buddha Wrote: ------------------------------------------------------- > ^ > Buy side > > Table should be 4-5 rows sized, company > description usually a small paragraph I copy from > bloomberg, Thesis, Risk, Valuation, Difference > from consensus usually makes it 2 pages long. > > Then I end up having all the other stuff as an > appendix that I refer to in my two pages. > > For comparison when the sell side initiates on a > space or a name it is 30-100 pages. I don’t know what sell side reports you’re reading but my firm’s are generally 10-15 pages (for initiating on a company… and they are only that long because the font/spacing is quite large), follow up notes/reports are 3-5 pages including updated models who is going to read an 100 page report? Not an effective selling tool
IH8FSA Wrote: ------------------------------------------------------- > I like the qualitative side of the buy-sider > mentioned above, (company meetings, conferences > etc) > > Is there such shops that only use sell-side > research and therefore dont really let their buy > side analysts travel anywhere? Those would be pretty useless funds, I’m not aware of their exsistence.
JasonU Wrote: ------------------------------------------------------- > buddha Wrote: > -------------------------------------------------- > ----- > > ^ > > Buy side > > > > Table should be 4-5 rows sized, company > > description usually a small paragraph I copy > from > > bloomberg, Thesis, Risk, Valuation, Difference > > from consensus usually makes it 2 pages long. > > > > Then I end up having all the other stuff as an > > appendix that I refer to in my two pages. > > > > For comparison when the sell side initiates on > a > > space or a name it is 30-100 pages. > > > I don’t know what sell side reports you’re reading > but my firm’s are generally 10-15 pages (for > initiating on a company… and they are only that > long because the font/spacing is quite large), > follow up notes/reports are 3-5 pages including > updated models > > who is going to read an 100 page report? Not an > effective selling tool Depending what space you are talking about. When Solar-mania look at every piece DB, Citi etc they went through the technology supply and demand factors if i remember correctly each report was 130+ pages. Also bernsteins normal pieces are so long the are usually 100 pages. Is it long? yes. but depending on the topic it may be necessary. Also a 10 page intiation is pretty useless, considering 3 pages are stupid things from compliance about the ratings system yada yada yada. The first page is usually a summary form. So you are left with 6 pages, given how the spacing is, there is no way you can give enough details about a new company.
That’s not what our clients say
^ like I said it depends on the item. A new E&P I like the 10 page intiation that says how many acres, where it’s located. I don’t need info on the overall natural gas market supply and demand (I have been through it 100x) A solar company with a unique conductive material for their PV like CiGS, I want as much detailed info as possible. and that usually requires a long report.
buddha Wrote: > > Typing in all caps just made your argument all the > more authoritative. sorry dude. I do it on threads where I quote someone else. I hope this is easier on your eyes > > . But do I have a > IS that is linked to a CF statement that is linked > to a BS for every company? you dont, but some firms do. In my case, it was not all the analysts there, it was just a couple of the Wharton MBAs who were in their 30s. absolute monsters on excel. they were all about the models and I guess seeing their firm wide emails with models colored my view. > > Not sure what shop you work at, maybe a hedge fund > with an outrageous expense ratio, but even then I > doubt that the modeling is that comprehensive. I dont mean to be a know it all. trust me. I am younger than you and have less experience. that I know for sure. I am just saying that at a particulatr east coast shop, modeling was huge. I had never seen something like it.
> > > > > > who is going to read an 100 page report? Not an > > effective selling tool > > > when you need to ramp up on an industry, you have to.
Im on the buyside and we dont build models at all, I believe it is a complete waste of time when you can download a sellside model and change the variables. Sectors generally move together, picking the correct direction of a sector is probably more important than deciding if a company is going to meet or beat earnings expectations.
I’ll throw my hat in the ring on this discussion. I work on the sell-side and generally think our models are almost worthless. They are basically just earnings models (like everyone else) with a few growth assumptions. Not that helpful or difficult to produce. I interviewed with a hedge fund yesterday and they don’t use models at all, and in fact, really couldn’t care less about what the sell-side is doing. The fudn focuses on directional calls so it’s pretty irrelevant if some analyst on the sell-side shaves 10 bp off his gross margin assumption, result in a penny or two difference to his EPS estimate. Also, a lot of the bigger firms do produce 100 page reports. They are supposed to be used as comprehensive references. I don’t think many people sit down and read the entire report – the point is that the sell-side analyst who wrote the report establishes his name and, to a certain extent, credibility with the stock or industry. This drives revenue for the research department.
From the hedge fund perspective it depends alot on the particular funds strategy and investment process. I worked for one fund that was a fundamentally driven long short equity fund where sell side models and modelling definitely played a key role in the invest process. If the fund didn’t have it’s own model a sell-side model would be used as a quick and dirty substitute until our own model could be built. Now I am at a quant fund and we couldn’t care less about the sell side. Either way the sell side models primarily give a feeling about the street consensus on a name and the money is typically made when you can find the opportunity that isn’t already priced into the consensus.
bsider Wrote: ------------------------------------------------------- > Im on the buyside and we dont build models at all, > I believe it is a complete waste of time when you > can download a sellside model and change the > variables. Sectors generally move together, > picking the correct direction of a sector is > probably more important than deciding if a company > is going to meet or beat earnings expectations. Where do you download these sell side models from bsider?
IH8FSA Wrote: ------------------------------------------------------- > Where do you download these sell side models from > bsider? There are a variety of pay websites that host the models. Or, if you have a relationship with the sell-side, you can call and ask. They are not available for free to retail investors.
IH8FSA Wrote: ------------------------------------------------------- > bsider Wrote: > -------------------------------------------------- > ----- > > Im on the buyside and we dont build models at > all, > > I believe it is a complete waste of time when > you > > can download a sellside model and change the > > variables. Sectors generally move together, > > picking the correct direction of a sector is > > probably more important than deciding if a > company > > is going to meet or beat earnings expectations. > > > Where do you download these sell side models from > bsider? Reuters knowledge Themarkets.com and each company has it’s own website gs portal morgan markets lehman live etc but like bsider said, none are free.
bsider Wrote: ------------------------------------------------------- > Im on the buyside and we dont build models at all, > I believe it is a complete waste of time when you > can download a sellside model and change the > variables. Sectors generally move together, > picking the correct direction of a sector is > probably more important than deciding if a company > is going to meet or beat earnings expectations. 1) sector bets dont always work. There have been academic studies proving so. no strategy works all the time. 2) I guess downloading a sell side model and changing inputs is ok, but god damn that is lazy. I personally do everything organically. When you sit with mgmt, you know the model better bc YOU built it. The smart guys, like Chanos, etc , the guys that grill execs on CCs and makes the billions, they do it organically.
bromion Wrote: ------------------------------------------------------- > IH8FSA Wrote: > -------------------------------------------------- > ----- > > Where do you download these sell side models > from > > bsider? > investext if you are in a top 20 MBA program
daj224 Wrote: ------------------------------------------------------- > 1) sector bets dont always work. There have been > academic studies proving so. no strategy works all > the time. > > 2) I guess downloading a sell side model and > changing inputs is ok, but god damn that is lazy. > I personally do everything organically. When you > sit with mgmt, you know the model better bc YOU > built it. The smart guys, like Chanos, etc , the > guys that grill execs on CCs and makes the > billions, they do it organically. I work at an independent small/smid cap research firm and am just wondering what academic studies have proved that… thats a strong word these days. We have had various “theme” bets work great and the few that haven’t were because we were wrong about the theme, not because the stocks didn’t follow. I also strongly disagree with you on your second point. Not that its bad to have your model from scratch, but you are giving the model too much emphasis. Who cares if you’re understanding/estimate is better on a hundred thousand dollar line item if you miss the whole fundamental change underway? …and what makes Chanos such a smart guy in your opinion? The guys that grill execs on the conference call are usually doing so to get their view of a company known to other like-investors. Its the shorts version of a sell-side basic. I’d venture to guess though that trying to blow up management on a cc isn’t going to lead to the best relationship with mgmt, or better information about the company they are modeling in such detail. Its not always about the paper victory.
JasonU Wrote: ------------------------------------------------------- > I also strongly disagree with you on your second > point. Not that its bad to have your model from > scratch, but you are giving the model too much > emphasis. Who cares if you’re > understanding/estimate is better on a hundred > thousand dollar line item if you miss the whole > fundamental change underway? +10 Models (the excel kind) are pretty overrated. You can spend hours tweaking your assumptions, but if that time is not helping you pick stocks, then it is wasted time. There is a difference between being right on your estimates and making money in the market. People who spend too much time on models sometimes miss that and get bogged down with superfluous information. And of course, if you miss the paradigm shift, that’s even worse.
I think models are useful for understanding a company… you need to know where the revenue drivers are, the margins, the debt levels, the inventory efficieny, and whether it has enough cash for expansion/dividends… You can tweak your model to see the impact of each of the risks… (fx changes, country risk, inflation, etc). How are you going to do those if you don’t have a model?
Take a look at any sector or sub-sector, on any given day probably 80% or so of the stocks in that sector are directionally the same (positive or negative) and this generally holds true over weeks/months/years. Simply pick a sector go to Yahoo Finance or Bloomberg and put in an ETF ticker for the sector then type in a handful of tickers from the sector, I think you’ll find that for the most part they all go the same direction (there will obviously be a spread between the best and worst performer) but the spread is generally based on leverage, management strength, geography/positioning, all variables you will understand by following the sector. Building models often times comes down to the amount of concentration in your portfolio, if you have 40 positions that are constantly changing spending lots of time building models is a waste, if you are going to have ten 10% positions and hold them for a year or two that is a different story. You will have nothing else to do so you might as well build a model. You can grill a management team endlessly without having built a model, it just comes down to your understanding of the company and sector. As an example, was it really necessary to build a LEH model to know that LEH was f*cked? When Einhorn questioned LEH he probably had a model but all of his questions could have been asked based on the previous conference call transcript and the filings.
> > …and what makes > Chanos such a smart guy in your opinion? The guys > that grill execs on the conference call are > usually doing so to get their view of a company > known to other like-investors. Its the shorts > version of a sell-side basic. I’d venture to guess > though that trying to blow up management on a cc > isn’t going to lead to the best relationship with > mgmt, or better information about the company they > are modeling in such detail. Its not always about > the paper victory. you are right, but admit that chanos is a beast: caught ENRON when everyone else had it on a pedestal.