Improving The Communication Between Analysts And Portfolio Managers

Improving The Communication Between Analysts And Portfolio Managers

9/27/17 Presentation at CFA Society of NYC: Couples Counseling: Improving the Communication Between Analysts and Portfolio Managers

On September 27, we gave a talk at the CFA Society of NYC addressing the critical issue of the tension between analysts and portfolio managers. A portfolio manager’s sole purpose is to generate alpha by outperforming his benchmark. In an increasingly efficient market, portfolio managers are under enormous pressure to find investment ideas that will deliver excess returns. In this lecture, we used concepts from our new book, Pitch the Perfect Investment, to show how analysts and portfolio managers can improve their communication, tighten-up their research process and work together more effectively to get alpha-generating investment ideas into the portfolio.

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Article by Pitch the Perfect Investment

Book Review

Pitch the Perfect Investment: The Essential Guide to Winning on Wall Street (Wiley Finance) by Paul D. Sonkin, Paul Johnson

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Investors who succeed on Wall Street spend their career analyzing companies, and honing and refining their investment strategies. But they had to start somewhere.

Training for research analysts is basically non­existent on Wall Street resulting in a "baptism by fire" that forces the new analyst to develop expertise on their own through an agonizing process of trial and error. To overcome this deficiency, Sonkin and Johnson have written the ultimate "survival" guide for someone embarking on a career as an investment professional. Arnie Ursaner, a sell side veteran, who retired after 43-years on Wall Street said, "I wish I had this book when I started in the business. I re­member my early days being characterized by a lot of hits and misses. This book provides valuable short­cuts to experience more hits and fewer misses."

The single most important element in survival is having knowledge, as knowledge dispels fear, and on Wall Street, fortune favors the prepared mind. Pitch the Perfect Investment accelerates the learning process, giving the college or MBA student the edge they need to succeed, whether they are pitch­ing a stock idea in a job interview, in a stock pitch competition, or for a student-run investment fund. Echoing this sentiment, Aswath Damodaran, a prolific author of over 20 books on valuation and a professor at New York University, said, "...this is a book that most of my students would have loved to have had before their first interview and job."

Sonkin and Johnson also seek to push the open-minded, seasoned investment professional out of their comfort zone and challenge them to think about familiar concepts differently. In an industry where even the most successful veterans must worry about younger managers snapping at their heels, Pitch the Perfect Investment equips the Chief Investment Officer and Director of Research with new tools, enabling them to tighten their analytical process and signifi­cantly improve communication and efficiency throughout their organization. As noted by Geoffrey Moore, author of several highly-acclaimed strate­gy books in the technology industry, "Much heartache will be avoided and faster decisions will be reached by any organization that adopts Sonkin and Johnson's recommendations."

Nicholas Galluccio, CEO of Teton Advisors, added, "In this era of hyper-competition on Wall Street, active portfolio management is under attack by ETFs and passive investment vehicles. In this new environment, beating the market is even more essential to the active portfolio man­ager and even the smallest edge can make the difference between success and failure. Pitch the Perfect Investment will give the professional inves­tor that edge."

No other single resource will provide students, money managers, analysts, bankers, executives, salespeople, and individual investors with a faster way to improve their performance. Pitch the Perfect Investment is the essential guide to winning on Wall Street.

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"It is rare that you get a book on finance that is fun to read, immensely informative and deeply insightful. Sonkin and Johnson have pulled off the trifecta in this book. Read it if you work in the investing business already, plan to work in it or want to make sense of an investment pitch made to you." Aswath Damodaran Professor of Finance, New York University Stern School of Business and author of The Dark Side of Valuation, The Little Book of Valuation and Narrative and Numbers.

"My decades of experience have taught me that pitching is a vital skill one must master to succeed on Wall Street. Sonkin and Johnson's book gives someone new to the industry a significant head?start in obtaining this skill." ? Regina Pitaro, Head of Institutional Marketing ? GAMCO Asset Management, Inc. and author of Deals... Deals... and More Deals.         

"On Wall Street, fortune favors the prepared mind. In Pitch the Perfect Investment, Sonkin and Johnson provide a novel framework for this preparation, enabling you to both select investments and convince others of your view. Their explanations of market efficiency, the wisdom of crowds, and security valuation set a benchmark for clarity and practicality. - Scott E Page, Leonid Hurwicz Collegiate Professor Complex Systems, Political Science, and Economics - The University of Michigan

"A successful investor has to say 'no' far more often than they say 'yes.'The key is making it count when you find the right investment.  The first 30 seconds of your pitch are often the most important chance to win or lose your audience.  Pitch the Perfect Investment provides the toolkit to build conviction in your analysis and effectively articulate how it should be implemented.  Sonkin and Johnson follow their own advice with concise and persuasive principles.  Their guidance will neutralize the intimidation factor in pitching a portfolio manager,and allow the analyst to shine."  - Bruce Geller, CEO of DGHM & Co., LLC     

"To the active portfolio manager, beating the market is essential. Sonkin and Johnson explain how to identify and exploit mispricings to accomplish that goal. It's refreshing to read a book that stresses the importance of fundamental research in stock analysis, especially when active portfolio management is under attack by ETFs and passive investment vehicles." - Nicholas Galluccio, CEO Teton Advisors, Inc.

"The job of a venture associate is to bring great investment opportunities to the general partners they support.  The models and frameworks in Pitch the Perfect Investmentalthough aimed at public stock investing, translate easily to venture capital, where young analysts make the same mistakes in pitching their recommendation to senior VCs.The authors present their ideas is a straight-forward, fun manner. Much heartache will be avoided and faster decisions will be reached by any VC organization that adopts these recommendations."- Geoffrey Moore, author Crossing the Chasm and Zone to Win

"While Pitch the Perfect Investment might appear to be written for the equity investor, it also provides the credit or distressed debt investor with critical insights to gain an edge - especially through the authors' discussion of risk and uncertainty. In the credit markets, finding mispriced investments with an asymmetrical return is extremely valuable. Sonkin and Johnson provide a rigorous framework to properly identify and vet these situations. In addition to investing, my other passion is teaching. As an educator of analysts and MBA students, I am surprised it has taken so long for someone to write a book like this one. Sonkin and Johnson have finally corrected the problem." - Michael Gatto, Partner Silver Point Capital and Adjunct Professor Columbia Business School.

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