This summer I interned as a healthcare research analyst at David B. Shaw Private Portfolio. The start-up hedge fund is located downtown in the financial district in San Francisco, California. Currently, the portfolio contains pharmaceutical, biotechnology and medical device companies but is looking to expand into other industries, potentially technology. David Shaw, my portfolio manager and supervisor for the summer, graduated from Colgate in 1998 with a degree in molecular biology and spent 15 years on both sides of Wall Street. He taught me everything I know about investing, valuation, financial modeling and the healthcare industry. Together, we explored many different healthcare companies as potential core positions for the portfolio.
After being absent from the fall banking recruiting season while studying abroad in Geneva, Switzerland, I turned to the always-supportive Colgate network in search of a summer internship in finance research. I found the opportunity David posted on a Colgate resource. I was immediately intrigued by the thought of working directly under a Colgate alumni and performing investment research in the healthcare industry. Although I am not a science major, I am interested in the changing healthcare world. After multiple phone interviews, performing my first stock analysis and input information into a DCF, David flew to Hamilton, NY during Entrepreneurs weekend for my final interview. He offered me the internship opportunity the following day! I was very excited to move out to San Francisco for the summer and dive into pharmaceutical, biotech and medical device companies. Before beginning my internship, I read value investing guru, Seth Klarman’s book, Margin of Safety and Howard Marks’ Dare to Be Great.
During the summer, I established a process of analyzing companies from fundamental research to building financial models in order to discover a potential core position for the portfolio. When presented with a ticker to analyze I began by annotating the company’s stock chart, developing a roadmap of upcoming events that could impact the stock price and evaluating their SEC filings (10K, 10Q, 8-K, proxy reports, press releases, and presentations). I researched the company’s products by following FDA Advisory Committee meeting materials and looked at the products’ intellectual property coverage in the FDA Orange Book. Based on the company’s filings, I input relevant information into a DCF model to determine an initial estimate of what is discounted into the current stock price. I then built financial models to analyze and forecast revenue, incorporating prescription volume from Symphony Health and pricing information from management commentary. Next, I developed a base conservative case of the stock price using financial modeling and outlining assumptions. I developed and iterated the upside and downside (bullish and bearish) cases based on more aggressive and negative assumptions. I further analyzed the key business drivers of value during the company’s 2Q14 earnings reports and tweaked the initial DCF scenarios. I evaluated required versus sufficient circumstances for the stock price to have an upside and for the stock price to have a margin of safety, necessary when investing. During my research process I also decomposed the valuation analysis in a proxy filing and compared it to a dramatic change in the stock price after the company announced an M&A deal. Finally, to conclude my internship I summarized all my findings on one company, Horizon Pharmaceuticals, developed an Initiation Report based on solid fundamental research and recommended an investment strategy.
Dave guided me through the process of learning how to analyze, value a company’s stock and perform diligent research on the company and industry. He helped me along the way but also let me face and overcome challenges and obstacles. We discussed the two seminal value investing books I read in preparation for my internship. He taught me how to input data into a DCF model, explained mathematical valuation and guided me through building financial models. We frequently discussed how to analyze the value of a company to determine the correct investment strategy based on forecasts in the financial models.
During my time in San Francisco I took advantage of the huge and very supportive Colgate alumni network in the Bay Area. I met with almost twenty Colgate alumni who work in finance to understand the wide breath of career opportunities. All of the alumni I met were very willing to offer extremely helpful advice and insight into the finance world. Not only did I discover many different jobs and career paths that I did not know existed but I also formed a much better idea of what I am interested in pursuing after graduating from Colgate.
I have never learned as much about finance, the stock market, my interests and my future career path as I did during these 12 weeks and I look forward to continue improving my new skills in the workplace.
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