What is a manageable amount of coverage for a research associate?

How many stocks is reasonable for an ER associate to cover? I'm currently evaluating an opportunity where I will work for one senior analyst who covers around 16 stocks (large caps) and another analyst junior to him (sort of a VP-level guy) who covers another 8 (small caps). I will be working for both of them, so my coverage could be 24 stocks. Is that manageable for a new research associate or will I be slammed for the first few months getting up to speed?

Comments (17)

Mar 26, 2013

Personally, I think any more than 15 is too hard. You want to get to a point where someone can say a ticker and you can give me the entire story and where its going. With 24 stocks, it will take year at least 2+ years to get to that point.

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Mar 27, 2013
newfirstyear:

Personally, I think any more than 15 is too hard. You want to get to a point where someone can say a ticker and you can give me the entire story and where its going. With 24 stocks, it will take year at least 2+ years to get to that point.

What do you mean by too hard? As in if someone on the buyside got me on the phone, I could potentially stumble or not know something even after 2 years? I'm mainly worried that they are giving one person the work of two associates, which means super long hours even after earnings season. But then again...it's a team of 3 covering 24 stocks.

Mar 28, 2013
waterbucket:
newfirstyear:

Personally, I think any more than 15 is too hard. You want to get to a point where someone can say a ticker and you can give me the entire story and where its going. With 24 stocks, it will take year at least 2+ years to get to that point.

What do you mean by too hard? As in if someone on the buyside got me on the phone, I could potentially stumble or not know something even after 2 years? I'm mainly worried that they are giving one person the work of two associates, which means super long hours even after earnings season. But then again...it's a team of 3 covering 24 stocks.

24 names for 3-guys is "tough" but not unheard of. It's important to consider how much news is released within your converage list (retailer=ouch!) and how long of a note your analyst likes to publish.

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Mar 27, 2013

Can anyone else chime in? I'm just trying to get an idea of whats potentially going to be on my plate.

Mar 29, 2013

A 2+2 team should be comfortable for a 24 name coverage...otherwise as the associate you'll get buried in model and comp updates.

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Mar 27, 2013
IntoTheRain:

A 2+2 team should be comfortable for a 24 name coverage...otherwise as the associate you'll get buried in model and comp updates.

I see. Thanks. It seems like it is a 3 person team for 24 names for the time being.

Mar 30, 2013

The industry is moving to covering more and more names. As volumes decline, you need to have more coverage to justify yourself on the trading side. Particularly for smaller cap names that's true. For large cap, I would expect for the average analyst to cover between 12-16 names, while for smaller cap analysts, its probably closer to 18-22.

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

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Mar 30, 2013

My 3 person team currently covers 17 companies. The senior analyst covers 13 companies (including the large caps) and the senior associate covers 4 small-mid caps, and will probably pick up 1-2 more. I assist both.

We have a little excess capacity. If I stay on the sell side, I would want to pick up 1-2 names in the near future, while I wait to move up to a senior associate role.

For reference, we cover financials. So our notes are rarely simple "beat by x% in segment Y, driven by z" reports. Lots of noise to filter out and interpret.

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Mar 30, 2013

You can't really just look at the coverage universe and determine immediately what the work load is like let me explain with a few examples using your 24 companies approach.

Lets say the Senior Analyst is really the "axe" on five names. Be certain those names will be getting the vast majority of the research reports. IE: If he publishes 4 notes a week, then of those 20 or so notes a month something around 14 will be tailored to those "axe names".

Then the Jr. Analyst or "VP" whatever your name is, it depends on if he's an "up and comer" or if he is really just support in case the lead analyst leaves. So what I mean there, is if he's really good, they are likely just running the team lean because he is expected to become the "axe" on maybe 2 of those 8 names. He will be obsessed with getting traction so likely won't be coming down on you to make sure you do work for him. He will be doing more of it himself to make sure he doesn't step on the wrong shoes (top analyst) and two (no offense) likely wont trust your work since he's in stress mode moving from maitanance to revenue generation.

Now moving on.

In terms of "knowing" stories, I would agree with newfirstyear that knowing in detail about 12-15 names is max but again it depends on how much real work you are doing on them. So again simply looking at "coverage universe" doesn't matter.

Anyway with that all said of course take the job but here's what you're looking for when you sign up for ER gigs.

1. Institutional Investor ranked Analysts
2. Big plus is if they are head of their sector as well example "II ranked number 2 in Mortgage REITS and is also "head of REIT" department"
3. Upward mobility, ideally the space you're covering has some smaller to mid cap names growing in the space, this is how you "gain some light coverage" similar to the "junior analyst" you mentioned in the OP.

Anyway with all that said, from a "quick glance" it looks like a decent opportunity. A junior guy is getting some names = looks like they are okay with internal promotes and two 24 names isn't death, but its also not a cakewalk. No one said success is easy.

Hope that all helps if you got any other Q's ask away.

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Mar 27, 2013
WallStreetPlayboys:

You can't really just look at the coverage universe and determine immediately what the work load is like let me explain with a few examples using your 24 companies approach.

Lets say the Senior Analyst is really the "axe" on five names. Be certain those names will be getting the vast majority of the research reports. IE: If he publishes 4 notes a week, then of those 20 or so notes a month something around 14 will be tailored to those "axe names".

Then the Jr. Analyst or "VP" whatever your name is, it depends on if he's an "up and comer" or if he is really just support in case the lead analyst leaves. So what I mean there, is if he's really good, they are likely just running the team lean because he is expected to become the "axe" on maybe 2 of those 8 names. He will be obsessed with getting traction so likely won't be coming down on you to make sure you do work for him. He will be doing more of it himself to make sure he doesn't step on the wrong shoes (top analyst) and two (no offense) likely wont trust your work since he's in stress mode moving from maitanance to revenue generation.

Now moving on.

In terms of "knowing" stories, I would agree with newfirstyear that knowing in detail about 12-15 names is max but again it depends on how much real work you are doing on them. So again simply looking at "coverage universe" doesn't matter.

Anyway with that all said of course take the job but here's what you're looking for when you sign up for ER gigs.

1. Institutional Investor ranked Analysts
2. Big plus is if they are head of their sector as well example "II ranked number 2 in Mortgage REITS and is also "head of REIT" department"
3. Upward mobility, ideally the space you're covering has some smaller to mid cap names growing in the space, this is how you "gain some light coverage" similar to the "junior analyst" you mentioned in the OP.

Anyway with all that said, from a "quick glance" it looks like a decent opportunity. A junior guy is getting some names = looks like they are okay with internal promotes and two 24 names isn't death, but its also not a cakewalk. No one said success is easy.

Hope that all helps if you got any other Q's ask away.

That makes sense. Sounds like there are a lot of variables involved, and I won't truly know until I do it. By "axe" you mean that from the pool of analysts he's the one the buyside trusts the most, right?

Mar 30, 2013

That is correct "axe" is research slang for meaning "the guy to go to on the name".

You can have a massive coverage universe but really be the go to guy for maybe 2-4 names. Now if those 2-4 names are all huge (Google, Amazon) then you're golden because your platform will survive for a long time. If you're the axe on say a mid cap name, its thinner ice... however... if you're the axe on that name and the thing four or five bags over a short time span, not only are you in great shape now but its going to be very hard for someone to come on top of you because you've been hammering the table on the name for several years.

Give and take.

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Mar 31, 2013

It's too hard to decide if 24 is too many names or not; it's not that black and white. There is a spectrum of understanding and familiarity with the companies you follow. For each additional name you take on, assuming your hours stay constant, that's less time you're spending on other names.

Think of it like this. If you work 60 - 75 hours per week and cover 24 stocks, that's roughly 2.5 - 3 hours per week that you can spend on each company. And that's assuming you're not doing broad overall economic research etc. Compare that to somebody who works the same hours following 15 stocks - they can spend 4 - 5 hours per week on each company.

Having said that, this sounds like a good opportunity anyways and if I were in your situation I wouldn't make a decision based on whether I thought I could keep up with a given number of companies.

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Mar 27, 2013
MFFL:

It's too hard to decide if 24 is too many names or not; it's not that black and white. There is a spectrum of understanding and familiarity with the companies you follow. For each additional name you take on, assuming your hours stay constant, that's less time you're spending on other names.

Think of it like this. If you work 60 - 75 hours per week and cover 24 stocks, that's roughly 2.5 - 3 hours per week that you can spend on each company. And that's assuming you're not doing broad overall economic research etc. Compare that to somebody who works the same hours following 15 stocks - they can spend 4 - 5 hours per week on each company.

Having said that, this sounds like a good opportunity anyways and if I were in your situation I wouldn't make a decision based on whether I thought I could keep up with a given number of companies.

Thanks for your thoughts. Very valuable in understanding the industry and factors I need to consider.

Apr 3, 2013

Try 34. Three sectors, three analysts one associate. Fuark.

Mar 30, 2013
RepThyBananas:

Try 34. Three sectors, three analysts one associate. Fuark.

That sounds awful. 1 person to do the bitch work of 3 analysts - a never ending stream of marketing deck updates.

I don't even want to think about earnings season. Jesus.

Apr 3, 2013
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