The stock you pitched in a case competition, Selvora Chemicals, fell 22% in the six months after. The market fell 5%, the chemicals sector 8%, and Selvora's beta to the sector is 1.1. How much of the fall was your thesis, and how do you talk about it in an interview?

The sector explains about 8.8 points of the 22% fall, so about 13.2 points were specific to Selvora, and that is the part your thesis owns. Of the 8.8, 5.5 came from the market and 3.3 from chemicals doing worse than the market. In the interview, give the split first, name the assumption that failed, then say whether you would own the stock at today's price and what you now do differently.

A student whose marks fall 20% in a year when the whole class fell 10% did worse than the class, but not 20 points worse. To judge a stock pick, strip out the part of the move that the market and the sector would have delivered anyway, scaled by how sensitive the stock is to them; what is left is the part your thesis is answerable for. Selvora's betaHow much a stock tends to move for each 1% move in a benchmark. A beta of 1.1 means it has tended to move 1.1% for every 1% the benchmark moves. to the sector is 1.1, so an 8% sector fall explains 1.1 x 8 = 8.8 points. The residual, 22.0 minus 8.8, is 13.2 points.

Without the beta you would subtract the sector's 8% and call 14 points your own; with it you call 13.2. The difference is small here, but on a high-beta name in a bad tape it can be the whole story. A beta is an estimate from past data, so treat the 13.2-point residual as roughly 13, not as a precise measure of your error. On a Rs 10 crore position, that residual is about Rs 1.32 crore of loss that no hedge on the sector would have saved.

Interviewers ask about an old pitch to see whether you can own an outcome without excuses and without collapsing. Use four steps. First the split: about 9 points were the sector, about 13 were Selvora. Second, the assumption that failed: the plant was three months late and a large customer delayed orders, so the margin step-up you expected in the second half has not arrived yet. Third, and the step most people skip, re-underwrite from today's price: is the thesis delayed or broken? If the plant is now running and the customer's orders are deferred rather than lost, the thesis is delayed and the lower price may make it more interesting. If the customer has moved to a rival, it is broken.

Fourth, what you would do differently: size the position for the plant-delay risk you underweighted, and set a check-in date tied to the plant's start rather than to the share price. A candidate who says the market fell has answered about 9 points of a 22-point question. One who owns the 13 points, explains them and says what they learned sounds like someone a portfolio manager can trust with capital.