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Graduates: this is what top equity researchers say their jobs involve nowadays

Het gemiddelde equity research rapport....

Het gemiddelde equity research rapport....

Are you thinking you might, maybe, like to work in equity research? Even after reading our existing content on what the job of an equity researcher involves, do you still have some unanswered questions?

Fortunately, Bloomberg has interviewed some senior equity researchers who have provided a few insights into what their jobs are about. This is what you need to know.

1. Nowadays, working in equity research is all about identifying big, macroeconomic, so-called ‘secular trends’

It’s very hard for clients to make money from research that identifies a single stock, said the researchers. Ever since the crisis began in 2007, it’s been all about pointing out big macroeconomic issues.

“It’s a heck of a lot harder to make money on a stock- specific basis in the short term,” Stephen Penwell, director of North American equity research at Morgan Stanley told Bloomberg. “You’ve got to identify secular trends.”

2. The best researchers won’t be writing reports on particular stocks, but will be working with colleagues to write big exhaustive studies of global industries

‘Analysts today are more focused on churning out exhaustive studies of trends and industries, with colleagues on several continents providing insights,’ says Bloomberg.

“We’re in the business of connecting the dots,” says David Bleustein, head of US equities research at UBS. “We can tell you how a longshoremen’s strike in Australia is likely to affect a US coal company.”

3. Equity researchers are becoming a bit like market researchers, just more analytical  

Bloomberg points to a study of 14,500 consumers in Brazil, Russia, and other emerging markets economies conducted earlier this year by Credit Suisse and market research company Nielsen.  This looked at everything from perfume purchases to credit card debt.

“You’ve got to be an investigator now,” Stefano Natella, Credit Suisse’s co-head of securities research and analytics, said.  “We’re looking for global themes that are disruptive and cut across economic sectors.

4. Equity researchers need to find the big themes and then the companies aligned to those themes

“You want to identify the theme that can make money for clients and then you want to identify the companies that are most leveraged to that theme,” says Kash Rangan, a Bank of America application and systems software analyst

5. It helps to have radically different ideas to everyone else

Rod Lache, the top-ranked auto analyst at Deutsche told Bloomberg it’s all about being contrarian now: “We’re trying to be contrarian,” he told Bloomberg. “That’s how you make money in this part of the market.”

6. Researchers are still very important, but they’re being paid less to work harder

Every now and then, someone says equity research is dead: that it’s a cost and that cost constrained clients won’t pay. This isn’t true.

“The decline of Wall Street research is vastly overblown,” said Noelle Grainger, head of Americas equity research at JPMorgan. “There continues to be a demand for high-quality talent. Investors still want to know what is going on in an industry.”

On the other hand, however, equity commissions are falling, there’s more passive investing, and equity researchers are getting paid less. In the US, compensation is down 20% since 2007.

And as we’ve noted before, analysts have had had new duties added to their lives – most notably, taking investors to see clients. Equity research has become about marketing your research during the day and writing it in the evening, one researcher complained to us.

Comments (3)

Comments
  1. my pet equity researcher says that his job involves looking for something – anything – out of ER. It’s terminal, apparently. Unless you’re cheap as chips and are fine with never getting a decent bonus. Oh, and being happy to carry the can for all the trader c*ck-ups. This does not apply to the jerks. I will expatiate on jerks another time.

  2. Having previously worked for almost 5yrs as an Equity Analyst it was the the best choice I made leaving it back in 2005. Every Equity Analyst I have ever known whose sector went out of favour was made redundant and has never worked again as it is too specialised. Avoid – it is career death.

  3. “Equity research has become about marketing your research during the day and writing it in the evening, one researcher complained to us.”

    I was an equity analyst for ABN AMRO 20 years ago and that was the story then, too. Nothing has changed.

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