7 Steps Top Pod Shop Investors Use to Analyze Stocks
7 key points to consider for a stock idea in the multi-manager world
In the multi-manager world, you want a differentiated and meaningful view supported by evidence with a well-defined catalyst, good risk/reward and factor exposures that fit the construct of the book.
There are 7 key points to consider for a stock idea:
Thesis
Numbers / valuation
Buy-side consensus / bogeys
Catalyst and path to getting paid
Sentiment and positioning
Risks
How does it fit into the portfolio?
One common trade in 2023 among multi-managers was long META after the stock was down 70% from its all-time highs (ATHs). We will use it as an example to go through each of the points above. It was actually a pair trade long META / short SNAP, but for simplicity we will focus on the long side.
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What distinguishes the truly great investors is a working investment process they have - a set of things they do to screen for ideas, evaluate risk/reward, construct their portfolio, etc. This is exactly what our newest content with Allen White provides. If you are interested in seeing this in action, see our latest update on what we offer at Phoenix: https://www.phoenixlearning.io/program.
In this post, we will do a mini version of providing a simplified framework you can use to evaluate and pitch an idea. We have written about each of the points above separately and will now put them together into one.
Thesis
Note we use italics below to write from the perspective of an analyst at the end of December 2022. Anything that is non-italicized is commentary.
We should be long META because the buy-side is massively overstating the impact of high Metaverse Capex and Apple’s ATT privacy changes, ignoring the early signs that the company is actively working on fixing both. Cost-cutting and AI-driven ad recovery are likely to drive operating margin expansion.