Sell-side ER to buy-side conundrum: Staples vs. Energy

Without providing too many revealing details, I did sell-side ER for a small handful of years covering the consumer sector, grabbed my MBA from H/S/W, and interned at a few hedge funds during the program.

My goal is to continue to pursue buy-side opportunities; which of these sell-side seats would likely appear more attractive and ideally be more of a poaching/transition magnet?

  1. Top 3 BB by II ranking standards, on a ~1-3 ranked II team. However, the team covers one of the Energy verticals.

  2. Top MM firm in top 10-15 by II ranking standards, on a new'ish team that's barely cracked the top 10 II rankings for their space - Consumer Staples.

I'm struggling to weigh which sectors would be more attractive vs. the II rankings which are the only proxy I have for the buy-side's view of the teams themselves. Any help would be greatly appreciated.

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Comments (25)

  • Analyst 3+ in HF - Event
Jan 28, 2020 - 6:50pm

Option 1. Don't turn down the opportunity to work for a highly ranked team covering a highly specialized sector. You'll learn a ton, meet great people, and consumer staples will always be there. I would argue that it would put you in a good position to jump to a generalist spot on the buyside after a bit given you'd have the ability to understand more nuanced energy businesses in addition to vanilla consumer making everything in between doable to pick up.

  • Research Analyst in AM - Equities
Jan 29, 2020 - 3:07pm

I'd go option one. But you should really avoid going back to the sell side at all costs. With HSW and previous sell side experience I would think you wouldn't have too much trouble getting into one of the big long onlys.

  • Assist. VP in ER
Jan 29, 2020 - 4:11pm

If I had the opportunity to avoid the sell side, I definitely (read: definitely, completely and in all ways) would. However, it's been tougher to get conversations going in this environment with my limited buy side experience despite the nice H/S/W tag on my resume.

Regarding the big LOs, they almost exclusively recruit for post-MBA positions out of their intern pool in my experience. I have had 0 traction with pretty much all the usual suspects despite having friends at those shops push my name to PMs.

Feb 1, 2020 - 4:27am

To me, the industries are usually more important than top 15 vs. top 3. The best on the buy side want alpha, not pedigree to trot to clients and prospects. If you can develop expertise in an industry with high alpha potential, that's gold.

With that said, both of these industries suck, so I'm kind of at a loss. Both industries are relatively easy to understand. Neither really forces you to develop investing frameworks that may be useful in less easy to understand industries (e.g. technology, biopharma, internet).

I'm very tempted to endorse the energy route (because staples are so boring), but I just can't get over the dire condition of the sector currently. Generalists have given up. They've been burned too many times over the last five years to care about a sector that's less than 4% of their benchmark. Also, the climate change rhetoric is really gaining steam. It's a serious long-term headwind.

We will need oil and gas for a long time, but it may take ten years for the market to come back to energy stocks.

Staples gets you somewhat close to plant-based foods and cannabis, so it isn't all bad.

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Jun 8, 2020 - 8:58pm

You lose so much credibility when you say something like energy being "relatively easy to understand". There is so much more going on than just selling commodities at X price. To really understand a company and the industry, you have to be familiar with all the various O&G processes, engineering terms, and individual assets (literally to the well level) in order to properly value it. Add in the high volatility and sector activity, it takes an incredible amount of bandwidth to learn and keep up with the space.

I will agree it is a niche industry and the long-term outlook is limited, so it might not be the best sector to go into. However, there are plenty of L/S and credit funds that still play the space and experience covering it is always preferred, since it is not an easy sector to just pick up.

Jan 31, 2020 - 11:38am

Some tough love coming here so brace yourself.

You've got the pedigree and knowledge. Figure out what is holding you back from buy-side roles and address it. You've interned at funds - ask yourself why didn't they turn into full-time positions?

Smaller funds, asset managers etc. could be a way in if you're willing to network aggressively. If you honestly think you've done everything you can in terms of reaching out to companies (not just applying to those that came to recruit on-campus) then take one of the bank jobs.

  • Assist. VP in ER
Jan 31, 2020 - 1:25pm

I appreciate the feedback. One of those roles offered me a FT, but I turned it down for what I believe were credible, material issues.

Otherwise, the funnel of opportunities after exhausting my network (alumni and otherwise) is almost non-existent (OCR opps were in the single digits so that was never anything I was relying on) and headhunters blatantly ignore my resume. I am for sure not limiting myself to brand name/large/prestige nonsense - I've been initiating conversations with anyone at any buy side shop that's been willing to chat. The recruiting environment has just been tough, though maybe it is in fact just me.

Regardless, these are my current options and I can only play the hand I've been dealt.

Jan 31, 2020 - 3:38pm

Makes sense that long-onlys generally hire out of their intern pool. But why do you think headhunters are "blatantly" ignoring your resume? Seems like your experience is decent (sell side + HF internships). Are you an international?

Feb 2, 2020 - 4:31am

Team II rank doesn't really matter when jumping to the buy-side. Often they don't even reflect which teams are good, but is an OK proxy I guess. 9/10 the investor community will not have a clue who is ranked where though.

However, if you truly believe one team is much better than the other then of course on the better team you have capacity to learn more, get more exposure to clients and field their questions. It's just more busy on the good teams, which can only be good since the main analyst also relies on the associates way more to do the work.

  • Assist. VP in ER
Feb 3, 2020 - 6:43pm

Not to be brash, but not sure why I'd ever make the jump to the buy side any more challenging.

Feb 3, 2020 - 6:59pm

In ER you have to make a name for yourself. Do you really want to cover the same names that everyone else is, most likely have the same consensus and a good chance of being ignored. Apposed to covering unknown names and being right and then having HFs going to you for your insight and having your choice on the Fund you want once your ready.

Jun 9, 2020 - 9:16pm

Do you have an interest in either sector? Reason I'm asking is it can be difficult to switch coverage later on, so I would choose the sector you are interested in working in longer term. If interest were equal, I'd probably choose the first option. II rated analysts get more calls so you will have more chances to network, and the name/brand value should help you move over later on.

Jun 9, 2020 - 9:45pm

I had a similar choice to make and ended up working for a ranked team.

Even though it's Energy, the exposure you get from working on the ranked team will likely be miles above for a non-ranked team. It's true II is a popularity contest, but those that stay in front of the buyside more often will receive more votes.

If I were you I'd ask around about what the analyst is really well known for to get a sense of the work. The only way I'd turn down the job was if the team was focused heavily on corporate access only and less on the actually research process. The only downside to choosing the energy team is that you might have a stigma transitioning to non-energy roles and will likely be limited to industrial sector.

Can also confirm buyside recruiting is pretty hard these days unless you want to work at a pod

  • 1
Jun 11, 2020 - 12:24pm

Who is buy side recruiting so bad right now? Is it just the current environment or is that the new norm? I am in sell side ER wanting you get my MBA to move to the buy side but this post is discouraging me, would that not be a good move?

Jun 13, 2020 - 8:01pm

Apologize in advance that I don't have anything to add to the conversation. Curious, however - what do post MBA SS analysts stand to make? How does this compare to LO? Thanks

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