Equity Research Skills

Skills required for Equity Research

It has been seven years since I left my research analyst job at CLSA India. I co-founded eduCBA to train students on Investment Banking & Equity Research. Since then, we have trained more than 10,000 students on different research topics. However, each time we see the same set of questions, one common question is, “What are the Top Equity Research skills that one should acquire to be successful in Research.”

Here are the top 5 Equity Research Skills –

  1. Excel Skills
  2. Financial Modeling
  3. Accounting SkillsAccounting SkillsAccounting Skills are the set of skills required to present business transactions comprising of financial and non-financial in the books of accounts as per prescribed Standards of Accounting (US GAAP, IFRS, Ind AS) and as a part of legal compliance and analysis of business outcome in an optimum way.read more
  4. Valuations
  5. Writing Skills

Let us discuss each one of them in detail –

Equity Research Skills

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#5 – Writing Skills

Writing Skills is at number #5. The equity research report is the most important communication from a securities firm to its clients. This report has a particular purpose; i.e., it is intended to help an investor make a decision about the allocation of resources.

  • First thing First – One crucial aspect is that the research report is nowhere close to novels from Dan Brown, wherein the best is saved for the last!. In a research report, the stock target and price recommendations come first.
  • KISS Principle – “Keep it Simple Silly” is the golden rule. It is essential to be to the point and precise.
  • Less is More – Another essential aspect to note here is that you are not required to write a full Ph.D. thesis here; a single page note or a couple of pages of reports would be great. Readers hardly have 1-2 minutes to read your full report. They may not even scan till the 2nd page.

#4 – Accounting Skills (More than Numbers!)

Number#4 is Accounting! Accounting here is not about Debits and Credits. It is much more than that.

Accounting Frauds

#3 – Valuations (Lies in the eyes of the beholder!)

Valuation Skills is at Number #3. Equity Valuation is the process of estimating the potential market value of a financial assetFinancial AssetFinancial assets are investment assets whose value derives from a contractual claim on what they represent. These are liquid assets because the economic resources or ownership can be converted into a valuable asset such as cash.read more or liability. Valuations are required in many contexts, including investment analysis, capital budgeting, merger and acquisition transactions, financial reporting, taxable events to determine the proper tax liability, and litigation. You should be aware of the following –

#2 – Financial Modeling (Cliffhanger!)

At number #2 is Financial Modeling. Financial modeling meansFinancial Modeling MeansFinancial modeling refers to the use of excel-based models to reflect a company's projected financial performance. Such models represent the financial situation by taking into account risks and future assumptions, which are critical for making significant decisions in the future, such as raising capital or valuing a business, and interpreting their impact.read more forecasting the future of the company or an asset by way of an Excel Model that is easy to understand and perform scenario analysis. In the context of our discussion here, Excel-based Financial Modeling includes professionally forecasting future financial statements like Income Statements, Balance Sheets & Cash Flows. Unfortunately, in graduation and post-graduation, every other subject is taught except Financial Modeling and Excel.

#1 – Excel Skills (Most Obvious is Most Dangerous!)

At number #1 is the Microsoft Excel Skills! Neither I am joking, nor am I drunk. Equity Research AnalystEquity Research AnalystAn equity research analyst is a qualified professional who interprets financial information and trends of an organization or industry to provide recommendations, opinions, reports, and projections on the corporate stocks to facilitate equity trading.read more spend around 10-12-14-16 hours each day working on excel doing financial modeling, valuations, and financial statement analysis. Important points to note in Excel are

This article has been a guide to Equity Research Skills. If you learned something new or enjoyed the post, please leave a comment below. Let me know what you think. Many thanks, and take care. Happy Learning!

Reader Interactions

Comments

  1. Farouq V. says

    Wow I normally read and your posts but I have really liked this one, great and informative. Actually am doing a course in banking and investment management – Uganda. I am so much interested in financial modeling and Excel program to help me get more skills for equity analyst and research.
    Thanks

  2. Nikhil Jaju says

    Hi Dhiraj,

    You are doing a tremendous job via this blog as it is quite informative.
    I am a Chartered Accountant and want to explore opportunities in the areas of Equity Research and Investment Banking. Further, I am pursuing CFA USA as well. So just wanted to know which certification apart from CFA Course I should pursue to land a job in these areas. I just came to know about Financial Modelling certification as well offered by many institutes. Does this includes Equity Research?

    • Dheeraj Vaidya says

      Hi Nikhil, CA + CFA is an awesome combination. Additionally, you can gain training in practical applications of Investment Banking and Equity Research. Financial modeling may or may not contain Equity Research as the scope of Financial Modeling varies with Institute. If you wish to do online trainings, then we also offer such courses. Here is a link to Investment Banking Training (this includes Financial modeling)

  3. Hussein Abdulateef says

    hello, is the equity research training also included in the investment banking training course. thank you

    • Dheeraj Vaidya says

      Yes, it is included in the investment banking course.

  4. Gowtham says

    Nice article Dhiraj. I enjoyed reading it.

    • Dheeraj says

      Thanks Gowtham!

  5. shrikant says

    Hi Dhiraj,

    I am shrikant ex banker , served in credits in analysing balance sheets and preparing project reports for ccs/TL’s and side by side I develop passion about cap market, interested in pursuing financial modelling. Kindly communicate which is good course for me and its prospectus.
    regards,
    shrikant

  6. Neeraj says

    Very informative for aspirants in Financial and Business Performance Analysis …Cheers

  7. deepak says

    its a very useful information and i wanna to know more abut courses that i should pursue in financial carrier as sir am actually a student of 2nd year. am waiting eagerly for ur reply.

    • Dheeraj says

      Thanks Deepak for the note. You should look at developing 2 skills primarily, a) financial Modeling b) excel. You can take any course on this. Infact, on this website there is a free step by step tutorial on financial modeling as well.

      Hope this helps,
      Dheeraj

      • savi says

        Is this free financial modeling course enough to make me able to get the thorough knowledge of it.

        • Dheeraj says

          Hello Savi,

          this free financial modeling course is actually good enough to get knowledge on financial modeling. However, it is upto you to take your learnings ahead by applying the financial modeling methodologies learnt to other set of companies. More you practice, better you will become.

          All the very best,
          Dheeraj

  8. mohamad adityo nugroho says

    Thank you very much, Dheeraj

    Your article will guide me to be a good equity analyst :)

    Greetings from Jakarta

    • Dheeraj says

      thanks Mohamad!

      • Raj Kotecha says

        Hello Sir,

        I am a first year MBA Student and have cracked Equity Research analyst internship in an investment bank. I currently read Bloomberg Business, Business Today and Mint Newspaper everyday. Sir, I request you if you can guide me on other sources of data I should be reading apart from these 3 sources of data to get information that is beyond between the lines.

        Awaiting for your reply.
        Thank You.

  9. Prateek Bali says

    It would be great if you could upload the financial model as well.

  10. mahendra says

    Thanks Dheeraj,
    each and every time i learn new things with the help of your articles…

    • Dheeraj says

      Thanks Mahendra, I am glad you find these articles helpful.

  11. Michael Samonas says

    Very usefull post as always. Dheeraj thanks for sharing so usefull subject with the rest of us. If you do not mind I tweet your posts and I share them with various groups at linkedin.

    BR

    Michael

    • Dheeraj says

      Many Thanks Michael! I really appreciate your help in sharing these posts in your group.

      Best,
      Dheeraj

  12. bruks says

    Thanks Rafael. I would like a specific example let’s say a simple “Balance Sheet”, “Income statement” Cash Flow” to build in Excel financial model with graphics.

  13. Vanshja Gairola says

    Nice article. Very informative.

    • Dheeraj says

      Many Thanks Vanshja!

  14. Hari says

    Great Article!!! Enjoyed project finance classes in educba.

    • Dheeraj says

      Thanks Hari!

  15. Rafael says

    Great post! Excelent read for students who are willing to pursue a career in equity research.

    • Dheeraj says

      Thanks Rafael :-)

  16. Nitesh says

    Thanks for the information.

    • Dheeraj says

      Thanks Nitesh!

  17. deepak says

    Content was very much useful. Thanks for the information.

    • Dheeraj says

      Thanks Deepak!

  18. sneha says

    Very good article. Please suggest some courses..

  19. Danish Cooper says

    This is some real good advice thanks alot. But is it possible to value a company without accounting skills and rather using mathematical techniques.

  20. Angela says

    Thanks Dheeraj. This was an eye opener. I always overlooked Excel, maybe it is high time for me to focus on MS Excel. Any startup training that you recommend for excel?

    • Dheeraj says

      Many thanks Angela.

    • Uuganaa says

      Hello Dear,
      I read your article and I’m really interested in FCA. Could you tell me how i study, what do i do need at first of all. I hope that you will help me.
      See you soon.

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