Recommended Books for equity research

Tomroy's picture
Rank: Chimp | 12

I've locked up my internship for this summer as an equity research analyst intern. Now that I don't have to worry about interviewing and can put less of a focus on networking I would like to find a few books on equity research to read in my free time. Any good recommendations? Any books that you have read and really enjoyed or learned a lot from? Though my focus is on research, please feel free to recommend books that you just think are a great overall read as well. Thanks, I look forward to your thoughts!

Comments (98)

Jan 30, 2010

wall street meat and liar's poker

Smokey, this is not 'Nam, this is bowling. There are rules.

Jan 30, 2010

How is 'Liar's Poker' remotely useful for Equity Research?!

Look at Graham and Dodd's Security Analysis book, as well 'A Random Walk down Wall Street' for the nuts and bolts of Technical and Fundamental Analysis.

Jan 30, 2010

double post

Jan 31, 2010

listen, i am pretty sure an intern is not going to want to read graham and dodd for a summer internship. it is better to get the gist of what working at an investment bank is all about rather than learning the intricacies of valuation.

... he also said, "please feel free to recommend books that you just think are a great overall read as well"

Think before you speak.

Smokey, this is not 'Nam, this is bowling. There are rules.

Feb 1, 2010

I think you'll find he asked for 'books on Equity Research'...Liar's Poker is not much to do with ER, face the facts, it's an autobiography essentially, about somebody who worked in Sales.

Jan 31, 2010

David Einhorn's "Fooling Some of the People All of the Time"

Feb 1, 2010

House of Morgan, Den of Thieves, Liars Poker, When Genius Failed all books that are not bad to read unlike the Graham books. Thats if you just want casual reading books otherwise get CFA books

Feb 1, 2010

maybe you should consider books on fin modelling, and read reports and recommendations by other research analysts..

equities research is more about selling your ideas, so get to know how these researchers market their ideas

Feb 1, 2010

Not sure if anyone has mentioned this one yet but 'Confessions of a Wall Street Analyst' is a great book for research. That's defintiely one you'll want to pick up.

Feb 1, 2010

McKinsey puts out a book called Valuation that's pretty good.
Benninga has a financial modeling book if you want to sharpen up your Excel skills.

Damodaran has put out some books on Valuation.

The Intelligent Investor, Security Analysis, or the Interpretation of Financial Statements (all by Graham).

Feb 2, 2010

Thanks for all the responses and suggestions. Once I read them I will get back to you with my thoughts!

Feb 15, 2010

Take a look at "Applied Equity Analysis." I just ordered a copy. Supposed to be a very practical book from someone who worked in sell side research. I was debating between this and some others, but will probably read this and then potentially dive into either a) Security Analysis, or b) Steven Penman's financial analysis textbook thereafter. If anyone has any thoughts on which to choose, it'd be much appreciated. Both books require very very many hours so I'm still wrangling over what to go with.

Feb 25, 2010

I'd recommend "The SuperInvestors of Graham and Doddsville" over "The Intelligent Investor" simply because it's a quick read and gives a good overview of what value investing is about. I would avoid "The Intelligent Investor" for now because it's enormous and you need time to chew over and digest what Graham is saying. You should definitely read it, but when I tried reading it before my internship it gave me an enormous complex about how much I didn't know :-)

http://www7.gsb.columbia.edu/alumni/news/hermes/pr...
I don't think any one's mentioned Buffet's letters, but you should definitely look at those if you want to do some reading. One letter is about 22 pages, so it's good for reading on the go. Man's got style.

Feb 26, 2010

Confessions of a Shopaholic!

LOL. I'm reading Confessions of a Wall St Analyst right now, and it's pretty interesting. But the landscape is definitely different now... sigh.

Feb 26, 2010

Went with Rosenbaum and Pearl

Feb 26, 2010

For general equity research, assuming you are just building a foundation, I would recommend any Warren Buffet related books. One that I enjoyed and has helped me a lot is "A Random Walk Down Wall Street" mainly because its current.

If you are looking for specific books dealing with valuation, I am halfway through Jim Kelleher's book "Equity Valuation for Analysts and Investors." Some things, particularly in the beginning, have gone over my head but it is a great and relatively simple book that walks through DCF, multiple method, and ratio analysis.

Recent College Graduate

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Feb 26, 2010

James Valentine's Best Practices

It's one of the better ones around for practitioners and is apparently updated annually or so (can't verify this as I bought the first edition and not going to buy another copy for the luxury of looking for updated material). I keep this one on my shelf in the office.

Note that I said practitioners because a big part of the book is about workflow and process. It may not be that applicable for an outsider, so to speak.

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Feb 26, 2010

Margin of Safety

"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."

Feb 26, 2010

Great, thanks everyone! I will look into your suggestions.

Feb 26, 2010

Agree with margin of safety. I would also try to find some initiation reports and comb through those.

Feb 26, 2010

Any idea where to buy Margin of Safety? I am struggling to find an affordable copy.

Feb 26, 2010

Download the pdf, print it if you need to (should be slightly over 100 pages, double-sided).

Feb 26, 2010

deleted

Feb 26, 2010

S. Benninga - Financial Modeling
Rosenbaum - Investment Banking
J. Valentine - Best Practices for Equity Research Analysts

These would probably cover all you need to know. ER modeling is not THAT much different from IBD modeling.

Feb 26, 2010

Valentine's book was recommended to me by a #1 ranked analyst at JP Morgan as the best book to read before entering the ER field.

Feb 26, 2010

It is really good, but some of the advice applies for the 'Analysts' (i.e. the lead guys/sector heads) vs. 'Associates' (i.e. the junior guys). Regardless, definitely worth a read as it covers everything from how to interview company management to Excel-specific stuff.

Feb 26, 2010

One Up on Wall St. by Peter Lynch
Largely written for buyside investing, but principles apply nonetheless.

"Success means having the courage, the determination, and the will to become the person you believe you were meant to be"

Best Response
Feb 26, 2010

//www.wallstreetoasis.com/forums/er-modeling-test-1 .... check my post in this link - the links in my post will be more important than the other stuff i wrote -- the stuff in this should help you in the short term

do the CFA - should be good for the long term but you can learn ER stuff without it

below is a list of books ... My personal favorites are:-
1 McKinsey Valuation
2 Financial Valuation: Applications and Models
3 Financial Shenanigans
4 Intelligent Investor
5 How to Read a Financial Report: Wringing Vital Signs Out of the Numbers (there are other similar books by Mariusz Skonieczny & Thomas R. Ittelson - without being able to analyze Financial Statements and the notes to the statements everything is pretty much pointless

Books - these books are for the long term and sort of financial general knowledge
1. Financial Risk Taking: An Introduction to the Psychology of
2. Currency Wars - Rickards, James
3. Damodaran - Investment Fables
4. Taleb - The Black Swan - The Impact of the Highly Improbable
5. Antifragile Things That Gain From Disorder
6. Laiou - Morrison - Byzantine Economy
7. Wiley Behavioral Finance and Wealth Management
8. Accounting Shenanigans
9. The house of rothchild
10.The Handbook of Business Valuation and Intellectual Property Analysis
11.the essays of warren Buffett
12.Damodran Investment Valaution 3rd
13.Security Analysis - Graham & Dodd
14.Adam Smith
15.Economics - Freakonomics - A Rogue Economist Explores the Hidden Side of Everything
16.The Bank Analyst's Handbook
17.Stocks for the long
18.Against the gods
19.Common sense on mutual funds
20.Irrational exuberance
21.Business Valuation - Shannon Pratt
22.The Handbook of Fixed Investments
23.Active Value Investing
24.When markets collide
25.McKinsey Valuation
26.The Real Warren Buffet
27.Global asset allocation
28.Investment Performance Measurement
29.The Handbook of Traditional and Alternative Investment Vehicles: Investment Characteristics and Strategies
30.3 Modelling Books:-
Building Financial Models - Tija 2nd
Wiley.Financial.Modeling.with.Crystal.Ball.and.Excel.Mar.2007
Financial Simulation Modeling in Excel + Website A Step-by-Step Guide
31. Quantitative Business Valuation
32. Models behaving badly
33. Restructuring Macroeconomics
34. Macroeconomics: Understanding the Wealth of Nations
35. Economic Development (11th Edition) (The Pearson Series in Economics)
36. Liars Poker
37. The Global Crisis Makers
38. When Genius Failed
39. The Investor's Dilemma: How Mutual Funds Are Betraying Your Trust And What To Do About It
40. Clash of investment cultures
41. The Economics of commmodity markets
42. Damodaran Investment Philosophy
43. Behavorial Investing
44. Financial Markets & Exchanges Law
45. Market Microstructures in Emerging and Developing Market
46. The Economics of Commodity Markets
47. The Future of Finance
48. Information Rules: A Strategic Guide To The Network Economy

General Direction Should be:-
1. Equity/financial modelling Modelling: 30,32 ---- for modelling I would also recommend youtube videos, WSO material, Macabacus, etc ... and do learn to Analyse Financial Statements
2. Valuation/Analysis: 25,8,12,31,10,28,29
3. Investment Philosophy: 3,23,38,42,40,17,
4. Investment Psychology: 3,7,20,43,
5. Markets products/regulation: 27,41,48,44,46,47,16
6. Economics current/classic/theory: 14,34,45,35,6,2,5,4,33

these books should be available on piratebay.com, 4shared, etc

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Feb 26, 2010

mind you though the financial modelling Book by Tija uses the debt plug for the financial statement projections .. i do not know why... the standard practice as I learned it, was to balance the projected Balance Sheet and the Cashflow Statements by checking the Assets/liabilities and their relevant cash flows

look for this video on youtube:-
Step 10_ Balancing the Balance Sheet - Completing Cash Flow
it explains the concept in a very simple manner

Feb 26, 2010

Have you personally read all of the above?

Feb 26, 2010

list additions

49.How to read financial statements - John tracy
50.Reading Financial Statements for dummies
51.Creative Cash Flow Reporting
52.The Financial Numbers Game
53.Financial Statement Analysis: The Practitioner's Guide
54.The Market Wizards
55.The New Market Wizards
56.The Hour Between Wolf and Dog
57.Reminiscences of a Stock Operator Jesse Livermore
58.Soros - The New Paradigm for Financial Markets
59.The hour between dog and wolf
60.The art of value Investing
61.how to think like graham and invest like buffet
62.A random walk down wall street

General Direction Should be:-
1. Equity Modelling: 30,57
2a. Analysis: 8,49,51,50,52,53,
2b. Valuation: 25,12,31,10,28,29
3. Investment Philosophy: 3,23,38,42,40,17,60,61,62
4. Investment Psychology: 3,7,20,43,56,57,59
5. Markets products/regulation: 27,41,48,44,46,47,16
6. Economics current/classic/theory: 14,34,45,35,6,2,5,4

Feb 26, 2010

Check out @"Simple As..." post "on the job with simple as"

Edit* http://www.wallstreetoasis.com/forums/on-the-job-w...

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Feb 26, 2010

Thanks for the shout out!

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Feb 26, 2010

@"TheFamousTrader" Correct me if I'm wrong, but isn't Financial Modeling by S. Benninga a textbook? Wouldn't it be better to take a financial modeling class at school rather than going through a whole textbook by yourself?

Consumption smoothing is retarded. If you stay in this game for a handful of years, money will be the least of your worries. Live it up, because this is the one time in your life where you might actually have time to spare.

Feb 26, 2010

Tel Aviv lectures by Simon Benninga on youtube can be used with the book... it is a very good book though

but in any case you are correct.... specific courses or the material by Mcabacus would be more applicable accompanied by a user friendly book like McKinsey Valuation ... that should pretty much fulfill basic financial modelling/valuation needs

Feb 26, 2010

Yes it is. But it's still nice to have something like that nearby - there are many other options like McKinsey etc. or simply taking BIWS, which covers a lot.

Feb 26, 2010

Those book suggestions are great for a general overview but if you really want a feel for what you'll be doing, get your hands on actual research reports published by an analyst. That will give you insight into the specific industry statistics you'll need to research and the various valuation methodologies that are used and why. You'll also get a feel for the tone of the research that you'll be writing as an analyst/associate in ER.

Feb 26, 2010

yes reading reports is essential but without knowing how to make them and not knowing the reasons behind the valuation models used, reading reports becomes sort of pointless ...making stock selection frameworks, paper portfolios, sector analysis and having a few stock pitches ready are necessary to get a glimpse of how it is actually done ... getting someone who is in ER to check it would also be good before applying for an ER job

Feb 26, 2010

my previous list was very general because there is more to being an equity analyst than knowing valuation models .. however two books that will cover most of your valuation & modelling needs
McKinsey
Equity Valuation: Models from Leading Investment Banks

and modelling only can be learned from MacaBacus (free with templates), BIWS, WSO and ...
http://www.edupristine.com/ca/online-courses/finan...

Feb 26, 2010

TTS AMT materials

Feb 26, 2010

Damodaran in valuation

Feb 26, 2010

Porter's "Competitive Strategy"
CFA curriculum
and I've liked what "Best Practices of an ER Analyst" has in it. Not so much educational, but a nice picture of good modeling habits and things like that.

Feb 26, 2010

Best Practice for Equity Research Analysts

Feb 26, 2010

does it go over modeling?

Feb 26, 2010

Totally agreed. I had a conversation with a top ranked Researcher and he highly recommended the book. Plus it's updated every 1-2 years.

Si Vis Pacem Para Bellum

Feb 26, 2010

I can second best practices for Equity Research Analysts. it does not go over the nitty gritty details of modelling, but it is an excellent overview of the field

Feb 26, 2010

Great resource, recommend

Feb 26, 2010

If you are interested in the modeling aspects (and its gets a bit more nitty gritty) I would recommend "Equity Valuation for Analysts and Investors" by Jim Kelleher. The first few chapters might seem a bit confusing but is a good overview of modeling DCF and P/E.

Recent College Graduate

Feb 26, 2010

Are you focused on a specific sector, or are you looking to get a wider perspective on macro issues? Have you got access to Thompson One?

Feb 26, 2010

Macro Issues would be a area of interest, however, bottom up equity research reports would also peak my interest. Don't have access to Thompson One, anything free?

Feb 26, 2010

You can usually find solid equity reports on Seeking Alpha. Look in either the "top ideas" or "alpha-rich ideas" sections. Occasionally, you will find very lengthy and detailed reports by prominent hedge fund managers like Whitney Tilson (Kase Capital), Chris DeMuth Jr (Rangeley Capital), and several more. I publish my investment ideas on SA, with three out of my five receiving "editor's pick". PM me if you would like a link to my articles.

Feb 26, 2010

1) Buy-side pitches at investor conferences (i.e. VIC). Some are more coherent than others, but all of them know how to build a thesis
2) Bernstein still has a lot of quality research, but access is tightly controlled. Look up the institutional investor all-americans in your sector of choice and read them, don't discount the top guys at smaller firms (i.e. Imperial in Industrials, Moffet in Cable).

Feb 26, 2010

If you're already working as an associate, can't you find research reports that prior associate or what the analysts in your shop wrote? I think those are the best templates and guidelines for you if you can get it.

Feb 26, 2010

Hi
I am going to write ER on real estate industry......
I would appreciate any suggestions!

Cheers

Feb 26, 2010

I recruited from school and must have met 50 people through the course of networking for an EQR job. I interviewed with 7 firms including first rounds and final rounds. During all that networking and all those interviews, I was never asked what finance books I read. Read for pleasure- it'll make you a more interesting person.

Feb 26, 2010

Yeah, I am interested in this as well.....

Feb 26, 2010

I'd probably pick up notes from analysts and read them . They are available on some company websites.

Feb 26, 2010
ratul:

I'd probably pick up notes from analysts and read them . They are available on some company websites.

interested in this, do you have any links?

Also does anyone have anything to add to this list?

Feb 26, 2010

I read a lot of financial books, but one that I would recommend is by Pat Dorsy, CFA and Director of Equity Research for Morningstar. Forgot the name of it, but search for it on Amazon.

Other than that, what better than CFA Level 1 and CFA Level 2!!!

Feb 26, 2010

Confessions of a Wall Street Analyst, decent book about the industry itself, lifestyle, etc.

Feb 26, 2010

Wall Street Meat by Andy Kessler and Confessions of a Wall Street Analyst by Dan Reingold are both good for the equity research industry as a whole. They are both based during the late 90's tech boom, however, and we all know research has changed drastically since.

Feb 26, 2010
jotah:

Wall Street Meat by Andy Kessler and Confessions of a Wall Street Analyst by Dan Reingold are both good for the equity research industry as a whole. They are both based during the late 90's tech boom, however, and we all know research has changed drastically since.

mind sharing the major changes?

Feb 26, 2010

"Blood on the Street" by Charlie Gasparino gives a good, although possibly biased, portrait of the Mary Meeker, Jack Grubman, Henry Blodget, Eliot Spitzer era on Wall Street that led to the fortification of the Chinese Wall.

Feb 26, 2010

Research's pay used to be tied to IBD revenues which led to less fundamental/straight forward research and more self-serving/profitable reports to bring in more IBD clients/deals.

Feb 26, 2010

Applied Equity Analysis - by James English, former JP Morgan managing director, now an adjunct professor of finance at the Columbia University School of Business. Some nice case studies and overview of analysis techniques.

Feb 26, 2010

I would appreciate help with this too.

Feb 26, 2010

Confessions of a Wall Street Analyst is a great read for ER specifically. It'll give you a little insight into what the industry was like back in the 90's and tech bubble.

Feb 26, 2010

Accounting for M&A, Equity, and Credit Analysts [Hardcover]
James Morris (Author)

http://www.amazon.com/Accounting-M-Equity-Credit-A...

Feb 26, 2010

Financial Shenanigans - although I don't really know how much help it will be. It mainly covers quality of earnings and sketchy accounting issues.

Feb 26, 2010

Thanks!

Feb 26, 2010

you can see their models in this book titled equity valuation on Amazon

Feb 26, 2010

Currently: future psychiatrist (med school =P)
Previously: investor relations (top consulting firm), M&A consulting (Big 4), M&A banking (MM)

Feb 26, 2010

1) Company contacts (non-management: guys in sales, R&D, procurement)
2) Industry experts (research institutions, academics, suppliers/distributors)
3) On the ground research (ie: visiting a retail location if you are a consumer analyst)
4) Competitors of the company your cover (ie: Dell, HP, Lenovo, etc.) and piecing together the story.
5) Competitors at other banks (ie: reading other analysts reports)

Financial reports are usually the last method of research and it's just a validation/check - a good analyst should have enough contacts that he/she knows what the company should be reporting, or expected to report.

Granted they are not right 100% of the time as companies do surprise on the upside or downside, but financial reports are backwards looking and everyone has access to that info, so there is no value add in that to clients.

===============

I'm also working on a project to give people insight into the sell-side, would love to have your input in a short 20-s survey:

http://www.surveymonkey.com/s/F8SBV9K

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Feb 26, 2010

I have read the Bank Analyst's Handbook...don't buy it. 90% of the book is explaining how banks work, and a lot of the regulatory information is outdated post-2008. Also, a Google search may or may not turn up a free PDF of the book...

I would try to get in touch with any contacts you have in a FIG coverage group, or in Banking ER. They often make industry primers for new analysts.

Feb 26, 2010

The Bank Valuation and Value-Based Management book is decent. I would say half the book is useful in reference to valuation stuff. The other half is risk management and that is not all that useful.

Smokey, this is not 'Nam, this is bowling. There are rules.

Feb 26, 2010

thanks !

Feb 26, 2010
Comment

Currently: future psychiatrist (med school =P)
Previously: investor relations (top consulting firm), M&A consulting (Big 4), M&A banking (MM)