I’ve gotten a couple interviews for sell-side equity research lined up and they are all at smaller banks (one had 2 offices, the other a few 5-6 I think). Some of these places only have 3-4 analyst. I’m thinking they may be good opportunities because they have room to grow and if anything, it is a nice foot in the door to the industry. Long-term, I could see myself doing that or switch to buy-side, depends on what my interests are then and what the market is like.
Are there any risks that I should be thinking about? Any specific due diligence questions you would ask during the interview? I’ve switched jobs quite a bit during my time after school and would like to make sure I’m not missing anything important and have considered everything before I make a jump.
Also, is there a reliable source to check analyst rankings by person?
defn great experience to have. the foot in the door is one of the most important steps, and once you lock in a couple of years of exp, there’s a lot of potential things you can jump to.
if you have some exp, they’ll ask you probably modeling questions, ways to see how naturally intellectually curious you are, analyst rankings in what way, II rankings? unless they are top 3 it’s not easy to come by
it’s a steep learning curve generally (some sectors are harder than others),
Thanks itera for your thoughts. If I get picked, I’m going to dedicate myself 100% to make sure I’ll make it through those couple years. I have sub-industry experience in my coverage universe and have taken some modeling classes so hopefully that will be enough. I’ve been going through his coverage universe list and reading up as well.
I was googling one of the guy’s names and I found a website called TipRanks, which ranks sell-side analyst. Are websites like that reliable?
Just a heads up, I’m not a member of the site and don’t plan to be one as it is not really of use to me. I found out about it by googling one of the guys I’m interviewing with (who happens to have a very very low ranking). But not sure how or where they pull data and if it is reliable or not.
Under methodology it says:
<p>When evaluating analyst performance, TipRanks takes into account two key factors:</p>
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Success Rate: the percent of analyst recommendations that outperformed the desired benchmark (S&P 500, sector, or no benchmark)
Excess Return: the average return of the analyst recommendations in relation to the S&P 500
Methodology:
Expert performance is measured since January 2009 until present day.
Recommendation performance is measured based on the benchmarks defined by the user.
TipRanks uses the statistical Z-test to determine the statistical viability of the analysts’ ability to outperform the market.
Note on Z-testing analyst performance
<p><a href="http://en.wikipedia.org/wiki/Z-test">Z-test</a> enables answering tough questions when it comes to comparing analyst performance.</p>
<p>For example, how do you compare an analyst that gave 10 recommendations out of which 7 outperformed the benchmark to an analyst that gave 100 recommendations out of which 68 outperformed the benchmark?</p>
<p><a href="http://en.wikipedia.org/wiki/Z-test">Z-test</a> incorporates the behavior of the entire analyst population and shows us that 68 successful recommendations out of 100 is "statistically harder" than getting 7 successful recommendations out of 10, hence there is potential that the analyst will have a higher ranking.</p>
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Hey man you’ve always been really chill on this forum so figured I’d reply. I wouldn’t stress too much about those rankings. At first I think people want to go to ratings to see if their analyst is good, but those ratings are often popularity contests for BB banks so they can get better economics. Their business model is very different from non-BB research. Itera probably has a better handle on this aspect, but think of the research dynamic of covering companies with thirty analysts vs two. The hedge funds I’ve talked to that you hear about on the news have made comments where they don’t use the research of BB but rather the other things like management access. I’d find out how close the analyst is with his companies, how often he markets, how often he travels with companies, and if you are allowed to tag along. I don’t think the ranking avenues is going to be very useful outside of BB analysts. A lot of very successful and well paid guys could care less about those rankings, but their banks don’t focus on that for their business model.
None of this “success rate” matters. Bottom line is if you want to get into equity research (either buy side or sell side), just getting your foot in the door will go a long way. And what matters far more than Institutional Investor or Greenwich Poll ranking are (1) how quickly you can hone your analytical and modeling skills, (2) quality of mentorship from your analyst as well as work/life balance, and (3) client exposure. Rankings mean far more to your senior analyst than they do to you; what you should care about is learning how to talk stocks, build models, assess risk/reward, etc. Success rate and excess return doesn’t mean anything at these levels.
P.S. Check out the articles in my signature and/or contact me if you haven’t already done so…that is, if you care about crushing your interviews and getting a job.
i think it’s a tradeoff between the brand recognition of a large established firm versus the higher respobsibility and more exposure of a boutique firm. can’t say for sure that one is better than the other, just depends on what you value more.