How to Find a Great Stock Pitch Idea

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Pitching a stock is the most important part of the interview process for hedge funds and asset management. After you’ve submitted a polished resume and telling your story in your first round interview, you’ve been asked to pitch a stock. Now what? How do you find a great stock pitch idea?

Your first instinct might be to go on a research portal like SeekingAlpha and SumZero to get inspirations.

The issue is, reading reports is a great way to get other people’s opinions on a stock. But that shouldn’t be your starting point.

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19 Best Investing Books on Wall Street

By | Investment Process | 2 Comments

Let’s face it. When it comes to learning how to invest, most college and business school textbooks just aren’t cutting it. We need to build our own collection of the best investing books to hone the craft.

Academic classes teach you how to put together an income statement or how to run multi-variable regressions in Stata. Those are important skills to have, but they don’t give you the full picture on how to invest. I know, because I’ve taken a lot of them.

Investing takes a tremendous amount of self-learning. It takes an entrepreneurial effort to research and discover the best books on investing, and then extract golden nuggets of knowledge from a pile of regurgitated nonsense.

This is why every hedge fund interviewer would ask you what books have you read and why.

They want to see how much time you’ve spent on self-learning and hear what you’ve learned from it.

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How to Short a Stock: 4 Ways to Develop Short Ideas

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Pokemon Go’s popularity exploded like a firestorm. The mobile hit leapfrogged Twitter in active users in just days after launch, and Nintendo’s stock price has risen 57% since. Expectations of further monetizing Nintendo characters are high. But let’s think about the reverse – could Nintendo be a prime example of how to short a stock?

Are the lofty expectations for Nintendo realistic, or is there irrational exuberance?

Pokemon Go is certainly not the first mobile game with high expectations, and it won’t be the last either. In 2013, a Japanese game developer called Gungho Entertainment released Dungeons and Dragons, wich monopolized mobile usage among Japanese teenagers. Gungho’s stock skyrocketed 2100% in just 5 months.

But as the game waned, Gungho’s stock price has dropped 80% since. And before Dungeons and Dragons, there was Farmville. A similar story played out with its developer Zynga.

Each case is different. Whether history would repeat itself in Pokemon Go is up for debate. But irrational exuberance is certainly one of the central themes in developing a short stock pitch.

Good advice on how to short a stock is notoriously difficult to find. There are a plethora of volumes written on finding undervalued investments to go long. But what would make a good short stock idea? Is identifying unrealistic hype simply enough?

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