Time to learn company from scratch

Futura's picture
Rank: Senior Monkey | 94

How long does it usually take you to learn a company's operations?

Meaning, from the moment that you get an assignment to research a new company, how long does it take you to go through its financial statement and develop a confident thesis on its standing?

Comments (18)

May 27, 2009

About a day.

May 27, 2009

A day of research on my own (provided we already have all the info - not a trivial request), plus one phone call with management to hear how they view the business.

  • Capt K
May 27, 2009

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May 27, 2009

I think that depends on how proficient you are with research, and how complicated the business model is.

I'm not on the sell-side so I haven't done that type of in-depth work, but I'd assume it could take a few days from start to finish.

May 27, 2009

Other than reading the 10-Ks and research reports?

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May 27, 2009

I like to read all the company presentations found on their website in the IR section. Also run a Google or Bloomberg search on all the recent articles in the past 6 months or more. I like to research their competitors a bit to get a feel for the company's competitive standing. You also may look at industry associations to get a better feel for the industry in general.

It usually takes me a few days to get a good feel for a company.

May 27, 2009

I consider myself a generalist trader and one of my bigger weakness' in trading is truly understanding the business model and relative strengths/weakness of a given company. Could anyone recommend a plan of attack as to how to begin to analyze a company from scratch. What about a plan of attack on how to analyze a sector as a whole.

I am speaking on this from a short term traders point of view that wants to understand the companies im trading more in depth.

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May 28, 2009

i second trade4size's request. if all you have is five hours to study a firm, how would you do it?

May 28, 2009

For me it all depends on the sector the company is in.

But it's my opinion that you take at least 2-4 weeks to FULLY understand the company. And include in that sometime spend with a member of the management team for a chat about the company's operations and the competitve landscape.

May 28, 2009
lui:

For me it all depends on the sector the company is in.

But it's my opinion that you take at least 2-4 weeks to FULLY understand the company. And include in that sometime spend with a member of the management team for a chat about the company's operations and the competitve landscape.

2-4 Weeks? Holy shit. You must have spare time my freind.

May 28, 2009

I think you get a pretty good idea of the company if you read the 10k and most recent 10Q, read a research report, and listen to transcripts for the past few analyst calls. The calls have a ton of great information and they usually focus on the most important issues and challenges that the company is facing.

May 28, 2009

MoneyKingdom, if you read my answer carefully, you'll see that I'm talking about FULLY understanding a company, and also said that it depends on the sector.

And given that it's a research forum, I'm assuming the OP is asking about understanding a firm for purposes of ER, since he wrote "develop a confident thesis" and not the IB quick & dirty research on a company.

For example, if you haven't ever looked at a mining company exploring uranium in Namibia (Africa) for nuclear power, you think you'll be able to understand their business/operations in 1 day??
I doubt you can do so...

Now, if you are talking about having an overview of the company, then I agree nobody needs to take 2 - 4 weeks... just a few hours to review the company's website, 10K's, investor presentations and research reports - this is more for IB folks.

May 29, 2009

Hmm, ok, well, speaking as a sell-side analyst, I would say that the best way to learn about a company is to build a model and be aware of the swing factors that move the company. For example, in retail, same store sales are always important, and the dynamics of which tend to drive the movement in the stock. Plus, you need to understand the macro factors, such as consumer confidence which will move your stock.

Valuation is also quite important, if a stock is trading at a high premium, then it requires upgrades, and if it only meets expectations, the stock will go down.

BUT, all this takes time. It's hard to learn a company in five hours, and if it was possible, people would do it all the time

Jun 4, 2009

modeling/valuation is only part of the research process. there's also product lineup/pipeline, company culture, management, competitive dynamics, etc.

learning a company in 5 hours? that's like reading yahoo finance company description and recent sell-side reports; you will know nothing.

May 28, 2009

Agree ratul...
BUT, moneykingdom can understand a company and its business operations in 5 hours or less maybe...

he might be a genius....

May 27, 2009
lui:

Agree ratul...
BUT, moneykingdom can understand a company and its business operations in 5 hours or less maybe...

he might be a genius....

I don't think you need to be that sarcastic.
Sell-side bankers might not have that thoroughness as equity research guys in terms of understanding the business as a whole, but they try to understand a firm in their own specific way. The guys in research might know better, but they won't have the same sense of moving on with opportunities to create deals. In other words, they are complementary to each other, and both definitely not in a position to compete with each other.

May 28, 2009

Easily. I can read the latest K and Q, look at ER reports, IPresentations, talk with my MD, all in a day. Good luck finding the time to research a company for 2-4weeks. Only if you are in management consulting and you have to go on-site to get a better insight on their operations...

As far as the Nambian Uranium mining company example goes...it would take you a couple of weeks to perhaps understand the entire industry, not a specific company. This is exactly why IB and ER divisions are split up by industry.

The modeling is the easy part, your MD just tells you the EV that he wants to see, and you make the numbers fit.

May 28, 2009
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