Equity Research Q&A with Flake
Mod (Andy) note: This thread is from December '11, but Flake said he is still up for answering questions, so fire away
Given the holiday season, I'm in a relatively good mood and feel the need to give back a little. I've seen a bunch of these "fielding questions" threads and I thought they were extremely helpful.
I am a week away from hitting my one year anniversary of being in a BB research role and I figured this would be a good time to do an entry-level Q&A session on ER. I will do my best to answer any questions and PM's. It might take me some time to get back to you with all the family crap going on this weekend.
Quick disclaimer: there are a few things I will not feel comfortable discussing given my relatively short time in ER, as I don't want to spread misinformation and will note when I'm not 100% sure. Sometimes, I will simply respond with an "I don't know" to questions that are out of my league. Additionally, I came from a back/middle-office job (also spent a year there) and will answer any questions that have to do with that.
Mods, if there is not enough interest or if this was done before, please delete the thread and I will attempt to do this again next year.






What is your career path? You
What is your career path? You mentioned you came from a back-middle-office job....
What is the most attractive thing in your job?
What do you research?
Thanks for the thread!
Walkerr wrote: What is your
What is your career path? You mentioned you came from a back-middle-office job....
What is the most attractive thing in your job?
What do you research?
Thanks for the thread!
My career trajectory changes with new developments. Currently, I'm seeing a few options I can pursue:
1) Stay where I am right now, work towards my CFA designation, and hope that my analyst throws a couple of coverage stocks my way. After that, I can try to make the move to the buy-side, work in the industry, or go to a different sell-side firm as a lead analyst. If my analyst left and I was offered the lead spot at my current bank, I would probably still move to a different firm. Why? I heard that you will always be the "associate" in the eyes of your sales force and clients, basically, the guy who moved up only because someone else left...wouldn't want that.
2) Go to b-school and try something else entirely (i.e. banking).
The most attractive thing about my job? I'll take that as "what do I enjoy the most."
I get a huge kick out of being viewed as helpful to a client or when my analyst is asking me for my opinion on something. My favorite two quotes would be something like: Institutional Sales Guy "My account doubled up on his position after speaking with you yesterday and said you were very helpful. We already made $X from these guys this month" or Senior Analyst: "Do you agree with my assumptions here? Am I understanding this correctly? What do you think we should add here?" Maybe I just need people to pad my ego, but I enjoy the fact that in addition to any grunt work I do (updating models, writing up reports, etc), I get to provide my input, which is also viewed as valuable in certain cases.
What do I research?
Specialty finance companies, which can range from mortgage REITs to business development companies.
Under my tutelage, you will grow from boys to men. From men into gladiators. And from gladiators into SWANSONS.
What's a typical day like? To
What's a typical day like? To get more specific, what did you do at work last Thursday? What time did you get in and out?
Thanks for doing this.
How did you break into ER
How did you break into ER from BO/MO?
Could you comment on the
Could you comment on the valuation models used; does anyone use DCF on the sell-side or is it all forecasting next quarters earnings and attaching a PE multiple? In terms of the work you do, what % is modelling and what % is report writing?
Thanks
Rana Clamitans wrote: What's
What's a typical day like? To get more specific, what did you do at work last Thursday? What time did you get in and out?
Thanks for doing this.
December is pretty slow for my team. That said, last week was unique, we were busy Monday-Wednesday and then things really slowed down on Thursday and Friday. The things on our plate last week consisted of publishing a 2012 outlook piece and picking up coverage of another company.
In addition to us initiating coverage and publishing an outlook piece, last Thursday was also a big macro/key data day. I'll try to do one of those timelines, with a lot of detail:
6:50AM: I get to my desk (this is actually early for me, I usually come in at 7:30-7:45). My analyst is on the morning sales call today, where he will discuss our outlook and the new coverage name. I quickly check Bloomberg and my industry specific news sources for any big headlines that we should be aware of prior to the morning meeting. I get myself some coffee and run down to the trading floor for the meeting. I would usually sit these out and just dial in.
7:20AM-8:00AM: Morning meeting, I sit through a bunch of other speakers until my analyst gets up to present. A couple of sales guys ask a few questions, my analyst handles himself well and comes off confident.
8:30AM: Initial jobless claims, PPI, and the NY Fed Empire manufacturing index hit the tape. I briefly review the numbers and the street's consensus estimates. Any sub-component of GDP or the unemployment rate is important for my sector (as is for most), but we don't publish anything unless the news is shocking and will cause us to change our estimates or ratings.
8:50AM: Our economist blasts out a note with his thoughts on the data that just came out. I review to make sure nothing stands out, give my analyst a brief rundown of the note.
9:00AM-10:00AM: I check the futures, look at my coverage stocks' off-hour prices, and see that not much is going on. I shoot the shit with the guys around me, discussing holiday travel plans, etc.
10:00AM-11:30AM: My analyst makes/takes a few more calls with various accounts and sales people and discusses the new coverage name as well as the big outlook report, while I rebuild one of our messier models and clean it up.
12:00PM-4:00PM: I get lunch, do "maintenance work" items which include things like updating our industry comp table, writing up a "to-do list" for my offshore associate (we have a guy overseas that does random/mundane crap for us), and I update our 100 page marketing presentation for my analyst's marketing trip in January.
4:00PM-6:00PM: Three of our companies post dividends after market close, two of them are below our estimates and one in-line. I write up three notes, one for each company (not long, 1-2 pages), with our commentary, and any change in our 4Q expectations.
6:00PM-6:30PM: My analyst reviews the notes I wrote up, and submits them for compliance approval.
6:30PM-7:00PM: I wait for compliance/supervisory analysts to approve the notes and release them to the public. Everything goes smoothly and I go home.
This week, with people out on vacation and things moving slowly, I've been coming in around 9:30 and leaving around 4:30, checking my blackberry in case something happens later after market hours.
Under my tutelage, you will grow from boys to men. From men into gladiators. And from gladiators into SWANSONS.
.
.
Under my tutelage, you will grow from boys to men. From men into gladiators. And from gladiators into SWANSONS.
Ovechkin08 wrote: Could you
Could you comment on the valuation models used; does anyone use DCF on the sell-side or is it all forecasting next quarters earnings and attaching a PE multiple? In terms of the work you do, what % is modelling and what % is report writing?
Thanks
It varies by sector.
For example, since our companies are financial companies, we use book value multiples to value our stocks and set target prices. This is our primary tool. We also use a dividend model (our stocks pay consistent dividends) as a sanity check, but we do not forecast/discount other cash flows. Book value would be useless for something like Tech or Healthcare.
DCF is commonly used in other sectors but I think it's usually in addition to other valuation tools. I think most groups use a combination of intrinsic and relative methods for their valuation and to create a range of target prices. Also, very little technical analysis.
Can't speak for the other teams, but for me, the % split between time spent on report writing and modelling (excluding everything else) would be about 75/25.
Under my tutelage, you will grow from boys to men. From men into gladiators. And from gladiators into SWANSONS.
what do you think is the
what do you think is the best type of preparation for your work - pick a specific sector and learn everything you can about it? or is it practically useless, considering the quality of information I am missing out on by not being at a bank? (i'm an undergrad)
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febreeze wrote: what do you
what do you think is the best type of preparation for your work - pick a specific sector and learn everything you can about it? or is it practically useless, considering the quality of information I am missing out on by not being at a bank? (i'm an undergrad)
I wouldn't focus on any single sector as a means of preparing for an ER job ahead of time, unless you are going into an interview and you already know what sector you are being interview for. Even if you do know that you are being interviewed by an analyst covering technology stocks well ahead of time, you should still stay away from pitching a technology stock to him/her. Odds are, given your lack of industry exposure, you will be torn apart and will probably say something stupid.
I would stick to just following the broad based markets and understanding the impact of any current macro event on the economy or a specific sector (that you are interviewing for). Industry specific knowledge will come while you're on the job. It can take several months to ramp up your knowledge, if not longer.
Let's use the technology sector example. If I had an interview with a tech analyst I would do the following as an undergrad:
- Read up on the news in the sector, familiarize yourself with the big players and any recent events or deals that went down. Look for any big technology breakthroughs and developments, etc.
- If your school has a Bloomberg/FactSet/CapitalIQ terminal, get your hands on a few research reports. Pay attention to what metrics are being used and are deemed as important. What valuation method(s) is being used for these types of companies?
- Determine which key macro forces are driving the industry demand/profits/growth. Consumer spending? GDP growth? Business/Capital expenditures?
- Prepare a stock pitch using the above information, preferably not from the technology sector, unless you are really confident. Try to challenge the consensus view, if you can pull that off and present a logical argument, it would look impressive.
Under my tutelage, you will grow from boys to men. From men into gladiators. And from gladiators into SWANSONS.
As I work at the other end of
As I work at the other end of your output, how do you find dealing with the buy-side? Do you ever come away feeling this guy/client know (or doesn't) know his stuff?
Anything you wish you could tell clients that you wouldn't say in a 1 on 1?
Awesome, here's another: How
Awesome, here's another:
How much accounting knowledge is used in the way you research a company?
RIP WSO Chat.
febreeze wrote: Awesome,
Awesome, here's another:
How much accounting knowledge is used in the way you research a company?
Bumpp
alman wrote: As I work at the
As I work at the other end of your output, how do you find dealing with the buy-side? Do you ever come away feeling this guy/client know (or doesn't) know his stuff?
Anything you wish you could tell clients that you wouldn't say in a 1 on 1?
There was one incident with an institutional account, where we set up a meeting between two buy-side analysts (from the same fund) and company management (C-level guys). The analysts completely wasted management's time and not only made themselves look bad, but made our sales people (and us) feel like shit for dragging the CEO and CFO out to NYC from Boston.
Aside from that, the institutional guys are usually pretty knowledgeable, given the amount of time they put into the sector. It's been a year and so far I had no big issues with any of our accounts for the most part. There are a few big accounts where the analyst or PM will know so much about our space that we really have to prepare ahead of our calls. Nothing bad to say really...and if there was, it was so minor that I don't even remember it. I don't know about the other guys in ER though, I'm pretty laid back. Honestly though, it's our job and this is what I'm getting paid for. You can bet your ass I will be patient and helpful if you're willing to meet me half way.
Can't say the same for our retail clients that we deal with occasionally (PWM accounts). Also, our sales force can be frustrating at times.
Under my tutelage, you will grow from boys to men. From men into gladiators. And from gladiators into SWANSONS.
febreeze wrote: Awesome,
Awesome, here's another:
How much accounting knowledge is used in the way you research a company?
You need be very comfortable with financial statement analysis. Be able to identify weaknesses in the balance sheet and point out changes in the quality of earnings and cash flow (i.e. Sales increased 25% sequentially, but accounts receivable increased 30%, good or bad?). Be able to understand your sector specific metrics and ratios (i.e. leverage decreased one turn, why? What does this mean for next quarter?).
This is in addition to knowing accounting topics that are associated with valuing the company (DCF, multiples, etc.).
Under my tutelage, you will grow from boys to men. From men into gladiators. And from gladiators into SWANSONS.
Why did you go for equity
RIP WSO Chat.
Dear Flake, If one puts in
febreeze wrote: Why did you
Under my tutelage, you will grow from boys to men. From men into gladiators. And from gladiators into SWANSONS.
obscenity wrote: Dear
Under my tutelage, you will grow from boys to men. From men into gladiators. And from gladiators into SWANSONS.
I'm an accounting major, and
RIP WSO Chat.
Flake wrote: There are plenty
febreeze wrote: I'm an
Under my tutelage, you will grow from boys to men. From men into gladiators. And from gladiators into SWANSONS.
whatwhatwhat wrote: Flake
Under my tutelage, you will grow from boys to men. From men into gladiators. And from gladiators into SWANSONS.
thanks for the info, man. +1
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I'm also wondering, how much
RIP WSO Chat.
Flake, This is all dead on in
trying to start gathering
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AndyLouis wrote: trying to
Under my tutelage, you will grow from boys to men. From men into gladiators. And from gladiators into SWANSONS.
febreeze wrote: I'm also
Under my tutelage, you will grow from boys to men. From men into gladiators. And from gladiators into SWANSONS.
HOLY SHIT, THE FUCKING
"Look, you're my best friend, so don't take this the wrong way. In twenty years, if you're still livin' here, comin' over to my house to watch the Patriots games, still workin' construction, I'll fuckin' kill you. That's not a threat, that's a fact.
golfer23 wrote: Flake, This
Under my tutelage, you will grow from boys to men. From men into gladiators. And from gladiators into SWANSONS.
Will Hunting wrote: HOLY
Under my tutelage, you will grow from boys to men. From men into gladiators. And from gladiators into SWANSONS.
Thanks for sharing Flake.
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Useful information. Did you
Check out my Blog
How many reports would you
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febreeze wrote: Also, if you
"Accept no one's definition of your life; define yourself."
Currently: quantitative marketing/business development
Previously: management consulting, investment banking
Flake, this is actually,
Flake, Good post man, but can
Clever got me this far
Then tricky got me in
Eye on what i'm after
I don't need another friend
Smile and drop the cliche
'Till you think I'm listening
I take just what I came for
Then I'm out the door again
Flake wrote: AndyLouis
Do you think fundamentals
Unforseen wrote: Useful
Under my tutelage, you will grow from boys to men. From men into gladiators. And from gladiators into SWANSONS.
blastoise wrote: Do you think
RIP WSO Chat.
febreeze wrote: How many
Under my tutelage, you will grow from boys to men. From men into gladiators. And from gladiators into SWANSONS.
awesome. so, how do you (or
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do you feel that the depth of
Here's the thing. If you can't spot the sucker in the first half hour at the table, you are the sucker.
How often are you right? Are
chicandtoughness
Under my tutelage, you will grow from boys to men. From men into gladiators. And from gladiators into SWANSONS.
oracle wrote: Flake, Good
Under my tutelage, you will grow from boys to men. From men into gladiators. And from gladiators into SWANSONS.
febreeze wrote: awesome. so,
Under my tutelage, you will grow from boys to men. From men into gladiators. And from gladiators into SWANSONS.
bullbythehorns wrote: do you
Under my tutelage, you will grow from boys to men. From men into gladiators. And from gladiators into SWANSONS.