1/8/17

So I'm feeling a bit generous over the holidays. So have at it kids, ask away. Straight-dope answers will be provided.

Comments (83)

12/25/16

What are some of the qualities that your best associates have had, and what generally made them stand out from other poorer performing associates? Besides passion for the sector/job, which is a given.

Any general advice/wisdom for newer associates?

Also, it would be helpful to hear your background and experience as an analyst. What led you there, how many years did it take etc.

Financial Modeling

12/25/16
researchguy1234:

What are some of the qualities that your best associates have had, and what generally made them stand out from other poorer performing associates? Besides passion for the sector/job, which is a given.

Any general advice/wisdom for newer associates?

Also, it would be helpful to hear your background and experience as an analyst. What led you there, how many years did it take etc.

Disclaimer: my views are my views only and may not be reflective of everyone else in in the industry. What works for me may not work for everyone else

What are some of the qualities that your best associates have had, and what generally made them stand out from other poorer performing associates?
---- I've been fortunate that I've had very few poor associates. I guess that comes from the screening and vetting process I conduct. Where I have had poor associates was with "bad attitude/non team player." Most of my associates have eventually been promoted to senior analysts or have gone on to prominent positions in industry, all with my encouragement when the time was right.

Besides passion for the sector/job, which is a given.

Any general advice/wisdom for newer associates?
------- Never stop being curious and learning as much about the industry as you can. Of course many senior analysts really don't want their associates to be "too good" for fear they will make them look bad or leave to be a senior analysts (aka competitor) at another shop. All depends on whom you work for.

<

p>Also, it would be helpful to hear your background and experience as an analyst. What led you there, how many years did it take etc.</
------- Studied undergrad/business degree for the industry I currently cover.
--------Worked in that industry for several years after graduation.
--------Next, went to work on wall street for several years in Sales and Trading in a pre-mba role.
--------Got MBA at top-30 business school.
--------summer internship at well known hedge fund covering current industry.
-------- One year at non-bulge bracket investment bank covering current industry.
--------Three years at bulge bracket on top ii team as senior associate and given several names under coverage.
--------Promoted to senior analyst in early 2008 at said bulge-bracket bank. Subsequently let go one month later due to downturn. Promoted and fired within a month (!)
--------Quickly found position as senior analyst/MD at non-bulge bracket but well known shop. Stayed 4 years.
--------Lured away by well-know non-bulge bracket with better compensation package. Been MD for 5 years at said shop.

Array

12/26/16

Thanks for the reply and congrats on the success!

12/26/16

Thanks for doing that. I am about to start FT in ER.
I have not been assigned a sector yet and I know it will depend on business needs but they may ask for my preference.
Which sector should I avoid at all cost if any? Which ones would you recommend if any?
Also have you seen any newcomers fired right after their probation period?
Anything you wished you had known when you first started?

12/26/16

Which sector should I avoid at all cost if any?
------- I don't think there is an answer to this. Some people think my sector is "boring" but I find creative ways to make it exciting.

Which ones would you recommend if any?
------- The one where you have any sort of background or work experience in is always preferable.

Also have you seen any newcomers fired right after their probation period?
------- Very rare. Usually only happens when a shop suddenly shuts down. It takes a lot of time and expense to hire someone and typically if it is not working out the person is given ample warning(s) in hopes they will improve.

Anything you wished you had known when you first started?
--------For 90% of sell-side analysts, the word "research" is a misnomer as for this 90% their research is simply a re-hash of publically available information; hence no use to the buyside. Don't be the 90%, be the 10%, and you will have a long and successful career. Also valuation calls usually don't work. I tell my clients (for the most part) that I really don't care about valuation such as P/E and EV/EBITDA; Free cash flow yield is a different story.

Array

12/27/16
Frank Rizzo:

Some people think my sector is "boring" but I find creative ways to make it exciting.

Can you mention some examples in general terms, without giving away your sector? Just curious

12/26/16

What is your opinion the future of ER? Obviously there will always be a need for sell-side research, but to what capacity? Would you still recommend it for as viable long-term career option for somebody looking to break into the industry? Thanks.

12/26/16

What is your opinion the future of ER?
-----I've hearing since the early 2000s that ER is dying and will not be around in 5-10 years. ER will always be there in some shape or form. At a minimum, banks need analysts to explain deals to clients.

Obviously there will always be a need for sell-side research, but to what capacity? Would you still recommend it for as viable long-term career option for somebody looking to break into the industry?
------ What has changed is compensation. Until Spitzer changed the rules, some sell-side analysts in my sector made millions per year. Today, the number 1 ii guy in my sector makes 1-1.5 tops (not too shabby but not 2000's levels). Most make between 250k and 1M.
-------Of course I would recommend it. If you're looking to become an instant billionaire, it's probably not the job for you. That said, there are CEOs in my covered industries that used to work on the sell-side at one time and make $10M+ per year.

Array

12/26/16

This is interesting -- thanks for doing it!

Few questions on your relationships with the buyside;

  1. Do you get offended when a buyside analyst keeps you out of a management mtg when you're hosting a roadshow? Always wondered about this as our company explicitly doesn't allow the sellside guys in the mtgs.
  2. How frequently are you talking to the average hedge fund analyst vs. mutual fund analyst for similar tenured analysts (e.g. not in their first 6-12 months covering the space)?
  3. How much visibility do you have as to which buyside analysts are sponsoring you in the broker vote? Or is it all just lumped together in a firm-wide allocation at your end?
  4. Have you ever had a bad experience with a mgmt team after you downgrade their stock, or initiate with something other than a 'buy'?

thanks!

12/27/16

I've always wondered the same thing regarding keeping sellside analysts out of management meetings. Apparently it's a huge Boston buyside ritual

12/27/16

Few questions on your relationships with the buyside;

1.Do you get offended when a buyside analyst keeps you out of a management mtg when you're hosting a roadshow? Always wondered about this as our company explicitly doesn't allow the sellside guys in the mtgs.
------Not at all. After two or three management meetings, it's like watching paint dry so I actually look forward to getting kicked out of a meeting so I can catch up on emails and check on the stocks.

2.How frequently are you talking to the average hedge fund analyst vs. mutual fund analyst for similar tenured analysts (e.g. not in their first 6-12 months covering the space)?
------it's about a 50/50 mix in my sector.

3.How much visibility do you have as to which buyside analysts are sponsoring you in the broker vote? Or is it all just lumped together in a firm-wide allocation at your end?
-----Good visibility. I track client votes like a hawk. Fyi, I am the #1 ranked analyst at my firm out of 40 analysts for client votes, and I have to know who is voting for me and who is not (and should have).

4.Have you ever had a bad experience with a mgmt team after you downgrade their stock, or initiate with something other than a 'buy'?
------- Of course, most analysts have.

Array

12/26/16

Would you recommend starting on the sell side (to get the training and learn the core skills) to then transition to the buy side or if you could go straight out of undergrad to the buy side then that is an opportunity to jump on?

12/27/16

Again it all depends. For me personally starting on the sell side was preferable (I actually turned down an offer from the hedge fund I did my summer MBA internship with). That said, there are plenty of people coming from undergrad who do quite well on the buyside.

Array

12/27/16

How would you suggest leveraging informational interviews into actual interviews for internships?

12/27/16

How would you suggest leveraging informational interviews into actual interviews for internships?
----- it's a numbers game. Basically show passion/excitement during the informational interview and then follow up to let them know you would like to be considered for the intern program. Also it never hurts to have the dean of your school also reach out afterwards to convey your interest in the internship program. An email from the dean gets one's attention.

Array

12/27/16

How old are you and what is your compensation?

12/27/16

really

Best Response
12/27/16

45.
Base 300k
Bonus 400k
Still room for some upside this year, tbd...

Array

12/28/16

Wow sick! Thanks for the answer.

12/29/16

Don't think for a second that it comes easy. And this is an industry not known for its job security.

Array

12/29/16

You are underpaid for the number one guy at your shop...unless your sector has zero banking activity.

12/30/16

I can't comment on any correlation between analyst pay and banking, but let's say you've made some good assumptions here. And assuming that assumption is in fact true, how many sell side analysts make that kind of coin with minimal banking support? (hint: I'm one of the very few).

Array

12/27/16

Why didn't you move to the buy side?

12/27/16

The offer from the big and famous hedge fund after my MBA internship was "Your stock picks need to be up 50% in six months or you're fired.".
I wasn't ready to end my career after 6 months if it didn't work out.

That said, I have several "open offers" from various hedge funds if I should ever to decide to jump to the buyside. Eventually I will but sellside still has not fully run its course for me. And once you leave the sellside it's next to impossible to come back in today's day and age.

Array

1/15/17

Why is it so hard to return to the sell side after leaving?

Financial Modeling

12/27/16

Do you prefer associates who have prior work experience covering your industry?

I ask because I currently cover a specific industry as a consultant but am trying to get into ER.

12/27/16

I do prefer associates with prior work experience in the industry. Really gives "value add".
It works for me.

Array

12/27/16

When will you short Nvidia?

You killed the Greece spread goes up, spread goes down, from Wall Street they all play like a freak, Goldman Sachs 'o beat.

12/27/16

Cannot comment on stocks.
And I don't know even what Nvidia is. Tech?

Array

12/28/16

Tesla's subsidiary

You killed the Greece spread goes up, spread goes down, from Wall Street they all play like a freak, Goldman Sachs 'o beat.

12/27/16

BTW, I have received quite a few private messages. Not going to respond to those as I simply don't have time.
Post your questions on the message board.

Array

12/27/16

How many years on average would you say it takes an associate to jump to analyst? Who decides which associates make analyst? What are the qualities of associates who successfully make the jump?

For associates that don't make the jump, where do they typically end up? B-school? Buy side? Industry?

12/28/16

How many years on average would you say it takes an associate to jump to analyst?
--------4-10 years. Though most never make the jump for various reasons.

Who decides which associates make analyst?
-------- Typically the senior analyst and/or director of research. Really depends on the analyst you work for. Some experienced senior analysts have never had an associate make the jump (because the senior could care less about career development of their employees) whereas others have had many associates make the jump.

What are the qualities of associates who successfully make the jump?
--------Passion for the profession and proven ability to speak with accounts. Also good ratings from the sales poll.

For associates that don't make the jump, where do they typically end up? B-school? Buy side? Industry?
-------Bschool, investor relations, different careers.

Array

12/28/16

Currently a senior in my undergrad, looking to break into ER. Graduation is early June. How would you suggest aiming for a position? Starting by emailing/cold calling now, waiting til spots open up after people jump ship after bonuses, or waiting til much closer to graduation?

If I'm emailing you, would you prefer to get a resume, writing sample, or both? And is it better to ask if you have any open positions on your team or not quite as brash?

12/28/16

Currently a senior in my undergrad, looking to break into ER. Graduation is early June. How would you suggest aiming for a position? Starting by emailing/cold calling now, waiting til spots open up after people jump ship after bonuses, or waiting til much closer to graduation?

-------You're not going to like what I tell you here but unless you've had a quality summer internship in finance or you have very-very strong connections, it will be next to impossible to land a spot in ER right out of undergrad. Barrier to entry is high.

If I'm emailing you, would you prefer to get a resume, writing sample, or both? And is it better to ask if you have any open positions on your team or not quite as brash?

-------Both. I wouldn't ask as it is assumed. Also in said resume' or writing sample, don't use the word "til."

Array

12/28/16

What are some of the things a you would expect a FICC analyst to know / cover?

12/28/16

Sorry, equity analyst here in the consumer sector, so can't help you with that.

Array

12/28/16

You say "Don't be the 90%, be the 10%". What's your top tips for daily work in equity research to become the 10%?

12/29/16

So what I am about to tell you is far easier said (written) than done, and again this is what works for me and may not work for everyone:

For the stocks you cover, find the #1 driver that moves your stocks. For my sector it is an industry-specific measure of revenue. And using Big Data and Alternative Data sources that collect such revenue data points I can get a better read on those future revenue trends than anyone else in the world.

Also find a boring sector and turn it into the greatest thing since sliced bread. People may think you're a bit crazy, but they'll come to realize you really know your industry and are interesting to talk to about it.

Array

1/9/17

I have been really interested in applications of Big data and alternative data sources. Do you think a plucky young Associate can add a lot of value by learning to code and process that data? Or is it something you already outsource to a quant internally/externally so it doens't matter as a skillset for an Associate who supports you?

12/28/16

Do you ever find yourself getting a little bored or burned out? I find that not having skin in the game makes me somewhat bored/lazy at times. Maybe just a personality thing./

12/28/16

Of course. But what keeps me motivated is my proprietary research. I pride myself in discovering trends before anyone else does.
Earnings season is boring and leaves me feeling burnt out as it is simply "reporting" and not actual research. But it is part of the job.

Array

12/28/16

You spoke about having industry experience and hiring people with exp as well. What factors do you look for in their experience? Essentially, what are the value add features they provide?

...

12/28/16

A finance background in one of the companies I cover goes a long way.

Array

12/30/16

To add to this, after undergrad I worked for one of the companies for three years that I currently have research coverage on.

Array

1/6/17

If you're willing to take PMs at some point, please let me know. I have some more personal questions to ask.

...

12/28/16

Do you have any thoughts on those that work in IR? I currently work as an IR associate directly out of undergrad and I am wondering if there are any ways I can leverage this experience to move into an ER associate role outside of the sector I am in now. Thanks in advance.

12/28/16

IR is a good background for making the jump. Plus you are one of the first to know if an ER spot becomes available.

Array

12/28/16

Do you happen to know which of your clients consistently beat their benchmarks? For those that do, do they ask questions or approach stocks in your sector in a different way than your average client?

I'd imagine the most successful clients must have something consistently different about their methodology.

12/29/16

I don't specifically know. But I'll tell you that the clients I speak to most frequently have been on the buyside for many years and I'm going to assume you don't last 10+ years on the buy side by having poor performance.

The ones that tend to approach the stocks in a different way also tend to be "big data" junkies like myself. And like myself, have a healthy dose of skepticism about anything management teams say.

Array

12/28/16

Hi Frank

What is the trend in ER, is it dominant with sector specialists or generalists ? Does it preclude your promotion/jump if you were a specialist ?

12/29/16

I would say sector specialists. But you don't want to be a specialist in the buggy whip sector.

Array

12/28/16

Hey thanks for doing this. You mentioned you pride yourself on proprietary research (the 10%). How do you go about spotting a trend in the consumer sector? I know ideas usually come from random events/news/etc, but is there anything specific that has worked best for you?

Is there a certain way you do store checks or any tips you could give?

It seems like technology is being used more and more on the buyside to spot trends (credit card data, traffic counters, etc). Do you think this impacts the long term outlook of the space?

What qualities would an associate have for you to recommend they would be better suited for the buyside rather than stay on the SS?

12/29/16

Hey thanks for doing this. You mentioned you pride yourself on proprietary research (the 10%). How do you go about spotting a trend in the consumer sector? I know ideas usually come from random events/news/etc, but is there anything specific that has worked best for you?
-----See my previous response on "big data". Keep in mind that I am in a macro-GDP driven sector with a product for sale that really hasn't changed in many years, so I have to look at billions of data points and slice and dice those data points many different ways to tease out what are the emerging trends.

Is there a certain way you do store checks or any tips you could give?
-----Big Data and Alternative data. (if it were easy to do this, then everyone would do it).

It seems like technology is being used more and more on the buyside to spot trends (credit card data, traffic counters, etc). Do you think this impacts the long term outlook of the space?
------Cha-Ching!! This is where the interest of the buyside seems to be heading.

What qualities would an associate have for you to recommend they would be better suited for the buyside rather than stay on the SS?
------ For the sell side, you have to have somewhat of an extrovert in you, or at least be able to fake it like myself. Some people just aren't born to pick up the phone every week and make 30+ essentially cold calls, which is something a new analyst needs to do. So, I find the buyside is better suited for introverts. (not saying this is a good or a bad thing, rather it is what it is).

Array

5/24/17

.

Array

12/29/16

1) That's how you will get your foot in the door, by starting at a small shop. As far as big or small firm, you can get screwed at both. Also once you start, I would recommend getting to work on your CFA. Get it out of the way while you're young.
2) Look for a jr. position in a brokerage or sales and trading role. And work on your CFA.

Array

12/28/16

At what year do you begin doing copious amounts of drugs and tossing midgets at targets/bowling with midgets?

12/29/16

Um that was in undergrad.

but funny you say that as I always laugh when I hear such stories as that's not the Wall Street world that I've ever been involved with. But I do know people who were at that party you referenced....

Array

12/30/16

Let's just say that my side of Wall Street is far more Tri-Lambda than Alpha-Beta.
(some of you young-ins may have to google that one)

Array

12/29/16

Hi there!

I'm a junior that will be a SA in an S&T role at a bulge bracket this summer and I come from a very nontechnical background - any tips or suggestions on the best ways to prepare for my summer so I can really stand out?

12/29/16

CFA level 1 is a good place to start. Though S&T seems to be more about personality than actual CFA-type knowledge (though the very best sales guys know their sh-t when it comes to finance and the companies the analysts are covering).
I'd guess I'd also read up on how to best function at work with a bad hangover and no sleep.

Array

12/29/16
  1. Don't you think sellside research should be unbundled? It would shine a light on the real value (plus or minus) of research. Seems like commoditized S&T is eating into your commissions/P&L without any ability for you to see why. Example of this are the top independent shops who are doing very well or have funds attached to them, Citron/FriendlyBear/Kerrisdale/etc.

1b. Related to above, why not go independent? Thoughts on this? http://news.efinancialcareers.com/us-en/174694/sen...

  1. Do you think there are too many analysts? Seems like the bottom 50% can be culled without any impact on the buyside and it would obviously increase wallet share for the remaining analysts who add value.
  2. Finally, do you think we've seen the worst of active management AUM declines and ER bonuses? Or is there more bad news to come.
1/2/17

When you get emails from college students/job seekers, what do you prefer most? Resumes, work samples, cover letters, etc?

In addition, do you prefer someone asking simply for information, or just coming out and saying they're looking for a position at your firm?

1/5/17
lbajessu:

When you get emails from college students/job seekers, what do you prefer most? Resumes, work samples, cover letters, etc?

In addition, do you prefer someone asking simply for information, or just coming out and saying they're looking for a position at your firm?

I get so many requests that unless they went to my small undergrad program (175/class) or were a member of my fraternity, I don't respond anymore.

Array

1/6/17

1) How often do you want to tell some of the buy-side guys that they don't know what hell they're saying and do you sometimes do it?
2) Do you have a following of some clients that more or less blindly jump on-board with your view?

1/8/17

1) How often do you want to tell some of the buy-side guys that they don't know what hell they're saying and do you sometimes do it?
----- Never. Buy-side ignores me at their own risk. I tell them more "truth" than any management team ever will.

2) Do you have a following of some clients that more or less blindly jump on-board with your view?
-----Yes. And it took many years for that to happen. I have some funds, mostly state pensions, that have told me I am in charge of picking which stocks they should own (for the industries I follow).

Array

1/6/17

Finishing up my senior year before I join FT at a BB where I interned this summer. Currently studying to take CFA I before I begin working as well. Sector placement is decided through a mutual interview process between senior analysts and the 10 incoming undergrad analysts. I know I will be able to find passion and excitement in whichever sector I cover. My question for you is 1) what criteria should I look for when picking a sector/ team to join and 2) what can I be doing over the next few months to make myself most marketable to seniors who will be interviewing me as well. Thank you!

1/8/17

My question for you is 1) what criteria should I look for when picking a sector/ team to join
----Do you get to decide? Usually you have no choice. You take what you get with a smile. (wasn't how I did it but that's how most do it).

and 2) what can I be doing over the next few months to make myself most marketable to seniors who will be interviewing me as well. Thank you!
---CFA is good. Read the WSJ every day.

Array

1/7/17

Thanks so much for doing this.

As a Chinese, working as an equity analyst in Tokyo for four years, I wish to get a job in US in the near future. So I really appreciate your advice.

My question is:
**At what kind of position, can a foreigner with background like me, provide value for a company in US?
(or I should ask how to make myself attractive for a US company)
**
From my experience, equity research is a local business, and this means that my job experience, skills and networks outsides US can hardly be transferable.

1) Language skill?
This seems to be one of the few things that I can differentiate, so besides English, Japanese, Chinese, I am learning Spanish.

2) MBA?
I am already 30, perhaps too old for a MBA course.

3) various working experience?
I am even considering working in primary market, such as PE, before I move to US. Knowing things about researching and doing business seem to be more powerful candidate.

Thanks beforehand!

1/8/17

My question is:
**At what kind of position, can a foreigner with background like me, provide value for a company in US?
(or I should ask how to make myself attractive for a US company)
------Well a sector that has a big Asian/Japanese component (whatever sector(s) that may be?). I'd image Japanese and English language skills are a competitive advantage for the right sector.

1) Language skill?
This seems to be one of the few things that I can differentiate, so besides English, Japanese, Chinese, I am learning Spanish.
-----See above. But make sure you are targeting a sector where those languages are a competitive advantage. Don't need a foreign language if you're covering US retail stores.

2) MBA?
I am already 30, perhaps too old for a MBA course.
---Not at all. I started mine at 29 and finished at 31. Now if you're 30 with children, then it is too late, IMO, for investment banking (of course IB is not the only industry out there). You do not want to be a first-year IB/ER associate with children (and a long commute).

3) various working experience?
I am even considering working in primary market, such as PE, before I move to US. Knowing things about researching and doing business seem to be more powerful candidate.
----PE is a solid background

Thanks beforehand!

Array

1/7/17

Hi, thanks for doing this! I just had a few questions.

Do you have an opinion on Fidelity International (not Fidelity Investment)?

You spoke about compensation on the sell-side. Do you know what compensation is like at a large long-only asset manager for someone at an equivalent level to yours? Is it roughly more or less?

Thanks!

1/8/17

Do you have an opinion on Fidelity International (not Fidelity Investment)?
-No. Just speak to the Boston people. And they are top-notch (usually).

You spoke about compensation on the sell-side. Do you know what compensation is like at a large long-only asset manager for someone at an equivalent level to yours? Is it roughly more or less?
----Probably more but far more risk to it being a long career.

Array

1/7/17

What makes a great thesis? Do you have a specific outline?
Do you use any outside analytics tools?

1/8/17

What makes a great thesis? Do you have a specific outline?
----A great thesis is a differentiated one. No specific outline, other than having your finger on the pulse on where the buyside and sellside are at and then having the proprietary research that says what they are thinking is incorrect.

Do you use any outside analytics tools?
---Not really. I develop my only proprietary data analysis excel programs.

Array

1/19/17

Do you think it makes sense to create a equity research type of business for hot startups? Like for Snapchat or Uber that are about to go public.

1/8/17

AGAIN, NO PRIVATE MESSAGES PLEASE.
I WILL NOT ANSWER.
MESSAGE BOARD ONLY.

Array

1/8/17

Thanks for starting this discussion! So much valuable insight.

What is your screening and vetting process? What are some characteristics of successful candidates? Did most of these successful candidates come to you through mutual connections?

1/8/17

Dear Frank,
Happy New Year!!! I am joining this discussion late, though would be interested to know your thoughts.
I have a PhD in Chemistry and has worked in the industry for 5 years in R &D. Currently I am pursuing my MBA and trying to become an equity analyst (FT). I have also given my CFA L1, awaiting results.
I am looking for suggestions and feedback on how to network to get an offer.

Thanks,
Andy

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