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Equity Research Dead end?

I’ve been thinking about trying to get into the Equity Research Department at a top bank where I work in Commercial banking as an Analyst. They usually hire people from other departments for an associate role which doesn’t really pay much but could be a great role to learn although after hearing so much noise of budget cuts and job losses, I’m starting to feel that it would be a waste of time to pursue this path. I’m looking for some insight from people who are working as an ER analyst - what do you guys think? Alternatively, I can move into Corporate Banking which provides better job security but then you’ll have to meet sales target and also bring clients if you are looking to advance.  

What kind of job do you want to end with ? 

I believe research is my strong arm because I love to take deep dive into financials and understand their relations with business strategies but I don’t particularly dislike credit either. I think in the long term you have to do sales in credit. I might be wrong. 

All the automation, money flowing to passive funds, and budget cuts don’t make a good case for pursuing career in research. 

Unless you move to the buyside, equity research is also sales. Perhaps you’d enjoy underwriting? 

My goal would be get hired at our ER department which I believe is funded by investment bank. Associate turnover is pretty high so you can get in with the right network. The problem is that I don’t have any money management experience. I would like to develop expertise in TMT and Energy sector. 

Underwriting is interesting but you have to remember that CB is all about relationship. 

I assume you are a buy side analyst? 

I work in private equity, but worked on the sell side earlier

I highly recommend the transition into equity research. It’s true that every year, the buy-side needs to fend off more outflows to passive and combined with gradually declining volumes in the public markets, commissions to the sell-side have gotten smaller. However, neither of these are new trends. Does that bode well for the next 20 years? Probably not, but these trends have also been taking place for the last 20 years.

Anyway, at most banks your all-in compensation in equity research will be considerably higher than in commercial banking at your pay grade. Moreover, the fundamental skills you gain doing due diligence, valuation, accounting, corporate finance and so forth leads to some pretty attractive and versatile exit opportunities afterward.

If you have the choice between TMT and energy, I recommend TMT. It’s ~25% of the S&P 500 and is the biggest sector in most market benchmarks, so your exit opportunities will be broadest.

Check out the links in my signature for more ideas.

Numi, there is no one here who knows more about equity research than you and maybe I would need your service one day when I’ll be actively seeking research roles. I’m hoping to do a couple of years in Corporate Banking first before I move to research and wait it out this trend that you mentioned. Have you ever seen candidates from Corporate Banking moving to research? 

Bro you need to make the move now, not later. The longer you wait the less likely you going to make it 

So I think if I’m correct it’s been at least 10 years since Numi was on the sell side and his transition to the buy side was aided by a full-time MBA in between (correct me if I’m way off).  A lot has happened over that period to the industry and I’ve had a pretty long list of friends who were well regarded SS analysts that have been displaced and are currently or did experience very long searches to find employment in which they struggled with the specter of not working in the industry.  When I talk to them now, they are all buy side and talk about the fears of job insecurity and knowing other highly qualified SS analysts currently in search of work with long unemployed stretches and how that makes them very nervous.  I’m not saying its like that for everyone, but it is absolutely an industry in decline.  Just in the last few months I’ve had SS analysts out of NYC telling me they can’t even fill a day worth of meetings in Boston when there used to be wait lists because of 1) the regulatory changes to SS services (which are new) 2) the pressure from rising share of passive management and 3) the general loss of shine in the SS reputation.  It’s just tough.  One of these guys I talk to frequently is at one of the premier HF’s, (think C, looks like a castle) and has had to move twice in a year coast to coast to keep up with shifts in the organization.  It’s not the end of the world, but it’s far from an expansionary period in active research.

#FreeCVM #FreeTurd #2007-2017

I think BS is right, but being an ER associate is still probably an OK job for a couple of years that gives some flexibility in exit ops. 

Please refrain from posting your personal issue here. We are not here to read your stupid post. Instead seek insight from your people working in your firms.

Easy Fella!!

Parichay Sarway wrote:

Please refrain from posting your personal issue here. We are not here to read your stupid post. Instead seek insight from your people working in your firms.

Why r u dumb?

#FreeCVM #FreeTurd #2007-2017

Black Swan wrote:

Parichay Sarway wrote:

Please refrain from posting your personal issue here. We are not here to read your stupid post. Instead seek insight from your people working in your firms.

Why r u dumb?

you spelled “smart” incorrectly, lol. You can’t judge people sitting on your ass in home. We don’t know each other. So, the who the hell are you to say I’m dumb. I just replied non-sense answer to realise the OP how non-sense he answered my question on my post.

StreetFighter wrote:

Numi, there is no one here who knows more about equity research than you and maybe I would need your service one day when I’ll be actively seeking research roles. I’m hoping to do a couple of years in Corporate Banking first before I move to research and wait it out this trend that you mentioned. Have you ever seen candidates from Corporate Banking moving to research? 

Yes, I’ve worked with several clients that have moved from corporate banking into research but will say that it’s a harder transition to make, as compared with moving from IB / consulting / corporate finance in the industry. In every case, you need to prove fundamentally that you are passionate about stocks (and not just “research”) and that you have the basic toolkit in accounting / valuation / modeling to hit the ground running. That said, I also agree with rawraw: “Bro you need to make the move now, not later. The longer you wait the less likely you going to make it.”

Black Swan wrote:

So I think if I’m correct it’s been at least 10 years since Numi was on the sell side and his transition to the buy side was aided by a full-time MBA in between (correct me if I’m way off).  A lot has happened over that period to the industry and I’ve had a pretty long list of friends who were well regarded SS analysts that have been displaced and are currently or did experience very long searches to find employment in which they struggled with the specter of not working in the industry.  When I talk to them now, they are all buy side and talk about the fears of job insecurity and knowing other highly qualified SS analysts currently in search of work with long unemployed stretches and how that makes them very nervous.  I’m not saying its like that for everyone, but it is absolutely an industry in decline.  Just in the last few months I’ve had SS analysts out of NYC telling me they can’t even fill a day worth of meetings in Boston when there used to be wait lists because of 1) the regulatory changes to SS services (which are new) 2) the pressure from rising share of passive management and 3) the general loss of shine in the SS reputation.  It’s just tough.  One of these guys I talk to frequently is at one of the premier HF’s, (think C, looks like a castle) and has had to move twice in a year coast to coast to keep up with shifts in the organization.  It’s not the end of the world, but it’s far from an expansionary period in active research.

Interesting anecdotes – I think this all makes sense to me. I also agree that equity research is unlikely to see an expansionary period in finance for a while, though I’d say the same is likely true for research and trading in other securities as well as commission dollars are under pressure and regulatory changes make the business more expensive to compete in. That said, the most recent regulatory change was MiFiD II and I think most of the firms I spoke with (admittedly not European based) indicated that the YTD impact on research spend ended up being more benign than people expected. I also might have a more cynical view of the world in that most areas outside of healthcare and technology aren’t seeing true secular growth, and any place where you’re looking to experience higher growth typically comes with needing to take higher risk as well (e.g. more compensation tilted towards stock options, both at private and at public companies).

In terms of the jobs themselves, I happen to think that entry level roles (like pre-MBA) in equity research are still very desirable because of the prestige/signaling of the job as well as the basic fundamental skills attained, e.g. most sell-side equity research job openings get nearly a thousand applications per role, which is somewhat surprising given an industry that is at maturation in a country at peak employment. I think there is a recognition that there aren’t that many jobs out there where you can still earn six-figure compensation just a couple years out of school.

^ I agree with those points, I just wanted to highlight the difference in selecting SS ER as a pre-MBA role (great opportunity) versus the risks around it as a long term term career path.  Only because I think from conversations that the OP is more interested in the latter than the former.

#FreeCVM #FreeTurd #2007-2017

you better know your python and R on top of three statement analysis.

I’ve been on the buyside (equity hedge funds and now private equity) for almost 10 years now…Gone are the days of reading 10k and exporting past data and trying to do some proforma using bbg term and excel….now all that - including summary and trend of all regulatory filings - is done via python in seconds….the proforma, dcf, comparables analysis takes up less than 50% of the weight at funds I’ve worked at….the other 50% is talking to senior managers, board, firms’ strategic plans etc etc….

the gist of my post is excel, dcf, proforma is easy to learn and “master”….what you need is people skills and ability to connect with senior managers of firms you are researching and ability to see where the company and industry are going..

having said that, hedge fund owners know this and they want to minimize the time you spend on excel and crunching numbers…so naturally, many funds have been going to automated route..at least here in NYC and at hedge funds

end result = fewer buyside analysts, need programming language under your “skills”

Be yourself. The world worships the original.

infinitybenzo - I understand what you’re saying, can you clarify what you mean about talking to senior managers / board / firms’ strategic plans? While these are good to understand, why do you think there is a greater emphasis on this than in prior years? Firms have always valued management access and sometimes I wonder if investors over-index to what they are saying to you in management meetings or whatever.

numi wrote:

infinitybenzo - I understand what you’re saying, can you clarify what you mean about talking to senior managers / board / firms’ strategic plans? While these are good to understand, why do you think there is a greater emphasis on this than in prior years? Firms have always valued management access and sometimes I wonder if investors over-index to what they are saying to you in management meetings or whatever.

Also my thoughts.  But I agree with the idea that some base level of programing skill has risen in prominence.

#FreeCVM #FreeTurd #2007-2017

After starting to learn python, I’m amazed at how much easier it is than excel for a lot of things. It’s definitely a cool tool 

I was trying to use python to scrape condo pricing data from StreetEasy, but turns out they have security controls to block that exact activity. It should still be possible to take over the browser itself and somehow copy the data (slowly) though…

“Visit the Water Cooler forum on Analyst Forum. It is the best forum.”
- Everyone

ohai wrote:

I was trying to use python to scrape condo pricing data from StreetEasy, but turns out they have security controls to block that exact activity. It should still be possible to take over the browser itself and somehow copy the data (slowly) though…

Did you check github? May find an alternative by using this legacy one, 

streeteasy_scrape

Python code for scraping real-estate data from a popular rental listings web page.

Important

As of 2/20/2017, Streeteasy.com has blocked web scraping (https://www.distilnetworks.com/). I’m keeping this repository here to archive the existing database and code from which it was generated. Consider https://rentlogic.com/ as a potential alternative source for rental listing data.

numi wrote:

infinitybenzo - I understand what you’re saying, can you clarify what you mean about talking to senior managers / board / firms’ strategic plans? While these are good to understand, why do you think there is a greater emphasis on this than in prior years? Firms have always valued management access and sometimes I wonder if investors over-index to what they are saying to you in management meetings or whatever.

fundamental shops “compete” against automated and AI tradings firms these days. Some insti guys bring this up and our answer is my reply…unlike these computer trading firms that trade like wild, we look at the qualitative portion of the company. We also don’t trade several hundred or thousand times a day because of this very reason. We look at the whole of the company not just their financials and data and price changes, factors or etc etc.

Be yourself. The world worships the original.

numi wrote:

Yes, I’ve worked with several clients that have moved from corporate banking into research but will say that it’s a harder transition to make, as compared with moving from IB / consulting / corporate finance in the industry. In every case, you need to prove fundamentally that you are passionate about stocks (and not just “research”) and that you have the basic toolkit in accounting / valuation / modeling to hit the ground running. That said, I also agree with rawraw: “Bro you need to make the move now, not later. The longer you wait the less likely you going to make it.”

Besides the stock pitch, what points do you have to hit in an ER interview? I had an interview last month but didn’t get the job. I wasn’t asked to do a stock pitch. It was more of an informal/unstructured chat with the analyst.

I suggest you read the articles in my signature

ohai wrote:

I was trying to use python to scrape condo pricing data from StreetEasy, but turns out they have security controls to block that exact activity. It should still be possible to take over the browser itself and somehow copy the data (slowly) though…

VPN + rotate your user agents. There’s always a way to pretend you’re a real user.