This guide is meant to tackle all the “How do I prepare for an interview with X team” questions, since 90% of the preparation is the same regardless of the industry or product group that you are interviewing for.
The fit part of the interview (anything not talking about markets or brain teasers) will be the longest and will carry the most weight. To prepare for the fit part, look hard at your resume for possible questions that could be asked (e.g. I see you studied abroad in China, how was it?). Prepare answers and try to come up with an interesting story rather than “China was really cool. Great experience”.
Given that fit is so important, some of you might be tempted to not bother much with technicals. Big mistake. Technicals are there to differentiate candidates. If there are two candidates who are about equal in the fit category, you are going to take the one that either A) has a skill set you want (p.e. computer science) or B) knows more technicals. Technicals also help to show commitment to the industry.
First thing I recommend is that you read and download the Vault Guide to Finance Interviews. A quick Google search would reveal several other links should this one go down in the future. The guide is excellent in providing a basic understanding of several products and different types of questions that you could be asked.
Reading the Market Wizards books or Come Into My Trading Room by Alex Elder could also be beneficial to get an idea of what goes on in the equity markets. Market Wizards is candid interviews with top traders, and Elder’s book is one of those “learn how to trade books”. None of these books will give you much technical knowledge of the “you calculate the WACC by…”, but the point of reading them is to give you a better sense of what people look for when they trade stocks.
Staying up to date with the markets
The Financial Times is probably the best financial newspaper -try to read the Lex column on the back page-, but let’s focus on the WSJ since that is what most people have access to. If you only have 30 minutes of free time a day and can only get your information from one source-read the front cover of the WSJ, the front page of The Marketplace section, and the Money and Investing section. The Marketplace section can be used to generate a stock pick or a talk about why a specific event makes an industry look attractive.
Your primary focus should be the money and investing section. Read the front page, Heard of the Street (back page), Moving the Market, and any article on currencies or commodities. The idea is to get a general sense of what is happening in the markets along with investor’s general mindset (the driving forces). That way when you tell the interview what is your view of the economy you can provide some examples—I think Energy will be a very big sector with higher commodity prices, demand from China and India, Potash, BHP. Maybe mention a growth number you picked up in your reading about the increase in demand for Iron ore, whatever. The idea is to have a 2-3 investment “themes” and examples of those themes playing out.
Apart from the WSJ/FT, there are plenty of other sources of information, like Pimco.com -for fixed income research-, Abnormalreturns.com, seekingalpha.com, etc. These sites would keep you up to date with current events and provide plenty of investment ideas to talk about during an interview.
Specific Stock Question
When it comes to the specific stock question, have at least 2 choices. You should know the stocks P/E ratio (historically high or low), Sales, Net Income, Operating Margin, products, risks to their business, areas where they are growing, what are their strengths—brand name, international exposure, and things that they have done recently. You can try to pick a stock and then steer the interview back to the general economy. So touch on its P/E ratio and comment on whether it was cheap or expensive, then say areas they were growing, some of their strengths, and how events in the general economy would affect it going forward.
Facts & Figures you NEED to know
You should have an idea of the current levels for all of the below, as well as what their price movements looked like over the last 6-9 months and , if possible, the market sentiment behind the moves—all of which becomes very easy if you actively follow the markets-. You should also note their support and resistance levels and events that could force them out of their ranges.
The S&P 500, The Dow Jones, Oil, Gold, 2 yr UST, 5 yr UST, 10yr UST, 30yr UST, Fed Funds Rate, O/N Libor, 3-month Libor, 6 month Libor, USD,GBP,JPY,EUR,AUD.
More Technical Stuff
If you were to follow the assigned reading and keep up to date with the markets, you would probably be fine for any research interview. If you have an interview that is geared towards a particular industry, you are not expected to know everything about it, but do have the basics covered. Know what factors is the industry particularly sensitive to, main risks that companies in the sector face, or the nature of the relationship with suppliers or customers. Google or wikipedia can probably give you more than you need on this.
If someone asks you if you know about X, always respond with “I have done some reading so I know a little bit, I know that X and Y about Z. Show the interviewer your knowledge by talking about it—it may lead to more detailed questions, but if you are honest and humble about it those detailed questions that you don’t know won’t hurt you. If you get a question you don’t know, admit you don’t know it, offer some guesses with your reasoning behind them and then politely ask the interviewer what the answer is. Even if you know a great deal about a topic, it’s always safer to play it humble and let your answers reveal your knowledge. If you walk into an interview with a cocky know it all attitude, there is a good chance you will get mind fucked with technicals and not get the job even if you get them all right. A matter of fit.