skills/long-short-pitch/references/sector-overlays.md

# Long / Short Pitch Sector Overlays

Load only the overlay that matches the prompt. These overlays sharpen trade judgment; they do not replace the core pitch workflow.

## SaaS / Subscription Software Long
Use when the pitch is a public software long, especially vertical SaaS, application software, payments software, or workflow software.

### What a PM cares about
- whether growth durability is mispriced
- whether retention, expansion, pricing, and seat/module growth support the target multiple
- whether cash conversion is better or worse than headline ARR / revenue growth implies
- whether margin expansion is operating leverage or temporary cost timing
- whether SBC, restructuring, implementation costs, or deferred revenue distort economic FCF

### Must-have pitch facts
- revenue growth, ARR/MRR if available, NRR, gross retention, churn, and backlog where relevant
- gross margin, EBITDA margin, FCF margin, SBC load, and rule-of-40 context
- net cash/debt and diluted share count
- peer valuation and the company's own trading history
- next 1-3 catalysts: print, guide, product event, price increase, investor day, margin reset

### Common failure modes
- calling a stock cheap without explaining normalized growth
- leaning on AI/product narrative before it is economically measurable
- using EBITDA without addressing SBC or FCF conversion
- assuming rerating without a catalyst or peer/history support

### Monitoring triggers
- retention / NRR
- cRPO / bookings / billings
- gross margin and FCF margin
- large-customer commentary
- guide revisions and consensus estimate drift

## Consumer Internet / Platform Short
Use when the pitch is a short in consumer internet, marketplaces, ad platforms, fintech platforms, or other network-effect assets.

### What a short seller cares about
- what still supports the multiple and why that support should break
- whether deterioration is cyclical, execution-driven, regulatory, or structural
- whether the catalyst path is strong enough to offset borrow, crowding, and timing risk
- whether a healthier segment or cash balance can keep the equity alive longer than expected

### Must-have pitch facts
- key usage metric: MAU/DAU, payer count, transactions, GMV, engagement, conversion, retention, or monetization
- segment split between deteriorating and healthy assets
- revenue growth, margin trend, guidance quality, and intervention intensity
- borrow/carry/crowding if available
- scenario price targets including adverse upside risk

### Common failure modes
- descriptive bear case with no catalyst
- ignoring the offsetting healthy segment
- no cover discipline
- assuming multiple compression without explaining what forces it

### Monitoring triggers
- user/payer metrics
- monetization intervention quality
- guide revisions
- regulatory milestones
- next one or two earnings prints

## Pair Trade / Relative Value
Use when the pitch compares two securities, two baskets, or one security against a benchmark hedge.

### What a PM cares about
- whether the trade is genuinely relative value or just two unrelated directional bets
- whether factor, beta, sector, rates, FX, commodity, or liquidity exposure overwhelms the spread logic
- whether the long and short legs have comparable catalysts and time horizons
- whether the hedge ratio is explainable

### Must-have pitch facts
- long leg and short leg thesis
- valuation spread, earnings revision spread, KPI spread, or credit spread differential
- hedge ratio, beta residual, sector/factor exposure, and liquidity mismatch
- catalyst path for both legs
- break conditions for each leg

### Common failure modes
- pair trade is actually net long or net short with no disclosure
- using a valuation spread without explaining why it should close
- ignoring idiosyncratic event risk in one leg
- no rule for what happens if only one leg works

### Monitoring triggers
- spread / ratio movement
- relative EPS revision trend
- catalyst slippage for either leg
- factor exposure drift
- borrow or liquidity changes

## Event-Driven / Special Situation
Use when the pitch is tied to merger arbitrage, spin-offs, litigation, regulatory approval, restructuring, index inclusion, tender offers, or other discrete events.

### What a PM cares about
- expected value after probability, timing, and break downside
- what the market-implied probability is versus the pitch probability
- whether the legal, regulatory, shareholder, financing, or process path is correctly mapped
- whether the trade can be resized before the final binary event

### Must-have pitch facts
- current spread or price
- consideration, timing, outside date, and break price
- probability tree
- required approvals and milestone calendar
- downside if the event fails

### Common failure modes
- treating management confidence as probability
- ignoring timing drag
- no break price
- no interim milestones or resize triggers

### Monitoring triggers
- regulatory docket updates
- shareholder vote timing
- financing conditions
- court / agency milestones
- spread movement versus news

## Credit Markets Handoff / Equity-Risk Signal
Use only when credit data is an input to a listed-equity pitch, not the security being recommended.

### What an equity PM cares about
- whether refinancing stress, maturity walls, liquidity runway, rating pressure, or CDS/spread signals change common-equity downside
- whether equity optionality survives under realistic enterprise value and liquidity stress
- whether the credit read-through changes sizing, hedge posture, catalyst timing, or the kill case

### Required local framing
- state the equity-security implication first
- label credit data as equity-risk context or Credit Markets handoff
- route bond, loan, CDS, covenant, recovery, restructuring, spread/yield, and debt-security analysis to Credit Markets

### Common failure modes
- turning a credit instrument into a local Public Equity recommendation
- using headline spread or CDS widening without an equity downside mechanism
- implying recovery or covenant analysis without Credit Markets support

### Monitoring triggers
- liquidity runway and maturity-wall updates
- refinancing announcements or rating actions
- CDS/spread signals that move with equity drawdown risk
- Credit Markets handoff output that changes the equity case