The right time to lateral?

CeilingAvenue's picture
Rank: Orangutan | 312

I have been at a Credit Rating Agency (Moody's, S&P, Fitch, etc.) for four months. I started straight out of undergrad as an Associate Analyst (comparable to an analyst in IB or associate in ER). I graduated from a small non-target with a 3.9 GPA, Economics and Poli Sci double major, and internship experience at a rating agency, PWM shop and a start-up boutique IB (aka fetching coffee and sending out mail). Also, I played baseball for four years and held the same extracurricular positions that every other person applying for real finance jobs held (president of investing club, participated in blah, etc.).

The finance alumni base at my school is extremely helpful, but the alumni are unfortunately limited to IB, S&T and PWM. I could care less about comp and I prefer not working IB hours, but I want a more challenging position that demands more technical skills than I will find in my current position at the rating agency. For that reason and many many other reasons (ER is just fun...), I want to break into ER and I always have.

Given that I have been in my current position for only four months, what should be my time frame for making the move into ER? For obvious reasons, I do not want to burn bridges or make a jump too early, but I certainly am dead-set on making the transition at some point. In the meantime, I am reading Aswath Damodaran's book on Valuation and applying it by making my own models to keep myself busy. I plan to do the same with Rosenbaum's. Any other tips to keep myself busy before I deciding to start actively searching for open ER positions?

Thanks WSO!

  • "The ceiling is the roof"

Comments (26)

Oct 16, 2017

This exact answer isn't in the lateral guide. @Sil ?

"The only thing I know is that I know nothing, and i am no quite sure that i know that." Socrates

Oct 16, 2017

@CeilingAvenue, I am not familiar with equity research, but four months at your first job out of undergrad is incredibly short. You may want to see what others have to say, but I am thinking you will have a lot more luck if you were to give it a year at your current firm.

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Oct 16, 2017

Agreed with Sil,

I worked for a year in valuation before moving to a sell-side ER role. I think it may raise questions leaving this early in. You can probably start networking and cold-emailing however.

Also, consider sitting for the CFA exam next July. There will always be a number of job postings on the CFA board related to equity research and is where I found my current position.

Oct 16, 2017

I agree with above, 4 months is very short I'd give it more time. From what I've seen even the most eager stay at least a year... even then its rare to see a lateral that soon.

Oct 16, 2017

@Sil @Sil @Sil By all means, I was not implying that I would lateral now. The question was more centered around when I should lateral... Anyways, thank you all for the responses, but more importantly, what could I do to better prepare myself for the move besides what I am already doing? I already am networking, cold emailing/linkedin, reading Damodaran, reading forums, etc. This question is more targeted for Peter given your current role in sell side.

Oct 18, 2017

@CeilingAvenue Ah, my bad for misreading.

I'd recommend staying for 1-year, which is what I ended doing at my old role.

In terms of advice, these things helped me throughout the process:
* Read the "On the Job With Simple As... My Research Process" post. This provides a treasure of resources to better analyze public equity.
* Myfinanceinterview(dot)com - a blog focused primarily on equity research. The interview guide was helpful for me.
* Practice linking the 3 financial statements. I signed up for Breaking Into Wall Street. Although it's IB focused, there's still lots of relevant information.
* After creating your valuation model, do a writeup based on an ER report template. I found that I spoke with a lot more conviction about the stocks I followed despite my writing being garbage.

Lastly, while Damodaran's books are the standard for valuation, his material is very dense and theoretical. While it won't hurt to go through everything, there are probably more effective and efficient ways to get better at modeling. I read portions of his book during undergrad, but nothing really clicked until I started working.

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Oct 16, 2017

Why ER? Why not credit or fixed income research?

Oct 16, 2017

@SGL7313 While credit/fixed income research would be the more logical route, I personally find ER to have a stronger appeal. ER is faster paced, has a boundless upper range, is the center of public attention, etc. Also, I am especially drawn to the modeling of equity research given that it revolves around trying to understand each individual company's story. This becomes much more apparent on the buy-side in L/S equity, which is my long-term goal (another driver in why I want ER over FI). I would much rather forecast revenues, expenses, etc. than build out debt and interest scheduling.

I guess the true question is whether someone enjoys micro or macro. I enjoy both, but I find micro to be more tangible (actual products are drivers in your analysis) and fun. ER requires a much more in-depth understanding and analysis of the company itself. It does also demand a strong understanding of macro-level concepts, but the day-to-day (modeling, comps, earnings season, etc.) is more centered around micro.

On the flip-side, FI's primary analysis drivers are interest rates, duration, coverage, leverage, other macroeconomic conditions, etc. FI, for the most part, is more black and white. Especially considering that we are talking about FI research and not FI S&T. In research, while there can certainly be exciting situations like PR's GO debt, structured FI (CDOs, CMBS, etc.) and other HY debt, these opportunities are few and far between. I do not now much about the S&T industry, but from my understanding, FI is much more interesting and engaging with regards to when there are exciting situations/events in S&T. Since I am interested in a position in research and not S&T, to each his own, but I am not really interested in credit/fixed income.

This is just my take on it. I may be misunderstood and all the veterans can certainly correct me, but it is just what I have gathered on that debate to this point.

Feb 27, 2018

"Since the process is so unstructured, the general WSO rule of "if you do not hear back the next day" does not apply. The bank may call you as you are heading out of the building, while others may take a month. The bank whose offer I finally accepted took a month from the superday to extend me an offer. So, do not sweat it if you do not hear back right away. It is definitely nerve-wracking, though."

From a thread on lateraling in banking. I think it might be similar when it comes to the informal nature of the process. Is it possible to follow up?

"The only thing I know is that I know nothing, and i am no quite sure that i know that." Socrates

Feb 27, 2018

i followed up a week after and HR responded in minutes saying they haven't heard anything yet. curious about this all too.

Oct 19, 2017

Dude if you want to be in ER for the long haul, do that. Don't sit around at some job that you don't want to work at.

Everyone is going to say "wait a year". These same people will say, you're not adding any value until after a year. Do yourself and your firm a favor, pursue your goals, don't waste your time and their money. Be honest with your colleagues about being interested in ER (no need for Forrest Gump honesty, or Machiavellianism)

Ways that it could hurt you.

1) You stay less than 2 - 3 years at your next job. Job # 3 will think you are going to bounce on them too. But if you want Firm 2, then leave firm 1

2) Bonuses, be smart about this.

3) Reputation - this is 51% your execution and 49% whether or not the people in your group suck ass.

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Oct 20, 2017

@realjackryan I like the perspective. Can you expand on the second point about bonuses?

Oct 23, 2017

Dont leave 2 weeks before your bonus is paid out. Dont Work somewhere for 11 months which wont be paid a bonus

Oct 24, 2017

Credit and equity research are actually inter-related so you're really not wasting your time at all in this position. When I was in equity research, I got asked about balance sheets and credit pretty often. In my opinion, it's pretty awesome to be able to tell a client that you worked at S&P and here's your opinion on the balance sheet of XYZ or their credit rating.

As someone else said on here, the ER hiring process can take some time. I would start applying at about 9 months in with the expectation that it could take another 6 months or more to get a role. With a year of credit experience, you are pretty well-positioned.

Also, you didn't mention this, but another possibility to think about is going to fixed income buy side. In my opinion, there's a lot less competition in this area of buy side and it's a lot easier to get in than on the equity side. It might not be as interesting as equity but definitely way more exciting than being at a rating agency.

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Feb 27, 2018

You need to wait at least six months. I started trying to lateral at the five month mark and really gained no traction until I had worked for about seven. If you try lateraling too early, you raise the question "does this kid really like IB?"

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Best Response
Oct 20, 2017

I would start now. Just because you start job-hunting doesn't mean you will find something in the immediate future. It took me over a year to break into ER. You might have a better transition ahead of you than I did, but even so, it's never a bad idea to be networking and talking to people in the industry w more experience than you.

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May 17, 2018

i just lateraled. The best time is NOW in my opinion.


May 17, 2018