Basic, lesson 1 of 3
Learning a new sector in two weeks
A new associate is often placed on a team whose sector they have never studied. A fixed method gets you to useful questions in days.
8 min, 2 checks
1The method
- Draw the value chain: who sells to whom, and where the profit pools sit
- Write the revenue equation and the cost structure for the main business model
- Find the three numbers that move the stocks on earnings day
- Read the last two 10-Ks and four earnings call transcripts for the two largest companies
- Read the team's last initiation and the debates in its recent notes
- List the trade data, government statistics, and industry surveys the sector watches
Worked example
Market share from trade data
- 1An industry association reports 80 million units shipped last year
- 2Your company shipped 12 million
- 3Share: 12 / 80 = 15%
If the company's units grew 6% while the market grew 2%, it took share. That sentence is a thesis point.
Check 1
The market grew from 50 million to 52 million units. Your company went from 10 million to 11 million. By how many percentage points did its share change, to one decimal?
2Primary sources and their limits
Channel checks (talking to distributors, customers, suppliers) and expert calls fill gaps that filings leave. The line is material non public information: you may ask an expert about industry trends, but not about a specific company's unreleased results, and research departments route these calls through compliance.
Check 2
On an expert call, a former employee offers this quarter's unreleased order numbers for the company you cover. What do you do?
Terms in this lesson: Value chain.
2 checks in this lesson. Sign in to keep your progress.