NEW YORK (TheStreet) -- Being a successful equity analyst requires several skills. Analysts must be quantitatively adept and be able to write and speak effectively.
They must understand financial accounting and securities valuation and know how to apply these skills to the analysis of industries and companies. They have to be creative in finding useful sources of information, while earning the respect of company executives and institutional investors.
While very few analysts excel in all of these areas of proficiency, new analysts can "make their bones" by showcasing their talents in a particular performance category. During my career on Wall Street I observed several types of high-performing analysts stand out. The following professional profiles might be instructive to those trying to break into the competitive field of equity research.
1. The Channel-Checker: In the wake of the SEC's passage of Regulation FD in 2000, companies must disclose financial information to all investors at the same time. That regulation spawned new "expert network" services. It also impelled analysts to scour their network of company vendors and customers in order to obtain insights not available from traditional corporate sources. Technology analyst Brian White at Cantor Fitzgerald made a name for himself by hosting regular tours of Apple (AAPL) suppliers in China. He does this to fine-tune his understanding of tech hardware supply chains.
Independent consumer analyst Brian Sozzi at Belus Capital Advisors (and a Street.com columnist) uses Twitter to pair photos of store displays with commentary about retailing companies. Sozzi uses his Tweets and on-site photos to punctuate sometimes-controversial calls about the fate of certain retailers, like Sears Holdings Corporation (SHLD). (Note from Brian Egger: Having the first name, Brian, isn't a prerequisite for being a successful analyst).
2. The C-Suite Schmoozer: Regulation FD requires that communications between company executives and analysts be carefully monitored, in order to ensure that certain investors aren't accorded preferential access to information. Even in the wake of that regulatory ruling, certain analysts have continued to demonstrate a unique ability to interpret the words and actions of CEOs and CFOs. The value of their corporate contacts, and the insights they gain from those relationships, still looms large.
Needham & Company analyst Laura Martin became well-known, in part, because of her ability to facilitate meetings between investors and senior executives in the entertainment industry. New analysts must be aware of the potential pitfalls of speaking with mid-level corporate managers. Those relationships can become problematic if these company employees overstep the information barriers imposed by Regulation FD.
3. The Modeling Maven: Most analysts maintain detailed financial models to forecast company earnings. Why would a hedge fund manager decide to turn to you for analytical insight when they have access to the financial spreadsheets of any established analyst on the Street? In order to earn that distinction, an analyst must be a superlative numbers person. Forecasting and valuation models need to be meticulously maintained, easy-to-follow, and internally consistent. Good isn't good enough.
Maintaining detailed models on multiple companies is a labor-intensive undertaking that often requires the assistance of a dedicated analyst team. Activist investor Jason Ader developed a loyal following when he was a sell-side gaming and lodging analyst. His associates helped him maintain a formidable arsenal of financial models. He also annotated his models and exhibits with user-friendly call-out windows to identify numerical trends.
Readers might be able to identify other categories of standout analyst performers. While the foregoing analyst profiles aren't intended to be all-inclusive, they should provide a useful guide for those seeking to understand the elements of professional success that have enabled some analysts to rise to the top of their field.
At the time of publication the author had a position in AAPL.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
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