Why are you still trying to break into equity research?

thefinancekid:

It's significantly harder to break into IBD and S&T if u go to a non-target, so the people who are going into ER are from mostly non-targets. Haven't seen anyone from targets go for ER

Not sure if that's true now but generally you'll have mostly people from target school in AT, same as any FO position. I would also say that by the number of jobs available ER is comparable if not harder to get into then IBD

You clearly have no fucking idea what you're talking about. Don't talk about an industry unless you've been in it/have experience in it.

What do you think is different about investment banking?

probably not much. I hope consulting is somewhat different.

Idk dude. What's so attractive about M&A or trading? If you don't like it, GTFO and give someone else your job.

lol what a dick.

You get to enjoy all the "amazing things" about investing and stock-picking without any of the risk (or the reward).

i dont see any of those "amazing things" ... So much goddamn reading and numbers that are meaningless to me.

Have you began to ponder the purpose of life as you fade in and out of consciousness while reading footnotes?

You don't enjoy reading? How many white collar jobs do you think that works in? People that are good at their jobs are reading constantly. Yes, even traders. You are an intern-ever consider that the "meaningless" numbers actually mean quite a bit to people with the experience and knowledge to interpret them? If it's not a fit for you that's fine but you sound like your expectations were a bit off.

I guess to more directly answer your question- I can tell you a lot of positive things about Equity Research. I work on the buyside so somewhat different than your experience, I suppose, but I enjoy reading about all different companies as a generalist and trying to analyze them.

lol howd you get the job?

Mr. Hansen:

Have you began to ponder the purpose of life as you fade in and out of consciousness while reading footnotes?

Exactly.

What is your target career if you're not a fan of reading filings and looking at numbers?

cheese86:

You don't enjoy reading? How many white collar jobs do you think that works in? People that are good at their jobs are reading constantly. Yes, even traders. You are an intern-ever consider that the "meaningless" numbers actually mean quite a bit to people with the experience and knowledge to interpret them? If it's not a fit for you that's fine but you sound like your expectations were a bit off.

These meaningless numbers are useful for modeling and stuff. Great. But I guess I just think forecasting is kind of bullshit. I really enjoy making connections and learning some new business sector, but honestly, I don't understand how you "interpret" numbers when there is no consensus.

NYU:

What is your target career if you're not a fan of reading filings and looking at numbers?

I love numbers. Readings are okay, too. But the 10k is so fucking verbatim. I am now considering management consulting or IT consulting. I think I like cause-effect relationship and fixing problems than trying to come up with a model that simulates a company.

cheese86:

I guess to more directly answer your question- I can tell you a lot of positive things about Equity Research. I work on the buyside so somewhat different than your experience, I suppose, but I enjoy reading about all different companies as a generalist and trying to analyze them.

I am on the buy side for this internship as well. What is your extent of "analysis?" Reading 10ks and building up a model on excel with revenue projections and whatnot? I am just confused if this is really what it takes to make a judgment on billions of dollars.

Febreeze:

lol howd you get the job?

Leveraged school portfolio mgmt experience and networked with alumni. I honestly thought there was a lot more technique and skills to investing.

I look at it as a stepping stone the same way most people look at IB. The only difference is ER people have to work a lot less than IB people. That and the exit opps don't have as much variety as IB exit opps.

Hooked on LEAPS:

I look at it as a stepping stone the same way most people look at IB. The only difference is ER people have to work a lot less than IB people. That and the exit opps don't have as much variety as IB exit opps.

What are the exit opps with ER? You are pretty much gonna be doing the same thing from the buy side anyways.

What do you expect? You're an intern. In terms of importance and the "totem pole," you're at the bottom. No, not even above those "proles" working BO jobs - they've got seniority and are more crucial than you are. So your work is comprised of "boring" fundamentals so that you can eventually prove yourself to use those skills to produce insights and build a client base with powerful people whom you advise and extract info from. At your level, you find it boring because there's not demand for your creative input? Why not offer it or challenge your analyst's assumptions (tactfully)? The allure, from my perspective as an outsider, is that you get to voice your opinion at the entry level (you apparently haven't) about potential trades and ideas. Later, it's the client building. Then, if you "make it," the firm you work for becomes nearly irrelevant (goldman vs. boutique & no-name? not your problem) whereas your name and word alone can move markets. Not quite to the extent that The Beard of at the Fed's word moves them, but similarly. You also bear less risk, allegedly (at senior lvls) work ~60-70 hours (unlike IB) a week, and can make serious money (I've heard of top analysts making $2M annually) without the stress. Allegedly, it's a more creativity-friendly atmosphere and that makes the work itself enjoyable - but I'm rambling at this point. Try your hand at something else, perhaps trading or w/e, and speak with senior ER people about their job at that level. Get a mentor. But to reiterate, all entry-level positions will entail this BS because this BS will be integral to the product you offer (research) and thus your future in the role.

If you're just starting to realize that ER is boring, wtf were you doing in your 'portfolio mgmt experience?'

I would second the notion that a lot of it is fairly bullshit. Most ER firms or divisions cannot consistently make the right calls. It's really a crap shoot, but gives you good fundamental knowledge on how professionals do valuations. It's also my opinion that the firms that employ industry experts with strong qualitative knowledge do far better than the firms that believe they can quantitatively model everything (which is absurd, frankly). A model that could actually simulate a complex company would have to be infinitely more complex than the models that exist at present.

In my view, ER is a stepping stone. To where? The buy-side - asset management or a hedge fund.

That's really the problem. I - and a lot of folks here on WSO - are passionate about investing, not about research.

Instead of picking stocks, a sound investment strategy can go a lot farther. Few portfolios have unhedged long positions, and there are great lengths that the more conservative firms go to diversify their investments. Point is - that if the traditional valuation approaches were so effective, then why do firms not put their money where their mouth is and go with their picks? IMO, it's cause research is very much bullshit.

Would gladly appreciate any counter-arguments to this or an alternate perspective

Take_It_To_The_Bank:

I would second the notion that a lot of it is fairly bullshit. Most ER firms or divisions cannot consistently make the right calls. It's really a crap shoot, but gives you good fundamental knowledge on how professionals do valuations. It's also my opinion that the firms that employ industry experts with strong qualitative knowledge do far better than the firms that believe they can quantitatively model everything (which is absurd, frankly). A model that could actually simulate a complex company would have to be infinitely more complex than the models that exist at present.

In my view, ER is a stepping stone. To where? The buy-side - asset management or a hedge fund.

That's really the problem. I - and a lot of folks here on WSO - are passionate about investing, not about research.

Instead of picking stocks, a sound investment strategy can go a lot farther. Few portfolios have unhedged long positions, and there are great lengths that the more conservative firms go to diversify their investments. Point is - that if the traditional valuation approaches were so effective, then why do firms not put their money where their mouth is and go with their picks? IMO, it's cause research is very much bullshit.

Would gladly appreciate any counter-arguments to this or an alternate perspective

I agree with your argument. I'll add:

(a) ER guys are sector specialists. They are great at making relative value calls within their sector, but not great working outside it.

(b) They do not do well at extremes. Do not expect them to call tops/bottoms. They expect the near future to look like the recent past. Not many analysts had sell ratings on AAPL at 700.

(c) Notes are mostly bullshit. They are a marketing tool that goes out to say "hey, call me. maybe process some trades through us."

In ER you're covering a sector. Good, bad, and mediocre companies. And there are a lot of bad/mediocre companies, aka "holds". Researching a non-investable company is painful.

I went into ER because it seemed like a path to the buyside that would be a bit better than banking, both from a life and skills perspective. The IB skill-set doesn't overlap all that much with investing (less than PE, at least). Recruiters love bankers though.

And sound investment strategies matter a lot: you don't need a crazy Yale-model allocation. Just reasonable diversification across strategies.

To all the ER haters:

A) Unless you are really really good you will make less money on the buy side with more stress, think top 20% of the buysiders making 80% of the industry comp, and by definition most of you can't be in the top 20%. I am always having fun with the buy side saying sell side is irrelevant and then paying millions and millions in commissions for research specifically (your bosses who are paying commissions are not as dumb as you think). There are some firms that really don't pay much for research - I respect that, but they are in very small minority

B) Much more varied work than IBK with the comp actually being comparable these days (at the analyst and senior level, not at the associate level though - bankers make much more money from associate to VP level but then research picks up)

C) You interact with more senior people as a junior compared to consulting

D) As a junior you will be treated much more like a human being (if you care)

Just make sure you go and work for a well ranked analyst that you like (don't just go for prestige of the firms and the sector)

Every person in ER ive talked to says that it all depends on the analyst you work under, and that they would be better off working under a good analyst at a MM than an average analyst at a BB. Is this true?

Im beginning to think I should start looking for ER FT positions because im not exactly happy with IB right now..

There was a really great post about ER a while ago. The main gist was the analyst who can actually pick stocks is very rare. Most analysts will add value through relationship management and being able to connect investors with the stocks they cover.

NYU:

What is your target career if you're not a fan of reading filings and looking at numbers?

NBA Basketball player

No one is insulting the career, they are questioning the premise. Most of the picks are wrong, and even if they are right, they are rarely consistently right. Of course it beats IB, almost anything beats IB.

When you call equity research analysts a mere segue to upper management, well, the profession becomes a lot less desirable. If you want your work to be a tangible value-add, go to the buy-side.

Plus, what about the multitude of independent research firms that simply don't have the connections that the BB research divisions do? Makes me wonder how many of them go down on account of the unreliability of their targets.

I've been with one buy-side firm and they paid a decent amount for research. We would usually discount any forecasts/estimates and come up with our own through our own models. In my experience, the research wasn't really worth the cost. Frankly, I found a lot more value in technical industry news outlets (covered semis).

Whats not to love about ER? People rely on your research to invest their life savings. It's great. If you don't get a thrill out of recommending strong buys that it is obviously not your gig.

To give an update:

I am starting to realize that I enjoy the modeling and figuring things out part. But I just hate the verbatim aspect of the 10k.

I think this interview sums up why ER will continue to be important. Also addresses the whole buy-side vs. sell-side argument. Enjoy.

//www.wallstreetoasis.com/forums/here-is-how-equity-research-works

ytinifni:

If you're just starting to realize that ER is boring, wtf were you doing in your 'portfolio mgmt experience?'

DictatorCloudy:

cheese86:

I guess to more directly answer your question- I can tell you a lot of positive things about Equity Research. I work on the buyside so somewhat different than your experience, I suppose, but I enjoy reading about all different companies as a generalist and trying to analyze them.

I am on the buy side for this internship as well. What is your extent of "analysis?" Reading 10ks and building up a model on excel with revenue projections and whatnot? I am just confused if this is really what it takes to make a judgment on billions of dollars.

My extent of analysis is pretty deep. We spend weeks working on a potential investment idea before potentially putting a large position on. We run a very concentrated portfolio with low turnover so I know a company backwards and forwards before presenting it to my PM, I'd argue better than most of the sell-siders who cover it at that very moment. We actually don't forecast much in the way of revenue projections but I'm sure a lot of shops do. I could write a book answering that question but think about it man, what do you think we look at? Barriers to entry/moat for the industry to assess the sustainability of margins, market share, etc; Management team and their track record (this is huge); valuation from a number of different angles but much more focused on what is here today than what we project in out years; while we are bottoms up of course I'll look at some industry trends, etc. Part of the excitement of the job is figuring out exactly what you need to figure out.

Just a disclaimer here, associates don't make anywhere near $350 all-in. Most banks will cap you until you get promoted/have your own coverage to some extent. Post-MBA associates will still have a hard time clearing $200.

Bonuses for juniors aren't nearly as large as they are in IB, $60-$70 doesn't suck but that is generally for the absolute rock stars/long tenured guys (jr. for 4-5+ yrs.). Heard some BBs will pay large bonuses to juniors but rarer than your comment leads people to believe.

Going to have to agree with Street Smart here...no way 350 for associates is happening. Only way an associate gets near that is to become an associate/junior analyst and pick up coverage. Maybe before the industry started coming under pressure, but these days I would be very surprised