19 January 2013

All equity analysts are lazy? That's a bit harsh!

Deborah Kops, a former marketer and currently a researcher with HfS, an outsourcing analyst firm, recently wrote a scathing piece on equity analysts. In her well argued piece, she lambasted the analysts for not doing enough research on the companies they covered.

I'm sure she speaks from experience. But I cannot agree entirely. Oh sure, there are lousy analysts out there who do poor research. But that's like saying there are lousy journalists or engineers out there who do poor work. 

I used to run investor relations at mid sized IT services companies in the early and mid 2000s and my impression of equity analysts — we mostly talked to the folks who made the Institutional Investor lists so maybe their reputations were well earned — was very different. 

I've spent endless hours on one-on-ones and at investor conferences dissecting the business for them. Most of them were hard nosed and inquisitive and politely skeptical of management briefings — excellent traits in an analyst. 

On the whole, I found the analyst community intellectually honest — barring the poor sods who were ‘encouraged’ by the broking side of their fund houses to game a report when an investment deal was imminent. But then, nobody believed those reports anyway. 

But hey, that's me. Maybe the game's changed since then.

© 2013 Vijay Menon

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