Steve Wilson, UConn’s Director of the Investment Management Initiative, sat down with Carl O’Donnell, an investor across global equities, and one of the OFP Investment Committee’s founding members. They discussed Carl’s experience with the initiative so far, his impressions of how the OFP students’ investing process has evolved from taking part in the initiative, and his advice on starting a career in finance.
Carl, you’ve been on the OFP Investment Committee since the program launched over three years ago. How would you describe your role?
Each term I sit on the panel that reads the students’ detailed stock write-ups. A few days later, our panel then observes the presentations that accompany those stock pitches. We judge and grade each pitch individually, and then decide as a group what weighting, if any, that stock deserves to have in the OFP portfolio. We therefore have a responsibility both to the students, to provide valuable feedback and accurate grades, and to the university, as this is real-life investing, with real capital at stake. The outcome of the students’ work decides how the OpportuntityFund’s capital is invested. Ultimately, we are playing the role of experienced portfolio managers as player-coaches to smart but less experienced analysts.
What drew you to the program in the first place?
At the outset, it was the first all-female student managed investment program in the US, and that resonated. I nearly bit your hand off when you asked me to get involved! I’ve been a professional investor for close to 20 years, and before that I was an M&A banker. Over my career I repeatedly tried to hire more women onto banking and investment teams and kept hitting the same wall: there simply weren’t enough women choosing to move from university into investment banking and then into investment management. The bottleneck has always been at the start of the pipeline, so it was a no-brainer to help a program looking to address this at the earliest possible stage.
Can you say more about that hiring frustration?
Sure. We all have blind spots. When you’re building a team, especially an investment team, you want different perspectives. It leads to a wider variety of ideas and views. This helps inform better decisions, and often helps you identify investments (or holes in an investment thesis) that you never would have thought of because they come from outside your comfort zone. Achieving that is easier said than done, though. In my experience, when you open an investment role, the candidate pool is overwhelmingly male, and that’s largely set years earlier by who chooses finance as a career after college. You can’t fix that at the hiring stage alone, you need to make that path more appealing earlier, so promoting the industry when students are thinking about which career avenue to pursue is vital. Programs like OFP give students real investing experience and the confidence to pursue a career in investing.
Why do you think you were asked to join the IC?
Well, we got to know one another when we both invested in the same company. I guess we respected each other’s insights into the investment rationale and how we assessed that company’s prospects, despite approaching it from different angles. Also, I think we both understand the importance of varying perspectives and backgrounds in an investment team. So, presumably having different career experiences to your own was going to add diversity to the investment committee, and you saw value in that. Also, I tend to be very thorough when analyzing company fundamentals, as well as stock technicals, and see great value in investing time in a thoughtful investment memo. I hope that comes across in the feedback and advice I give the students.
What do you think you bring to the panel that’s different?
Two things mainly. First, an international perspective, and second, a macro lens.
I think I’m the only non-American on the panel. I started my career in London doing European M&A deals and capital markets transactions, then worked at a London-based hedge fund for almost a decade, investing in Financials globally. This was during the GFC and then the Eurozone crisis, so in the regulatory aftermath a lot of funds just stopped investing in Financials altogether, as those companies fell into the “too difficult” bucket and you had no idea what the regulators were going to do next. When I first came to the US, it was ultimately this experience that got me hired. There weren’t a whole lot of folks still around who really understood Financials, particularly in the US, where the sector shrank considerably as an index weight. And those who were still at it were focused on domestic banks and, increasingly, payments companies.
My then boss, who had just started his own fund, was a brilliant Financials investor but needed someone who understood, and could give him comfort on, less picked-over investment opportunities outside the US. That requires a very different skillset, which is in short supply over here. In the US, you have the luxury of having the world’s reserve currency, energy and food self-sufficiency, and checks and balances around respected institutions. This is very different to a lot of the rest of the world. So, US investors don’t have to think about the macro as much and are very bottom-up and company-focused, which is typically fine, until you experience a real liquidity crisis.
So, from the standpoint of students, I tend to ask how a company competes globally, not just domestically. How reliant is it on those revenues and profits, and are there significant risks or opportunities to consider around that or that the market is not currently seeing? Investing in emerging markets teaches you that interest rates, currencies, capital flows, and politics can overwhelm company fundamentals. Most US-focused investors don’t have to think that way, so I push students to think about it; it will help them see around corners.
Is there a framework you encourage students to use when evaluating an idea?
There is. I’ll get to it in a bit, but in summary, I try to encourage them to consider external as well as internal forces. The students, understandably, often initially gravitate to “hot” or high-quality companies they read and hear about. But a good company is not always a good investment.
I suggest top-down and bottom-up factors are both important in determining whether an investment is likely to work out. The top-down factors relate more to the external environment and prevailing secular forces, and these factors are largely outside of the control of the company itself, but assessing them helps you figure out whether a company has wind in its sails. The bottom-up factors then are more company-specific: how well is it being run and is that reflected in the company’s valuation, and the company has more control here.
In emerging markets, you learn that a great company operating in a bad macro environment or in a country with poor public policy can still be a bad investment. Therefore, I’ll often ask the students what happens to their thesis if the dollar strengthens sharply or rates stay higher for longer or if there is a regime change in an important market, and what the probability of such an outcome is. On the other hand, poor companies in well-run countries or in attractive sectors can turn out to be terrible investments. My rule of thumb is never underestimate how much value a bad management team can destroy. Plus, it’s always important to be thoughtful on entry price – if that’s at an elevated valuation multiple, it doesn’t leave you with a margin of safety, and then a lot needs to go right for the investment to work but plenty can go wrong if it doesn’t.
So, regarding your framework question, I suggest to the students that a good idea should tick four big boxes:
First, an accommodating macro environment. For example, government infrastructure spending supporting an industrial supplier or a notable shift in policy upon a change in administration, such as the promotion of stablecoin adoption – that’s a huge unlock for digital asset infrastructure demand. Basically, a company’s cost of capital will be lower when policymakers are on their side.
Second, a secular trend working in its favor. If the company is riding that wave directly or is operating adjacent to that trend, it’s going to do just fine. Take embedded finance as an example. No small business wants to deal with a bank or a traditional merchant acquirer anymore. The experience is awful, but those businesses still need a way to accept payments, and they still need working capital. Then look at how Shopify has solved this pain point and simultaneously transformed itself over the years by embedding Stripe’s payment and capital engine within its core ecommerce platform. Financial products have become the largest revenue contributor at Shopify, and now it is harnessing another secular trend to boost profitability, leveraging AI to enhance product development and optimize operations.
Third, a best-in-class company and management team, with a strong capital allocation record and a dynamic and winning culture that can adapt to changing circumstances. Basically, this shows that they can compete and win versus their competitors and be opportunistic in times of stress. Look at how Nubank schooled the rest of the world on what a bank should look like or how JPMorgan sailed through the GFC and then capitalized on the Regional Banking Crisis by buying First Republic for a song.
And fourth, an attractive valuation. There’s no point buying a stock if it’s priced for perfection or better. Equally, selling out of a position at a deep discount to intrinsic value when you should be buying more is never a great long-term strategy either. I think this is one area where the students can learn a great deal from you and the investment committee, who have lived through many cycles and have likely been guilty of both overpaying and buying bargains throughout their careers. In my experience, Europeans tend to focus more on what can go wrong, while Americans look on the bright side, focusing on what can go right. The right approach is to consider both and ideally put some numbers around it. Rather than simply coming up with a target price, I ask the students what the risk-reward on the investment looks like: how much can you lose if it goes really wrong, and how much can you make if it goes really right? Ideally, you want to make an investment where the potential upside is multiples of the potential downside.
Your own investing focuses on Financials. How does that inform how you evaluate pitches?
Financials are all about understanding balance sheets, credit and funding risks, regulation, and economic sensitivities, so I tend to push hard on some of those areas regardless of the sector being pitched. This means regulation is usually a focus area for biotech or pharma pitches, while input cost sensitivities draw plenty of questions where commodities are involved in the value chain. Also, I’m always interested in how well management is allocating capital – are they over-levered, are they making smart use of excess cash? And if the company is very profitable and generates a lot of cash, what are we assuming they do with that over our investment horizon? If management has a track record of doing great acquisitions or buying back considerable levels of stock, we should give them some credit for that in our forecasts. This is something typically overlooked by the sell side and can be an important source of outsized returns over what the Street is expecting. Essentially, it might be something that we see that the market doesn’t, and that’s when investments get interesting.
What separates a strong pitch from a weak one?
Early on, many students fall into the trap of describing the company in painful detail, rather than assessing it as an investment. This obviously changes over time as they learn from going through many IC processes. The most common mistake is explaining why something is a good company rather than why it’s a good investment. A strong pitch opens with a one-page summary that should give the IC a snapshot of all the relevant information as to why the opportunity is compelling. This includes: what the company does in one sentence, pertinent themes, the investment thesis, what the market is missing, the catalysts for the investment to work, the key risks, and the KPIs to track. It also has a thesis breaker, meaning what would make you sell. And it frames valuation as reward-to-risk: if you think a stock can rise 100% over three years but is highly unlikely to fall more than 25% in the near term, that’s a 4x reward-to-risk multiple. That discipline forces students to think about the downside, not just the upside.
What’s the feedback you find yourself giving most often, and has AI changed it?
Similar feedback to what I was given at the start of my investing career, so given the students are at that point while still in college, they are already way ahead of the game!
Starting out, there is just so much to take in, so it’s hard to pick out what’s genuinely important, and what’s not impactful, i.e., unnecessary information. The default option is to present all the information. It’s only through doing the job that you learn over time to distill an investment down to the small number of things that really matter.
On AI, if anything, I wish the students felt more comfortable using it as an editing and formatting tool to improve and refine their pitch. It’s really important to consider your audience and its attention span. I encourage the students to use AI as an editor to cut out repetition, to help visualize important information for their reader, especially as it pertains to financial trends, and to keep descriptions tight.
Interpretation matters more than description in these exercises. I use an analogy: if you review an art exhibition, the reader wants the story of the show; for example, how the curator has chosen to structure the flow of the exhibition and whether this works, maybe some background on the artist and the arc of their career, and your verdict on whether it’s an exhibition worth seeing and why. What they don’t want is a detailed description of every painting – a picture has far more impact. An analyst should be the critic, not someone who reproduces the artworks in text. So, I encourage students to present data visually in tables and charts and use their words to interpret that data and what it means. AI tools make that point even sharper. LLMs can summarize a company’s business in seconds, and even help to pick out the salient points, so the value a student adds is in interpreting the data and the qualitative factors they’ve garnered from their research and then highlighting what really matters as it pertains to the investment.
Also, AI is a game changer on the modelling and productivity front. Building your first financial model and running multiple scenarios and sensitivity analyses are a lot less daunting when you have a tool like Claude on your side. This should free up time for more thoughtful analysis and allow students to get more reps in. Which is vital, because ultimately, the most important skill in investing remains good judgment, and this stems from recognizing patterns over time.
How have you seen the students develop over the terms?
Two areas. One is around the last point I made. The tendency to present a lot of raw and unimportant information in the investment memos gives way to much tighter and more thoughtful analysis over time. It’s easy to spot those who have been through a few processes.
The other is around confidence. The students in whom you notice the greatest growth are usually those who are less confident and more humble at the outset. Those students will make the best investors longer term. They are honest in the Q&A sessions about what they know and don’t, and they are very open to pushback and advice. You then see them come back the following term or year and they are just so impressive. They’ve taken things we’ve said on board, they anticipate questions and not only are they confident in defending their views, they have the data ready to back them up. The ones who exude confidence out the gate and think they have all the answers – it’s a lot harder to get through to them. Arrogance is very dangerous in investing. As a pursuit, it is intellectually very honest – as investors, we’re wrong a lot of the time, and it hurts. But those mistakes are vital; we learn more from them than from our successes. They make us much better investors.
What advice do you give students considering a career in investing?
Some of it is practical career advice, and some of it is around the investing process itself, like we just discussed. I tell them it’s important to think about both the craft of investing and the business of investment management.
Whether we like it or not, brand matters and critical thought is in short supply in today’s world. I feel everyone is chasing the same few things.
Whether it’s high school students I mentor at my old high school in Ireland, or students on your course, I encourage them to get on the right path as early as possible, because otherwise, it’s a real uphill struggle. I also encourage them to think long-term and laterally. Your course is more public markets in nature, which tends to be more rigorous from a craft standpoint, but active investment management across public markets as a business is a slow-melting ice cube. There’s a lot more secular growth in private investing and across alternatives, and in other pockets, like wealth management and fintech.
Your students have already made their decision on which college to attend, so I stress how important their first job out of college is in terms of a signal for future employers. Getting a summer internship at a great Wall Street brand or at a great tech company will make your life much easier when it comes to finding that first job after college. And landing at the right place means you have a lot more options after that, going back to what I said about everyone chasing the same thing – employers are no different.
Failing that, don’t feel sorry for yourself; you just need to work harder to make it happen. I, and many others before me and after me, came out of college without a job. So, I jumped on a flight to London, stayed at a friend’s place and banged on doors until either my money ran out or I got a job in finance. Thankfully, the latter happened first, and I’ve been doing it ever since.
Given how competitive it is out there, you have to be able to stand out. So, absent going to the right schools, you need to figure out a way to get in the door. Take initiative around pitching interesting ideas, using the skills you learned in this course, and finding niches that others aren’t looking at and where you can develop an expertise. Also, be creative about delivery of those ideas and getting them out there – for Dan Sundheim it was Value Investors Club, for you it might be articulating your pitch creatively in short video format on relevant social platforms. Those sorts of things will stick in people’s minds and give you credibility. It’s easy to see when someone has a genuine curiosity or passion about certain sectors or how businesses and economies work. And have a view, your own view. In fact, there’s one guy you had a few years ago from Central Asia, I remember him because not only was he really smart, but he genuinely thought differently to others and had an independent viewpoint. He had intellectual maturity and obviously had an edge in that he came from a very different background to others. My advice to him was to lean into his difference and bring some left-field ideas to his career search, as no one else would be pitching ideas from that part of the world or have the macro and industry perspectives that he might have coming from a commodity-dependent country.
Why does a program like OFP matter for the industry more broadly?
Personally, I would have loved to have something like this when I was in college. Coming from a country where “working in finance” meant joining an accounting firm, the connection to the industry would have been invaluable. I remember sitting in a finance module during my master’s program thinking how far removed the stodgy theory must be from the actual real-world application. The professor had spent his career in academia, so couldn’t illustrate the content with experiences from his time in the field. It was hard to get excited. If I weren’t so single-minded from a young age, it would have turned me off entirely.
If nothing else, it exposes the students to what the job is actually like and to real practitioners like you and the IC members. If that helps them make more informed decisions, then we get more people coming into the industry who (a) know what they are signing up for and want to be there and (b) come from a wider variety of backgrounds, who may otherwise not have been exposed to it, and may otherwise not take their shot.