Research Reports
I'm curious if anyone can provide some insite to the research reports that both MM (Jefferies, Thomas Wiesel, etc.) and BB provide. Specifically:
Do these reports often consists of investment advice based on their research or are they just straight non-bias research in which its the discretion of the PM to trade accordingly to?
Based on this question do how often do people that start in ER end up as PMs (Portfollio Managers) / upper management at Hedge funds (If the reports are straight research how do you gain exposure to the trading aspect of being a PM / making decisions on trades)?
Thanks in advance.
In responding to the first question, yes the reports are "unbiased" but there is always a question as to whether or not they truly are. During the tech bubble, there was a lot of speculation as to whether or not research analysts would release reports and do interviews in which they would pump up a stock that their company had an interest in. Sure, they would disclose their position, but the general public was pretty dumb and listened to the analysts, resulting in the HUGE increases in stock prices, especially during the IPO. The research reports will normally consist of historical financials and EPS, as well as projected financials and EPS. They will normally also include some background on the company and their recent developments.
I do not really have any insight into the second question unfortunately.
Any sell-side research report is going to be based on an investment thesis, ie. backing up the analyst's buy/hold/sell recommendation. An initiating coverage report will have an in-depth analysis of the macro environment, the company's operations, prospects for growth, etc. It will also have a lengthy discussion on why the analyst believes the company is going over/under perform the market and/or its peers over the next year or so. Other reports are written to change recommendations, discuss new developments in the company, etc, but there's always going to be an opinion by the analyst. Having an opinion is what ER is really all about. Inevitably not everybody is going to agree with you, but you need to be able to have a stance one way or the other.
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