I was thinking about why I'm drawn to ER and figure it's because I've always wanted to be an "expert" on something, and while you can do it in industry by moving around positions and busting your ass from the bottom up, effectively taking 10 or more years to get to that point, in ER it becomes your job to just learn everything. So how long does it take to become an expert?
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Depends how proactive you are. Some of the folks I work with will just sit around and surf the web all day between earnings seasons or big projects, others will read news, other research, industry pieces. If you're proactive, I'd say you can be an expert in 2 years.
Maybe the 10,000 hour rule would apply
I think it depends on what you mean by "expert". If you're implying knowing pretty much all the players, key trends coming down the pipe, knowing the supply chain inside and out for the industry as a whole, having a read on any piece of relevant economic data and the second-degree impacts, what moves the business vs. what moves the stocks, then I'd think it takes a fairly long time. Like newfirstyear said above, depends on how much work you put into it, but I would think it takes longer than 2 years, but we could be differing based on what we're calling an "expert" I would think.
For someone who is astute and can pick things up quickly, AKA anyone who possesses the IQ necessary to get a job in ER, I'd guess it takes about 5-6 years to be confident enough to tell someone in finance that you're an actual "expert," and maybe 10-12 years to say that to a professional in the industry. Trying to use my own experience as an example, I wouldn't say I'm close to a full-blown expert in any area in particular... perhaps agriculture if anything, but it takes a lot to be able to sit there and have a really in-depth discussion about some esoteric concept related to irrigation or something with a lifelong farm owner, or the equivalent for any other industry. In my eyes you're not really an expert until you can sit down with a lifer in the field and talk about basically anything with them.
Took me 2 years to become an expert. I cover Healthcare. I think...
My experience is that it takes 2 to 3 years - judging from people on my team and personal experience
Becoming An Expert (Originally Posted: 08/04/2014)
I'm just starting as a first year analyst at a BB, just finished training and about to hit the desk.
I went to an undergrad b school and did a banking internship, and felt good about my technical knowledge. In training, I knew a lot of what we learned, but was also exposed to a wealth of information that I didn't know about finance. I had a better base of knowledge than a lot of my peers in my training class, but some people absolutely blew me out of the water, and I could tell based on the questions that they were asking that they just understood the material at a deeper level than I do/did.
So my question is for people who have spent time in banking, maybe even exited to PE or HF, and I want to know the best advice anyone has for becoming an expert in corporate finance. I want to understand the numbers in a 10-k better than anyone. I'm sure a lot of it is just being on the desk and learning as you go, but I wanted to see if anyone had any specific advice. Books that are great for this, certain types of deals to request to work on, maybe just poring through financial statements?
Looking forward to hearing any advice that you may have.
Not trying to be argumentative on this. Could you maybe frame what you mean by "expert"? I totally agree that a ton of stuff can be gleaned during that time frame, but I guess I think of an "expert" more like BlackHat said in the above post, and 2-3 years seems super fast to get to that point without prior industry experience.
A point at which you can add value to a " smart" client ie he/she would be interested in listening to whatever color you are providing, and you can have an intelligent conversation with a company that is more than going over the quarterly numbers
I guess by expert, I really mean be able to hold a value add conversation with someone who's been doing the job for 10 years. I'd say for a year I was worthless, the second year I really picked things up super quickly, would connect dots, make trading calls (which I actually made a decent name for myself doing). Now I'm at the point where I've had PM's of funds that have 25+ billion AUM call to talk about a stock with my MD, and if he's busy, I can have a real conversation, share my opinion and back it up, and not have them think I'm a moron.
I'd say after two years you can get to this value add point, if you spend you're time being more than just a drone. The best way to learn in your first few years, is to go and sit with your MD when a buyside client calls to ask about a stock, or talk about the industry. You'll learn what they're thinking about, and what's important to them.
interesting post!
Looking forward to any answers
http://www.wallstreetoasis.com/forums/anatomy-of-the-10-k great step by step
http://www.wallstreetoasis.com/forums/on-the-job-with-simple-as%E2%80%A… another great step by step, also has book recommendations
I find the best analysts are those who are the most resourceful. Before you are fully staffed, I would locate 5-10 previously built models that you know were built by good analysts. If you spend time going through full merger models, LBOs, operating models, etc. and then start building them yourself, you will have a good understanding of how things flow. I find that being able to trace everything in a model will help you understand the various links and allow you to then speak to the relative impact of making changes in the model.
In terms of going through 10Ks and other filings, you will learn where to find things fairly quickly through repetition.
Yes. Listen to this advice. 90% of people are simply not resourceful, and I have no idea what to do when they need something and have no idea where to get it. Half, probably over half actually, of my job is simply figuring stuff out. Get comfortable with ambiguity.
Onto 10-k's themselves, read them. Backwards and forwards including every single note there is. Once you get through a few of them you will begin to see similarities in all of them (there really isn't THAT much variation). Then you should probably sort them by industry and begin picking up industry specific metrics that matter 'more' than others in a particular sector. Once you've done that, I'd recommend going back and grabbing some accounting classes online to shore up your accounting. I haven't looked recently, but I'm sure that some of the Ivies have posted those to their free course sites.
One last thing, there is a huge difference between knowing the mechanics of a 10-k and having a holistic view of how everything ties together. You can rip apart a model, make numbers tie out on a balance sheet like a boss but if you have no idea what they actually mean for the company in the long run you will only have so far to run.
i'm facing the same troubles(?) as you mentioned, and even worse. As an AM intern, I seldom get involved in my mentors' works, but do things like revising documents, translating, gathering data and spend a lot of time on WSO, Bloomberg, etc.
NO ANY MODELING.
But i think these are relevant to the company, your mentors, location, and sometimes we are just too anxious. My mentor once told me, "those who works 16hrs per day indeed catch up things faster than you, but you are still exposed to lots of other events and cool ppl. It's true that you might spend more time to follow up when you need the skill someday, and that's all, you should relax, take your time, and enjoy your job." I accepted, calmed down.
And my advice is simple. You can have a talk with those you considered realizing the materials at a deeper level than you do directly. At least this helps me a lot.
I've also found that being exposed to as much as the materials in a short amount of time to be advantageous when learning something new. Even though we went to business school or had an inherent interest in the industry, there's still a lot out there that we don't understand. Understanding will come after you've looked at the materials, and there's a specific issue you have to work out. Over time, you will become the expert of your models, or the process.
Don't be afraid of getting work, and embrace new processes that may not seem interesting. The most that I've learned from a single process was an small M&A assignment where we sold a software company to a large conglomerate, and I managed the process from start to finish. Normally, there is another analyst involved on the project, but my VP informed that he couldn't allocate more resources. If you own that type of project, you will gain a wealth of knowledge.
This will probably be the first time in your life where you will never get the feeling that you're on top of everything, and you're barely keeping it all together. Remember, 2 things: 1) It's okay, and 2) everyone is thinking exactly the same thing, even if they're not saying out loud.
Being an expert means stop analyzing correlations, and start understanding causations, but obviously correlative knowledge comes before causal.
For example, cost of debt is generally lower than cost of equity - that is what every amateur understands. But such knowledge is just what happens on average. An expert needs to go beyond general patterns and connect context, not attributes, to the cause and effect relationship. Therefore, understanding the exceptions to the rule, ie when equity is cheaper than debt, will teach you to truly understand the connections and the big picture.
It's a shift in thinking - to go from generalizing and matching attributes to instead examining details and matching contexts. The latter is much more intensive and requires you to recall knowledge when needed - but it is where idea generation comes from.
Understand these 2 concepts stone cold:
1) DuPont Model 2) Gordon Growth Model
Understand how they interconnect and how the different inputs impact valuation. Do that and you'll be in great shape understanding what's being implied in a stock price or an M&A deal. You'll better understand why industries gravitate towards certain metrics and what drives the differences in valuation multiple.
if it really takes that long (ie at least 2 years) how do new ER associates do their job competently for the first couple years? how can they be expected to write reports for buysiders and give them input on the phone? yes the analyst is "the" guy but don't associates generate much of the writing? and dont they often talk to the buyside when the analyst is not available?
It is a big issue on the sell side, for an analyst to do well he/she needs to market and to spend a lot of time with managements, outsourcing too much writing to juniors leads to diluted product. Buy side often complains that as an analyst rises in polls too much work gets outsourced and the product becomes less value added
I trid to provide some of the examples of the work that junior analyst on the team can do in terms of writing early on, even if they don't know the industry too well yet
A) This is where some of the buy side complaints come from, as in many cases the juniors are the ones doing the writing and they just regurgitate the news - "we were forecasting X and the company reported Y", so this gets the job done, but arguably not value added
A good analyst would NEVER get a product out without checking it first, and in many cases even such basic reports would require multiple rewrites - as you get better you do fewer of those. A good analyst will at least provide key points for the junior to focus on
For bigger reports a junior would usually get a pretty detailed outline with the key points and he or she would have to look for the data to support the point or to create the charts - ie look up the data in a database or reach out to another team
B) There is a reporting component: ie publishing about widely followed industry data releases "industry shipments were such and such, may be they follow up with the reporting organization and get some additional color or details that go beyond the reported numbers"
C) juniors are the ones doing the channel checks - calling stores, or distributors - so a client might be interested in hearing more about those
D) updating models for 10-K or 10-Q filings and writing
E) summarizing key points of a presentation at an industry conference - managements usually make it simple by stating those at the beginning of the presentation, granted, limited value- add, but still helpful to clients that didn't get to go, and more time efficient than reading the entire transcript
This. +1
I'm sympathetic to the 10,000 hour rule, though I believe time is only one variable, albeit a highly influential one. In most cases a Cobb-Douglas-esque function of Hours and Talent Relative to Competition should suffice. I'd like to think that access to quality mentorship acts as a kind of turbo, but it's not essential.
the day people refer and talked about you behind your back as "the _____ guy, go talk to him"
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