Equity Research - Typical comp and hours?
I am going to preface my question by saying that I know that this is a IB forum, but I also noticed that many of the members are very knowledgable about other areas as well. So my question is what does anybody know about being a Equity Research analyst. i.e. typical jobs, comp, hours, and things of that nature. Thanks a lot.
Answer - Part I
Unfortunately, the business model in sell-side research has gone down the tubes in the wake of the Spitzer era. Compensation is no longer (at least officially) tied to investment banking, spreads (commissions) on equity trades are razor thin (and keep falling), and the days of the rockstar analyst are generally over. It's tough to make a lot of money in research nowadays (at least compared to the 7-figure numbers you used to see).
And your hours are still bad (not as bad as IB, but late nights and weekend work--especially during earnings season--are not unusual).
THAT SAID, for a junior level person, sell-side research on a strong II-ranked team can open doors to the buy-side. The learning experience is still highly regarded and worth considering. Making a career out of equity research, however, is probably not the wisest move--at least in the current environment.
Answer - Part II
As far as what you'd be doing...I am not in research but have friends who are. Seems to be a routine of maintaining comps / earnings models, monitoring news and press releases (earnings, M&A activity, etc.), talking to companies, some travel, and pounding out notes. The better research teams also usually put together some kind of larger, periodic (quarterly) package on all the companies in their coverage universe, which includes both company and industry research, charts, tables, etc.
All in all a pretty good mix of verbal and quant skills are required.
thanks a lot very informative. Since i am seeking out internships for this upcoming summer, i came across an opportunity for a possible position at ML in ER. What would be your opinions on that.
yea
If you can't get a summer internship in IB (which is ideal), a gig in research ain't too bad. Definitely could do worse.
Equity Research Analysts directly work with equity sales people who will make sales calls to PMs (i.e. the buyside) - in return for good research and trading ideas, PMs direct trades to the firm's traders generating trading fees for the firm. This cycle is how equity research makes money for the firm.
Sorry to bring up an older topic. What kind of opportunities would getting a summer internship in research at a place like Sanford Bernstein get me? Would it improve my chances at all when i try for full time in i-banking?
How would I rate a stock as a buy or a sell and what metrics I would use to compare stocks within a particular industry? Can anyone help me answer these questions?
"How would I rate a stock as a buy or a sell and what metrics I would use to compare stocks within a particular industry? Can anyone help me answer these questions?"
Firms have recommended guidlines. If TP is X% above current price then it can have Y rating.
i.e.
less than 0, 0-8% sell 8-12% Hold 12%+ Buy
Not sure what the exact rqmts are but I remember it being something like that at the bank I summered. Should vary by firm. Also taken into consideration is the volatility of the market (U.S. vs emerging).
As far as metrics-- depends on the industry/what investors care about.
Usually: P/E, EV/EBITDA, P/BV, occasionally P/S
DCF is also a valuation metric, but gets less emphasis than multiples (b/c so many assumptions are made to arrive at terminal value).
but thats why people spend hundreds of hours doing research. Learn the industry, the company in detail, do some bottoms up research on the key drivers of the business from your research and model this out, let that lead you to a valuation (use different techniques), decide how comfortable you are with that valuation, look at where the current stock price is, and you're done.
Culture of an ER department (Originally Posted: 08/21/2008)
I may be wrong, but would you agree that the culture of an ER department is kind of "nerdy" and reflective of that of a library?
Are there any other front-office departments with that similar type of culture?
You are confusing culture with atmosphere.
No...I don't think I'd agree with that. It depends mostly on your team, and partially based on the firm. Granted, it's less interactive with colleagues than banking simply because the teams are smaller, but it's not like you're throwing parties all the time in banking either. I have seen certain teams that really keep to themselves, though.
Based on my experience at a couple of BB's, I can say that one of them was a lot of fun, whereas working at the other one was not. The reason the latter experience wasn't that fun was because a lot of people didn't like their jobs there, the overall culture of the firm was pretty poor in my view, and they had gone through a fairly sizable round of layoffs which definitely dampened the mood. Plus, I grew increasingly discontent with my boss, so much that I later moved to private equity and never looked back. In your words, I guess you could say that my first experience in research was a lot more engaging, whereas the latter was more "reflective of that of a library" because I basically lost interest in engaging with my boss -- he was too annoying and not competent enough.
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