Hedge Fund Pitch and Persuasion (a)

Abstract

This field-based case uses the experiences of an equity analyst at his first job post–MBA to explore challenges of persuading a boss to support an action that the analyst determined would benefit the firm. In the A case, Fred Hill had been at his job for two years and believed he had come across a fresh idea—a long stock position in J. C. Penney (JCP). The company was misunderstood by the market, had a catalyst, and the valuation was cheap, all the things his boss usually required to initiate a size position in the portfolio. Hill knew it would take multiple conversations, clear analytical deliverables, and a passionate pitch with the boss to get him comfortable enough to buy JCP. Hill had intended to introduce the stock briefly at the meeting as a prelude to a larger pitch in the next day or two, but the tables had turned and it was time to do it now. The analysis had to be right and the communication crisp or Hill would be fired. At the end of the case, Hill's job is to convince his boss to buy more JCP stock. The A case includes an Excel supplement with Hill's valuation of JCP and would be suitable for an introductory finance class in addition to management communication. The B case provides Hill's actual pitch, his boss's responses, and the challenge to communicate effectively the reasons to stay with the position during the volatile days that accompanied any new investment in the stock market. Excerpt UVA-BC-0272 Apr. 18, 2019 Hedge Fund Pitch and Persuasion (A) Fred Hill, the 30-year-old special situations equity analyst for the $ 1 billion hedge fund Nelson Ridge Partners, grabbed the notebook from his desk and stepped into the conference room for the firm's morning meeting. It was 9:00 a.m. on August 22, 2003. Around the oak table were four other analysts for the multistrategy fund responsible for evaluating event-driven, merger-arbitrage, distressed-debt, and technology-investment opportunities in the US stock and bond markets and making recommendations to the firm's portfolio manager, Mark Savage. Savage, a 45-year-old with a formidable physique, penetrating eyes, and a notorious temper, entered the room, trailed by the firm's trader, Big Rob. Savage fixed the first analyst in his gaze. “So, what have we got?” Listening as he took notes, Savage fired questions at each analyst who defended and made recommendations on their existing portfolio positions. At the end of each analyst's update, Savage was legendary for thundering, “Well, what have you got that's fresh?” Hill noticed in his two years at the fund that Savage liked to push his analysts, intimidate them, to test their convictions on their stock recommendations. “To last in the firm,” Hill said, “you had to know your stuff and be able to get it across under pressure.” Hill believed that effectively communicating a stock had nearly as much importance as the idea itself. He prided himself on generating creative and thorough ideas. “But without persuading Savage to buy my stock, and to buy a sufficiently large position,” Hill said, “an analyst's impact on the fund and ultimately my compensation would be hurt.” . . .