Learning by Doing: Stock Pitching

When it comes to getting an edge in a stock trade, HBS finance professors Lauren Cohen and Christopher Malloy urge students to go straight to the source. “We encourage them to get out in the field and talk to managers and analysts,” says Malloy, the Sylvan C. Coleman Professor of Financial Management. “We are surprised by how teams come in and say we talked to the CEO,” laughs Cohen.

One of the key lessons in Cohen and Malloy’s field course, Stock Pitching, is that the market is almost always right. It’s only by developing their own special insights in an industry or region, and then going out and testing them in real life, that students can find those tiny gaps where it’s wrong— and where they can leverage with smart investments.

“We don’t want the course to just be about polishing diamonds,” says Cohen, the L.E. Simmons Professor of Business Administration. “The person who can go out and find the diamond gets the highest return.” Once they do, students present their idea—a stock pitch—to an actual hedge fund manager who is invited to each class to offer critiques. “They forced us to rebuild a lot of the logic and iterate in ways that were really productive,” says former student Nami Singhal (MBA 2013), now an associate at asset management firm AQR Capital Management.

Singhal’s team made a bet that Argentina would default during its debt crisis; they were eventually proved right. “I had some pretty phenomenal classes at HBS, but these two professors were really fantastic,” she says. “What they are doing for a generation of students is going to have substantial impact on how financial management practitioners approach theory.”

Left to Right: Professor Christopher Malloy, Professor Lauren Cohen

Multimedia Simulation Provides Real-World Reality Check

Part Monopoly marathon, part chess championship, Harvard Business School’s new multimedia simulation “Strategic Brew” engages students in a fast-paced exercise in strategic decision- making. The goal of the simulation is to show, rather than tell, students how to strategize. Working in teams, students gain practical exposure to the choices involved in developing a product (beer), bringing it to market, and devising a competitive advantage. The exercise, incorporated into the required Strategy course, was introduced in March to all 900-plus first-year students during a two-day event in the Batten Hall hive classrooms.

“Strategic Brew” was created over a two years by Ramon Casadesus-Masanell, the Herman C. Krannert Professor of Business Administration, and Gastón Llanes, an associate professor at Catholic University of Chile’s School of Management, with help from HBS’s Educational Technology Services. It is an example of how experiential learning and technology are being incorporated into the MBA curriculum.

The School’s most complex simulation to date, “Strategic Brew” focuses on maximizing the profitability of a beer company. Students are assigned to four-member brewery teams, and four of these teams are then aggregated into an industry. Team members study data and collaborate on beer design, pricing, and packaging, as well as on decisions concerning manufacturing and marketing. After each round, reports are generated that include balance sheets, customer beer preferences, and ways in which the brewery compares to the competition. Team members then have an hour to digest the information and formulate a new strategy. At the end of eight rounds, industry winners are selected based on their overall performance.

“There’s a lot of energy in the room,” says Casadesus-Masanell. “Students get right into the simulation because they have skin in the game. They want to do well, and they work all the harder when they can see very clearly whether they are doing better or worse than the other teams.”

“The simulation enables students to think very broadly about strategy, using the same tools that they’ve seen in the [Strategy] course,” he adds. “We can have a case discussion to determine whether ideas are reasonable or not, but there’s no way for us to test them in the classroom. In the simulation, students have to make choices and then learn about the consequences of those choices.”

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