How do you stay motivated given markets are extremely efficient?

I find that there's an observable disconnect between detailed analyst reports and share price performance.

First of all we need to beat consensus not individual brokers. There's dispersion in the forecasts which could be a source of alpha in itself (if you're playing in the modelling edge game, which I honestly haven't seen many people do successfully).

Sellside research has its place, but it's just one piece of the puzzle. They forcasts results in 12-month price targets. More often then not, that doesn't align with how alpha curves are captured.

Analysts can be great company researchers but mediocre stock pickers - we've got tools tracking their stock calls, and you'd be surprised how few consistently outperform, regardless of how well they write up a company.

In GARP-y type sectors sellside is often revenue-focused and has its own stock selection biases. They're good at tracking direction of near-term KPIs over the next quarter, but sometime struggle with longer-term forecasts (there's plenty of emperical studies on this).

Their defined coverage creates blind spots, missing cross-sector trends or broader market dynamics which are huge stock performance drivers.

From a market neutral perspective, we play the relative game, not absolute. In theory one can use sellside views to construct alpha-generating books (platforms for this already exist).

The key to beat the sellside at their game is being dynamic - switching between having your analyst hat on (fundamental views) to then putting on your capital allocator hat (what drives the price). The views can differ. Needless to say, you make money on price action, not forecast accuracy.

To a lesser extent, I also find that there's occasional information asymmetry. Companies sometimes tell investors things they don't share with equity research, all in the name of managing expectations.

Imagine a scenario where there's a great analyst with amazing corporate access and who just calls it correctly fundamentally time and time again. He/She will have a good view on the known knowns, and make best guesses on the known unknowns. I'd take their views of the known knowns at face value, research how the analyst tracks the company that inform the view. I’ll access the model and ask for meeting notes… I am the client after all. I’ll then use my resources (access to the entire street, more tools, better budget for proprietary research) to form a more informed view on the incremental known unknowns where the analysts’ guess is a good as anyone's. If I'm good at my job, I’ve leveraged the analyst to improve my process and I'm edging and trading on the incrementals. Now, it doesn't always turn out that way, but at least that's the objective.

In reality there’s rarely an analyst who always gets it right with a company. Some are good at calling inflections, other at calling the duration of a broader theme (just like on the buyside). The smart investors knows who’s good at what and dares to borrow ideas and analyses, on top of building your own conviction to help guide your bets and how you put money to work. 

Perhaps the most important contrast, there's discrepancies in risk tolerance. We have our jobs on the line with our calls. Sellside less so. They can instructed by their firms to have a certain buy/hold/sell ratios.

Their job is to collect company information, package their views and sell it to us to drive engagement (sometimes having controversial views for the sake of driving incoming calls, esp by lesser known brokers). Our job, on the other hand, is to generate returns, not win forecasting contests.

So contrary to the original point; there are noticeable inefficiencies on the broker-share price dynamic I want to capitalize on, which is what keeps me motivated.

/My two cents