What is Equity Research?
Equity Research primarily means analyzing the company’s financials, perform ratio analysis, forecast the financial in excel (financial modeling), and explore scenarios with the objective of making a BUY/SELL stock investment recommendation. Equity Research analyst discusses their research and analysis in their equity research reports.
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In this in-depth article on Equity Research, we discuss the nuts and bolts of Equity Research.
- Role of Equity Research
- Hierarchy in Equity Research firms
- Role of Head of Research
- Job of the Senior Analyst
- Responsibilities of an Associate
- Responsibilities of a Junior Analyst
- Typical Day at an Equity Research Firm
- Who pays for Equity Research?
- Equity Research Professional Approach
- Equity Research Skills-Set
- Top Equity Research Firms
- Equity Research Compensation
- Equity Research Exit Opportunities
Equity Research explanation is quite simple. Let us look at these steps below
- Equity research is all about finding the valuation of a listed company (Listed companies trade on a stock exchangeStock ExchangeStock exchange refers to a market that facilitates the buying and selling of listed securities such as public company stocks, exchange-traded funds, debt instruments, options, etc., as per the standard regulations and guidelines—for instance, NYSE and NASDAQ.read more like NYSE or NASDAQ etc
- Once you have the company under consideration, you look at the economic aspects like GDP, growth rates, the market size of the industry and the competition aspects, etc.
- Once you understand the economics behind the business, perform the financial statement analysis of the historical balance sheet, cash flows, and income statement to form an opinion on how the company did in the past.
- Based on management’s expectation, historical performances, and industry competition, project the financial statementsFinancial StatementsFinancial statements are written reports prepared by a company's management to present the company's financial affairs over a given period (quarter, six monthly or yearly). These statements, which include the Balance Sheet, Income Statement, Cash Flows, and Shareholders Equity Statement, must be prepared in accordance with prescribed and standardized accounting standards to ensure uniformity in reporting at all levels.read more like the BS, IS, and CFs of the company. (also called as Financial Modeling in Equity Research)
- Use the Equity valuation models like DCF, Relative valuations, a sum of parts valuationSum Of Parts ValuationSum of the Parts Valuation is a valuation method wherein each of the subsidiary or segment of a Company is separately valued & then all of them are added together to estimate the business’s total value. read more the company.
- Calculate the Fair price based on the above models and compare the fair price with the Current Market Price (stock exchange)
- If the Fair Price < Current Market Price, then the company stocks are overvaluedStocks Are OvervaluedOvervalued Stocks refer to stocks having more current market value than their real earning potential or the P/E Ratio. Overvaluation of stocks might occur due to illogical decision making or deterioration in a Company’s financial health. read more and should be recommended as a SELL.
- If the Fair Price > Current Market Price, then the company shares are undervalued and should be recommended as a BUY.
Role of Equity Research
- Equity Research plays a very critical role that fills the information gap between the buyers and sellers of shares.
- The reason is that at all levels (individual or institutional) may not have the resources or the capabilities to analyze every stock.
- Additionally, full information is not provided by the management due to which further in-efficiencies are created and stocks trade below or above the fair value.
- 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 spends a lot of time, energy, and expertise to analyze stocks, follow the news, talking to the management, and provide an estimate of stock valuations.
- Also, equity research tries to identify the value stocksIdentify The Value StocksValue Stock is one that has the potential of selling at a higher price but due to the company’s adverse condition in the market, the stock is trading at a lower price than its actual worth based on its earnings, dividend, or sales.read more out of the massive ocean of stocks and help the buyers to generate profits.
What is the Typical hierarchy in Equity Research firms?
- A typical hierarchy at an Equity Research firm starts with the Head of Equities/Head of Equities at the top.
- Thereafter there are Analysts (senior) covering different sectors. Each analyst mostly covers around 10-15 companies in a specific sector.
- Each Senior analyst may be supported by an Associate, who in turn, may be supported by a couple of Junior Analysts.
What is the role of the Head of Research?
- Head of Research acts as a key member to manage the Equity research analyst team, providing the team with leadership, coaching, and guidance to ensure that the brokerage goals and objectives are met.
- They oversee research reports, publications; it’s editing as well as monitor the process of analysis and brokerage recommendations.
- They ensure that adequate support is provided to sales and trading teams.
- Contribute to Equities by providing expert-level inputs for overall strategy, goals, initiatives, and budgets
- Responsible for Analyst hiring, compensation, development, and performance management
- Liaison with fund managers and the research teams
What is the job of the Senior Analyst?
Below is an excerpt from a job requirement of a Senior analyst –
source – FederatedInvestor
- Typically an equity research senior analyst would cover a sector with not more than 8-15 stocks. Coverage implies tracking these stocks actively. Senior Analyst tries to bring maximum companies under coverage in the sector he/she tracks (initiating the coverage)
- Many senior equity analysts cover companies that investors may want to invest in. These companies are like the high market capitalization companies or the ones with higher trading volume, and there could also be cases where investors want to invest in small-cap or mid-cap stock companies with fewer analysts coverage.
- One of the most important responsibilities of Senior Analyst is to come up with Quarterly Results Update – results summary, expectation, and performance against those expectations, updating forecasts, etc.
- Talking to the clients (buy sideBuy SideThe term "buy-side" refers to entities that advise their clients like individual investors and institutional buyers on investments and securities purchases. Private equity firms, mutual fund companies, life insurance companies, unit trusts, hedge fund companies, and pension fund entities are examples of buy-side firms.read more) and showcasing their calls on the stocks. They have to diligently communicate buy sell recommendations of stocks. Additionally, they have to articulate clearly why a certain stock should be included in their portfolio.
- Write important industry event updates like conferences or management meeting updates.
- To update the Sales team, dealing with and trading team about the latest news in the sector and the company, and keep them updated with the brokerage’s view on the same.
- Attending conference calls for important company updates, results, etc
- Attend trade shows, meet company management, suppliers meetings, etc
Responsibilities of an Associate
Below is the summary of the Associate job description from efinancialcareers
- The primary job of an associate is to support the Senior Analyst in the best way possible.
- An associate has prior experience of around 3 years or so in a similar industry.
- Updating the financial model, verifying the data, and preparing the valuation models
- Working on various client requests like a request of data, industry analysis, etc
- Prepare draft Equity Research Reports (update of results, events, etc.)
- Work on client requests
- Participate in meetings and calls with clients on the stock under coverage.
Responsibilities of a Junior Analyst
Here is a snapshot of Junior Equity Analyst’s responsibilities.
source – careers.societegenerale.com
- The main responsibilities of Junior Analyst are to support the Associate in every format.
- The majority of the work done by Junior Analyst is related to data and excel etc.
- Also, Junior Analyst may be involved in doing primary research, industry research, coordinating with clients, etc.
- Maintaining the industry database, charts, graphs, and financial models, etc.
Typical Day at an Equity Research Firm
Previously, I had worked with companies like JPMorgan and CLSA India as an Equity Research Analyst. I covered Indian Oil & Gas sectors with stocks like ONGC, BPCL, HPCL, GAIL, etc. Below was my typical day as an Equity Research Analyst.
7:00 am – Reach office
- Check emails from traders and salespeople
- Check the stock markets (Asian Markets that open first)
- Check for all the news related to your sector
7:30 am – 8:00 am Attend Morning Meeting
- Morning meeting is nothing a formal discussion of the recommendations before the market opens along with Sales & Trading Team
- In this morning meeting, all analysts present their views on key developments in their sector along with the Head of Research or Equities presenting their views on the general markets.
9:00 am – Market Opens
- Follow the Market, look for key developments in your sector
- Try to rationalize if there are any rapid stock price movements
10:00 am – Regular Work
- Perform regular research analyst duties like Client Requests, Financial Model updates,
- Follow the News and keep a close check
11:00 am – Regular Work / Client Discussions
- Discussion with buy side clients for any explanation of research/calls
- Continue doing your regular maintenance work
3:30 pm – Market Closes
- Capture the market movements of the company under coverage for the day closure.
- Check if there is anything that the clients should know and work accordingly.
4:00 pm – Work on New Research Publications
- Work on the new research piece for publication (next day or in coming days)
- Generally, research analyst targets at least 1 to 2 research pieces every week.
7:30-8:00 – go Home
- If there is no earning season (company results), then the typical go home time is 7:30-8:00 pm. However, during earning seasons, there is no surety when you will reach home.
- You need to fully prepare the result update report and keep it ready for the next day early morning publication.
Who Pays for Equity Research?
- For Independent Equity Research firms: Independent equity research firmsEquity Research FirmsThe list of top 10 equity research firms in the world comprise: JP Morgan Chases and Co, Bank of America Merrill Lynch, Credit Suisse, Barclays Capital, Citigroup, Goldman Sachs, Morgan Stanley, AllianceBernstein L.P.,UBS, and Nomura Holding Inc.read more do not have a trading and sales division. They perform financial analysis with an idea of charging Fees on a per report basis. Also, see Equity Research vs. Sales and Trading.
- For Major Equity Research firms: Fee income is earned by brokerage trades (Soft Dollars). To understand this in detail, let us look at the diagram below –
- As noted above, on one side is the Buy Side firms like Hedge FundsHedge FundsA hedge fund is an aggressively invested portfolio made through pooling of various investors and institutional investor’s fund. It supports various assets providing high returns in exchange for higher risk through multiple risk management and hedging techniques.read more, Pension Funds, Insurance Companies, Mutual fundsMutual FundsA mutual fund is an investment fund that investors professionally manage by pooling money from multiple investors to initiate investment in securities individually held to provide greater diversification, long term gains and lower level of risks.read more, etc.
- On the other side are the sell side firms like JPMorgan, Goldman Sacks, Credit Suisse, etc.
- The buy side firms manage the portfolio, and they are required to invest their portfolio as per the investment objective.
- Investment objective may mandate these companies to keep a portion of their assets in Stocks etc.
- In such cases, the buy side analysts seek to advise from the sell side analyst for investment decisions.
- The advice or the idea provided by the sell side analyst is literally for FREE.
- Once the buy side analyst has taken the decision of investing in the stock, the buy side analyst may look forward to executing the trade through the Trading division of the sell side firm.
- The trading division will, in turn, charge a commission for executing the trade at the lowest price.
- The commission, in return, is basically the earnings of the research firms.
Equity Research Professional Approach
So what is your work like as an Equity Research Professional? Equity Research analysts follow stocks and make recommendations on whether to buy, sell, or hold those securities using Fundamental Analysis. Equity Research is a very challenging job, where an analyst may be required to spend more than 12-14 hours a day.
For creating a professional Equity Research Financial model, an expert analyst recommended approach is as follows –
Economic Analysis / Industry Analysis / Company Analysis
- The very first thing you need to take care of while doing a professional analysis is to learn about the economic parameters affecting the industry, the industry dynamics, competitors, etc.
- For example, when you are analyzing Alibaba, you should know about each and every subdivision of Alibaba and its competitors.
Fundamental Analysis
- You should be awesome at Fundamental Analysis. Fundamental Analysis means performing a Ratio Analysis of the company under consideration.
- Before you start ratio analysis, you should populate at least the last 5 years of financial statements (Income Statement, Balance Sheet, and Cash FlowsCash FlowsCash Flow is the amount of cash or cash equivalent generated & consumed by a Company over a given period. It proves to be a prerequisite for analyzing the business’s strength, profitability, & scope for betterment. read more) in excel.
- You should prepare a blank excel sheet with Separate Income Statement, Balance Sheet, and Cash Flows and use neat formats.
- Populate the historical financial statements (IS, BS, CF) and do the necessary adjustment for Non-recurring itemsNon-recurring ItemsNon-recurring items are income statement entries that are unusual and unexpected during regular business operations; examples include profits or losses from sale of asset, impairment costs, restructuring costs, and losses in lawsuits, and inventory write-off.read more (one time expenses or gains).
Do the Ratio AnalysisRatio AnalysisRatio analysis is the quantitative interpretation of the company's financial performance. It provides valuable information about the organization's profitability, solvency, operational efficiency and liquidity positions as represented by the financial statements.read more for Historical years - An example is presented below in Colgate Ratio Analysis
Preparing a Professional Financial Model
- Company management does not provide the future financial projectionsFinancial ProjectionsFinancial projection is a statistical forecast of a company's future revenue and expenditure based on historical market patterns, internal factors, data interpretation, anticipated market developments, and experiences. To meet production or sales targets, both short-term and long-term financial estimates are sometimes evaluated.read more of the company. Therefore, it is important as a research analyst to project this data. Forecasting the financials of the company is known as Financial Modeling. I earlier wrote a 6000 words step-by-step tutorial on Financial Modeling. If you want to master Financial Modeling, you can refer to this Financial Modeling Tutorial
Valuations – DCF
- Valuation is primarily done using two methods – a) Discounted Cash flow and b)Relative Valuations.
- Once your financial model is ready, you can perform Discounted cash flows as given in the steps below –
- Calculate FCFF as discussed in class and the handbook
- Apply a suitable WACC post the calculation of the capital structure
- Find the Enterprise Value of the Firm (including the Terminal ValueTerminal ValueTerminal Value is the value of a project at a stage beyond which it's present value cannot be calculated. This value is the permanent value from there onwards. read more)
- Find Equity Value of the Firm after the deduction of Net Debt.
- Divide Equity Value of the Firm by the total number of shares to arrive at the “Intrinsic Fair Value” of the company.
- Recommend whether to “BUY” or “SELL”
Valuation – Relative Valuations
- Relative valuation is based on comparing the valuation of the company under consideration with the valuation of other firms. There are valuation multiples used to value companies like PE MultiplePE MultipleThe price to earnings (PE) ratio measures the relative value of the corporate stocks, i.e., whether it is undervalued or overvalued. It is calculated as the proportion of the current price per share to the earnings per share. read more, EV/EBITDAEV/EBITDAEV to EBITDA is the ratio between enterprise value and earnings before interest, taxes, depreciation, and amortization that helps the investor in the valuation of the company at a very subtle level by allowing the investor to compare a specific company to the peer company in the industry as a whole, or other comparative industries.read more, PBV ratioPBV RatioPrice to Book Value Ratio or P/B Ratio helps to identify stock opportunities in Financial companies, especially banks, and is used with other valuation tools like PE Ratio, PCF, EV/EBITDA. Price to Book Value Ratio = Price Per Share / Book Value Per Share read more, etc.
The common approach is given below.
- Identify the comparable based on the business, Market Capitalization, and other filters.
- Identify a suitable trading valuation multiple to be used for this business.
- Use the average valuation multiple to find the valuation of the company.
- Suggest “Undervalued” or “Over-valued.”
Research Report
- Once you have prepared the financial modeling and find the fair valuation of the company, you need to communicate this to your clients through Research Reports. This research report is very professional in nature and is prepared with a lot of caution.
- Below is a sample of the Equity Research Report. You may learn about Equity Research Report Writing here.https://www.wallstreetmojo.com/wp-content/uploads/2015/03/Reliance-Petroleum.pdf
Equity Research Skills-Set
Here are excerpts from the Equity Research Job Requirements Description –
Key highlights to note from this excerpt is –
- MBA is a plus (not a necessity). If you are an MBA, then you have certain advantages, but if you are a graduate, you should not get disheartened. You have a chance if you prove your interest in finance. Please do have a look at Can an engineer get into an Investment Bank.
- Financial discipline is not essential, but you must have a strong interest in the financial markets with excellent quantitative and analytical skills.
- You should be fluent in English and have excellent verbal and written communication skills.
- You possess intellectual curiosity, focus, and creativity, and have a keen research instinct with creative problem-solving abilities.
- Strong proficiency in Microsoft Excel and Powerpoint
- CFA designation – This is one important designation that the finance industry respects. Try to ensure that you take the CFA examinationCFA ExaminationThe 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. read more and pass at least a couple of levels.
- I wrote a detailed post on the skills required to enter into Equity Research. My top 5 skillsets required to enter the Equity Research Industry are –
- Excel Skills
- Financial Modeling
- Valuations
- Accounting
- Report Writing
You can get an in-depth understanding of the skillsets here – Equity Research Skills.
Top Equity Research Firms
Institutional Investors ranking suggests that in 2014, the best research firm was Merril Lynch Bank of America, second place was taken by JPMorgan, and Morgan Stanley came third.
Apart from the top 3 above, there are other notable equity research firms (listed below)
| Deutsche Bank | Standard Chartered Bank |
|---|---|
| Credit Suisse | Cornerstone Macro |
| UBS | Wolfe Research |
| Barclays | BNP Paribas Securities |
| Citi | CIMB Securities |
| Nomura | Cowen and Co. |
| Goldman, Sachs & Co. | Berenberg Bank |
| CLSA Asia-Pacific Markets | Citic Securities |
| Wells Fargo Securities | CRT Capital Group |
| VTB Capital | Empirical Research Partners |
| Sberbank CIB | J. Safra Corretora |
| Santander | Keefe, Bruyette & Woods |
| ISI Group | Kempen & Co. |
| Daiwa Capital Markets | Otkritie Capital |
| Jefferies & Co. | Raymond James & Associates |
| Mizuho Securities Group | Renaissance Macro Research |
| SMBC Nikko Securities | SEB Enskilda |
| Macquarie Securities | ABG Sundal Collier |
| HSBC | Amherst Securities Group |
| Banco Português de Investimento | Antique Stock Broking |
| Batlivala & Karani Securities India | Autonomous Research |
| BBVA | Helvea |
| BGC Partners | Ichiyoshi Research Institute |
| BMO Capital Markets Corp. | ICICI Securities |
| BOCI Research | ING Financial Markets |
| Brasil Plural | Intermonte |
| Commerzbank Corporates & Markets | JB Capital Markets |
| Davy | Kepler Capital Markets |
| EFG-Hermes | LarrainVial Corredora de Bolsa |
| Equita S.I.M. | Lazard Capital Markets |
| Fidentiis Equities | MainFirst Bank |
| Gazprombank | N+1 Equities |
| Goodbody Stockbrokers | Oddo Securities |
| Guggenheim Securities | Okasan Securities Co. |
| Handelsbanken Capital Markets | Oppenheimer & Co. |
| Samsung Securities | Petercam |
| Stifel | Rabobank |
| Strategas Research Partners | Redburn Partners |
| UniCredit | Washington Analysis |
| Vontobel | Zelman & Associates |
Equity Research Compensation
- Junior Analyst/Assistants have a base comp of $45,000 – $50,000 per year (average)
- Associates have a base salary of $65,000 – $90,000 per year (average) depending on the experience. Additionally, they get a bonus of 50-100% of the base salary (in an average to good year)
- Senior Analysts generally have a base compensation of $125,000 – $250,000. Their bonus may range from 2-5 times the base compensation.
Equity Research Exit Opportunities
Sell Side research analyst has various Career Opportunities –
Within Equity Research Firm
- If you joined as an associate, then you can move up the ladder to become a Senior analyst assuming full responsibility for the sector coverage.
- Later you can move further up to become Head of Research and Head of Equities.
Private Equity Analyst
- Sell side analysts also move to the Private Equity domain working as Private Equity AnalystPrivate Equity AnalystA private equity analyst is an analyst who looks for undervalued companies for a private equity investor to buy, take them private and earn profits. The companies are primarily unlisted, and the risk is higher.read more.
- Instead of analyzing public companies, they analyst private companies from the point of view of investments.
- They can move up the hierarchy to become a Private Equity Fund manager. Check out the list of Top Private Equity Firms.
Investment Banking Analysts
- Movement of sell side analysts to Investment bankingInvestment BankingInvestment banking is a specialized banking stream that facilitates the business entities, government and other organizations in generating capital through debts and equity, reorganization, mergers and acquisition, etc.read more is slightly tough but not impossible.
- Sell side analysts are fully aware of financial research and modeling related work.
- What they haven’t worked on is the transaction-related work like IPO filing documents, Pitch books, registration work, etc. If you are confused between Investment Banking and Equity Research, read this article – Investment Banking vs. Equity ResearchInvestment Banking Vs. Equity ResearchEquity research is a mechanism through which an organization's financial well-being, i.e. assets and liabilities are analyzed, which further helps investors make investing decisions. In contrast, investment banking is a banking function that offers financial services to individuals and companies and enables them to raise capital.read more.
Buy Side Firms
- Sell side analysts sometimes are also absorbed as buy side analysts (working for Mutual funds, etc.).
- The buy side analysts assume the responsibility of fund managers over a period of time.
Corporate Finance
- Sell side analysts work a lot on financial analysis, analyzing company projects, and its effect on the overall company’s financials. Hence, they get into typical Corporate finance roles of large corporates (take care of financial analysis, planning Projects, etc.)
- Another unique role they get into is Investor relations. As a sell side analyst, they get equipped with the FAQs and how to deal with critical information and its sharing, etc. Due to this, they also become eligible for Investor Relations jobs.
Recommended Articles
Conclusion
Equity Research essentially means preparing an estimate of company fair valuation for recommending the buy side clients. Though, as a research analyst, you may spend 12-16 hours a day at the office; however, this is a dream job for many who love Finance and Financial Analysis. If you like to work in a challenging and dynamic environment, then this is one career you must consider. Not only equity research job rewards analysts with relatively higher compensation, but also, it provides excellent exit opportunities.
Equity Research Video
What next?
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!
Hi Sir, I am a CA and an aspiring investment banker. i have done your beginner course on IB and now this article. I learned a lot and now i am having a deep insight about investment banking. Will keep reading your post. Thanks
Thanks for your kind words!
i have gone through your work it is really educative ,i will now be going through it to learn more
Thanks Dheeraj!!
It’s crisp and clear fora beginner like me with Societe generale.
thanks Basantkumar!
Thank u very veru much sir ,I learn something new and I want further please
Very nice article and provide deep insight about equity research.
Thank you Dheeraj. I frequently read you published articles.
Thanks Aqeel. Glad you liked the articles.
Thank you for the post. It was very useful and involved detailed content.
thanks Allan!
Hello Dheeraj,
I am a Chartered Accountant and a CFA level 2 candidate. I have no work experience in equity research till now but i am very much interested and hence persunig CFA. I am a fresher. So what are the chances for a freseher to get into equity research as i am really trying hard to get into one? How to approach those firms?
Thanks.
Jinali
Hi Jinali, your chances are very bright already (given you are CA and CFA Level 2 candidate). You should be in a position to get an equity research job soon. Try updating your skills as well to include Financial Modeling, Valuations etc. This will help you get the shortlist for such positions.
Good luck,
Dheeraj
recommended post, thank u Dheeraj! im working as a junior analyst. Is it possible if i want to take the opportunity as a fund manager after this?
Hi Kevin, the first move would be to move into the buy side position as an analyst and later you can get promoted to fund manager roles.
Hii Dheeraj,
I have just completed my MBA in finance,and eagerly planning to grow my career into analyst profile.Your article has really given me an overwiew of how it works,the whole analysis thing.Moreover,I would like to get more updates into the same.
Thankyou
Regards
Priya
Thankyou
Priya
Thanks Priya, i am happy to see that you liked this equity research article.
Hello Dheeraj
Please help me to understand the role of corporate access in the success of an equity analyst?
Hi Gavin, can you please let me know what you meant by Corporate Access here?
Hi Dheeraj
Thank you for this brilliant article. I feel well informed now.
thanks Salem!
That was an informative piece dheeraj.. Thanks a lot
Thanks Given!
Hi Dheeraj
First of all thank you for such an informative post on a topic about which finding information is tough. Very well written.
So I am currently pursuing my MBA in finance (2nd Year). Also I will be appearing for CFA level in Dec 2016.
Would like to get your insights about how to get an opening in this field as a fresher. Also some tips on facing the CFA level 1 exam.
Hi Parth, I am glad you found this article valuable. As a fresher, CFA level 1 will help you alot in getting a shortlist. Also, you can learn some practical tangible skills from this professional equity research training.
Here are some Tips on Facing CFA Level 1 exam
Hope it helps,
Dheeraj
Thank You Dheeraj
Found the post really helpful especially the part on how to manage your time on different study resources.
Hope you continue writing this blog.
thanks Parth for the appreciation. I am glad you like this blog :-)
An amazingly well written article. Such a wonderful change from the usual related articles filled with the technical jargon and confusing descriptions. Having said that there are some things that I would like to discuss with you offline. And I have sent you a mail to that effect. Could you please look at it and send me a response if at all you feel it necessary.
Warm regards,
Hi Sanjay,
Thanks. Unfortunately, I am unable to locate your email. Can you please resend me the same?
thanks,
Dheeraj
Hi Dhiraj,
Very good information..
Let me know for entry in research part of capital market which is the best equity research training institute.
Hi Varun, you can take the equity research training from BSE institute. Also, you can consider the Equity Research Training provided by WallStreetMojo for the same.
Thanks,
Dheeraj
Informative post..thanx for d post..need to ask u from wer to start fr equity research analyst..I have interest in stock markets..but I want to make career in dese line..I have completed my CA CS recently.
Hi Jinal,
You can start by converting your interest in stock markets to your passion. The starting point would be learn the nuts of bolts of research. To start with you can look at learning Financial Modeling, valuations, accounting and excel.
you can also consider CFA level 1 exam for the same.
Thanks,
Dheeraj
Dheeraj, What a wonderful resource you have developed! I am beginning to get to know to about Equity and your blog seems to be the first place to start!
sure Gaurav.
Thank you Dheeraj! Very insightful guide for career transitioners like myself.
Thanks. It’s my pleasure :-)
Hello Dheeraj,
Which valuation method would you recommend? Which is more commonly used by equity analysts. The CFA curriculum places more emphasis on the relative valuation approach. This method is also more convenient for me as most of the inputs that go into the DCF calculation such as beta, equity risk premiums etc are not readily available for my country. Should I calculate these myself?
Thanks
Hi Amber, I would prefer Relative valuation due to its ease. However, applying DCF (using the financial modeling forecasting along with FCFF approach) helps us understand company’s business in totality. I typically apply both to find the fair price.
Also, please note that CFA curriculum hardly covers the DCF valuations using Financial Modeling. do have a look at this Financial Modeling using Excel Guide
Excellent blog!! Dheeraj, May I request you to kindly send the excel formats.
Thanks Again for the through & detailed treatise of equity research.
Regards;
Milind
Hi Milind, did you receive the templates?
Hi Dheeraj,
Thank you for the article. Can you please provide the list of equity research firms based in India. please
Thanks
Hi Archana, please have a look at the top equity research firms here
Hi Dheeraj,
Nice Article.very useful for person like me who wants to start a career in Capital Market.
Also if you can share some tactics how to start with equity research.
Regards,
CA Gaurav M Lukka
Hi Gaurav, start with learning excel and financial modeling. A good place is this Financial Modeling using Excel Guide
hello- I am unable to access your excel sheets, is something wrong?
they are not being sent to my maibox
Hi,
I have just resent you the excel sheets. Please check.
Thanks,
Dheeraj
Hi Dheeraj,
My name is Megha completed my MBA in Finance fom Pune university in 2012. Graduated in Bsc-chemistry in 2007 , than worked sep 2012 to jan 2014 with barclays shared services in back office role and due to some problem left my job. Now got admission in post graduate program in securities market in National Institute of securities Market,and same time interested in equity research profile/ or as a trader, It will be great help if you can advice is it CFA worth for me ?
Hi Megha, if you have keen interest in equity research, then CFA will be fantastic addition to your resume.
Hi Dheeraj,
I must say you are an exceptional blogger. I have ready 100s of articles and blog on this topic but you have just stricken the right cord . You got that flair of connecting with the readers and write in a way they best understand.This blog is perfect for everyone . Indeed I look forward for more such insightful
work on investment banking.
Thanks Afreen :-)
It’s a great post and very useful. I am 25 yrs old and currently working as a Sbi po I am also planning to give CFA this year, I want to know how to prepare for same.please guide me.
Thanks
Hi Yogesh,
Please do have a look at this CFA Level 1 tips
Thanks for the great post. Provides clarity to a career decision I’m sorting through. Currently I’m a banker in the consumer line of business at a big box firm. I want to get into Equity Research however, my BA is in Philosophy and my only financial services designations are series 6/63 ( 2.5 yrs experience) Given these circumstances I understand that I’m at a disadvantage. To close the gap or give myself a legitimate shot in ER I’m considering the CFA or an MBA. I’ve done extensive research on both and it seems by most measures ( opportunity cost, monetary investment, time, preparation) that the CFA is the way to go.
Just wanted to get your insight on my situation regarding best way to get into ER.
Thanks in Advance
-Renard
Thanks Renard. I think given your background and work experience, CFA seems like the best option.
Cheers,
Dheeraj
Great post and very insightful!
thanks Joy!
Brother it was a really informative piece for people who want to pursue Eq. Research as a career. Thanks for the writeup.
Thanks Shubham :-)
Hi Dheeraj,
I’m just starting out in following the markets and putting together some knowledge for potential interviews. I am a qualified accountant, cfa level 2 and I understand financial modelling and valuations.
How would you go about choosing a sector and firms to follow so that you can pitch stocks comfortably at interviews. would i have to model a few companies and what sources would i use apart from published annual reports? thanks
Hi Danny, you have great qualifications at hand to crack interviews related to equity research. I think you should choose any sector that you have a good sense of. For example, retail, FMCG are easier sectors as we can walk into malls and stores and understand what’s going on. However, sectors like Oil & Gas, Banking, Pharma are difficult sectors to start as they require domain expertise.
Other sources (apart from Annual report) could be conference calls, press releases, industry data, investor presentations etc.
Good luck.
Thank you for sharing your insights about equity research! I really learned a lot from your guide and this article is very useful for everyone interested in Equity research! Thanks again for your help!
Thanks Ken! Glad you found this article helfpul!
very detailed information. thanks for sharing.
Thanks Devi!
Thank you very much for your article. Equity Research Analyst is my dream job. Keep posting articles like this one please. It is very informative for newbies like me.
Thanks Olesya. I am glad you liked the post.
Great stuff Dheeraj! Thanks a lot
thank you Siddharth. I am glad you liked the article.
Best,
Dheeraj
Dear Dheeraj,
Your frank opinion is very interested. I am senior manager having exposure to financial services. Passionate about finance and bank for last 13 years. I intend to go for this course. It is very useful for my career and profession.
Be free to contact on my email address if you have any information.
With Best Regards,
Habtamu Debela
hello Habtamu,
which course you are talking about – Equity Research or Investment Banking? given your background of 13 years in Banks, just wanted to understand from you, what is your long term objective?
Thanks,
Dheeraj
Thank you soo much for posting such a valuable information Sir…
Thank you very much :-)
Dear Dheeraj,
Your frank opinion is solicited: I am ex banker having exposure to credits. Passionate about capital market for last 30 years and I am long term investor too. I intend to go for this course. Whether it will be useful ? In which capacity I will get opportunity to work? pl inform. I am having lot of my own
information data-in economics/counting/balance sheet and ratio analysis.
Pl free to contact on my email Id if necessary.
Regards,
shrikant
how can i jion & start
Hi Vaibhav, if you want to join the free investment banking course, then click here.
This is a very interesting presentation. Thanks for sharing.
My Pleasure Nadine!
HI Dheeraj, Thanks for this article. Its highly informative. People like me who plan their career in equity research for them its very useful. Also could you please throw some light on buy side and sell side analyst. However I know that IB, Corporate Finance & Commercial banking falls in Sell side and Assets management, hedge fund and retail investing falls under buys side. Could you please explain this in short.
thank you Vivek. For your question on Sell Side vs Buy Side, you may refer to this sell side buy side infographics for details.
Thank you Dheeraj :-)
Highly informative post.Enjoyed it.I have a query regarding this topic.Do Equity research analysts make use of technical analysis?
Hi Kaustubh, thanks :-). You have a good question – Whether equity research analyst use technical analysis? I missed including this completely in my post. Equity Analyst primarily use fundamental analysis and NOT technical analysis for stock recommendation. The reason comes from the clients they server. Equity Research clients are mutual funds, insurance, pension funds etc. These clients mostly have long term time horizon. Using fundamental analysis, an equity analyst is able to guide the clients from long term investment point of view. However, the technical analysis is looking for trading opportunities that are short term in nature.
Best,
Dheeraj