if you had to learn an industry from scratch in a few days. like really learn it, ex. different business models in the industry, who the big players are, recent trends, industry outlook,value drivers etc.
How would you do this. I have been through reading sell side research reports on the companies in the industry but i could care less about p/e ratios and whos stock has outperformed whos. Any other suggestions?
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Ya, I hear you. Its hard to get off the ground, especially when 95% of sell-side reports are very micro.
But DB has a few good "primers" (200-400 pages) on certain industries: Oil&Gas, Software, Semiconductors, Chemicals, and a few others.
S&P also publishes industry reports, and updates them semi-annually. They do all the major industries and are usually about 30-50 pages that gives you a brief overview of history/business models/valuation metrics/outlook/and other important info (legislation, etc...).
That should be enough to get you started.
Most industries have several magazines and other publications that have a very specific focus. Is there a specific industry you were looking to learn about?
nott really
What about the healthcare industry? Any relevant publications, blogs, magazines, etc. I could use to get a good grasp/stay updated? Thanks.
Here's a good paper on Pharma/Biotech: http://hc.wharton.upenn.edu/danzon/PDF%20Files/Mergers&AquisitionsInPha…
It's about M&A, but it does a good job of explaining the patterns within the firms and industries (how they are structured, what the drivers of success are). Beyond educating you about the two industries, it explains when you should be expecting M&A activity at the firm level, and helps to identify when and why you should be pitching to firms in these industries.
Perfect, thanks man.
Mez if you have links I would really appreciate it!
"Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.
Not sure if they can be shared to the public. But if somehow they do, I would like to have some too.
You generally need a subscription to some sort of service, such as Thomson Research, to get access to these reports. They aren't simply posted online at a site where anyone can go and download them.
To the person who asked about the Healthcare industry: There are dozens and dozens of reports out there for all of the various sectors within healthcare. It really isn't something you can sum up in a single report.
~~~~~~~~~~~ CompBanker
Thats what I figured. I would love to employ a more micro approach to my trading but the fact is these research services are expensive relative to the information they provide. Isnt going to add enough to my bottom line to make it worth paying for them yet.
"Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.
I believe if you still have access to your school's library website, they might have the S&P ones -- thats where I got mine from. Check out the library's Periodicals section and you might have access to this:
http://www.netadvantage.standardandpoors.com/NASApp/NetAdvantage/servle…
Some slick Googling would be better than nothing, if you don't have access to those subscription services and whatnot.
I have some nuggets for you:
S&P Industry Survey: pretty good overview, somewhat general though Where to get it: school often have these available, also if you have an online brokerage account you can sometimes get this stuff too (ETrade, ScottTrade, I know Fidelity def has some trimmed down S&P reports)
Moody's Ratings Methodology: IMO one of the best resources for a non-professional since its free and some quality info/perspective.... Where to get it: go to the Moody's Ratings homepage, and start poking around until you see a list of their ratings methodology. I think you need an account, which is free, and you can download the various documents they have.
SEC Filings: Also a great reference, these often go into very granular detail which could be good. Pick an industry, identify a few industry leaders(the closer to pure play the better), and read through the MD&A or MDMA as I call it, in their 10K's. They typically discuss the different products/services they offer, the markets they service, specific product/service level detail, etc... Some also have glossy annual reports, these are sometimes good references also. If you could somehow find an Offering Memorandum, that would be money also. Where to get it: Company web site--> investor relations section(free), EDGAR(free), 10KWizard(paid), CapitalIQ(paid)
Also, try to identify trade organizations or consultants specializing in a very focused industry. There's one in particular, which I can't share on here, but I know they have TONS of free info on their web site for a VERY specific industry. We received their latest industry report which was several hundred pages long and costs thousands of dollars, and when I did additional research I found much of the same info in a more user friendly format just by cruising Google.
I usually start with 10K's, then equity research, Moody's and S&P, news wires, trade organizations etc...
How to conduct industry analysis? (Originally Posted: 08/07/2012)
My fellow monkeys,
This is kind of an elementary question but one that I couldn't think of a perfect answer for. If you were assigned on a new deal/project, how would you go about learning everything there is to learn about the industry of the company in question? What exactly would you want to know?
I'm an IBD generalist at a bank and have been working for about a year but i've never actually had to learn an industry well enough during a pitch or a deal. I would assume equity research guys and maybe industry coverage bankers elsewhere are good at this so i would love to get everyone's opinion.
Cheers
Interested as well
This may sound elementary as well, but try using a PEST analysis, or Porters five forces model to conduct an industry analysis.
The key thing to remember is why you are conducting industry analysis to begin with. From a company perspective you want to understand how competition within an industry will affect the company you are analysing going forward. I would start with the Porter's 5 forces framework as i think its a great way to gain a quick overview of the key drivers facing an industry.
1) How competitive is competition between the existing players? Is the industry highly fragmented or concentrated and what do the key players compete on? Is it price or product differentiation?
2) How difficult would it be for new players to enter this industry? Are there massive economies of scale/scope that make this difficult? Do the incumbents have patents or supply chain relationships or distribution networks that shut out new entrants?
3) What is the relationship like between these companies and their suppliers? Are there many suppliers or just a few? Who captures most of the value in the supply chain? Can companies pass on prices to suppliers or use their scale to keep gross margins intact? Is there a threat of forward integration up/down the supply chain?
4) What is the relationship with customers like? Are customers fragmented or a small group? Is the product/service a big ticket item with higher price elasticity or are consumers willing to pay for brand/quality?
5) What new products/services could come along and make this industry obsolete? Are there any substitute technologies or products that might change the relationship between a company and its consumers?
I think if you go through these 5 points you can get a very high level overview of an industry. I currently cover European Telco's and I see a lot of this stuff day to day. Highly concentrated telco markets get turned on their head when regulators deregulate and new entrants come into the market starting price wars trying to gain market share. If you stick to the above framework you should have a rough idea of whats going on.
Thanks, this was quite helpful after you put it this way (i would've guessed porters five forces too but you definitely laid it clearer than i imagined). Could you (or anyone else) shed a bit of light as to how much you would be expected to know about an industry if you've worked on a deal in said industry and now are talking about it in the context of an interview? The reason why i'm curious is i'm preparing for buy side interviews and i figured HFs that conduct fundamental analysis would be doing this on a day to day basis and to prepare for this type of interview, I'm guessing I would need to walk the interviewer through the industries i've looked at step by step.
Thanks again for the speedy reply
Sell side ER guys will know an industry inside out like the back of their hand given that they specialize in one particular industry. From my short time in the industry I would say that on the buy-side the industry knowledge is not very deep, which is not surprising as very few houses can afford to employ industry specific analysts. Most guys on the buy-side are generalists and use sell side research to dig deeper into any issues they may have.
I've never worked in IBD so I have no clue how much industry knowledge you would have but I'm assuming in any deals you did you had to come up with assumptions for the inputs into your models, especially DCF? In all likelihood those assumptions would have been based on industry dynamics, so I would look back to that for guidance. Again I'm assuming that any deals you did involved M&A and synergies? You should be able to discuss why you felt the M&A was necessary given the current industry dynamics. As an example:
Company XYZ is operating in a mature slow growth industry where top line growth is in the mid to low single digits. Margins are mediocre and the industry is fragmented. XYZ decides to acquire ABC to boost its market share and increase top line growth. Management at XYZ are also confident that the new larger company will have greater scale giving it stronger bargaining power with suppliers. Also, the increased market share may allow the company to boost margins by raising prices and cutting costs through synergies. The result of this, if it happens as planned, is that higher margins should boost ROE which increases value for shareholders.
Try and think about the deals you did in that sense and you should be able to talk about how value was created within the Porter frame work.
Best of luck
I agree porter's five forces, concentration, stage in lifecycle, sensitivity to the business cycle, etc are good places to start. In more practical terms, IBISWorld and S&P publish reports on all industries, you can do a search by NCIS number if you have access. Reading those reports is the first thing I do when trying to familiarize myself with an industry.
Most efficient way to learn about an industry? (Originally Posted: 02/08/2016)
Hi all. I'm meeting with a PM at a large fund covering US pipelines & utilities in 3 weeks. The problem is whilst I have experience dealing with equities, insofar my background as a value investor dealing with micro/small-caps. I don't have ANY clue in regards to the infrastructure, O&G, pipelines and/or utilities of the like. Aswell as the fact that I normally stray away from companies of the sort because I feel that there are too many variables to take into account/ out of my circle of competence.
I just wanted to hear thoughts on the most efficient way you guys have found in learning/bringing oneself up to an industry within the next couple of weeks/ month~. I'm doing the traditional things at the moment - reading every primer I can, reading some books on the industry as well as trying to bring myself to industry news.
Willing to hear suggestions. I'm doing what I can to bring myself up on an industry which I initially thought was the devil, so i don't sound like an idiot infront of the PM.
Anyways, I'm all ears..
You're pretty much on point. Primers, industry research etc.
See if you can get your hands on initiation reports for a bell-weather in the industry (KMI,PAA,EPD,ETE,SE) etc. They often have the depth of a primer but with a focus on the particular company. Very substantive and can help you understand micro as well as macro, and especially good for wrapping your head around valuation etc.
You're doing all the right things.
Thank you so much!! I'll be on the look out for these, I'm particularly having problems with valuation.
Bump, open to more thoughts!
Bump
How to learn about industry sectors (Originally Posted: 03/13/2015)
Just want to ask if anyone has any suggestion on how to learn (in-depth) about an industry sector. Apparently sell side research is always a good start or just speaking to the analysts. But say I'm not familiar at all about a sector, how can I best and fastly learn about it?
How would you do it if you were me?
Google, read some sector overview here on WSO, Primers I've found some super in-depth primers on any sector from a bulge bracket bank. Find Initiating Coverage report. Some go very in-depth in the industry.
S&P Industry Surveys are great.
For a dated view on many different sectors - The Paine Webber Handbook of Stock and Bond Analysis
Understanding the Industry (Originally Posted: 01/26/2010)
This is a very basic question but I'd really appreciate some feedback.
Recruiters constantly stress how important it is to stay current with the markets and to be able to intelligently discuss the impact of events within the industry. As a beginner I was wondering what should I be reading in order to get a grasp of the IB industry. For example, my school has the wsj laying around everywhere and gave us student subscriptions to the website as well. Obviously, reading the main articles is important but is there a specific section I should be reading everyday?
Also, are there any other sources that are your personal favorites? I work in the finance lab at my school where I have pretty much 5 hrs of free time a week to explore Bloomberg, WRDS, and Reuters 3000Xtra among others.
Thanks, I know its something of an afterthought.
Stiffel Nicholas if you can get a hold of a traders report.
Read Liars Poker, although that is more trading focused. Can someone post the title of a book that might be more deal/IB focused.
One thing to note about the Journal is that it is a great habit to get into reading and sifting through. I find the macro-economic stories (not just indicators) and fed/legislative impact to be most stories. Specific mergers and new management updates are really not relevant to students.
Also a very useful skill will be to pick a random company and build a working DCF model. The more you work through this and understand the moving parts, the easier the interview will be. Many ib interviews are technical. They will ask you about different items in the financials and their impact throughout.
For an overview: http://books.google.com/books?id=FwI2YXhLfu8C&printsec=frontcover&sourc…
The WSJ, FT, NYT Dealbook are all good daily resources. I also really like the Big Picture, a macro blog by Barry Riholtz: http://www.ritholtz.com/blog/
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