Do’s: Passion, variant view, understanding of unit economics
Don’ts: Consensus idea, low conviction, shallow understanding of the business model
One of the most important jobs of an analyst is to have conviction. Portfolio managers hate when an analyst pitches a stock but doesn’t really believe in the thesis. On the flip side, if an analyst has a lot of conviction around a thesis but the work isn’t there to support it, that is grounds for dismissal. The key is to do enough work where you can develop a strong enough opinion to truly believe in the thesis.
Another key to a strong pitch is to develop a variant view. That means you understand what the consensus is, and you develop a thesis that is different from the consensus. Crowded trades are extremely dangerous and portfolio managers hate hearing a pitch they have already heard multiple times before
The easiest way to test if an analyst really understands the business is to ask questions around unit economics. If an analyst says a company is going to grow revenue 10% next year, the first question is how. Is it due to the number of products they are selling or the price or both? The understanding of unit economics is crucial to understanding the true roots of the business.