Comments (93)

Jul 3, 2014 - 7:12am

Congratulations on the move, is it a long shop?

While I understand that a large part of your success is dependent upon your analyst performing well (e.g., having good ranking, talks a lot to clients/sales, marketing), but as an associate, what would I be able to do to accelerate my career and contribute as much as possible to the team?

Should I be as vocal and visible as possible with S&T?

Looking forward to your insights.

Jul 13, 2014 - 1:42pm

Yes, as I say one of BlackRock/Welllington/Fidedlity/TRowe/CG/MFS.

I would say one of the best things about ER is that you are generally/hopefully perfectly free to go above and beyond what you are required to do. So, you will have your "duties" and things you are expected to do in your role, but once that is done anything you can do above and beyond will be noticed and serve you well. E.g. putting together a supply and demand model of some sort for a product sold in the sector, or something along those lines. A database, a neat global comp sheet that can be sent to clients. Client requests can often be dealt with much easier if someone makes an initial investment of time to e.g. put together a big excel file for an industry with as much data as possible, which can be sent across as a one size fits all to clients. That's something you can do straight away early on which will be appreciated, because if your team can send across these types of files they are genuinely valued by the buy side guy who receives them.

Yes, be as vocal and visible as possible. Crucial. Do not just bury yourself behind your excel screen. One thing which is great to do is (especially after a year or so), if your team has published a note that day, around midday go and speak to the sales force. Ask if they had any questions or client feedback from the research. Good excuse to start talking to them and building rapport. Maybe you can give feedback to them about what their client base has been saying about the research you have published. All of this is valuable feedback for them, and not everyone does it – not by a long way.

To sum this up, just don't underestimate how much value you can add early on, and don't overestimate other people in your position. It is very possible to add genuine value to (a) your direct team and (b) internal and external clients. And crucially, a lot of people will not be being proactive enough. If you are, you will stand out.

Jul 3, 2014 - 7:23am

I assume getting a buy-side gig was the end goal the second you started your role on the sell-side within ER, so the question is what steps did you take (if any) to position yourself well for buy-side recruiting? I.e. did you read a lot of investment book classics, did you invest on your own account, did you go to conferences (not so much sector specific, but for your own personal development within the field)?

Similarly, do you feel the 3 years on the sell-side have prepared you well to think independently and be at least a decent stock-picker? In short, if somebody put you in a room and told you to come up with several cool long and short ideas, would you be able to do so independently without the help of your superiors (obviously channel checks or whatever else you want is allowed, just not guidance from another buy-side professional).?

Is the buy-side role within traditional AM or alternatives? Regardless of the answer, would you say an ER background is as great for HF recruitment as it is for traditional AM and stand-alone long-only shops?

Cheers for doing this.

Jul 3, 2014 - 10:33am

No problem. Yes, that was the plan from the start but this also became more and more the case the longer I was on the sell side (I can discuss why in more detail, but there are distinct changes needed in sell side ER capacity requirements and business model in my personal opinion).

I read the "classics" before university (Ben Graham, Phil Fisher, etc) as a lot of people do (and should), and started doing my own PA early... so it has been a big interest since I was 18. Since then though yes I have read a lot of books (would recommend the Manual of Ideas and Investment Valuation)- and these were definitely discussed in interview (as was the PA trading by the way).

How well do I think it has prepared me? I think there's advantages and disadvantages of starting on the sell side vs. starting on the buy side. The advantages? You speak to a lot of clients, both hedge and long funds, and you listen to what they are asking – which is very useful – and once you have more experience you debate these things with them and bounce ideas off them. You also get to know a lot of people in the sector very quickly, and know exactly what is going on at a sell side shop. The disadvantages? You get no experience being involved in the investment process.

In answer to your question on can I come up with ideas independently – definitely. Is that as a result of having worked on the sell side? No. But it helps- because (a) you observe the thought process of clients and what they are asking as per the above paragraph, and (b) you also get ideas off your boss/ colleagues. So it definitely gives you more to think about for sure in terms of what questions you could/should be asking.

The buy side role is big AMBlackRock/Welllington/Fidedlity/TRowe/CG/MFS.

On the last question - I think ER is a great place to start in finance, and personally think it is an equally good stepping stone to either a HF or AM. You get a lot of responsibility early on (client contact, plenty of access to management, travel), you learn how to write, you learn how to present an argument, you get good modelling experience. And you learn how to sell. ER is a sales job, and it's very important to be able to communicate your view to others - as it is on the buy side, by the way.

Jul 3, 2014 - 8:47am

@"TheFamousTrader" asked a lot of great q's I'd be interested in hearing.

Also, if someone is interested in a research/future PM role, would you recommend someone going the ER->AM/HF route, or just jumping into a AM/HF research role as soon as possible? (This is assuming the person has been out of school for 3 years and has passed all 3 levels of the CFA exam)

Did the client exposure provide you the best resource for networking into this buy-side role? Or were you doing a lot outside of work to meet people?

Did you feel your analyst's performance directly affected your chances of buy-side recruiting? (i.e. is it worth it to worry whether you'll be working under a crappy analyst?)

Is your buy-side role focused specifically on the sector you covered? Did you ever have any worries that you were getting pigeon-holed into only covering XYZ sector?

Did working for that BB dramatically help garner exposure to big clients versus a MM? Or did you find clients focused on the quality of research and not so much who it came from?

Thanks for doing this!

Best Response
Jul 3, 2014 - 10:48am

The client exposure is definitely the big networking resource in my opinion. The key thing is from my point of view is they have a direct way of seeing your work and way of thinking, via (a) published research (b) speaking to them via phone on in a one-on-one meeting and (c) models you have sent them. I will be doing the same sector as I currently do, working directly with someone I have spoken to as a client for the last three years. He knows me well, and how I think (and vice-versa). That I think is the key networking opportunity as your work is directly visible… plus of course you will know the calibre of the people you will be working with.

On the direct route vs. ER route question… tough one, as I say there are pros and cons of each (as per the answer to the famous trader). Honestly though, I think despite all the advantages I mentioned about sell side equity research being a great place to start I think if I had been offered a graduate associate position at a big AM shop I would have taken that. If you have been out of school for 3 years and have passed the 3 CFA exams as per your question, I would definitely be getting into AM/HF as soon as possible. It is a common point of view that it is becoming harder and harder to move over to the buy side.

I wrote a post a while back on there being 3 types of top-ranked analyst which I will find and paste into this thread. Essentially being a top ranked analyst does not necessarily mean you are the most insightful, it may mean you are providing better corporate access or you are a better salesperson. I know I am probably in the minority, but I would rather work for a very diligent analyst who is not top ranked but I would learn a lot from than an analyst who is top ranked for providing more corporate access. It's an important distinction to make in my view.

Yes, the buy side role is in the same sector I have covered for the last three years. Worried about being pidgeonholed? Personally, not really. (a) because ex-financials, most sectors are really not that different once you have looked at them for a couple of months – a widget business will produce something at a cost and sell it (b) at many buy side places you will cover various sectors even if you are not technically a generalist (c) I know plenty of people who have done one sector for 3+ years and changed.

Answer to final question – quality of research becoming really important. It's a common theme, and I think there will be a big shakeout of brokers which aren't adding anything of value. I think as a junior at a BB you are still arguably in the best position to move over to the buy side, but the boutiques providing more insightful research are gaining ground very fast – especially as regulators tighten the screw in terms of clients only being allowed to pay for "substantive research".

Jul 3, 2014 - 10:56am

Following here is the post i mentioned on the 3 types of top ranked analyst:

There are 3 types of top ranked analysts:

(1) Those who are all over the detail and provide valuable insights to clients which generate alpha.
(2) Those who are awesome at the sales aspect, client entertainment, and are very visible.
(3) Those who are providing the best corporate access / putting on the best conferences in the sector (which is valued by clients despite new regulatory changes to what clients are allowed to pay for- i.e. not corporate access, but purely research. Informally, clients still pay for and value corporate access, even if not explicitly).

If you want to move to the buyside, the type of analyst you want to work under is type (1)- because then you will be picking up his knowledge and skills that will leave you in good stead when you move.

Therefore my advice is this (adding to what was said in the above post). Know what the analyst's advantages and disadvantages are. He may be top ranked, and this will always give you more visibility to the buy side all things being equal. But what is the reason for him being top ranked- is he all over the detail, and therefore are you going to pick up the tangible skills working for him that will serve you well when you move across.

One thing I would also add as an aside point to the above post, is that yes associates or people who have 2-5 years of experience will be the typical profile to leave to the buy side. However, in the last 2 years there is also a definite trend of Director-level hires at top hedge funds- this is contrary to the tradition, as once you are at this level ER is a very cushy job. However, they can be seeking a change and/or challenge - plus the potential upside can be considerably higher, with this trend likely to continue given the regulatory changes in terms of what clients are allowed to pay for. From the fund's point of view, a Director or MD-level hire can also have the advantage of them being MUCH better connected than an Associate with 7 years' less experience. Who you know is very important in this business, and having the right contracts can be a very valid way to generate alpha.

Jul 3, 2014 - 8:49am

tell us a little about your background: school, grades, internships, etc.

why the move?

why ER initially?

Are you staying with your sector on the buy side or being more of a generalist?

one thing I've always been curious about, is how new ER analysts get assigned to and then become experts in a sector. I hear about primers and all of that, but I'd be curious to see what you think.

Jul 3, 2014 - 3:43pm

I would break down the progression from the start date like this:

First three months or so: Getting to know the ropes, (a) in terms of the industry and companies in it , but (b) also your role as an ER analyst. So getting used to modelling, getting on top of the accounting, knowing what key drivers are, etc. You will help out the rest of the team mostly ad-hoc, i.e. this could be gathering data for client requests, helping write notes, and doing data analysis. Basic stuff, but essential. What is good about this (as with the rest of ER in my view) is you get out of it what you put into it. If you get your head down you can get through this stage as quickly as possible.

Next nine months: Building on the above – i.e. you now know the basics of the industry through a combination of your own reading, listening to your boss and people on your team, etc. You don't have the in-depth knowledge of the rest of your team, but you will be surprised how quickly you get up to speed on a large portion of what you need to know industry-wise. What you don't have is a sense of perspective because you have no prior experience and have nothing to compare the present moment against.

Next year: Your contact with clients will increase a lot. As per my first paragraph, how quickly you get through these stages depends on you. Could be longer, could be quicker. Your personality will have a lot to do with it- do you communicate with confidence and are you being proactive in going above and beyond what you are technically supposed to be doing. I have generally found that as long as you do what is required of you, you have quick a free reign in terms of taking on extra stuff if you can make the time to do it. If you have the initiative to spend a couple of extra hours per evening re-doing models, doing scenario analyses, constructing neat excel files that you can send to clients, creating data bases etc, that will definitely be noticed. If you can show you are a good communicator and have good rapport with clients, you will have a lot of client contact by this stage- you will have your own client base of small accounts which you will contact via email and phone, and you will also go with your boss to meetings with larger accounts – if you're lucky, after a year you could be taken on marketing trips to Europe / US.

Once you've been there 18 months you can probably look at taking your own coverage, likely smaller stocks in the sector. Common misconception is small = bad. Not true. 40+ analysts cover the big blue chip companies. If you initiate on a small

Beyond this it's taking on more / bigger stocks. Maybe someone above you will leave- if you're at the appropriate experience level this can be a great thing to happen to someone with 3-5 years experience… people can find themselves covering a range of pretty major stocks because their boss left and they already had good rapport with the client base.

Now to answer your actual question… again, you get out of it what you put in to it. Between earnings, you will (a) put out research on your own stocks and (b) help your boss with his. If you want to work 18 hours a day, you can put out a lot of good research. Generally you would do I would say 1 big piece per quarter, either on a company or a sub-sector within an industry. Then you will likely do 1 or 2 other shorter company update notes which give clients food for thought. So that would be in terms of the actual research you are publishing (though of course depends on team, some will do more some less). Then aside from that, yes you will definitely be taking a lot of client calls, and if there is a big piece of news you will be phoning round to discuss with clients the likely impact (your view may change by the 10th call because a client has given you food for thought). You may even publish a note if the piece of news is a material game-changer. You will also field client requests- if a big account gives you some sort of data-gathering exercise you will do it to the best of your ability and hopefully get rewarded via commission and votes.

I covered 15 stocks, either as a lead analyst or support analyst.

Jul 10, 2014 - 11:50pm


No problem. I will also do another one in 6 months or so when have been at new shop for a few months.

Looking forward to that one. Great AMA thread.

Under my tutelage, you will grow from boys to men. From men into gladiators. And from gladiators into SWANSONS.
Jul 3, 2014 - 1:15pm

Standard AMA Questions:
1. Can you provide some information about your background and how you broke in?
2. Thoughts on CFA?
3. In regards to the BB ER interview process, what made you stand out?
4. What would your career trajectory be like if you stayed in ER?

Jul 8, 2014 - 2:45am


Economics major at top school. As I mentioned in an above post I got interested in investing just before university and started reading what seems to be the standard reading list when people first become interested. Applied for internships at every asset manager in existence, whether traditional AM or HF, just by sending cold emails, to no avail. Also however went through the internship recruiting for BB's in ER (which I saw as next best thing), and got internship in ER where I work now. Was a great internship, was a few years ago now but I remember enjoying it even though found it initially hard work. I wrote a post somewhere about how to impress as an intern, I'll paste it when I find it- but to summarise one absolute key in my view is to make yourself as visible as possible. There's a lot of people who have plenty of potential but are just invisible and people won't go out of their way to see if you are doing a good job/ are capable – you have to stick your neck out and show them instead… i.e. arrange to sit with / get coffees with as many people as possible, so that there are more people to vouch for you / remember you when they sit round a table and decide who will get an offer and who won't. I got the full time offer after internship (if you intern in ER you will likely have a project where you present a thesis on a company – that is very key) and came back after finishing final year at university.


My personal opinion is the CFA is great if you are in ER, whether buy or sell side… and I would say it is quickly becoming almost necessary for the buy side. It CERTAINLY would not hurt to get it. Yes, it is a big effort. But it is good for 2 reasons… (a) you actually learn a fair bit in my view, it is a v comprehensive syllabus (b) the events they put on are actually great even though not many young people seem to go. In the major cities you have weekly events with the CFA society – it would be a great networking tool for example if you were looking to move to the buy side.
But basically to answer your question, I think especially if your firm will pay for your exam fees and training, the CFA is really a no-brainer (in my opinion). Yes I understand it is a big investment of time, and that you must spend c.300 hours (v realistic estimate btw) for each level – but in my opinion it is completely worth it, even if it is a pretty painful Janurary – June period for 3 years.

Standing out in interview process:

Interest in markets. It's the key. Everyone will have a great academic profile, have all the extra-curricular activities, etc. But you'd be surprised how many people (e.g. interns we currently have) can actually have a 30 min conversation about the markets. Or answer a simple question, like what is the EURUSD exchange rate. If you are genuinely interested it will come across and not go unnoticed… after 30 mins conversation you know if someone is faking an interest or not. My advice? Spend the money on subscribing to a top financial publication like the WSJ or the FT. Get into the habit of reading the app when you are standing in a queue, on the subway, etc. Just get into the habit of reading it… it's interesting. And if you do that, and develop a genuine interest, you will stand out vs. someone who just buys a copy of the WSJ the day before the interview and spends the 30 min before the interview memorising the level of the S&P, the price of oil, and key exchange rates. You can tell the two types of people apart straight away…

Career trajectory if stay in SS ER:

Continue to ramp up coverage of stocks and progressively become more senior… so for example someone in the team may leave and I would take on his coverage… that is an inflection point because you instantly become a more important figure internally and externally. Continue to develop the client relationships, get voted, and develop your name in the sector. If you are a ranked analyst, you'll get paid welll. Assuming no massive shake up in the industry and big reduction in capacity, you would be hiring an associate once you reach a certain seniority. That associate would free you up to spend more time with clients. So really the job I would argue would not change that much. It would however involve more and more marketing/ client meetings, and less and less writing own research.

Jul 8, 2014 - 2:59am

My post i mentioned on advice on how to stand out as an intern/ grad:

If you have no finance experience I would also purchase a modeling course e.g. WSP before you start. As you say they will want you to hit the ground running and you would impress if in your project you can turn in a solid model - a lot of sell side models are very poor and this is something you can do in advance that will stand you in good stead. I have seen WSP and I definitely think if you have no modeling experience it is worth the money. Presumably your internship will only last 2 months or so and you wont want to waste any of that time catching up on modeling. It will allow you to benefit as much as possible from the experience if the modeling box is ticked in advance.

Agreed with HFer post above - whatever you do stay humble and do not pretend you know more than them - in saying that make sure the work you present is as good as possible and it will not go unnoticed... Be confident, but not arrogant.

I would also make the point to take every opportunity to get coffee/ drinks with as many people as possible and show you are a social person who they would actually want to work alongside... this is very important.... every year when we have interns, the ones who say nothing and keep to themselves will be overlooked... that is not to say you should be brash, just take every opportunity to socialise and get to know as many people as possible informally. This does make a big difference when the internship period is over and people meet to discuss who they liked. Remember of course that this is also a part of the job itself - research is a sales job, so not only will this mean the people assessing you are more likely to rate you if they like you as a person, but to be honest if you cannot socialise and interact with people sell side equity research is not for you.

In other words, "be remembered"... this is very important. The ability to do a good job is clearly very important, but to the point where it is essential. Because so many people can produce good work. What you need to do on top of that is to be remembered and give people a reason to vouch for you when the time comes to choose who is coming back and who isn't.

Jul 13, 2014 - 2:06pm

I have, at least twice where I currently am. And importantly, they have both done very well and are ramping up strongly. Both came in as Associates (i.e. more senior than analyst, not the other way round) after 3 years in consulting.

I think absolute key for this sort of hiring is network... I know a lot of people who have lateraled in from knowing someone - that someone mentions that there is a spare position in a team, and just put the person's CV in front of their team head with a recommendation for them. Happens all the time....

If you have specialised in some industry in consulting (e.g. oil and gas) and there is an associate position free in the oil and gas team, you should be in with a very good shot on paper. However, both the consultants i mentioned above did not have any specific background in the sectors they are now covering. Why may have they done well? Well in ER being able to present effectively is very important. So the written research tends to be well-presented, and they tend to be able to communicate well when talking also.

What can you do as a consultant to maximise your chances?

(1) CFA. I would put this top with no doubt. Shows (a) you are serious about moving given CFA really only widespread in research and (b) you will have a very good introductory knowledge that will leave you well placed to hit the ground running once you start.

(2) Network as much as possible, as per second paragraph. First step, definitely classmates. I'd be surprised if no-one at all was in either sell side or buy side research. Second step, headhunters. Get in touch with all of them and communicate your intentions to move, why you are so keen to move, and why you would be good at it. You should emphasise the consulting experience as a differentiating factor. Whilst it is possible as i say, not many people do have this experience.

(3) The personality and fit will likely be very important factors from what i have seen. On the sell side you are constantly talking with clients, sales, and your own team. You have to come across as someone that people are going to be happy working alongside. This is also one reason why being recommended by a classmate will work in your favour.

Jul 3, 2014 - 2:47pm

1) How long does it take for most associates to become analysts in ER? On LinkedIn, and in my prior firm it seems like most people do quite a bit of moving around, possibly an MBA, and 4-8 years before becoming an analyst.

2) How hard is it to get to a long/short equity fund as opposed to long only AM? Is an event-driven/merger arbitrage fund possible?

3) I see a lot of senior industry guys make the move to ER analyst, why is this move common? It seems like hours would be worse in ER than what I see industry guys working.

4) What other options were you considering besides AM? What else do you think would have been possible?

5) What were your hours like?

Jul 13, 2014 - 2:28pm

(1) 4 is definitely a realistic low end of the range, though probably more like 3. Upper range... bit lower than 8, more like 6 or 7 I'd say.

(2) Wouldn't say HF or AM harder than one another. What I would say, is there is a very big difference between the tiers of each type of fund... more than i would have expected. If you want to just move to buy side as soon as possible and dont care where, you could move to a bottom tier HF or AM very easily. Top tier? Different story. Networking will help (did in my case), a very solid profile will be a given, and there are few positions available. Merger arbitrage / event driven... I'm sure it is, but the vast majority of people i have seen move across has been to fundamental equity.

(3) I would argue this isn't that common.... but it definitely does happen, and the reason for that is because from a client perspective they are talking to someone with a unique insight and expertise in that industry, rather than the average analyst who started in finance from the start. Yes, he will know the industry very well, and will have been on a lot of site trips to see assets, but this is often not the same as a guy who may have started out on a WalMart management program, then spent a few years running a store, then spent a few years in HQ doing strategy. Those guys can be analysts because industry knowledge does not translate into being able to spot profitable investment opportunities. But if they can adapt and have an ability to do this, the industry expertise will pique a lot of clients interests and they will have a meeting with this guy which will give them a very different type of insight to the rest of the street, who likely all come from different backgrounds and have less obvious differentiating factors. So the industry guy will have a clear USP vs. the competition, even if he does not provide profitable ideas he can make clients feel like they are getting a more comprehensive / inside view of the industry. You do not need to be excellent at all aspects of the job to succeed... it is fine if you get a reputation for one particular thing, whether that is stock picking/ modeling/ etc etc- and this guy is going to be known as the industry expert with professional experience in it.

(4) Not really, I've always wanted to do it. Perhaps HF, but does not appeal to me in the same way- though investment time horizons seem to be continually lengthening at HFs. Some sort of lateral move into IBD would have been completely possible, but personally had absolutely no interest at all in doing that.

(5) Outside of earnings season, i would call 7 a.m. to 7 p.m. average. In earnings season, I would call 7 a.m. to 9 p.m. or 10 p.m. average. Latest I have been in the office has been 11:30 p.m. When I was starting to take on my own coverage, I was working every weekend. One thing you do need to consider is the CFA- the 300 hour estimate for each level is very realistic and perhaps conservative if you want to feel confident on exam day. This means your weekends will become dominated by the CFA, plus the evenings if you get off early, and you will have the feeling of working round the clock in the six months leading up to exam day. So overall, the hours are definitely manageable - crucial is there is much more predictability than IBD... in general you will have some big news or shock announcement that will require plans to be scrapped and work to be done, but in general you can plan your schedule in confidence. In saying that, you still do work hard by most peoples standards, and if you pursue the CFA your weekends will unfortunately disappear!

Jul 3, 2014 - 3:39pm

Thanks for doing this.

What industries within sell-side ER do you think are best for buy-side recruiting?

"My dear, descended from the apes! Let us hope it is not true, but if it is, let us pray that it will not become generally known."
Jul 4, 2014 - 2:43am

I would hesitate to give one sector in particular… what I would say is my preference was (and still would be) anything ex-banks or insurance. You actually have plenty of opportunity to go to the buy side in those sectors, but of course those are the 2 sectors where you are more pidgeonholed because they are not normal widget businesses… whether you are analysing Ford, Rio Tinto, or P&G, they will produce a product or service at a cost and sell it… the differentiator is having a better feel/insight into what is going to drive those line items going forward. As I said above, I think it is very possible to feel comfortable looking at a new sector of companies after only a month or so really. You won't have the full depth of knowledge that a specialist has after he has looked at it for 20 years, but you can get up to speed very quickly. I know a lot of people who have either (a) covered a sector for 3+ years on sell side and then moved to another sector or (b) covered sector A on the sell side and moved to the buy side to cover sector B. Therefore, the best sector should be the one you are most interested in- because you will be more motivated and therefore learn more, and the skill set you pick up will be more transferable than is perhaps intuitive.

Jul 3, 2014 - 3:50pm

Also, if one is currently in ER and has an ultimate goal of HF or AM, how helpful do you think a H/W/S MBA would be? While I think it would be an incredible experience, I'm almost worried that it would be looked down upon for being too conventional/unnecessary for this path.

"My dear, descended from the apes! Let us hope it is not true, but if it is, let us pray that it will not become generally known."
Jul 4, 2014 - 2:42am

I would say depends pretty heavily on the place, but in general in my view the one area where a top MBA would definitely help is traditional AM, i.e. the Wellingtons/Capitals/Putnams. A lot of analysts/PMs will have MBA's at these places, and depending on shop could almost be seen as a pre-requisite, if not simply a common denominator. For a HF I think again it depends on the type of place… you have funds where everybody seems to have an MBA, but in general I would say it is less important. An important question to ask is why an MBA might be of use in these industries – and one clear answer would be that it is a people business and how well-connected you are matters. At a big AM shop you will likely be having management meetings >3 times a day. So I think if you want to be an analyst at a big AM in particular, an MBA would in no way be looked at as unneccessary in my view. For sell side research on the other hand, I know very few people with MBAs- this does not mean it is a disadvantage to have one, rather it appears to be a less important factor for sell side recruiting.

Jul 3, 2014 - 9:10pm

1. Assuming you have your own private account, has your trading performance gotten better with more research experience?

2. If I want to do my own stock research, what are the best public sources of information besides the 10k? How would I know which fundamentals are significant?

Jul 7, 2014 - 2:47pm

It would of course vary depending on whether it is reporting season or not. Also by the way on whether you're marketing – i.e. going round a geography (e.g. US/ Europe) meeting with investors in a long series of one on one meetings and discussing your research and the broader sector. This is of course just full-time travel, with meetings all day then going back to the hotel, and is different to a normal day in the office. A said normal day in the office would depend on whether or not you are in reporting season. Roughly speaking:

Reporting season (for e.g. a company reporting at 6 a.m.)

5:00 wake
5:50 get to work
6:00 the company reports is results. Print off press release, check if any funny items, check where / if out of line with expectations. Probably get a couple of incoming calls from clients which take and discuss… will call traders to let them know the bottom line on whether the result better or worse than expected and whether anything has changed in our view. Ditto for sales.
6:30 – 8:00 start drafting a post-release note
9:00 – company will hold a conference call for about an hour. Sell side will ask questions to ensure the entire time is used, regardless of whether the questions need to be asked. Most will be generic, some will be insightful.
10:00 finish post results note and submit it for compliance review
11:00 note approved, send it to clients
11:00-19:00 business as usual (see below), leave c.7pm. If the company had reported after the market close, I would be leaving likely 9-10pm.

Out of reporting season

6:00 wake and go to work – read news on way in
7:00 get to work, coffee
7:00 – 7:20 check Bberg/Reuters news, if anything material then may need to write a note and/or call clients. But probably not.
7:30 – 8:00 may be a busy day because something has happened, if so will be talking to clients/ traders / sales during this time. If published a research note in the morning, will be on the morning meeting call with sales and will be fielding questions from sales/ calling clients all morning

9:00 – 19:00 "Business as usual".
- This could entail writing new research / carrying out said research. Could be reading industry reports, going through company presentations, talking to company, talking to people in the industry/ channel checks.
- It could mean initiating on a new company – you would speak to the company a lot during this time, whilst you are building the model/ getting your thesis together.
- You could get a random client request come in, say at around 2pm, and you spend the next hour doing that… this should be appreciated, and you will cc in sales to your reply to make sure they know what you have done for the account.
- You could have a conference call set up with a client, which could last an hour or so. This could be a teach in on a stock a generalist has not looked at before, or could be a discussion with a sector specialist who has covered the stock for 20 years and wants to get your view to either get a different opinion/ bounce ideas off you/ see if he is missing anything/ hear what his counterparts at other funds are saying. This last point by the way is one area of value you have as a sell side analyst – you speak to so many buy siders that you know what people analysing your sector are thinking, which is of value to other such people within the sector.

19:00 go home at this time on average. Most days go to the gym, Friday and/or Thursday will definitely get a drink. This could also be with a client by the way, on average you will likely see a client for a drink maybe once every week or every 2 weeks.

It would be rare for me to work a weekend during normal times... NB when initiating however i was often in, as there simply wasnt enough time in the day to do everything. When you are initiating if you want to ramp up quickly, you need to put in the hours... when i was building coverage I would say i was working from 7:00am to 9:00 pm every day, then doing say 9:30 a.m. to 4:00 pm at the weekend. Wanted to ramp up as quickly as possible and this clearly gives you the time to do so.

Jul 5, 2014 - 9:20am

I'm interning at a buyside shop and we rely on sell side models to some extent. However we often use the info in the sell side models to develop our own significantly simpler models (only a few major inputs and value drivers) for valuation as my manager believes that the sell side models often over complicate things and cannot be quickly updated when new data is released. Therefore rather than spending lots of time developing the most detailed model that will gaurentee to hit next quarter earnings results, we spend more time thinking about how the major value drivers will change over the longer period. In your view, do you think that many of the sell side models over-complicate simple matters and to some extent, having an extremely detailed valuation model actually destroy value as it takes too long to update and you may end up losing focus on analysing the drivers which affect value the most?

Jul 22, 2014 - 3:01pm

There are loads of sectors which I would potentially want to do / liked to have done. I actually really like Autos as it's very macro-driven but at the same time with plenty of differentiating factors between the companies within it. It's a good example of a sector where the share price performance of not just the sub-sectors (e.g. tyre manufacturers), but the auto manufacturers themselves, has varied completely by company over the last 3 years as a result of how the companies have performed/ executed on strategy.

Sectors I am (personally) less interested in include Metals & Mining. In a sector like that, yes there are differences in the strategies between the companies with regards capex plans/ cost savings measures, but in general it really does just come down to commodity prices because everyone knows management's capex plans and the cost structure of the mines they own. If you value these companies using a DCF, which you theoretically should, then it really does just come down to what commodity prices you are using in your model- and as such over time the share prices of the miners will generally track the blended price of the commodities they sell. Forecasting commodity prices is notoriously difficult, and having the valuation so dependent on a factor as difficult to predict as that makes me lose interest in the sector as an equity analyst.

Some sectors are seeing a load of M&A or new issues at the moment... tech and media are of course at the top of this list but healthcare is also seeing a lot of M&A... so these would be good if you are interested in sectors which are seeing constant change and shake-up. On the subject of healthcare, if you have a medical or biology background then this could be of interest as conferences such as ASCO are crucial, where the big companies announce their test results for key drugs they have in the pipeline- and i imagine this would be interesting if you follow these developments closely anyway due to a medical background. Plus a background in an industry may not just be interesting for you, but also it can/will give you greater credibility with clients than you would otherwise have.

The two sectors I really wouldn't want to do are banks and insurance because they're so different from all other widget-producing sectors. But that's personal opinion.

Jul 7, 2014 - 10:44am

First, would just like to say congratulations on your move onto the buyside. I'm interning at a large buyside shop right now and the culture is great. Really an invaluable post on an industry that is commonly under-covered here. Would really appreciate some potential insight on the following questions. Just to give you some background, I'm heading into sell-side recruiting season in the fall while currently working as a summer ER analyst at a large buy-side firm.

-How did you break into the sell-side role out of university and/or what was your internship experience leading up to the offer?

-I'll be spending several days this week at BB "buyside intern days" in which they'll have MDs presenting on various macro and sector-specific topics, followed up with networking events later in the days. How would you suggest standing out to analysts that will be crucial to getting my resume pulled in the fall?

Really look forward to your insight.

Jul 7, 2014 - 7:44pm

Also, great timing with the post! Quite a few people will start their application process in a couple of months, with me being one of them.

1) What are your "insider" thoughts on where the industry is going ? You hear about the new regulation, ER bonus cuts and other such "events", one can't help but ask - is it a sinking ship?

2) For someone interested in public markets and in eventually breaking into the buy side, do you believe that sell-side ER after university is still a valid choice these days, especially as compared to the mainstream investment banking?

3) While you were in, were you given headroom for, as silly as it may sound, actually thinking and being creative in the work?

Thank you very much!

Jul 13, 2014 - 1:49pm

To be honest just read as much as possible, and speak to as many people as possible if you can.

Source examples:

(1) Annual reports and quarterly reports
(2) Company presentations
(3) Earnings call transcripts, to find out what the market is focusing on and therefore what are the important points.
(4) Other sell side research notes if can, again to get a feel of what sell side thinks are the relevant points
(5) Company website

Your team should subscribe to at least a few key publications for the industry. For example, Diio Mi is the crucial airports/ airlines data which every half decent bank covering the sector will subscribe to. Each industry will have its own, or some may be more general such as WoodMac. If your team subscribes to this stuff, a consultant or analyst at such a place should be willing to spend at least some time on the phone with you to give an overview of the industry.

On top of this, if you also have access to industry insiders/ experts such as through GLG, then that is of course very useful.

Once all of these sources have been used to get you to a certain level of knowledge, you then get google into the equation to plug any gaps and deepen the knowledge you have acquired from the above steps / explore a particular issue further... amazing how much you can find and how diverse the sources are which can be very useful indeed.

Jul 9, 2014 - 1:42pm

A couple of add-ons to a great thread:

1. Analysts/firms are always looking for a pool of quality potential associates. Finding good people is quite difficult. If you are interested in breaking in, do not be afraid to reach out (cold email etc.). If you do reach out, make sure you have your shit together. Know why you want to do ER, why xyz sector interests you, have some names in a PA and associated investment theses on each. You only get one chance per analyst.

2. As you get more senior your time increasingly becomes absorbed by marketing and client calls. A good analyst is meeting with his/her best clients once a quarter/half and is on the phone with them at least once a month (ideally more). A typical non-earnings note is usually accompanied by 20-30 VMs to your best clients (more if you are using a robo-dialer) and 5-10 live calls. You also spend a good amount of time crafting personalized emails and thoughts to your better clients to try and differentiate.

3. You are on the road A LOT, particularly as your list grows. You are marketing at least one week a month, attending analyst days (both public and pre-IPO), attending industry conferences (as many as possible), etc.

4. Due to 2 and 3, quality associates are huge assets (at least in my view) and a good analyst/DoR is always cultivating potential candidates for his team. Associates generally are doing a lot of the writing and modeling, due diligence calls for new issues, etc.

5. You can still make a lot of money in this industry, just not as much as you could before.

Best of luck to those interested in breaking in and feel free to reach out.

Jul 11, 2014 - 2:26am

In your time in research, did you see many people come in from banking? I am currently exploring the move to do BB research from a top industry IB boutique - the end game is to work at a long/short value hedge fund. Trying to weigh the pros and cons of moving into research and wanted to get some insight into that.

Jul 12, 2014 - 12:35pm

Definitely, you see people move across all the time. (and vice-versa, but the latter is less common). If the boutique is top as you say, it shouldn't be too much of a problem... so you would certainly have the ability to move across into a L/S hedge fund after doing ER for 2-3 years or whatever following your existing banking experience. You would be able to move 2 years in or 5 years in, definitely.

In terms of whether you should or not, I would say 2 things. (a) you'll probably have a better lifestyle than your current job I imagine, and (b) I would argue (more improtantly) you are going to get a much better understanding of the markets being in ER than banking. I'm sure you will have pcked up good technical skills and solid modelling in your current role, and combining that with 2-3 years of working in ER where you are researching public companies/ talking to clients doing the same thing all day, you would have a good broad skill set and be well placed to move across in my view. Plus good networking with people at L/S funds compared to your current networking opportunity with them. You speak to them all day. Bear in mind that when you go to a L/S you need to perform v early on. If you have had no experience looking at public equity markets it could be more difficult to do this. If you had 2+ SS ER experience on top of your banking experience I imagine the learning curve could be less steep once you have the pressure of having to come up with profitable ideas. Of course, plenty of people go straight to L/S HF from IB without this ER stepping stone, however my personal opinion is that it would broaden your skill set and give you a better understanding of public markets, leaving you better placed. In my opinion.

Jul 13, 2014 - 5:17pm

Thanks for doing this, I have a few questions:

1. Where do you see the ER industry going? More and more buyside firms have internal research to cut costs; do you see consolidation for sell-side ER positions?
2. Did you get recently hired through connections you made with clients at your ER job?
3. Specifically for your team: How long does it take to prepare a report? How many pages is a report? What are the 3 most important parts of a report?
4. Last one: if you had to pick a team of 7 people, what specific finance proficiencies would you look for? (Example: financial statement analysis, valuations, industry trends)

Thanks again!

Jul 22, 2014 - 3:40am

The big difference of course is during the interview process for this job I had 3 years of experience whereas when I was going through the interview process for sell side ER that was for an internship as I was still at university – so at that stage I had zero formal finance experience. So the expectation was clearly going to be different from their side in terms of what they would expect me to be able to say.

In saying that, in the sell side interviews as I said in some above posts I had been investing for 2 years at that point and was pretty well-read, so the interviews were still mainly concentrated around markets and investing ideas. With of course fit questions etc also. On the buy side my interview process was really more conversations about markets and investing ideas I would say… there were certainly no brain teaser questions or anything like that. I would therefore say overall the buy side process was more focused on the markets but less formal – whereas for my SS interviews I felt as though there was a checklist of boxes which needed to be ticked, at the BS interviews I felt it was more them getting a feel for who I am as a person and how I think as an investor, and did not feel that such a checklist existed. This was done by them simply having several hours of conversation with me and talking about a range of subjects. I refer you to my point on reading as much as possible- we discussed subjects ranging from accounting (for example methods of earnings manipulation and examples I and they have seen in my 3 years, accounting adjustments, etc), China (talked a lot about china actually), other Emerging markets (India and Indonesia in particular given the elections in those countries), the US and Europe.

However, the less structured process I have described is just my personal experience and not necessarily indicative of how it is at other shops. I know someone for example who recently went through interviews at a very similar shop in terms of size and strategy, and felt the process was very formal and had for example brain teaser questions which I never had. So I imagine I would vary by place depending on what they think the best way of choosing a candidate is.

Jul 14, 2014 - 11:14am

High quality OP and thread, thank you.

Based on your experience, I'm guessing you are a junior buy-side analyst. Curious about what comp range is like for top AMA junior and senior buy-side roles.

I can say that top HF L/S (Citadel etc) can all-in comp Senior Analyst between $500k decent year - $1 MM stellar year. What are you seeing range wise on your end as junior and senior analyst?

Thanks again

Jul 15, 2014 - 12:36am

Thanks a lot for this AMA, and in particular for the advices on the job. I've been interning part-time for the last 6 months and there are some of the things you developed that will definitely help me improve.

Jul 22, 2014 - 3:35am

Thanks. The shorter answer is I feel it is less stressful than the sell side but it would depend on the person. One crucial point to make here is the difference between a typical HF and a typical long only. I am at the latter, and in my opinion the stress level is lower than on the sell side. At a HF however, I suspect it would be higher– I know various people who have moved to a HF and have told me the stress level is pretty incomparable.

Of course the key is that on the buy side your performance matters whilst on the sell side your stock recommendations are only one aspect which you are judged on and hence matters a lot less. In a typical HF however where the time horizon is going to be much shorter than a big AM there will of course be more pressure because your monthly performance will matter. At a big AM the time horizon of course much longer and it is instead about long term capital allocation. All things being equal, a short time horizon should generally mean more stress.

On the sell side the stressful aspect is the volume of work you need to churn out to keep up with the competition and the tedious aspect of writing pages of research if it is more commentary instead of deep analysis. This is most notable during reporting season- whereas on the buy side you will still be going through results and changing your forecasts if necessary, the key is you focus on what really matters, i.e. identifying straight away whether anything has materially changed and making the appropriate adjustments. On the sell side however you will publish a note following the result which is a lengthy process- over the course of a reporting season you will be writing hundreds of pages of research. However this will also be clear any time where there is a big event within the sector – for example M&A or some regulatory change. On the buy side, yes you will still do the work in analysing the consequences of what has happened. But on the sell side you will need to write and publish a research note on top of this– as with reporting, the frustrating point for me is the attention that needs to be paid to wording, presentation and the like- and the procedure of getting the note checked by compliance and supervisory analysts before the note can be published. This is a waste of time, and I would much rather spend the time doing deeper analysis of the implications which is much more value add.

Jul 20, 2014 - 5:22pm

Do typical hours depend on what kind of firm you're at? (i.e. BB vs. Boutique)

Jul 22, 2014 - 3:35am

I have no idea on hours at boutiques - however what I can say is I have friends at most BB's doing ER- and I can say that the hours vary a LOT between (a) bank and (b) team within that bank. On top of that (and I would say more importantly) the hierarchy and responsibility as a junior varies considerably also between shops. I know two people at GS in particular who have given me very negative feedback on their experience because the hierarchy is so pronounced that they have had little to no client contact, and their contribution to the written research is minor and low value-add. Plus both are working very long hours. Both are in the office most weekends and doing 14+ hours a day during week. Of course this can simply be sample bias. But the message is that the hours will vary considerably depending on your team / bank – and I guess that's luck of the draw.

Jul 19, 2014 - 11:48am

Thank you so much for doing this Saracen.

My question is pretty straightforward: is there a possiblity for an auditor (big 4), who has a clear interest in finance and markets (CFA L2 Candidate, has a habit of reading the FT everyday...) to make the jump towards ER?

Jul 22, 2014 - 3:32am

Yes. I have seen this and whilst the transition is not "common" is not exactly "rare" either. So the key is yes it is definitely possible and if you put in the effort you should be able to move across. Have seen it happen plenty of times.

Emphasise the audit experience as something that should (be humble about it) give you a very deep understanding of accounting which could differentiate you vs other candidates. Loads of chartered accountants move to equity research. In saying that, the CPA itself will by no means be a ticket in, so your interest in investing needs to be made crystal clear to the people interviewing you. Primary on the list of questions to prepare an answer for is why you started in accounting and not finance if you are so interested in the markets. If the reason is as simple as not receiving an offer from an IB but you received one from a Big 4, then that's perfectly fair. If you put in the effort and apply everywhere you can you should get interviews for sure – what you need to then do is make sure your interest in investing comes across. As a caveat to this though, note that "interest in the markets" is important but there are a load of other factors also. First and foremost don't forget ER is a sales job. So make sure that you show to them you have the appropriate people skills for the job also.

Jul 27, 2014 - 2:11pm

Thanks for the thread man. I am an associate on the sell-side in NY and am considering taking a position back home in IB, but I have only been in my role for 9 months. Should I expect to burn bridges if I leave? Does this happen a lot? Any feedback or comments would be great either about your knowledge or experience with such issues. My end goal is to get to the buy-side at a small shop at home. I initially wanted the Wall Street experience but am feeling that I'd prefer to be at home. Thanks

Jul 28, 2014 - 4:47am

Bridges in general wont be burnt as long as you do what is expected when you leave... If you have impressed them then it is generally possible to come back later if things dont work out (nb that is just from my experience/ other peoples where i am, could be completely different elsewhere).

My point though is would you really want to go to IB if you want to go to the buy side as your end goal... If you have 9 months as an associate on sell side, bear in mind you will be fully eligible for buy side roles after another 12-18 months, and belng in NY now will not stop you going home... If you go to IB at your stage you will start as a first year analyst and have a significant lifestyle hit most likely. From a buy sode perspective (assuming you mean AM or HF) it will not look like tjat really is your end goal if you move now to PE. At your stage with 9 months on sell side my opinion is you sjould stay for another year and then try amd move across if that is your end goal. Moving to Ib now is a deviation from thr end goal and a reset of your career.

Jul 29, 2014 - 9:56pm

More of a random question, but lets say someone's almost two months into their job as a sell side associate and they're supposed to take the series 7, 86, 87 within the first six months on the job. Unfortunately, they're only one chapter into the series 7 so far since they've been so busy with work - how much time does it take to study for all three exams and what advice would you have to offer for this person?

Much thanks..

[quote=rufiolove]When evaluating whether or not to post something on WSO, I think to myself, "would an idiot post this" and if the answer is yes, I do not post that thing...[/quote]
Jul 30, 2014 - 5:01pm

In your opinion, what's the future (next 5-10 years) of sell side ER? I've heard many US-based banks are outsourcing much of the data crunching (excel models, etc) to India and other places, and the main role of the Western-based analysts is just providing as much "edge" as possible to the buy-side clients in exchange for trades (fees). Do you think that's an accurate assessment? It seems like most ER sell side analysts spend much more time on the road and chatting with clients privately rather than worrying about how accurate their earnings models are. What are your thoughts?

Jul 31, 2014 - 5:39pm

Been taking in all the information, lots of good bits. One thing I haven't seen many comments on is exit opps outside of hedge funds/AM.

Could you provide some color on exiting to industry? Can you only go to companies you cover? Or are you able to exit into companies that are outside of the group you cover?

Jan 24, 2015 - 3:40am

This does happen... i can name plenty of sell side people in particular who have gone into industry - sometimes this can be as IR for a company in the sector (generally for someone at MD level looking for a somewhat easier lifestyle), but have seen younger people do it also, but of course this will generally be for smaller companies.

In saying that the key exit opps are HF and AM. But this i would argue is because for a lot of people doing SS ER, those 2 industries will often be the 2 most desirable things to go into - or indeed the reason they may have started on SS in the first place. So although most people will leave to do HF or AM (if they can, not easy to get the good jobs!) people do leave for industry also.

In my opinion you learn a lot of skills in the SS ER role which should set you up well to enter industry if you so choose... you learn to communicate, both written and orally, you learn about business and how a company works, you learn how to work hard, how to manage time... if you do the CFA I would also argue you would have a quantifiably decent amount of accounting knowledge... and of course the big differentiator is that you understand how the public markets work and what's important for investors when looking at companies in your given sector - which is valuable knowledge for a company, the stock price is something senior management pay a massive amount of attention to. If you roadshow management for example on the sell side you will see they will check the stock price between every meeting.

To answer the last part of your question, the obvious exit would be to a company you cover, or to a company in your sector but one that you don't cover - however because of the general skill set you pick i described above i would argue you would have a good experience and skill set for a lot of corporate roles, regardless of sector.

Aug 6, 2014 - 4:24pm

What is the relationship between ER and IBD - are analysts involved in any phase of M&As/ IPOs/ SEOs? Deriving from this - is the move from ER to IBD industry coverage do-able/common?

Also, as a few others have asked - could you give some flavour on the pay in ER (even as compared to say IBD, if we are on the topic).


Jan 24, 2015 - 3:45am

Close relationship depending on sector. In tech for example, or any sector seeing a lot of primary activity. A sell side research analyst will often be asked to cover a stock by IBD because IBD wants the primary business - depending on the workload of the research analyst this can sometimes cause problems. But yes in a lot of sectors there is plenty of overlap - whereas in sectors which are not seeing any banking activity you can easily go 3 years as a junior without having ever spoken to IBD.

The move from ER to IBD is wirthout a doubt doable. Have seen it several times. It's not common though. One reason i would argue is once you are at an experience level where would make sense to transition (2-3 years) you would often be starting to cover your own stocks and gain transaction with clinets, which can be very satisfying - and people may not want to interrupt this and start from scratch. But yes i have seen the transition - and particulary in the M&A heavy sectors, or if an analyst has been working closely with IBD and has shown quality.

On pay - base will be the same, bonus will be less - bonus in first few years can be disappointing, depending on how many stocks you cover - if you don't cover many early on, your bonus will be disappointing if pay is your number 1 priority... however would note that the early years are all about the learning experience, ER is a very good place to learn and you can potentially have some very attractive exit options where you can apply that skill set and be paid for doing so.

Aug 10, 2014 - 2:54pm

As a follow-up to above, what exactly does it mean when the ER analyst goes over the wall?

Jan 27, 2015 - 12:05am

Hey @"saracen", thanks so much for the post! Definitely one of the best I've read in a while, and bookmarked for sure.

My question for you is related to internship interviews. In the "pitch me a stock" question, what financials would you expect a potential intern to include and discuss? I've got a 1st round interview on Thursday and my overall pitch is based strongly on a variety of important macro / micro factors relating to the company. I know adding financials is what I need to do, just not sure what!

Thanks :)

Jan 27, 2015 - 4:03am

No problem.

The more the better, but the key financials you should definitely know will be
(a) the key P&L items- top line revenue, EBITDA, net income (and therefore operating and net margins)
(b) cash flows - FCF, capex outlook, CFO
(c) key B/S and leverage metrics - net debt, net debt/ebitda, D/E
(d) valuation metrics - P/E, EV:EBITDA, FCF yield, dividend yield - and where these are vs peers
(e) some returns metrics - ROIC, ROE etc

But the key would be just immerse yourseful in the stock and these key financials will (or should) naturally follow - i think the key here is not just to memorise certain figures, but actually try to understand what is going on... in an interview situation if you try and just memorise the numbers that is not the right strategy - much better to have the operating margin out by 1% but understand roughly what it is, what the trend is for it, and why the trend is doing what it's doing. Much better to have the ROE number off by a few percent but be able to explain its been inflated due to high leverage and a big tax shield than being able to cite it to 1 decimal point but not being able to explain why it is that number. I really think this is the key for these interviews - focus on the understanding.

Good luck!

Feb 2, 2015 - 6:07pm

My 2 cents on the valuation question:

I believe there is some qualitative reason for using 2020 EPS: say the CO is undergoing some changes and is expected to reach the "new" normality by 2020.

With regards to discounting, the numerator in multiples is usually at valuation date (i.e. Current equity value/ Forward EPS) and hence the equity valuation that you obtain by multiplying the forward EPS (in your case 2020 EPS) with the multiple is actually current and does not need discounting. Hope this helps.

Feb 2, 2015 - 6:07pm

My 2 cents on the valuation question:

I believe there is some qualitative reason for using 2020 EPS: say the CO is undergoing some changes and is expected to reach the "new" normality by 2020.

With regards to discounting, the numerator in multiples is usually at valuation date (i.e. Current equity value/ Forward EPS) and hence the equity valuation that you obtain by multiplying the forward EPS (in your case 2020 EPS) with the multiple is actually current and does not need discounting. Hope this helps.

Feb 4, 2015 - 4:42am

As per the rookie's answer, this will most likely be an early stage company which is going through a long investment cycle - it may not be making a profit or genertaing any cash for the next few years which makes it impossible to use a multiple of next years earnings. And by 2020 the co should be at a normalised earnings level. However in saying that 2020 is a long way away to be using a p/e multiple and discounting back. Depending on the company in question this may or may not be appropriate - but for a company entering a long investment phase e.g. a single-asset E&P, a DCF is going to be the more common way of arriving at a target price. So applying a multiple to 2020 EPS may or may not make sense - it would depend on the company... but of course that valuation is going to have a wide bound, because not only are you forecast earnings 5 years out but you are also discounting back at an arbitrary discount rate.

Feb 4, 2015 - 4:37am

It's ok - it doesn't have the brand of the bulge brackets clearly and it's not at all in the same category as Bernstein, but they are a decent enough research house. If you get an offer there and you want to do ER then you should take it- however if you also had BB offers I would advise you to take one of those instead, all other factors being equal (e.g. you really want to do one particular sector & exane have offered you it). You will have more options if you go to a BB.

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