HF new coverage timeline

Based on the most helpful WSO content, the time it takes to develop a model and conduct due diligence can vary significantly depending on several factors, including the complexity of the company, the level of detail required, and the specific expectations of your PM or team. Here are some insights:

1. Initial Model Development:

   • For sell-side analysts, launching coverage on a new company typically takes around two weeks to build the initial model. The first model usually takes the longest.
   • For buy-side analysts, the process can be different. The time horizon and strategy of the PM can influence whether you adapt an existing model or create a new one from scratch.

2. Maintenance and Updates:

   • Once the initial model is set up, maintaining and updating it over time becomes easier. The initial build-out is the most time-consuming part.
   • For seasoned analysts, maintaining coverage on a large number of companies (e.g., over 70) involves having a deep and up-to-date knowledge of a select list of high-conviction companies.

3. Diligence Process at L/S Hedge Funds:

   • The diligence process at L/S hedge funds involves creating expertise under tight deadlines, often with the same data that competitors are reviewing.
   • The process includes making a judgment call on whether the company's prospects are better than the consensus, ensuring the company isn't a "ponzi scheme," and focusing on a few key performance indicators (KPIs).

4. Investment Idea Formulation:

   • The time to formulate an investment idea or stock pitch depends on the complexity of the company and the volume of information gathered. Analyzing data and formatting research for external distribution can also be time-consuming.
   • It's important to critically reflect on the names you're working on and decide whether to continue or move on to more promising opportunities.

In summary, the time to develop a model and conduct due diligence can range from a few days to several weeks, depending on the specific circumstances and requirements. The process involves a combination of initial model building, ongoing maintenance, and critical analysis to ensure the investment thesis is sound.

Sources: What does a model look like at a L/S hedge fund? What is the diligence process like?, How to convert sell-side models to your own models faster?, How long does it take to formulate a investment idea / stock pitch, What does a model look like at a L/S hedge fund? What is the diligence process like?