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What’s in an Equity Research Report?

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Even though you can easily find real equity research reports via the magical tool known as “Google,” we’ve continued to get questions on this topic.

Whenever I see the same question over and over again, you know what I do: I bash my head in repeatedly and contemplate jumping off a building…

…and then I write an article to answer the question.

To understand an equity research report, you must understand what goes into a  stock pitch first.

The idea is similar, but an ER report is a “watered-down” version of a stock pitch.

But banks have some very solid reasons for publishing equity research reports:

Why Do Equity Research Reports Matter?

You might remember from previous articles that equity research teams do not spend that much time writing these reports .

Most of their time is spent speaking with management teams and institutional investors and sharing their views on sectors and companies.

However, equity research reports are still important because:

• You do still spend some time doing the required modeling work (~15%) and writing the reports (~20%).
• You might have to write a research report as part of the interview process.

For example, if you apply to an equity research role or an equity research internship , especially in an off-cycle process, you might be asked to draft a short report on a company.

And then in roles outside of ER, you need to know how to interpret reports quickly and extract the key information.

Equity Research Reports: Myth vs. Reality

If you want to understand equity research reports, you have to understand first why banks publish them: to earn higher commissions from trading activity.

A bank wants to encourage institutional investors to buy more shares of the companies it covers.

Doing so generates more trading volume and higher commissions for the bank.

This is why you rarely, if ever, see “Sell” ratings, and why “Hold” ratings are far less common than “Buy” ratings.

Different Types of Equity Research Reports

One last point before getting into the tutorial: There are many different types of research reports.

“Initiating Coverage” reports tend to be long – 50-100 pages or more – and have tons of industry research and data.

“Sector Reports” on entire industries are also very long. And there are other types, which you can read about here .

In this tutorial, we’re focusing on the “Company Update” or “Company Note”-type reports, which are the most common ones.

The Full Tutorial, Video, and Sample Equity Research Reports

For our full walk-through of equity research reports, please see the video below:

Table of Contents:

• 1:43: Part 1: Stock Pitches vs. Equity Research Reports
• 6:00: Part 2: The 4 Main Differences in Research Reports
• 12:46: Part 3: Sample Reports and the Typical Sections
• 20:53: Recap and Summary

You can get the reports and documents referenced in the video here:

• Equity Research Report – Jazz Pharmaceuticals [JAZZ] – OUTPERFORM [BUY] Recommendation [PDF]
• Equity Research Report – Shawbrook [SHAW] – NEUTRAL [HOLD] Recommendation [PDF]
• Equity Research Reports vs. Stock Pitches – Slides [PDF]

If you want the text version instead, keep reading:

Watered-Down Stock Pitches

You should think of equity research reports as “watered-down stock pitches.”

If you’ve forgotten, a hedge fund or asset management stock pitch ( sample stock pitch here ) has the following components:

• Part 1: Recommendation
• Part 2: Company Background
• Part 3: Investment Thesis
• Part 4: Catalysts
• Part 5: Valuation
• Part 6: Investment Risks and How to Mitigate Them
• Part 7: The Worst-Case Scenario and How to Avoid It

In a stock pitch, you’ll spend most of your time and energy on the Catalysts, Valuation, and Investment Risks because you want to express a VERY different view of the company .

For example, the company’s stock price is $100, but you believe it’s worth only $50 because it’s about to report earnings 80% lower than expectations.

Therefore, you recommend shorting the stock. You also recommend purchasing call options at an exercise price of $125 to limit your losses to 25% if the stock moves in the opposite direction.

In an equity research report, you’ll still express a view of the company that’s different from the consensus, but your view won’t be dramatically different.

You’ll spend more time on the Company Background and Valuation sections, and far less time and space on the Catalysts and Risk Factors. And you won’t even write a Worst-Case Scenario section.

If a company seems overvalued by 50%, a research analyst would probably write a “Hold” recommendation, say that there’s “uncertainty around several customers,” and claim that the company’s current market value is appropriate.

Oh, and by the way, one risk factor is that the company might report lower-than-expected earnings.

The Four Main Differences in Equity Research Reports

The main differences are as follows:

1) There’s More Emphasis on Recent Results and Announcements

For example, how does a recent product announcement, clinical trial result, or earnings report impact the company?

You’ll almost always see recent news and updates on the first page of a research report:

These factors may play a role in hedge fund stock pitches as well, but more so in short recommendations since timing is more important there.

2) Far-Outside-the-Mainstream Views Are Less Common

One comical example of this trend is how all 15 equity research analysts covering Enron rated it a “buy” right before it collapsed :

Sell-side analysts are far less likely to point out that the emperor has no clothes than buy-side analysts.

3) Research Reports Give “Target Prices” Rather Than Target Price Ranges

For example, the company is trading at $50.00 right now, but we expect its price to increase to exactly $75.00 in the next twelve months.

This idea is completely ridiculous because valuation is always about the range of possible outcomes, not a specific outcome.

Despite horrendously low accuracy , this practice continues.

To be fair, many analysts do give target prices in different cases, which is an improvement:

4) The Investment Thesis, Catalysts, and Risk Factors Are “Looser”

These sections tend to be “afterthoughts” in most reports.

For example, the bank might give a few reasons why it expects the company’s share price to rise: the company will capture more market share than expected, it will be able to increase its product prices more rapidly than expected, and a competitor is about to go bankrupt.

However, the sell-side analyst will not tie these factors to specific share-price impacts as a buy-side analyst would.

Similarly, the report might mention catalysts and investment risks, but there won’t be a link to a specific valuation impact from each factor.

So the typical stock pitch logic (“We think there’s a 50% chance of gaining 80% and a 50% chance of losing 20%”) won’t be spelled out explicitly:

Your Sample Equity Research Reports

To illustrate these concepts, I’m sharing two equity research reports from our financial modeling courses :

The first one is from the valuation case study in our Advanced Financial Modeling course , and the second one is from the main case study in our Bank Modeling course .

These are comprehensive examples, backed by industry data and outside research, but if you want a shorter/simpler example you can recreate in a few hours, the Core Financial Modeling course has just that.

In each case, we started by creating traditional HF/AM stock pitches and valuations and then made our views weaker in the research reports.

The Typical Sections of an Equity Research Report

So let’s briefly go through the main sections of these reports, using the two examples above:

Page 1: Update, Rating, Price Target, and Recent Results

The first page of an “Update” report states the bank’s recommendation (Buy, Hold, or Sell, sometimes with slightly different terminology), and gives recent updates on the company.

For example, in both these reports we reference recent earnings results from the companies and expectations for the next fiscal year:

We also give a “target price,” explain where it comes from, and give our estimates for the company’s key financial metrics.

We mention catalysts in both reports, but we don’t link anything to a specific valuation impact.

One problem with providing a specific “target price” is that it must be based on specific multiples and specific assumptions in a DCF or DDM.

So with Jazz, we explain that the $170.00 target is based on 20.7x and 15.3x EV/EBITDA multiples for the comps, and a discount rate of 8.07% and Terminal FCF growth rate of 0.3% in the DCF.

Next: Operations and Financial Summary

Next, you’ll see a section with lots of graphs and charts detailing the company’s financial performance, market share, and important metrics and ratios.

For a pharmaceutical company like Jazz, you might see revenue by product, pricing and # of patients per product per year, and EBITDA margins.

For a commercial bank like Shawbrook, you might see loan growth, interest rates, interest income and net income, and regulatory capital figures such as the Common Equity Tier 1 (CET 1) and Tangible Common Equity (TCE) ratios:

This section of the report explains how the analyst or equity research associate forecast the company’s performance and came up with the numbers used in the valuation.

The valuation section is the one that’s most similar in a research report and a stock pitch.

In both fields, you explain how you arrived at the company’s implied value, which usually involves pasting in a DCF or DDM analysis and comparable companies and transactions.

The methodologies are the same, but the assumptions might differ substantially.

In research, you’re also more likely to point to specific multiples, such as the 75 th percentile EV/EBITDA multiple, and explain why they are the most meaningful ones.

For example, you might argue that since the company’s growth rates and margins exceed the medians of the set, it deserves to be valued at the 75 th percentile multiples rather than the median multiples:

Investment Thesis, Catalysts, and Risks

This section is short, and it is more of an afterthought than anything else.

We do give reasons for why these companies might be mis-priced, but the reasoning isn’t that detailed.

For example, in the Shawbrook report we state that the U.K. mortgage market might slow down and that regulatory changes might reduce the market size and the company’s market share:

Those are legitimate catalysts, but the report doesn’t explain their share-price impact in the same way that a stock pitch would.

Finally, banks present Investment Risks mostly so they can say, “Well, we warned you there were risks and that our recommendation might be wrong.”

By contrast, buy-side analysts present Investment Risks so they can say, “There is a legitimate chance we could lose 50% – let’s hedge against that risk with options or other investments so that our fund does not collapse .”

How These Reports Both Differ from the Corresponding Stock Pitches

The Jazz equity research report corresponds to a “Long” pitch that’s much stronger:

• We estimate its intrinsic value as $180 – $220 / share , up from $170 in the report.
• We estimate the per-share impact of each catalyst: price increases add 15% to the share price, more patients from marketing efforts add 10%, and later-than-expected generics competition adds 15%.
• We also estimate the per-share impact from the risk factors and conclude that in the worst case , the company’s share price might decline from $130 to $75-$80. But in all likelihood, even if we’re wrong, the company is simply valued appropriately at $130.
• And then we explain how to hedge against these risks with put options.

The same differences apply to the Shawbrook research report vs. the stock pitch, but the stock pitch there is a “Short” recommendation where we claim that the company is overvalued by 30-50%.

And that sums up the differences perfectly: A Short recommendation with 30-50% downside in a stock pitch turns into a “Hold” recommendation with roughly equal upside and downside in a sell-side research report.

I’ve been harsh on equity research here, but I don’t want to disparage it too much.

There are many positives: You do get more creativity than in IB, it might be better for hedge fund or asset management exits, and it’s more fun to follow companies than to grind through grunt work on deals.

But no matter how you slice it, most equity research reports are watered-down stock pitches.

So, make sure you understand the “strong stuff” first before you downgrade – even if your long-term goal is equity research.

You might be interested in:

• The Equity Research Analyst Career Path: The Best Escape from a Ph.D. Program, or a Pathway into the Abyss?
• Private Equity Regulation : 2023 Changes and Impact on Finance Careers
• Stock Pitch Guide: How to Pitch a Stock in Interviews and Win Offers

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street . In his spare time, he enjoys lifting weights, running, traveling, obsessively watching TV shows, and defeating Sauron.

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Read below or Add a comment

15 thoughts on “ What’s in an Equity Research Report? ”

Hi Brian, what softwares are available to publish Research Reports?

We use Word templates. Some large banks have specialized/custom programs, but not sure how common they are.

Is it possible if you can send me a template in word of an equity report? It will help the graduate stock management fund a lot at Umass Boston.

We only have PDF versions for these, but Word should be able to open any PDF reasonably well.

Do you also provide a pre constructed version of an ER in word?

We have editable examples of equity research reports in Word, but we generally only share PDF versions on this site.

Hey Brian Can you please help me with coverage initiated reports on oil companies. I could not find them on the net. I need to them to get equity research experience, after which only I will be able to get into the field. I searched but reports could not be found even for a price. Thanks

We have an example of an oil & gas stock pitch on this site… do a search…

https://mergersandinquisitions.com/oil-gas-stock-pitch/

Beyond that, sorry, we cannot look for reports and then share them with you or we’d be inundated with requests to do that every day.

No worries. Thanks!

Hi! Brian! Do u know how investment bankers design and layout an equity research? the software they use. like MS Word, Adobe Indesign or something…? And how to create and layout one? Thanks

where can I get free equity research report? I am a Chinese student and now study in Australia. Is the Morning Star a good resource for research report?

Get a TD Ameritrade to access free reports there for certain companies.

How do you view the ER industry since the trading commission has been down 50% since 2007. And there are new in coming regulation governing the ER reports have to explicitly priced and funds need to pay for the report explicity rather than as a service comes free with brokerage?

In addition the whole S&T environment is becoming highly automated.

People have been predicting the death of equity research for over a decade, but it’s still here. It may not be around in 100 years, but it will still be around in another 10 years, though it will be smaller and less relevant.

Yes, things are becoming more automated, but the actual job of an equity research analyst or associate hasn’t changed dramatically. A machine can’t speak with investors to assess their sentiment on a company – only humans can do that.

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A Student’s Guide to Writing A Buy-Side Equity Research Report

• via Research , Resources

Marina Chang

A career in finance can take on many different forms — from investment banking to equity research. Equity researchers conduct detailed analyses in order to offer well-supported investment recommendations. Their analyses are then compiled into what is referred to as an equity research report. These reports differ on the sell-side and buy-side, but they do have some overlaps. This guide will break down the key components and formats to help you successfully craft your own equity research report.

What is an equity research report? What is the purpose of a research report?

An equity research report is a document prepared by an analyst that gives an overview of a business, including the industry it operates in, its management team, its financial performance, risks, and its target price. The purpose of a research report is to provide a recommendation on whether investors should buy, hold, or sell shares of a public company.

What’s the difference between a buy-side and sell-side equity research report?

Sell-side reports are the most common type of equity research report. They are typically produced by investment banks for their clients to help guide investment decisions. Sell-side analysts issue the often-heard recommendations of “buy,” “hold,” “neutral,” or “sell” to help clients with their investment decisions. This is favorable for the brokerage firm as each time a client decides to trade the brokerage firm gets a commission on the transaction.

Buy-side reports are internal reports, produced for the bank itself, and are guided by differing perspectives and motivations. Buy-side analysts determine how promising an investment seems and how well it fits with the fund’s investment strategy. These recommendations are made exclusively for the benefit of the fund that employs them and are not available to anyone outside the fund.

What information should be included within your equity research report?

• Recommendation  – Typically to buy, sell, or hold shares in the company. This section also usually includes a target price (i.e., $47.00 in the next 12 months).
• Company Update  – New releases, quarterly or annual results, major contracts, management changes, or any other recent or important information about the company.
• Investment Thesis  – A summary of why the analyst believes the stock will over or underperform and what will cause it to reach the share price target included in the recommendation. This is probably the most interesting part of the report.
• Financial Information & Valuation  – A forecast of the company’s income statement, balance sheet, cash flow, and valuation. This section is often an output from a financial model built in Excel.
• Risk & Disclaimers  – An overview of the risks associated with investing in the stock. This is usually a laundry list of all conceivable risks, thus making it feel like a legal disclaimer. The reports also have extensive disclaimers in addition to the risk section.

What information is needed for the industry pages?

• Competitive Rivalry  – This looks at the number and strength of competitors. How many rivals does the company have? Who are they, and how does the quality of their products and services compare?
• Supplier Power  – This is determined by how easy it is for suppliers to increase their prices. How many potential suppliers does the company have? How unique is the product or service that it provides, and how expensive would it be to switch from one supplier to another?
• Buyer Power  – Here, you ask how easy it is for buyers to drive prices down. How many buyers are there, and how big are their orders? How much would it cost them to switch from the company’s products and services to those of a rival? Are buyers strong enough to dictate terms?
• Threat of Substitution  – This refers to the likelihood of customers finding a different way to do what the company offers.
• Threat of New Entry  – The company’s position can be affected by how easy it is for a new company to enter the industry. How much would it cost, and how tightly is the industry regulated?

How to create and forecast a financial model.

• Gather the company’s most recent 10-K and 10-Q SEC filings.
• For all three financial statements, copy and paste the line items that can be forecasted.
• Make income statement projections based on margins as a percentage of revenue.
• Create a depreciation schedule to account for the reduction of PP&E and intangible assets over time.
• Calculate working capital assumptions.
• Forecast current assets and liabilities on the balance sheet.
• Adjust net change in cash and cash equivalents (CCE) with the cash flow statement.
• Reconcile the cash flow statement with the balance sheet.
• Compute the dividend payout ratio if the company offers a dividend.
• Create the shares repurchase schedule if the company has a share buyback program.
• Construct the debt schedule.
• Calculate interest income and interest expense from the debt schedule.
• Run multiple scenarios – Wall Street Case, Bear Case, Bull Case.
• Sanity check your assumptions.

How many pages should your equity research report contain?

An equity research report should not be more than 10 to 15 pages long. Aim to be both concise and cohesive.

What kind of disclaimer should be included?

It is important for the report to have certain disclaimers to show that the analyst writing the report isn’t biased. Some typical disclaimers are as follows: 

• Every ER report entirely reflects the views and personal opinions of the analyst as on the date of publication.
• The equity research analyst does not have an interest in the shares of the company.
• Compensation of the analyst is not linked directly to any specific research recommendations contained in the report.
• Financial analysts or equity research analysts working in brokerage firms or sell-side analysts write equity research reports.

With all these points in mind, you are now ready to write your own equity research report. Select a public company, use this guide as a reference, and see what results from your analysis. Congratulations in advance on completing your research report!

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About Romero Mentoring

Since 2016, Romero Mentoring investment banking training programs have been delivering career mentoring to job seekers, professionals, and college students pursuing careers in finance. We’ve helped over 400 students start their careers on Wall Street through our Analyst Prep and Associate Investment Banking Training Programs. Our graduates work at top-bulge bracket banks and consulting firms, including Goldman Sachs, JP Morgan, McKinsey, and many more.

References:

• https://www.financewalk.com/equity-research-report/
• https://corporatefinanceinstitute.com/resources/knowledge/valuation/equity-research-report/#:~:text=What%20is%20an%20Equity%20Research,distributes%20that%20research%20to%20clients.
• https://quickbooks.intuit.com/r/marketing/market-research-tips-how-to-conduct-an-industry-analysis/

About the Author

Marina Chang is a business student at New York University pursuing a double concentration in Finance and Data Science. She is currently an Investment Research Intern at Romero Capital. Marina is an Analyst at NYU's Smart Woman Securities, where she worked with a team of 5 to compete in a stock pitch. She is also a Staff Consultant at 180 Degrees Consulting. The organization provides affordable advising services for non-profits and social enterprises. Marina was a mentee of the Analyst Prep Program.

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The Value of Equity Research

Equity research is an invaluable asset for anyone looking to stay up-to-date on market and industry trends. In this guide, you will learn about the type of information contained in equity research, the value it offers to corporate professionals, and how the most advanced teams are already leveraging the expertise of Wall Street’s top analysts to inform critical business decisions.

Get the guide

Introduction.

Equity research, which forms a multi-billion dollar industry for investment banks, is produced by thousands of analysts worldwide to provide the market with valuable information on companies, industries, and market trends. Today, over 90% of equity research is consumed by fund managers, who have the Wall Street relationships to acquire it and the analyst resources to mine it for insights. For corporate strategy professionals who lack this access, however, equity research has historically been challenging to obtain and navigate.

To help corporations circumvent these challenges, AlphaSense has introduced Wall Street Insights, the first and only equity research collection purpose-built for the corporate user. Through the AlphaSense platform, any business making strategic plans or product decisions, conducting competitive analysis, evaluating M&A, or engaging in investor relations can now tap into the deep industry expertise of Wall Street’s top analysts.

What is Equity Research?

Equity research is developed by sell-side firms to help investors and hedge fund managers discover market opportunities and make informed investment decisions. Increasingly, this expert analysis has also been identified by forward-looking corporations as a highly valuable tool to inform strategic decision-making.

There are thousands of sell-side firms that employ expert analysts around the globe to write equity research for the market. The majority of firms producing equity research are hyper-focused and only have one or two analysts developing reports on a specific industry. However, larger firms, such as Morgan Stanley and Bank of America, collectively employ thousands of analysts to write reports on thousands of public companies–covering everything from TMT giants to niche products.

Equity research analysts are deep subject matter experts who are often former executives, industry veterans, or academics. These analysts conduct in-depth research and publish reports on corporations, industries, and macro trends, offering an expert lens into a subject.

Historically, over 90% of equity research was consumed by buy-side fund managers, who had the Wall Street relationships to acquire it and the analyst resources to mine it for insights. For buy-side professionals, equity research is a critical tool to inform sound investment decisions backed by expert insights.

Today, equity research is increasingly relied upon by corporate teams as a high-value source of information. These teams leverage equity research to make strategic business plans, conduct competitive analysis, evaluate mergers and acquisitions, and make product and marketing decisions. For corporations, the value of equity research lies in the detailed coverage of their company, their competitors, and how they are performing related to the marketplace they are within.

What is an Equity Research Report?

An equity research report is a document prepared by an equity research analyst that often provides insight on whether investors should buy, hold, or sell shares of a public company. In an equity research report, an analyst lays out their recommendation, target price, investment thesis, valuation, and risks.

There are multiple forms of equity research, including (but not limited to):

An update report that highlights the latest news, company announcements, earnings reports, Buy Sell Hold ratings, M&A activity, anything that impacts the value of the company.

A comprehensive company report that is compiled when an analyst or firm initiates their coverage of a stock. Initiation reports cover all of the divisions and products of a company in-depth to provide a baseline of what the company is and how it is performing. Initiation reports can be tens to hundreds of pages long, depending on the complexity of a company.

General industry updates that cover a group of similar companies within a sector. Industry-specific reports typically dive into additional factors such as loan growth, interest rates, interest income, net income, and regulatory capital.

A report compiled by research firms either daily or weekly. These reports can often be a great place to get more in-depth insight on commodities and also get market opinions from commodity analysts or traders who write the reports.

A quick 1-2 page report that comments on a news release from a company or other quick information

What is Included in a Typical Equity Research Report?

Research reports don’t need to follow a specific formula. Analysts at different investment banks have some latitude in determining the look and feel of their reports. But more often than not, research reports follow a certain protocol of what investors expect them to look like.

A typical equity research report includes in-depth industry research, management analysis, financial histories, trends, forecasting, valuations, and recommendations for investors. Sometimes called broker research reports or investment research reports, equity research reports are designed to provide a comprehensive snapshot that investors or corporate leaders can leverage to make informed decisions.

Here’s a quick overview of what a standard equity research report covers:

This section covers events, such as quarterly results, guidance, and general company updates.

Upgrades/Downgrades are positive or negative changes in an analyst’s outlook of a particular stock valuation. These updates are usually triggered by qualitative and quantitative analysis that contributes to an increase or decrease in the financial valuation of that security.

Estimates are detailed projections of what a company will earn over the next several years. Valuations of those earnings estimates form price targets. The price target is based on assumptions about the asset’s future supply & demand and fundamentals.

Management Overview and Commentary helps potential investors understand the quality and makeup of a company’s management team. This section can also include a history of leadership within the company and their record with capital allocation, ESG, compensation, incentives, stock ownership. Plus, an overview of the company’s board of directors.

This section covers competitors, industry trends, and a company’s standing among its sector. Industry research includes everything from politics to economics, social trends, technological innovation, and more.

Historical Financial Results typically cover the history of a company’s stock, plus expectations based on the current market and events surrounding it. To determine if a company is at or above market expectations, Analysts must deeply understand the history of a specific industry and find patterns or trends to support their recommendations.

Based on the market analysis, historical financial results, etc., an analyst will run equity valuation models. In some cases, analysts will run more than one valuation model to determine the worth of company stock or asset.

Absolute valuation models : calculates a company’s or asset’s inherent value.

Relative equity valuation models : calculates a company’s or asset’s value relative to another company or asset. Relative valuations base their numbers on price/sales, price/earnings, price/cash flow.

An equity research analyst’s recommendation to buy, hold, or sell. The analyst also will have a target price that tells investors where they expect the stock to be in a year’s time.

What Does an Equity Research Analyst Do?

Equity research analysts exist on both the buy-side and the sell-side of the financial services market. Although these roles differ, both buy-side and sell-side analysts produce reports, projections, and recommendations for specific companies and stocks.

An equity research analyst specializes in a group of companies in a particular industry or country to develop high-level expertise and produce accurate projects and recommendations. Since ER analysts generally focus on a small set of stocks (5-20), they become specialists in those specific companies and industries that they evaluate or follow. These analysts monitor market data and news reports and speak to contacts within the companies/industries they study to update their research daily.

Analysts need to comprehend everything about their ‘coverage’ to give investment endorsements. Equity research analysts must be conversant with the business regulations and regime policies within the country to decide how it will affect the market environment and business in general. The more you understand the industries in detail, the easier it will be for you to decipher market dynamics.

One prevalent aspect of an equity research analyst’s job is building and maintaining valuable relationships with corporate leaders, clients, and peers. Equity research is largely about an analyst’s ability to service clients and provide insightful ideas that positively influence their investing strategy.

EQUITY RESEARCH ANALYSTS:

• Analyze stocks to help portfolio managers make better-informed investment decisions.
• Analyze a stock against market activity to predict a stock’s outlook.
• Develop investment models and provide trading strategies.
• Provide expertise on markets and industries based on their competitive analysis, business analysis, and market research.
• Use data to model and measure the financial risk associated with particular investment decisions.
• Understand the details of various markets to compare a company’s and sector’s stock

Buy-Side vs. Sell-Side Analysts

Although the roles of buy-side and sell-side analysts do overlap in some respects, the purpose of their research differs.

How Do Corporates Currently Access Equity Research?

If you were to Google “equity research reports,” you would not get access to equity research, earnings call transcripts or trade journals. You would, however, discover an unmanageable amount of noise to sift through.

Accessing equity research reports is highly dependent on relationships and entitlements, particularly for corporate teams. Unlike financial firms and investor relations teams, who can access equity research by procuring the right entitlements, corporate teams have a much harder time finding and purchasing high-quality equity research.

If you were to search online for equity research, for example, you would be presented with sub-par options such as:

Some websites allow you to search for research reports on companies or by firms. Some of the reports are free, but you must pay for most of them. Prices range from just $15 to thousands of dollars.

If you want just the bottom-line recommendations from analysts, many sites summarize the data. Nearly all the websites that provide stock quotes also compile analyst recommendations, however, you will only get the big picture and not any of the detailed analysis.

Some independent research providers sell their reports directly to investors. These reports typically include an overview of what a stock’s price could be, plus an analysis of the company’s earnings. These reports often cost less than $100 but can be more.

The majority of equity research is completely unsearchable, which is why AlphaSense’s Wall Street Insights is changing the game for corporations globally. Now, with WSI, corporations can leverage this high-quality research to augment their understanding of specific companies and industries; plus, AlphaSense’s corporate clients can now conduct more meaningful analysis and make more data-driven decisions.

Real-Time Research : Real-Time research is available to eligible users (based on an entitlement) immediately upon publication by the broker. Financial Services users with entitlements are the primary consumers of real-time research, while some Corporate professionals are also eligible. Payment for real-time research is made directly from clients to brokers through trading commissions or hard dollar agreements.

Aftermarket Research : Aftermarket research is a collection of many of the same documents as the real-time collection, but it is available after a zero to fifteen-day delay. Investment bankers, consultants, and corporate users are the primary consumers of Aftermarket research.

What is Wall Street Insights?

Wall Street Insights is the first and only equity research collection purpose-built for the corporate market, providing corporations unprecedented access to a deep pool of equity research reports from thousands of expert analysts.

Through partnerships with Morgan Stanley, Bank of America, Barclays, Bernstein, Bernstein Autonomous, Cowen, Deutsche Bank, Evercore ISI, HSBC, and others, corporate professionals can now access the world’s most revered equity research, indexed and searchable in the AlphaSense platform.

From macro market trends and industry analyses to company deep-dives, the Wall Street Insights content collection provides corporate professionals with a 360-degree view of every market. With the valuable expertise of thousands of analysts on your side, corporate teams can quickly compare insights, validate internal assumptions, and generate new ideas to guide critical business decisions and strategies.

In terms of search and accessibility, Wall Street Insights is the first of its kind. Not only does AlphaSense offer hard-to-find equity research reports, but we also provide a robust and seamless search experience.

What Research Do You Get Access to with WSI?

Get access to the world’s leading equity research with Wall Street Insights. Download the e-book to learn more about equity research from Morgan Stanley, Barclays, Bernstein, Deutsche Bank, and more.

“We are delighted to partner with AlphaSense to expand access to Morgan Stanley’s global research platform,” says Simon Bound, Global Head of Research at Morgan Stanley. We have over 600 publishing analysts covering companies, industries, commodities, and macroeconomic developments across more than 50 countries. Morgan Stanley will bring corporates a unique perspective from our best in class analysts, a global platform, and a collaborative culture that enables us to unravel the most complex market and industry trends.”

How Can Companies Leverage Equity Research?

Discover how the world’s most innovative companies leverage Wall Street Insights to make critical business decisions every day. Download the e-book to read real case studies from a Corporate Development team and a Corporate Strategy team.

“AlphaSense’s corporate users are typically Corporate Strategy, Corporate Development, and Investor Relations professionals. Today, thousands of enterprises rely on equity research to power data-driven decision making. These teams leverage equity research reports to:”

• Create investment ideas
• Monitor peers in real-time (and discover what equity research is being produced about them)
• Model and evaluate companies (for M&A or general benchmarking)
• Dive deep into customers, partners, and prospects
• Get up-to-speed quickly on specific industry trends
• Prepare for earnings season

Ready to explore the world’s leading equity research

An Ultimate Guide to Equity Research

We have all heard the adage that information is power - this could not ring more true than it does with financial planning, investments, and M&A.

With this idea in mind, the function of equity research is to provide high-level information and analysis of a company (or sector) so that other companies can in turn use this information to guide investments and investment banking M&A transactions. 

This work is completed by professionals on both the buy-side and the sell-side .

Specifically, on the sell-side, the equity research division is comprised of analysts and investment bankers, while on the buy-side it is usually a division of senior analysts that work directly for the company.

They study small groups of stocks (about ten - give or take) within a specific industry, becoming experts in their domain, and produce formal reports to communicate their findings, namely whether clients should buy, sell, or hold stocks.

In this article we, at DealRoom, will explore investment banking vs. equity research as well as equity research buy-side vs. sell-side. We provide software solutions for deal management for all of them and have some interesting insights to share with you.

Let's start with equity research definition.

What is equity research?

Equity research, often referred to as ‘securities research’, is the process through which investment bankers and other investment firms like asset managers and investment funds invest equities and decide on whether they’re attractive investments.

The people responsible for this process - equity analysts - typically produce 3-6 page documents outlining the prospects for the equity in question in the context of the business, its management, and the wider industry and economic picture.

The bigger the investment bank or investment firm, the more reports that they’ll tend to churn out, and the more detailed the analysis included will be.

Examples of the kind of analysis would include:

• Commentary on how the macroeconomic picture is likely to affect the company
• Operational changes or investments that are likely to affect the company’s performance
• Reviews of the company’s financial statements and explanations of movements therein
• Projections on where the company’s revenues (and share price) are headed.
• Recommendations on whether to buy, hold, or sell the company’s equity.

How is equity analysis conducted?

In a word, research.

And lots of it, both primary (talking with the company’s investment relations team) and secondary (reading industry reports, etc.).

The equity analyst, usually part of a team, looks at scenarios that the company could face, and how that will affect the company’s financials, and by extension, its fundamental valuation.

The aim is to gain a more informed picture of the company’s prospects in the coming period.

Usually this research is conducted on an ongoing basis.

Companies employ investment relations teams to speak with equity analysts on an ongoing basis, and the annual report is always the subject of an investor call, where the CEO answers questions from senior equity analysts from high profile investment banks.

Piecing all of the information together, allows the equity analyst to generate a valuation, which can then be compared with the company’s share price, enabling them to make a statement on whether investors should buy, sell, or hold the equity in question.

What is equity research report

Whether a report is a buy or sell- side equity research report, it is prepared by an analyst and usually include the following:

• An industry research overview, including trends and news related to competing companies
• Company overview, specifically any new information as well as quarterly results
• Investment thesis, which is the analyst explaining why he/she thinks the stock will or will not perform well; the share target price is also included here - many consider this the most important piece of the report
• A forecast of the company’s income, cashflow, and valuation produced from a financial model
• Risks associated with stock

Difference between equity research and investment banking

Equity research sell-side is related to investment banking, though it often does not get the same amount of attention.

The research analysts relay information to the investment banks’ sales-forces and executives.

We will discuss additional differences between these two areas in the career section below. 

Roles in equity research

1. sell-side analysts.

The sell-side’s mission is to sell opportunities and/or assets , therefore, the analysts on the sell-side are usually investment bankers trained to study capital markets in the interest of providing investment recommendations to the buy-side (also known as institutional investors) or to the investment bank itself.

For example, the buy-side might use the research to decide whether to buy a specific stock or company.

The sell-side researchers must possess robust research skills and have the ability to produce valuation models and research reports.

Additionally, they must be experts in financial modeling and analysis as their work influences a company’s value and is made public.

Sell-side analysts will also spend time using a finance data room to complete due diligence with the buyer.

2. Buy-side analysts

The buy-side is comprised of asset managers, hedge funds, and institutional investors; its goal is to expand its opportunities, increase its assets, and raise capital .

With this in mind, buy-side equity researchers and analysts study and build financial research on companies.

More specifically, they examine and analyze companies to ensure that risks are limited and future investments stay true to their institution’s overall strategy and mission.

Consequently, it is critical that they track current news and trends in order to craft strong financial models.

Here we should note that buy-side equity research reports differ from sell-side equity research in that they are not for public consumption.

Finally, additional skills buy-side equity researchers should possess include the ability to analyze risks, the ability to produce high quality reports in a timely fashion, the ability to identify and track new business opportunities, and the ability to effectively communicate. 

The most famous equity research firms

The following are some top ranked equity research firms:

• Merrill Lynch Bank of America
• Morgan Stanley
• Wells Fargo Securities
• Guggenheim Securities
• Washington Analysis
• Zelman & Associates
• Wolfe Research
• Deutsche Bank
• Goldman, Sachs & Co
• BGC Partners 
• BMO Capital Markets Corp.
• Sberbank CIB

Things to consider when hiring an equity research firm

Here we must return to the notion of information being powerful and valuable.

Equity research can allow companies to gain capital and entice new buyers and/or investors.

Equity research firms can also help companies generate new ideas and identify potential red flags.

When you are looking to hire an equity research firm to address these needs or others, the following are top considerations:

• The background, training, and skills of the research analysts
• The quality of the firm’s research reports
• The analyst’s ability to understand the type of information that is relevant to you as the client

How to get into equity research

Equity research is an excellent entry point for people from a non-finance or economics background to enter the world of investments.

The ability to research, write well, and generate solid conclusions - arguably more the strengths of a good liberal arts major than an accounting graduate - are extremely important skills for the equity analyst.

A short course on valuations or corporate finance can allow them to quickly fill the gaps in quantitative areas where they’re lacking.

Whether you’re from a finance or economics background or not, the best way to get into equity research is by proving your ability.

Although the blue chip investment banks rarely if ever stray from the summer internship - junior analyst route, smaller investment firms will be happy to receive a well-written equity report which shows strong valuation and reasoning skills.

Use SeekingAlpha.com to see what some of the best equity research reports out there look like. And be better.

Tips here include:

• If you can find a stock that is highly undervalued or overvalued and your take on the stock goes against the grain, go for it. Investment firms will be more interested in something that changes their mindset than “Apple’s revenue is going to grow 10%, not 8%...”
• Use plenty of charts and tables that reinforce your argument. An article of 1,000-2,000 words should have at least five informative charts and tables. FYI - a stock chart of the company is not particularly informative for an equity research report, unless you’re using it to make an argument about how the stock has performed against its peers.
• Don’t be afraid to go more detailed than you think is required. Ultimately, your aim is to show the investment firm that you know financial metrics, how they work, and the story they’re telling about a company. But if you are adding it, it has to be correct (there’s a good chance SeekingAlpha’s editors won’t be long in telling you if they’re not!).

Repeat these steps and hone your equity research and valuation skills.

After two or three, you should already have something to send to senior research analysts at investment firms, and begin the conversation about how you can join their ranks.

Careers in equity research vs. investment banking

Careers in capital markets tend to fall into the two categories of investment banking and equity research.

Equity researchers must be strong research paper writers since they communicate critical information through reports, as well as skilled financial analysts.

The abilities to stay organized and work in a timely manner are also essential - in many regards, equity research can be seen as a highly structured career.

This does not mean, however, contrary to the stereotypes of analysts vs. investment bankers, that equity researchers and analysts do not need to possess strong social and oral communication skills.

In fact, the best equity research analysts meet with clients and help facilitate meetings; therefore, they must be able to communicate effectively both on paper and in person.

Oftentimes, on larger teams, the senior team members spend more time meeting with clients and companies, while the junior team members tend to spend more time working on financial models.

There is a general consensus in the industry that financial analysts tend to face lower levels of stress and work fewer hours than investment bankers.

On average, financial analysts are recorded as working 12 hour days , while investment bankers are usually reported as working 16 hour days .

For example, during due diligence , investment bankers may spend 50 plus hours a week solely inside the finance data room. 

‍ Read also

How to find the right data room for investment banking.

Of course, buy-side or sell-side equity research analysts do deal with stress, as one does in any job, but reports show the job is generally less stressful than the constant high stress endured by investment bankers.

Generally, the most stressful time for equity researchers is during earnings season.

Additionally, M&A deals will certainly create longer hours and higher stress for these individuals. 

To pursue a career as a research analyst, one must have at least a bachelor’s degree, although MBAs are often preferred.

To truly progress in this career, one should earn the Chartered Financial Analyst certification (CFA), which requires at least three years experience in the field. 

Difference between equity research and private equity

Another two industries that often get confused is equity research and private equity . ‍

The difference is that equity research consists of finding the valuation of the listed companies on stock exchanges, while private equity is researching and analysing the private companies and interpreting the results.

An equity research analyst would speak with firm’s traders and brokers for discussing and sharing investment recommendations for clients.

Where as a private equity analyst uses financial modeling techniques and a private equity software and CRM to research and analyse private companies.

Just like with banking, private equity analysts also use a private equity due diligence checklist template to work with their clients and collect information during diligence.

While equity research produces valuable information, we would be remiss not to acknowledge that the industry has faced some criticism in recent years, which has led to reports of a decline in industry practitioners.

‍ However there are some sources that predict the number of jobs in this career will actually increase faster than other careers in the next few years.

Whatever the number of practicing equity researchers, it is important to note that one should not rely solely on equity reports when making major decisions as analysts can both make mistakes and exaggerate or compose information in ways that benefit their customers and/or the market.

For instance, the sell-side might work to frame its subject in a favorable light to potential buyers.

While one should be aware of these trends and potential red flags, equity research is still a substantial part of our business world, specifically M&A. 

Get your M&A process in order. Use DealRoom as a single source of truth and align your team.

What is an Equity Research Report?

One of the most powerful tools at investors’ disposal is equity research reports. Wall Street firms employ some of the sharpest minds in the industry who study companies with publicly traded stocks. These analysts delve into every aspect of the company, from its financial statements to its management team and competitors. Equity research reports provide solid analysis and the opinions of the analysts who follow the companies and their stocks extremely closely.

What Is an Equity Research Report?

An equity research report is a detailed report written by an analyst at a sell-side firm or independent investment research firm that analyzes the company’s business and finances and gives the analyst’s opinion of the company’s prospects and future stock price.

Analysts are experts in the companies’ businesses, finance, and industries they follow. They research a company’s financials, performance, and competitive landscapes. They also create models to predict metrics like future earnings per share, sales, and a target price for the stock.

Analysts keep a close eye on every move of the companies they follow and update their equity research reports at least once a quarter after the company issues its quarterly earnings report. If significant material changes occur mid-quarter, the analyst will write an update to their research report in a flash report.

An example of an equity research report is a report on Apple written by a sell-side analyst from Argus. This report includes the analyst’s analysis and opinions about the company’s financials and future revenue and earnings predictions. The report also provides the analyst’s target price estimate and rating.

Important Components of a Typical Equity Research Report

The typical equity research report includes components that dig into the company’s financials, industry landscape, risks, and other vital aspects that can materially affect the company’s future business performance and stock price.

Recent Results & Company Announcements

Shortly after a company announces its quarterly results, an analyst will issue a new equity research report. This report will include an analysis of the recent quarterly results, including EPS, sales, and various financial metrics like EBITDA and profit margins.

When releasing quarterly results, a company often makes announcements in a press release or through a conference call between management and the analyst community. The equity research report will include an analysis of these company announcements.

Organizational Overview and Commentary

An equity research report typically summarizes the company’s organizational structure. This summary outlines the management structure and the company’s major divisions.

If the company makes any significant structural changes, such as appointing a new CEO or shutting down a division, the analyst will discuss the implications of these changes in the equity research report.

Valuation Information

Perhaps the most impactful part of an equity research report is the valuation analysis provided by the research analyst. The analyst provides an overview of the company’s performance through this analysis.

The valuation information included within an equity research report includes margin analysis, EPS and sales estimates, the stock’s target price estimate, and other valuation and financial metrics calculated through a deep dive into the company’s financial statements.

An analyst uses a company’s reported results and their own research into the company’s operations and the industry to calculate various estimates. The most prominent estimate is the EPS estimate, the analyst’s estimate for earnings per share for future quarters and fiscal years. Analysts also calculate forecasts for sales, margins, and other financial metrics.

Many equity brokerage reports include a target price estimate, which is a short-term estimate for the stock’s price. An analyst may also issue a rating for the company’s stock, such as buy, sell, or hold.

Financial Histories

An equity research report typically contains financial data going back several years on both a quarterly and fiscal year basis. The analyst uses this financial data to perform an analysis of the company’s financial health and create projections.

While research reports typically do not include complete financial statements, the reports often include important line items, valuation ratios, and financial metrics in tables which the analyst will reference in the commentary.

Evaluating trends is a big part of an analyst’s job; equity research reports discuss these trends. The report includes trends like year-over-year and quarter-over-quarter growth rates for metrics such as EPS, sales, and margins.

The trend analysis gives an excellent overview of the growth of the company. For example, suppose sales significantly grew year-over-year, but EPS was stagnant. In this case, the company may be facing higher expenses, and the analyst will dive into the financial results and attempt to uncover the cause of the problem.

Many equity research reports include a section that describes the risks the company and investors may encounter. These risks may include economic headwinds, an increasingly competitive landscape, and company-specific risks like failed product launches or management changes.

In-Depth Industry Research

While analysts are experts on the companies they follow, they are also experts on the companies’ industries. Equity research reports include the analyst’s evaluation of the industry trends, the competitive landscape, and how the company’s prospects align with changes within the industry.

Buy Side vs. Sell Side: What Role Do Both Sides Play?

Buy-side and sell-side firms play different roles in financial markets, and it is vital to understand the role of each.

Buy-side firms, such as hedge funds, pension funds and asset managers, have money to invest. They buy stocks and other investments and are fiduciaries of their client’s money. Sell-side firms, such as brokerage houses, sell investments to their clients, including buy-side firms.

Sell-side firms employ analysts that write equity research reports. The sell-side firms provide these equity research reports to their buy-side clients. Buy-side firms use these equity research reports to help make investment decisions.

Other Types of Research Reports

Analysts produce several types of equity research reports. These include initiation of coverage reports, quarterly results reports, flash reports, and sector and industry reports.

Initiating Coverage Reports

When a sell-side firm begins covering a stock, the first analyst report is called an initiation of coverage report. This report gives the analyst’s first take on a company and its stock. Many investors pay attention to initiation of coverage reports because they provide a fresh perspective on a stock.

Quarterly Results Reports

After a company reports its earnings, an analyst will issue a new research report incorporating recent results. The analyst discusses the results and what went wrong and right in the last quarter. The analyst will also calculate new financial projections based on the results, company guidance, and management commentary.

Related Resource: Portfolio Management: What it is and How Visible Can Help

Related Resource: How To Write the Perfect Investor Update (Tips and Templates)

Flash Reports

Analysts issue flash reports when significant material changes involving the company, or the company’s industry, occur. An analyst may issue a flash report if the company’s CEO resigns, the company initiates a significant stock buyback program, or other major news breaks. In a flash report, the analyst will discuss the relevant news and how it may impact the company and its stock price.

Sector Reports

Sell-side firms also issue sector reports. The sector reports will dive into trends within the sector, a high-level analysis of the top companies in the sector, and past and future predicted performance of the stocks within the sector.

Industry Reports

Like sector reports, industry reports discuss the competitive landscape and major players within an industry. An industry is a subset of a sector. For example, the technology sector includes the semiconductor, personal computer, and cloud computing industries. Industry reports focus on a narrower industry rather than a broader sector.

Equity Research Report Example

Although each sell-side firm has a unique style for presenting analysts’ research in equity research reports, most contain similar types of information. Let’s conclude our discussion of equity research reports by looking at a recent Microsoft report written by Argus analyst Joseph Bonner after the company issued its fourth quarter 2022 results.

The report starts with several tables of key statistics, such as financial and valuation ratios and the analyst’s investment thesis. The table also includes the analyst’s rating and target price for the stock.

The report continues with the analyst’s investment thesis for Microsoft stock. This thesis briefly explains the analyst’s rationale for his Buy rating on MSFT stock.

A section detailing recent developments within the company, which the analyst derives from the company’s earnings report and conference call, is followed by a look at select financial data. An analysis of growth rates for several key metrics like revenue and margins leads to an overview of risks that investors of Microsoft may face.

Equity research reports offer investors a great way to harness the power of Wall Street analysts. These analysts live and breathe the companies they follow. Investors can use their expertise to advise them in the investing process.

Equity Research Report Template

Demonstrate transparency, accountability, and provide sound financial recommendations to investors with this equity research report template..

• Design style modern
• Colors light
• Size Letter (8.5 x 11 in)
• File type PNG, PDF, PowerPoint
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Equity research is the process of analyzing a publicly traded company to determine its investment potential. It provides investors with detailed financial analysis and recommendations on whether to buy, hold, or sell a particular investment. Equity research can be conducted by individuals working in an investment bank's equity research division, by employees at a buy-side institution such as a mutual fund or pension fund, or by independent analysts. The primary purpose of equity research is to help investors make informed decisions about where to allocate their capital. Banks often use equity research to support their investment banking and sales and trading clients by providing timely, high-quality information and analysis. Portfolio managers also use equity research at buy-side institutions to build and manage their portfolios. The work of equity researchers is divided into three main categories: company analysis, sector analysis, and stock analysis. In company analysis, equity researchers examine a company's financial statements and track its historical performance. They also assess a company's competitive landscape and determine its prospects. In sector analysis, equity researchers look at the overall industry in which a company

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A Day in the Life of an Equity Research Analyst

Responsibilities of an Equity Research Analyst

Working as an equity research analyst requires multiple talents and skills and can make for a rewarding career. These professionals research public companies and come up with recommendations for investors about whether to buy, sell, or continue holding certain stock. Analysts are usually assigned a particular group of companies, in a specific industry, for which they are responsible.

Brokerage firms (known as the sell-side , since they provide the research to their customers interested in making investments) employ equity research analysts. Mutual funds, hedge funds , and others that manage their clients’ money and invest on their behalf, known as the buy-side , also employ equity research analysts, who make investment recommendations to their portfolio managers. But what do these analysts actually do on an everyday basis?

Key Takeaways

• Equity research analysts research public companies and come up with recommendations for investors about whether to buy, sell, or continue holding certain stock.
• Both brokerage firms on the sell-side as well as funds on the buy-side both employ equity research analysts.
• On a daily basis, an equity analyst keeps a pulse on the stock market and company-specific news that could affect returns, updates colleagues on these changes, and issues reports.

Catch up and Keep up With the News

Typically, equity research analysts start their day pretty early, before the nine-to-five grind begins, and keep abreast of what’s going on with the companies they cover. They do this by keeping up with wire services and other news sources, and also tracking global economic and market developments and trends. Throughout the day, analysts stay on top of any breaking news that impacts the stock markets and the companies they cover, getting input from both industry-specific and general news sources. On particularly volatile market days, this can make for quite a roller-coaster ride.

Update Colleagues

Another aspect of the equity research analyst's job is to inform and update colleagues on the sales side with recommendations and insight on various stocks (buy, sell, or hold ratings) so that brokers can better explain those choices to clients. This requires critical and creative thinking, strong communication skills, and the ability to quickly and accurately synthesize data from a number of different sources and present that information in an accessible way. Analysts need to anticipate and be prepared to answer questions their sales-side colleagues may have about certain stocks, and they might also need to update senior analysts about actions taken on various stocks.

Throughout the day, analysts may have to meet with colleagues, such as their supervisors, to touch base and exchange notes and ideas.

Issue Reports and Keep Track of Companies Covered

Analysts come up with forecasts and earnings estimates for the companies they cover. During earnings season , as companies release their quarterly figures, analysts come out with their take on how the company has performed and might also update and tweak their earnings models for particular companies. In addition to following general news and economic events, analysts track any specific developments that could affect the value of the stock of any company in their particular group.

For instance, if a company announces a new product that could impact its earnings, analysts assess this news and include their findings in the reports they produce. Analysts might need to update these reports on a daily basis.

Keep in Touch With Company Management

Frequently, equity research analysts meet with the management of the companies they cover so as to get the most timely information in order to update their earnings estimates and reports. They could get such updates in person or on conference calls. While management provides such input to equity research analysts, executives have to be careful not to share any information with analysts that might impact the company's stock price and that isn’t available to the public. That would give an unfair advantage to the analysts.

The  Securities and Exchange Commission (SEC) has issued rules relating to such fair disclosure practices, meaning analysts have to tread carefully with management. Some companies tend not to cooperate with analysts they feel haven’t treated them fairly in reports. Analysts need to provide investors with an accurate picture of a company’s potential, but they also don’t want to alienate a company's management and risk losing access to important information.

Analyst Opportunities

In the wake of misleading research issued during the dot-com boom, the SEC enforced regulatory action meant to curtail the practices of investment banks that used research reports more as an avenue to generate investment banking business than as a means to provide accurate and objective information for investors. This led investment banks to scale back on their equity research needs. However, while sell-side roles at large investment banks have declined, there are still opportunities for equity research analysts, particularly with smaller research firms and boutiques.

The Bottom Line

Analysts typically spend more time than average at their work but don’t need to put in the grueling hours associated with investment banking. In general, analysts keep up with news, update their colleagues, catch up with the companies they cover, issue and update company reports, and attend meetings in their day-to-day work. While the job of an equity research analyst has lost some allure in recent years, as firms have cut back on the number of analysts they employ, it remains a competitive field.

U.S. Securities and Exchange Commission. " Fact Sheet: Regulation Fair Disclosure and New Insider Trading Rules ."

U.S. Securities and Exchange Commission. " Analyzing Analyst Recommendations ."

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Answered By: Lippincott Library Last Updated: Apr 21, 2024     Views: 170301

Use LSEG Workspace (formerly Refinitiv).

• To find analyst reports (also known as sell-side, broker, or equity research reports) for a specific company, search for that firm's ticker symbol or name in the top search box. Then, on the News & Research  menu, click on Company Research . Use filters near the top of the page to refine your search. 
• To screen for analyst reports based on a set of criteria, type  ADVRES in the search bar and select the Research Advanced Search app, or click on  Research in the main menu. then, click on Advanced Research . You can filter for reports by industry, geography, contributor, keywords, and more.

Note: LSEG Workspace has a  150-page daily limit for viewing and downloading research content. This limit is in lieu of retail prices listed on reports and resets at 12:00 AM Eastern Time daily.

Bloomberg (see access details ) contains some analyst reports.

• Type your company's ticker symbol, then hit the yellow EQUITY key, then type DSCO and hit the green GO key.
• To find reports by industry or keyword, type RES and hit the green GO key.

Morningstar equity research reports and analyst cash flow models can be found in PitchBook .

Hoovers contains some analyst reports as well.

• Type in a company name and select the company you want.
• Scroll down the screen; if available, analyst reports appear under Advanced on the left side.
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Breaking into buy-side equity research - my experience

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This will be my very first post to this forum, which is admittedly dedicated more to banking and private equity rather than investment research. Given the dearth of content on buy-side equity research (understandable given the small size/low turnover of the industry), I have decided to share my experience breaking into buy-side research from the sell-side.

DISCLAIMER Although I am personally a devout member of the value camp, I will be talking about long-term oriented fundamental investing in general. So when I write “buy-side research”, know that I will be referring to that instead of quarter-trading hedge funds (think the Citadel hedge fund family, Balyasny, etc) and the like.

Why would you want to work in buy-side equity research?

I can't speak for all shops, but in general, the work environment is very intellectually stimulating and the organization is very small and flat. Research teams in general number at most in the tens of people. Your work is about finding the truth the market doesn't see rather than trying to close the next deal. The market is the ultimate determinant of whether you are correct in the long-run, not whether or not you can trick the next idiot to buy your garbage (I’m very cynical about the sell-side). I will not be talking about life on the buy-side, because BlackHat wrote a very good post about it a while ago, and it still rings true today. I will note that his perspective is from that of a hedge fund, likely a fundamental shop (maybe a Tiger Cub), so there will be some differences between our comments.

If you like to think and analyze, to have a ton of autonomy, to have very reasonable work hours, to be very well compensated, and to work with a small team of smart, dedicated people, then buy-side research may be the right place for you (you results may vary).

What is my background?

I will be intentionally vague when it comes to personal information. I’ve recently started at a relatively small shop ($10B+ AUM, fewer than 10 people on the investment team) after having worked at a non-BB sell-side equity research shop on the east coast for less than 3 years after graduating from a non-target school. The entire recruiting process took around two years. This is because I was targeting a very specific niche within the already small buy-side equity research opportunity set: long-term value funds that outperform over full market cycles.

What was my experience like in sell-side research?

It’s pretty miserable. You’re basically marketing for stocks of your bank’s IBD clients. Sell-side research makes money through the traders (commissions) and through offering corporate access. Most people don’t really care about sell-side “insight.” When we weren’t running around like headless chickens during earnings season, we were scraping the bottom of the barrel on quarterly/monthly/weekly information with which we could spam up our clients’ (buy-side research) inboxes and voicemails with our “differentiated research.” I came in knowing that sell-side research is likely the best way to break into buy-side research, so I really just had to tough it out for a while.

Although the quality of research of our department wasn’t all that great, it was pretty clear to me that most sell-side research in general just sucks, be it from bulge brackets or from boutiques. Many initiations are no more than a rehashing of investor relations presentations with little to no value added. The industry itself is dying right now due to the overhang of MiFID being rolled out in Europe, which will be separating payment for sell-side research and commission payments for trade execution quality (normally when a sell-side shop provides research a buy-side guy finds useful, it is expected trades will be directed to the S&T department of that sell-side shop to “reward” them for the research).

Luckily, your targets are the very clients your department deals with on a day-to-day basis: the buyside research professionals that you spam email or spam call. The downside is that the people who tend to take sell-side opinions seriously are generally really bad investors (likely quarter traders) and you probably don’t want to work there anyways. However, there is normally some sort of exhaustive client database available where you can find the contact information of pretty much every single buy-side shop in the industry. This is where the real work begins: the networking.

Since the buy-side has such low turnover, especially for the good firms, how do you break in? In general, the larger shops tend to have established research associate (RA) programs for people with 0 – 4 (up to 6 or more) years of experience. However, at the end of the program, the RA is usually kicked out and is expected to go to either MBA , another shop, or leave the industry altogether. (Note that the hierarchy is associate, analyst, PM) This is because top level (analyst and PM) turnover is so low that there’s simply not enough room for promotions. Some shops that do this include: Brandes, Dodge & Cox, Hotchkis Wiley, Fidelity, Wellington, Putnam, T Rowe Price.

How would you break in then? I’ve found there are a few opportunities to do so:

• Right out of undergrad, either full-time hire or intern conversion (relatively difficult since the companies that do this normally recruit either with local schools or at “target” schools).
• Breaking in as a research associate after 2-3 years of experience (most frequently from sell-side research, but I’ve also seen bankers doing this).
• Analyst hire out of MBA as a career switch. This is very straightforward.

Like with any position in finance, networking is your best bet for breaking into this industry, I would say even more so than banking since by far the most important consideration on hiring you is cultural fit. When I say “cultural fit,” I don’t mean that bs buzzword that you bring up during your banking interviews, where every culture is just frat bro excel modeling. I’m talking about stuff like:

• Is research done slow-paced or fast-paced? How long does it take to vet an idea?
• Is the decision making based on a committee model or a star PM model?
• Do people prefer consensus building or a meritocracy of ideas?
• Is the quality of the ideas valued more than the rank of the person coming up with the idea?
• Is there more focus on breadth or depth?
• Are people siloed in their industry coverage or is there a generalist style sharing of ideas?
• Is there a collegiate environment? Are colleagues approachable?
• How do people react when they are proven wrong?
• What is the philosophy on risk management? Is it a critical component of the thesis or an afterthought?
• What is the orientation of the funds (absolute value, deep value, relative value, growth, GARP)?
• How much emphasis do they place on the qualitative side like management teams versus the quantitative side like modeling?

Networking as a way to find openings:

Networking is not only important to determine cultural fit, it is also useful to find openings! What do I mean by that? The problem with hiring, especially at a lot of smaller shops, is that openings are sometimes not advertised anywhere, even on their own websites! In fact, for my own position, I was referred by a director of research at another very solid buy-side shop who knew my current shop was looking for a junior hire. My strategy has been: **building out the professional network and making a good impression so when an opening comes up, you would be the first to know.** Your strategy should be to never let any door unopened, because the opportunity set is so small you cannot afford to miss out.

How to network:

How do you go about networking? The progression is simple and should normally go like this: cold email asking for a call, networking call with hopefully a referral, apply to opportunity and reference your contact. I won’t be going over cold emailing other than to say you definitely would want to personalize it for the company you are reaching out to. I’ve mostly been reaching out to RA’s rather than analysts or PM’s. Also, sometimes it could be helpful to reach out to someone not in research, especially if that person is an alum of your school. In fact, I’ve gotten interviews this way by asking them to refer me to the relevant HR person! You could also ask them to refer you to research personnel.

For the networking call, you should come up with very specific and targeted questions for your contact. Really get into the heart of their culture and the way they do things. Obviously you will get better at this and asking questions over time. You shouldn’t be asking things that could be asked of any company like: “what are your hours?” “what is your favorite part of the job?” “what do you think of the current market?” You would be better off asking stuff like: “you guys are a value fund, but you own Netflix. What’s the value thesis behind that?” “Although you guys have a star PM model, is there any leeway for questioning or challenging the star PM’s ideas?”

Hopefully, at the end of the networking call you have made a positive impression on your contact, and you should ask about either open positions, potential open positions in the near future, or referrals. ALWAYS have an “ask” at the end of the call, since otherwise you’d just be wasting your time. In addition, the conversation should also have revealed to you whether or not you would fit in with their culture, e.g. if you are a slow, deliberate thinker, you wouldn’t enjoy working at a fast-paced shop. Wash, rinse, repeat. To attest to the power of networking, in my experience, I have been able to get at least a first round interview at 90% of the places I applied where I have at least 1 networking contact. And if you tailor your resume to buy-side investment research, you could even get a reasonable interview rate for places you don’t have a single contact.

Interviewing

You almost never interview with HR in this industry since cultural fit is so important. In addition, you should never get asked stupid questions like “if you could be a fruit, what would it be?” at least at any shop that you would want to work for. You also never get asked irrelevant behavioral questions like “tell me about any leadership experience you’ve had.” First round interviews are done over the phone by analysts. Then, if you make it to the next round, you would be interviewing onsite with many members of the team, including PM’s.

There are actually two types of interviews:

1) “Investing” interviews where the interviewers are interested in your abilities as an investor more than your technical knowledge and excel modeling skills; generalist shops always conduct these while industry coverage shops sometimes conduct these 2) “Coverage” interviews where they don’t really care about your investing skills since you’re going to be their excel monkey; these are industry coverage positions where all they care about is how well you know the industry and if you can do the modeling work

Objective of the interviewer:

I will go over the types of questions they ask, but first, I will discuss the objective of the interviewers. Ultimately, interviewers are trying to determine if the candidate possess the three necessary qualities for a great analyst (in my opinion and in no particular order):

1. Intellectual integrity – this is not just being honest, but having a love of the truth. This means being willing to admit when you are wrong and relentlessly pursuing the truth (not falling for confirmation bias, the bane of investment analysts). This quality also includes an insatiable curiosity. If you lack this but possess the other two, you’re a sell-side analyst, i.e. a sleazy salesman. 2. Analytical skill – having a love of the truth is not enough if you can’t arrive at the truth. As an analyst, you need to be able to synthesis information and draw conclusions. 3. Passion for investing – possessing the above two would be sufficient for a scientist, but to be a great investor, you need to love investing. It’s the passion that drives you to read boring filings and tread through massive datasets. It’s also this passion that translates your conclusions into actionable insights to inform the next investment. 4. Culture – this isn’t a quality, but this is something the interviewers want to know about to make sure you’re a cultural fit

Interview questions:

Below, I will list questions that you will almost definitely encounter in your “investing” interviews. Note that these are all behavioral, as 95% of your questions will be behavioral, with 5% remaining being brain teasers to make sure you’re not an idiot. I will number them 1 to 4 to correspond to the qualities listed above.

• What got you into investing? (3)
• What’s your investing style? (4)
• Tell me about a time when you were wrong. (1)
• Tell me about a book you’ve read recently (3,4)
• How do you approach valuation? (2)
• What is the process you use for due diligence on a company? (2)
• Tell me about something that’s not on your resume/what do you do for fun? (4)
• Why do you enjoy investing? What keeps you going when things get tough? (3)
• (If you’re in sell-side research) Do you disagree with your analyst on any names? (1)
• (If you’re in sell-side research) Are there any names you like outside your coverage? (1,3,4)
• What is your greatest weakness? (1,4)
• Why do you want to work here? (4)
• Who’s your favorite investor/which investors do you follow? (3,4)
• What do you think about the holdings in our portfolio? (1,4); I’ve once bad-mouthed one of their holdings and it turns out my interviewer was the one who had pitched it (and he’s the director of research)! I ended up moving on to the next round, so the intellectual integrity element is clearly valued!
• What do you have in your own portfolio? (3,4) This question may be tough if you’re in sell-side research, since there is very likely a substantial amount of trading restrictions on companies in your industry, which just so happens to be the area you’re most familiar with. I would recommend having a few names to talk about here, unless for some reason ownership of all stocks is restricted by your current employer.
• Pitch me a stock. (1,2,3,4)
• Any stocks you don’t like? (1,2,3,4)

In addition to these interview questions, I highly recommend you have at least 1 fully developed pitch and corresponding report as a work sample. The pitch will be something to talk about during the interview and you will be referring to it many times to demonstrate and highlight your strengths. For instance, you can point to the model to emphasize your technical/analytical skills. You can also talk about how you’ve head to dive through thousand-page filings to find the information needed to create the pitch (showing your passion for investing). You can even talk about things you’ve learned during the due diligence process (displaying your intellectual integrity).

Customize the pitch:

Ideally, the pitch should be customized for the place you are applying to. I had two pitches at my disposal, 1 “buy” and 1 “short.” These should be comprehensive and fully developed where you can speak confidently on any concerns or questions the interviewer may have on the name. Consider it a representative piece of work you would put out if you were hired as an analyst and needed to make an investment recommendation to the PM. Naturally, since I was recruiting exclusively for value funds, both my pitches were value oriented. These pitches took me two to three months to create each, since the only real time I could work on them is during downtime at work or during the weekends.

Don't be stumped on your own pitch:

Before you even interview, make sure the interviewer has a copy of your pitch so you could highlight your strengths during the interview. If you have ANY doubts as to whether or not your pitch would increase your chances of getting an offer or if you are afraid the interviewer could conceivably poke holes in your thesis, go back and DO MORE RESEARCH. You should NOT be stumped during the interview on your own pitch. Know the bear thesis if you’re bullish. Know the risks to your thesis. Know the different angles of attack.

Your report should be however long it needs to fully develop your thesis. You can have an appendix if you want, but you should have all your hard hitting arguments in your report. I’ve heard some people argue that a 2-page report will suffice, and there’s truth to that suggestion. In fact, most interviewers don’t even read this report. However, you will know a shop is really worthwhile if they read your report and ask you targeted questions on it. Those are the shops that actually want to develop internal talent and are the ones that have an open-minded culture where the merit of the ideas matter more than the seniority of the person coming up with the idea.

You will likely be asked about any other stocks you like, so it may be good to prepare one or two additional pitches (no need for full report) where you know the general thesis and some risks. You will only be asked 1 question on these auxiliary ideas, in all likelihood.

Companies of note

Don’t bother with bank owned asset managers like GSAM or JPMorgan’s asset management arm. Also don’t bother with BlackRock – they are trash. I’ve never heard a single good thing about them nor have I ever seen one of their ex-employees at a better shop. This is absolutely not an exhaustive list, just the funds that are decently sized and have been around for a while. There are quite a few very solid boutique value shops around the country I didn’t bother listing since they hire by demand.

Fidelity – only hires out of intern conversion, out of undergrad (lots of Ivy Leaguers), and out of MBA . No chance of joining as an experienced hire if you’re pre-MBA; All the Boston research associates know each other (I mean across firms. So you should expect the Fidelity guys to also know the Putnam or Wellington guys). Frankly the quality of their research team isn’t that high. Although you get coverage immediately out of undergrad, there’s no real unifying philosophy on their investing.

Putnam – same as Fidelity. Even the research structure and culture are extremely similar

MFS – not a great shop, but probably one of the oldest asset managers out there; I believe they do hire out of undergrad

Wellington – has an undergrad internship program for women and under-represented minorities. Hires out of undergrad and experienced hires and MBA interns and post-MBA. Their Launch Research Associate is the relevant program where you get placed into a group and rotate positions/coverage. They have quotas for both out of undergrad hires and experienced hires (pre-MBA). Their onsite portion gives you 1.5 hours to prep a pitch on two names they give you (pick one) and then you’ll need to present in front of a committee. A nonsensical exercise.

T Rowe Price – Has undergrad/ MBA internship, right out of undergrad, experienced hires, right out of MBA; no real culture, too big to succeed type. Their funds have so many holdings, they pretty much just do closet indexing

Clearbridge – Mostly growth strats, no real way in out of undergrad or at the associate level. Does do MBA interns and hires out of MBA . Has connections to Columbia

Fred Alger – Aggressive growth shop. Hires a lot of Yale people out of undergrad research associate program. Also experienced hire pre-MBA

First Eagle – well known shop, I don’t think there’s any way in pre-MBA

Ruane Cuniff Goldfarb – Sequoia Fund took a big hit after their Valeant debacle. Still a well-known name and highly respected value shop. Buffett recommends them. Don’t think there’s any way in out of undergrad; they rarely hire

Neuberger Berman – employees bought this group from Lehman Brothers during the crisis. Has many products including private equity. They have an “internal sell-side” structure, which is exactly as it sounds. Hiring at the pre-MBA level is by demand. No real upward mobility, and they are definitely a “coverage” interviewer. Expect the RA job to be very similar to sell-side RA in that you support your analyst with very little input.

Royce – famous small-cap value shop with strategies that run independently from each other. Almost never hires.

Tweedy Browne – old school international value. They very rarely hire and only at the post-MBA level

Davis Funds – founded by the son of the famous insurance investor Shelby Davis, now run by Shelby Davis Sr’s grandchildren, I believe. They do all industries not just insurance. They very occasionally hire post-MBA

Pzena – publicly traded investment manager. No way in pre-MBA.

Harris Associates – a top tier asset manager in Chicago, generalist structure, famed for their “devil’s advocate” procedure, with star PM Bill Nygren. Definitely a guy you should follow if you’re into value investing. They have domestic and international sides that run almost entirely independent from each other. EXTREMELY competitive to get a spot here. They recruit sophomore interns who have a chance to become junior interns who has a chance to become a research assistant (basically just does the modeling/support work). The research assistants work and compete with each other for a few years before one of them is promoted to research associate, where he would pick up a couple names as coverage. Now, the firm intends to develop and promote this associate hopefully to an analyst one day. Harris Associates also hires people out of MBA and post-MBA, though rare.

Diamond Hill Capital – a very fast growing value fund in Columbus. Has a relatively large team but also develops/promotes talent internally. Sometimes hire out of undergrad and pre-MBA experienced hires. Also sometimes take people out of MBA . Industry coverage groups.

Dodge & Cox – Takes junior interns and also hires people out of undergrad and experienced pre-MBA hires. Very occasionally takes MBA interns since they have extremely low turnover. Very old value shop using relative valuation. Committee decision making structure, though management can be very traditional and have a lot of biases. RA’s are kicked out within 4 years, though many people leave before then. Excellent placement into top MBA programs; you can be almost guaranteed to be placed into HBS , Stanford, Wharton, or Booth.

Hotchkis Wiley – Hires out of undergrad and pre-MBA experienced hires. Not sure about MBA hires. People generally stay around 4 years. This is a value shop with industry coverage.

Causeway Capital – Their differentiating factor is that they combine fundamental research with quantitative analysis. They do international value in industry coverage teams. They make experienced pre-MBA hires from time to time, currently building out their China coverage team. They do take MBA interns.

Brandes – International value shop run by Charles Brandes who retired 1Q18. They have a sizeable RA population that they hire out of undergrad and pre-MBA experienced hires. They run industry coverage groups. Also takes a good number of people for their MBA internship. Hires people normally starting in August as the school year starts – for both pre-MBA experienced and undergrad hires. If you’re a pre-MBA experienced hire, you would start in January whereas the undergrad hires would start in July. If you’re reading this post when I posted it, they should be starting their recruiting very shortly!

Capital Group – extremely hard to get in and very good reputation. They do make pre-MBA experienced hires but it is a buyer’s market for them since so many people apply there. Also their MBA intern program is extremely competitive and I hear they give maybe 1 full-time offer per year to MBA interns.

TCW – do take people out of undergrad and experienced hires. Don’t know much about them, but quality of research is likely low given I’ve never encountered any of their ex-employees at top shops.

Hope all of that help! Feel free to message me with any questions or post replies here. No guarantees I’ll resp ond.

Nice summary - is it possible to track performance of your recommendations? I'm at a start up value fund with $110 m and hoping we can raise aum but mindful I will most likely move if we can't. I'm concerned the lack of prestige factor from not being at a larger shop but wondering if this can be overcome. B

I'm assuming you're at the analyst level so you wouldn't have control of what goes in the portfolio. I'm not sure if there's a way to give a numerical value for your performance other than talking about how frequently you're correct. I've heard from many great investors that solid analysts are right 54% of the time and absolutely phenomenal analysts are right 58% of the time (not sure how they define being "right).

I want to ask you, are you more interested in becoming a great investor or making money & prestige? When I say great investor, I mean people with long track records of long-term outperformance. I will tell you that great investors do not care about prestige or your background in general. As long as you can get a conversation going with them (i.e. make it past the resume screens. you can skip that by networking, obviously) and you show them you have the track record and the qualities of a great investor (see my original post), they would be happy to consider you. These people tend to be very humble and very open minded individuals.

However, if you just care more about prestige & money, I don't really have any advice for you. I cannot comment with any certainty about the analyst compensation at those top-tier investment shops, but I can say that the big guys like T Rowe or Cap Group pay extremely well at the analyst level.

Hi Subutai , Being a great investor is far more important to me than prestige, I was more referring to breaking into a larger shop if my current small start up firm cannot raise more AUM. From what you're saying breaking into a larger shop if we can't raise assets is more about networking / interview performance which is good to know.

Here are some fund(s) I forgot to mention:

First Pacific Advisors (FPA) - Very solid value shop. hires by demand but does occasionally hire both pre-MBA experienced hires and MBA /post-MBA. Has the famous Crescent fund, which is a go-anywhere absolute value fund. They buy stocks, bonds, short stocks, derivatives, and other fixed income securities. I really like reading Steve Romick's commentary.

Loomis Sayles - decent growth shop focused primarily on fixed income products, building out equities products; research structure is grouped by portfolio (so research personnel report to solely their own PM). Has occasional demand for experienced hires pre-MBA and post MBA (and MBA interns). Hires by need.

I'm surprised you didn't mention anything about the CFA program, considering long only shops have tons of charter holders and most job apps will say "CFA and/or MBA preferred." Do you have it? Was recruiting easier/harder with/without it?

Oops, yes you're right, I should have mentioned the CFA . It slipped my mind since it was something I took for granted (almost like a good GPA being needed to break into banking). I have passed CFA level 2 exam and expect to take level 3 next year.

CFA is a weird thing. Everyone whom I respect as an investor considers the certification to be a scam, though something that is unfortunately necessary for marketing purposes (it's better for clients if everyone on the research team has a CFA). In fact, the CFA program frequently teaches pseudoscience and blatant misinformation, since exam materials are written by professors who've never done a fundamental report in their lives.

Think of the CFA like this: it is a badge of commitment to the investment research profession. Although you will never use anything learned from the CFA in any real capacity as a long-term oriented value investor, having the designation or having made progress on it shows people that you are committed to this career, since it takes a decent amount of time to study for the exams. If you're trying to break into buy-side from an industry that isn't sell-side research, you better have made progress on the CFA to show you're serious about investment research as a career. If you're in sell-side research, you should be making progress on it as part of your current job anyways.

Subutai Baghatur: In fact, the CFA program frequently teaches pseudoscience and blatant misinformation, since exam materials are written by professors who've never done a fundamental report in their lives.

The CFA exams while not perfect, are not written by just professors, but also include very experienced and senior professionals. I know someone personally who helped write exam questions for over 10 years and is very respected in their current line of work (asset management).

Not sure if I should start another thread, but curious to hear more of your opinion on Fred Alger. Do you consider them as a good shop? How are their analysts / research team perceived by the street/buy side community? Also just want to say thanks a ton for the valuable info that you provided here. Cheers.

I'm afraid I can't comment much on them since I'm a value investor, and I simply never bothered to learn much about them. I had one contact there, but dropped it and decided against applying after I realized they were on the complete opposite side of the spectrum. I do know they primarily do OCR at Yale, Harvard, Stanford, UPenn. They operate in industry cover teams, and obviously since they're aggressive growth, the tech team is the largest, then healthcare.

They have a decently sized RA program (started only 4 years ago) but promotion to senior analyst is unlikely. Use the tips I outlined above to reach out and hear it from their RA's.

+1 Excellent post, I have accumulated a similar target list to your companies of note section with similar opinions on them. The interview questions section you posted is especially helpful as well.

Questions I have: -Comp level/structure? Progression if they've laid it out for you? -Had you not been able to secure this position or a position out of the sell-side role, were you planning on going the MBA route? Has this changed now that you've landed your new role? I am of the opinion that for myself to land at one of the shops on your list, a top MBA would present the best opportunity, although I am planning on reaching out to some places post level 3 results. -Did you ever work with recruiters? If so, any recruiters that you think are of better quality?

Appreciate the post, hope that I can reach out to you in the future when/if I start looking to lateral as a Pre-MBA experienced RA type candidate when I have more specific questions.

Thanks for your reply.

I work at a very small shop, so there's very little structure on an "expected" path of upward mobility. They've indicated an intent to promote me to an analyst position after I complete the CFA program and I would then be coming up with ideas on my own and working largely independently. This is because I need time to acclimate to their culture and they way they do things (evidence of how damn important culture is!) My comp is extremely generous. Total comp assuming target bonus (assuming I perform in-line with expectations) is easily on-par with an equivalent IB position and a massive raise from my sell-side equity research position (which pays market rate). I would NOT assume this to be the norm for a buy-side transition since this is a buyer's market! In fact, it would not be unreasonable to expect your total comp to be similar or even might be slightly lower than sell-side research. Also do not assume a better shop would pay more at the associate level. They have so much buyer's power they can afford to pay you less.

Oof, I'd very much rather not think about what would have happened if I failed to move to the buy-side pre-MBA. I was very much determined to succeed; giving up was not an option. Call me a wimp if you want, but sell-side was so miserable it was a combination of the pull of my passion for value investing and the push of my hatred of sell-side research that drove me to to go as far as I did. This is why I emphasize leaving no stone unturned as the optimal strategy. I am dead serious when I say that if you can think of an action that would conceivably improve your chances of a successful transition at relatively minor cost in time or effort or money, DO IT ASAP. Set aside your anxiety, your fear of rejection, your fear of failure. I have failed so many times, it has become an art. You don't even want to know how many times I've fallen 5 feet from the finish line. I've even gone as far as flying myself out to meet a team that was unsure if they wanted to interview me in person (so I basically preempted their interview process) only to be rejected. (I probably don't recommend doing that unless you really know what you're doing). As of right now, I have no intention of doing an MBA . I've always viewed MBA as a means to an end (of becoming an analyst) if I were to go start out at a buy-side shop that would kick me out after a few years as an RA, and obviously if my current shop promotes me, I would no longer need an MBA . If you're comfortable with making that move after MBA , just remember to keep up your networking game right now and through your time in school. Don't wait to network, DO IT NOW (or when earnings season finishes, haha). Also, don't wait to recruit, DO IT NOW. Worst case scenario you try again during your MBA . Just remember not to make a bad impression anywhere, since this is a super tiny world...

I've had some exposure to headhunters. However, the vast majority of them either send you crappy opps (like bs fund of funds) or filthy quarter trading hedge fund opps. There are definitely some headhunters out there that specialize for long-only's, but I've never used or met them. If you're willing to use them, by all means see if your peers have access to good headhunters. They're always out on the prowl for new "inventory."

And feel free to reach out anytime. All I ask is that you pay it forward and mentor others who have a passion for fundamental investment research.

Thanks for the color, I feel as if we have very similar mindsets.

I try and chip in on this forum where I can and perhaps I'll write up a similar post or an AMA once I've landed somewhere that I consider to be more permanent.

Interesting thoughts on pay given it is a buyers market. Just curious if your bonus is larger percentage of total comp on the buy side or sell side? Also how does base salary progression differ?

From reading your post it sounds like you didn’t enjoy the sell side much. But would you have been willing to take a substantial pay cut from the sell side to get your foot in the door on the buy side?

Anything you can add on GAMCO?

Nah, sorry. Nobody responded to my emails so I never spoke with anyone there.

wow what a detailed post, THANK YOU

Thanks for doing this. Can you comment on which MBA programs would be best for recruiting for analyst roles at the shops you mentioned?

HBS , Stanford, Booth, Wharton, Columbia are the best feeder programs for asset management. I don't have much more info other than that.

Thank you Subutai Baghatur ! This is incredibly helpful as someone in sell-side ER hoping to break in post-MBA.

Not totally related to the topic, but do you have any favorite resources you've found that have helped develop your investing approach? Any blogs, podcasts, even things like twitter accounts? Books obviously helpful as well, but I think these have been covered pretty extensively on here.

Glad I could help. Why would you want to suffer through more sell-side than necessary? Why not start recruiting now? At least start networking immediately; no time like the present.

Honestly, there was nothing better for developing my investment philosophy (which I believe is somewhat unique; maybe I'll make a separate post for that in the future) than practice. This is also why creating a fully developed pitch for recruiting purposes is so helpful: it also serves the secondary purpose of giving you experience where you can start to develop your own methods and principles.

I highly recommend the book The Outsiders by Thorndike. Completely changed my opinion on capital allocation. You should also read quarterly letters and annual letters from great investors. Bill Nygren, Tweedy Browne letters, Buffett, Steve Romick, Howard Marks, Sequoia Fund letters, You can pretty much go to the websites of any of the solid value funds I've listed above and read their commentary. Also, some funds like Tweedy Browne do provide sample investment research reports if you ask for them.

I had sort of wondered how this transition was done, it's obviously a lot less of a trekked path than the one into SS ER / IBD . Were you ever concerned that your MD or people at your bank would find out about you cold emailing buy siders/potential clients?

Also, obnoxious questions by me because I know you're obscuring your background, but can $10B across 10 investment professional really be described as small?

Naturally, I always emailed them using my personal email account (our work email monitoring would make the Chinese Communist Party green with envy). Luckily, most shops I interviewed/networked with were not our clients. In addition, since I networked primarily at the associate level, they don't exactly speak with sell-side firms regularly. When I interview, however, my interviewers are well aware of whom my analyst is and can pull up our coverage at will. As long as none of them blab to our salesman or something, I would be fine. I never worried about it since there was no reason for them to destroy goodwill with a prospective candidate. Maybe it would be a different story if you were interviewing at the analyst level.

Size is relative, I would say. Compared to hedge funds, $10B in AUM would be fairly large. However, if you compare this to medium funds like Brandes, Diamond Hill, Causeway, Hotchkis Wiley, etc with >$20B but $100B. Finally you have behemoth $1T+ funds like Fidelity, Wellington, T Rowe (slightly below $1T), Invesco (also just shy of $1T), Black Rock, PIMCO .

So in that context, $10B is pretty small.

Thanks for this! Just a couple of questions.

Any tips on how a sell-side analyst with no coverage can network with the buy-side? Hesitant to reach out to our clients as I have nothing of value to offer them yet. Also worried that they might let my bosses know that I've made contact (obviously for job hunting purposes, if ever).

Where would you exit if not the buy-side? Worried about MIFID and job cuts and honestly just want a job with similar pay.

I did not know it was possible for a sell-side analyst to not have coverage. If you were promoted to the analyst position, you are almost guaranteed to have transitioned from an RA role, where you gradually pick up coverage. There's only 1 shop I know of that would risk hiring analysts without prior coverage...are you at Sidoti, by any chance?

I suppose in this instance, you would not want the buy-side clients to know immediately that you're actively recruiting for buy-side research, since the expectations for a sell-side analyst is much higher than a sell-side RA. You will be thoroughly judged on the research you put out, so I suggest making your investment style/philosophy shine through your research rather than going the typical route of a "successful" analyst by pumping out trash reports and being simply a corporate access conduit. So to answer your question, I wouldn't "network" with buy-side clients outside of what you would normally do as part of your job as a sell-side analyst, i.e. contacting them about notes, new ideas, news, etc. You would have to let your work do the talking for you, if you know what I mean. Actions speak louder than words. Also, I would suggest becoming good friends with the salesmen, as they're the ones with direct and constant client access.

The most common exits for sell-side research personnel is to corporate finance /corporate development or investor relations at one of your coverage companies. These should be relatively easy moves, since you're in touch with those management teams all the time as part of corporate access. If you're really good at shilling for companies in your coverage, they might just bring you onboard as their full-time shill! No offense to IR people, just a joke.

Whoops! We use the word analyst pretty liberally here (a bit weird cause I'm at a BB). Am actually in an RA position right now and look to gain coverage in 1-2 more years. Hope that clears things up.

Thanks for the thorough answer. That makes more sense - build my cred through my eventual coverage and get their attention through that.

Thanks for the post. What is your experience with non-traditional ways of breaking in. I come from a non-target with a low GPA but I know I got the intelligence and dedication for it. How do people in the buy-side look at past under performance. I am working on my CFA and grad school to make up for my past mistakes, but I know that the red flag will always be there. Also, would you say the best way to get to the buy side is through sell side research, or would you recommend any other path? Thanks for the input.

I unfortunately can't say a whole lot about non-sell-side research transitions, since almost everyone in buy-side research either started in buy-side research or jumped the fence from the sell-side. I have, on occasion, encountered people who did not break in from sell-side research, but there's no pattern. There's no clearly defined second best way in. You could always work in maybe corporate finance or something that gets you the background knowledge to do equity research (perhaps accounting related, even) then go MBA then transition. The only shop I've seen that takes people fairly consistently from outside of sell-side research pre-MBA is Brandes. That may be your best bet for a transition pre-MBA. Pretty much every other shop requires either prior buy-side research experience or sell-side research/banking experience. Also, I've seen some instances where people switched from back office support roles into front office research, so there's also that method.

Can any of these firms still perform at their size?

Truth is factor investing and quant firms (aqr etc) have vacuumed up a lot of their edges. I think a small go anywhere fund like what bill Miller is doing has at their size some edges they can target. I think you really need to target idiosyncratic risks to do much today or have time scales that differ.

Not sure on the hate of quarter trading funds. I might not believe in that short. But I do think there is a time frame where it becomes impossible to predict. ie for apple years ago you had to know that consumers would pay 900 a phone for a apple product when you could buy a Samsung product that does 99% same functionality for $200. Likely the first hardware company to never face margin compression. The only reason I own apple products is to text a girl and have it show up blue over green. Makes me look not poor. I guess that is worth a trillion. Point is every company has faced a crisis or risks that I don’t think an investor could have predicted in advance.

Any thoughts on AIG? I still own it from when the government sold out of it and have a ton of capital gains even at this price. Super cheap but they can’t underwrite correctly.

I would point to the long-term track records of the great value investing firms, like Harris, FPA, Tweedy, Ruane, Royce, etc. These funds generally deviate greatly from their respective benchmarks (high active share) and can capture that idiosyncratic risk. The Sequoia Fund in particular has a very concentrated portfolio (about 30 holdings, last I checked).

Quarter-trading hedge funds simply do not outperform in the long-run, which is why I like to hate on them; they are out to enrich themselves first and foremost, clients be damned. I have actually interviewed with one of them a year or so ago when a headhunter reached out. They were looking for someone with my industry coverage to join their pod. Our conversation revealed to me exactly how they make money:

The pod manager used to be a trader and he's supported by two analyst, looking to bring on 1 more. His pod manages $1B, including leverage, which is decided at the higher up level of management. Now let us suppose he uses 100% leverage, meaning that $1B is $500M client assets and $500M in leverage. If he delivers a 20% return in a year, that's 40% return on client assets. Assuming a 2/20 fee structure, his pod alone gets $10M in base fees plus $40M in incentive fees. That's $50M in revenues for his 3 - 4 man pod! Leverage only benefits the manager since it inflates their incentive fees when times are good. Even if a hedge fund manager outperforms, that outperformance needs to more than offset the exorbitant fees charged...the house always wins.

As to fundamental investing, it's all about being right more often than you're not an in places where it matters. Like I mentioned in another comment, a good analyst is right 54% of the time and a fantastic analyst is right 58% of the time. As a value investor, I believe it is not important for me to pick all the biggest winners but rather more so to avoid the biggest pitfalls and permanent destruction of shareholder capital (AIG, VRX, etc). My job is to find strong companies with shareholder friendly management and hold those for the long run. This topic can be expanded on and has been discussed extensively elsewhere, so I'll just leave it at that.

AIG sucks. I have not done extensive due diligence on them, but I know a number of value guys have taken up positions in it, including Harris. Like you said, they're horrendous underwriters, that much is obvious if you look at their consistent reserve charges year after year. My friend told me that they tend to give away the power of the pen too readily to brokers, who are compensated on sales rather than underwriting results. There was a headline that Berkshire 's National Indemnity had to take a multi-billion dollar charge on the reserve book of prior business reinsured from AIG.

You are using the wrong metrics to judge the pods. It’s all about risks management. The reason they get away with charging such high fees is because they are not a pure equity product but a trading vehicle. The secret sauce is risks management and pulling alpha. If a firm can string together 100 pods. Get the risks management right so they never “lose money” as a whole then the product no longer has the risks characteristics of an equity product. Which then allows them to charge a ton of fees because they’ve created a zero beta product. If you can create that kind of product why would the manager give the returns to the investor when the product has investors willing to take a much lower return since there’s no risks to them. I think you also underestimated the fees the pod gets 20% but the multistrat firm charges 20% on top of that.

I like value it’s why I own aig and yes valeant. Though aig has turned into disaster. Tough to dump something so cheap and pay significant taxes. Valeant I own from $11 and looks good long term now. At this point it just looks like a public lbo with most of the garbage from the prior administration gone. Though the short thesis was never correct they got lucky but that’s a long story.

Those long-term track records are dubious now. As I said they were built before things like factor investing existed. I think it can still work on a smaller fund that is quite creative smart and concentrated. But the larger funds I don’t think can find enough edge to exist in the new world. Not enough ideas.

Amazing post, thanks for sharing!

I would like to ask your thoughts about research in value hedge funds/funds nowadays, considering the AI/machine learning era. I would really like to break into the buy-side research, though I am more oriented to value research as well as fundamental analysis

Thanks a lot

There's really not much to comment on in terms of value oriented investment research - its principles have remained the same after decades, and I doubt it will change going forward. However, the actual processes and methods have changed and evolved over time: even Buffett himself has since started investing in companies he wouldn't dare touch a few decades ago. If you look at the great value investors (many of them are listed in my original post), you will find among them big differences in processes and holdings, despite all of them sharing the same underlying philosophy of value investing: the idea of having a margin of safety and disciplined buying/selling.

At the end of the day, this is a people business. A lot of the value creation at the company level comes from the decisions of management. Certainly, you would prefer to invest in a company that even an idiot could run, but you would be underestimating the ability of an idiot to make big, stupid mistakes that results in permanent impairment of investor capital. Computers have their uses, but they can't evaluate a management team qualitatively. They can't engage in "soft activism" (this is where a large shareholder gives suggestions to management/board without engaging in a public activist campaign - you'd be surprised how frequently this is used by value managers behind the scenes). They can't carefully weight the more ambiguous and nuanced side of finance like human judgment can.

A great reply mate, do appreciate it. Though, I finished my SB so cannot give you a +1 :)

Anyway, I echo what you said about value investors' holdings but likewise, I believe that we can apply this for the "contrarians" and "trend followers" as well. We saw a clear example with Druckenmiller during the dot com bubble

I commented above that I found your interview questions section particularly helpful. Building off that, are there any questions that you liked to ask either in the interview or while networking that you found particularly useful, or that you found effective in uncovering important information?

A lot of your questions should focus on their culture and processes. You should do some due diligence on their funds and ask them about peculiarities (for example their holdings). For questions related to culture, I've given a big list of questions about culture in the original post, in the networking section. Simply reword/rephrase those into questions you could ask your interviewer.

What are some of the challenges in value investing today and how has that affected your company? Sort of referring to the outflows from active value funds because of underperformance, client sensitivity to fees , and this general shift away from active and into passive, and how has that affected your firm's decision-making, comp, etc...Seems like even though certain value active managers are outperforming today after a really tough cycle, there's still a ton of outflows, which must be putting pressure on value shops, maybe not all but definitely some

Yes, you're absolutely correct: value managers are taking a hit on asset outflows and performance, particularly in light of the frothy market valuation today. Value picks are few and far in between, and many funds that do not have a mandate for being fully invested are holding big chunks of cash, also in preparation for when valuations become more reasonable.

But this isn't exactly a new phenomenon: value investors have always been unduly punished by client withdrawals when things start to look like a bubble; just ask any long-term value manager and they will tell you the same story of clients being annoyed that he isn't buying the latest fad. I've always found it funny that even though clients pay for a money manager's expertise and discipline but then end up tossing all that aside to pursue their own attempts at market timing... Regardless, so long as the value shop has a diverse client base and long-term track record, I wouldn't worry too much about it.

Excellent post. You provided helpful information about Brandes, but do you have any thoughts on the quality of their investing/culture/etc.? I know they had a tough time with financials in their portfolio during the credit crisis and had an f ton of redemptions at the same time. How large of a negative do you think Brandes himself leaving is? Everyone I've talked to there seems really sharp.

I've done some networking with a few guys at Brandes, but nothing extensive. I gave a reply to another guy asking about Brandes in another thread a few days ago, and that's pretty much all I know about them. Their culture and investment research are both held in high regard, from what I've heard, so you've definitely got a solid foundation for your investing career if you were to work there as a junior associate.

I'm not sure what the arrangement was for Charles Brandes before his departure, but I wouldn't be surprised if they get some outflows from that announcement. Considering they have a committee-based decision making approach, realistically and practically, his departure shouldn't make much difference from a research quality perspective, just more from a marketing perspective.

Curious about some of your ideas, if you'd care to share?

Sorry, I'm not comfortable sharing my picks since they might compromise my anonymity - this is a very small industry, after all. You might very well be able to identify me by my stock pitches alone, which I've used extensively in my networking and recruiting.

Doesn't have to be the ones you used.

I'm always curious when I hear someone describe themselves so adamantly as adherent to a particular style.

Hi! I loved your post. Thank you for posting it. I was recently looking for material to know more about buy side equity research. I want to apologize for making my questions long. I tried, but could not resist to ask them all.

I am an economics undergrad in my final year from Asia and I want to break in equity research. I want to do it in the USA or Canada. I am avoiding Europe because you mentioned Mifid and I just looked it up and I understood, to some extent, the negative impact on equity research career. I will need to study at schools in the USA or Canada to get in Research Associate programs. I am thinking of targeting graduate programs like Ms Finance/ Master of Management/ Master of Accountancy. RA programs are mainly targeted at undergrads and people with few years of experience as you mentioned in the post. Do you think it would be a stupid idea to do these masters programs just to get my foot in recruiting events, networking and getting a better school name? I passed my CFA Level 1 exam in December last year. Do you think it would be helpful to get in those Research Associate programs? I am also investing my own savings in Asian markets particularly in Chinese and Indian equities. Do you think this is a good way to showcase my interest and compete with undergrads for landing up in a RA position? I am targeting Canada because they have huge pension funds like CPPIB and OTPP, which have recruitment programs for students. I would like to know how you view these pension funds as a way of getting in buyside equity research.

Do you think Barron's rankings of fund families give somewhat accurate view of which firms are good to work for to hone one's investing skills and learn from senior analysts and portfolio managers?

My last question, sometimes I buy a stock based on my gut feeling after I am done with analysis. There are times when income statement seems pretty good but I feel like management of that company is not using its capital as efficiently as it can or not targeting markets where it can out grow its competitors so I avoid investing in it. There are also times when a company is doing pretty good financially and is quite cheap, but trading volumes are quite low. My gut says to buy it, but I also fear that low trading volumes will continue for years and I can get stuck with it if market never realizes the company's real value. Do analysts and portfolio managers encounter such situations and use their gut when making some buying decisions or it is me who does not know how to invest smartly yet?

No problem, thanks for your questions.

In my opinion, doing through a masters program is not a bad idea, since it is the best option you currently have. Obviously I wouldn't recommend it if you're already in the US. It will be a good tool to show potential employers that you're familiar with American finance/economics/accounting and English (since you're an international applicant; will be difficult to get past resume screen otherwise). Like you said yourself, during your masters program, you can also take time to network during your studies as opposed to applying blind, as you are now (with only an undergrad). Think through the perspective of an employer: why would they take a risk hiring an international candidate out of undergrad when there are so many eager candidates domestically? Unless they're trying to hire specifically an Asia coverage guy, I suppose. Also keep in mind that your employer would have to sponsor your work visa, I believe. You will likely need to go through the lottery system to determine if you can stay. Not sure about Canada.

Having the CFA level 1 under your belt is definitely a good thing; it shows commitment. Talking about stocks you own will also be helpful, as usual. But it may also be good to know a couple of US names too. No clue on Canadian pensions or how the Canadians hire. You should check out the LinkedIn profiles of their employees to see if anyone else made a similar move as you are attempting to make.

I've never used fund ratings for recruiting purposes, but I suppose they could help you make informed decisions on where to target. Obviously, you shouldn't try to restrict your targets too much. You should be taking every shot you can. Worst case scenario, you use the interview processes of the crappier funds as practice for future interviews.

Portfolio decision-making processes vary greatly across firms, so it depends. There are some funds (like at Royce) that play a numbers game with investments (one of their funds have 250 smallcap/microcap holdings). Obviously for them, they don't need to be as perfectly comfortable with a name before investing since each individual stock has so little influence on overall portfolio performance. However, if you manage highly concentrated portfolios, you would want to have total conviction when making the final decision to buy.

Strong article! Interesting take on BlackRock though... I don't think your opinion on that firm is commonly held throughout the industry. What is your basis for such a negative comment? Simply because you personally have "never heard a single good thing about them" or "seen one of their ex-employees at a better shop"?

Because BlackRock is losing assets from their active strategies to index funds, at least in regards to equities. In fact, last I heard, they laid off a bunch of people from their fundamental strategies and replaced them with computers. They are simply an asset aggregator, not a place where you can expect to improve your skills as an investor. No comment on their fixed income side, since fixed income indices cannot be replicated easily and is thus not subject to the same competitive pressures as equities.

Thanks. This makes more sense, however I would also point out that this is a trend exhibited by most large institutional asset managers (including Fidelity, the first firm you mentioned... their recent Zero fee retail funds have completed the “race to Zero,” which is a very dangerous precedent for the overall industry).

I personally love active equities and have had a lot of fun on large cap value desks in the past. However, I have not found confidence in post crisis industry trends out of active and into passive. Please note the referenced Bank of International Settlements paper below. Chart 1 shows that passive inflows have been met with nearly perfect active outflows.

My follow up question is then, given this trend of active outflows against mounting pressure from index funds, where do you find confidence in the longer term career prospects of smaller boutique firms like those you mentioned?

(My opinion is that the strong pay and stability these firms have historically enjoyed will diminish significantly over the next decades... if nothing else underperforming boutiques now face immense pressure from low fee beta index platforms that will increase the volatility of their earnings and stability.)

https://www.bis.org/publ/qtrpdf/r_qt1803j.htm

Do you think companies like BlackRock or GSAM are good places to start a career though? Or will it be hard to do much afterwards?

Any insight on Lazard Asset Management?

Just had an interview with them and would love to learn more.

I have a few thoughts on LAM. 1) ~90% of AUM is institutional - therefore highly sticky money. Average investors invests for 5+ years with LAM. 2) LAM has average performance across the funds. Not exceptional, but not terrible. 3) LAM has been quite successful at attracting positive inflows over the past few years driven by the firm's distribution model, willingness to incubate new strategies/poach teams, etc. Good luck - great shop overall!

thanks. any insight on comp/exits?

Thank you for answering my questions. I looked over again at the career programs offered by different funds and only a handful of them offer career programs focused on students and even less on students with Master's education except for an MBA . Do you see working for big4 accountancy firms and develop skills in financial statement analysis and gain a good understanding of a particular industry as a more viable path to end up in equity research?

You would be better off going to sell-side research first instead. There are so many open positions in sell-side research and it's easily the best feeder into buy-side research.

Interesting and insightful article. What is your advice on European boutique value shops & asset management companies? How do they differ in terms of recruiting from their US counterparts? Is there a possibility to break in from a more non-traditional role (think Investment Analyst / Data Analyst / Business Analyst) from a traditional Investment Bank? What would you suggest to a professional passionate about buy-side equity research on how to best prepare and get interviews at good companies? Appreciate your honesty and insight and thank you for this interesting discussion and article, I really enjoyed it.

Sorry, I've got no information on non-US asset management shops . I wonder, do they even have staunch adherents of value investing over there? I've certainly never heard of any famous non-US value investors. Try networking and reaching out to people in the field using the strategy I've outlined. After all, that's how I got all my information.

Either way, the requirements for a job in fundamental research should conceivably be very similar to the US. I can't think of any reason they would be substantially different. I've given all the interview advice I could think of in my original post. Not sure what other advice you're looking for.

Thank you for a very insightful post. It seems that you spent a lot of time thinking about important ideas. I would like to learn what your investment philosophy looks like, and how you think about the investment process. Who are some investors whose approaches you incorporated in yours based on your strengths and weaknesses? What are some books that you would recommend to study for aspiring value investors?

Thank you in advance.

Investment philosophies differ even across various value shops, though they are unified by an overarching belief in value investing. Mine is based on the concept of absolute value - which is cash flow based (think DCF ). I also like to think in terms of capital efficiency (like ROIC). The whole point of value investing is about finding areas where the risk/reward dynamics are in your favor - that there exists opportunities where you are taking lower risk for higher returns (a slap to the face of EMH). I believe that to deliver high quality outperformance, an investor must avoid what I call "false positives" at all costs. These are the Valeants and AIGs of the value universe. The due diligence must be extensive and thorough. One must make sure the management team is shareholder friendly.

I enjoy reading thoughts from FPA and Tweedy Browne, which resonate greatly with me. I recommend The Outsiders by Thorndike, margin of safety , Ben Graham's books.

Coming from someone who does not currently work in research how would you recommend younger entrants into the space sharpen their modeling skills. I've done a few research reports on the side and through school, however I really enjoy the work and want to showcase my passion for it. The only issue is its not part of my current position. How much modeling experience is required in getting a sell side position? I see that connection to the buy side as you've said earlier in this thread. Just curious as a young post grad because so much of industry is skills based, and when you're not gaining experience in a current role I feel like you are falling behind.

Also what are some buy side firms to recommend. Trying to compile a list. Thanks.

Modeling skills can only be improved through practice. If you are working through a pitch for recruiting purposes, this would be a natural component of the process. It would also help to have a "model" model to know what a good model should look like. You can always ask one of your sell-side research networking contacts to forward you one of their old models. Modeling should not be a major consideration if you're trying to break into long-term fundamental investing - these skills will be mainly learned on the job. On sell-side research requirements vary by position, seniority, and bank. Having prior experience with it (even if it's for a club) will reflect favorably on your candidacy.

I have a list of buy-side funds at the bottom of my original post...

Thank you for your post! I have an interview with Capital Group in a few days (straight out of undergrad) and don't have time to make a full on stock pitch nor do I have much investment management knowledge/experience. Not very optimistic about this interview but just wondering if you have much last minute cram tips.

Also wondering why you mentioned to stay away from bank owned asset managers (GSAM, JPIM, etc.). Thank you!

Are you interviewing for IGIR position? I've never interviewed with Cap Group, but I've only spoken with a recruiter there before. In all likelihood, you don't have much of a chance if you don't have at least one pitch to talk about - the process is extremely competitive. My best advice would be to do some last minute reading of investor letters from great investors (like at some of the shops I've listed above).

From my experience in sell-side research, the bank-owned asset managers are quarter-trading asset aggregators. Not to the extent of the highly levered quarter trading hedge funds, but still short-term focused. Their research personnel have never struck me as particularly good investors from my conversations. If you are looking at GS special situations group, then that's a totally different story.

I have a few questions on pitches for interviews.

What are your thoughts on pitching stocks that you cover on the sell-side in buyside interviews? Would this be considered an easy way out and not be taken seriously, even if you have strong conviction?

Did you pitch companies within the same industry you covered on the sell side or did you go in a completely different direction?

Lastly, what are your thoughts on providing sell side research as a work product sample (a good note you’re proud of or something like that), even if you pitch something different in the interview? Do you think a work sample should be something done on your own time?

Perfectly fine to pitch stocks that you cover, even better if your call is different than your analyst's rating, since this shows your ability to think independently. There's nothing inherently wrong about pitching a stock you cover, but be ready to talk about it on a long-term perspective instead of emphasizing quarterly catalysts as sell-side analysts usually do.

I pitched stocks that I think are good investments. I tried to find something in my industry, but nothing was compelling enough, so my primary pitch was on a company outside my industry.

I have never written a sell-side report that I was proud of, so I never did that personally. But if you think a report that you've written/published can help demonstrate your ability to think like a long-term oriented investor, then by all means use it as a work sample. You should be the one who came up with that differentiated idea and have done the bulk of the legwork on it.

Thanks for the insight! This thread is super helpful.

One more question - It seems that networking is the most important thing when it comes to getting interviews and finding open positions, but I’m curious to hear if you had any luck with pure resume drops (like LinkedIn/ CFA job board etc)? Did you land any phone calls/first rounds that way, or all through your network?

If so, what was your experience with those interviews?

Completely disagree with the notion of ER providing little market value. I've come to rely on ER reports quite heavily when doing my DD on BD opportunities. MS, as an example, provides high quality and very insightful research. Sure, there's garbage out there, but you can say that about anything.

Sent you a PM. Please don't reveal too much info about yourself online. Delete this post if possible.

Thanks so much for the great post! I'm personally interested in ESG /socially-responsible investing, and I was wondering what your thoughts are on the space and funds within it (e.g. Parnassus)?

Solid thread, thanks OP. I've probably interviewed or had substantive conversations with half of the firms you listed and generally agree with most of your insights. I do disagree on a few of them; e.g. T.Rowe is a very serious shop and their analysts are often top 2-3 nationally in terms of how well they know their coverage (no, I don't work there). I did enjoy the pod shop bashing, and generally agree with you on Fidelity, CapRe, Harris, Causeway and Brandes.

Anyways, thanks again. Always good to get some signs of life in the AM channel here ;)

Bumping this thread, this is an incredible post, thank you for taking the time to write this OP.

I was wondering what your take is on large AM firms vs small boutiques vs HF and what the differences can mean for someone early in their career.

Also, what is the idea generation process like at your shop?

Again, great post. Really enjoyed reading it and as someone relatively new to the AM industry I believe it gives a very good perspective on what is out there.

My opinion on large vs small boutiques isn't that different from my opinion for example between Fidelity and say FPA . One is "too big to succeed" closet indexer while the other one has a more compelling/clearly defined philosophy. I'm not saying every team at Fidelity is like that but it would be a fair generalization. Naturally there are some exceptions for large firms (Cap Group would be one). Also I'm not trying to imply all small boutiques are great - you should be selective about their culture and performance. Working at boutiques very often means a broader coverage universe and thus greater perspective on various industries, so at Fidelity you might be an associate covering video games but at a boutique you might be covering all media or whatever the superset industry is (or even a generalist). Normally, it could also mean you get a better shot at actually pitching your own ideas instead of exclusively working on your analysts', but Fidelity and Putnam are actually exceptions to this - their associates immediately have coverage. From my conversations with my contacts, it would appear that for most larger funds, associates rarely get to pitch.

A hedge fund is probably more similar to boutique asset managers, even at larger funds like Citadel . This is because these pod shops, as the name suggests, work in very small pods of maybe 5 people give or take. I've never really networked much with hedge funds so I can't comment too much on it. As you know, there's much more upside on pay and stability is lower relative to an asset manager. Because hedge funds are such a diverse group, it is hard to generalize much about processes beyond this, sorry.

At my company, idea generation is very fluid - there's no set way of screens or whatever (though we do run screens from time to time). Very often, a PM would come across a name that they've always held in high esteem but never bought because the price until only recently had been too high - we would catch up on the name as a potential new idea. There could be trigger events like change in management, spin-off, sudden increase in insider buying, drop in stock price due to a potentially transient issue, etc. that would initiate a due diligence process. I haven't been doing much idea generation myself since I'm still quite new here, but if I come across something that really shines, I have no doubt the PM's would encourage me to pursue it at my own pace.

Thanks for posting this. Great thread.

Can you go into more detail on your cold emailing process/template that you used?

It's really simpler than you would expect - you want to be brief and to the point. Cold emails should not be any more than a couple of sentences and should take less than 30 seconds to read. Introduce yourself, say how you found them, throw in a tidbit about what's interesting about their fund as a reason why you want to talk or maybe something unique about their work experience, express interest in buy-side research, ask for a short call .

Subject can be something like "aspiring research associate reaching out" or if the recipient is an alum, "_____ alum reaching out"

I will tag this article in my library with intellectually stimulating Please prefix your next article with an Executive Summary

How do each of these funds fare in terms of MBA placement. I know you mentioned Dodge and Cox, are there any other shops that have great BSchool opps? Also, from the perspective of adcoms, where does AM fare in contrast to HF / PE / IB /Consulting? What % of applicants would you say get into H/S? M7?

I just want to add two things to his post which is overall spot-on.

Make sure you target your pitch to fit the investment philosophy of the fund you are interviewing for. It may seem like common sense but having a pitch projecting Peloton double digit growth rates into perpetuity at a deep value shop is a death sentence to the process.

Have 1-2 report samples ready to go and date them. So if your report was written 6 months ago, whoever you sent it to will see that your call worked out. I had multiple final rounds where they will have you dig into a name in their portfolio or of their choice and present it to the investment team. So having these 1-2 reports ready to send on top of the report you are preparing will only show them that this is a repeatable process for you.

-Recently made transition after going through 3 processes where went to final round with various buy-side funds and manyother processes that didn't go as far..

bump since this is a great thread that helped me get an AM offer

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Seeing Is Believing

Sell-side Equity Research in a Nutshell

Updated: April 2 2023

By: Noah Edis

There’s a reason Wall Street banks are known as “The Sell-Side” – it’s because their primary business is to help companies raise money by selling stocks and bonds. And the people who work in this division are called equity researchers, or just “analysts.”

Their job is to study individual companies and figure out whether they’re a good investment. They track things like earnings, revenue, and profit margins, and then make reports for their clients to guide them about whether or not to buy or sell shares of that company’s stock.

But it’s not just about picking winning stocks. Equity researchers are also responsible for coming up with new investment ideas and helping to shape the overall market outlook. To do that, they need a solid understanding of financial statements and accounting concepts, as well as experience in fundamental analysis and valuation.

But how does this impact your investment choices? Let’s take a closer look.

What Do Sell-Side Equity Research Analysts Do?

Sell-side equity research analysts are responsible for providing analysis and reports for clients, typically institutional investors such as hedge funds, mutual funds, and pension funds.

The sell-side equity research department is responsible for the generation of new ideas and the production of high-quality analysis. The department is usually divided into sector teams, each of which covers a particular industry or group of companies.

These are analysts and associates. Analysts are the people who produce the actual research reports, while associates support them by conducting fieldwork, gathering data, and performing other tasks.

Their work process can be categorized into three main tasks:

• Information Gathering

Sell-side equity analysts are responsible for gathering information about the companies that they cover. This includes both financial information and non-financial information.

Research analysts can obtain financial information from a variety of sources, including company filings, earnings calls, and analyst presentations. On the other hand, they can gather non-financial information through fieldwork, such as meeting with company management or visiting factories.

Once the necessary information has been gathered, it must be analyzed to make investment reports. This analysis typically takes the form of financial modeling, which is used to forecast a company’s future performance.

• Report Writing

Sell-side equity research reports contain information on companies’ past performance, current situation, and future prospects. It also includes the analyst’s rating (e.g., buy, hold, or sell) and price target for the stock. The reports are then distributed to the firm’s clients to help them make investment decisions.

Buy-Side vs. Sell-Side Analysts: What’s The Difference?

The main difference between buy-side and sell-side analysts is the type of client that they work for. Buy-side analysts work for institutional investors, such as hedge funds and mutual funds. Meanwhile, sell-side analysts work for banks and other financial institutions.

Another difference is the type of research that they produce. Buy-side analysts tend to produce more in-depth, fundamental research. In contrast, sell-side analysts tend to produce shorter, more concise research reports.

A final difference is the compensation structure. Buy-side analysts are typically paid a salary plus a bonus based on their performance. On the other hand, sell-side analysts are typically paid a salary plus a commission based on the number of research reports they sell.

What Is The Difference Between Equity Research And Investment Banking?

There is some overlap between equity research and investment banking, as analysts at investment banks may also do research on companies. However, the two functions are separate, and analysts typically specialize in one or the other.

Basically, investment bankers are responsible for helping companies raise money by issuing and selling securities. Equity researchers, on the other hand, provide analysis of publicly traded companies.

What Is The Difference Between An Analyst And An Associate?

An analyst is typically the title given to someone who has been working in equity research for a few years and has gained some experience. In contrast, an associate is someone new to the field and still learning the ropes.

Analysts typically have more responsibility than associates, such as creating reports and making client presentations. They may also be involved in meeting with company management and other investors.

Associates typically assist analysts in their work and learn from them. They may also have some responsibility for creating reports, but their primary role is to learn about the industry and the market.

What Is a Sell-Side Equity Research Report?

An equity research report is a document that provides an in-depth analysis of a particular stock. The report typically includes a company overview, financials, valuation, and analyst commentary.

The main purpose of an equity research report is to help investors make informed decisions about whether or not to invest in a particular stock. The report should provide an objective overview of the company’s financials and valuation, as well as the analyst’s opinion on the stock.

Here are the typical components of an equity research report:

• Company overview – This section provides a brief overview of the company, including its business model, key products and services, and competitive landscape.
• Financials – This section includes a detailed breakdown of the company’s financial performance, including revenue, operating income, net income, and EPS.
• Valuation – This section provides a valuation of the company, including its price-to-earnings (P/E) ratio and enterprise value-to-EBITDA (EV/EBITDA) ratio.
• Analyst commentary – This section includes the analyst’s opinion on the stock, including whether or not it is a buy, sell, or hold.
• Investment risks – This section discusses the key risks associated with investing in the company.
• Catalyst – This section includes a discussion of the key events or factors that could impact the company’s stock price.

Different types of sell-side equity research reports

There are three main types of equity research reports:

• Top-down analysis – This type of report starts with a macroeconomic overview of the market, then drills down to individual sectors and companies.
• Bottom-up analysis – This type of report starts with a detailed analysis of individual companies, then drills up to sector and market level.
• Hybrid analysis – This type of report combines elements of both top-down and bottom-up analysis.

Why Sell-Side Equity Research is Valuable

Sophisticated professional investors.

The main customers of sell-side equity research are professional investors, such as money managers, hedge funds, and pension funds. These investors rely on research reports to help them make informed investment decisions. Outside suggestions may be of limited value because you will almost definitely do your own due diligence before investing.

Mitigate Risk

One of the primary goals of sell-side equity research is to help mitigate risk for investors. By providing accurate and timely information, analysts can help investors avoid making costly mistakes in their stock picks.

Get an Edge on the Competition

Many professional investors subscribe to multiple research reports to get a broad overview of the market. This gives them an edge over investors who only rely on their own analysis.

Get Unbiased Information

Remember that analysts are not always right about their analyses. However, by subscribing to a variety of research reports, you can get a more balanced view of the market and make better investment decisions. In addition, sell-side equity research informs investors of the latest news and developments in the constantly changing equity market.

Enhanced Corporate Access

Regulations make it impossible for corporate management teams to selectively provide important information to investors, posing a problem for huge fund managers who frequently require precise information when appraising a stock.

To get around this, fund managers frequently attend meetings sponsored by sell-side companies with contacts with executives of their research subjects, where they may meet company management teams.

Sell-side businesses’ institutional customers can also convey the most important issues they wish to see addressed by corporate management in quarterly earnings conference calls and reports.

Idea Generation

Sell-side equity research reports can be a valuable source of investment ideas. By reading these reports, you can get a better understanding of the companies that interest you and the stocks worth watching.

Creating Context

For skilled investors, reports may be most valuable as a way to establish a meta viewpoint. Short-term variables significantly impact stock values, so investors may learn about price fluctuations by keeping an eye on the whole research environment.

Consuming research also enables investors to assess the temperature of the sector and compare current conditions to previous happenings. In the market, history tends to repeat itself, thanks in part to the industry’s inclination to shake during collapses and attract new professionals during bull runs.

Having a detached viewpoint can help illuminate cyclical tendencies, making it simpler to spot alarming signs that might otherwise go unnoticed by the untrained eye. As a result, new investment possibilities are generated.

That said, investors should avoid research that just reinforces their own prejudice – a powerful factor that has undoubtedly contributed to market booms and collapses in the past.

Challenges When Choosing a Sell-Side Equity Researcher

Many analyst reports are available for free on the internet. The sheer number of firms providing sell-side equity research can be overwhelming for investors.

So how can you determine which research reports are worth your time and money?

Here are a few factors to consider when choosing a sell-side equity research analyst:

• Consider the firm’s reputation

First is the reputation of the sell-side equity research firm. Does the firm have a good track record? Are its reports well-regarded by other investors?

• Consider the analyst’s experience

Second, consider the experience of the analyst who wrote the report. How long has the analyst been covering the stock? Does the analyst have a good track record?

• Consider the firm’s coverage universe

Third, consider the firm’s coverage universe. Does the firm cover a lot of stocks or just a few? If the firm only covers a few stocks, is your stock one of them?

• Consider conflicts of interest

Fourth, be aware of any potential conflicts of interest. Does the firm have a banking relationship with the company? Does the firm’s parent company have a business relationship with the company?

• Consider the price

Finally, consider the price. How much does the report cost? Is it worth the price for the information it provides?

These are just a few factors to consider when choosing a sell-side equity research analyst. Ultimately, you should use your own judgement to decide which reports are worth your time and money.

However, what if there’s a way to view all these analysts’ price targets and ratings in one place?

Welcome to AnaChart. AnaChart is the only website that shows analysts’ past and present action. Other sites present current price targets, but none show previous ones for users to get context other than AnaChart.

Easily find and follow any analyst that outperforms the market. AnaChart assists you in determining which analyst price goals and ratings are essential so that you can feel more confident in your investments and spend less time worrying.

AnaChart’s simple, elegant design makes it easy to find and track the analysts you care about. Simply enter a ticker symbol to view an interactive chart of the stock price over time.

By comparing it to the previous day’s close, you can also see how much the stock has risen or fallen above and below the strike price over time.

You can also view the price target history for each analyst. This way, you can quickly and easily see how accurate the analyst has been in the past and get an idea of whether or not their current ratings are likely to be accurate.

In addition to price targets, you’ll also see analyst ratings (strong buy, buy, hold, underperform, sell) on the chart. This lets you quickly see how bullish or bearish the analysts are on a particular stock.

Also, outside ratings and price targets, you will get the following:

• Line per analyst per stock — separately and together
• Duration since the last posted price target
• The frequency of stock prices realizing price targets
• The average time it takes for price targets to be realized
• Performance scores for stocks so you can identify which analyst model works best
• Statistics regarding average success on analysts price targets fulfillment and average duration in doing so

AnaChart is the only website that provides all this information in one place. So, if you’re looking for an easy way to find and follow the best sell-side equity research, AnaChart is the place to go.

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