Recommended Books for equity research

I've locked up my internship for this summer as an equity research analyst intern. Now that I don't have to worry about interviewing and can put less of a focus on networking I would like to find a few books on equity research to read in my free time. Any good recommendations? Any books that you have read and really enjoyed or learned a lot from? Though my focus is on research, please feel free to recommend books that you just think are a great overall read as well. Thanks, I look forward to your thoughts!

 

listen, i am pretty sure an intern is not going to want to read graham and dodd for a summer internship. it is better to get the gist of what working at an investment bank is all about rather than learning the intricacies of valuation.

... he also said, "please feel free to recommend books that you just think are a great overall read as well"

Think before you speak.

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

Take a look at "Applied Equity Analysis." I just ordered a copy. Supposed to be a very practical book from someone who worked in sell side research. I was debating between this and some others, but will probably read this and then potentially dive into either a) Security Analysis, or b) Steven Penman's financial analysis textbook thereafter. If anyone has any thoughts on which to choose, it'd be much appreciated. Both books require very very many hours so I'm still wrangling over what to go with.

 

I'd recommend "The SuperInvestors of Graham and Doddsville" over "The Intelligent Investor" simply because it's a quick read and gives a good overview of what value investing is about. I would avoid "The Intelligent Investor" for now because it's enormous and you need time to chew over and digest what Graham is saying. You should definitely read it, but when I tried reading it before my internship it gave me an enormous complex about how much I didn't know :-)

http://www7.gsb.columbia.edu/alumni/news/hermes/print-archive/superinve…

I don't think any one's mentioned Buffet's letters, but you should definitely look at those if you want to do some reading. One letter is about 22 pages, so it's good for reading on the go. Man's got style.

 

For general equity research, assuming you are just building a foundation, I would recommend any Warren Buffet related books. One that I enjoyed and has helped me a lot is "A Random Walk Down Wall Street" mainly because its current.

If you are looking for specific books dealing with valuation, I am halfway through Jim Kelleher's book "Equity Valuation for Analysts and Investors." Some things, particularly in the beginning, have gone over my head but it is a great and relatively simple book that walks through DCF, multiple method, and ratio analysis.

Recent College Graduate
 

James Valentine's Best Practices

It's one of the better ones around for practitioners and is apparently updated annually or so (can't verify this as I bought the first edition and not going to buy another copy for the luxury of looking for updated material). I keep this one on my shelf in the office.

Note that I said practitioners because a big part of the book is about workflow and process. It may not be that applicable for an outsider, so to speak.

 
Best Response

//www.wallstreetoasis.com/forums/er-modeling-test-1 .... check my post in this link - the links in my post will be more important than the other stuff i wrote -- the stuff in this should help you in the short term

do the CFA - should be good for the long term but you can learn ER stuff without it

below is a list of books ... My personal favorites are:- 1 McKinsey Valuation 2 Financial Valuation: Applications and Models 3 Financial Shenanigans 4 Intelligent Investor 5 How to Read a Financial Report: Wringing Vital Signs Out of the Numbers (there are other similar books by Mariusz Skonieczny & Thomas R. Ittelson - without being able to analyze Financial Statements and the notes to the statements everything is pretty much pointless

Books - these books are for the long term and sort of financial general knowledge 1. Financial Risk Taking: An Introduction to the Psychology of 2. Currency Wars - Rickards, James
3. Damodaran - Investment Fables
4. Taleb - The Black Swan - The Impact of the Highly Improbable
5. Antifragile Things That Gain From Disorder
6. Laiou - Morrison - Byzantine Economy 7. Wiley Behavioral Finance and Wealth Management 8. Accounting Shenanigans 9. The house of rothchild 10.The Handbook of Business Valuation and Intellectual Property Analysis 11.the essays of warren Buffett 12.Damodran Investment Valaution 3rd 13.Security Analysis - Graham & Dodd 14.Adam Smith 15.Economics - Freakonomics - A Rogue Economist Explores the Hidden Side of Everything 16.The Bank Analyst's Handbook 17.Stocks for the long 18.Against the gods 19.Common sense on mutual funds 20.Irrational exuberance 21.Business Valuation - Shannon Pratt 22.The Handbook of Fixed Investments
23.Active Value Investing 24.When markets collide 25.McKinsey Valuation 26.The Real Warren Buffet 27.Global asset allocation 28.Investment Performance Measurement
29.The Handbook of Traditional and Alternative Investment Vehicles: Investment Characteristics and Strategies 30.3 Modelling Books:- Building Financial Models - Tija 2nd Wiley.Financial.Modeling.with.Crystal.Ball.and.Excel.Mar.2007 Financial Simulation Modeling in Excel + Website A Step-by-Step Guide 31. Quantitative Business Valuation
32. Models behaving badly
33. Restructuring Macroeconomics 34. Macroeconomics: Understanding the Wealth of Nations
35. Economic Development (11th Edition) (The Pearson Series in Economics) 36. Liars Poker 37. The Global Crisis Makers 38. When Genius Failed 39. The Investor's Dilemma: How Mutual Funds Are Betraying Your Trust And What To Do About It 40. Clash of investment cultures
41. The Economics of commmodity markets
42. Damodaran Investment Philosophy 43. Behavorial Investing 44. Financial Markets & Exchanges Law 45. Market Microstructures in Emerging and Developing Market 46. The Economics of Commodity Markets 47. The Future of Finance 48. Information Rules: A Strategic Guide To The Network Economy

General Direction Should be:- 1. Equity/financial modelling Modelling: 30,32 ---- for modelling I would also recommend youtube videos, WSO material, Macabacus, etc … and do learn to Analyse Financial Statements 2. Valuation/Analysis: 25,8,12,31,10,28,29 3. Investment Philosophy: 3,23,38,42,40,17, 4. Investment Psychology: 3,7,20,43, 5. Markets products/regulation: 27,41,48,44,46,47,16 6. Economics current/classic/theory: 14,34,45,35,6,2,5,4,33

these books should be available on piratebay.com, 4shared, etc

 

mind you though the financial modelling Book by Tija uses the debt plug for the financial statement projections .. i do not know why... the standard practice as I learned it, was to balance the projected Balance Sheet and the Cashflow Statements by checking the Assets/liabilities and their relevant cash flows

look for this video on youtube:- Step 10_ Balancing the Balance Sheet - Completing Cash Flow it explains the concept in a very simple manner

 

list additions

49.How to read financial statements - John tracy 50.Reading Financial Statements for dummies 51.Creative Cash Flow Reporting 52.The Financial Numbers Game 53.Financial Statement Analysis: The Practitioner's Guide 54.The Market Wizards 55.The New Market Wizards 56.The Hour Between Wolf and Dog 57.Reminiscences of a Stock Operator Jesse Livermore 58.Soros - The New Paradigm for Financial Markets 59.The hour between dog and wolf 60.The art of value Investing 61.how to think like graham and invest like buffet 62.A random walk down wall street

General Direction Should be:- 1. Equity Modelling: 30,57 2a. Analysis: 8,49,51,50,52,53, 2b. Valuation: 25,12,31,10,28,29 3. Investment Philosophy: 3,23,38,42,40,17,60,61,62 4. Investment Psychology: 3,7,20,43,56,57,59 5. Markets products/regulation: 27,41,48,44,46,47,16 6. Economics current/classic/theory: 14,34,45,35,6,2,5,4

 

@"TheFamousTrader" Correct me if I'm wrong, but isn't Financial Modeling by S. Benninga a textbook? Wouldn't it be better to take a financial modeling class at school rather than going through a whole textbook by yourself?

Consumption smoothing is retarded. If you stay in this game for a handful of years, money will be the least of your worries. Live it up, because this is the one time in your life where you might actually have time to spare.
 

Tel Aviv lectures by Simon Benninga on youtube can be used with the book... it is a very good book though

but in any case you are correct.... specific courses or the material by Mcabacus would be more applicable accompanied by a user friendly book like McKinsey Valuation ... that should pretty much fulfill basic financial modelling/valuation needs

 

Those book suggestions are great for a general overview but if you really want a feel for what you'll be doing, get your hands on actual research reports published by an analyst. That will give you insight into the specific industry statistics you'll need to research and the various valuation methodologies that are used and why. You'll also get a feel for the tone of the research that you'll be writing as an analyst/associate in ER.

 

yes reading reports is essential but without knowing how to make them and not knowing the reasons behind the valuation models used, reading reports becomes sort of pointless ...making stock selection frameworks, paper portfolios, sector analysis and having a few stock pitches ready are necessary to get a glimpse of how it is actually done ... getting someone who is in ER to check it would also be good before applying for an ER job

 

If you are interested in the modeling aspects (and its gets a bit more nitty gritty) I would recommend "Equity Valuation for Analysts and Investors" by Jim Kelleher. The first few chapters might seem a bit confusing but is a good overview of modeling DCF and P/E.

Recent College Graduate
 

You can usually find solid equity reports on Seeking Alpha. Look in either the "top ideas" or "alpha-rich ideas" sections. Occasionally, you will find very lengthy and detailed reports by prominent hedge fund managers like Whitney Tilson (Kase Capital), Chris DeMuth Jr (Rangeley Capital), and several more. I publish my investment ideas on SA, with three out of my five receiving "editor's pick". PM me if you would like a link to my articles.

Value investor working in the hedge fund industry. Portfolio Manager, Analyst at a $380+ million Texas-based value investing HF. Former Research Consultant, Analyst at a NYC-Based deep value and special situations HF.
 

1) Buy-side pitches at investor conferences (i.e. VIC). Some are more coherent than others, but all of them know how to build a thesis 2) Bernstein still has a lot of quality research, but access is tightly controlled. Look up the institutional investor all-americans in your sector of choice and read them, don't discount the top guys at smaller firms (i.e. Imperial in Industrials, Moffet in Cable).

 

I recruited from school and must have met 50 people through the course of networking for an EQR job. I interviewed with 7 firms including first rounds and final rounds. During all that networking and all those interviews, I was never asked what finance books I read. Read for pleasure- it'll make you a more interesting person.

 

"Blood on the Street" by Charlie Gasparino gives a good, although possibly biased, portrait of the Mary Meeker, Jack Grubman, Henry Blodget, Eliot Spitzer era on Wall Street that led to the fortification of the Chinese Wall.

 

1) Company contacts (non-management: guys in sales, R&D, procurement) 2) Industry experts (research institutions, academics, suppliers/distributors) 3) On the ground research (ie: visiting a retail location if you are a consumer analyst) 4) Competitors of the company your cover (ie: Dell, HP, Lenovo, etc.) and piecing together the story. 5) Competitors at other banks (ie: reading other analysts reports)

Financial reports are usually the last method of research and it's just a validation/check - a good analyst should have enough contacts that he/she knows what the company should be reporting, or expected to report.

Granted they are not right 100% of the time as companies do surprise on the upside or downside, but financial reports are backwards looking and everyone has access to that info, so there is no value add in that to clients.

===============

I'm also working on a project to give people insight into the sell-side, would love to have your input in a short 20-s survey:

http://www.surveymonkey.com/s/F8SBV9K

 

I have read the Bank Analyst's Handbook...don't buy it. 90% of the book is explaining how banks work, and a lot of the regulatory information is outdated post-2008. Also, a Google search may or may not turn up a free PDF of the book...

I would try to get in touch with any contacts you have in a FIG coverage group, or in Banking ER. They often make industry primers for new analysts.

 

The Bank Valuation and Value-Based Management book is decent. I would say half the book is useful in reference to valuation stuff. The other half is risk management and that is not all that useful.

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

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Currently: future neurologist, current psychotherapist Previously: investor relations (top consulting firm), M&A consulting (Big 4), M&A banking (MM)
 

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