Why Equity Research?

Christopher Ballesteros

Reviewed by

Christopher Ballesteros WSO Editorial Board

Expertise: Consulting | Private Equity

For those of you interested in, or working in Equity Research, why are you interested? Is there any specific event that you could point to that sparked your interest?

why are you interested in research?

Despite its interesting nature, often times equity research positions are overshadowed by this website's focus on IB and S&T. However, it is a very interesting career path and our users explained why they wanted / want to work in ER below:

User @Mr. Skilling", an asset management investment analyst, shared why he is interested in ER:

Mr. Skilling - Asset Management Investment Analyst:

  • It is a very unique role that offers a lot of responsibility and interesting work to people a few years out of college
  • I can call up a CFO of a company I cover right now and pick his brain on his company's options, Management Strategies, what the industry is looking like
  • I get to do research and model (with some input from team members) my own ideas and create a differentiated point of view vs. consensus and provide some value to HF/AM PMs and Analysts that are 2x my age and manage millions if not billions of dollars. It's pretty incredible to hear someone like that say "Thank you for your time, Mr. Skilling, I really appreciate your insight on ABC stock."
  • Every day is different in the markets. Something new happens and things are constantly changing
  • Something cool about having your name on models and reports that you put out to hundreds of clients in the industry and getting some recognition vs. being a pitchbook monkey
  • Nothing is cooler than being right on a big call and making clients money (JK - making that money myself would be great but that's another story)
  • You learn a SHIT ton. Every day you are reading, reading, reading, and reading some more and expanding your knowledge base. While the hours are long, I feel like one day I will be exchanging my knowledge and experience for more money and an even more important role for slightly less hours. The more you learn, the more you earn.
  • Lot of exit opportunities as well. A solid analyst can be picked off by a number of different roles/firms (HF, AM, corp. dev., IR, etc.)

why ER interview question

CygnusNept:
I am attracted to ER because I feel myself light up when I'm talking about what causes a company's stock to move. It's almost like solving a giant math problem where all the numbers click into place and you get it. I love knowing WHY revenue is down, or WHY market sentiment for a stock is up because it means I don't just understand the surface, but the entirety of what the company is and why it ticks the way it does.

Stay Thirsty My Friends:
Compared to banking you dive much deeper into learning about companies as opposed to how to structure deals. More of an intellectual environment. Develop a better overall understanding of how the world works (my top reason). You have to learn not only how to model but actually think about the assumptions behind the model (banking you just kind of copy mgmts model and tweak from there). You can have a direct input on where billions of dollars get invested.

Check out the video below to learn more about the job of sell side equity research analysts.

You can also check out a detailed thread comparing buy side and sell side research roles.

Read More About Equity Research on WSO

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Christopher Ballesteros is a member of WSO Editorial Board which helps ensure the accuracy of content across top articles on Wall Street Oasis. Christopher started his career at L.E.K. Consulting, where he joined as an associate and left as an associate consultant, working as a generalist. Christopher then spent two and a half years at General Catalyst Partners in both growth and venture groups. Currently, he works as a strategy, business development, and operations director at a venture-backed digital health company. Christopher holds a Bachelor of Arts in History from Harvard University This content was originally created by member BankingGuys and has evolved with the help of our equity research mentors.

Comments (28)

Best Response
Jul 31, 2015 - 10:24am

How I got into ER/why I was interested:
-Grew up poor as shit, worked 20-30 hours/week during late middle school and high school, wanted to figure out how I could grow all the money I saved up to pay for college
-Started investing in my own portfolio in college and was hooked on doing research
-Read some investing books that continued my interest (Security Analysis, books on Buffett, etc.)
-Was in the student-run University portfolio group/class at school and enjoyed it - knew I wanted to work in finance, preferably in investing

Why I am interested now:
-It is a very unique role that offers a lot of responsibility and interesting work to people a few years out of college
-I can call up a CFO of a company I cover right now and pick his brain on his company's options, Management Strategies, what the industry is looking like
-I get to do research and model (with some input from team members) my own ideas and create a differentiated point of view vs. consensus and provide some value to HF/AM PMs and Analysts that are 2x my age and manage millions if not billions of dollars. It's pretty incredible to hear someone like that say "Thank you for your time, Mr. Skilling, I really appreciate your insight on ABC stock."
-Every day is different in the markets. Something new happens and things are constantly changing
-Something cool about having your name on models and reports that you put out to hundreds of clients in the industry and getting some recognition vs. being a pitchbook monkey
-Nothing is cooler than being right on a big call and making clients money (JK - making that money myself would be great but that's another story)
-You learn a SHIT ton. Every day you are reading, reading, reading, and reading some more and expanding your knowledge base. While the hours are long, I feel like one day I will be exchanging my knowledge and experience for more money and an even more important role for slightly less hours. The more you learn, the more you earn.
-Lot of exit opportunities as well. A solid analyst can be picked off by a number of different roles/firms (HF, AM, corp. dev., IR, etc.)

Aug 5, 2015 - 11:41pm
Mr. Skilling:

Why I am interested now:
-It is a very unique role that offers a lot of responsibility and interesting work to people a few years out of college

Did you move into ER directly after undergrad? What was your path getting there? I am interning in corporate banking right now and trying to plot my path.

Aug 9, 2015 - 11:09pm
allidoisER:

Mr. Skilling:
Why I am interested now:
-It is a very unique role that offers a lot of responsibility and interesting work to people a few years out of college

Did you move into ER directly after undergrad? What was your path getting there? I am interning in corporate banking right now and trying to plot my path.

Yes, I moved directly after undergrad. I lucked out and got an off-cycle role solely because someone at the firm left a month or two before I graduated. That's how equity research roles work often times. They are not less investment banking roles where the Director knows that 30 kids are going to bail after two years so they need to bring in a new, large class.

I docked around freshman-junior year before I realized I needed to get my shit together. I lucked into a solid fixed income research intern role my senior year, learned a lot, passed my CFA Level I exam, and then lucked into my ER role right after graduation.

Let me know or PM me if you have any more questions. Happy to help out. Would not have landed my gig if it wasn't for this website.

Aug 2, 2015 - 11:46pm

I'm just beginning my journey now, but I am attracted to ER because I feel myself light up when I'm talking about what causes a company's stock to move. It's almost like solving a giant math problem where all the numbers click into place and you get it. I love knowing WHY revenue is down, or WHY market sentiment for a stock is up because it means I don't just understand the surface, but the entirety of what the company is and why it ticks the way it does.

This feeling first sparked when I took a summer course on the markets. Just basic knowledge, but we did a DCF and I found that interesting. That we could use prior data to estimate future data...that's awesome. I now understood why and how companies figures could proceed.

I also love reading...it's definitely a strong point for me!

Aug 5, 2015 - 11:36pm

I'll echo what a few others have said already. I've always had an interest in investing, running a portfolio, and markets in general. I love following market news and understanding how it will impact every company I am following. I love reading, writing, and learning. I also really enjoy being independent and thinking differently than the consensus view.

And maybe more than all the others, I just love finding a good idea. It's like a real life treasure hunt and every single time I open a 10k, I could be stumbling upon gold. I get an adrenaline rush reading an interesting 10k. It's all so fascinating!

Aug 7, 2015 - 1:06am

Compared to banking you dive much deeper on learning about companies as opposed to how to structure deals. More of an intellectual environment. Develop a better overall understanding of how the world works (my top reason). You have to learn not only how to model but actually think about the assumptions behind the model (banking you just kind of copy mgmts model and tweak from there). Having a direct input on where billions of dollars get invested.

Sep 18, 2015 - 12:32am

I'm interested because I took an interest in the markets when I was a freshman in high school and began reading as many books related to investing and financial services as I could. While I did consider investment banking at one point, I realized that:

  1. The work would not be interesting enough to hold my attention.
  2. I don't perform well without getting at least seven hours of sleep and would therefore not be a good fit for it.

Additionally, the culture in research is very intellectual and allows me to explore things on my own and to form my own opinions about things. If you're looking for a position that will give you a sense of discovery and the satisfaction of being "in the know", then choose equity research.

Sep 27, 2015 - 10:42pm

Why did you choose ER? (Originally Posted: 07/01/2015)

Why did you choose ER?
Did you consider IB?
Whats your lifestyle like? Hours?
Are you happy with your work/job?
Whats your day to day like?

Some questions I thought I'd throw out there as I'm still trying to decide between the two. I know the topic has been beaten to death of ER vs IB etc etc but I didnt see much of a personal side of people's stories and whether or not they are happy they chose the route they did.

Sep 27, 2015 - 10:43pm

I clearly don't have enough to do today so will give my two cents.

I interned in ER and liked it, but long term will do something else. If you like school - if you like reading, writing, researching, writing reports - you will like ER. I have friends like that and they love it.

ER taught me a lot about how to approach understanding and learning about different industries. I liked all the learning, but I don't like school, so it was not for me.

The 1st and 2nd years I worked with seemed to like their jobs. They occasionally worked crazy hours when something new had to go out, but generally worked 8am - 6pm(ish). ER is like working with a ton of academics, all intensely knowledgeable about their own space. It was admirable.

Sep 27, 2015 - 10:44pm

Do my strengths match ER? (Originally Posted: 06/14/2009)

I've been trying to figure out where I might fit in the world of finance given my strengths and interests; my gut tells me I should try research.

I'm a rising senior, econ major w/ poli sci minor. I write for my school's business newspaper, mostly free-market arguments about the perceived damage that is being done to the economy. I really liked my finance and accounting classes, especially when we got to analyze financial statements, calculate bond yields, etc. I like giving presentations. I have a thick skin and a good sense of humor, so I can take abuse. I really like writing and defending a position. I've been working since I'm 15 and I come from a lower-middle class family, so I'm hungry and willing to learn. 3.88 GPA.

My weaknesses: I prefer working alone (but can be a good leader) and, at the moment, I don't have much in-depth knowledge about stocks/sectors, most of my knowledge is related to economics (theories). Also, I am not too familiar with ratios and I am merely an Excel novice.

Would ER be a good place for me?

"Give me guys that are poor, smart, and hungry. And no feelings." - Michael Douglas as Gordon Gekko in "Wall Street"
  • 2
Sep 27, 2015 - 10:45pm

Lack of industry knowledge isn't a big problem for a college kid. You should, however, know one industry very well for interviews. Excel is a must have though. You publish a lot of notes in ER. I hope you don't mind writing in bullet point format though.

ER isn't just about pondering industries and economies - they do dirty work as well. You do a lot of "channel checks," scrounging up info by calling customers and suppliers of the companies you cover.

I interned on the sell side and I thought it was the most boring job in the world. However, its great for a certain type (re: nerds). You might fit in.

Sep 27, 2015 - 10:46pm

I too did a sell-side internship and I think that the decision really comes down to what you are ultimately looking to get out of your first finance job. Lack of in-depth knowledge is not a biggie at all for any entry-level analyst job in almost any division. That's what training and your zest for the job are supposed to take care of. The writing is standardized and gets old very quickly, as you're hammering home your view over and over again. In short, your reasons for research should be beyond getting an introduction to the market and the chance to write a lot. What do you want to do in the long run?

Sep 27, 2015 - 10:47pm

I guess I want to learn as much as possible from my first finance job and learn more about corporate finance and how companies operate and fund their operations. I'd like to be able to understand financial statements and how those in the industry use them to make decisions.

"Give me guys that are poor, smart, and hungry. And no feelings." - Michael Douglas as Gordon Gekko in "Wall Street"
Sep 27, 2015 - 10:48pm

Regardless of what career in finance/consulting you may choose, as you can run with ER, Strategy consulting, banking, even operations, the last thing you want to do is admit that you are not a team player. While I'm sure you won't actually say this in an interview (I hope), you need to get past that hurdle - in the finance world, especially on the junior levels, that's the name of the game. Develop that quality, you don't have to do everything alone - being a leader doesn't mean anything if you can't work with anyone. Regarding your career choice, I'd second what everyone else is saying in that you have to dig into the industry and the position much more as being in ER isn't all about broad market statements and picking a stock here and there - disclaimer: I know people who have done ER, and interviewed for ER, but never worked in ER.

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Sep 27, 2015 - 10:49pm

I think the team projects assigned in college create a bad association with group work. I probably shouldn't have said I prefer working alone because in the workplace, I do like it more than at school and it's a hell of a lot more productive and efficient.

"Give me guys that are poor, smart, and hungry. And no feelings." - Michael Douglas as Gordon Gekko in "Wall Street"
Sep 27, 2015 - 10:50pm

Yeah, you could be good - writing and communication skills are fantastic and frankly, having a thick skin is good. Definitely have the skill set - only thing that may hold you back is lower middle class background - everyone here is a complete upper class douchebag because your clients are generally upper class douchebags.

Sep 27, 2015 - 10:51pm

I rose through the ranks of ER and it's much less team-oriented than corp fin. You will work mostly with your senior analyst or perhaps one other junior person. You need to be good at working independently with occasional check-ins with your analyst.

Your background sounds like a good fit for research. You need to have strong analytical skills, strong communication skills, and be very comfortable having and defending a position. You should take the time to get very comfortable with excel, get a lot smarter about stocks. To do the latter, start reading analyst reports, read the WSJ, start managing a mock portfolio (guaranteed you'll be asked for a stock recommendation in any interviews). Focus on understanding qualitative (strong industry trends, proven management team, established brand) and quantitative (undervalued given relevant multiples) factors behind your stock pick. Almost everyone focuses on only the qualitative.

Here are a few things you might want to take a look at

How to become an Equity Research Associate
http://www.gottamentor.com/viewRoadmap.aspx?r=259

Equity Research Associate Summary
http://www.gottamentor.com/ViewMyJobRoadmap.aspx?r=463

Andrea
www.gottamentor.com

Gotta Mentor Connect to the Advice & People You Need to Achieve Your Career Goals
  • 2
Sep 27, 2015 - 10:54pm

Thick skin is absolutely necessary in any area of finance. You need to be able to take a beating from both internal and external shareholders. Particularly in research, people will not always like your research and you should not take it personally. In addition, many research associates act competitively to catch the eye of the various analysts within the department.

Smokey, this is not 'Nam, this is bowling. There are rules.
Sep 27, 2015 - 10:56pm

In research, you need a thick skin becuase it can be a bit of thankless job. You need to be right a lot more than salesman and companies will dislike you if you write a sell note (but if it is well argued, it is ok) and you are constantly sticking your neck out on the line to make stock calls. The challenge of this business is invariably having to be reasonably right most of the time. But, if you are reasonably right most of the time, then you can make it on the buyside and make serious cheddah - like Warren and George

Sep 27, 2015 - 10:59pm

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"The stock market is filled with individuals who know the price of everything, but the value of nothing." - Phillip Fisher
Sep 27, 2015 - 11:00pm

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