Hi
I'm a senior analyst at a small EM bottom-up equities hedge fund (AUM
I have to maintian the models of 80 companies or so (some of them are small caps companies within small industries and without much info out there... and obviously not covered by sell side analysts), keep track of the fund performance, prepare keynotes for the investment committee and propose changes to the portfolio. I also have to network with prospective investors. And I'm getting worn out.
My friends who work at mutual funds say the analysts in there follow just a couple of industries and 12 or so companies. And spend most of the time feeding the PM's and talking to institutional clients.
Generalist, but probably about 30 at any one time, with pretty brief maintenance work on a few dozen more that you just want to keep an eye on. Really only working on 2 or 3 names at a single time though typically. The rest are either portfolio companies, former portfolio companies, or companies we'd probably buy if we got a good price eventually.
Smaller fund I'd think would mean less names since hopefully they aren't super diversified. But depending on strategy and philosophy it could be very different I guess. And analysts with industry coverage typically have a fixed and/or smaller set than elsewhere but end up following those names a lot more intensely. Think of it as the same coverage reach as a sell side ER guy.
there's no way you can cover that many names effectively.
80 EM names sounds like absolute hell
That seems pretty ineffective. You honestly can't learn 80 companies well enough at once to make a good bet. 15 is probably max that you could do effectively. That must suck man.
At a large asset manager, the guys in our central research department officially covered about 12-30 names (with full models and should know everything) and unofficially covered about double that (where they would know them pretty well, but didn't necessarily have full blown proprietary models on them (basically borrow sell side models and tweak the inputs)). The official coverage universe was generally their top picks and widely owned names in the firm. These analysts were all industry focused and were expected to know what everyone else thought (externally) and where we had a different view, especially if it was high conviction.
I'm covering 20 large-cap and mid-cap names in consumer disc and industrials. I don't even model the companies that I think are total shit because it would be a waste of time, so I rate them sell though I do look for key catalysts/driver that could turn them around. I focus on the good long term stories.
Eighty companies WITH MODELS (!!!) is ridiculous...spreading yourself way too thin there.
This is kind of what I assumed buyside ER to be like. On the sellside we cover our sector. That's it. Good, bad, or mediocre, we try to know everything about them.
When I research companies independently, I don't model the ones that do not look promising. There is a small chance I might uncover something while building my model...but that is an extremely low reward for the time invested. There are enough good ideas that you don't need to boil the ocean for fear of missing one.
Yeah it's the story for plain vanilla, long-term focused MFs like mine. Of course, if I was at a long/short fund I'd love to focus on shit companies so I could put some short recommendations on...I'd def model them as well and keep a closer eye on them.
My universe as I've defined it - public companies in my industry within a certain market cap range - is about 200 names. That's where I draw my ideas from.
We probably have 15 names in my space in the portfolio at any one time (whole portfolio is pretty well diversified) and I'll be deep on those names. Then we sell our position and I'll try to keep the models up to date but more likely the stock kind of falls off the radar, while others that I'm prospecting move up in importance.
So maybe it's 30 names that I'm keeping really close tabs on.
I can't imagine what the purpose of modeling 80 companies would be. Hard to think you can have much confidence in those estimates vs. where consensus is if you are spread so thin. Or, conversely, hard to see you having much time for value-added research if you spend so much time on models.
Thanks for the feedback guys. I was overwhelmed by the amount of companies I had to cover. I was told the company was bringing in a new analyst to help me out tho. I agree with you that in many companies my knowledge is rather limited since I spent less than a week analyzing them and their industries. However there are some companies i don't pay up much attention to in order to stay focused en larger cap companies and I update their excel models when they file a report. I believe that once, the new analyst joins the fund and I weed out some companies my universe will be around 25-30 companies from half a dozen sectors.
I'm very interested in pursuing a career in the research side of the businiess, I had a quick question for the guys covering a specific sector.
Let's say you are covering ~~15 companies in consumer discretionary. How do you find time throughout the day to stay updated on all 15 companies, while trying to stay updated on the market as a whole?
I'm in SS ER covering ~15 companies and its not really that hard b/c you don't have news about every single company out everyday.
Earnings are a little rough - I hate the 6AM releases - buts its generally pretty manageable.
It also helps to know what important and what's not.
Price increase = yes New valves included with cylinder rental = no
I work for one of the UK's largest buy-side firms (£26bn AUM). While I am a science geek and only cover Pharma & Biotech at the moment, I am being made to take on additional sectors. The norm for us is 2-3 sectors covering a total of 20-25 companies. I model all 15 of mine in detail but that is probably why I'm looking to switch to the sell-side to keep my focus and attention to detail!
For those of you who are generalists or cover many sectors, how do you feel you have an edge or add value relative to those who cover a single sector and smaller # of companies? You don't create or maintain a model to the level of depth that single sector folks (both buy and sell side) do, and assuming you aren't doing a deep dive into a company for months or years on end, you probably don't know more about the company or industry than many others. Can the the broader perspective of a generalist actually more than compensate for lack of depth, or is there something else I could be missing?
How many companies do you know? (Originally Posted: 03/08/2017)
Hi all,
I'd like to hear a few numbers about how many companies you cover on a regular basis, how many companies you get to know per year (which means you know them so that you could recommend the company for investing).
And, do you think it is efficient to get know as many companies you can - let's say in preparation for a Job in equity research going through all the S&P500 companies?
"all the S&P500 companies"
I cant help here other than comment on the fact that 500 is a big number .. I feel like it would be tough to memorize the NAMES of all S&P 500 companies, much less there industry, pricing and other company specific info
Of course it would be very tough and stupid to just learn them by heart, but in the end its like a huge mind map which you can fill out over a couple of years.
In my firm, you only cover around 10 companies at any one time. That said, I believe that most sell-side equity research shops have you cover slightly more than that, usually around 15-20.
The point of the job on the sell-side is to know a few heavily-traded firms really, really well, as opposed to lightly covering as much of a particular sector as possible. On the buy-side, your coverage will inherently be a lot larger, since your job is just to find good investments rather than to know absolutely everything about a limited universe of stocks. In which case, you might cover around 40-50 names. I've met one portfolio manager who covered nearly 200 names, although I don't know to what detail that "coverage" entailed.
Anyways, to address your question: don't bother learning the entire S&P 500, that's crazy. Have 2 really good stock pitches on hand, and just read enough of the WSJ to be able to speak vaguely intelligently about most super large-cap stocks (e.g. if an interviewer asks you "What do you think about Facebook?", etc.)
The answer will vary for sell side vs. buy side. A typical SS analyst covers 10-15 names. When I see a SS analyst covering >15 companies I generally assume the analyst doesn't know some of the companies very well.
For buy side, the answer varies depending upon 1) the size of the firm 2) whether the firm uses a sector-based vs. generalist model. The larger firms tend to use sector-based coverage and, at the extreme (i.e. Trowe or Franklin), would basically resemble sell side coverage.
For generalists like me, you've probably looked at and met hundreds of companies once you're 5+ years into your career. You might have an active buy recommendation and own 10-15 at any given time, potentially closer to 20 if you're working on a very lean team. However, you're probably quite familiar with dozens of companies and just waiting for an opportunity to buy them.
Personally I have ~10 active recommendations and have price targets (but not buy recs) on 50+ companies. I also have my eye on another ~100 companies but don't have price targets on them.
I agree with this. A generalist will have ideas in every sector (not necessarily good ones ha), which probably means he will have an opinion on 80%+ of the SP500.
My team (one senior, two associates) covers approximately 15 companies. I know my half very well and have a working knowledge of the other names (i.e. can speak to thesis and general items but not deep in the numbers/model). My boss knows all the names although I'd imagine the associates may actually be more dialed into some of the small caps than he is.
I'm the only associate and we cover ~20 names. I cover two sub-industries though and half of my coverage has relatively simple companies that are easier to cover. It's still the high end of the spectrum at my firm as far as team size and number of companies goes.
Agree with above on interviews. Have two pitches that you know very well and other than that be able to speak intelligently about the markets and recent events.
I just had an interview for an ER position and you normally have between 10-15 companies in your portfolio.
I currently cover 19 names in biotech with an analyst ( 1 analyst, 1 associate). I would say upper teens to lower twenties is typical for biotech based in my glances at other peoples biotech coverage. I just started 4 months ago, so I'm still getting up to speed and being introduced to the management teams, but I know the couple companies I wrote the initiation reports on very well. I don't think it's unreasonable to cover low twenties as a sell-sider in biotech. However, maybe I have a slightly skewed view as most of our coverage universe are small-mid cap. We only have a few companies above 2 billion so the day-to-day management is relatively minimal with just bursts of activity when important research conferences have stock-moving data presentations.
Biotech and spec pharma associate here in a similar position. As you mention, smid cap biotechs, in many cases, have 1 value-driving asset with large blocks of time between catalysts so we can get away with having higher breadth of coverage given lower day-to-day news.
However, the flip side is that each of these companies may be working on drugs that have absolutely no relation to one another (i.e. nearly everything related to a company developing a drug for a cancer like AML will be completely different than a psych disorder like schizophrenia). This is in contrast to say, oil and gas, where every company is geared toward acquiring...oil and gas.
used to cover 12 on the sell side, now follow 20 on the buy side - this figure will probably get bigger later
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