Basic, lesson 1 of 4
What an equity research analyst does
A research analyst covers a list of stocks in one sector, forecasts their earnings, and tells investors what to buy and sell. The product is the opinion and the reasoning behind it.
7 min, 2 checks
1Sell side and buy side
Sell side research sits inside a bank or broker. Its analysts publish ratings, price targets, and estimates on the companies they cover, and their readers are the investors who trade through the bank: mutual funds, pension funds, hedge funds.
Buy side research sits inside the investor. A buy side analyst does the same work but publishes nothing. The only reader is the portfolio manager, and the only output that matters is whether the fund makes money on the call.
| Sell side | Buy side | |
|---|---|---|
| Employer | Bank or broker | Mutual fund, hedge fund, pension |
| Reader | Outside investors | Your own portfolio manager |
| Coverage | One sector, often 10 to 25 stocks | Often wider, and stocks come and go |
| Output | Published notes, ratings, targets | Internal memos and a buy or sell call |
| Judged on | Client votes, access, calls that work | Fund returns |
Check 1
Who reads a sell side analyst's research note?
2The year runs on earnings season
US companies report every quarter, so the year has four crunch periods of about four weeks each. A team covering 15 stocks can have four reporting on the same night. Outside those weeks the work is deeper: industry pieces, management meetings, model rebuilds, and initiations on new companies.
- Before the print: update the model, write a preview with what you expect and what matters.
- The night of the print: read the release, compare to your numbers and consensus, publish a first take before the market opens.
- The call: listen to management, note what changed in guidance and tone.
- After the call: update estimates and the price target, publish the full note, take client calls all day.
An associate, the entry seat after undergrad, does most of the model updates, the first drafts, and the data pulls. The senior analyst owns the rating and talks to the biggest clients.
Check 2
A covered company reports after the close on Tuesday. When does the first note usually go out?
3Why it is a good first job
You learn one industry deeply, you talk to investors and management from the first year, and your opinions are written down with your name on them. That record is why research is a common route to the buy side, where the job is the same reasoning with real money behind it.
Terms in this lesson: Sell side, Buy side.
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