Training · HF-1 · Lesson 04 of 06
Building a stock pitch
The rule
A pitch is a claim about what the market has wrong, the evidence, and the path that closes the gap. Anything without a catalyst is a research note.
The structure of a pitch
A pitch has five parts: the recommendation, the thesis, the valuation, the catalysts and the risks. Lead with the recommendation and price target, then explain why the market is wrong.
- ·Recommendation: long or short, target, time frame.
- ·Thesis: two or three reasons the market misprices the stock.
- ·Valuation: what it is worth and on what metric.
- ·Catalysts: events that will close the gap.
- ·Risks: what would prove you wrong.
Finding the variant view
A pitch is only useful if it differs from consensus. Know what the street expects — revenue, margin, earnings — and show the number you think is wrong and why. 'Good company, cheap stock' is not a thesis without a reason the market has missed it.
Valuation
Use the method the market actually uses for that stock: P/E for most large caps, EV/EBITDA for leveraged companies, free-cash-flow yield for mature businesses, sum-of-the-parts for conglomerates. Show bull, base and bear cases with probabilities.
- Consensus EPS next year
- $4.00
- Your EPS estimate
- $4.60
- Fair P/E
- 18x
- Target price
- $83
- Current price
- $64
- Upside
- 30%
Catalysts and timing
Catalysts can be earnings reports, product launches, regulatory decisions, management changes or capital returns. Without a catalyst, a cheap stock can stay cheap. Specify when you expect the market to see what you see.
Risks and the kill switch
List the risks and say what you would watch. Then name a specific observation that would make you exit — for example, two quarters of falling gross margin. Funds want analysts who define failure in advance.
Hold onto this
- ·One sentence: what is mispriced, why, and what makes it move.
- ·Show the number you disagree with, not just the price target.
- ·State the kill condition — the observable fact that proves you wrong.
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Education, not financial advice. Figures may be simplified for illustration.