As a sector specialist, what to do when you sector is out of favor?

If you are a sector specialist (8+ years of experience) in a cyclical sector (industrial, mining, energy), and the sector is currently in a downturn (market cap % shrinking, less funds, less jobs etc), should you ride it out or leave for other sectors/jobs (going to related industry, or tech industry etc)?

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Comments (16)

Jul 12, 2020 - 6:49pm

If you ride it out, you don't know how long the downturn will last. It's a cyclical sector, so eventually supply/demand balances and the sector starts to grow again. If you are one of the few people survived, there are ton of upside ahead. But how do you know if you will survive when the sector is shrinking and no one is immune.

If you decide to leave the sector, you will leave all your knowledge, network, skills behind, and start in another sector as a newbie (entry level salary).

defintely a dilemma, sorry I don't have any answers for you.

  • VP in ER
Jul 12, 2020 - 7:44pm

Yes, one fund may still do well, but as the sector shrink in market cap, number of public companies, etc. There are less and less jobs in HF, long-only, Sellside, industry, consulting, etc. And you will see people got laid off every year everywhere. The competition for a new job goes up, but comps goes down.

Jul 12, 2020 - 9:50pm

Right...but they're PAID on P&L so relative performance plus $2.75 will get you on the subway...

You may keep your job and yes, you'll always be able to look at sector pair trades/relval stuff. But when your sector is out of favor there is no sugar coating that the opportunity set shrinks, catalysts tend to play out slower or matter less, etc. It's frustrating.

Jul 12, 2020 - 11:16pm

Don't know what your goal is. I would expand your expertise into another sector, something secularly growing.

Show your next employer that you have the intrinsic knowledge during info interviews or have a compelling stock idea (if you trying to go buy-side) in that space.

Instagram: @dickthesellsider | Substack: dicktoad.substack.com

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Most Helpful
Jul 14, 2020 - 7:19am

a sector specialist should be able to trade a long/short basket of securities and make real P&L

if you can't do that....then you are bad at your job

if your employer is a long-only fund and fires the sector specialists of underperforming sectors...then perhaps you should find your way to a long/short fund where your expertise allows you to trade that knowledge

Jul 31, 2020 - 8:19pm

Yes of course if you can't trade successfully within your sector, that means you're bad at your job. Ultimately, only returns matter. But some jobs are arguably more difficult than others. I'd very much rather take a bet on picking names amongst FAANG than big oil. In theory, a lot of the sector specialists operate in a 'sector neutral' manner but in reality for whatever reason - it just seems easier to pick winners in a winning sector than to look for the best loser in a losing sector. Just my view though.

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