November cycle of grad school apps and start plugging time into the CFA level 1. It will generally parallel your 4th year classes nicely but it takes a lot of time and to fail would unravel an important part of your whole brand package.
Looking like your hot shit to a firm is really all about momentum. Because many students - especially from mid teir schools - don't land in the September of their 4th year it's really easy to lose momentum when you know you're going to have a whole year between undergrad education and your eventual hire. If you can pack that time with as much finance as possible you'll A) commit mild social suicide amongst your non finance friends and B) look really hungry for a job, the hungrier the better in an employers eyes generally.
Lets start at the end of your 3rd year. Hopefully you've been very involved with finance and investment clubs so far, and have taken - and aced - every quant pre-req you could get your hands on. Also (unlike myself) hopefully you have interned at a firm and made a connection that will push your resume forward come September when Analyst recruiting starts. Either way at the end of your third year you need to strongly settle on your goals. What job do you actually want? Can you get it with a BCom education? Do you have a connection that will vouch for you come September - don't be fooled by those online applications, if you're shooting high enough they are merely a facade; all the hiring happens through personal recommendations. So line up your contacts, grab that internship and work your but off.
Even if you think you can get this job with an undergrad I'd hedge your bets. Take kaplans GMAT prep course in the evenings after-work during the summer and plan to write that ungodly demoralizing test sometime in September. Obviously if you've decided you want to be hard-core quant back office you're going to need a masters in financial engineering or financial economics and so you should be looking at either the GMAT or the GRE.
Come August start making your push for that September Analyst hire (they hire in September for a July start the following year). Reach out to your network and try applying to 5-10 of the top firms that hold your job of choice. Enroll in the CFA level one for a June test date and put it on your resume. If you've got the connections and/or the grades you'll get picked up, if not you're preparing for the +1 lap.
So assuming things didn't pan out, pour your heart into GMAT prep and try to grab a 700+ score. Then apply to an MSc program that will give you that added push (see previous post). Don't forget the extracurricular's; for me my GMAT was nothing to brag about but experience I had outside of class opened doors to the right MSc program. Finance specific stuff is a plus, especially research based. Get on a project with a prof, or your schools pension fund, and make it as quant heavy as possible. You want to be talking about modeling in your interview, not how you proof read some technical writing. Case competitions are good to hone public speaking, and they are usually a welcome break from the grind as they often involve travel.
If you can, line yourself up for 4th year Economics courses in modeling - Econometrics classes. These classes are often qualifying courses for Masters degrees in Economics and they are tough but extremely valuable. There is really only a couple of 'good' times to learn about heteroskedasticity, autocorrolation, GARSH models, unit roots parameters, and ridge regressions, and the leisurely pace of an undergrad class is one of them. Obviously knock yourself out with every finance course offered, and if you can stomach it, take intermediate accounting as well.
As the year trickles on apply for the November cycle of grad school apps and start plugging time into the CFA level 1. It will generally parallel your 4th year classes nicely but it takes a lot of time and to fail would unravel an important part of your whole brand package.
Looking like your hot shit to a firm is really all about momentum. Because many students - especially from mid teir schools - don't land in the September of their 4th year it's really easy to lose momentum when you know you're going to have a whole year between undergrad education and your eventual hire. If you can pack that time with as much finance as possible you'll A) commit mild social suicide amongst your non finance friends and B) look really hungry for a job, the hungrier the better in an employers eyes generally.
The MSc for the Undergraduate Business Graduate
Sometimes a business student comes out of their undergrad and finds that all the golden doors of the private sector remain closed. As they bang their fists, and think indignantly that they have jumped through the hoops, passed the tests, and achieved the grade - why aren't the best employers hiring me?
Maybe its the economy, we are in the bottom of the trough and they aren't hiring anybody. Maybe today's BComm is yesterday's high school diploma and we all need to upgrade to masters and PhD's before the job market opens. Maybe you aren't supposed to work high finance after your undergrad but instead toil away in high tech or at a rental car desk. Perhaps although your school taught you enough to walk the talk, it failed to line up that all important recruitment meeting in your 4th year.
Regardless of what happened, top students seem to do one of 3 things. They upgrade their degree with a specialized masters degree, lower their sights and get ready to plug some time at a mid level job, or take the whole situation as a sign to enjoy their youth and go to Europe. I went to school.
The trouble with choosing to go to school is you need to make the choice in the summer between 3rd and 4th year so you can prep for the GMAT. Unfortunately I had decided to finally get a real summer job and load up on experience, and so instead of spending my days in the sun with clients I needed to plug some serious hours into an internship. Drop 2 classes of TAing on top, plus weekend work with the old employer and there's no time to chug GMAT math questions. So for 3 weeks in September I ignored my classes and plowed as much time as I could into relearning how to do high school math by hand. This hack-kneed self prep only set me up for one thing - dissapointment. So when November came along I slapped my 660 GMAT score on my applications and readied myself for top 20-30 b-schools.
I figured because I had paid attention during my undergrad I should be painfully well equipped for the material offered - these programs pull 80% of their students from non-BComm backgrounds after-all. So although getting top education is a priority, it's not the number 1 issue; I needed a school with brand.
The top tranche usually don't offer MSc degrees and they require 3+ years of work experience. So even without a 700+ GMAT score I'm not going to LSE unless I want to be a financial engineer. So after trimming down to schools that even offered degrees for students straight from undergrad I needed to look for a school that A)was known as a very strong Finance school and B)was a recruitment center for capital market analyst positions in the top firms. I need a stamp on my head that says "high quality | employable", maybe one of these schools could give me that.
BComm-Finance students don't do a Masters of Science in Finance to learn finance, they do it to get a job. And it works out perfectly. You enter this one year super accelerated program in the summer. While acing the foundation finance courses though August, you network your butt off with anyone you can pull a phone call from through your family, undergrad network, and newly established grad network. September recruitment opens up for Analysts and Associates; they usually hire Analysts first. Now you are pushing your b-school tooled up resume that says MSF instead of BCOMM to analyst jobs that typically go to the top undergrad students from the top universities. Better yet, because its September you get to drop that first quarter 3.9 GPA onto to the page. You look like a rock-star candidate; Masters student from a high quality finance school that is rocking great grades and is willing to start out as an Analyst. What they don't know is that your grades are so high because all the general arts students are learning finance for the first time, pulling down the curve, and you are answering all of their interview questions with know-how you learned in your 4th year M&A class. So early in the degree you're really the mid-level BComm grad they wouldn't look at twice disguised as Ivy caliber talent.
Not everyone approaches it this way, in fact most MS students land in the direct hire cycle in the spring. A lucky few with work experience can spin their MS like an MBA and grab associate positions, and some extend their 1 year program to 1.5 years to do an internship in the summer. But I'm convinced the best route is to tackle the market as a super-undergrad candidate. If you can land the top job the year at school refining your quant skills will be more than worth it, and you still leave the door open for an MBA later on.
Maybe its the economy, we are in the bottom of the trough and they aren't hiring anybody. Maybe today's BComm is yesterday's high school diploma and we all need to upgrade to masters and PhD's before the job market opens. Maybe you aren't supposed to work high finance after your undergrad but instead toil away in high tech or at a rental car desk. Perhaps although your school taught you enough to walk the talk, it failed to line up that all important recruitment meeting in your 4th year.
Regardless of what happened, top students seem to do one of 3 things. They upgrade their degree with a specialized masters degree, lower their sights and get ready to plug some time at a mid level job, or take the whole situation as a sign to enjoy their youth and go to Europe. I went to school.
The trouble with choosing to go to school is you need to make the choice in the summer between 3rd and 4th year so you can prep for the GMAT. Unfortunately I had decided to finally get a real summer job and load up on experience, and so instead of spending my days in the sun with clients I needed to plug some serious hours into an internship. Drop 2 classes of TAing on top, plus weekend work with the old employer and there's no time to chug GMAT math questions. So for 3 weeks in September I ignored my classes and plowed as much time as I could into relearning how to do high school math by hand. This hack-kneed self prep only set me up for one thing - dissapointment. So when November came along I slapped my 660 GMAT score on my applications and readied myself for top 20-30 b-schools.
I figured because I had paid attention during my undergrad I should be painfully well equipped for the material offered - these programs pull 80% of their students from non-BComm backgrounds after-all. So although getting top education is a priority, it's not the number 1 issue; I needed a school with brand.
The top tranche usually don't offer MSc degrees and they require 3+ years of work experience. So even without a 700+ GMAT score I'm not going to LSE unless I want to be a financial engineer. So after trimming down to schools that even offered degrees for students straight from undergrad I needed to look for a school that A)was known as a very strong Finance school and B)was a recruitment center for capital market analyst positions in the top firms. I need a stamp on my head that says "high quality | employable", maybe one of these schools could give me that.
BComm-Finance students don't do a Masters of Science in Finance to learn finance, they do it to get a job. And it works out perfectly. You enter this one year super accelerated program in the summer. While acing the foundation finance courses though August, you network your butt off with anyone you can pull a phone call from through your family, undergrad network, and newly established grad network. September recruitment opens up for Analysts and Associates; they usually hire Analysts first. Now you are pushing your b-school tooled up resume that says MSF instead of BCOMM to analyst jobs that typically go to the top undergrad students from the top universities. Better yet, because its September you get to drop that first quarter 3.9 GPA onto to the page. You look like a rock-star candidate; Masters student from a high quality finance school that is rocking great grades and is willing to start out as an Analyst. What they don't know is that your grades are so high because all the general arts students are learning finance for the first time, pulling down the curve, and you are answering all of their interview questions with know-how you learned in your 4th year M&A class. So early in the degree you're really the mid-level BComm grad they wouldn't look at twice disguised as Ivy caliber talent.
Not everyone approaches it this way, in fact most MS students land in the direct hire cycle in the spring. A lucky few with work experience can spin their MS like an MBA and grab associate positions, and some extend their 1 year program to 1.5 years to do an internship in the summer. But I'm convinced the best route is to tackle the market as a super-undergrad candidate. If you can land the top job the year at school refining your quant skills will be more than worth it, and you still leave the door open for an MBA later on.
Saturday, October 16, 2010
Canada's Best Bachelor Business Degree
I wish somebody sat me down at the beginning of grade 12 and shouted at me for half an hour straight. I wish they had scared me shitless, telling me that this was the time to make it or break it. They should have told me my life depended on getting 90's if I wanted to get into a good school, and that my parents were wrong - getting into a good undergrad DOES matter.
In business a good business school matters, and it matters a lot if you want to get into high finance. My parents had this notion that any education was a good education if you went to a big Canadian school. After coming down to the states and working through a masters in a top tranche b-school I would half agree with them. Carleton (my undergrad) was a good education, but there was no brand, and brand is what you need to make it in Finance.
I just placed in a bulge bracket i-bank and in my final round a "stack story" I had heard on many an occasion in my undergrad rang true. The story is that undergrads from all over the country apply to the top firms. The big Canadian banks, and the international banks that operate in Canada; RBC, TD, BMO, Goldman, Macquarie - you name it. These banks, inundated with thousands of resumes and online applications create stacks. The first stack is from personal recommendations - candidates who have family / friends/ or networked hard enough to get a personal in-firm recommendation. The next stack is Ivy or Richard Ivy School of Business, the case based competitive and generally most stuck up b-school in Canada (yes I'm bitter retrospectively). The next stack varies by the firm, it's usually McGill, but sometimes Queens or UofT makes stack 3. Then it's stack 4, the "other" stack. Here promising grads from mid line schools like Carleton, U of O, Concordia, Acadia, U of A, ect, end up in a mountain of resumes. The firm will hire more than 50% from the personal recommendation pile and 40% from the 2nd stack - their preferred recruiting campus. The third stack gets a body in there once in a while and the other stack is left to recycling.
The only hope a mid pack school grad has of getting into a top job is to network into the first stack. Is this the fact for everyone? Maybe not, but I have yet to hear of a single hire story from one of my Carleton friends who did not upgrade post grad or grab a golden handshake from a family friend. This rings true in my bulge bracket final round interview. We all met before the interview started (another story altogether) and I had to smile as the stack story played out in front of me. There was a Queens MBA with lots of family in the city and an engineering background - likely a golden handshake story. Then there was two undergrads from Ivy, one doing a 5th year lap to grab a double degree Bcomm and Economics. The firm already had Ivy grads in it, and the two students gave a shout out to an Analyst on their way in, definitely golden handshake stories. I was leveraging an expected US degree and a family friend connect to get into the door and I had to wonder, could I have pushed in beginning of 4th year while still at Carleton. I doubt it. I needed to move up in the ranks before the golden gates would open.
The irony is that Carleton did a good job educating me. When half the student body doesn't give a shit and another 30% set their sights on small business book keeping there is a lot of opportunity to push to the top of the class and the top of your extracurricular's. After some sage advice I had weaseled my deep into the Economics department and had strapped some Econometrics courses to my finance tool belt. Most of my interview was filled with experiences I had on case comps, investment funds, research projects, and metrics classes. But here I am 1.5 quarters through a Masters in Finance, that more than anything else, is putting the right banner on my resume.
So. Canadian high school students looking to break into private equity, investment banking, sales and trading, or back office, need to shoot for the top schools. Ivy, McGill are good bets and the rest is up to research. Call the school and ask what banks recruit there. More than almost every other university degree a Bcomm Finance is a trade school degree - you are learning the skills you will use on the job. This means the University isn't the eye opening liberating experience it is for art students; for finance students university is the factory that will mold you into the model producing, sensitivity measuring, NPV pumping, quant jock you need to become. Go to the right factory.
Saying this I still really appreciate the education Carleton gave me and I have a strong sense of loyalty to the school, more so than my masters. As I start working I will be sure to keep in touch with my profs to push as many Carleton grad resumes forward as I can (and as quality allows for). If money comes my way, I'll pour it into the school. It's time to break that damn Ivy, Queens, McGill mold; but for now it exists.
In business a good business school matters, and it matters a lot if you want to get into high finance. My parents had this notion that any education was a good education if you went to a big Canadian school. After coming down to the states and working through a masters in a top tranche b-school I would half agree with them. Carleton (my undergrad) was a good education, but there was no brand, and brand is what you need to make it in Finance.
I just placed in a bulge bracket i-bank and in my final round a "stack story" I had heard on many an occasion in my undergrad rang true. The story is that undergrads from all over the country apply to the top firms. The big Canadian banks, and the international banks that operate in Canada; RBC, TD, BMO, Goldman, Macquarie - you name it. These banks, inundated with thousands of resumes and online applications create stacks. The first stack is from personal recommendations - candidates who have family / friends/ or networked hard enough to get a personal in-firm recommendation. The next stack is Ivy or Richard Ivy School of Business, the case based competitive and generally most stuck up b-school in Canada (yes I'm bitter retrospectively). The next stack varies by the firm, it's usually McGill, but sometimes Queens or UofT makes stack 3. Then it's stack 4, the "other" stack. Here promising grads from mid line schools like Carleton, U of O, Concordia, Acadia, U of A, ect, end up in a mountain of resumes. The firm will hire more than 50% from the personal recommendation pile and 40% from the 2nd stack - their preferred recruiting campus. The third stack gets a body in there once in a while and the other stack is left to recycling.
The only hope a mid pack school grad has of getting into a top job is to network into the first stack. Is this the fact for everyone? Maybe not, but I have yet to hear of a single hire story from one of my Carleton friends who did not upgrade post grad or grab a golden handshake from a family friend. This rings true in my bulge bracket final round interview. We all met before the interview started (another story altogether) and I had to smile as the stack story played out in front of me. There was a Queens MBA with lots of family in the city and an engineering background - likely a golden handshake story. Then there was two undergrads from Ivy, one doing a 5th year lap to grab a double degree Bcomm and Economics. The firm already had Ivy grads in it, and the two students gave a shout out to an Analyst on their way in, definitely golden handshake stories. I was leveraging an expected US degree and a family friend connect to get into the door and I had to wonder, could I have pushed in beginning of 4th year while still at Carleton. I doubt it. I needed to move up in the ranks before the golden gates would open.
The irony is that Carleton did a good job educating me. When half the student body doesn't give a shit and another 30% set their sights on small business book keeping there is a lot of opportunity to push to the top of the class and the top of your extracurricular's. After some sage advice I had weaseled my deep into the Economics department and had strapped some Econometrics courses to my finance tool belt. Most of my interview was filled with experiences I had on case comps, investment funds, research projects, and metrics classes. But here I am 1.5 quarters through a Masters in Finance, that more than anything else, is putting the right banner on my resume.
So. Canadian high school students looking to break into private equity, investment banking, sales and trading, or back office, need to shoot for the top schools. Ivy, McGill are good bets and the rest is up to research. Call the school and ask what banks recruit there. More than almost every other university degree a Bcomm Finance is a trade school degree - you are learning the skills you will use on the job. This means the University isn't the eye opening liberating experience it is for art students; for finance students university is the factory that will mold you into the model producing, sensitivity measuring, NPV pumping, quant jock you need to become. Go to the right factory.
Saying this I still really appreciate the education Carleton gave me and I have a strong sense of loyalty to the school, more so than my masters. As I start working I will be sure to keep in touch with my profs to push as many Carleton grad resumes forward as I can (and as quality allows for). If money comes my way, I'll pour it into the school. It's time to break that damn Ivy, Queens, McGill mold; but for now it exists.
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