Worst sectors to cover as a sell-side analyst?

Hey dudes, new to the forum. I will be starting as a sell-side research analyst/associate/jr. whatever after I graduate from undergrad and take the damn cfa level 1 exam. With my career goal of being a portfolio manager at a traditional AM or HF shop, does it matter what sectors you cover? More specifically, are there any sectors that are completely different than the rest and don’t provide you with a great framework that can be carried over to other areas? Appreciate the help, not the haters

I was just on the other SS ER thread. Apparently, there are a LOT of haters for ER. Personally, I think most of them are bitter they can’t get in ER, and try to trash on it. I actually work in ER, and I don’t think you can really master all of them. You can learn which sectors are affected most by changes in the markets (commodities prices, demographics…), but as a PM, you can’t be up totally up to date versus say a SS ER analyst who only focuses on a sector. This is partly why SS ER actually exists. (according to some people in the other thread, SS ER is useless and is nothing except dead weight) A valid criticism of ER is that in some ways you have a more limited scope against the bigger picture.

I understand you can’t master them all. I also know that the people in that thread are morons Maybe this doesn’t relate to ER, but in IB, FIG is seen as a completely different than any other industry group and supposedly pigeon-holes you into financial institutions. Could the same be said for something like ER on the insurance sector?–given its very balance sheet driven and its other factors?

ummmmmmmmm…not quite sure how to say this, but you spelled it wrong

Regarding FIG and Insurance - yes. But what’s wrong with that? Lots of opportunity in that space and a specialized skillset can often be to your advantage when looking for exit opportunities.

Why is everybody so mad at SS for?

I like this topic Shmoozer…Are there any sectors that are looked down upon from other analysts?

greengrape Wrote: ------------------------------------------------------- > I was just on the other SS ER thread. Apparently, > there are a LOT of haters for ER. Personally, I > think most of them are bitter they can’t get in > ER, and try to trash on it. > > I actually work in ER, and I don’t think you can > really master all of them. You can learn which > sectors are affected most by changes in the > markets (commodities prices, demographics…), but > as a PM, you can’t be up totally up to date versus > say a SS ER analyst who only focuses on a sector. > This is partly why SS ER actually exists. > (according to some people in the other thread, SS > ER is useless and is nothing except dead weight) > > A valid criticism of ER is that in some ways you > have a more limited scope against the bigger > picture. I’m not taking any sides, just curious to know the percentage of sell recommendations your firm currently has. Also, if the information is available, the percentage in September 2007.

I would think that it is property - developers, land banks mainly Promoters hold chunk of the equity, either directly or indirectly. Shady political connections. Archaic land laws in India. Abundance of unofficial money. Leakages in project cash-flows to grease state machinery. Lack of quality construction talent. Mafia involvement. If I was buy side, I would call the sell side property analyst only to get an intro to the sector. I wouldn’t take his price call even if I was his/her mother/father ! Better to take a view on the underlying asset directly than through a corporate wrapper.

greengrape Wrote: ------------------------------------------------------- > I was just on the other SS ER thread. Apparently, > there are a LOT of haters for ER. Personally, I > think most of them are bitter they can’t get in > ER, and try to trash on it. > > I actually work in ER, and I don’t think you can > really master all of them. You can learn which > sectors are affected most by changes in the > markets (commodities prices, demographics…), but > as a PM, you can’t be up totally up to date versus > say a SS ER analyst who only focuses on a sector. > This is partly why SS ER actually exists. > (according to some people in the other thread, SS > ER is useless and is nothing except dead weight) > > A valid criticism of ER is that in some ways you > have a more limited scope against the bigger > picture. get out of here green grape, what you say is invalid cause you are an idiot

oil and gas

shmoozer Wrote: ------------------------------------------------------- > Hey dudes, new to the forum. > > I will be starting as a sell-side research > analyst/associate/jr. whatever after I graduate > from undergrad and take the damn cfa level 1 exam. > With my career goal of being a portfolio manager > at a traditional AM or HF shop, does it matter > what sectors you cover? > > More specifically, are there any sectors that are > completely different than the rest and don’t > provide you with a great framework that can be > carried over to other areas? > > Appreciate the help, not the haters A few analysts have told me that energy is a completely different ball game.

CFABLACKBELT Wrote: ------------------------------------------------------- > shmoozer Wrote: > -------------------------------------------------- > A few analysts have told me that energy is a > completely different ball game. i heard that spelling can be pretty cool to master as well

FIG, energy, bio-tech, and managed care all come to mind as “specialty”- That is however not a bad thing as usually those are great teams to be on… Greengrape do you work in ER? I can’t tell.

I can see that FIG would be perhaps more different from the rest and result in pigeon-holeing. That doesn’t mean that it’s looked down upon, it’s just a special category of business. Analysts can probably jump from consumer discretionary to defense contracting industries more easily than they can to banking and vice versa. The reason is that for most businesses, money is a source of financing, a resource to the business, an input. They then use that money to create a good or service, which they then sell to customers that need it. This means that to a large extent, you can analyze the drivers of product demand separately from the ability to meet that demand. But for FIG, money is both the input AND the product. This makes those companies tied to the economy and markets in a more intricate and complex way than companies that provide ordinary goods or services. There are so many feedback loops that it really gets very tricky.

bchadwick Wrote: ------------------------------------------------------- > I can see that FIG would be perhaps more different > from the rest and result in pigeon-holeing. That > doesn’t mean that it’s looked down upon, it’s just > a special category of business. Analysts can > probably jump from consumer discretionary to > defense contracting industries more easily than > they can to banking and vice versa. > > The reason is that for most businesses, money is a > source of financing, a resource to the business, > an input. They then use that money to create a > good or service, which they then sell to customers > that need it. This means that to a large extent, > you can analyze the drivers of product demand > separately from the ability to meet that demand. > But for FIG, money is both the input AND the > product. This makes those companies tied to the > economy and markets in a more intricate and > complex way than companies that provide ordinary > goods or services. There are so many feedback > loops that it really gets very tricky. FIG really requires a background in Econ; as you stated it is highly correlated with the macro picture. Pigeon holing is another thing, if you’re on a FIG sell side team you can move to the buyside and pick up the rest of the fig group; i.e if you cover life insurers on the sell side then you can move to the buyside and pick up P&C insurers, banks, asset managers, brokers, etc…

Best undoubtably is Technology as whole, because there’s (and there will be) always a bull run in tech in some way or the other, so you have good chance to keep employed all your life, and possibly making good bonuses, and later starting a fund, if you are a Technology analyst. Bad part is that, it’s not that easy to grasp, it’s vast in scope and one innovation changes the game, so you continuously need to be in the game full on steroids. Tech is one sector which runs on steroids, and personally my favorite sector too, so I may be little biased :-). Worst I think would be Food & Beverage, hospitality, transportation. They can dive in any time, hard to get hold of data required for analysis, and they are pretty slow moving. Though there is chance to make money in every sector, if you got the guts to short stuff. If you are looking for Bull Runs, then get in Tech.

^ So, you think a fund full of tech stocks is an awesome idea?

I would say that at the margins it would probably help to cover an industry that is very connected to the macro economy. Helps to really understand the big picture. But if you really want to be a PM, 1) hope that your dad is a PM and that he’ll pass the job on to you when he’s done or 2) be really good at raising assets.

naturallight Wrote: ------------------------------------------------------- > I would say that at the margins it would probably > help to cover an industry that is very connected > to the macro economy. Helps to really understand > the big picture. > > But if you really want to be a PM, 1) hope that > your dad is a PM and that he’ll pass the job on to > you when he’s done or 2) be really good at raising > assets. Although this is getting away from the original topic, but you bring up a good point. People tend to think that being a big shot analyst or a PM is the end all. In the process, they fail to realize that you need assets to manage. Without assets, guess what you’re analyzing or managing - didly!! Even Buffett (besides other legendary money managers) had to wear a sales hat or a business development hat at some point in their careers to raise money. Although this might need to happen only in the early stages, there is no guarantee that it will not need to continually happen.