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webuser.bus.umich.edu
webuser.bus.umich.edu
webuser.bus.umich.edu
webuser.bus.umich.edu
webuser.bus.umich.edu
webuser.bus.umich.edu
webuser.bus.umich.edu
webuser.bus.umich.edu
webuser.bus.umich.edu
webuser.bus.umich.edu
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  • REMARKS BEFORE STARTING THE PRESENTATION There are 2 objectives: (1) share findings and obtain feedback about the right picture we are getting (2) high-level discussion of strategic options for industry players The scope of the presentation is the Wine industry in Slovakia. Areas such “ Exporting opportunities for Slovak wine producers” and “ Comparison between the US ad Slovak Wine Industry” have been left out for discussion at the final presentation It is a high-level and general perspective. Details in this presentation have been omitted due to : Time constraints Difficulties to gather statistical information about the industry
  • Transcript

    • 1. Buy-side and Sell-side David Lowy September 26, 2002 Jim Ryans (Mod. Oct 2002) The Two Approaches to “Equity Research”
    • 2. Agenda
      • Overview and Context
      • Buy-side: Decision Makers
      • Sell-side: Opinion Makers
      • “ Recent” Controversy
      • Review
      • Quiz
    • 3. Overview and Context: Why is this Important to You?
      • In less than five minutes you should know:
      • Who the key players are in the investment world…
        • … and what they are called (buy-side or sell-side)
      • What your MBA friends are doing with their lives…
        • … and what questions to ask when they say they are going into “equity research”
      • Who a Wall Street analyst is…
        • … and why only 5% of all analysts recommend selling stock
    • 4. Overview and Context: Opinion Makers vs. Decision Makers
      • Financial media
      • B-School Cases
      • Friends
      • Family
      • Etc.
      • You
      Primary Opinion Makers Decision Maker Broker What influences individual investors’ decisions?
    • 5. Overview and Context: Opinion Makers vs. Decision Makers Analysts Institutional Investors Primary Opinion Maker Decision Maker Institutional Sales What influences institutional investors’ decisions?
    • 6. The Buy-Side: Decision Makers
      • Not an individual investor -- invests money on behalf of others
      • Examples include:
        • Mutual funds
        • Hedge funds
        • Pension funds
        • Asset managers
      • Researches companies in either industries or regions or for specific investment goals (growth, value, etc.)
      • Names you should know:
        • Fidelity Investments
        • Alliance Capital Management
        • State Street Global Advisors
      BUY STOCKS $                                         
    • 7. The Sell-Side: Opinion Makers
      • Not making investment decisions
      • Researchers paid to have opinions on a handful of companies/stocks in one industry
      • Examples include:
        • Large investment banks
        • Boutique research houses
      • Representative names:
        • Morgan Stanley
        • Merrill Lynch
        • W.R. Hambrecht
      GIVE INDEPENDENT ADVICE Buy! Sell!                                         
    • 8. “ Recent” Controversy: What are these Scandals All About? Jack Grubman Hyped: WorldCom and Global Crossing Mary Meeker Hyped: Homegrocer and AskJeeves Henry Blodget Hyped: Toys.com and Pets.com Why did these top-rated sell-side analysts put “buy” recommendations on such bad stocks?
    • 9. “ Recent” Controversy: Most Analysts are NOT Independent Institutional Investors Decision Maker Institutional Sales Investment Bankers Use Analysts to Get More (Profitable) Business: IPOs Mergers Acquisitions
      • There’s More:
      • - Companies
      • Investors
    • 10. Review
      • Buy-side: Decision Makers
      • Sell-side: Opinion Makers
      • “ Recent” Controversy
    • 11. Quiz (Part 1 – Easy) What Kind of Analyst Wrote this Report and Who Was it Written For? Sell-side for Buy-side
    • 12. Quiz (Part 2 – Harder) Why do only 5% of analyst recommendations recommend selling stock in the companies they cover? It Eliminates Potentially Lucrative Banking Business
    • 13. Quiz (Part 3 - Hardest)
      • Fact: The Buy-Side Has Always Known That Sell-Side Recommendations Are Not Independent
      • Fact: The Sell-Side Continues to Be Affected by Conflicts of Interest
      • Question: Who Will Listen to this Recommendation and Buy A Bad Stock?
      People Like US
    • 14. Sell-Side “Products”
      • Initiation Reports
        • Industry Overview
        • Business Segments / Products / Competition
        • Financial Analysis
        • Valuation
        • Investment Thesis
        • Rating / Price Target
      • Quarterly Updates
        • EPS / Financial Analysis
        • Business Review
      • News Analysis
      • Marketing Book
      • Models
      • Company Presentations
      • Investor Presentations
    • 15. Day in the Life
      • Sr Analyst
        • 7 am: morning call
        • 8 am: Calls! Calls! Calls!
        • 10 am: Company phone calls (IR)
        • 12 pm: Client lunch
        • 1 pm: Discuss report w/ Assoc.
        • 2 pm: Work
        • 4 pm: Review reports w/ Assoc.
        • 6 pm: Client dinner
      • Associate
        • 6:30 am: do work while things are quiet
        • 8 am: get directions and get to work (writing, other projects)
        • 10 am: Sit in on calls and take notes
        • 12 pm: Lunch at desk
        • 1 pm: Discuss report w/ Analyst
        • 2 pm: Work! Work! Work!
        • 4 pm: Review reports w/ Analyst
        • 8 pm: Finish and submit by deadline
    • 16. Associate Pros and Cons
      • Pros
        • Options (not stock)
        • Some travel
        • Access to Sr. industry people
        • Develop deep expertise
        • Strategic thinking
        • OK hours
        • Money???
      • Cons
        • Lots of writing
        • 2-3 years riding the desk
        • Assignment risk (analyst and industry)
        • Vacation?
        • OK hours
        • Money???
    • 17. Qualities of successful analysts
      • Love to read
        • WSJ
        • Economist
        • BusinessWeek / Fortune / Forbes
        • “ Forging & Casting Weekly”
        • Financial Analysts Journal / Analysts Accounting Observer
        • Books
      • Sales Affinity
        • Phone mannerism
        • Persuasion ability
        • Enthusiasm
        • Presentations
      • Writing
        • Clear / Fast / Effective
      • Your Hook
        • Thorough research
        • First to publish
        • Access to management
        • Banking business
        • Innovative products
    • 18. Getting the Job
      • Get the interview
        • Standard
        • Skills
      • Interviews
        • What do you know about the business
        • What skills do you have
          • Financial
          • Writing
          • (Technical - Industry)
      • Interviews Cont’d
        • Strategic thinking
          • Explain an industry
          • Why you think someone will succeed (stock pitch)
          • Analysis thought process
        • Analyst fit
          • Hard working
          • Doesn’t complain
          • Eager to learn

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