Get up, Sleepy. It’s 4 a.m. and your alarm goes off. Time to shower, dress and catch a cab to the airport. You’re on your way from New York to Florida to Boca Raton, Fla. for the annual CAGNY (Consumer Analysts Group of New York) conference.
Be ready to listen carefully. There will most definitely be golfing, fun in the sun and fancy dinners, but the bulk of your time during this multi-day event will be spent inside an air-conditioned conference hall, glued to a chair. You’ll be listening — mainly to CEOs, CFOs, and other C-suite executives from Tyson, Campbell, Hershey, Coca-Cola and other major names in the publicly traded food, beverage and tobacco industries — for important news that could affect your firm’s rating on their stocks.
You’re there to back up the lead equities analyst you work for, where you’ll be part of a crowd of sell-side and buy-side analysts, shareholders and other institutional parties. Everyone is on the lookout for changes in guidance on earnings for the coming quarter or year, hints at new product additions, or details on the pursuit of new markets to boost the top line.
And don’t forget your phone. You’re constantly checking your smartphone for messages from your boss, who is busy in a breakout session with management from another company down the hall. You just got a message: She wants you to escape during the break so you can get online and plug monthly sales data released by one of the companies the firm covers into the spreadsheet model that you share.
But wait! You just heard from the latest presenter from a mid-cap company your firm recently began to cover — Foodie BBB — that it’s is planning to allocate more capital toward tack-on acquisitions in the next 12 months. A reporter from Dow Jones Newswire has put out headline, and within a minute, BBB shares have already moved 3 percent higher.
Your analyst is frantic. She wants you to forget the modeling and instead focus on writing a note for investors explaining what kinds of acquisitions would be best suited for BBB. She needs it in 20 minutes so that it can go out as an email blast to clients, along with a reiteration of the firm’s “buy” recommendation and earnings targets.
Welcome to a typical day in your life as a junior sell-side research associate at a leading Wall Street investment bank.
Your judgment about what could affect your firm’s investment ratings is critical in most everything you do. The managing director of research for a sector at one of the leading New York investment banks says he wants to know that his analysts will “pick up the phone and find you (him) when they hear something is a big deal.” And if they aren’t sure, he wants his people to call him anyway.
Whether you are a sell-side expert on food, tech, retail or some other popular sector, your daily activities might include one or more of the following:
- Attending industry conferences like the one in Boca Raton
- Participating on the firm’s morning call with the sales team
- Meeting with institutional clients of the firm
- Plugging numbers into the spreadsheet models that track whether companies are meeting, beating or missing Wall Street expectations
- Creating succinct narrative on one or several stocks that may go out as a bulletin under the senior analyst’s name or be included in part of larger research report
- Listening to and asking questions on a conference call given by a company’s senior management team following the release of earnings or other material news
- Reading through lengthy 10K annual reports, quarterly earnings and other SEC filings from companies for material information
- Accompanying the analyst to sit-down meetings with companies’ senior management
Such activities can make for long, but always interesting days. And if you’ve got the energy, commitment and aptitude, you’re sure to find a challenging — and fiscally rewarding — career as you work to gain credibility and exposure within your sector.
“There’s a zillion things to do,” says the managing director. “It’s very important for me to have self-starters.”
How Buy-Side Analysts Use Sell-Side Analysts
1. The sell side remains important to buy-side equity investment decisions. The sell side brings companies to the radar screen and investors to the table.
2. Sell-side research and conferences are the second and third most important ways that stocks come to the attention of global buy-side investors.
3. Buy-side analysts use sell-side analysts to gain access to company management.
4. Buy-side frustrations with the sell side include:
- A perception that sell-side analysts are too focused on the short-term view
- Worries over potential conflicts of interest between sell-siders and the investment banking business
Source: “Buy-Side Use of the Sell-Side: A Global IR Best Practices Report, September 2013,” Rivel Research Group.
About the Author: Deborah Cohen is an award-winning business reporter and editor with a penchant for entrepreneurial stories and the issues facing small to mid-sized companies. She has covered large public corporations ranging from McDonald’s to Cisco for Reuters, Crain’s Chicago Business and Bloomberg News.