Buy-Side Report Fundamentals..

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IH8FSA

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Buy-Side Analysts
“Buy-side analysts are employed by fund managers like Fidelity and Janus, as well as pension funds. Like the sell-side analysis, the buy-side analyst specializes in a few sectors and analyzes stocks to make buy/sell recommendations; however, the buy-side differs from the sell-side in three main ways: they follow more stocks (30-40), they write very brief reports (generally one or two pages), and their research is only distributed to the fund’s managers.
Buy-side analysts can cover more stocks than sell-side analysts because they have access to all the sell-side research. They also have the opportunity to attend industry conferences, hosted by sell-side firms. During these conferences, the managements of several companies in a sector present why they are a better investment. After gathering this information, buy-side analysts summarize their case in a brief report that also contains an earnings forecast. These reports are only distributed to the fund’s managers.
The sell-side provides research and conferences to the buy-side in the hopes that the buy-side will let them execute the large trades that the funds make when they act on the recommendation provided by the sell-side. Having access to the sell-side’s primary research and the ability to attend industry conferences allows the buy-side analyst to follow many more stocks than a sell-side analyst. To compensate the firm for this information, the funds will buy and sell stocks with the brokerage firms that provide the best information”
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Is there anywhere where I can find an old buy side report or sample etc, just to see the way it’s constructed and to view the fundamentals needed for these reports???
I tried doing some searching, and I found one that had the following in about 2 pages:
-The Company
-Milestones
-Products
-Risks and Challenges
-Competitive Analysis
-Corporate Goals.
If anyone can send me an old buy side report, or provide info where to find some, It would be greatly appreciated.
[email protected]
 
i might get in trouble for doing so…buy side research is presumably “proprietary” : ) -
in the end, most are fairly short, 1-3 pages. most important part is the investment thesis, a model, and how the buy side analyst differs from consensus
 
Hey Daj,
you can block your firm name and the stock/company name. I just want to see the fundamentals used, the way its constructed etc. im not looking for stock tips here.
if you find an old one that you can scan and send from your personal email (non work email)
I would grealty appreciate it if you send it to [email protected]
 
daj would it be possible to make a mock report on some XYZ company and show us? Although im particularly not interested in being a buy side or sell side analyst i still would love to read a report done by one of them.
For knowledge’s sake!
 
EMRA32,
you can easily find sell side reports by searching the net since these are public. But the buy-sides are hard to come by since they are made for internal use and many are made through propieatary models.
I’m looking for one since i’m trying to break into that field and i’m supposed to make a mock one for an interview so i really need to get my hands on one.
 
Not to sound like a prude, I don’t think any analyst on the buy side would give out a current report on a name to people he doesn’t know on a message board.
If you have question as to what should be included feel free to ask…
 
buddha Wrote:
——————————————————-
> Not to sound like a prude, I don’t think any
> analyst on the buy side would give out a current
> report on a name to people he doesn’t know on a
> message board.
>
> If you have question as to what should be included
> feel free to ask…
Hey Buddha,
I mentioned that any names ( stock name, your company name) etc.. can freely be blocked (blacked out then scanned if need be etc.). I couldnt care less about what company it is, im not looking for any stock tips or looking to copy anything, i’m curious about the structure of the report.
What would be the main sections?
 
^
Company
Some sort of table that has basic info:
Market cap
Valutation multiples
your price target upside downside
your earnings est
consensus est
etc.
Some brief company description:
Thesis statement:
Details developing each of the thesis.
Risks to thesis.
Valuation approach: I try to keep the thesis and risks to fundamental things, and keep this section about talking about where i see the multiple contract or expand
Difference from consensus: discuss all the major differences, that get you your numbers
Appendix:
Segement breakdown: I usually have a table that gives sales, earnings revenue breakdown
by segment.
Then I give a description of each segment what is the market potential, their market share, some of the competitor what the trends drivers etc for each segment.
Industry work, or charts that help explain my thesis, sometime from company presentation, sometimes from sell side reports, sometimes something I thought
Financial Statements:
my model, or for companies I don’t cover closely a sell side model with my growth estimates.
 
Buddha,
Thank you for the response.
Is what you have provided a sell-side or buy-side report? From my research it says that buy side reports are usually 1-2 pages in length???
 
^
Buy side
Table should be 4-5 rows sized, company description usually a small paragraph I copy from bloomberg, Thesis, Risk, Valuation, Difference from consensus usually makes it 2 pages long.
Then I end up having all the other stuff as an appendix that I refer to in my two pages.
For comparison when the sell side initiates on a space or a name it is 30-100 pages.
 
Buddha,
Appreciate all the repsonses so far;
-Do buy-siders retain most of their information from sell-side research? if not, what sources do you use to obtain information?
 
Generic stuff, like valuation, market business description yada yada yada, copy and paste from either bloomberg or factset.
Segment data, market share etc. depends on what you do. I used to be an associate to a tech analyst Gartner and IDC were outstanding for that. I know retail analyst have their own thing for same store sales comp etc. As a energy analyst I use a variety of public available records, state drilling permit data, state geologist data, EIA data, IEA data DOT miles driven data, baker hughes rig count data etc. Sell side will already have a lot of this.
Alot of company specific data can be obtained form company presentations that you attend or form their IR pages. When you actually work in the industry you will get to know the people in IR fairly well, so you can just probably call them up and ask. Also listen to company conference calls you can get a lot out of it. depends on the company but overall most IR pages should contain a lot of information
The rest, thesis risk etc. are a combination of all the data you gathered, talking with the sell side, company mgmt, and your own expertise in the field.
 
Awesome Buddha,
Thank you for that information, it was of great help.
I guess viewing an old report wouldnt help much because i guess every company has different ways of presenting their information, and probably every indusry is different.
thanks again!
 
buddha Wrote:
——————————————————-
> ^
> Financial Statements:
> my model, or for companies I don’t cover closely a
> sell side model with my growth estimates.
I am surprised they let you get away with this.
 
IH8FSA Wrote:
——————————————————-
> Buddha,
>
> Appreciate all the repsonses so far;
>
> -Do buy-siders retain most of their information
> from sell-side research?
some, not all. the job breaks down to 5 things
- modeling
- meeting CFO/CEO teams
- learning about your industry
- learning EVERYTHING there is to know about your stock universe and “close companies under coverage”
- conference calls with PMS, and of coursem chiming in when yr company rpts…
- also, buy siders actually travel a bit, dep on the analyst. it helps to go to sell side conference, etcs, but if you go to too much, it can noise you out and leave you sounding like a sell sider
also, I WAS NOT IGNORING YOUR PREVIOUS POST. I want to help any way I can, but I dont want to post any buy side reports, even with the name blocked out. no need to, the forum did a decent job breaking it out
but the MAIN POINT, to repeat is:
- buy side rpts are much shorter than sell side rpts
- the qualitative is important, but I know that at some long only shops on east coast, a PM rather see 5 pages of models and 1 page of words instead of the other way around.
- a good model tells a story in and of itself
- buy siders love to “go against consensus” – that is the takeaway here – they think they are better than sell side analysts and try to hear meaning in a sea of noise…[ironically, see my post on the SS vs BS analysts – harvard did a study + BS guys are WORSE stock pickers….haha!!]
- i personally love the sell side rpts and read em all the time, so nothing against em, just reporting on some things i have seen.
 
^
I disagree the model, is just a tool that is built, most PMs would ignore you if you just gave them a copy of your model and told them the price target. They want to know what types of growth/margin estimate you have and how it differs from the sell-side.
Starting off on a new name I can just get a sell side model, models are not that big a deal. At some shops, there are no sector analysts and everyone is just a generalists they have no models period.
The biggest thing is getting a grasp of the drivers that effect the inputs of the model.
Sell-Side is where they really keep up to date on models.
 
Thanks to both of you guys, your posts have been of great help.
Daj, I read a study on the BS VS SS as well. The one I read was from FAJ, and it said the 2 main reasons sell siders were more accurate was because Buy siders were more optimistic in their forecasts, and had less available information at hand opposed to the sell siders.
it was an interesting article.
Thanks again guys!
 
buddha Wrote:
——————————————————-
> ^
> I disagree the model, is just a tool that is
> built, most PMs would ignore you if you just gave
> them a copy of your model and told them the price
> target. They want to know what types of
> growth/margin estimate you have and how it differs
> from the sell-side.
EXACTLY, AND THAT IS IN THE MODEL. JUST PLUG IN A DATA TABLE AND COND FORMAT IT.
>
> Starting off on a new name I can just get a sell
> side model, models are not that big a deal. At
> some shops, there are no sector analysts and
> everyone is just a generalists they have no models
> period.
I GUESS OUR EXPERIENCE DIFFERS. IF THERE IS A BUY SIDE SHOP WITH NO MODELS, I AM DEF SURPRISED. ALSO, GENERALISTS BUILD MODELS ALL THE TIME, SO YOU CANT SAY A GENERALIST BE DEFINITION USES NO MODELS AND INSTEAD RELIES ON BIG PICTURE/THEMATIC CALLS
>
> The biggest thing is getting a grasp of the
> drivers that effect the inputs of the model.
>
> Sell-Side is where they really keep up to date on
> models.
BUY SIDERS KEEP UP TO DATE MODELS TOO!!! THEY WORK LATE INTO THE NIGHT AND DISH OUT AN EPS CALL SUMMARY TO PMS THE NEXT DAY, AS WELL AS THIER UPDATED MODEL AND HOW IT MAY DIFFER FROM THE ST!!!
 
I like the qualitative side of the buy-sider mentioned above, (company meetings, conferences etc)
Is there such shops that only use sell-side research and therefore dont really let their buy side analysts travel anywhere?
 
daj224 Wrote:
——————————————————-
>
> EXACTLY, AND THAT IS IN THE MODEL. JUST PLUG IN A
> DATA TABLE AND COND FORMAT IT.
>
> I GUESS OUR EXPERIENCE DIFFERS. IF THERE IS A BUY
> SIDE SHOP WITH NO MODELS, I AM DEF SURPRISED.
> ALSO, GENERALISTS BUILD MODELS ALL THE TIME, SO
> YOU CANT SAY A GENERALIST BE DEFINITION USES NO
> MODELS AND INSTEAD RELIES ON BIG PICTURE/THEMATIC
> CALLS
>
> BUY SIDERS KEEP UP TO DATE MODELS TOO!!! THEY WORK
> LATE INTO THE NIGHT AND DISH OUT AN EPS CALL
> SUMMARY TO PMS THE NEXT DAY, AS WELL AS THIER
> UPDATED MODEL AND HOW IT MAY DIFFER FROM THE ST!!!
Typing in all caps just made your argument all the more authoritative.
A sell side analyst cover 10-12 names. Some one on the buyside covers 30+ if not well more in the case of these everyone is a generalist shop. It’s not that we don’t keep a model, but realistically it would be much to time consuming to have a detailed model on every name owned and looked at. I have worked at two mutual funds, and have close friends in the industry at just about every major asset manager, unless your firm is big enough that you can afford an associate for each analyst, there is no way that you keep ‘up to date models on every firm’.
That is not to say you can’t have a call on EPS. For something like energy I know what the guidance ranges for production were, I closely follow any data points inter-quarterly I keep tabs on what I think realized prices will be, and I have a good grasp on LOE, DD&A, etc will be. So yes I do have a good idea of what EPS will be. But do I have a IS that is linked to a CF statement that is linked to a BS for every company?
Not sure what shop you work at, maybe a hedge fund with an outrageous expense ratio, but even then I doubt that the modeling is that comprehensive.
 
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