Sell Side
Buy Side
Learning to Speak
Investment
Management
Joan Williams
March 6, 2002
Up Side
Down Side
Sell Side
PART ONE
Buy Side
Industry Organization
Sell Side
analyst
Buy Side
analyst
Industry Organization
Sell Side
Company
Industry
Buy Side
Sell Side
analyst
analyst
Economy
=
Recommendations
& Analysis
Company
Technical
=
Analysis &
Investment Decision
The World of the
Sell-Side
Analyst
Sell Side: Major Players
• Investment Banks
– CSFB, Morgan Stanley, Merril Lynch, JP
Morgan, Bank of America, Deutsche Banc,
Bear Stearns, CIBC
– Company and Industry Reports
• Regional / Industry
– Ex. – Simmons in Energy
Sell Side: Goals
• Produce and sell research
• “Call It”
• Reputation / Credibility
– Go-to analyst
– Expert status / air-time
• Funny Titles
Sell Side: Research
• Interfacing with Company Management
– Conference Calls
– Company
– Conferences (ex.- Extreme Networks)
–
–
Robertson Stephens Technology Conference -- San Francisco, CA Wednesday,
February 27, 2002 Time: 3:00 p.m. PT (6:00 p.m. ET) Presenter: Gordon Stitt, Chief
Executive Officer
Merrill Lynch Global Communications Conference -- New York, NY Wednesday, March
13, 2002 Time: 12:00 p.m. PT (3:00 p.m. ET) Presenter: Gordon Stitt, Chief Executive
Officer
• Economic and Industry Data
• Credit Ratings
Sell Side: Reports
• Company / Industry (Sector, SubSector,
Commodity)/ Economy / Theory
• Report team
• Earnings models
• Supporting analysis
• Expectations
– EPS and CFPS (First Call / consensus)
• Investment Recommendation
Sell Side: Clients
• Internal and External Buy Side
– Investment Management
• Intermediaries
– Investment banking analysts
• Chinese wall / conflict of interest
• Bias
– “Buy doesn’t mean buy”
– Dropping coverage
The World of the
Buy-Side
Analyst
Buy Side: Major Players
• Investment banks
– Institutional and Private Wealth
• Mutual Funds
• Portfolio Managers
– Institutional and Private Wealth
Buy-side: Sell-side relationships
• Buy-side pays for sell-side relationship
• Go-to people
– Often share models or background
information
• Daily conference calls
• Road shows (usually following report)
• Often internal (I-banks)
Buy-Side: Research
• Build own earnings models
• Utilize Conference Calls
– Daily sell-side calls
– Company earnings
• Company guidance
– Conf. Calls and Road Shows
• Real-time market trends
• Technical analysis (shhhh….)
Buy Side: Flow of information
• Flow up to PM’s and Fund Managers
– Sometimes same people
• Assigned to S&P sector and strategy
group
• Internal meetings and reports
Buy Side: Brokers and traders
• Access and timing
• Two-way information flow
Buy Side: Performance Measures
• Fund & Portfolio marketing results
• Benchmarking
Up Side
PART TWO
Down Side