Idea generation as a 1st year analyst?
Some background: prior to joining my current fund I graduated with double major from a non-target and completed multiple internships at MBB consulting and some mid market PE shops. I have been at my current fund for a couple of months now. My fund's AUM is in the $400-600 range, the team is basically the PM, two senior analysts and me. After joining, I discovered that it's my fully own responsibility to generate new ideas and pitch them to the PM. While I enjoy the whole process, from what I have heard, it's very rare for a junior analyst to take full responsibility for idea generation. I rather expected to be mostly analysing stocks proposed by the senior analysts and sometimes pitching something that I have found myself. I must admit that I find it pretty hard to source new ideas in high quantity and I feel like I am wasting a lot of time on that, instead on analysing the actual businesses.
Is it normal? When, typically, it is expected of an investment team member to be fully sourcing his own ideas?
Thanks.
How are you going about sourcing your investment ideas?
need to be curious and love the game man. i'm on the sell-side though so i get all my ideas from buzzfeed
First of all, you need to establish what your PM/Snr Analysts will be expecting from you. What universe do you invest in? Small, Mid or Large cap? Value vs growth? Long or L/S? Only once you understand exactly what you're P is looking for will you be able to create a SYSTEM to source ideas on a regular basis. Without a repeatable process you're going to find it extremely difficult to develop a pipeline of new ideas.
I'd reccommend that you check out some of the posts made by BlackHat and Simple As... Some of their posts are absolutely golden.
Let me know what the mandate is and maybe I can elaborate on how to an idea generation system.
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I was in a similar position and second what was said above..
Additionally, it’s important to understand what your team is expecting. I highly doubt anyone expects you to be developing pitches that are a meaningful portion of the book from the get-go. Your PM likely just wants another engine of idea generation.
I would observe what the senior analysts do on a day to day basis and the system they’ve set up. I’d get into meetings and hop on phone calls when they are pitching the pm their ideas. And then I’d reverse engineer them.
Basically you need to understand what their process is and then execute it. The more reps you get in the better you will be (hopefully.)
And you should view this as a positive - idea generation, implementation, monitoring, and management is a key step on the path to making real money in this business. Not by being a model monkey.
Obv you should know the market cap range and broad investment philosophy (value/growth/garp/special sit, etc.) of your fund/team. Figure out 4-5 criteria that match the philosophy of the team and build a broad screening tool (eg in bbg), rank it and do a sniff test on the first 20 names on that list - repeat weekly, read sell side emails (ok as a starting point) and write down interesting sounding tickers, dial into conf calls, join conference webcasts. If you find something that looks intriguing after spending 2-3h on it run a 3-5 bullet point summary by someone in the team you trust and ask "hey, I like xyz for these 5 reasons, haven't done enough work on it but from this superficial summary (be humble, provides you a way out) does this sound interesting or like total BS to you?" That way you know if you're going into the right direction. When you get a yes do your full research on it. Over time you'll get more confident and don't need to have the early stage check ins.
I've been doing this for five years and there are always more companies that I'd like to read up on than there is time. This discovery aspect is one of the favorite parts of my job. Over time you'll have a constant watchlist.
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