Equity Research writing test+modeling test next Tuesday, seeking for advice
Hey guys,
I am going to attend a 2 hours writing test + modeling test for an ER position next Tuesday, since I dont have any experience or much knowledge about ER, could anyone give me some advice on what the test might cover or what should I prepare for it? Thanks.
Definitely search the forum for this - there should be at least two threads.
Pretty much you should feel comfortable with the financial statements, and be able to take an Earnings PR and use it to write a re-cap note somewhat quickly. You know, "XYZ co reported 3Q10 results today. Revs grew _bps y/y to _%, GM's grew _bps to _%, OM's improved _bps to _%. Management reaffirmed guidance ...blah blah blah." That sorta thing w/color and your interpretation of the earnings release. Probably just a recap note in 2 hrs, so likely a flash/quick note that would be 1-2 pg's long.
I imagine they'll probably have you update the model with the info from the PR/earnings release first, and then have you write the report and fill in the numbers based off of your updated model. Have your valuation metrics down.... they'll probably want a price target, and you'll want to know whether to derive it from DCF, P/E, P/S or EV/EBITDA.
My advice is to go to yahoo.com/finance, and look up earnings PR's. Practice taking one and writing a report based off of it. Try to get a few sell side reports (and models if possible) and practice mocking your report after those. If you can get a hold of a model, wipe out one quarter's info in a column, and update the column with a PR you've found.
You've got plenty of time to practice. Good luck.
I've got a model and a note from when I used to work in ER. It wasn't for a BB but it is all pretty similar. Let me know if you'd like me to forward it to you.
Yeah, I just want to chime in to reiterate what Bodhis said about the writing part of the interview. Companies issue press releases along with their earnings, and you should be prepared to write a report that summarizes the main points of the PR.
An example of a press release http://investor.activision.com/releasedetail.cfm?ReleaseID=496970
Don't write one lengthy article. Rather, you should be prepared to do the following things:
1) Summarize the entire article with a snappy headline, just like in a newspaper. "Activision 1Q Beat, Raises Guidance for F10" or "Google: Robust Android Market Fuels Growth"
2) Your report should have the three/four most important items in a bulletized, headline format. Write a headline for each, and a paragraph (or two) for each that lays out the facts and describes your opinion.
This is the main body of your report. Each bullet should support your Buy/Sell/Hold recommendation. These four headlines should be below your main headline. The appropriate paragraph should be directly beneath each headline.
The whole idea is to allow your client to skim your report's headlines in roughly 15-20 seconds. By just reading the headlines, they should know all the main points of your article. If they want to read further, they can read your text for your in-depth analysis
Typical items to look for and bulletize would be
a) the main reason that the company is enjoying success/failure, and what that means for the future. b) a secondary reason that the company is enjoying success/failure, or another big impact item. "Google's acquisition of XYZ looks to add $0.10 to F10" c) did the company issue "guidance" for the next quarter's results? If so, that's a bullet. "GOOG reaffirmed F10 outlook" d) last bullet should be your valuation, although this might not be included in your report. "GOOG is a Buy with $550 Price Target" would be the headline, and then you write a few sentences about how you arrived at that conclusion, whether by using a DCF or multiples, etc.
3) Avoid overly sensational language in your writing. Words like: amazing, explosive, huge, etc should usually be avoided.
I can send you a real research piece if you'd like. PM me.