Things to learn for an ER role!

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oldmonk

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My plan is to learn as much as possible (realistically speaking) about valuation models etc. before I start applying for an equity analyst role. I am currently working as an analyst in asset consulting so I do have an elemantary understanding (or I’d like to think that) of most of the stuff.
My question is what are the things I should concentrate upon? As of now, the things I have on my mind are:
Browse thru most of the Damodaran’s spreadsheets on DCF/DDM/FCFE etc. and use a good book. If anybody can suggest a good book to get a decent grasp of these models, muchos gracias.
Next problem: Models are mostly text book stuff and shouldn’t be hard to get my head around. Is there some good material out there which can give me a sense of how analysts come up with the inputs into the model. Or at least a bit of meat to BS about it for a few hours.
What are some other things which would be useful to learn before I start applying.
I am hoping to cover as much as I can before I start applying and any help in this is greatly appreciated.
 
The only way to learn about modeling is to build one from scratch.
Reading books only help you get started.
One caveat on Damodaran’s models is that they are only good in helping one understand and wrap their heads around the concept, but are simplified and crude in its inputs and structures.
 
I am waiting on inputs for oldmonk’s post too. Do you recommend Excel modelling Premium package from Wall Street Prep to learn some Excel, VBA macros and some theorotical models we studied in L1 and L2. Please suggest.
 
Zuran Wrote:
——————————————————-
> The only way to learn about modeling is to build
> one from scratch.
>
> Reading books only help you get started.
>
> One caveat on Damodaran’s models is that they are
> only good in helping one understand and wrap their
> heads around the concept, but are simplified and
> crude in its inputs and structures.
I would imagine that Damodaran’s spreadsheets offer a good starting point.
If one is to interview for an equity analyst role, what level of proficiency with various valuation models would be considered ideal. This is for somebody who has worked in the financial industry for a few years (not ER though) and obviously can’t turn up at the interview claiming innocence.
Also, I do find the stuff quite interesting and wouldn’t mind spending some time learning it before I start applying.
 
I just ordered Bennenga’s (sp?) Financial Modeling book on Amazon for the exact same purpose. It seems to get good reviews from what I have read. It’s a lot cheaper than WSP so I figured I would start there and see if it leaves me wanting more.
I’ll let you know how it goes. It should be here on Wednesday
 
I ordered it as well and am printing Damodaran’s book too.
How many hours would be ideal to go thru the material and get a decent understanding of the relevant models? I guess this is an open ended question.
 
oldmonk Wrote:
——————————————————-
> I ordered it as well and am printing Damodaran’s
> book too.
>
> How many hours would be ideal to go thru the
> material and get a decent understanding of the
> relevant models? I guess this is an open ended
> question.
Depending on your background, ten hours or less. ER basically requires that you build out income statements and DCF models. Half of this is data entry or using a program to create the model, and the other half is making sure that your forecasts make sense. Honestly, it’s not really a big deal, but people seem to insist that it’s challenging or mysterious. I’ve come to think that ER modeling is actually extremely mundane and boring.
 
I signed up for …
FactSet DealMaven Financial Analysis Training
If you would like to know more, check it out on google; the emphasis is on creating a financial model in excel.
Been a bit too busy reading through my CFA books to really get into it but what I have seen is interesting.
 
bromion Wrote:
>
> Depending on your background, ten hours or less.
> ER basically requires that you build out income
> statements and DCF models. Half of this is data
> entry or using a program to create the model, and
> the other half is making sure that your forecasts
> make sense. Honestly, it’s not really a big deal,
> but people seem to insist that it’s challenging or
> mysterious. I’ve come to think that ER modeling is
> actually extremely mundane and boring.
That leads me to the next question (see the first post).
What makes an equity analyst a good equity analyst? Its not chugging numbers into a model. So is it coming up with quality ideas and inputs to be used in a model?
If you are working for a bottom up, fundamental, value fund, is a junior equity analyst stuck with the mundane and boring?
And will an equity analyst do things quite differently if he/she was to work for a thematic top down approach equity fund where the emphasis isn’t as much on the valuation and the analysts are encouraged to come up with quality ideas.
 
Damodaran’s models are a bit unorthodox and clumsy, at least from what I’ve seen in practice. The WSP prep guides and Deal Maven models look more like the models I’ve seen used by “real” analysts.
Personally I agree with Zuran, the books are only useful to get the underlying theory. Building the models is a hands on activity.
Based on the above, I’d roll with Deal Maven or WSP just because they are more hands on. Nevertheless the above courses will only build a foundation. Ultimately the modeling task will be based on the purpose of the analysis, the need for a specific level of detail, etc. That will be variable, of course and will not fit the cookie cutter format of books and courses.
The foundation from such tools should give you the confidence to strike out on your own and build your own models. In my experience, the more ad hoc request I get for different types of models the more I feel able to strike out on my own. I’ll probably still do the Deal Maven course someday just for the experience though.
Just my two…
 
Gotta go with Wall Street Prep, Training the Street, or DealMaven. This is how models are built in sell-side practice. Damodaran’s book is useful for theoretical purposes as others have pointed out, but if you want to learn how models are built functionally, go with one of the packages I named above. Either that, or just get your hands around a good sell-side model and use that as a template for your own use…
 
numi Wrote:
——————————————————-
> Gotta go with Wall Street Prep, Training the
> Street, or DealMaven. This is how models are built
> in sell-side practice. Damodaran’s book is useful
> for theoretical purposes as others have pointed
> out, but if you want to learn how models are built
> functionally, go with one of the packages I named
> above. Either that, or just get your hands around
> a good sell-side model and use that as a template
> for your own use…
I guess for interviews etc., its better to learn the more hands on practical way of building/working with models rather than the theoretical stuff. I will order WSP soon. I am hoping to develop enough proficiency with the material to be able to comfortably talk about it w/o sounding like a brain fart.
If anybody has a template of a good model, I would really appreciate if you could email it to me on oldmonk16 at gmail
 
Hi,
I use DealMaven, and based on what others have said above, I guess it’s fairly similar to WSP.
Here is a taste of what DealMaven level 1 is about: (It allowed me to download the finished model which I am meant to eventually make myself, I’ve emailed it to you - an excel file).
***********
“Now let’s take a tour of the different parts of the debt refinancing model you’ll be building from scratch later in this course…
As we’ve said, your model will include a transaction analysis, a valuation analysis and the ability to run multiple scenarios. We’ll go into great detail to explain all the concepts involved in its construction.
For now, let’s take a tour of the model in the order it appears when complete. (As you’ll see, this differs from the order in which it’s built.)
The model includes the following sections:
Cover Page
Operating Assumptions
Working Capital Assumptions
Income Statement
Balance Sheet
Cash Flow Statement
Debt Schedule
Valuation Analysis
Operating Lookup
Capital Structure Lookup”
***********************
 
oldmonk Wrote:
——————————————————-
> What makes an equity analyst a good equity
> analyst? Its not chugging numbers into a model. So
> is it coming up with quality ideas and inputs to
> be used in a model?
You probably won’t like my answer, but a positive attitude is the defining characteristic of a good junior analyst. Assuming you are not retarded with the finance stuff they give you (which won’t be too taxing), your ability to succeed will be directly related to how much people like you – this includes smiling a lot while bending over and pulling your pants down for any unreasonable requests you get (and there will probably be a lot of these type of requests).
Most likely people on your team will not care about your ideas. Try not to glorify the job, since it doesn’t get that interesting until a few years in.
If you must know what it takes to succeed on a technical level, you need to be decent with math, know how to write a complete sentence and know enough accounting (one FSA class will suffice) and finance (101 level) to do the basic stuff they ask of you.
 
bromion Wrote:
> You probably won’t like my answer, but a positive
> attitude is the defining characteristic of a good
> junior analyst. Assuming you are not retarded with
> the finance stuff they give you (which won’t be
> too taxing), your ability to succeed will be
> directly related to how much people like you –
> this includes smiling a lot while bending over and
> pulling your pants down for any unreasonable
> requests you get (and there will probably be a lot
> of these type of requests).
Isn’t this is true for pretty much any job.
I work in consulting and regularly stretch my b**t hole to width of Nile for clients and senior consultants. And the business development guys do the same for me. Its all Karma.
But I still need some idealistic fodder for an interview. Not to say that I don’t want to learn as much as I can.
 
oldmonk Wrote:
——————————————————-
> But I still need some idealistic fodder for an
> interview. Not to say that I don’t want to learn
> as much as I can.
Track down a couple of ER notes and see what it is about then. Basically, you research a company, build a model, use the model’s outputs to inform your valuation (usually relative valuation), talk to management to confirm your assumptions and gain additional detail, and then write your note. There really is not that much to it. The value you provide to your clients and the skill you demonstrate have mostly to do with your ability to read available information better than your competition and to utilize the judgment you have built up about the company / industry / economy over a number of years. Most of that is off in the distance so to speak, so if you can track down a note and understand it fully, you will be ready to rock in your interviews.
 
oldmonk, I just sent you a link to the ABT.xls model that you can download. If anyone asks for it, please download it and circulate/send it around. Good luck
 
I’ll take a copy if you don’t mind doing it. I know this will probably end up being one of those 100 email request threads, so no sweat if you can’t do it. I have a few of my own, but want to see what else is available.
vincent DOT thegooch AT gmail DOT com
Thanks
 
I’m sure he will upload the file.. no need to post emails.
 
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