Sell-Side Equity Research gets its fair share of criticism from investors, but it’s also a good training ground where you can learn about the investment process and become a better investor.
Here are 10 things I learned during my time on the sell-side
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Here are 10 things I learned during my time on the sell-side
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1. Writing
Putting your thoughts into paper forces you to think more clearly and organize your arguments and conclusions. There’s no better way to crystallize your thinking than by writing down what you think, and doing it on a weekly basis creates a very powerful lasting habit.
Putting your thoughts into paper forces you to think more clearly and organize your arguments and conclusions. There’s no better way to crystallize your thinking than by writing down what you think, and doing it on a weekly basis creates a very powerful lasting habit.
2. Primary Sources
Don’t read news articles, Bloomberg or third party sources as your 1st stop for company news or information
Always go to the primary source (company filings/press releases), become familiar with them, learn how to read these documents and digest them yourself
Don’t read news articles, Bloomberg or third party sources as your 1st stop for company news or information
Always go to the primary source (company filings/press releases), become familiar with them, learn how to read these documents and digest them yourself
3. Financial Modeling
Modeling may lead to false precision, but in practice it’s a great way to learn how a company makes money, how to value it and what the future may look like under various assumptions
First they should be complex & over time become simpler (via @PrefShares)
Modeling may lead to false precision, but in practice it’s a great way to learn how a company makes money, how to value it and what the future may look like under various assumptions
First they should be complex & over time become simpler (via @PrefShares)
4. Stock pitching
Pitching a stock helps you craft your views in an organized form, by explaining them succinctly to someone else, who in turn can ask questions and test your knowledge. It also forces you to compress the thesis into the most important drivers of returns.
Pitching a stock helps you craft your views in an organized form, by explaining them succinctly to someone else, who in turn can ask questions and test your knowledge. It also forces you to compress the thesis into the most important drivers of returns.
5. Research Process
The most useful content from the SS are initiations, company deep dives and industry notes. They’re also the most research intensive and what most closely resembles what an investor should do. It helps mold your process to learn a new company/industry from 0
The most useful content from the SS are initiations, company deep dives and industry notes. They’re also the most research intensive and what most closely resembles what an investor should do. It helps mold your process to learn a new company/industry from 0
6. Talking to clients
Your clients are PMs and Analysts, many smarter and more experienced than you. Need to build a track record, credibility and be able to handle push back. Having a good discussion with someone smart who is on the opposing side of you is a great skill to have
Your clients are PMs and Analysts, many smarter and more experienced than you. Need to build a track record, credibility and be able to handle push back. Having a good discussion with someone smart who is on the opposing side of you is a great skill to have
7. Management
One of the best perks is having access to senior management. Speaking to management teams helps you differentiate b/t the good and bad ones and ask the right questions. What do they say vs. what do they do? How consistent are they? Are they upfront and transparent?
One of the best perks is having access to senior management. Speaking to management teams helps you differentiate b/t the good and bad ones and ask the right questions. What do they say vs. what do they do? How consistent are they? Are they upfront and transparent?
8. Earnings
The craziest and busiest time is always earnings season, and it’s important to develop a process. Know which companies report in which format and the most important KPIs to look for; keep a balance between the quarterly performance variability and the long term view
The craziest and busiest time is always earnings season, and it’s important to develop a process. Know which companies report in which format and the most important KPIs to look for; keep a balance between the quarterly performance variability and the long term view
9. Following companies you don’t own
Every great investor needs to be capable of studying a company in-depth without falling trap to the sunk-cost fallacy that may lead you to invest b/c of time spent.
Be capable of studying a company for a long time without having to own it.
Every great investor needs to be capable of studying a company in-depth without falling trap to the sunk-cost fallacy that may lead you to invest b/c of time spent.
Be capable of studying a company for a long time without having to own it.
10. Circle of Competence
You spend your entire workday covering 20 companies in 1-2 sectors and over time you start to develop a circle of competence. It probably takes ~3 years, but importantly you learn how to learn, and can replicate it again over time to learn a new sector
You spend your entire workday covering 20 companies in 1-2 sectors and over time you start to develop a circle of competence. It probably takes ~3 years, but importantly you learn how to learn, and can replicate it again over time to learn a new sector
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