by: Sarah Bessette, Analyst - Tech & Telecom
“We don’t have to be smarter than the rest, we have to be more disciplined than the rest,” a well-known quote by Warren Buffet, highlights an important quality that successful sell-side analysts possess. During a visit to Sun Trust Robinson Humphrey in New York City, the Skyhawk Investment Group met with Stephen Buell, Associate Director of Research and Tom Buckley ’18, Equity Analyst to discuss best practices and learn about what it takes to be a good sell-side analyst. Three different analysts spoke to the group. They offered a wide array of insights, advice, and experiences, highlighting that while there are certain skills needed to perform the job, there is no single personality, skillset, or investment style needed to be successful.
The job of a sell-side analyst is to follow a list of companies, typically within the same industry, and provide research reports regularly to clients. As part of that process, analysts will typically build models to project the firms' financial results, as well as speak with customers, suppliers, competitors, and other sources with knowledge of the industry. From the public's standpoint, the outcome of the analyst's work is a research report, a set of financial estimates, a price target, and a recommendation as to the stock's expected performance.
Working as a sell-side analyst requires multiple talents and skills and can make for a rewarding career. These skills, among many, include:
- An Inquisitive Nature. This is a willingness to explore what lies on the other side of your personal boundaries and a secret weapon to becoming a great analyst. News flow is constantly changing and there are always new stories to understand. Always ask “why,” to come to a deeper understanding of what you are researching and gain important insight into where consensus could be wrong.
- Contrarianism. The best analysts are those who go against the grain and advise investors to buy or sell a stock before the rest of the world. It’s important not to fall into the trap of “groupthink,” when an individual’s own opinions are influenced by those of the majority in a group. An analyst who has researched the ins and outs of the industry, company, macroeconomic factors, and many other considerations, shouldn’t be afraid to offer their unique insights, opposing viewpoints and take actions with confidence and conviction.
- Discernment. An analyst is constantly filtering vast amounts of information. It’s important to have the ability to look in the right place for information and channel it into an accurate conclusion. After reading the Wall Street Journal or performing financial model and analysis on a company, always ask what information is relevant and appropriate to the decision being made. Discernment can be thought of as the combination of knowledge, memory, creativity, intuition, non-attachment,and awareness.
Knowing what it takes ahead of time to be successful in this industry gives those who are interested in becoming a sell-side analyst time to build these skills and prepare for the years after graduation. And always remember, “No matter how great the talent or efforts, some things just take time.” -Warren Buffett