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  • Abdul Tambal

What Do You Actually Do In Equity Research?

The specific responsibilities of an equity research analyst can vary quite a lot on a day-to-day basis but still follow a predictable pattern over the course of a quarter. Let's look at what the typical day of someone in equity research looks like.


Broadly speaking, the pace of work you’ll be doing outside of earnings season is slower than the sprint associated with publishing reports during earnings. Let’s start with a normal day outside of earnings first.


Earnings season refers to one of four periods in a year when companies you cover report their results for the most recent quarter.





If you're interested in breaking into equity research, check out our course, which will teach you all of the modeling, valuation, stock pitching, and recruiting strategy you need to get the job.


Outside of Earnings Season


Equity research analysts typically start their day around 7 AM. At most investment banks, that’s around the time when the Morning Call is held, which is where equity research analysts present their most recent actionable reports and trade ideas to the sales team.


As the sales team is generally one of the first points of contact between clients and a new piece of research, they ask the presenting equity research analysts questions to refine their own understanding of the pitch by anticipating what their clients might later ask them.


Attending the morning call is optional, though senior analysts aim to make many appearances throughout the year to broaden their reach. As a junior, you’re likely going to attend to learn from other presenters or to help answer some questions that you're better equipped to handle. On occasion, you might be asked to speak as well.


Keeping Up with News


After the morning call, you’ll spend a large portion of your day keeping up with news and events relevant to coverage.


As a new hire, you’ll spend a considerable amount of time after hitting the desk ramping up on your coverage by reading news and industry reports. You’ll need to have an understanding of overall economic trends and market developments to the extent that they impact the stocks you cover, whether directly or tangentially.


More seasoned employees still spend a lot of time finding insightful news to stay current and continue to refine their views.


Generally, you’re going to get hundreds of emails a day based on alerts you’ve set up to capture any announcements which could be impactful for your coverage, so expect to spend a good amount of time sifting through those to see what matters.


Publishing Reports


These are the most common types of reports you’ll create outside of earnings season:


  • Company Initiations Equity research teams publish Initiation of Coverage reports when they assume coverage of a new stock. These reports establish the team’s initial rating and views on a company and include detailed information on its business model, competitive landscape, and key financial metrics. From the reader's perspective, they’re a great source of information for someone who’s starting to learn about a company or industry.


  • Rating Changes – Published to revise a team's rating on a stock. These reports often have a significant impact on a stock's price especially when the publishing team is well-followed by investors and the broader media. These reports include the rationale behind the rating change and a new price target when applicable.


  • Price Target Revisions / Model Updates – Issued when a team changes the valuation methodology used to value a stock, or alongside publishing a model update which changes the financial metric inputs into an existing valuation framework. These reports also tend to be stock-moving, depending on the influence of the analyst team.


  • Thematic Reports / Industry Updates – These reports focus on broad themes specific to an equity research team’s coverage. They are normally longer-term projects that are worked on over several weeks or longer.



Delta Air Lines Initiation - Peak Frameworks
Excerpt of Peak Framework's Initiation on Delta Air Lines - Available In Our Course


Interacting with Clients


Throughout the day, you’ll speak with the sales team to set up calls with clients they manage. You’ll also be expected to keep the trading team updated on certain stock-moving news, especially as traders are spread too thin to keep track of relevant news across all the stocks they trade.


Both sales and trading can be thought of as another client to equity research, as the same rules which govern interactions between outside clients and equity research also apply to anyone outside of the equity research department within an investment bank.


You'll speak with many types of clients on the job which exposes you to different investing styles and stock theses.



Types of Investors an Equity Research Analyst Interacts With
Types of Investors Interactions in Equity Research


What Kinds of Requests Do You Get from Clients?


  • Data / Industry Model Requests – Equity research analysts often get requests for the large datasets of industry-specific metrics they maintain. Clients often ask for these datasets to use in their own analysis or models and ask equity research to help them interpret any trends.


  • Company Model Requests – These requests come from clients who want to compare their predictions with your team’s. They also typically ask questions about specific assumptions in your model, such as why you might be forecasting 3Q23 revenue growth that’s 200 basis points higher than management’s most recent guidance, for example.


  • Industry Calls – Industry calls are requested by investors who are new to the space or by those who have recently picked up coverage of a stock in your coverage. You typically discuss overall market trends, your future expectations, and the nuances of analyzing the industry from your perspective.


  • Specific Company Calls – These calls happen when a client wants to learn more about your view of a particular company. You would discuss your rating on the stock, talk about recent price movements, and answer questions about potential risks to your view (i.e., what would it take to change your rating on the stock?).


During Earnings Season


Earnings season is the time when publicly traded companies release their quarterly financial reports. These reports give equity research analysts actual data to which they can compare their prior estimates, and provide a new set of data points to inform forecasts for future periods.


Earnings season happens four times a year. It's usually a really hectic time for equity research analysts due to the speed at which they have to synthesize a lot of new information to publish reports.




Excerpt of NVDA's Earnings Release
Excerpt of NVDA's 2Q23 Earnings Release



Responsibilities During Earnings Season


  • Earnings Previews – During the days leading up to a company reporting its earnings, you’ll write an earnings preview note which gives investors an idea of what to expect from the upcoming release. These notes can be used to reiterate an equity research team's views, or as a final opportunity to change estimates reflecting any new information they may have gathered before an earnings release.


  • Set Up the Model – The day before an earnings release, equity research juniors set up the models for upcoming releases by building and formatting a variance table, which just shows how actual reported results differed from the analyst’s expectations, consensus estimates, and any previous management guidance.


  • Write a First Take Note – In the U.S., core stock market hours are from 9:30 AM to 4:00 PM on weekdays. Companies release their financials either before the market opens (generally around 7 AM, or sometimes earlier) or after the close, typically around 4:30 PM.

  • When results hit, you’ll have ~30 minutes to analyze the financials and publish what’s known as a “first take” note. While there's a lot of stress that comes with writing, proofreading, and publishing a note in such a short time frame, these notes are generally pretty simple. They include high-level takeaways from a company’s earnings results and include a variance table.


  • Get On the Earnings Call - After an earnings release, a company’s management hosts an earnings call where they discuss the results of the previous quarter, issue guidance, and answer questions from the equity research analyst community.

  • As a junior, you’ll be using this time to update the model based on any new insight you can gather from the call, and take copious notes which you’ll use to write a final note to wrap up that company’s earnings season. Your senior analyst will be using that time to come up with engaging and insightful questions to ask the management team on the call. You’re likely to do some of this part of the job too, even at the junior level.


  • Update the Model and Publish a Final Takeaways Note – Finally, you’ll write a key takeaways note to summarize the company’s earnings release and management call, and highlight any changes to your modeling or investment thesis. These notes generally include price target revisions, and upgrades or downgrades to the overall rating when warranted.


Conclusion


Overall, the responsibilities of an equity research analyst can vary quite a lot on a day-to-day basis but still follow a predictable pattern over the course of a quarter. The main responsibilities include keeping up with relevant news and events to inform your views around a group of stocks or industries, which are shared with clients through research reports and live interactions.


If you're interested in breaking into equity research, check out our course, which will teach you all of the modeling, valuation, stock pitching, and recruiting strategy you need to get the job.

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