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.
- The primary role of an Equity research analystResearch AnalystResearch analyst is a profession where the main task includes research on specific fields, analyzing the facts and figures, interpreting the analysis, and finally presenting the same to a structured audience that can relate to marketing, finance, operations. is to give the recommendation to buy, sell, or to hold any financial securities. They prepare a report based on the 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.
- They 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. It 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 every analyst has a different specification.
Equity research analysts can be classified as follow:-
#1 – Buy Side
In buy-side companies have research analysts to help them in investment purposes. They monitor the securities daily and access the impact of macroeconomic news on the long term performance of the stocks. Additionally, they are in touch with the sell-side 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 research analyst.
Equity Research Analyst Career
Equity Research careerEquity Research CareerEquity research comprises an individual's expertise in researching, reporting, projections, and predictions surrounding a company's stock. The top five careers in equity research are - Market research analyst, Sector research analyst, Senior equity research analyst, Fund manager, and Chief investment officer. starts 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.
- The 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 regularly.
The key here is to be able to work well under pressure. You should be good at research and analytical stuff. For the 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 examsTaking CFA ExamsThe Chartered Financial Analyst (CFA®) Program offers a graduate-level curriculum and examination program designed to expand your working knowledge and practical skills related to investment decision-making. is one plus.
What is expected from an Equity Research Analyst?
#1 – You should be awesome in Financial analysis
As an analyst, you are expected to be excellent in financial ratio analysis. You should be able to pull fully understand and analyze the SEC filingsSEC FilingsSEC filings are formal documents submitted to the Securities and Exchange Commission in the United States that contain financial information about the company as well as any other relevant information about recent or upcoming activities. 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 ValuationDCF ValuationDiscounted cash flow analysis is a method of analyzing the present value of a company, investment, or cash flow by adjusting future cash flows to the time value of money. This analysis assesses the present fair value of assets, projects, or companies by taking into account many factors such as inflation, risk, and cost of capital, as well as analyzing the company's future performance., 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 earning seasonsEarning SeasonsThe Earnings season refers to the quarterly report of companies' results, such as revenue/profits, released in the first two weeks after each quarter ends (Dec, Mar, Jun, Sep). It helps investors in making investment decisions and determining the value of their investments. (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?
These 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, after that, 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 managersThe Portfolio ManagersA Portfolio Manager is an executive responsible for making investment decisions & handle investment portfolios for fulfilling the client’s investment-related objectives. Also, he/she works towards maximizing the benefits & minimizing the potential risks for clients. . 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 research analysts move into Investment Banking rolesInvestment Banking RolesInvestment bankers play diverse roles and responsibilities in a company as analysts, associates, vice president and managing director. They handle the front, middle, and back-office responsibilities to cater to the clients with all sort of financial services. like IPO, M&A, etc. It is because most of the skills required for Investment Banking are the same as that of equity researchEquity ResearchEquity Research refers to the study of a business, i.e., analyzing a company's financials, performing Ratio Analysis, Financial forecasting in Excel (Financial Modeling), & exploring scenarios to make insightful BUY/HOLD/SELL stock investment recommendations. Moreover, the Equity Research Analysts discuss their findings & details in the Equity Research Reports. and offer a lucrative career due to its dynamic nature.
#3 – Get into Private Equity
Getting into private equity could be another exit option. However, this can get tough as you are not working on transactions at equity research jobsEquity Research JobsEquity research analysts jobs are competent for the candidates who have a keen interest and understanding in financial analysis of the companies. The profile includes suggesting equities as well as buying and selling the stocks on the clients' behalf. and hence the profile differs a bit. That does not mean it is impossible to get into PE. As a research analyst, you would be well versed with investment researchWith Investment ResearchInvestment research entails analyzing the performance of various financial instruments such as stocks, mutual funds, bonds, debentures, and so on in order to present an investor with a view of how the firm is performing. It also aids in predicting their future performance for price movements. only that this will be respect to private companies and not public.
This article has been a guide to Equity Research Analysts. Here we discuss the classification of equity research analysts, their roles and responsibilities, qualifications, and exit opportunities. You can learn more about Equity Research from the following articles –