What is the Role of Equity & Commodity Research Analyst?
Research is gathering information from various sources and then analyzing - and processing data to make decisions.
Data and information are essential to the role of the equity research analyst. Equity Research analysts need information relevant to the investment being assessed.
This would comprise information about the macro and microeconomic factors, industry-related information, and company-related information.
Economic information can be gathered from government statistics and data provided by the Reserve Bank of India. Data on the global aspect can be gathered from International agencies such as the International Monetary Fund (IMF), Asian Development Bank (ADB), and other Global Development Financial Institutions.
Industry-related journals and publications can gather information on industries/sectors.
Company-related information can be gathered from a range of sources, including the financial statements filed by the companies as part of regulatory compliance needs, officials of the company authorized to provide it, and other sources such as plant visits, surveys, and interviews.
Analysis and decision-making progression are a mixture of perceptive qualitative aspects that affect functional performance, such as competence of operations, business plans, and work principles of the management, among the others, the quantitative characteristics such as costs, revenues, profitability, and risks to these financials.
Hence, Risk analysts spend a lot of time interacting with companies and others, building up data, analyzing it, and arriving at a buy, hold, or sell call.
Types of Equity & Commodity Research Analysts:
Equity Research Analysts can be categorized by the nature of analysis they do, the coverage, and the use of the recommendations they provide. Below are a few:
Sell-side Analysts:
They characteristically publish research reports on companies or industries' securities with a precise recommendation to buy, hold, or sell the subject's security.
These recommendations comprise the analyst's expectations of the company's earnings and future price performance of the security ("price target"). These analysts work for firms that offer clients investment banking, broking, and advisory services.
Buy-side Analysts:
They, in general, work for money managers like mutual funds, hedge funds, pension funds, or portfolio managers that purchase and sell securities for their investment accounts or on behalf of their clients. These analysts make investment recommendations for their internal consumption, using the fund managers inside the organization.
These analysts' research reports are generally dispersed among the employer firms' top management/investment managers as these reports contain recommendations about which securities to buy, hold or sell.
Independent Analysts:
They work for research creators or boutique firms from full-service investment firms and sell their research to others on a subscription basis. Their clients could be investors, regulators, stock exchanges, fund managers, institutions, investment bankers, etc.
They also offer customized research reports on the businesses on specific requests. The intention of these market analysis reports could vary from investment activity to aware the competition to mergers and acquisitions etc.
Apart from these three top categories, entities such as newspapers, media, and information consolidators also provide research reports.
To summarize, the role of an equity research analyst is that of a selector - to do a comprehensive study of companies, evaluate their past performance, analyze how a company is predicted to perform in the future to make guidance based on this analysis.
