A stock pitch is a brief presentation or write-up that advises for or against investing in a public company’s stock.
Stock pitches are helpful for various purposes, including buy-side interviews, networking, investment clubs, competitions, and personal or professional investing.
A well-designed stock pitch can influence an investor’s decision. Therefore, you should be informative, engaging, and persuasive when giving a stock pitch. Furthermore, it’s important to address related risks and explain how an investor can manage them.
Here, we will give some simple recommendations on how to pitch a stock to engage investment decision-makers and hedge fund chairs.
1. Research a company
This step will form the basis of your investment thesis. So, first, you need to study the financials (review your net profit, balance sheet, cash flow statement, etc.). This way, you determine financial stability for future growth.
Also, explore growth prospects and identify potential catalysts driving growth. Finally, consider investing risks, including market, regulatory, and operational ones.
2. Develop an investment thesis
While there are many variables to consider, you have all the chances to get a clear investment thesis with the proper research and analysis. For this, determine how long you will hold the stock. In particular, decide whether to sell the stock when it reaches a specific price or hold it long-term.
Besides, identify the investment key drivers, which you can use to create an investment thesis. They may include market share, revenue growth, competitive advantage, and new product launches.
Once you identify the drivers, use them to develop your investment thesis. If you think a new product launch will trigger revenue growth and market share gains, focus your thesis on the potential for future solid earnings growth.
3. Value a stock
Since companies are different, they require a unique approach to valuation. For instance, the one that generates a lot of cash may be better valued using discounted cash flows. On the other hand, valuation multiples may suit a more stable business.
If you choose a DCF analysis, forecast a company’s cash flows over a specific period. Then, discount them to their present value using a discount rate. The resulting net present value estimates the intrinsic one.
Note: The discount rate can significantly impact the valuation, so consider it carefully.
If you use valuation multiples, identify comparable companies and analyze their multiples. By comparing, you will see whether the reviewed one is under- or overvalued.
4. Design a presentation
Your purpose here is to convince investors. So, you need to know how to do it well.
When you make a structure of a stock pitch presentation, start with an introduction that provides a company overview and reasons to invest in your organization. Then, move on to your investment thesis. Finally, summarize the main points and call to action.
We recommend including graphs, pictures, and diagrams to illustrate your ideas engagingly. Also, use statistics that support your investment thesis.
Tip: If you work in a highly regulated industry, address concerns about related risks. Remember, addressing potential challenges demonstrates awareness and builds trust with investors.
Company overview example
5. Present your stock pitch confidently
Think about what investors might ask and prepare answers. This way, you can respond confidently and knowledgeably. Stick to the principle of short and comprehensive answers and never get defensive.
Finally, devotion and confidence in your stock pitch are crucial for investors to trust in your company’s potential. So, you can share personal stories and speak with enthusiasm to demonstrate your belief in the investment opportunity.
Here are common questions the buyer side asks after or during a stock presentation. Be ready to answer!
- What methods did you use to develop your investment thesis?
- Why is this a good investment for me now?
- What are your main sources of income?
- What is the organization’s market share?
- Who manages the company?
- Who is on the board of directors?
- What do customers say about the company?
- What sets the company apart from the competition?
- Do you have other stock pitches?
This market enables companies to raise funds by offering stock shares and corporate bonds. At the same time, it allows investors to participate in these companies’ financial achievements. Furthermore, they earn dividend income and make profits through capital gains.
As a platform for directing investments and savings into productive avenues, this market contributes to capital formation and the economic growth of a country.
The quality and consistency of stock pitches form key market drivers. Therefore, you must cover all the factors contributing to this to succeed. For this, we recommend joining the MNAcommunity, where you can find expert assistance and critical insights to improve your chances.