Best Practices in Equity Research

June 14th, 2011

IAIP hosted James Valentine, CFA director Analyst Solutions for his presentation on the best practices in equity research. He started with fact that only 40% of the fund managers are able to beat S&P 500 in an year and only 50% of the sell side analysts beat S&P over three year period. These are poor records for any professional standards. One of the reasons for these is lack of sharing of best practices in the industry. It’s time for the industry to change.

To be successful an analyst needs intelligence, resources and time management skills. James dwelled on time management and sited few time drains for an analyst. Firstly, analyst may be tracking too many stocks. Generating desired outcome then becomes difficult. The ideal number of stocks and sectors covered by a sell side analyst are 5 to 7 stocks and 1 to 3 sectors. The same numbers for the buy side analyst are 35 to 50 stocks and 5 to 6 sectors respectively. Second, time drain is the information overload. Unlike average analysts who go through each and every press releases and company filings, Top analysts focus on critical things that are relevant for company’s stock. Again most analysts waste time hunting at the wrong places. Good analysts spend time in developing an edge in information sources which provide unique insights. Top analyst create differentiated high conviction stock ideas by spending more time on evaluating critical factors, thinking out of box, and networking with both sell side and buy side analysts. Finally James drew a framework for communicating differentiated stock call by ensuring the content has value, utilization of optimal channel and ensuring the message has value. These are the keys for either building or killing the reputation.

About the speaker:

James J. Valentine, CFA, is the founder of AnalystSolutions, dedicated to providing best practices, training and career advancement services for equity research analysts. He is also the author of Best Practices for Equity Research Analysts (published by McGraw-Hill), a body of work to help analysts in the formation and delivery of their stock calls. Valentine has held a number of roles at four of Wall Street’s largest firms, including most recently Morgan Stanley where he was the Associate Director of North American Research as well as Director of Training for the firm’s global Research department. He was also an established research analyst where, for 10 consecutive years, he was ranked by the major Wall Street institutional investor polls as one of the top North American analysts within his sector. In 2006, Forbes named him one of the top three Wall Street analysts among all 2,000 U.S. sell-side analysts that year. He has been recognized for his stock picking, earnings forecasts and client service from the Wall Street Journal, Thomson Reuters, Institutional Investor, and Greenwich Associates. He holds a Ma[slideshow]sters degree in finance and the Chartered Financial Analyst (CFA) designation. He lives in a Connecticut suburb of New York City with his wife and three children. More information about his efforts can be found at

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