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Top5EquityResearchSkills|WallstreetMojo
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It has been seven years since I leftmy research analyst job at CLSA India. I
co-founded eduCBA to train studentson Investment Banking & Equity
Research. Since then we have trained more than 10,000 students on different
research topics. However, each time we see the same set of questions and
one common question isWhat are theTop Equity Research skills that one
should acquire to be successful in Research
I think the best way toget ananswerto this question is to see the actual
output of Equity Research (Equity Research Report).Below is a sample
Research Report prepared byus when I was atCLSA , we downgraded
Reliance Petroleum.We sawexcellent response to this report in the market.
Reliance Petroleum Stock tumbled by 18% in just 1 day.
Click here to know more Reliance Petroleum Downgrade
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#5 Writing Skills
Writing Skills is at number #5. Equity research report is the most
important communication from a securities firm to its clients. This report
has a very specific purposei.e. it is intended to help an investor takea
decision about the allocation of resources.
First thing First One important aspect is that the research report is no
where close to novels from Dan Brownwherein the best is saved for the
last!. In research report the stock target and price recommendations
comes first.
KISS Principle Keep it Simple Silly is the golden rule. It is important to
be to the point and precise.
Less is More Another important aspectto note here is that you are not
required to write a full PhD thesis here, a single page note or a couple of
pages of reports would be great.Readers hardly have 1-2 minutes to read
your full report. They may not even scan even till the 2nd page.
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Numbers!)
Number#4 is Accounting! Accounting here is not about Debits and Credits.
Infact is is much more than that.
Be proficient in Financial Statement Analysis The key word here is
FinancialStatement Analysis.This means you are expected to be
proficient in vertical analysis, horizontal analysis, ratio analysis, cash
conversion cycles, ROEs, ROCEs etc.
Sourcing of Right Data Another aspect where I see lot of challenges is
to sourcing the right data. For example, if you require Annual Report of a
company, would you visitcompanys website or SEC website. In
addition, which other documents will you refer to draw your
conclusions.Typical key sources to look for information are thePress
Releases, Conference Calls, SEC Filings etc.Financial Statement Analysis
done on wrong set of numbers will lead to results which will mislead the
analysis. Hence, as an analyst the primary challenge is to fetch the right
data.
Identify the Shenanigans Our main focus in Analyst specific
Accounting is identify and predict the accounting malpractices by
companies.These are normally hidden away. You can see below the
confessions inSatyam Fraud Case
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http://www.wallstreetmojo.com/equityresearchskills/
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Equity Research Industry. MSExcel is the only place I can say where
there are Shortcuts to Success!I have hardly seen research using
mouse and majority of them aremasters in Excel.
Analysis One should be able to use Excel tools like Pivot, Filter, Sort,
VLOOKUP, HLOOKUP etc to analyze complexdata andclient requests.
Scenario Building It is important for to create different scenarios for
Modeling like Optimistic, Pessimistic and Most expected. In addition,
your client may want to change a few assumptions to see how they
affect the target price. Hence, it is important for you to be well aware of
Data Tables, Goal Seek etc so that you can provide these features to your
clients.
Graphs & Charts A picture speaks more than thousand words!You will
find majority of the research reports contain neat and informative graphs
and charts and less of written material. You should try and master
thisdata representation technique.
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What next?
If you learned something new or enjoyed the post, please leave a
comment below.Let me know what you think.Many thanks and take care.
Happy Learning!
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Comments
By Gowtham on June 17, 2015 at 4:43 pm
Author
Thanks Gowtham!
Reply
Hi Dhiraj,
I am shrikant ex banker , served in credits in analysing
balance sheets and preparing project reports for ccs/TLs
and side by side I develop passion about cap market,
interested in pursuing financial modelling. Kindly
communicate which is good course for me and its
prospectus.
regards,
shrikant
Reply
By Neeraj on April 5, 2015 at 1:11 am
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Reply
Author
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Author
Hello Savi,
this free financial modeling course is actually
good enough to get knowledge on financial
modeling. However, it is upto you to take your
learnings ahead by applying the financial
modeling methodologies learnt to other set of
companies. More you practice, better you will
become.
All the very best,
Dheeraj
Reply
Author
thanks Mohamad!
Reply
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Hello Sir,
I am a first year MBA Student and have cracked
Equity Research analyst internship in an investment
bank. I currently read Bloomberg Business,
Business Today and Mint Newspaper everyday. Sir,
I request you if you can guide me on other sources
of data I should be reading apart from these 3
sources of data to get information that is beyond
between the lines.
Awaiting for your reply.
Thank You.
Reply
Author
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Reply
Thanks Dheeraj,
each and every time i learn new things with the help of
your articles
Reply
Author
Author
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Author
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Author
Thanks Hari!
Reply
Author
Thanks Rafael
Reply
Author
Thanks Nitesh!
http://www.wallstreetmojo.com/equityresearchskills/
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Reply
Author
Thanks Deepak!
Reply
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Author
Hello Dear,
I read your article and Im really interested in FCA.
Could you tell me how i study, what do i do need at
first of all. I hope that you will help me.
See you soon.
Reply
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