Who is an Equity Research Analyst?
Equity Research Analyst refers to the person who analyzes financial information along with the different trends of the different organizations or the different industries and then gives an opinion in his equity research report on the basis of analysis conduct thereby helping the clients in making the goods investment decisions.
Equity Research analyst makes a decision of performance of stocks, industry, market, economic development and other important economic factors like interest rates, inflation rates, etc.
- The primary role of an Equity research analyst is to give the recommendation to buy, sell or to hold any financial securities. They prepare a report on the basis of a financial statement of a company. They analyze costing, revenue, risk in the company. An analyst also keeps track of various activities in a company like an industrial seminar, investor day event, investor meeting.
- Equity research analysts gather all information and analysis to build a financial model. These models are used to find the value of a company and to analyze the financial position of a company it is based on some assumptions and helps to predict the future financial performance of the country. An output of the model has the recommendation to buy, sell or hold with a potential return from the current price. Assumption made differ from analyst to analyst and each and every analyst has a different specification.
Equity research analysts can be classified as follow:-
#1 – Buy Side
In buy-side companies have equity research analysts to help them in investment purposes. They monitor the securities on a daily basis and access the impact of macroeconomic news on the long term performance of the stocks. Additionally, they are in touch with the sell-side equity research analyst for stock advice and update.
#2 – Sell-Side
In the sell-side, the analysis is done to advise the client on the current investment opportunities. The analyze equities to recommend buy or sell particular financial security. These tips are provided to the agent or relationship manager of a brokerage firm and bank in the form of reports which are prepared by the equity research analyst.
Equity Research Analyst Career
Equity Research Analysts mostly start their career as junior analysts and the move to the Equity Associates roles.
- As a junior analyst, you are responsible for almost everything including data entry jobs as well as preparing the financial model of the companies. Your main role is to support the Associate in his daily tasks.
- The associate manages either one or maybe two to three junior analysts and ensures the timely completion of the results updates, financial models, equity research reports for the senior analyst.
- Senior Analyst role is mostly client-facing wherein they are expected to call and meet the fund managers and communicate about their investment thesis and its rationale on a regular basis.
Equity Research Analyst Qualifications
The key here is to be able to work well under pressure. You should be good at research and analytical stuff. For roles of Junior equity research analyst, a bachelor’s degree in accounting may be sufficient. However, you should be able to demonstrate your passion for finance. Taking CFA exams is one plus.
What is expected from an Equity Research Analyst?
#1 – You should be awesome in Financial analysis
As an equity research analyst, you are expected to be excellent in financial ratio analysis. You should be able to pull fully understand and analyze the SEC filings and present those in excel.
#2 – Excellent Communication Skills
It is important to have great communication and writing skills. Equity Analysts are expected to publish their investment reports at frequent intervals and they should be able to communicate well with their clients.
# 3 – Awesome in Financial Modeling
Financial modeling involves forecasting the financials of the company and estimate of the fair value using DCF Valuation, trading multiple valuations as well as other valuation tools. As an Equity analyst, be prepared to be awesome in financial modeling.
#4 – You should be Great at Excel
Mostly, you will work under intense pressure with deadlines especially during the earning seasons (quarterly and annual result announcements. Clients expect you to come up with the analysis in a fast and accurate manner. Therefore, you must take every measure to save time. Equity Analysts are experts at excel and they are able to pull reports and prepare financial models and charts in no time.
Who provides equity research analyst Jobs?
Equity research analysts are hired in the following sectors –
- Stock Brokerage
- Mutual Funds
- Wealth Management Firms
- Credit Rating Firms
- Media Companies
- DataBase Firms
Equity Research Analyst Exit Opportunities.
You may work a sell-side equity research analyst for a couple of years and thereafter get promoted as an associate and move up the chain as discussed earlier. However, if you have decided to quit equity research, the following options may be open for you –
# 1 – Get into Buy-Side Roles
Here you would be basically working for the hedge fund managers or the portfolio managers. The skillset for both is similar as you are analyzing investments and making recommendations. The buy-side offers an even better lifestyle and actually investing.
#2 – Get into Investment Banking
Many equity research analysts move into Investment Banking roles like IPO, M&A, etc. This is because most of the skills required for Investment Banking are the same as that of equity research and offer a lucrative career due to its dynamic nature.
#3 – Get into Private Equity
Getting into private equity could be another exit option. Although this can get tough as you are not working on transactions at equity research jobs and hence the profile differs a bit. That does not mean it is impossible to get into PE. As an Equity research analyst, you would be well versed with investment research only that this will be respect to private companies and not public.
This has been a guide to Equity Research Analysts. Here we discuss the classification of equity research analysts, their roles and responsibilities, career opportunities, qualifications, and exit opportunities. You can learn more about Equity Research from the following articles –