How Much Would A Lack of Math Skills Hurt in ER?
Hi,
I was wondering how important quant skills are in equity research (I've been reading about it, and it seems like a field that suits me fairly well)? I know that for trading, quant majors are looked upon favorably and that majoring in something like finance may actually hurt you, but I was wondering if this is true in equity research as well? I'm pretty decent with numbers and am good at working with them, doing mental math, and manipulating them, but beyond Taylor Series, iterated integrals and all that jazz, math got really theoretical for me, and I was never quite good at Linear Algebra and such. Therefore, I thought I'd turn to this forum to get a feel for how my lack of math classes/major in math will hurt me?
Also, realistically, is it possible to break into ER from a non-target, especially compared to trading/i-banking, or is it more or less as difficult as the others?
thanks
ER is completely different from S&T. Focus more on the accounting/corporate finance courses (valuation, financial statement analysis, etc.), not math. Know the principles of fundamental analysis for stock-picking, including industry characteristics and firm-level financial statement trends/ratios. For ER, an interest in the stock market (i.e. managing your own stock portfolio or at least attempting to) is infinitely better than a quant with 0 interest/experience. If you've ever read an ER report, you'll realize that the analytical aspects are similar to IB and that the writing/reporting aspects are a lot like journalism. Just be sure you can synthesize data (no complex math) and communicate ideas well based on your analysis. That's probably the most important thing, so don't worry about hardcore math.
In terms of recruiting, there are definitely some independent research shops that don't care as much about school prestige. I would guess that the BB ER groups care most about school, followed by the buyside funds. I know a lot of funds also recruit regionally (e.g. the Boston area).
Hmmm ER definitely sounds more up my alley than Trading then. I remember in intro financial accounting, we had to do a project where we looked at a couple of companies' (from the same sector...I did Apple and Dell) financial statements and then wrote a report on who to invest in after analyzing various financial ratios, doing background research on the company, etc. Even though that took a long time, I actually had a lot of fun doing that project. Thus, even though ER is probably infinitely more complex than what I did, if that's what a lot of ER is (based on your description), that sounds like a good fit for me.
So, since I'm a sophomore at a non-target, do you have any advice as far as what I should try to do for internships this summer? I'm guessing that I'm too late for an ER internship this summer, but when should I start keeping my eye out for internships next summer? Also, what is the minimum GPA I should have to get an ER position? Obviously, I'll be aiming for the best possible GPA, but what is the absolute minimum I can have before ER starts to become a pipedream?
If you enjoyed that project, chances are you will like ER/fundamental analysis. That's basically the gist of it. If you personally invest, even better. Take a look at research reports, and you'll get a feel for what kind of analysis/reporting they do. If you read news, you'll also hear things like "ABC Firm misses estimates" or "misses Wall Street consensus" or something like that. So as an ER analyst, you'll be making earnings forecasts for the companies you cover, and investors will be paying attention to what you (and others covering the same stock) say. Note that the "analyst" title is higher than "associate" for ER, so it's different from banking titles. The analysts, often CFAs, are the ones who get to have their name on the report, while the associates mainly support them.
If you're a sophomore, it will be hard to get into a "real" internship, but it's not bad to get into PWM first. If you can't get PWM, then I would say accounting wouldn't hurt. If not that, then something involving research and writing, including academic. You can always sell that positively even if it's not 100% relevant. For next year, check to see if you have any alumni at BB or MM firms. Many small MM players have ER groups too. And independent shops like S&P and Morningstar have junior-year internships. In the meantime, I would recommend joining investment clubs and participating in stock pitch competitions if there are any. I'm no expert on GPA, but I've seen 3.2's getting decent offers, so nothing's impossible. Also read up on the basics of investing so you know how fundamental analysts traditionally think. Investopedia tutorials, for example, are a good resource to start out with in my opinion.
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