Top 5 Equity Research Skills _ WallstreetMojo

8/19/2019 Top 5 Equity Research Skills _ WallstreetMojo

1/22

3/9/2016 Top 5 Equity Research Skills | WallstreetMojo

http://www.wallstreetmojo.com/equity-research-skills/

429 TOTAL SHARES

Top 5 Equity Research SkillsApril 1, 2015 by Dheeraj — 33 Comments

It has been seven years since I left my research analyst job at CLSA India. I

co-founded eduCBA to train students on Investment Banking & Equity

Research. Since then we have trained more than 10,000 students on different

research topics. However, each time we see the same set of questions and

one common question is “What are the Top Equity Research skills that one

should acquire to be successful in Research”

I think the best way to get an answer to this question is to see the actual

output of Equity Research (Equity Research Report). Below is a sample

Research Report prepared by us when I was at CLSA , we downgraded

Reliance Petroleum. We saw excellent response to this report in the market.

Reliance Petroleum Stock tumbled by 18% in just 1 day.

Click here to know more – Reliance Petroleum Downgrade

Home » Top 5 Equity Research Skills

http://www.wallstreetmojo.com/equity-research/http://www.wallstreetmojo.com/equity-research/http://www.wallstreetmojo.com/equity-research/http://www.wallstreetmojo.com/equity-research/http://www.wallstreetmojo.com/equity-research/http://www.wallstreetmojo.com/equity-research/http://www.wallstreetmojo.com/author/w6db63/http://www.wallstreetmojo.com/http://www.wallstreetmojo.com/http://articles.economictimes.indiatimes.com/2007-11-07/news/27690496_1_rpl-reliance-petroleum-biggest-fallhttp://www.wallstreetmojo.com/equity-research/http://www.wallstreetmojo.com/free-investment-banking-courses/http://www.educba.com/http://www.wallstreetmojo.com/author/w6db63/


2/22


http://www.wallstreetmojo.com/equity-research-skills/ 2

source: CLSA Research Report

If you wish to learn Equity Research professionally, I have an awesome offer

for you. I have created an epic bundle of 99 courses on Investment Banking

and Equity Research

Now assuming that you have seen the research report, let me ask you a

couple of questions –

What are your key observations in general about the report?

What do you think are the key skillsets required to prepare a research

report like the one above?

http://www.wallstreetmojo.com/investment-banking-training-course/


3/22



Do you currently possess these skills?

Till date, I have conducted more than 200 seminars across college

campuses and I still receive the same responses. Most answers revolve

around securing high GPAs, high quantitative analysis, analytical abilities,

Intelligent, communication etc.

However, My top 5 Equity Research Skills are as per below –

#5 – Writing Skills

Writing Skills is at number #5. Equity research report is the most

important communication from a securities firm to its clients. This report

has a very specific purpose i.e. it is intended to help an investor take a

decision about the allocation of resources.

First thing First – One important aspect is that the research report is no

where close to novels from Dan Brown wherein the best is saved for thelast!. In research report the stock target and price recommendations

comes first.

KISS Principle – “Keep it Simple Silly” is the golden rule. It is important to

be to the point and precise.

Less is More – Another important aspect to note here is that you are not

required to write a full PhD thesis here, a single page note or a couple of pages of reports would be great. Readers hardly have 1-2 minutes to read

your full report. They may not even scan even till the 2nd page.

#4 – Accounting Skills (More than


4/22



Numbers!)

Number#4 is Accounting! Accounting here is not about Debits and Credits.

Infact is is much more than that.

Be proficient in Financial Statement Analysis – The key word here is

Financial Statement Analysis.This means you are expected to be

proficient in vertical analysis, horizontal analysis, ratio analysis, cash

conversion cycles, ROEs, ROCEs etc.

Sourcing of Right Data – Another aspect where I see lot of challenges is

to sourcing the right data. For example, if you require Annual Report of a

company, would you visit company’s website or SEC website. In

addition, which other documents will you refer to draw your

conclusions. Typical key sources to look for information are the Press

Releases, Conference Calls, SEC Filings etc. Financial Statement Analysis

done on wrong set of numbers will lead to results which will mislead the

analysis. Hence, as an analyst the primary challenge is to fetch the right

data.

“Identify the Shenanigans” – Our main focus in Analyst specific

Accounting is identify and predict the accounting malpractices by

companies. These are normally hidden away. You can see below the

confessions in Satyam Fraud Case

http://archive.financialexpress.com/news/satyam-fraud-full-text-of-rajus-letter-to-board/407799


5/22



#3 – Valuations (Lies in the eyes of beholder!)

Valuation Skills is at Number #3. Equity Valuation is the process of

estimating the potential market value of a financial asset or liability.

Valuations are required in many contexts including investment analysis,


6/22



capital budgeting, merger and acquisition transactions, financial reporting,

taxable events to determine the proper tax liability, and in litigation. You

should be aware of the following –

Intrinsic Valuation methods – Intrinsic Valuation Method (DCF) which

means primarily determines the value by estimating the expected future

earnings from owning the asset discounted to their present value

Extrinsic Valuation Method – Relative value models determine the value

based on the market prices of similar assets. This includes valuation

ratios like PE, P/CF, P/BV and many more

Key is to identify the right valuation methodology – There are more than

15 valuations approaches including DCF, Enterprise Valuation Methods

and Equity Valuation Methods. Important thing to know is why a

particular valuation Methodology is used in a specific sector. For

example, Banks are valued using Price/Book Value, however, other

sectors may not use Price/Book Value as a key valuation metric.


7/22




#2 – Financial Modeling (Cliffhanger!)

At number #2 is Financial Modeling. Financial modeling means forecasting

the future of the company or an asset by way of an Excel Model that is

easy to understand and perform scenario analysis. In the context of our

discussion here, Financial Modeling includes professionally forecasting

future financial statements like Income Statements, Balance Sheets & Cash

Flows. Unfortunately, in graduation and post graduation, every other

subject is taught except Financial Modeling and Excel.

Financial Modeling follows Modular Approach – The primary approach


8/22



taken is Modular one. Modular approach essentially means that we

build core statements like Income Statement, Balance Sheet and Cash

Flows using different modules/schedules.

Provide Additional Schedules for clarity – The additional schedules are

the depreciation schedule, working capital schedule, intangiblesschedule, shareholder’s equity schedule, other long term items schedule,

debt schedule etc. The additional schedules are linked to the core

statements upon their completion

Free Financial Modeling Training – If you want to learn Financial

Modeling from grounds-up, you can refer to the Free Financial Modeling

Course. Please note that Financial Modeling skill may not be very easy toacquire. It requires time and patience to master this skillset.

#1 – Excel Skills (Most Obvious is Most

Dangerous!)At number #1 is the Microsoft Excel Skills! Neither I am joking, nor I am

drunk. Equity Research Analyst spend around 10-12-14-16 hours each

day working on excel doing financial modeling, valuations and financial

statement analysis. Important points to note in Excel are

Formatting is most important– It is important for analyst to produce an

output that is error free and neat. There is lot of money riding on the

research reports published by analyst and the last thing one needs is to

lose a client due to loosely formatted tables and excel models.

Speed & Accuracy – Timely delivery of reports, models is required in

http://www.wallstreetmojo.com/free-financial-modeling-training-course/


9/22



Equity Research Industry. MS Excel is the only place I can say where

there are “Shortcuts to Success”! I have hardly seen research using

mouse and majority of them are masters in Excel.

Analysis – One should be able to use Excel tools like Pivot, Filter, Sort,

VLOOKUP, HLOOKUP etc to analyze complex data and client requests.Scenario Building – It is important for to create different scenarios for

Modeling like Optimistic, Pessimistic and Most expected. In addition,

your client may want to change a few assumptions to see how they

affect the target price. Hence, it is important for you to be well aware of

Data Tables, Goal Seek etc so that you can provide these features to your

clients.Graphs & Charts – A picture speaks more than thousand words! You will

find majority of the research reports contain neat and informative graphs

and charts and less of written material. You should try and master

this data representation technique.


10/22



429 TOTAL SHARES


What next?If you learned something new or enjoyed the post, please leave a

comment below. Let me know what you think. Many thanks and take care.

Happy Learning!

Filed Under: Equity Research

Back to top ▴

http://www.wallstreetmojo.com/category/equity-research/


11/22



Nice article Dhiraj. I enjoyed reading it.

Reply

Thanks Gowtham!

Reply

Hi Dhiraj,

I am shrikant ex banker , served in credits in analysing

balance sheets and preparing project reports for ccs/TL’s

and side by side I develop passion about cap market,

interested in pursuing financial modelling. Kindly

communicate which is good course for me and its

prospectus.

regards,

shrikant

Reply

Very informative for aspirants in Financial and Business

Performance Analysis …Cheers

Comments

By Gowtham on June 17, 2015 at 4:43 pm

By Dheeraj on June 18, 2015 at 11:31 am Author

By shrikant on April 9, 2015 at 7:02 pm

By Neeraj on April 5, 2015 at 1:11 am

http://www.wallstreetmojo.com/equity-research-skills/?replytocom=42630#respondhttp://www.wallstreetmojo.com/equity-research-skills/?replytocom=54050#respondhttp://www.wallstreetmojo.com/equity-research-skills/?replytocom=53918#respond


12/22



Reply

its a very useful information and i wanna to know more

abut courses that i should pursue in financial carrier as sir

am actually a student of 2nd year. am waiting eagerly for

ur reply.

Reply

Thanks Deepak for the note. You should look at

developing 2 skills primarily, a) financial Modeling b)

excel. You can take any course on this. Infact, on this

website there is a free step by step tutorial onfinancial modeling as well.

Hope this helps,

Dheeraj

Reply

Is this free financial modeling course enough to

make me able to get the thorough knowledge of it.

Reply

By deepak on April 4, 2015 at 2:41 pm

By Dheeraj on April 4, 2015 at 6:25 pm Author

By savi on July 5, 2015 at 8:20 pm

http://www.wallstreetmojo.com/equity-research-skills/?replytocom=57098#respondhttp://www.wallstreetmojo.com/equity-research-skills/?replytocom=41805#respondhttp://www.wallstreetmojo.com/equity-research-skills/?replytocom=41785#respondhttp://www.wallstreetmojo.com/equity-research-skills/?replytocom=41844#respond


13/22



Hello Savi,

this free financial modeling course is actually

good enough to get knowledge on financial

modeling. However, it is upto you to take your

learnings ahead by applying the financial

modeling methodologies learnt to other set of

companies. More you practice, better you will

become.

All the very best,Dheeraj

Reply

Thank you very much, Dheeraj

Your article will guide me to be a good equity analyst

Greetings from Jakarta

Reply

thanks Mohamad!

Reply

By Dheeraj on July 6, 2015 at 11:03 am Author

By mohamad adityo nugroho on April 3, 2015 at 9:52 pm

By Dheeraj on April 4, 2015 at 11:05 am Author

By Raj Kotecha on February 19, 2016 at 11:02 am



14/22



Hello Sir,

I am a first year MBA Student and have cracked

Equity Research analyst internship in an investment

bank. I currently read Bloomberg Business,

Business Today and Mint Newspaper everyday. Sir,

I request you if you can guide me on other sources

of data I should be reading apart from these 3

sources of data to get information that is beyond

between the lines.

Awaiting for your reply.Thank You.

Reply

wow. Congratulations Raj. You are doing

great! I think if you wish to do really well as an

intern, learn financial modeling and

valuations.

Hope this helps.

Dheeraj

Reply

It would be great if you could upload the financial model

as well.

By Dheeraj on February 22, 2016 at 6:43 pm Author

By Prateek Bali on April 2, 2015 at 9:31 pm

http://www.wallstreetmojo.com/equity-research-skills/?replytocom=86518#respondhttp://www.wallstreetmojo.com/equity-value-vs-enterprise-value-calculate-formula/http://www.wallstreetmojo.com/free-financial-modeling-training-course/http://www.wallstreetmojo.com/equity-research-skills/?replytocom=86376#respond


15/22



Reply

Thanks Dheeraj,

each and every time i learn new things with the help of

your articles…

Reply

Thanks Mahendra, I am glad you find these articles

helpful.

Reply

Very usefull post as always. Dheeraj thanks for sharing so

usefull subject with the rest of us. If you do not mind I

tweet your posts and I share them with various groups at

linkedin.

BR

Michael

Reply

By mahendra on April 2, 2015 at 6:33 pm


By Michael Samonas on April 2, 2015 at 3:33 pm


http://www.michaelsamonas.gr/http://www.wallstreetmojo.com/equity-research-skills/?replytocom=41396#respondhttp://www.wallstreetmojo.com/equity-research-skills/?replytocom=41422#respondhttp://www.wallstreetmojo.com/equity-research-skills/?replytocom=41421#respondhttp://www.wallstreetmojo.com/equity-research-skills/?replytocom=41436#respond


16/22



Many Thanks Michael! I really appreciate your help in

sharing these posts in your group.

Best,

Dheeraj

Reply

Thanks Rafael. I would like a specific example let’s say a

simple “Balance Sheet”, “Income statement” Cash Flow” to

build in Excel financial model with graphics.

Reply

Nice article. Very informative.

Reply

Many Thanks Vanshja!

Reply

Great Article!!! Enjoyed project finance classes in educba.

Reply

By bruks on April 2, 2015 at 1:05 pm

By Vanshja Gairola on April 2, 2015 at 12:57 pm


By Hari on April 2, 2015 at 12:49 pm

http://www.wallstreetmojo.com/equity-research-skills/?replytocom=41375#respondhttp://www.wallstreetmojo.com/equity-research-skills/?replytocom=41378#respondhttp://www.wallstreetmojo.com/equity-research-skills/?replytocom=41376#respondhttp://www.wallstreetmojo.com/equity-research-skills/?replytocom=41379#respondhttp://www.wallstreetmojo.com/equity-research-skills/?replytocom=41398#respond


17/22



Thanks Hari!

Reply

Great post! Excelent read for students who are willing to

pursue a career in equity research.

Reply

Thanks Rafael

Reply

Thanks for the information.

Reply

Thanks Nitesh!


By Rafael on April 2, 2015 at 10:35 am


By Nitesh on April 2, 2015 at 10:10 am


http://www.wallstreetmojo.com/equity-research-skills/?replytocom=41347#respondhttp://www.wallstreetmojo.com/equity-research-skills/?replytocom=41355#respondhttp://www.wallstreetmojo.com/equity-research-skills/?replytocom=41350#respondhttp://www.wallstreetmojo.com/equity-research-skills/?replytocom=41377#respond


18/22



Reply

Content was very much useful. Thanks for the information.

Reply

Thanks Deepak!

Reply

Very good article. Please suggest some courses..

Reply

This is some real good advice thanks alot. But is it possible

to value a company without accounting skills and rather

using mathematical techniques.

Reply

Thanks Dheeraj. This was an eye opener. I always

By deepak on April 2, 2015 at 10:03 am


By sneha on April 2, 2015 at 9:43 am

By Danish Cooper on April 2, 2015 at 9:28 am

By Angela on April 1, 2015 at 6:27 pm

http://www.wallstreetmojo.com/equity-research-skills/?replytocom=41340#respondhttp://www.wallstreetmojo.com/equity-research-skills/?replytocom=41343#respondhttp://www.wallstreetmojo.com/equity-research-skills/?replytocom=41357#respondhttp://www.wallstreetmojo.com/equity-research-skills/?replytocom=41344#respondhttp://www.wallstreetmojo.com/equity-research-skills/?replytocom=41356#respond


19/22



overlooked Excel, maybe it is high time for me to focus on

MS Excel. Any startup training that you recommend for

excel?

Reply

Many thanks Angela.

Reply

Hello Dear,

I read your article and I’m really interested in FCA.

Could you tell me how i study, what do i do need at

first of all. I hope that you will help me.

See you soon.

Reply


By Uuganaa on April 13, 2015 at 7:18 pm

Leave a Reply Your email address will not be published. Required fields are marked *

Comment



20/22



Name *

Email *

Website

Back to top ▴

About Dheeraj?

>> worked as JPMorgan Equity Analyst, ex-CLSA India Analyst >>edu

qualification - CFA Charterholder, FRM Charterholder, IIT Delhi, IIML >>This is

my personal blog that aims to help students and professionals become

awesome in Financial Analysis. Here, I share secrets about the best ways to

analyze Stocks, buzzing IPOs, M&As, Private Equity, Startups, Valuations and

Entrepreneurship.

Learn PE Ratios the Right Way!

Post Comment »

Guides

http://www.wallstreetmojo.com/pe-ratio/


21/22



What is Investment Banking?

Financial Modeling Training

Equity Research

Private Equity Analyst

What is Hedge Fund?

Option Trading Strategies

Alibaba IPO Financial Model

Leveraged Buyout Analysis

CAPM Beta

Earnings Per Share

Terminal Value

Free Cash Flow to Firm

Comparable Comp Analysis

Box IPO Valuation

CFA Exam

FRM Exam

PRM Examination

CFA vs FRM - Which is Better?

CPA vs CFA - Which is Better?

Claritas vs CFA Exam

ACCA vs ACA - What's the Difference?

CFA vs MBA

ACCA vs CIMA

Certifications

http://www.wallstreetmojo.com/acca-vs-cima/http://www.wallstreetmojo.com/cfa-vs-mba/http://www.wallstreetmojo.com/acca-vs-aca/http://www.wallstreetmojo.com/claritas-vs-cfa/http://www.wallstreetmojo.com/cpa-vs-cfa/http://www.wallstreetmojo.com/cfa-vs-frm/http://www.wallstreetmojo.com/prm-exam-profesisonal-risk-manager/http://www.wallstreetmojo.com/frm/http://www.wallstreetmojo.com/cfa-exam/http://www.wallstreetmojo.com/box-ipo-valuation-to-buy-or-not-to-buy/http://www.wallstreetmojo.com/comparable-company-analysis-comps/http://www.wallstreetmojo.com/free-cash-flow-firm-fcff/http://www.wallstreetmojo.com/terminal-value-formula-method-calculations-in-excel/http://www.wallstreetmojo.com/earnings-per-share-basic-eps-diluted-eps/http://www.wallstreetmojo.com/capm-beta-definition-formula-calculate-beta-in-excel/http://www.wallstreetmojo.com/leverage-buyout-lbo-analysis/http://www.wallstreetmojo.com/definite-guide-to-alibaba-ipo-financial-and-valuation-model/http://www.wallstreetmojo.com/options-trading-strategies/http://www.wallstreetmojo.com/what-is-hedge-fund/http://www.wallstreetmojo.com/private-equity-analyst/http://www.wallstreetmojo.com/equity-research/http://www.wallstreetmojo.com/free-financial-modeling-training-course/http://www.wallstreetmojo.com/what-is-investment-banking/


22/22


CPA vs CA

CA vs CS

Terms of Service

Privacy Policy

Contact

CFA Institute does not endorse, promote, or warrant the accuracy or quality of

WallStreetMojo. CFA® and Chartered Financial Analyst® are registered trademarks

owned by CFA Institute.

Copyright © 2016 - WallStreetMojo
http://www.wallstreetmojo.com/contact/http://www.wallstreetmojo.com/privacy-policyhttp://www.wallstreetmojo.com/terms-of-servicehttp://www.wallstreetmojo.com/ca-vs-cs/http://www.wallstreetmojo.com/cpa-vs-ca/

Documents

Top 5 Equity Research Skills _ WallstreetMojo