Equity Research Analyst

Equity Research Analyst

In the role of an equity research analyst, you will be required to assess issues influencing key financial investment decisions such as the stock market performance, currency market positions, various industry performances, inflation rates, economic environment and other such factors.

You need to comprehend the various market dynamics to follow all the pertinent participants, from the biggest industry players to new and fresh start-ups in the market with a keen eye.

Equity research analyst is a person who will prepare financial reports on equity stocks and financial securities.

The research conducted by the equity research analyst helps the readers of the report to question, inspect, find or study truths, facts, principles and theories.

The report that an equity research analyst would prepare will typically include an analysis of equity stocks or securities of various organizations or various industries.

As an equity research analyst your work would serve as a gauge for your clients who could be organizations or individual financial investors.

As an equity research analyst, you will have to evaluate the value of the organization and guide your clients or readers in taking profitable decisions after reviewing the market in detail.

As an equity research analyst you will also appraise the impending revenue or financial potential of the organization.

To reiterate, an equity research analyst studies the market dynamics and the market participants along with the impending business environment, to write an equity research report which will help his clients or readers take calculated decisions which will get them optimal returns.

Who Is an Investment Banking Analyst?

An investment banking analyst is a person who works in a financial organization or firm which is primarily in the business of raising finance or capital for organizations (large corporates as well as small start-ups), companies, associations, governments and other such bodies, or someone who would work in a big bank’s unit which is involved in such financing activities.

Investment banking analysts could also deliver further services to their clients such as M&A advice (mergers and acquisition), guidance on specific financial dealings, such as an equity stake sales, private placements, IPO (initial public offers),spin-offs or corporate reorganizations.

An investment banking analyst will be required to accomplish comprehensive market research and financial due diligence on various industries and organizations he covers to formulate the background which will help to pitch for business.

He will also have to do all-encompassing research on the organization he is pitching to – Including everything from collecting strategic as well as financial information from various company documents such as – 10K, 10Q, audited financial statements, balance sheets, etc.

You will be expected to work diligently with other team members and contribute to major phases of the deal execution procedure.

Finally to reiterate, an investment banking analyst is a person who helps organizations, associations or governments in raising finance (equity or debt) by issuing or selling stock in the primary market.

He assists public and private corporations to raise finance in the financial markets, as well as offers strategic and financial advisory services for M&A (mergers and acquisitions), stake sales, IPOs and other kinds of financial dealings.

Skill Sets Required for an Equity Research Analyst

To be an effective and successful equity research analyst, you will need to have access to correct and reliable intelligence at correct and timely intervals.

You should also be in a position to be able to predict the future market moves.

It is vital for you as an equity research analyst to continually elevate yourself with the newest events in the market.

For this, it is imperative that you have good computer knowledge of various research techniques which will help you get easier admission to important and timely intelligence.

For becoming an equity research analyst, you should typically have a degree or a diploma in finance, business or accounting from a reputed university.

Further skill sets required to flourish in this career include good communication skills (both written as well as spoken), analytical mindset, decisive thinking, and excellent research skills.

If you can combine both – excellent communication and data analysis skills effectively, you can be very successful in this field.

Skill Sets Required for an Investment Banking Analyst

Investment banking analysts are typically very well-paid professionals, but these spots necessitate specific financial skills, number-crunching abilities, superb communication skills (both verbal and written), and the ability to work very elongated and grueling hours.

One of the most significant skills that you will be expected to have is the profound knowledge of finance and money.

You have to display understanding of what, how, and why a particular thing is happening or is going to happen.

As an analyst you will have to be well-organized, hardworking,suave, responsible, detail oriented, and ready to put in long hours.

Educational expectations typically comprise a post-graduation from a reputed university, an MBA (Master of Business Administration degree) from a top institution and/or the CFA degree (Chartered Financial Analyst).

Output Expected from Equity Research Analysts

As an equity analyst your work would typically include reviewing quarterly and annual financial statements (the balance sheet, the profit and loss statement, the cash flow statement, the notes to accounts, etc.), revenue figures and forthcoming projections, intelligence concerning important clients, quantity of debt the organization is having, any lawful accountabilities, current market movements, and the products or services presented by the organization.

After reviewing all this in detail and scrutinizing the data, you will have to make crisp but comprehensive equity research reports, which will aid your clients in taking optimum decisions about their portfolios.

The bulk of your time will be consumed on research.

The remainder of your time will be spent on financial modeling and research report scripting.

It could require some time initially to create financial models in the first place but once you are done with it you just have to do small changes and revise it for new financial announcements and significant channel checks.

Output Expected from Investment Banking Analysts

The most important document that you will be expected to create is pitch books.

Pitch books are marketing collaterals used to pitch for deals with probable customers.

They are mostly compiled using Microsoft PowerPoint software.

A pitch book would typically cover detailed analysis of investment considerations and various key recommendations for the customers which will help them achieve their strategic targets.

A pitch book would generally consist of detailed analysis of the industry the organization works in, a S.W.O.T analysis (Strengths, Weaknesses, Opportunities and Threats) of the company,PESTLE (P – Political, E – Economic, S – Social, T – Technological, L – Legal and E – Environmental) analysis, various ‘comps’ (Comparable Company Analysis) where various ratios of competitors are compared to the ratios of the client, various recent trends, growth rates of the industry, opportunities for the company in the market, macro and micro economic and organization specific scrutiny.

It also includes intelligence on the Investment Banking team working on the transaction, profiles of key Investment Bankers, previous success stories and key techniques used by them (i.e. explanations as to why they should be appointed for the transaction!)

Other responsibilities of an investment banking analyst could comprise of attending corporate meetings with clients to deliberate on a specific transaction or strategy, going on road shows with customers to discuss with Institutional Investors around the country or even abroad.

Growth for an Equity Research Analyst

As an equity research analyst in the USA working in a top firm such as Merrill Lynch, Goldman Sachs, J.P. Morgan or Citi Bank, you could begin your career as a junior equity research analyst and then climb the ladder to become an equity analyst, then a senior equity research analyst, then a VP (vice president), then a Head of Research, then a regional fund manager and finally the global fund manager.

Equity research firms are more like how asset management firms of hedge funds are organized where there is one senior person taking all the decisions while everybody else under him or her are executing the orders or suggesting fresh thoughts.

Here you have a quasi-mid-level where you could possibly have a senior analyst and then research analysts, but it’s quite less hierarchical than how it is in Investment Banking.

Equity research is mostly about how good you can be at solving your client’s problems and coming up with new and more perceptive concepts.

Growth for an Investment Banking Analyst

As an investment banking analyst in the USA working in top investment banks such as Goldman Sachs, Morgan Stanley, JPMorgan Chase, Morningstar, Value line or Bank of America Merrill Lynch, you could begin your career as a junior analyst and graduate to a senior analyst.

The typical hierarchy thereafter could be an analyst, then an associate, then a VP (vice president), then a SVP (senior vice president) or director and then a managing director.

Some investment banking firms diverge a little bit from this typical hierarchy, for example where they have the SVP (senior vice president) and director to be distinct roles.

Some other firms, especially non-American firms, have similar hierarchies but with somewhat diverse names for every position (director for vice president and ED (executive director) for SVP).

One difference for American firms is that leading investment banking firm Bear Stearns refers the SVP (senior vice president) position a MD (managing director), and calls their managing directors as senior managing directors.

But really, irrespective of the designation definitions, the typical job functions of each position incline to be consistent across different firms.

Compensation for Equity Research Analyst and Investment Banking Analyst

Typically both investment banking analysts and equity research analysts would begin with a similar base compensation.

However, bonuses in investment banking typically are around 25% higher than what an equity research analyst would get at the entry level.

In fact, the variance in some countries could be even higher.  There were some stories that bonuses at equity research firm Credit Suisse were around USD 5,000 this year. In fact investment banking jobs become even more rewarding as you go up the hierarchy.

Final Word

Both the jobs are unique and high paying jobs with advantages and disadvantages.

You have to remember one thing that is to work very hard and give your more than 100% to which ever role you choose to target.

Warren Buffett Tells You How to Turn $40 Into $10 Million

Warren Buffett is perhaps the greatest investor of all time, and he has a simple solution that could help an individual turn $40 into $10 million.

A few years ago, Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) CEO and Chairman Warren Buffett spoke about one of his favorite companies, Coca-Cola (NYSE: KO), and how after dividends, stock splits, and patient reinvestment, someone who bought just $40 worth of the company's stock when it went public in 1919 would now have more than $5 million.  

Source: Coca-Cola.

Yet in April 2012, when the board of directors proposed a stock split of the beloved soft-drink manufacturer, that figure was updated and the company noted that original $40 would now be worth $9.8 million. A little back-of-the-envelope math of the total return of Coke since May 2012 would mean that $9.8 million is now worth about $10.8 million.

Source: Microsoft.

The power of patience
I know that $40 in 1919 is very different from $40 today. However, even after factoring for inflation, it turns out to be $540 in today's money. Put differently, would you rather have an Xbox One, or almost $11 million?

But the thing is, it isn't even as though an investment in Coca-Cola was a no-brainer at that point, or in the near century since then. Sugar prices were rising. World War I had just ended a year prior. The Great Depression happened a few years later. World War II resulted in sugar rationing. And there have been countless other things over the past 100 years that would cause someone to question whether their money should be in stocks, much less one of a consumer-goods company like Coca-Cola.

The dangers of timing
Yet as Buffett has noted continually, it's terribly dangerous to attempt to time the market:

"With a wonderful business, you can figure out what will happen; you can't figure out when it will happen. You don't want to focus on when, you want to focus on what. If you're right about what, you don't have to worry about when" 

So often investors are told they must attempt to time the market, and begin investing when the market is on the rise, and sell when the market is falling.

This type of technical analysis of watching stock movements and buying based on how the prices fluctuate over 200-day moving averages or other seemingly arbitrary fluctuations often receives a lot of media attention, but it has been proved to simply be no better than random chance. 

Photo: Flickr/J Greer.

Investing for the long term
Individuals need to see that investing is not like placing a wager on the 49ers to cover the spread against the Panthers, but instead it's buying a tangible piece of a business.

It is absolutely important to understand the relative price you are paying for that business, but what isn't important is attempting to understand whether you're buying in at the "right time," as that is so often just an arbitrary imagination.

In Buffett's own words, "if you're right about the business, you'll make a lot of money," so don't bother about attempting to buy stocks based on how their stock charts have looked over the past 200 days. Instead always remember that "it's far better to buy a wonderful company at a fair price." 

If you're interested in creating your own version of this story, it's essential to find investments that stand the test of time. To help out in your search, for a limited time we're sharing a company that meets the stringent criteria our analysts require when seeking out incredible long term investing opportunities. Oddly enough, this particular company's product has one of Warren Buffett's most cherished investments directly in it's crosshairs! Our analysts are calling it "Warren Buffett's Worst Nightmare", and 152,298 investors have recently capitalized on similar research we've released. Make sure to access your free copy today by clicking here now. 

THE END OF THE "MADE-IN-CHINA" ERA
The 21st century industrial revolution has already begun. Business Insider calls it "the next trillion dollar industry". A new investment video reveals the impossible (but real) technology that could make you impossibly rich.

The 10 commandments for succeeding at CFA exams

by Julia Lemarchand

4 days ago

How to achieve CFA exam joy

In less than two weeks, 40,000 candidates globally will take this year’s June CFA exams. If you’re one of them, you have reason to feel stressed. The pass rate isn’t high (40% for CFA Level I last June) and the amount of revision you’re advised to do is enormous.

So what can you do to improve your chances? We’ve asked a selection professionals, students, coaches and people from the CFA Institute.  This is what they suggest.

1. Engage in revision sessions that are marathons, not sprints

If you want to pass the CFA Level I, you’re advised by the CFA Institute to spend six months preparing and to do between 300 and 400 hours of revision per exam during that time.

“Success is strongly correlated with the date you start revising,” says Nathalie Columelli, a former Deutsche Bank trader who now coaches people in the CFA exam. In other words, the earlier you start revising, the greater your chances of success.

Now is therefore not the time to be cramming for the June exam. Now’s the time to be starting to revise for the exam in December!

“This is the best moment to start revising [for December],” says Patricia Donnelly, head of consultant services at BNP Paribas Investment Partners and former president of the CFA Society France. “It’s generally calm at work and on the markets. If you start now, you can get ahead before things heat up after the summer.”

2.  Plan carefully

Six months is a long time. And during that time it’s easy to go astray and to spend less time revising than you’d intended.

To prevent yourself neglecting revision times, Columelli advises using Outlook to block out 12 hours of revision time every week over the next six months. If things get in the way, make sure you transpose those blocked out hours to other times.

Philippe Maupas, president of CFA Society France, advises that students need to build two or three completely free weeks into their revision schedules. That way, you can absorb any professional or personal issues which might come up. If nothing comes up, you can simply have a break. Or you can use that extra time to go back over the most difficult parts of the syllabus.

3. Find a method of revising that works for you

“The best thing is to use a revision technique that you’ve employed for previous exams and that’s worked for you,” says Columelli. “Some people work best in the mornings, others at night. Some like to go to the library, others will work in their office or at home – each to their own!”

Corporate finance student, Bastien Doutreleau is currently doing an internship in Spain and preparing to take the CFA level II exam in December. When he studied for Level I, Doutreleau said he watched CFA videos and is regularly exchanged information with professionals who’d already passed the exam. Talking to those people with successful careers helped remind him why he decided to take the exams in the first place. On the other hand, Doutreleau said that he avoided CFA exam forums, which can be stressful places when you’re studying.

4.  Make the most of the materials on offer

The CFA itself offers materials that will help you prepare for the exam. “With your login and password you can access a heap of information and advice from the CFA site itself, says Columelli. “Candidates too often neglect this,” she adds.

Donnelly suggests that students nearing the end of their revision look at the list of ‘Learning Outcome Statements (LOS)’ provided by the CFA Institute.  They’re especially good for running through during a commute, or on the morning of the exam, she suggests.

5. Practice, practice and practice

“It’s essential that you’re able to respond to the questions without stopping and that understand each one quickly and in the sort of conditions you’ll encounter in the exams,” says Bastien, who regularly put himself through timed mock exams prior to level I. “This is the best way of finding out how good you are and what you still need to work on. It will also give you confidence before the big day,” he said.

6. Don’t leave anything out

Each of the ten units is important for CFA level I, says Maupas. You can’t leave anything out.

The first time he took CFA Level I, Bastien says he didn’t devote enough time to the economics material, on the grounds that it involved 300 page of coursework for just 10% of the marks in the exam (while other units were 100 pages of coursework for 15% of the exam). This was a big error, he admits.

It’s particularly important that you know the small subjects without much coursework extremely well. This is especially true for the ethical and professional standards section, says Donnelli. “A wrong note here can compromise your success in the whole exam if you’re on the border of passing and failing,” she says.

7. Have a strategy

The passing score in the CFA exam is a matter of utmost secrecy, but is thought to be around 70%.

If you want to pass, you’ll therefore need to be good at everything (see point six).

Bastien advises against studying one particular area at a time. Instead, he suggests proceeding in the style of a ‘crab’ and covering several disciplines at once during revision sessions whilst alternating theoretical with quantitative disciplines.

Columelli advocates paying particular attention to details on subjects you’re traditionally good at in order to avoid careless mistakes. Work harder on the subjects where you achieve irregular results during mock exams, she adds.

8. Look after yourself as the exam approaches

“As the exam draws closer, you need to treat yourself a bit like a baby,” says Columelli. “Eat regularly, go outside, take in some fresh air at least twice a day.”

If you’re in a full time job, Donnelli advises taking some half days. They’ll help you relax and give you more time for revision. Some employers will even offer time off for exam preparation, she says.

9. Don’t disqualify yourself on the big day by doing something stupid

The CFA website has important information on the materials you can take into the exam – read it carefully. Make sure the information on your passport conforms to what you’ve written on the CFA entry forms. Recharge your calculator batteries. Give yourself enough travel time – remember that quite a few people will be converging on the exam hall.

10. Retain your common sense

As with all exams, you should:

-  Start with the easy questions.

-  Always give an answer. You have nothing to lose.

-  Make an intelligent guess if you don’t know the answer.

-  Don’t panic. At worse this is just preparation for your next attempt!