Best Practices for Equity Research Analysts: Essentials for Buy-Side and Sell-Side Analysts (Anglais) Relié – 1 février 2011
Descriptions du produit
Présentation de l'éditeur
A real-world guide to becoming a top-performing equity analyst
Praise for Best Practices for Equity Research Analysts:
"Jim Valentine has taken his decades of experience as a highly successful security analyst and written an effective and comprehensive guide to doing the job right. Ionly wish I had this book by my side throughout my career." -- Byron R. Wien, Vice Chairman, Blackstone Advisory Partners LP
"Given the fast pace and high-pressure nature of the markets, analysts don't have the luxury to make mistakes. James J. Valentine's Best Practices for Equity ResearchAnalysts should be required reading for all new and experienced analysts, particularly those who were not lucky enough to be brought up in the business under amentor. Valentine can be that mentor." -- Jami Rubin, Managing Director, Global Investment Research, Goldman Sachs
"Jim's book is an excellent window into the world of securities research. Very few works cover the complete life cycle of an analyst and the necessary balance betweentheory and practice. This is one of them." -- Juan-Luis Perez, Global Director of Research, Morgan Stanley
"Valentine's book doesn’t rehash the basics of finance but covers all the nonacademic topics in terms of how the analysts should manage their time, resources,data, and contacts in order to come up with the best stock picks. This book is required reading for beginning analysts and a must-read for all analysts who want todevelop an edge." -- Carl Schweser, Founder of Schweser’s Study Program for the CFA Exam
"Best Practices for Equity Research Analysts is by far the best written and most comprehensive book that I have read on how to become a top-notch analyst. I shouldn't be surprised; it was written by one of the best analysts that Wall Street has ever seen. Every securities firm should require their analysts to read this book." -- Eli Salzmann, Portfolio Manager
Most equity research analysts learn their trade on the job by apprenticing under a senior analyst. However, equity analysts who work for senior producers often havelittle time or incentive to train new hires, and those who do have the time may not have research skills worth emulating.
Now, Best Practices for Equity Research Analysts offers promising equity research analysts a practical curriculum for mastering their profession. James J. Valentine, a former Morgan Stanley analyst, explains everything today's competitive analyst needs to know,providing practical training materials for buyand sell-side research analysis in the United States and globally.
Conveniently organized for use as a learning tool and everyday reference on the job, Best Practices for Equity Research Analysts covers the five primary areasof the equity research analyst's role:
- Identifying and monitoring critical factors
- Creating and updating financial forecasts
- Deriving price targets or a range of targets
- Making stock recommendations
- Communicating stock ideas
Expanding upon material covered in undergraduate courses but written specifically to help you perform in the real world, this authoritative book gives you access to the wisdom and expertise of leading professionals in the field. You'll learn best practices for setting up an information hub, influencing others, identifying the critical factors and information sources for better forecasting, creating a better set of financial forecast scenarios, improving valuation and stock-picking techniques, communicating your message effectively, making ethical decisions, and more.
Without Best Practices for Equity Research Analysts, you're just treading water in the sink-or-swim world of the equity analyst.
Biographie de l'auteur
Aucun appareil Kindle n'est requis. Téléchargez l'une des applis Kindle gratuites et commencez à lire les livres Kindle sur votre smartphone, tablette ou ordinateur.
Pour obtenir l'appli gratuite, saisissez votre adresse e-mail ou numéro de téléphone mobile.
Détails sur le produit
En savoir plus sur l'auteur
Dans ce livre(En savoir plus)
Commentaires en ligne
Commentaires client les plus utiles sur Amazon.com (beta)
Another key, since the book is long, is to look at the shaded summaries which are usually at the back of each chapter. If stretched for time, read those first, and then read the chapter if you didn't get it.
This book aims to focus analysts on information that matters. Aim for information that makes a difference, and that few others have. Create an information web that maximizes the value of your time, and creates value for your research.
This book covers both the buy-side and the sell-side, telling each how to best use the other side. As a former buy-side analyst, to me it means fewer analyses, and better analyses. Aside from that, it is a game: buy-side: identify the better sell-side analysts and listen to them. Sell-side: identify clients that will generate commissions and market their best insights to them.
Regardless, analysts must identify the few factors that account for 80% of the performance in a given industry, and focus on those intensely. It helps to get into the industry organizations, which can help drive insight into the industry as a whole, and provide a backdrop for questions to ask when talking with executives in the industry.
Learning this will give an analyst a leg up on other analysts. Analysts should also understand the basic accounting structures of their industry so that they can identify companies that are not playing fair -- over-reporting income. I would add don't get negative too quickly. Frauds can develop a momentum of their own. Wait until the fraud gets large relative to the size of the industry before issuing a sell call -- wait for price momentum to go to zero. (Note: for investigative journalists, this does not apply. Jump on early, so that you can say that you warned everyone.)
Basic forensic accounting skills help, as do modeling skills, and basic statistical skills. I was surprised to learn a bunch of Excel shortcuts that I haven't seen elsewhere, and I have used Excel for nineteen years at a high level. The summary of accounting deviations is cogent, as well as pointing readers to Mulford and Schilit.
One idea that I heartily agree with: set up your spreadsheets to differentiate data and formulas. Cells with data series should only contain data. Formulas should have no numbers in them, unless they are trivial. This makes analysis a lot easier and cleaner in the long run.
The book also brings out the need to consider multiple scenarios, which help an analyst to flesh out his analysis. Being willing to consider what can go wrong, or right, richens an analysis. Also, the book warns against common pathologies that overcome analysts, notably -- Confirmation bias, overconfidence, Self-Attribution-bias, Optimism, Recency, Momentum, Heuristics, Familiarity, Snakebite (won't go back to one that hurt you), Falling in love, anxiety, over-reaction, loss-aversion, etc. I have experienced a few of those myself, and would have benefited from thinking these through before becoming an analyst.
I would warn any analyst trying to use simple or multiple regression that they are playing with fire, unless they understand the weaknesses of the data, and the limitations of the general linear model. In twelve-plus years working on Wall Street, I never saw regression used right once.
The author seems to favor DCF over multiples. Truth, neither works well, and one must live with the weaknesses of any approach. DCF embeds a lot of assumptions that are known, though some may be wrong -- multiples embed unknown assumptions.
The author does not like price-to-sales. For industrials and utilities I would say look at a chart of price versus price-to-sales. In most cases, they track, because sales don't vary that much in the short run. If you know the high and low P/S ratios for companies in an industry (P/B for financials) you have valuable information. It gives you boundaries to look at in buy and sell decisions.
I would also warn analysts against using Damodaran and those like him. I don't think his models are wrong so much as impractical. I would rather use a simple model that catches 80-90% of the action, versus one that catches 100% of the action, bet cannot practically be calculated.
Who would benefit from this book:
All equity analysts would benefit from this book. It is detailed, and yet practical. Some of our competitors will benefit from it, and if you don't read it, you will wonder why.
The book covers a number of topics such as influencing your research coverage, handling relations within you own organisation and with clients, finding insights to include in research, stock valuation and how to best communicate the research done. Valentine is writing a number of lists of things that often is quite intuitive and basic. The list form is hardly the recipe for a colourful writing and as the same advice is repeated in both the check lists and the text surrounding those lists there is a fair amount of repetition.
There is much in this book that irritates me. However the coverage of topics is comprehensive and I would agree that they probably are close to a best practice for the profession. The advice in this book will both be a good guide for a less experienced analyst and it will remind the more seasoned analyst that he perhaps has neglected one or two aspects of what he could do. There is some good advice regarding psychological pitfalls, too few analysts utilize statistical analysis in the way the author suggests which is a shame and there is also a useful discussion around the best way to build financial models for the companies covered by the analyst.
For an investor, outperformance in the stock market is accomplished by either doing something different from others or by acting like most others but being cleverer than they are. This is a best practice for those who have accepted the professional role as it is, i.e. for those who will run with the crowd. The time horizon for the work of a mainstream US sell side equity analyst is one to six months. With a horizon like that, relative stock performance within a sector is driven by changes in company specifics that are not appreciated by consensus and there is a need for near time triggers. The intrinsic value of the stock is less interesting as valuation is slow-acting.
Here instead, value is something relative within the sector covered. First choice for valuation is to assign a pro cyclical single period multiple to the near term estimate. Growth is seen as the primary reason for differences in multiples, notwithstanding that the spread between return of capital and cost of capital is equally important. Many analysts have a deep knowledge of the companies covered but they are simply momentum analysts.
The author's way to try to create alpha, while at the same time doing the same thing as everybody else, is through focus on three to four key variables. This is the best advice of the whole book. There is no chance you can win by knowing more details than other investors on every topic. There is much to gain from understanding what the key issues for the stock are and then dig deeper around these and recognize the rest of the information is non-important noise.
This is a cookbook to produce the short-sightedness of today's Wall Street, but it is also a unique guide for the person working as a sell side analyst. If you are one, or aspire to be one, you really should read it. I would.
This is a review by eqtbooks.com
I would suggest that future editions contain a disc or web access to go into more detail on sections (autocorrelation in residuals, time series, etc..) and provide non analysts with the opportunity to run through exercises.
Or consider exercises on one long valuation throughout the book running from top down, bottom up selection of sector and company. A fictional interview with management, running a history of numbers, forecast earnings..come up with various price multiples..and finally making a recommendation.
I think that would give readers a more interactive experience and help to use those many Excel tricks.
On the whole, I extracted some value from this book.
That's where Valentine comes in.
We all read these book and product reviews and always wonder what's real and which are planted by those who will benefit from the sale of the product. While I have no financial ties to Mr. Valentine and will not benefit for this review, you don't need to be an analytical genius to figure out that I know the guy.
But as someone who has been on many sides of this business for 18 years, I've gotta say that this book should be standard issue for every new Analyst, Associate (or whoever...) that wants to get a leg up in this business. Sure...there are parts of the book that are not super fast moving -- like Business Ethics. But I'm sure we can all think of a few people on the News being handcuffed and escorted out of a building wearing an orange jumpsuit bc they lacked Ethics.
When all is said and done, the book is highly readable -- just like Valentine's research. Concise, Decisive, Thorough, and without a single word wasted.
Congratulations Jim. Job well done.