“Sell side level work”
The good researchers on the sell side don’t get enough credit. If you just listened to the right person at the right time, that could make alpha (not saying just buy / sell - the actual underlying theses).
sure a lot of work is super shallow but there are some gems out there and I think sometimes the buy side too egotistical to admit it.
thoughts?
You’re not wrong, there are sell side guys to listen to. But, you do have to filter the guys who just regurgitate the 8Ks / investor presentations. This is assuming you want to leverage sell side for analysis. I could care less if an analyst has a correct thesis if he can turnaround a management meeting for me within the week.
I tend to find sell side initiations to be quite good, you can tell when someone has really done their homework in that type of piece.
"If you just listened to the right person at the right time"
As someone on the buyside putting capital to work, your entire value add is comprised of listening to the right person at the right time. If sell side analysts were consistently correct, there would be no reason for buysiders to exist. Those sell side guys should be the ones allocating capital. Feels like a bit of a circular discussion here.
That's part of it, but not exactly what sell-side is used for nowadays.
You provide industry contacts, corp events, and you are part of "consensus" which is the benchmark for what is considered contrarian.
Agreed w/ Acidophilus and SanityCheck. sell side is not paid to be right about stocks - that's a bonus and there's certainly money to be made there for an analyst who can do that, but that's not your core function. and those who are good at it usually find themselves over to the buyside quite quickly. so in that regard, there's minimal incentive to do "buyside level" work on the sell side, since you're not paid proportionately for it.
The best sellside value add comes from mgmt meetings that I couldn’t attend or from earnings callbacks. Longer-term, not a lot of value besides initiations.
I know some top sellside people who get paid in gold (Bellini) but LT they are tied to a secularly challenged business (buyside) so LT doesn’t look too great.
But since you started the thread OP, which sellside guys have you found worthy of calling out? I don’t mean on BS price targets but on actual value add via previews or your convos with them.
There are plenty of excellent sell-side analysts. You just have to find the 1-2 analysts that matter for each name. Half the buyside investors I know rely mostly on the sell side for analysis and channel checks anyway, or on expert network calls that effectively mirror sell-side with a bit more color.
Part of the problem is that, post Mifid 2, the biggest buyers of research are the multi-manager pods and so a lot of the sell-side research I see now is geared towards that customer base. I see fewer and fewer detailed industry reports/initiations and a lot more focus on quarterly previews.
I love sell-side research, though it is fundamentally different than investment analysis at a hedge fund. HFs have some view that they want to express, while equity research folks curate their top ten lists. It’s like being a book shopper (who’s interested in a romantic historical fiction set in 18th century Paris) and going to a bookstore. The folks there know books intimately and would be able to help you find a set of books that meet your interest. But from there you probably will want to read the flap, look at other reviews, and skim through a bit first.
The issue with sell-side research, at times, is that a lot of the ratings/analysis can be driven by the needs of the banking team for a particular company under coverage. Please correct me if I'm way off base here, but from what I've seen and from plenty of friends in ER, the level of actual thought/accuracy in a report often times (but not always) ends up falling with the reputation of the analyst's name covering said client. To expound, if a well-known analyst who is II ranked in biotech initiates coverage on Gilead then there is a higher chance the report may be more objective, especially if the bank said analyst is tied to is not actively involved in any deals/pitching any deals for Gilead. However, if you have a lower tier bank with a lesser-known analyst initiating a Neutral on Gilead when the banking team of the same firm is pitching for Gilead's business, there may be pressure on the research team at that time to provide Gilead with an Overweight rating so that the firm as a whole looks more favorable when the bankers are pitching for whatever deal. Now I bring up a pretty generalized scenario but my point is more that the banking team, despite the chinese wall, can often sway research coverage choices based on the economic benefit said rating would have on the firm
Facilis ut beatae nihil tempore aspernatur praesentium distinctio. Sint adipisci quasi fuga ut aliquid ea porro. Quasi odit accusantium et earum ex inventore. Dolorum velit atque placeat sit.
Est quod voluptatum modi nisi deleniti velit. Alias non autem atque earum sint.
Fugiat illum et sit. Reiciendis laborum adipisci enim quia et rem quos. Rerum tempora labore voluptas. Ipsa magnam ipsam delectus aut. Quibusdam at quia a ipsa rerum. Nisi eligendi aut corporis nemo magnam incidunt.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...