equity research interview questions

Equity Research Interview Questions (Top 50 With Answers)

April 14, 2019

After you get hired, it’s now time to face the equity research interviews.

Usually, it has four parts:

• First screening
• Interview with Human Resources
• Financial Modeling tests
• Interview with Equity Research Department

Usually, the fourth part is one of the difficult ones. I’m here to prepare you for it. Here are the 50 Equity Research interview questions you must get ready for.

Technical Equity Research Interview Questions and Answers

Q.1: what is contained in an equity research report.

An equity research report is a recommendation to clients which convince them to either BUY, SELL or HOLD equity securities.

The preparer must justify each recommendation. As such, the following components must be found:

• Industry Overview – gives the reader a summary of the trends that affect the industry covering the company
• Company Financials and Ratio – Key metrics are shown here, example: liquidity, solvency, sales turnover and market share
• Valuations and Projections – based on the financial performance of the company , the research attempts to measure the future value of each share
• Management Overview – Who are the management team? Are they highly qualified to run the company?
• Recommendation – After a-d, the researcher will now recommend to either BUY, SELL or HOLD the security.

Q.2: What is the earnings season?

Earnings season is the time of the year, where companies declare the results of their operations. It is usually in the 2 nd quarter of each year.

Q.3: Describe the Equity Research Hierarchy

The organizational chart of equity research looks like this:

Q.4: What is the difference between Enterprise Value and Equity Value?

Equity value and enterprise value is essential when you are using valuations to find the fair value of stocks.

To compute Equity Value, we will add the following:

• Equity Value – is typically the total market value of the company’s equity shares.
• Enterprise Value – is Equity Value plus Net Debt.

Net Debt – is the total of short-term debt (including a portion of long-term debt), long-term debt, all non-controlling interest, preferred shares and then deduct cash and cash equivalents.

Q.5: What are the standard ratios used for company analysis?

Quick Assets Ratio – use to determine the ability of the company to pay its current liabilities using its highly liquid assets like cash, deposits and short-term investments.

• Solvency Ratios – these are ratios used to measure the company’s ability to pay its financial obligations.
• Current Ratio – current assets / current liabilities
• Current Liability to Inventory – current liabilities/ inventory
• Total liabilities to net worth – Total Liabilities / Equity

Turnover Ratios

• Accounts Payable Turnover
• Days Payable
• Cash Conversion Cycle
• Inventory Turnover
• Receivables Turnover
• Days Receivables
• Days Inventory

Operating Efficiency Ratios

• Equity Turnover
• Asset Turnover Ratio
• Net Fixed Asset Turnover

Operating Profitability Ratios

• Return on Total Assets
• Return on Equity
• Dupont Model for Return on Equity
• Gross Profit Margin
• Operating Profit Margin

Financial Risk

• Debt Service Coverage Ratio
• Interest Coverage Ratio
• Debt to Equity Ratio
• Leverage Ratio

Q.6: What is Financial modeling in Financial Analysis?

Historical financial statements cannot give us the future value of the stocks.

Only through financial modeling that we will be able to take a glimpse of the estimated value of those shares.

The most common ways to value a company is Discounted Cash Flows and Comparable Companies analysis.

You’ll be able to find the fair value of the shares using these financial modeling techniques.

Compare those share values with the current market price to conclude.

If Market Value is lower than fair value, then BUY because the share prices are expected to go up.

Otherwise, the recommendation should be SELL or HOLD.

Q.7: How do you do a Discounted Cash Flow?

Discounted Cash Flow is a valuation method that values a company using its discounted future cash flows.

The discount rate used is the Weighted Average Cost of Capital.

Discounted Cash flows model is done generally in 6 steps:

• Computed the discount rate, which is the Weighted Average Cost of Capital
• Compute Free Cash Flows that is the discounted cash flows within the projected period.
• Compute Terminal Value; it is equal to the discounted cash flows outside the projected period.
• Computed the diluted number of shares
• Compute Equity Value and Enterprise Value
• Compare the estimated fair value and market value, then recommend either BUY, SELL or HOLD

Q.8: How do you do Comparable Companies Analysis?

Comparable companies’ analysis is comparing one share over other shares in the same industry using valuation multiples.

This method is being done generally on six steps.

• Collect financial information about the company. This is usually composed of the three primary financial statements.
• Project the income statements to 3 years, five years, or whatever length you deemed necessary.
• Compute the Equity and Enterprise Value
• Determine the total number of diluted shares
• Compute forecasts and valuation multiples
• Based on valuation multiples, compute the fair value of each share.
• Evaluate results and make recommendations.

Q.9: What is Free Cash Flows?

Free Cash Flows is the cash available to debt and equity security holders after deducting all outflows related to working capital and Capex.

To compute free cash flows:

• Start with the after-tax net income
• Add back all non-cash expenses (because they reduced income but not cash, e.g. depreciation)
• Deduct all non-cash income (because they increased income but not cash, e.g. accrued income)
• A decrease in assets must be deducted because they reduce cash but do not affect net income. The opposite happens when assets increase.
• An increase in payables decreases cash but does not affect net income, and so, we must deduct it. The opposite has the opposite effect.

Q.10: What is Free Cash Flow to Equity?

Free Cash Flows to Equity is the amount of cash that is available to equity shareholders after deducting all expenses related to capital outlays, debts and taxes.

Q.11: What is Sensitivity Analysis?

Sensitivity analysis is the technique to determine the effect of an independent variable on other dependent variables.

Q.12: What is the use of Sensitivity Analysis in Equity Research?

Sensitivity is used in Equity Research in a variety of ways. Instead of assuming a single scenario, a range of scenarios of factors is being investigated.

Independent variables that are often used are discount rates, growth rates or Sales.

Thus, the recommendations are not based on a single scenario but a range of scenarios that could happen considering their possibility ratios.

Sensitivity analysis is presented using a sensitivity analysis table through DATA tables in Excel.

Q.13: What are the common valuation multiples used in Equity Research?

• Price Earnings Ratio
• EV / Assets
• Price-Earnings Growth Ratio
• Price / Book Value

Q.14: How do you compute the Weighted Average Cost of Capital for Discounted Cash Flows?

Q.15: what is the difference between a training pe and a forward pe.

Trailing PE Ratio is computed using the financial figures of the past period (usually a year).

On the other hand, a forward PE is a ratio calculated using projected data (usually one year ahead).

Q.16: What is BETA?

Beta is the measure of a stock price’s sensitivity to changes in the stock market. This is derived using historical figures using regression analysis.

A beta of 1 means that it moves equally proportionated to the movement of the stock market.

A beta lower than one means that it is less volatile, or less movement than the stock market movement.

A beta is higher than 1 means that its price is more volatile than the market.

Q.17: Which is better between EBIT and EBITDA?

The issue should be which one is more interesting to decision-makers.

The only difference between the two is that EBITDA is after depreciation and amortization, unlike EBIT.

If the depreciation and amortization are very significant, decision-makers most likely consider using EBITDA.

Q.18: What are the disadvantages of using the Price-Earnings Ratio?

a . It is too simple . Aside from current price and net income, it doesn’t take into account other factors that could affect the fair value of the company.

• Price-Earnings need other multiples to have meaning.
• PE Ratio does not take into account growth.
• PE Ratio doesn’t consider debt

Q.19: How does oil price changes affect our economy?

Oil and other petroleum products are the main inputs in most of our industries.

Increasing oil prices will increase the costs of producing products and services, especially in the manufacturing and transportation sectors.

On the micro-level, increases in oil prices decrease a household’s spending power.

It also dramatically reduces a company’s ability to pay, especially organizations that are heavily reliant on gasoline (e.g. bus companies)

On the macro level, oil price increases tend to reduce economic growth and increase inflation.

Q.20: Suppose your grandma’s broker told her to SELL already here Apple stocks, how would you react to this?

I’ll first ask my grandma to tell her broker to send her an equity research report.

I’ll explain to my grandma each part of that report (assuming she doesn’t know yet), and how it could affect her decision of buying, holding or selling stocks.

I’ll take a look at the equity research report, and if I see something off, I’m going to do further research on my own.

If time permits, I’ll even do comprehensive research for my grandma.

Q.21: How do you value a stock?

There are a lot of ways to value a stock. The most common is to use Discounted Cash Flows.

Discounted cash flows use the future cash flows of a company to determine the current fair value of a stock.

We can also use multiples to value a company.

We use relative valuation methods such as Comparable companies analysis and the Precedent transaction valuation method.

Q.22: If a company has a higher Price-Earnings ratio than another company, what could be the reason?

The formula for Price-Earnings ratio is:

Based on this formula, the PE ratio could go higher if the Price per share is high relative to earnings per share.

Price per share is high if investors assess that the growth potential of the company is high. As such, they will also value the shares higher in the market.

Q.23: What can you imply with a company that has a low PE multiple but a high EV/EBITDA multiples?

The difference between the two multiples is Net Debt.

Net Debt is the total of short-term debt (including a portion of long-term debt), long-term debt, all non-controlling interest, preferred shares and then deduct cash and cash equivalents.

As such, the difference in the multiples means that eh company has a significant amount of net debt.

Q.24: Why is it sometimes necessary to unlever a beta?

To unlever a beta means that to remove the effect of debt of the company to the movements of the stock’s price.

Unlevering data means that you only want stockholder’s equity to affect it.

Unlevered beta is assumed to be a more accurate measure of a stock’s volatility due to the removal of the effect of debt securities.

The beta you get from tools like Bloomberg is levered data.

Unlevered data is computed by:

Un-Levered Beta = Levered Beta / (1 + ((1 – Tax Rate) x (Total Debt/Equity)))

Q.25: Is it possible for a stock to have an Equity Value that is higher than its Enterprise Value?

Yes. Based on the formula Enterprise value = total equity market value + Gross Debt less Cash, Equity value is higher when it has no interest-bearing debt but have cash.

Q.26: What is the disadvantage of Discounted Cash Flows?

DCF cannot be used when the analyst cannot reliably forecast the cash flows of the company.

This usually happens when the company is just in the beginning, and do not have stable operations yet (e.g. Tech start-ups)

Q.27: Based on Warren Buffett, why are EBIT multiples more preferable than EBITDA multiples?

This is what Warrant Buffett says about EBIT vs EBITDA.

“Does management think the tooth fairy pays for capital expenditures?”

“It amazes me how widespread the use of EBITDA has become. People try to dress up financial statements with it.”

“We won’t buy into companies where someone’s talking about EBITDA.

If you look at all companies and split them into companies that use EBITDA as a metric and those that don’t, I suspect you’ll find a lot more fraud in the former group.

Look at conglomerates like Wal-Mart, GE, and Microsoft — they’ll never use EBITDA in their annual report.”

Including depreciation and amortization is a less accurate value of the company.

For example, the depreciation of an aging factory is not a factor in the current fair value of a stock.

Q.28: Why do we use 5-10 years as the projection period for Discounted Cash Flows?

The reason is that of the relevance and usability of the report. Less than five years is a relatively short measure of the future of the company.

It will be hard to look in the long-term if you are looking at less than five years’ projections.

On the other hand, the projection of more than ten years is already too far ahead.

There are already a lot of unseen factors that could affect the company in more than ten years.

Q.29: What is the discount rate used in Discounted Cash Flows?

The most common discount rate used in DCF is the Weighted Average Cost of Capital (WACC).

WACC is composed of Cost of Debt, Cost of Preferred Shares and Cost of Common Shares. As such, you will need to compute three items.

Q.30: How do you compute the terminal value in a Discounted Cash Flow?

Terminal value is the present value of all cash flows beyond the projected period. It is commonly computed using the Gordon growth model or using exit multiples.

Q.31: What is a mid-year convention in Discounted Cash Flows?

Midyear convention is DCF is used to reduce the effect of assuming cash flows are done at the end of the year.

Midyear convention assumes that cash flows are done in the middle of the year instead of at the end of the year.

As such, instead of using discount rates of 1 for the first year, 2 for the second year, etc., the analyst uses 1.5, 2.5 and so on and so forth.

Q.32: Pitch me a stock.

This is a sell-side pitch, meaning you want the person to buy the stocks. As such, you need to highlight the strengths so that he’ll buy them.

You’ll need to have the following in advance so that you can make a successful pitch during an interview:

• A company of your choice. You must completely agree that this company’s stock price is going up.
• An equity research report you made
• Valuations, Models, Ratios that will support your pitch

Q.33: Tell me about a company that you admire, and that makes you buy a significant amount of its stocks.

This is similar to “pitch me a stock”, so you’ll do the same.

Prepare in advance an equity research report you made along with all your justifications (valuations, etc.).

You might also want to highlight the strength of the management, the industry or the products of the company.

Q.34: Suppose you have USD$1M, how would you invest it?

This question has a very high chance of being asked, and so, you must be ready.

You can even prepare a portfolio mix through Excel, which you can show the interviewers.

Should you just include stocks? No. Include fixed income securities as well because your target is to diversify your assets.

Ideally, your portfolio mix is one that is considered quite risky. Why? Because you are a sophisticated investor given your advanced knowledge in financial instruments.

This kind of combination has stocks as the most significant percentage, followed by corporate bonds and then government bills.

Q.35: What is the difference between Fundamental Analysis and Technical Analysis?

Both are methods to analyze and project future prices of stocks.

Fundamental analysis uses extensive analysis of financial statements, non-financial data and external factors to determine the future price of the stock.

Technical analysis is merely analyzing the stock chart in an attempt to find trends and patterns that will determine the future value of the stock.

Now, below you will read about non-technical Equity Research Interview Questions

Non-Technical Research Analyst Interview Questions

Q.36: how much does money motivate you in your career.

The amount of money especially, the number of salaries motivate me in such a way that I can live comfortably with a higher wage, that’s why I went to finance, notably investment banking .

However, it’s not the one thing which composes the 100% of my motivation. In this early part of my career, I highly value having a company and a manager that will guide me and make me leap to the next level of my career .

Q.37: What keeps you motivated?

“New learnings and new experiences. I’m motivated that every I get to learn new things and that someday I’ll be respected equity research professional.”

Q.38: Do you consider leaving your job in the future to start your own company?

The employer wants you to hearsay NO to this question.

“I’m currently enjoying all that’s happening to my career right now.

I’m good with the fact that I am under the tutelage of experienced senior professionals.

At the same time, I am happy that I am under the wing of an established company.

I don’t have to think about the ‘operations’ side of things and focus only on equity research itself.

Q.39: In equity research, what is the difference between analysts and associate?

In a firm or department, analysts have higher positions than associates.

Analysts have the responsibility of checking and reviewing the work of associates, before submission to senior analysts or equity research head.

This is in contrast to investment banking where associates have higher roles than analysts.

Q.40: What skills are needed in equity research?

Q.41: what is a restricted list in equity research.

The restricted list is a list of shares that the research firm is not allowed to report based to avoid conflicts of interest.

The most common basis of this is when the investment banking arm of the same company is working on an IPO of that company.

Q.42: How do you explain equity research to a 5-year old kid?

Equity research is a career where adults advise adults about whether it’s good to buy a goodie.

That goodie is good to buy when after some months that goodie is going to be worth higher.

For example, a goodie now is worth $1.

The equity researcher will do his work and then realizes that the goodie will be $2 after six months.

He will then tell other adults to buy that goodie for $1 now and then sell it after six months for $2.

And so, the adults will get $2 instead of having just$1.

To gain a deeper understanding, read this step-by-step guide on equity research career .

Q.43: What is the difference between sell-side and buy-side equity research?

Sell-side and equity side in research refers to the motives of clients for buying stocks.

Sell-side firms buy and sell shares to earn from fluctuations in stock prices.

Sell-side firms include investment banks , commercial banks, stockbrokers, market makers, and private firms.

Buy-side entities buy stocks to add to their investments. They earn by growing that company and then exiting when the share prices are already favourable.

Buy-side firms include asset management firms, hedge funds , institutional and retail investors.

Q.44: Why Equity Research and Are you prepared for stressful work?

Before I decided to be an equity researcher, I already knew that this is a very tough job.

I know for sure that there would be long working hours and various deadlines throughout the day.

To get me ready for it, I improved my skills so that I can work even faster.

For example, I memorized a lot of Excel shortcuts so that I can save time. I also make sure that I know the valuation methods by heart.

I also practised writing reports so that it would be easier for me when I’m already on the job.

I hope you’re enjoying this list of Equity Research Interview Questions?

Q.45: What does an Equity Research associate do?

They usually maintain files of companies under the sector they are assigned to.

They provide a fundamental analysis of those companies consistently. They develop financial models, industry analysis and sector databases.

They must always be in-the-loop in terms of news related to the industries and sectors they cover. This is very crucial as it is part of their fundamental analysis.

They assist the heads in publications of research reports.

Q.46: What does an Equity research Head do?

The head of equity research provides support and leadership to achieve goals and strategies set by the brokerage firm.

They ensure that all pricing is estimated based on best practices.

They supervise the publication of research reports, as well as recommendations for both internal and external use.

They also usually talk with other brokerage firms, research consultants, equity research analyst, portfolio manager, or fund managers.

Q.47:Some firms do have Senior Analysts, how do they support the Equity Research Head?

They coordinate research reports before releasing for publication.

As such, they provide notes, additional texts, comments, reports or edits to the research reports submitted by associates.

They are also the ones who coordinate or regulate the distribution of research products, ensuring that all legal or company policies are being followed.

Because of this, they must have a high level of knowledge of regulatory functions together with their finance knowledge.

Q.48: What is MiFID II?

What is MiFID II?

MiFID 2 (Markets Financial Instruments Derivative 2) is legislation by the European Union (EU) that will increase the integrity of European markets, protect investors from biased research reports and improve the competitiveness of the financial markets.

MiFID II affects different financial markets such as stock, fixed income, currency, futures and forwards and derivatives markets.

Q.49: How does MiFID II affect the equity research profession?

Like others, this question is also essential, so we included in our list of Equity Research Interview Questions

Among the provisions of MiFID II is the disallowance of giving free equity research reports.

Such reports are usually, technically, are paid as part of the brokerage fee. As a result, firms can only get paid if they can broker stocks.

There could be a tendency to create the report in such a way that it will entice the reader to buy.

This bias is what MiFID II is trying to avoid.

As such, research reports and brokerage fees would now be unbundled, meaning, paid separately.

Because of this change, this could significantly lower the number of clients of equity research, as a lot would not opt to pay for the reports. Some equity research firms are planning to cut employees.

There would be less working opportunities in equity research.

On the other hand, it could improve equity research reports because of the unbundling of services.

Q.50: What are some soft skills in Equity research that you think you’ll significantly need?

• Report Writing Skills
• Accounting Skills
• Excel Skills
• Financial Valuation and Modeling

I hope you find this guide helpful about Equity Research Interview Questions that includes 50  (Technical as well as Non-Technical equity research interview questions with complete answers).

• Download BIWS Course sample videos here .
• Read Students’ Testimonials here .

Avadhut is the Founder of FinanceWalk. He enjoys writing on Finance Careers topics. Check our Financial Modeling Courses . Contact us for  Career Coaching based on Your Inner GPS.

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ContentsTechnical Equity Research Interview Questions and AnswersQ.1: What is contained in an Equity Research Report?Q.2: What is the earnings season?Q.3: Describe the Equity Research HierarchyQ.4: What is the difference between Enterprise Value and Equity Value?Q.5: What are the standard ratios used for company analysis?Q.6: What is Financial modeling in Financial Analysis?Q.7: How do you do a Discounted Cash Flow?Q.8: How do you do Comparable Companies Analysis?Q.9: What is Free Cash Flows?Q.10: What is Free Cash Flow to Equity?Q.11: What is ...

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Equity Research Interview Questions

The most important interview questions for Equity Researchs, and how to answer them

Getting Started as a Equity Research

• What is a Equity Research
• How to Become
• Certifications
• Tools & Software
• LinkedIn Guide
• Interview Questions
• Work-Life Balance
• Professional Goals
• Resume Examples
• Cover Letter Examples

Interviewing as a Equity Research

Types of questions to expect in a equity research interview, technical questions, market insight and industry-specific questions, modeling and forecasting questions, behavioral questions, stock pitch and investment thesis questions, current events and news analysis questions, preparing for a equity research interview, how to do interview prep as an equity research analyst.

• Understand the Firm and Its Coverage Universe: Research the firm's focus areas, the sectors and companies it covers, and its investment philosophy. Knowing the firm's top picks and recent research reports can provide valuable context for your discussions.
• Master Financial Modeling and Valuation: Be prepared to discuss and demonstrate your proficiency in financial modeling, DCF, comparable company analysis, and precedent transactions. You may be tested on these skills during the interview process.
• Stay Current with Market Trends: Have a solid grasp of current events and understand how they affect the markets and your sector of interest. Be ready to discuss recent news and its potential impact on the stocks you may be covering.
• Prepare to Pitch a Stock: You may be asked to pitch a stock during your interview. Choose a company you are familiar with, prepare a thorough analysis, and be ready to defend your investment thesis with confidence.
• Analyze the Firm's Recent Reports: Reviewing the firm's recent publications will give you insight into their reporting style and the metrics they emphasize. This can guide you in aligning your approach to their standards.
• Practice Behavioral and Technical Questions: Be ready to answer behavioral questions that explore your past experiences and work ethic. Also, prepare for technical questions that test your industry knowledge and analytical skills.
• Develop Insightful Questions: Prepare thoughtful questions that demonstrate your interest in the role and your understanding of the equity research field. This can also help you assess if the firm's culture and values align with your career goals.
• Engage in Mock Interviews: Practice with mentors, peers, or through mock interviews online. This will help you refine your delivery, manage interview nerves, and receive constructive feedback on your performance.

Stay Organized with Interview Tracking

Equity Research Interview Questions and Answers

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Start Your Equity Research Career with Teal

15 Equity Research Analyst Interview Questions (With Example Answers)

It's important to prepare for an interview in order to improve your chances of getting the job. Researching questions beforehand can help you give better answers during the interview. Most interviews will include questions about your personality, qualifications, experience and how well you would fit the job. In this article, we review examples of various equity research analyst interview questions and sample answers to some of the most common questions.

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Common Equity Research Analyst Interview Questions

How do you think about and analyze equity investments, what is your experience with conducting research on companies and industries, how do you go about constructing a financial model for a company, what are your thoughts on valuation methods, how do you think about risk when making investment decisions, what have been some of your most successful investments, what have been some of your biggest losses, what do you think is the most important thing to know in order to be successful in equity research, how do you stay up-to-date on developments in your field, who are some of the most respected analysts in your field, what do you think sets your research apart from that of other analysts, what do you think is the most important factor to consider when making investment decisions, what are your thoughts on market timing, what are your thoughts on active vs. passive investing, what do you think is the most important thing for investors to remember when making investment decisions.

An interviewer would ask "How do you think about and analyze equity investments?" to a/an Equity Research Analyst in order to gauge the analyst's investment philosophy and process. It is important to know an analyst's investment philosophy and process because it will give you insight into how the analyst makes investment decisions, what type of investments the analyst is likely to recommend, and how the analyst's recommendations might perform over time.

Example: “ I think about and analyze equity investments by looking at a company's financial statements, its competitive landscape, and its overall business strategy. I also look at analyst reports and other research to get a sense of where a company is headed. ”

The interviewer is asking this question to gauge the analyst's ability to conduct research on companies and industries. This is important because equity research analysts need to be able to understand a company's financials, its competitive landscape, and the trends affecting its industry in order to make recommendations to their clients.

An analyst who is not able to conduct thorough research on companies and industries will not be able to provide accurate and actionable recommendations. This could lead to losses for the analyst's clients and damage the analyst's reputation.

Example: “ I have experience conducting research on companies and industries. I have worked as an equity research analyst for a few years and have gained a lot of knowledge about the process. I know how to use different sources of information to gather data and then analyze it to form conclusions. I am also familiar with financial modeling and valuation techniques. ”

An interviewer would ask "How do you go about constructing a financial model for a company?" to an equity research analyst to understand how the analyst creates a model to value a company. It is important for the interviewer to understand the analyst's process because the model is only as good as the inputs and assumptions used. If the analyst has a sound process, it is more likely that the model will be accurate.

Example: “ There are a few steps that go into constructing a financial model for a company. The first step is to gather data on the company, including historical financial data, if available. This data can be gathered from the company's financial statements, SEC filings, and other public sources. Next, you will need to create assumptions about the future of the company. This includes estimating things like revenue growth, expense growth, and capital expenditure requirements. Once you have your assumptions in place, you can begin building out the model. This typically involves creating a pro forma income statement, balance sheet, and cash flow statement. These statements can then be used to generate key metrics and ratios that can be analyzed to assess the financial health of the company. ”

Valuation methods are important to equity research analysts because they provide a framework for estimating the intrinsic value of a security. This is important because it allows analysts to make recommendations to buy or sell securities based on whether they are trading at a discount or premium to their intrinsic value. There are many different valuation methods, and each has its own strengths and weaknesses. As such, it is important for analysts to be familiar with a variety of methods in order to make the most informed recommendations possible.

Example: “ There are a number of different valuation methods that equity research analysts use to estimate the value of a company or security. Some common methods include discounted cash flow analysis, relative valuation, and intrinsic value estimation. Discounted cash flow analysis (DCF) is a method of valuing a company or security based on its future cash flows. The idea behind DCF is that the value of an asset is the present value of all its future cash flows. In order to estimate the present value of future cash flows, DCF uses a discount rate. This discount rate represents the opportunity cost of investing in the company or security, and is typically based on the risk-free rate plus a risk premium. Relative valuation is a method of valuing a company or security by comparing it to similar companies or securities. Relative valuation methods include price-to-earnings (P/E) ratios, price-to-book (P/B) ratios, and enterprise value-to-EBITDA (EV/EBITDA) ratios. These ratios compare the company or security being valued to other companies or securities in the same industry, with the idea being that similar companies or securities should have similar values. Intrinsic value estimation is ”

There are a few reasons why an interviewer might ask this question to an equity research analyst. Firstly, it is important to understand how an analyst thinks about risk when making investment decisions because it can impact the type of recommendations they make to clients. Secondly, it can also impact the performance of a portfolio if an analyst is not appropriately managing risk. Finally, this question allows the interviewer to gauge an analyst's level of risk tolerance and understanding of risk management techniques.

Example: “ There are a number of different ways to think about risk when making investment decisions. One way is to consider the potential downside of an investment, and compare that to the potential upside. Another way is to think about the probability of different outcomes occurring, and how much each outcome would impact your portfolio. When it comes to downside risk, one important thing to consider is the worst-case scenario for an investment. What could happen that would cause the investment to lose value? How likely is it that this scenario will occur? And how much money would you stand to lose if it did occur? It's also important to think about the probability of different outcomes occurring. For example, what is the chance that an investment will go up in value? What is the chance that it will go down in value? And what is the chance that it will stay flat? Different investors have different tolerance levels for risk. Some investors are willing to take on more risk in exchange for the potential of higher returns, while others prefer to play it safe and focus on preserving their capital. Ultimately, it's up to each individual investor to decide how much risk they're comfortable taking on. ”

An interviewer might ask an equity research analyst about their most successful investments in order to get a sense of their investment strategy and how they generate returns. This question can also be used to gauge an analyst's level of experience and their ability to generate alpha (excess return) in their investments.

Example: “ Some of my most successful investments have been in technology companies, particularly those that are leaders in their respective fields. I have also had success with investments in healthcare and biotechnology companies. In general, I have found that companies with strong fundamentals and a solid track record of growth tend to be the most successful investments. ”

This question is designed to test an analyst's ability to handle setbacks and to learn from their losses. It is important for an equity research analyst to be able to identify their own mistakes and to learn from them in order to avoid repeating them in the future.

Example: “ Some of my biggest losses have been in the stock market. I have also lost money in investments in real estate and other businesses. However, I have learned from my mistakes and I am now more careful with my money. ”

There are a few key things that equity research analysts need to know in order to be successful. First, they need to have a strong understanding of the financial markets and how they work. They also need to be able to analyze companies' financial statements and identify trends. Additionally, equity research analysts need to be able to effectively communicate their findings to clients and potential investors.

The most important thing for an equity research analyst to know is how to effectively communicate their findings to clients and potential investors. This is important because equity research is all about providing analysis and recommendations to investors in order to help them make informed decisions. If an analyst cannot communicate their findings clearly, investors will not be able to understand and use the information properly.

Another important thing for an equity research analyst to know is how to effectively use financial analysis tools. This is important because analysts need to be able to identify trends and make recommendations based on their findings. If an analyst does not have strong financial analysis skills, they will not be able to provide accurate and useful information to investors.

Lastly, it is important for an equity research analyst to have a strong understanding of the markets. This is important because analysts need to be able to identify opportunities and make recommendations based on their findings. If an analyst does not have a strong understanding of the markets, they will not be able to provide accurate and useful information to investors.

Example: “ There are a few key things that are important to know in order to be successful in equity research. First, it is important to have a strong understanding of financial accounting and financial statements. This will allow you to understand a company's financial position and performance, and identify any red flags that may be present. Second, it is important to have a strong understanding of valuation methods and be able to value a company using various techniques. This will allow you to determine whether a stock is undervalued or overvalued, and make investment recommendations accordingly. Finally, it is important to be able to effectively communicate your research findings and recommendations to clients or investors. This includes being able to clearly articulate your investment thesis and explain your rationale behind it. ”

The interviewer is trying to gauge the analyst's commitment to keeping up with changes in their field. This is important because the equity research analyst needs to have a good understanding of the current landscape in order to make accurate predictions about the future performance of a company's stock.

Example: “ There are a few different ways that I stay up-to-date on developments in my field. I read industry-specific news sources and publications, attend relevant conferences and seminars, and network with other professionals in my field. Additionally, I make it a point to keep up with the latest research in my field by reading academic journals and papers. By staying informed of new developments, I am able to provide my clients with the most accurate and up-to-date information possible. ”

The interviewer is asking this question to gain insight into the equity research analyst's network and the sources that he or she uses to generate investment ideas. It is important for the interviewer to understand the equity research analyst's process for generating investment ideas, and this question helps to shed light on that process. Additionally, this question allows the interviewer to gauge the equity research analyst's level of expertise in the field.

Example: “ There are many respected analysts in the field of equity research, but some of the most highly respected ones include: 1. Jim Cramer - He is a former hedge fund manager and now hosts the popular financial news show "Mad Money" on CNBC. He is known for his in-depth analysis and stock picking skills. 2. Peter Schiff - He is the CEO and Chief Economist of Euro Pacific Capital, Inc. He is a well-known financial commentator and has accurately predicted many major economic events, such as the housing market crash in 2008. 3. Jeremy Siegel - He is a professor at the University of Pennsylvania's Wharton School of Business. He is one of the leading experts on stock market history and has written several books on the subject, including "Stocks for the Long Run." 4. Andrew Smithers - He is the founder of Smithers & Co., an economic research firm. He is a renowned expert on valuation and has written extensively on the topic, including his book "Valuing Wall Street: Protecting Wealth in Turbulent Markets." ”

There are a few reasons why an interviewer might ask this question:

1. To gauge the analyst's confidence in their research. If the analyst is unable to articulate what sets their research apart, it may be an indication that they are not as confident in their abilities as the interviewer would like.

2. To see if the analyst is familiar with the competition. It is important for an equity research analyst to be aware of what other analysts are doing in order to make sure that their research is truly unique.

3. To get a sense of the analyst's analytical skills. In order to answer this question well, the analyst must be able to critically evaluate their own work and compare it to that of others. This ability to compare and contrast is an important skill for an analyst to have.

Example: “ There are a number of things that can set my research apart from that of other analysts. First, I have a strong understanding of the companies and industries that I cover. I'm always up-to-date on the latest news and developments affecting these companies and industries, and I have a deep understanding of the underlying trends driving them. This allows me to provide insights and perspectives that other analysts may not be able to provide. Second, I'm very disciplined in the way that I approach my research. I have a rigorous process that I follow in order to ensure that my analysis is as accurate and objective as possible. This process includes conducting extensive primary and secondary research, analyzing data from multiple sources, and speaking with industry experts. Third, I have a proven track record of being able to identify companies that are poised for success. Over the years, I've developed a keen eye for spotting companies with strong fundamentals and attractive growth prospects. As a result, my recommendations have outperformed the market by a wide margin. In sum, these are just a few of the things that sets my research apart from that of other analysts. ”

The most important factor to consider when making investment decisions is the risk-return tradeoff. This is the balancing of the potential return of an investment against the risks involved. Higher potential returns are usually associated with higher risks. It is important to consider this tradeoff when making investment decisions because it can help you choose investments that are right for your goals and risk tolerance.

Example: “ There are many factors to consider when making investment decisions, but the most important factor is likely to be the expected return on investment. Other important factors could include the level of risk involved, the liquidity of the investment, and the time horizon over which the investment is expected to generate returns. ”

There are a few reasons an interviewer might ask an equity research analyst about their thoughts on market timing. Firstly, it is important to know how an analyst views the market in order to gauge their investment recommendations. Secondly, market timing is a difficult skill to master, and if an analyst is able to do it successfully, it can add a lot of value to their research. Finally, market timing is a controversial topic, and an analyst's views on it can reveal a lot about their investment philosophy.

Example: “ There is no perfect answer to market timing, as there are a number of factors to consider and no one can predict the future with 100% accuracy. However, there are a few general principles that can be followed in order to improve your chances of success. 1. Have a long-term perspective: One of the biggest mistakes investors make is trying to time the market short-term. This is often driven by fear or greed, which are two emotions that should be avoided when making investment decisions. Instead, focus on your long-term goals and objectives, and don’t let short-term fluctuations in the market derail your plans. 2. Consider your risk tolerance: Another important factor to consider is your risk tolerance. If you are investing for retirement, for example, you may have a longer time horizon and be able to tolerate more volatility in the markets. On the other hand, if you are investing for a shorter-term goal, such as a child’s education, you may need to be more conservative in your approach. 3. Have a diversified portfolio: Diversification is key to any investment strategy, and this is especially true when it comes to market timing. By spreading your investments across different asset classes, ”

There are a few reasons why an interviewer might ask this question to an equity research analyst. First, it is a way to gauge the analyst's investment philosophy and approach. Second, it is a way to see if the analyst is familiar with the different types of investment strategies. Finally, it is a way to get the analyst's thoughts on which type of strategy is more effective.

Active investing is a strategy where the investor takes a more hands-on approach, trying to beat the market by picking individual stocks. Passive investing is a strategy where the investor tries to match the market, typically by investing in index funds.

There are pros and cons to both approaches. Active investing can provide higher returns if the investor is successful in picking stocks, but it also carries more risk. Passive investing is more predictable but typically provides lower returns.

The answer to this question will depend on the analyst's personal opinion. Some analysts may believe that active investing is more effective, while others may believe that passive investing is a better strategy. There is no right or wrong answer, but it is important for the analyst to be able to explain their reasoning.

Example: “ There are pros and cons to both active and passive investing. Active investing involves trying to beat the market by picking stocks that will outperform the overall market. Passive investing involves investing in a basket of stocks that track a market index, such as the S&P 500. Active investors argue that they can add value by carefully picking stocks that are undervalued by the market and selling those that are overvalued. Passive investors counter that it is very difficult to consistently pick stocks that will outperform the market, and that the fees charged by active managers eat into any potential gains. Both approaches have merits and it really depends on the investor’s goals and preferences as to which approach makes more sense. ”

There are a few reasons why an interviewer might ask this question to an equity research analyst. First, it allows the interviewer to gauge the analyst's understanding of the investment process and what factors should be considered when making investment decisions. Second, it gives the interviewer insight into the analyst's thought process and how they approach investment analysis. Finally, it allows the interviewer to see if the analyst is able to articulate their thoughts clearly and concisely.

The most important thing for investors to remember when making investment decisions is to think long-term. Too often, investors get caught up in the short-term fluctuations of the stock market and make decisions based on emotion rather than logic. This can lead to poor investment decisions that can cost them a lot of money in the long run. By thinking long-term, investors can avoid these mistakes and give themselves a better chance at earning a profit on their investments.

Example: “ There are a few things that investors should remember when making investment decisions: 1. Diversification is key - don't put all your eggs in one basket. 2. Consider your risk tolerance - how much risk are you willing to take on? 3. Do your homework - research the investments you're considering thoroughly. 4. Have a plan - know what your goals are and stick to your plan. 5. Be patient - don't try to time the market, but rather invest for the long term. ”

Related Interview Questions

• Equity Research Associate
• Equity Analyst
• Private Equity Analyst
• Research Analyst
• Market Research Analyst
• Marketing Research Analyst

Top 50 Equity Research Interview Questions and Answers

In the world of finance, Equity Research holds a vital role in providing insights into stock market trends and investment opportunities. As you prepare for your Equity Research interviews, it’s crucial to understand the industry’s dynamics and be well-prepared to answer a range of questions. This guide aims to equip you not only with answers but also with a profound understanding of Equity Research principles. By mastering these questions, you’ll not only confidently navigate interviews but also enhance your ability to analyze stocks effectively, identify investment potentials, and contribute meaningfully to the financial sector.

Equity Research Basics

Question 1: What is the primary purpose of equity research? A) Analyzing real estate markets. B) Recommending fashion trends. C) Providing insights to investors about company performance. D) Predicting weather patterns.

Answer: C) Providing insights to investors about company performance. Explanation: Equity research aims to analyze companies’ financial performance and provide valuable insights and recommendations to investors, helping them make informed decisions about investing in stocks.

Question 2: What is the key purpose of an equity research report? A) Sharing personal opinions. B) Promoting company products. C) Informing investors about company analysis and recommendations. D) Discussing political ideologies.

Answer: C) Informing investors about company analysis and recommendations. Explanation: An equity research report is designed to provide investors with a comprehensive analysis of a company’s financials, industry trends, and investment recommendations, enabling them to make educated investment decisions.

Question 3: What is the role of a sell-side analyst? A) Managing investment portfolios. B) Providing research to clients and generating trading commissions. C) Handling customer service inquiries. D) Analyzing environmental impact reports.

Answer: B) Providing research to clients and generating trading commissions. Explanation: A sell-side analyst works for brokerage firms or investment banks, offering research and analysis to clients. This research can lead to trading activity, generating commissions for the firm.

Question 4: What concept is assessed to determine a company’s competitive advantage? A) Market share analysis. B) Profit margin ratio. C) Competitive disadvantage. D) Moat analysis.

Answer: D) Moat analysis. Explanation: A company’s competitive advantage, often referred to as its “moat,” is evaluated to understand how well it can maintain profitability and fend off competitors. This involves analyzing factors that give the company a lasting edge.

Question 5: What does DCF stand for in equity research? A) Discounted Company Finance. B) Dynamic Cash Flow. C) Discounted Cash Flow. D) Diversified Capital Funds.

Answer: C) Discounted Cash Flow. Explanation: DCF stands for “Discounted Cash Flow.” It’s a valuation method used to estimate the present value of a company’s future cash flows, incorporating the time value of money.

Financial Analysis and Ratios

Question 1: Which ratio assesses a company’s short-term liquidity? A) Debt-to-Equity ratio. B) Price-to-Earnings ratio. C) Return on Equity ratio. D) Current ratio.

Answer: D) Current ratio. Explanation: The current ratio measures a company’s ability to cover short-term liabilities with its short-term assets, indicating its liquidity and ability to meet immediate obligations.

Question 2: What does the P/E ratio stand for? A) Profit to Expense ratio. B) Price to Earnings ratio. C) Portfolio to Equity ratio. D) Performance to Efficiency ratio.

Answer: B) Price to Earnings ratio. Explanation: The P/E ratio, or the Price to Earnings ratio, reflects the market price of a share relative to its earnings per share (EPS). It’s used to assess a company’s valuation compared to its earnings.

Question 3: What does the Debt-to-Equity ratio measure? A) Company profitability. B) Short-term liquidity. C) Financial leverage. D) Market capitalization.

Answer: C) Financial leverage. Explanation: The Debt-to-Equity ratio compares a company’s total debt to its shareholder equity, indicating the level of financial leverage it employs.

Question 4: What does ROE stand for in finance? A) Return on Expenses. B) Revenue Over Equity. C) Return on Efficiency. D) Return on Equity.

Answer: D) Return on Equity. Explanation: ROE stands for “Return on Equity.” It measures a company’s profitability by calculating how much profit it generates relative to the equity invested by shareholders.

Question 5: What does the EBIT margin indicate? A) Operating profitability. B) Total asset turnover. C) Debt coverage ratio. D) Inventory turnover.

Answer: A) Operating profitability. Explanation: The EBIT margin, or Earnings Before Interest and Taxes margin, represents a company’s operating profitability by indicating how much operating earnings it generates for each dollar of revenue.

Valuation Methods

Question 1: What is the purpose of a Discount Rate in valuation? A) To reduce future cash flows. B) To increase the present value of cash flows. C) To discount future cash flows to present value. D) To calculate tax liabilities.

Answer: C) To discount future cash flows to present value. Explanation: The Discount Rate is used to discount future cash flows back to their present value, considering the time value of money and risk factors.

Question 2: What is the primary difference between DCF and CCA? A) DCF values companies based on comparables. B) CCA is forward-looking, while DCF is relative. C) CCA uses projected cash flows, while DCF uses valuation multiples. D) DCF is a relative valuation method.

Answer: B) CCA is forward-looking, while DCF is relative. Explanation: DCF (Discounted Cash Flow) is based on projected cash flows and is forward-looking, while CCA (Comparable Company Analysis) uses valuation multiples of similar companies to assess valuation.

Question 3: How can you value a company with negative cash flows? A) Use the DCF method only. B) Use the CCA method only. C) Use both DCF and CCA methods. D) You cannot value a company with negative cash flows.

Answer: C) Use both DCF and CCA methods. Explanation: Valuing a company with negative cash flows can involve using both DCF and CCA methods, and potentially considering future positive cash flows once the company becomes profitable.

Industry Analysis

Question 1: What is Porter’s Five Forces framework used for? A) Predicting stock market trends. B) Analyzing industry competition and attractiveness. C) Assessing consumer preferences. D) Evaluating political stability.

Answer: B) Analyzing industry competition and attractiveness. Explanation: Porter’s Five Forces framework is used to analyze the competitive forces within an industry, helping assess its attractiveness and the potential profitability for companies within it.

Question 2: Which stage of the industry life cycle involves rapid growth? A) Introduction. B) Maturity. C) Decline. D) Growth.

Answer: D) Growth. Explanation: The Growth stage of the industry life cycle is characterized by rapid expansion and increasing demand for products or services within the industry.

Domain 5 – Economic and Market Analysis

Question 1: How can macroeconomic factors impact a company’s performance? A) They have no effect on a company’s performance. B) They influence costs and profitability. C) They only impact customer service. D) They affect stock market holidays.

Answer: B) They influence costs and profitability. Explanation: Macroeconomic factors such as interest rates, inflation, and GDP growth can impact a company’s costs, revenue, and overall profitability.

Question 2: What characterizes a bear market? A) Rising stock prices and optimism. B) Falling stock prices and pessimism. C) Stable stock prices and caution. D) Fluctuating stock prices and uncertainty.

Answer: B) Falling stock prices and pessimism. Explanation: A bear market is marked by a prolonged period of falling stock prices and negative investor sentiment.

Financial Statements and Analysis

Question 1: What does the Income Statement primarily show? A) Cash flow for the period. B) Assets and liabilities at a specific point in time. C) Financial position at the end of the year. D) Revenues, expenses, and net income for a specific period.

Answer: D) Revenues, expenses, and net income for a specific period. Explanation: The Income Statement, also known as the Profit and Loss Statement, displays a company’s revenues, expenses, and net income for a specific period, indicating its financial performance.

Question 2: What is the purpose of the Balance Sheet? A) To show revenues and expenses. B) To display changes in equity. C) To summarize cash flows. D) To present assets, liabilities, and equity at a specific point in time.

Answer: D) To present assets, liabilities, and equity at a specific point in time. Explanation: The Balance Sheet provides a snapshot of a company’s financial position by listing its assets, liabilities, and equity at a specific moment, helping assess its financial health.

Question 3: How does the Cash Flow Statement differ from the Income Statement? A) The Cash Flow Statement shows cash inflows and outflows, while the Income Statement shows net income. B) The Cash Flow Statement displays net income, while the Income Statement shows cash flows. C) The Cash Flow Statement focuses on expenses, while the Income Statement focuses on revenues. D) The Cash Flow Statement summarizes assets and liabilities, while the Income Statement focuses on equity.

Answer: A) The Cash Flow Statement shows cash inflows and outflows, while the Income Statement shows net income. Explanation: The Cash Flow Statement details cash inflows and outflows over a period, including operating, investing, and financing activities. The Income Statement, on the other hand, primarily shows revenues, expenses, and net income.

Question 4: What does the Operating Cash Flow ratio assess? A) Company profitability. B) Liquidity and ability to meet short-term obligations. C) Capital structure. D) Asset turnover.

Answer: B) Liquidity and ability to meet short-term obligations. Explanation: The Operating Cash Flow ratio evaluates a company’s ability to generate enough cash from its operations to meet short-term obligations, indicating its liquidity.

Question 5: What is the significance of the Gross Profit Margin? A) It indicates a company’s ability to cover interest payments. B) It shows the proportion of net income to total revenue. C) It reflects the proportion of gross profit to total revenue. D) It demonstrates a company’s ability to cover operating expenses.

Answer: C) It reflects the proportion of gross profit to total revenue. Explanation: The Gross Profit Margin indicates the percentage of gross profit relative to total revenue, highlighting the portion of revenue that covers production costs.

Risk and Return

Question 1: How is systematic risk also known? A) Non-diversifiable risk. B) Unsystematic risk. C) Unique risk. D) Specific risk.

Answer: A) Non-diversifiable risk. Explanation: Systematic risk, also known as non-diversifiable risk, refers to risks that affect the entire market and cannot be eliminated through diversification.

Question 2: Which type of risk can be reduced through diversification? A) Systematic risk. B) Market risk. C) Unsystematic risk. D) Interest rate risk.

Answer: C) Unsystematic risk. Explanation: Unsystematic risk, also known as specific risk or diversifiable risk, can be reduced through diversification by holding a diversified portfolio of assets.

Question 3: How is the risk-free rate typically determined? A) Based on the average market return. B) Set by government policies. C) Calculated using the company’s cost of equity. D) Determined by industry benchmarks.

Answer: B) Set by government policies. Explanation: The risk-free rate is typically determined by government policies, often represented by the yield on a government bond with minimal default risk.

Question 4: What does the Capital Asset Pricing Model (CAPM) help determine? A) Market risk premium. B) Unsystematic risk. C) Interest rates. D) Currency exchange rates.

Answer: A) Market risk premium. Explanation: The Capital Asset Pricing Model (CAPM) helps determine the market risk premium by analyzing the relationship between an asset’s expected return and its risk relative to the market.

Question 5: Which concept suggests that higher returns are expected for higher levels of risk? A) Efficient market hypothesis. B) Risk-free rate. C) Time value of money. D) Risk-return trade-off.

Answer: D) Risk-return trade-off. Explanation: The risk-return trade-off states that investors expect higher returns for taking on higher levels of risk. This relationship helps guide investment decisions.

Equity Research Interview Questions : – Portfolio Management

Question 1: What is diversification in portfolio management? A) Focusing investments on a single asset. B) Reducing investment risk by holding a variety of assets. C) Investing solely in government bonds. D) Maximizing returns without considering risk.

Answer: B) Reducing investment risk by holding a variety of assets. Explanation: Diversification involves spreading investments across various assets to reduce overall risk. It aims to mitigate the impact of poor performance of any single asset.

Question 2: How does the Modern Portfolio Theory (MPT) contribute to portfolio construction? A) By maximizing returns regardless of risk. B) By minimizing returns and risk. C) By balancing risk and return to achieve optimal portfolios. D) By focusing on individual stock performance.

Answer: C) By balancing risk and return to achieve optimal portfolios. Explanation: Modern Portfolio Theory (MPT) helps construct portfolios that balance risk and return to achieve optimal levels of both, considering the correlation among assets.

Question 3: What does the Sharpe ratio measure? A) Return on assets. B) Total return. C) Risk-adjusted return. D) Market risk premium.

Answer: C) Risk-adjusted return. Explanation: The Sharpe ratio measures the risk-adjusted return of an investment, indicating how much excess return an investor receives for the risk taken.

Question 4: What is the primary goal of an index fund? A) To outperform the market. B) To achieve maximum capital growth. C) To replicate the performance of a specific market index. D) To generate high dividend income.

Answer: C) To replicate the performance of a specific market index. Explanation: An index fund aims to mirror the performance of a specific market index, providing investors with returns that closely match the index’s performance.

Question 5: What is an advantage of a passive investment strategy? A) It aims to outperform the market. B) It requires constant monitoring and adjustment. C) It typically incurs higher fees. D) It tends to have lower fees and requires less active management.

Answer: D) It tends to have lower fees and requires less active management. Explanation: A passive investment strategy, such as investing in index funds, generally has lower fees and requires less active management compared to actively managed strategies.

Equity Research Interview Questions: Options and Derivatives

Question 1: What is an option contract in finance? A) A contract to buy or sell a stock at a fixed price. B) A contract to lend money to a company. C) A contract to purchase government bonds. D) A contract to purchase real estate.

Answer: A) A contract to buy or sell a stock at a fixed price. Explanation: An option contract gives the holder the right, but not the obligation, to buy or sell an underlying asset, such as a stock, at a predetermined price within a specified time frame.

Question 2: What is a call option? A) An option to sell an asset at a specified price. B) An option to buy an asset at a specified price. C) An option to lend money to a company. D) An option to purchase real estate.

Answer: B) An option to buy an asset at a specified price. Explanation: A call option is a contract that gives the holder the right to buy an underlying asset at a predetermined price (the strike price) within a specified time period.

Question 3: What is a put option? A) An option to sell an asset at a specified price. B) An option to buy an asset at a specified price. C) An option to lend money to a company. D) An option to purchase real estate.

Answer: A) An option to sell an asset at a specified price. Explanation: A put option is a contract that gives the holder the right to sell an underlying asset at a predetermined price (the strike price) within a specified time period.

Question 4: How is the premium of an option determined? A) By the current price of the underlying asset. B) By the strike price of the option. C) By the option’s expiration date. D) By market demand and supply factors.

Answer: D) By market demand and supply factors. Explanation: The premium of an option is determined by market factors such as supply, demand, the underlying asset’s price, volatility, and time to expiration.

Equity Research Interview Questions: Final Words

To sum up, the realm of equity research presents a dynamic landscape that demands a comprehensive understanding of financial markets and analytical prowess. This compilation of frequently asked interview questions and their detailed answers aims to equip aspiring equity research candidates, like yourself, with the insights and preparation needed to confidently navigate these interviews.

However, it’s crucial to recognize that success in equity research interviews extends beyond rote memorization. A firm grasp of fundamental concepts, such as financial statement analysis, industry trends, and valuation methodologies, serves as the bedrock upon which your interview performance is built. This collection of questions covers a wide spectrum of topics, spanning from equity research basics to more intricate valuation techniques, enabling you to establish a robust knowledge foundation.

Remember, an interview isn’t solely an exhibition of your factual knowledge; it’s also a platform to showcase your critical thinking and problem-solving abilities. Embrace these questions as catalysts for honing your analytical skills and articulating your insights clearly and convincingly. Furthermore, staying attuned to real-world financial developments and embracing a proactive approach to learning will undoubtedly enhance your preparation and adaptability in the dynamic field of equity research.

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Equity Research - Interview Questions

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Expertise: Private Equity | Investment Banking

Please check out WSO's free Equity Research Interview page for an in-depth guide to acing your ER interview.

Positions in equity research are available for seasoned professionals and new hires. New hires out of school will start as research associates and move up the chain to a research analyst after gaining experience. Before any of this though, you must get the interview and show the interviewers you have what it takes. The best way to prepare for these interviews is to follow the markers, learn the common questions asked and practice tirelessly.

Equity Research Questions - Fit/Behavioral

• Tell me about yourself/Walk me through your resume
• Why equity research?
• Why this firm?
• Potential 5-year plan
• Tell me about a time when… faced a challenge, worked on a team, etc.

Prepare a handful of anecdotes that you can use and mold to answer a variety of questions. Here’s a good tip from @esbanker", a private equity analyst, of things to keep in mind when answering fit questions:

esbanker - Private Equity Analyst: Some key words that should guide your examples for fit questions in Equity Research - analytical, detail oriented, excellent writing skills, strong verbal communication, at ease with financial modelling. Some people tend to think that Equity Research Analysts are mainly 'bookish', but i'd argue that teamwork still plays an important role, especially during earnings season. arguably the most important fit question is why do you want to do equity research as opposed to something more "prestigious" (IB) or "exciting" (S&T).

Techincal Equity Research Questions

Unlike ib interviews, equity research technical questions tend to focus more on actual investing and figuring out your thought processes, but it’s best to be prepared for everything.

• Pitch me a stock
• What do you think about X industry?
• What’s your investment philosophy?
• If you had $X to invest, what would you do with it?
• Why might a tech company have a higher PE than a grocery retailer?
• Tell me when you would see a company with a high EV / EBITDA multiple but a low PE multiple.
• What’s beta?
• Why would you unlever beta?
• Enterprise value vs. equity value?
• Can equity value be larger than enterprise value?
• Know the major valuation methodologies
• Why do some like Warren Buffett prefer EBIT multiples to EBITDA ?
• How is valuing a resource company (e.g. oil and gas) different from valuing a standard company?
• What do you use for the discount rate in a DCF valuation?
• How do you calculate the terminal value in a DCF valuation?
• Market questions

Answers to most of these can be found online, but for things related to the market it’s just a matter of staying up to date. Read the front cover of the WSJ journal and other sources like the FT , subscribe to newsletters you can get daily through email, and always be looking out for new investment ideas that you can bring up in an interview if needed.

Equity Research Associate Interview Questions - The Stock Pitch

Here’s a sample stock pitch, courtesy of @esbanker", a private equity associate.

esbanker - Private Equity Associate: Well, I've recently been following Copa Airlines, a Panamanian airline company, currently trading at $xx per share. Recently, the airline industry has been underperforming the markets for several reasons: compressed margins from the volatility in oil this year, increased competition from low-cost carriers, and overleverage by most airlines (think American or Air Canada). While many airline companies are in desperate need of restructuring, Copa airlines has seen their revenues - now at $1.4 billion - grow at a robust 10% compounded over the last 5 years. Copa boasts EBITDA of approx. $350 MM , Net Income of around $240MM which translates to roughly 18%. Margins have remained stable over the last few years and are significantly greater than other airlines. After running a basic DCF (5 year projections), Copa has an implied price per share of $xxx. In terms of  comps , Copa is trading at an EV/EBITDAR of 7.7x which is slightly less than the industry median of 10.3 x, and a PE ratio of 12.9 x relative to an industry median of 14.1 x. Given Copa's strategic positioning in Latin America, its strong operating and financial performance of late, and its relatively cheap share price, I would strongly recommend to buy Copa Airlines. (note, some of the numbers are out of date - this is from an early 2011 model)

Check out a video about the stock pitch below.

Also be sure to check out this thread on S&T interview questions created by @Gekko21": S&T Interview Questions . Most if not all the things in that guide can also be applied to a equity research interview in terms of types of questions and how to prepare.

Read More About Equity Research on WSO

• Career Ladder: Equity Research Vs. Investment Banking
• Breaking Into Equity Research - How Difficult Is It To Break Into ER Fresh Out Of School?
• Choosing Between Buy Side Vs Sell Side In Equity Research?

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Patrick Curtis is a member of WSO Editorial Board which helps ensure the accuracy of content across top articles on Wall Street Oasis. Prior to becoming our CEO & Founder at Wall Street Oasis, Patrick spent three years as a Private Equity... This content was originally created by member theglazeb and has evolved with the help of our equity research mentors.

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A stock pitch written out? There are lots of stock newsletters out there that pitch ideas and stocks - get past the 'make a million dollars with this junk mining company' headline and they will generally pitch you the idea (if that's what you're looking for?). Google stock gumshoe, he tracks, follows, and makes assumptions about the companies those newsletters are pitching. You may want to research the firm you're interviewing to see what their slant on investments are. You don't necessarily have to mirror them, but if they are long term value guys, you probably don't want to pitch a stock idea based heavily on technical indicators.

Although I'm sure articulating and supporting your idea well is more important than the idea itself.

some key words that should guide your examples for fit questions in ER: analytical, detail oriented, excellent writing skills, strong verbal communication, at ease with financial modelling . some people tend to think that equity research analysts are mainly 'bookish', but i'd argue that teamwork still plays an important role, especially during earnings season. arguably the most important fit question is why do you want to do equity research as opposed to something more "prestigious" (IB) or "exciting" (S&T).

as for as stock pitch goes, id recommend finding a business that you are really passionate about (hopefully it's something a little more interesting than brand names like google or apple). There is no exact formula for a pitch, just be logical.

Here's I went about it:

start by talking about the industry and one or two recent trends that are particularly interesting or worth noting.

then link those trends to the company you're pitching, explaining why the company is well positions.

talk a little bit about the operations and finances of the business, ie. market share, end market, key customers, revenue, margins, ebitda , working capital requirements, capex requirements. (don't have to go through all of them; pick 3-4 that are particularly strong; you just want to be able to give some specifics)

I would then transition into valuations: intrinsic first, then followed by relative valuation. for comps I would go with the basics: EV /Revenue, EV / EBITDA , PE , PEG, and lastly - if your feeling confident - Id throw in there an industry specific multiple; just be careful because if the interviewer knows his or her stuff you might have to go into more detail.

Comps helps you transition to how the company stacks up to others in the industry, and you can finish off with why it has a competitive advantage in both the short run and long run.

Finish off with an assessment: make your buy, hold, or sell opinion explicit. THIS IS KEY.

best of luck!

Hi esbanker and nate,

Thanks for the comments! These are great.

esbanker -- I actually just realized that I don't have a good answer for why Equity Research Analyst rather than IB or S&T. What is the best way to approach that topic?

nate -- thanks for the link! I've been looking at gumshoe, but it isn't quite what I am looking for. The stock pitches in those newsletters tend to use a lot of inflated rhetoric rather than solid facts and sound, logical reasons for buy/hold/sell. Gumshoe is analyzing those use letters to see if the information they present makes sense (typically not the case).

What I am looking for is a model answer to a stock pitch question. I.e. in an interview, when asked, "pitch me a stock to invest in" what would be the best way to answer that?

The format that esbanker gave is great start for an outline, but I am looking for a model answer where I can see how it is done and then I will find my own industry/company and emulate that model answer.

Any help would be appreciated

any help would be appreciated! Or a link to already written out sample stock pitch answers

Say that you are interested in equity research because you are a very curious person who is really passionate about understanding the fundamental and macro drivers of a company. In terms of skills, say that you have to be in tune with the markets in ER (overlap with s&t, without all the high risks), but you gain the modeling and analytical skills of an investment banker. Not to mention that for the most part, the lifestyle (hours) are more palatable.

Sample of pitch me a stock (i'd say somethign along these lines - though I would probably fine tune it a bit).

Well, I’ve recently been following Copa Airlines, a Panamanian airline company, currently trading at $xx per share. Recently, the airline industry has been underperforming the markets for several reasons: compressed margins from the volatility in oil this year, increased competition from low-cost carriers, and overleverage by most airlines (think American or Air Canada).

While many airline companies are in desperate need of restructuring, Copa airlines has seen their revenues – now at $1.4 billion – grow at a robust 10% compounded over the last 5 years. Copa boasts EBITDA of approx. $350 MM , Net Income of around $240MM which translates to roughly 18%. Margins have remained stable over the last few years and are significantly greater than other airlines.

After running a basic DCF (5 year projections), Copa has an implied price per share of $xxx. In terms of comps , Copa is trading at an EV / EBITDAR of 7.7x which is slightly less than the industry median of 10.3 x, and a PE ratio of 12.9 x relative to an industry median of 14.1 x.

Copa has recently acquired Aero Colombia to gain significant exposure to the growing Colombian market (~xx% of market share ), as well as provide quicker access to Brazilian airports. Air traffic in Panama is also expected to grow by xx% by 2014 due to infrastructure development and increased trade from the Panama canal expansion. Given Copa’s strategic positioning in Latin America, its strong operating and financial performance of late, and its relatively cheap share price, I would strongly recommend to buy Copa Airlines.

(note, some of the numbers are out of date – this is from an early 2011 model)

hope this is somewhat helpful

is there a template for running a basic dcf for this sort of thing?

How do you remember all that bro

Thank you so much for the help!

This is really great. Now, I am still a newbie when it comes to equity research. Do you have any suggestions of books or guides that I could read in order to understand equity research a little more? Ideally this would be in simple/layman's terms as I haven't had any prior banking experience and I am fairly lost.

Essentially, a "equity research 101 for dummies" type of book would be extremely helpful if something like that exists.

I found this one book, but it relates directly to the interview. What do you think? http://www.amazon.com/How-Get-Equity-Research-Analyst/dp/1905823932

However, it still doesn't explain the industry to me in enough detail so that I can feel as though I am getting a better grasp on the topic.

Essentially, how is S&T different from equity research? What exactly would I be doing on a day to day basis? Am I more concerned with internal dynamics of a company or macro economic market factors? Who's money are we investing? What are mutual funds? etc etc. Lots of really basic (and I'll admit, probably very laughable questions for most of you). But I'm trying to learn as much as I can quickly.

Thanks! And my apologies if I am being incredibly annoying with my basic questions. I'm trying to read guides or books that will help me understand what equity research is, so that I am no longer as lost.

You can think of the research department as the think tank of an investment bank. In BB's there are usually several divisons: the macro analysts, the equity analysts, the fixed income analysts.

I can speak mostly for equity research, where I started my career in finance. My team was comprised of 3 more people: an associate, a junior analyst, and a senior analyst (note that in research an analyst has seniority over an associate). You usually cover a "universe" of stocks within an industry (ie, aerospace and defense, construction and engineering, automobiles, technology, telecommunications, etc).

your work will consist of getting acquainted with the industry and the companies you cover. get ready to pour over 10-ks and 10-qs. there is quite a bit of financial modeling (tho this will realistically be about 30% or less of what you do overall). lots of focus on the operating model. investment bankers usually have the luxury of using equity research reports for growth projections. but in equity research you have to do tops-down or bottoms-up analysis to come up with these projections from scratch. you run valuations just like in IB , but the metric of choice for analysts is EPS since this is what ostensibly makes a stock move up or down in the markets. your main output is research notes, which could be industry-specific, trend-specific, or (most often) company-specific. these research notes make it to the S&T so that they can add color to their decisions. other investment firms pay quite a bit of money to gain access to these notes.

hours are not bad, usually 7 to 7, but it depends on the team. during earning season (when companies report earnings every quarter), things get a lot more hectic as you have to listen in on earning calls, revamp your models, and publish several notes in a constricted amount of time. had to stay in past midnight a few times.

personally, i hated my team, but i did gain an strong framework for analyzing companies. i don't really know what you mean by "what are mutual funds ?" or, more specifically, how that relates to equity research.

pm me if you have more specific questions (i am happy to send you a sample equity research report so that you familiarize yourself).

Pitching a stock in an ER interview ( Originally Posted: 09/21/2007 )

How important is it to pitch a stock that is in the sector you're interviewing for?

I would not do it.

I would only do it if you are dead confident you know the stock. Otherwise, the interviewer knows way more than you about that stock, and will drill you hard on it. If you can't defend your position, it's gonna be bad.

That said, if you are interviewing for a specific sector, you should be able to talk about names in that sector and being able to talk about it well is a big plus.

I had an interview and turned out the firm I picked to talk about was under the ERA sector. Needless to say I was dead wrong. I looked like a fool and was not made an offer.

thanks for the advice guys.

About the Stock Pitch ( Originally Posted: 08/27/2009 )

I am quite new to all of this so forgive me if this question sounds ignorant. I wanted to know about the nature of the stock you are supposed to pitch during ER interview. Do they only want to hear your arguments for the immediate growth of stocks? Or would it be favorably looked upon to argue for the long-term growth potential of certain stocks that may see little immediate gains?

bump about a stock pitch for SA interviews.

I would avoid a short term recommendation. They're looking for your ability to analyze and value a company, not day trade a stock. I would say your time horizon should be 6 months at minimum, perhaps a year or longer. You want to discuss what makes the company great, why they are poised for growth, etc.

Bad: Buy company A because their earnings come out tomorrow. Bad: Buy company A because the technical indicators on the chart say so.

Good: Buy company A because they are a leader in their market, have a revolutionary new product coming to market, own a defensible competitive advantage, and I think they are going to crush earnings expectations over the next several quarters due to X, Y and Z. You need to back all this up.

Basically, read some equity research reports. Clearly, they want to see if you can think like they do. The types of things commonly mentioned in published equity research are probably the types of things you should focus on in your pitch.

All great advice, thanks!

the Stock Pitch ( Originally Posted: 08/24/2010 )

I am quite new to all of this so forgive me if this question sounds ignorant. I wanted to know how I should go about pitching a stock for a Greentech Investment firm interview coming up. The pitch itself needs to be 5 minutes long - any ideas on where to start, what to talk about etc.?

Many thanks

Tech Interview guide gives some guidance to answering that question...

ah yes it does have some, thanks

Stock Pitch forum ( Originally Posted: 01/23/2011 )

Wasn't too sure where to post this so I'll try here. Does anyone know of any good stock pitching forums? I want to learn how to do stock pitches and how to bash them too! Thanks

none...anybody know of any?

Some of the trading forums have areas where traders discuss equities and the like....

Equity Research - Pitch a Stock ( Originally Posted: 12/21/2012 )

Hey there fellow monkeys,

Can anyone please give me a step-by-step guidance on how to analyze a stock/company? At what accounts/ratios to look at and how to derive conclusions from them...and should I refer to other data except from this?

Also does anyone know where I could find a sample analysis of a stock as I have searched the Internet but unsuccessfully..

If you have unsuccessfully searched you for this you are being lazy or you are incredibly bad at it. WhiteHat did a pretty amazing write up on this site of Fossil I believe. Find that and do your best to emulate it and you should be golden.

There is no silver bullet solution to analyzing an asset; and considering your general question, my two cents would be:

There are two ways to value a “stock”—absolute and relative valuation…

Absolute is basically valuing an asset through projecting and discounting the future cash flows to arrive at a present value. At the end of the day, this method is obviously contingent on various assumptions pertaining to the company, industry (life-cycles), economy, etc. Some toolbag at bag might start throwing around acronyms like “DCF”—discounted cash flow is the rudimentary way to discount a stream of CF…

Relative value is taking an comparing it to a comparable company or industry—“similar assets should have a similar value” might be a good way to think about it.. P/E, P/B and other financial statement ratios will allow you to compare the ratio ‘relative’ to a similar asset… Brocade Communications has a P/E of 13.04 and Juniper Networks is at 56.7…. from this elementary and vanilla approach, you could assume that Brocade is cheaper/undervalue (or just a piece of crap, which it is) relative to Juniper..

Have a great Holiday

Thanks for the helpful advice SFTechUES & Cruncharoo, I apologise for the noob question, but I am at the beginning of my familiarization with the company valuation process...As far as iRX is concerned: is it hard for you to be a bit more socially acceptable? your the equivalent of a fart right now :)

Get yourself very familiar with accounting to understand how each line of IS, BS , CF is related and what drives its. Not the simple shit like oh Change in cash from CFS is added to start of BS Cash, but like how inventory turnover affects WC , etc.

I'm guessing this is for a starting level internship/job and not on a personal investing level?

I'm just curious as to how you even got this position if you have no previous background to even basic investing/accounting.

Anyhow, I'll try my best to help you. I'm an analyst intern at a hedge fund so I have to deal with this every day.

First off, any particular industry you are looking at? Every industry works differently so certain ways you evaluate a company in a certain industry won't necessarily work in another industry.

Ex. A bio-pharmaceutical company, especially a small one, has little to no revenue and earnings. Does this make the company shit? No, because all these companies are focused on research and development . You have to look at their pipeline (the drugs they are testing) and chance of stock dilution in the future.

However, revenue and earnings are critical for companies in consumer retail. That's what they run on. They don't do research and development. So ratios like P/E, P/CF, P/S would be useful in this sense.

So Step 1: Look at the economy and narrow down your search to a particular industry and research the correct way to evaluate them.

Next, start narrowing down your search to several comparable companies in that industry. Start looking through some finance websites and see what's on the news. Which stocks are hot? Which ones are getting publicity (good or bad)? Which stocks are being talked about frequently? Keep in mind that you do not want to make an investment decision based on what you see and hear alone, but it does give you a better idea where to start. You can then start filtering through stocks for the ratios you prefer and start doing some research.

So Step 2: Narrow down to several comparable companies.

Okay, let's say at this point you have finally decided which company you want to do the analyzation on. Let's name this company Whiggets Inc. who is a major player in the automotive industry (Think Chevy, Toyota, Honda size).

Now here comes the hard work. There are many, many different things you have to look into to perform a thorough analysis. Since you in equity research, I am assuming you have to do more of an in-depth analysis than what I have to do (where I work, it's better to spend a week analyzing 10 stocks and being 50% sure of them rather than analyzing 1 stock for a week and being 99% sure of it).

However, I can suggest what you want to research to be thorough:

As of right now, I can't think of anymore from the top of my head but this should be sufficient to make an acceptable equity report/ investment thesis , provided you do due diligence while researching and you research the correct stuff.

So Step 3:Start analyzing your company thoroughly.

Next, once you have all the data/valuations and other research material, format it into something that is presentable. I'm not sure what your firm expects, but mine prefers to have more charts and tables than paragraphs and paragraphs of bland statements portraying the company's status.

So Step 4: Format it presentably.

Finally, after you have basically finished your report, it's time to take a position on the stock. Is it a buy/hold/sell? Do you want to go long/short? Is it a short-term profit stock or does it have sustainable value for the long-term?

These conclusions are arrived at by evaluating your research. At this point of the process, it shouldn't be too hard to pick a position on the stock. You don't necessarily have to be RIGHT, but they prefer you to take a position rather than take no position (it doesn't help anyone if at the end of your report you don't state what YOU would do. That's like making a lot of noise but then having nothing good to show for it. That's just how my boss tells it. Yours could be different, idk).

So Step 5: Pick a position.

TO RECAP: Step One: Narrow Down to an Industry Step Two: Pick Several Comparable Companies Step Three: Pick The "Best" One and Analyze Step Four: Format ReportPresentably. Step Five: State Your Position.

Obviously you have your work cut out for you as you are doing equity research without having ANY prior knowledge about any of this, which is probably freaking overwhelming, but we've all been rookies once. Hope this helps and try not to butcher it too much (Stating Ford is going to collapse because of some hearsay you read on a message board that was actually written by some troll.)

Thanks a lot GrandJury for the detailed response. I am currently studying Finance and did not yet have any courses dealing with company valuation (next term I'll have though). Also, I didn't took the time to study it myself apart from now :P. I am intending to apply for equity research positions in the future and would like to prepare for the interview/position in advance.

Also, except from Blomberg/Reuters to which I do not have continuous access, what are your suggestions for the best alternative market data providers?

FellowMonkey: Thanks a lot GrandJury for the detailed response. I am currently studying Finance and did not yet have any courses dealing with company valuation (next term I'll have though). Also, I didn't took the time to study it myself apart from now :P. I am intending to apply for equity research positions in the future and would like to prepare for the interview/position in advance. Also, except from Blomberg/Reuters to which I do not have continuous access, what are your suggestions for the best alternative market data providers?

Ah. I see. Since you're actually just preparing for an interview, use what I put in my post as a starting guide to expand your knowledge. Build on what I told you because it is positive you'll be asked questions pertaining to the research of equity and all that jazz in the interview.

WSJ, NASDAQ , Yahoo Finance, Finviz are some. It's really not that hard to find reliable sources you prefer. Just google the stock symbol and plenty of websites will show up. You'll have to sift through the sites that are clearly not worth your time but there are plenty of solid sites out there.

Also you can use google.com/finance/ as it will have relevant news for each stock symbol you look up or ones that you have in your 'portfolio' in a feed

Have the similar questions, thanks for your replies.

Here's a website I came across with some in-depth questions to ask yourself when analyzing a company

http://equity-research.com/how-to-analyze-a-stock/

bored help a fellow money with stock pitch idea ( Originally Posted: 01/30/2013 )

Well as a macro guy myself here's a few things to consider:

One could argue that x stock in a particular region is undervalued. Why? Well, it has various subsides from its government, it could be insured by the aforementioned government, or the country is in a recession and one would expect the cycle to shift and consumer spending to be up the up and up, so anyway let's go over some pertinent examples:

Vinici. An old French construction company, currently with a massive cash flow and undervalued due to the current economic credit crunch, but with fundamentals coming back and the company being a key driver in its sector, one would expect it to be a fine firm to buy into.

Another could be Allianz, an insurance company befuddled by bad growth in its region. But if Europe even grows by 1% in the year, the insurance company is looking to turn 10% growth from its low.

Or how about American stocks with Chinese exposure? There are plenty of those out there...

So on and so on.

Honestly, I think you should be picking the actual stock on your own. Getting tips on how to answer, what to look for in the stock, what is expected by the interviewer, and how questions are asked is one thing. But it is YOUR interview and if you really deserve the IM spot you would have enough passion for investing to have your own genuine answer for a particular stock.

Not trying to be obnoxious, so sorry if it seems that way. But I would hate to think I am the only person who believes that you should pick the stock on your own, do the work, and just be smart enough to implement tips from others.

Don't ask for actual stocks from others because that is not what the job is. The job would involve YOU working, not you coming onto WSO everyday to get some stock suggestions so you can then give them to your colleagues and/or bosses.

Pitch a stock ( Originally Posted: 02/11/2013 )

I am from non finance background, so want to get a idea how some one from finance background will pitch a stock in an interview.

So here goes a question : pitch a stock ?

considering that value investors only come up with 1 good idea a year... your better off searching the presentations put out by big investor. that guy ackman tends to put out a couple of public investment pitches...

Stock pitch - Okay to pitch a foreign stock listed on NYSE? ( Originally Posted: 02/12/2013 )

Is it okay to pitch a foreign stock listed on nyse during an ER interview?

Why wouldn't it be?

Yes, but be able to discuss the economics and the main things you should know about investing in said country - are any major accounting practice differences, is the government stable, what are the staples of that country's economy , is there currency risk and can/should you hedge it, etc.

Penny stock pitch in ER interview ( Originally Posted: 04/02/2013 )

Just a question to all you ER guys for an upcoming interview I have. I wanted to know if it is appropriate to pitch a pink sheet stock as a sell in an ER interview and if that's seen as the equivalent of pitching something cliche like apple.

Not all OTC stocks are penny stocks, per se. But I'd imagine you have to be pretty damn sure of what you're saying to consider it. And even then, it doesn't really connect with what they do, since no sell-side analyst is ever going to cover such a stock.

I'd actually be impressed if a kid pitched a penny stock. But make sure you know EVERYTHING inside and out. ANd be prepared to answer the obvious:

• Why are they a pink sheet?
• Why should I buy them versus apple?
• Can I drop $10 mil in this thing without just destroying the bid-ask

Here is you upside and downside from pitching a penny stock

• Upside is it is unique and different from everyone else
• They will unlikely know the story so you can get away with knowing less about the company
• If it is related to the space you are interviewing for then you are okay but if it is not you'll look at bit "off"

Downside. 1. They won't know if you're making things up 2. They could think you are a young "immature person" out of the gate if you're pitching a random 0.0001 cent stock

Overall if forced to choose though it is likely better to choose a well known stock in the space (Defining penny stock by actually being sub $1.00 stock price, no volume etc etc and not something that is an ADR share and is really actually a large company.

With that said choose a relatively well known company to pitch to an Analyst or group because of the following reasons.

• If you choose a company they at least "kind of" or do "know" they can see how much work you've put in to learning the story. If you do your homework you get brownie points for 1) knowing the story well 2) being able to talk about fundamental analysis 3) being well versed for a young person in the room.
• You can "tilt" the interview, if you know the analyst is outperform on "value based" stocks versus " growth stocks " you simply pitch him a deep valuation based stock
• Large companies have high trading volume, this is important because large Equity Research platforms ... do not cover penny stocks.... You run the risk of them thinking you don't understand equity research as they would never initiate coverage on the company.

So overall there are your puts in takes, if you really think you got it locked up go for it.

Finally the below was left on a separate thread to explain a stock pitch (Please Ignore if not of Interest) 1) story of stock, 2) why you think community doesnt have it right 3) talk some fundamentals.

"I am pitching Apple at these levels because I believe the investment community is undervaluing the release of a possible iWatch, iTV and even an iPhone Mini. Every three years the company tends to release a new major product line (iPad 3 years ago, iPhone 6 years ago) so I would not be surprised to see a new major line up act as a kicker to the stock in CY13. The bears are certainly going to point to the recent disappointing guide and softer than expected Dec-qtr results, however with three possible products coming out and a ~$300 price point ex-cash the company can buy back all of its shares with 6 years of flat free cash flow . With that said i'd be long the stock at these levels"

Double post

WallStreetPlayboys: 3. Large companies have high trading volume, this is important because large Equity Research platforms ... do not cover penny stocks.... You run the risk of them thinking you don't understand equity research as they would never initiate coverage on the company. "

This to me is the deal breaker. They would question whether you understand the business and might doubt you are a good fit.

I would talk about a stock with a broad secular theme so you don't get bogged down in the technicals more than necessary. It's more about showing you can have an intelligent discussion and are truly interested than being "right".

Funny story, the day I got my offer for ER the stock I pitched in every interview reported after the close and get absolutely smoked. Missed earnings, lowered guidance, down 20% the next day. My portfolio took a big hit but I was still laughing my ass off.

I wouldn't do it personally. The risk of not being taken seriously isn't worth the possibility of differentiating yourself.

Thanks for the insight!

Pitch Me A Stock - ER interview ( Originally Posted: 05/07/2013 )

Hi guys. It seems that in an equity research interview , the inevitable pitch me a stock question is going to come up.

What I wanted to know is how much in detail should this stock pitch be? What facts and figures are you expected to know? Some people suggest having 2 or even 3 stocks ready for a pitch, so it seems like it'll be difficult to remember figures for all the companies? Will last year's revenue, profit, current share price, P/E be enough? Also, should you rate it simply buy/sell or provide a target price too?

Any other comments regarding the stock pitch will also be appreciated. Thanks.

if you could talk about a stock like this article http://www.wallstreetoasis.com/blog/apple-news-noise-and-value i think you are in good shape.

All that is historical info., you need a forward looking stance with catalysts you think can happen within 18 months.

I been on a few equity research interviews before landing my currently gig. I always interviewed with two pitches in mind. I discussed the landscape of the company, the market, revenue drivers and a price tag. I would try to pitch the stock under 5 minutes max. I always left a research report, I wrote on my own with my interviewer.

You don't need to do a ton of memorizing. I think the only figures you really need to know are....revenue, ebitda , net income , P/E ratio, dividend yield, and market cap . And even then you won't be listing those off, you'll just be using them as evidence to support your argument. And don't memorize them, just use rough figures. "Revenue is around 8 billion / year right now and showing growth in the early teens" is fine. P/E ratio just use the nearest whole number..same with dividend yield, market cap you can round to the nearest billion, or maybe even nearest 10 billion for larger companies.

Basically what I did during my interviews was I started by telling a story. My example was always SLM. SLM traditionally has relied on FFELP loans as its main source of income, but in 2010 a law was passed that.........as a result, SLM is transitioning to the private loan market.....I think the markets are overstating the detriments of no longer being able to issue FFELP because SLM's current portfolio makes up 80% of their revenue and is set to amortize over the next 20 years......further, I think the market is underestimating the growth opportunity in the private market, as SLM is only trading at 8x earnings, whereas most companies in this market trade at 12x earnings, and SLM's strong dividend of 3%+ support the stock etc etc etc.

Stock Pitch - Normal to have 2-3 catalysts be top 2-3 risk factors ( Originally Posted: 12/28/2013 )

I am currently working on a stock pitch for my own educational purposes. I am going through the company's 10-k looking at some of the risk factors they mention and many of the top factors that I believe should be mentioned are also the catalysts I have put for the company's growth. For example, a potential catalyst for this company is opening new stores/expanding their geographic footprint (since they are only located in one part of the country currently). However, one of their main risk factors is that they may not be able to open these new stores successfully and operate them profitably. Is this normal to have some of your top 2-3 catalysts also be your top 2-3 risk factors? I don't really see a way around this happening. If anyone has some thoughts/insights, I would really appreciate it. Thank you.

Stock pitch for mutual fund equity research position ? ( Originally Posted: 04/17/2014 )

I know for HF they usually ask for stock pitches during the interview..but what about an equity research position with a mutual fund? Do they ask for stock recommendations? (this position is for experienced hire: 1+ years of experience)

Prepare stock pitch for 20 minute ER interview? ( Originally Posted: 04/25/2014 )

I have what I guess is a superday (isn't it kinda late to have one?) for a Summer ER internship. I am speaking to 4 people, 20 minute each. This is the first time I interview for an ER position, so I'm not sure how to prepare. I don't really have a stock pitch, although I could just use the stock I'm researching for a valuation class. Should I prepare a stock pitch? 20 minutes seems like a really short amount of time for an interview including a stock pitch.

From my past experience interviewing for ER positions, you will most definitely be asked to pitch a stock for a buy (maybe for a sell also). This is probably the most important part of your interview so put your hearing ears on.

High level - pick a stock that you have some knowledge of. Since know the gaming sector well, i will pick a gaming company to illustrate. Let's say it is MGM. Take the following top-down approach.

Basically you should begin by discussing the overall U.S economy and the stock market and how both have fared YTD and where you see them going. For example, you will say that historically all bull markets that make it through to the sixth year typically go up by 20%. We are in a sixth year and so far have been flat YTD so we should springboard from Q2 through year end. Keep your guard on here as they will throw something like "quantitative tightening" at you to poke holes in your thesis.

Then focus on the sector. In this case gaming is a cyclical business so if the economy improves then this sector should fare well as well.

Then you will have to make a bull case for the stock. Basically you need to know how the valuation looks like as of current (p/e multiple vs historical etc..) and come up with a target price. Let's say the stock currently trades at $25 and can go up to $35 in a year. You should be able to bridge the two prices via your bull thesis. For example, you will say that due to multiple expansion (due to Las Vegas convention market improving) you see the stock price going up by $5. Another $5 will be due to improvement in asset utilization (compare the Rev/empl for this company to a lean competitor) and mention the opportunity for improvement. Finally the last $5 will be due to new properties coming on board (name them).

One thing these analysts get a hard-on for is if you mention the downside risks to the stock. Take an opportunity to mention something like "if MGM cannot penetrate the Japanese market then investor sentiment can cause the stock to be undervalued for a short period of time."

All in your pitch should not last more than 5 minutes. Take the first minute to introduce the company and why you chose it, 3 minutes to substantiate your case, and one minute to conclude.

Since you seem new to the business they will ask for a 3 statement model and a writing sample. Hate to say this but if you don't know how to put together a 3 statement model you are out of luck unless you can cram. Shoot me a message and i can point you to a website.

CFA Charterholder

Great response. Quick question: do you think it's necessary to build a DCF model for a stock pitch for an entry level ER position? Thanks!!!

Wow, that was very helpful. Thanks a lot. Also sending a PM.

Exactly what CFA said. Start with the top-down approach of the economy, fed, ceo of the firm your recommending, the firms value proposition, financials, competitors, price, technical analysis - the whole 9 yards. You will be good, and practice in front of teachers or your family friends.

do apple im sure they've never heard that one

Stock Pitch: A Page from MBB 's Book? ( Originally Posted: 12/30/2014 )

This question is addressed to WSO users with work experience in ER . If you were listening to a 1-3 minute stock pitch from an inexperienced candidate, how would you react if the pitch was largely focused on " corporate strategy " points? E.g., competitive positioning, market segmentation/sizing, 5 forces industry analysis , etc.

This is not to say that the pitch would exclude fundamental analysis ; just wondering what ER analysts/associates thought of corporate strategy as it pertains to investment theses. Any insight would be greatly appreciated.

I'll give you the typical consultant's answer - it depends. Some interviewers/analysts will like it, others will think it's BS . It makes more sense if it plays to your strengths and background (e.g. if you are trying to switch to ER from consulting).

I think it would be fine (maybe even great as many focus on rather more easily observable points like cheap valuation + some sort of vague understanding of sector direction).

If you do what you laid out above + hit on other key points (valuation + catalysts etc.) atleast in simplistic fashion, then it should be fine.

Topics for Fall Equity Research Interviews ( Originally Posted: 07/28/2016 )

Simply put, what is everything a student should know going into an internship interview for Equity Research this fall? Examples from past interviews and/or emphasis on current events would be appreciated

I can in no way tell you "everything", but I can provide some tips as I just recently went through the process of ER interviews.

• Have a good sense of the market environment and current economic trends (have an opinion on things such as the Brexit , Monetary Policy, etc.) and how they can affect certain sectors/the overall equity market .
• Make certain to have not just one, but multiple stock pitches prepared. You will more than likely have to pitch a stock or two. If possible, find out who you will be interviewing with and do not pitch a stock that they cover. It is acceptable to write some notes on a notebook/padfolio to help guide you.
• Brush up on your financial ratios and financial statement analysis .
• Like any interview, make sure that you can answer the typical questions: Why ER , Why this firm, Why are you qualified?

Hope this helps a bit.

E/R 1st Round Interview ( Originally Posted: 08/12/2009 )

I am looking for some guidance on how to perform and what to expect for a first round equity research interview via telephone. This is for a BB and will be conducted over the telephone.

I would like guidance on the process from top to bottom (Fit, Qual, Quant, Behavioral...everything).

Anyone who has actually going through or is working in equity reaseach please chime in with what division (to see if questions are geared towards the sector) and with what level bank (ie. Boutique, MM , BB).

I've been in ER at boutique and bulge bracket firms and have interviewed associates at both. The key things they'll look to assess you on are:

Analytical skills - comfort level analyzing financial statements, experience looking at key financial ratios, ability to absorb lots of information, figure out what's important, and draw conclusions

Communication (written & oral) skills - can you make logical and persuasive arguments? What experience do you have doing this? Are you comfortable having and defending your opinion?

Relevant Skills (modelling, research, valuation experience)- have you picked stocks before? what stocks do you like and why? How resourceful are you in finding information and developing sources of information? Can you get stuff done without a lot of guidance

Fit - Research is very flat. The relationship between the Analyst and Associate(s) is key. You just have to hit it off. Can't prepare for this.

Here's a summary of some of the responsibilities, terms, etc you should know http://bit.ly/gXYks

Gotta Mentor www.GottaMentor.com Connect to the Advice & People You Need to Achieve Your Career Goals

Thanks Former MD! That post was DENSE, every word has a shit ton information to it.

I will be looking at that website to help guide me on this. Basically, I HAVE to perform well on this interview. This is probably one of the last big opportunities I have to break into a meaningful finance position. If i get the job I can do it and do it fucking well, so I am doing as much research as possible to help myself out.

Thanks again.

swagon: Go team!

I am also thinking of rereading my CFA L1 book (sitting in December) and more specifically the Equities/Financial Reporting Analysis sections.

Any other advice? I feel like FormerMD pretty much left no room for anyone else to say anything!

What is the lifestyle like being in ER ? I have looked through the other threads but most seem a little outdated. I am not afraid of working 90 hour weeks and going in on the weekend, in fact I would prefer to have a job that rides me.

Sector that I will (hopefully, everyone pray) working in is Transportation with a focus on Auto Manufacturers, this seems to be getting a lot of news lately.

Also, I got the call from the recruiter yesterday that they were considering me for the interview/position. Is this a good sign that she reached out to call me? Also, I have not heard anything today, should I be worried? Finally, they said that there will be no relocation reimbursement and I will have to fund my trip to the interview location should I make it past the 1st round (telephone).

I am very nervous/anxious/excited for this possibility. I am really worried now that I havent heard anything in 24 hours, any insight on the normal cycle time would also be GREATLY appreciated.

Thanks FormerMD for all of your help!

Interviewing For A Specific Group- Equity Research ( Originally Posted: 09/07/2017 )

I have been fortunate enough to land a few interviews for equity research positions for specific groups. Based on your experiences, what level of knowledge of the industry is expected for an entry level ER associate role? Should I have a long and a short for companies within the group I'm interviewing with? Or is it expected that coming from a big 4 background (auditing tech companies) that I would not have that much knowledge about the specific industries? So far to prepare I've been reading recent news on the WSJ etc. about companies within the industries, in addition to looking over some industry primers.

I don't think they would expect in-depth levels of knowledge about the industry (unless your background is in it) but would definitely expect you to know the basics of the sector & a little more about the stock you are pitching (i.e. you will look dumb if you pitch Disney but don't know when they are planning to roll out their new streaming service)

Also, I would definitely have a long & short ready for that specific industry, but probably not a stock they cover. Its a good way for them to see how interested you are in the stock market & their sector. I have been asked for a short pitch only once in my interviews, but if you don't have it ready, it might take you by surprise.

I would say you should be knowledgeable about the major trends in the sector you're interviewing for and have an opinion about them and the possible direction things will go, but I don't think its necessary to have your stock pitches be in the same sector. This could backfire because it will be harder to sound smart considering the interviewer knows the sector backwards and forwards and could easily stump you with questions. The purpose of the pitch is to test your ability to present a coherent and logical idea in a concise manner while being knowledgeable enough to handle follow-up questions, not necessarily to test you on the industry. That being said, you should be able to answer why you want to cover that particular sector, or at least why you would be good at it/how your experience prepared you. Have both a long and short prepared just in case.

I came from big four into ER . I pitched a large cap and small cap in my interview. Pitching a short is great, but not essential, as it's a lot harder than a big. Again you don't need in depth knowledge, but you need to have a conviction and identify good critical factors.

Thanks for your response. How detailed were your stock pitches? I usually give a basic intro to the company (a relatively unknown small cap), a few reasons why I like the company and then the valuation . I'm not sure if its better to keep it relatively brief and provide more details in follow up questions or provide an ample amount of detail in the original pitch .

Boutique ER Interview Prep ( Originally Posted: 12/07/2017 )

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Hey theglazeb, I'm the WSO Monkey Bot and I'm here since nobody responded to your thread! Bummer...could just be time of day or unlucky (or the question/topci is too vague or too specific). Maybe one of these topics will help:

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Fingers crossed that one of those helps you.

Equity Research Interview Final Round ( Originally Posted: 01/18/2018 )

I have my final round for an equity research associate position today. The analyst said it will be a report writing assessment where he will provide an M&A press release and presentation, and I will have 2 hours to turn a report around. He said there doesn't have to be any quants, he's only looking for thought process, structure and writing style.

Does have anyone know how these reports are typically structured and what type of information is usually included? I'm thinking of starting out with a brief summary of what my revised EPS projection and share price would be, followed by 3-4 main points from the deal that will impact the business. Then I will expand on each of the main points and conclude with why I think my EPS projection/share price is warranted.

If anyone knows where I can find a sample, that would be helpful as well - last round I based my report on one of the analyst's reports and he specifically mentioned the structure and writing style was great. Unfortunately I don't have access Thomson/Capital IQ/Bloomberg so I am only limited to Google.

Hey Adrian-Wong1, I'm here to break the silence...any of these links help you?:

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• Final Round Help. I am almost an Associate straight out of undergrad! Head of Research , done a modeling and writing test, and finally , I am at the last round . The group is ... I am at a non-target school (Arizona State University) and have made it to the final round at ... Wells Fargo Securities for a position as an Equity Research Associate. Yes, an Associate straight out of ...
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2nd Round Interview -- ER ( Originally Posted: 07/29/2013 )

First round interview went pretty well. It took them 3 weeks to finally get back to me and schedule a second round interview.

On Friday, I met with two new people and both meetings went very smoothly. Then I had a "writing test' which was a quick and dirty mock case study where I had to write a mock earnings press release. I used DCF with some applied assumptions as well as some quick valuation methods to arrive at the current stock price and a target price. It was not as easy as I expected though and they purposely inundated you with extra information.

After the writing test the person I met with in the first round took me out to lunch with the group. Lunch went pretty well, and at that point I was kind of expecting an offer. No offer and they told me they were still interviewing other candidates for second rounds and they didn't have a definite timeline. This surprised me. I guess they will review my writing sample, but I went from feeling very good about the interview to somewhat confused in that they didn't even offer me a timeline.

Given that they took so long to get back to me after the first round, should I expect another couple of weeks to hear back?

They'll interview everyone before they make a decision and they'll delay letting you know that your rejected until offer person has signed.

Therefore, you really have no clue until you hit about the 4 week mark probably (but later the worse obv).

Just got a response from a thank you email that I sent to one of the associates that interviewed me last week. Said in the middle of earnings season but to reach out for any questions.

Good sign I guess? Should I follow up with any insightful questions or just stay put and wait?

Long Sendrax: Just got a response from a thank you email that I sent to one of the associates that interviewed me last week. Said in the middle of earnings season but to reach out for any questions. Good sign I guess? Should I follow up with any insightful questions or just stay put and wait?

That's fair. My networking game has been put on hold for the time being cus of earnings season, so you should expect to hear back from them whenever they have some free time. If you want to coordinate your e-mails so they have the best chance of seeing em quickly, look at an earnings calendar and pick a day when none of their companies report.

Just revisiting this item here. Time to follow up on this interview? It has been a week and a half. They did say they were finishing up earnings season but they also said to feel free to send them questions. Is it a good time to send a question? If so should I be direct and ask an associate where they are in the hiring process?

Long Sendrax: Just revisiting this item here. Time to follow up on this interview? It has been a week and a half. They did say they were finishing up earnings season but they also said to feel free to send them questions. Is it a good time to send a question? If so should I be direct and ask an associate where they are in the hiring process?

Whats the position?

StryfeDSP: Long Sendrax : Just revisiting this item here. Time to follow up on this interview? It has been a week and a half. They did say they were finishing up earnings season but they also said to feel free to send them questions. Is it a good time to send a question? If so should I be direct and ask an associate where they are in the hiring process? Go for it

Should I go through HR or ask the associate who said to feel free to ask him questions? I am sure the associate will be asked his feedback but he is not the decision maker.

Also, I am had a first round interview with another ER shop. Should I include that in the note? I don't want to come off as too aggressive.

Thanks in advance. Hoping to handle this situation as best as I can.

Long Sendrax: StryfeDSP : Long Sendrax : Just revisiting this item here. Time to follow up on this interview? It has been a week and a half. They did say they were finishing up earnings season but they also said to feel free to send them questions. Is it a good time to send a question? If so should I be direct and ask an associate where they are in the hiring process? Go for it Should I go through HR or ask the associate who said to feel free to ask him questions? I am sure the associate will be asked his feedback but he is not the decision maker. Also, I am had a first round interview with another ER shop. Should I include that in the note? I don't want to come off as too aggressive. Thanks in advance. Hoping to handle this situation as best as I can.

Talk to the associate. Waiting a week and a half to follow up on your interview isn't aggressive, it's pretty passive.

5 things to think about during an ER interview to make it sound like you know what you are talking about ( Originally Posted: 04/27/2014 )

I noticed there wasn't a lot of interview advice particularly geared towards ER so I'm just writing down a few things to say during an interview that will definitely make you stand out.

1) If you get the question who is the most important client to you, always answer the trading desk. They are the ones who risk the bank's capital so they should get priority. For any material news on your universe you should always send a quick email to the traders covering your space telling them how this is going to effect your stocks.

2) Actually invest in the stock market. It is painfully apparent when a person is lying about a stock they say they invested in but haven't. Open up a Scott Trade account and throw a couple hundred into a name you like. You will definitely get a crash course in investing when you have skin in the game. 3) When you pitch me a stock don't just tell me if it's a good buy or a good sell. Tell my why is this a good price point to enter and what is a good price to exit out of. Follow that up into why should I invest in this particular sector over another. Bonus points if you manage to say the phrase "sector rotation" correctly in your pitch.

4) Don't get wrapped up on your initial sector coverage. Odds are you're going to move sectors quite a bit in your career. What you should most care about is the analyst you are working under. He will have the most impact on your career and how much you learn.

5) Don't be a complete finance geek. Have an interest outside of work and be able to back that up with small talk. Tell me about your upcoming study abroad plans to Spain or your opinion on NFL free agency this year or that iPhone app you are programming. The interviewer will want to know if you are personable or not. At the end of the day ER is a relationship business. Our goal is to help generate volume for our trading desk and to service our clients. That DCF you spent 3 days working on, the 50 page report you wrote and that 20 company slide deck are just means to an end. They are just tools we use so we are be able to speak to our clients.

Just normal small talk. Complain about how awful this winter was, ask them their opinion on the last GoT's episode, what are there plans for Easter, best ways to find an apartment in NYC , etc. From there you can go into the usual stuff about about their career and finance in general. If you know they have been in finance for awhile ask them war stories about the financial crisis and what it was like to work under such duress. That always kills about half an hour.

Great post. Thanks for this.

Same fit questions . You'll probably be asked valuation questions during your pitch on how you arrived at your price objective.

Don't forget to use the word "color" often. It's critical.

Miser: Don't forget to use the word "color" often. It's critical.

If I ever ran a group/division/company, my first order of business would be to ban that word.

"Get more color on this report." "Get more color on this new client." "Can you get some more color on this calculation?" "Can you get more color on the color of this colorful presentation?"

As an associate in research you only have 3 clients (in order)...your analyst; your trader; sales

That generally is true but for internal communications I cc every one in the same email so it they get it at the same time and then I give them a call or visit the floor if it's truly material.

Just nitpicking but even if trading desk is top client (commissions) they are different ways of getting paid - i.e. some analysts go for the broker vote in order to get volume, in which case you might interact with sales more.

But ya stock pitch with a view on valuation (method, comps etc) really is key.

thanks bearing, good post

Great content, especially since I am heavily pursuing an associate position currently. I am looking at one that deals with capital equipment in a particular field. I feel like that would differ a bit from a normal associate or analyst position. Am I way off base with that? Should I still have a stock pick from that field ready to go?

I don't understand your question but if you know specifically what industry you are going to be assigned to I would definitely do a pitch on a company in the sector. This leaves you open to some tough questions but it it also gives you the opportunity to demonstrate your perpetration.

Equity Research Analyst by Gillian, excellent preparation

Could you elaborate more on #3? Specifically, how do you identify the proper entry and exit points for a specific stock without doing an in-depth model? The only other way I can think of is technical analysis which I imagine an ER interviewer would offense to

There is always 2 sides to a trade, when to buy and when to sell. If you pick up a research report there is always a price objective along with the overall recommendation. That PO is the result from your valuation analysis be it comp, transaction, DCF , SOTP, etc. No matter what you are pitching the cornerstone of any trade, heck the cornerstone of finance is valuation. If you uncover in your research that the asset is trading below what you think is fair market value then that is a good buy. I want the person who is pitching to tell me why I should be interested in this stock, what do they see as a PO for that stock, what are the catalysts for that PO to happen and what is the time frame you expect this to happen. It's a tall order but that is the essence of what you are going to do on a daily basis in ER .

Undergrad ER interview ( Originally Posted: 06/20/2009 )

What kind of questions/interview can I expect as an entry level ER analyst at an NY BB? Will I have to walk someone through a DCF or WACC , or is that reserved for MBA interviews? How in-depth does a stock pitch have to be? Will I have to know specific numbers from the companies' financials?

Depends on your educational background. IF coming from a target with liberal arts (not finance), then you shouldn't get very technical questions.

If however you are coming from a state school, have finance background, or study finance, I would make sure to know DCF / WACC /different multiples.

I have extensive posts on the types of interview questions below. Feel free to reach out.

Chase Us, Break In http://chasingconsultantsbreakingbankers.blogspot.com/

Assume the worst and you'll be prepared. You should expect to know different ways to value a company. You should be prepared to give a stock recommendation and don't make the mistake of focusing only on qualitative factors (great brand, growing industry, strong management team, cool products that consumers love). Talk about the quantitative factors (valuation versus its comparable group on relevant metrics).

You could definitely get asked to define WACC and DCF and walk someone through how you'd do it. Here are a few pieces of finance-related advice from Gotta Mentor. There's lots of good stuff for Wall Street prospects on the site so search " equity research " or " investment bank " and go at it.

Preparing for investment banking interviews http://www.gottamentor.com/viewRoadmap.aspx?r=311

DCF Example - Valuing a Cow http://www.gottamentor.com/viewDocument.aspx?d=1746

Relative Valuation Basics http://www.gottamentor.com/viewDocument.aspx?d=905

You will definitely not get hired for ER unless you know your valuation and FS analysis techniques cold. Much leaner than IB , especially these days, and no room for "smart people" that can be trained at the associate level.

Equity Research - Interview coming up ( Originally Posted: 01/26/2010 )

I have an Equity Research Internview coming up for internship position. How/What should I prepare for this interview? Does anyone know firm called "Primary Insight"? please give some comments!

Let's talk about your resume, first. That's one of the first things that's going to come up in an interview. Is there anything on your resume where it would be helpful for you to explain stuff by getting out a diagram or maybe some of your work product?

Also, what is your undergraduate major? If you're in accy, econ, finance, or math/engineering, you can expect questions geared towards the competencies that they'll be hiring you for.

Ack, double-post.

Know a sector really well and be able to articulate your opinion of trends and particular companies. Even if it's not the space your interviewer operates it, you'll inevitably get the "how are the markets doing" question and it's always nice to talk about something you know. Try to gear your responses (and in turn future questions) towards the industry you've chosen to research so you sound half intelligent. Memorize a bunch of metrics (PE, EV / EBITDA , market cap, blah blah) about a few companies and prepare a stock pitch.

I've successfully gone through IBD (FT) recruiting and ER recruiting (SA) and I have to say ER is a lot easier than IBD . It may be that they just have lower expectations for summers, but I feel as if the ER interview is focused more on fit/soft skills.

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30 Equity Analyst Interview Questions and Answers

Common Equity Analyst interview questions, how to answer them, and example answers from a certified career coach.

In the world of finance, an equity analyst plays a critical role in conducting research and analysis to guide investment decisions. To succeed in this challenging field, you must not only possess strong analytical skills but also be able to communicate your findings effectively and persuasively. Now that you’ve landed an interview for an Equity Analyst position, it’s time to prepare yourself for the questions that will help potential employers understand just how valuable your financial acumen is.

To assist you in making a remarkable impression during your upcoming interview, we have compiled a list of essential equity analyst interview questions along with expert advice on crafting compelling responses that showcase your expertise and passion for the industry.

1. Can you explain the difference between top-down and bottom-up approaches in equity analysis?

This question is designed to test your understanding of two fundamental approaches to equity analysis. Your answer will help the interviewer assess your knowledge of the basic concepts and methodologies used in the finance industry. Additionally, it’ll provide insight into your analytical thought process and how you might apply these approaches in real-world scenarios when assessing investment opportunities.

Example: “Certainly. In equity analysis, top-down and bottom-up approaches are two distinct methods used to evaluate investment opportunities.

The top-down approach starts with a broad macroeconomic perspective, analyzing factors such as global economic trends, industry performance, and market conditions. Once the most promising sectors or industries have been identified based on these factors, analysts then narrow their focus to specific companies within those areas. This method emphasizes the importance of external factors in driving company performance and stock prices.

On the other hand, the bottom-up approach focuses primarily on individual companies, regardless of the broader economic environment or industry trends. Analysts using this method conduct thorough fundamental analyses of companies’ financial statements, management teams, competitive advantages, and growth prospects. The goal is to identify undervalued stocks with strong fundamentals that can outperform the market, even during unfavorable economic conditions.

Both approaches have their merits, and many investors use a combination of both strategies to make well-informed decisions about their investments.”

2. What are some key financial ratios that you use to evaluate a company’s stock?

When hiring an equity analyst, interviewers want to ensure you have a solid understanding of financial metrics and investment analysis techniques. This question helps them gauge your ability to identify key financial ratios that can provide insights into a company’s performance, valuation, and financial health, which are crucial in making informed decisions when evaluating a company’s stock for potential investment opportunities.

Example: “When evaluating a company’s stock, I consider several key financial ratios to gain insights into its overall health and performance. First, I look at the Price-to-Earnings (P/E) ratio, which helps me understand how much investors are willing to pay for each dollar of earnings generated by the company. A high P/E ratio may indicate that the market has high expectations for future growth, while a low P/E ratio could suggest undervaluation or potential issues.

Another important ratio is the Debt-to-Equity (D/E) ratio, which measures a company’s financial leverage by comparing its total debt to shareholders’ equity. A higher D/E ratio indicates that the company relies more on borrowed funds, which can be risky in times of economic downturns or rising interest rates. On the other hand, a lower D/E ratio suggests a more conservative capital structure.

I also analyze the Return on Equity (ROE), which measures the profitability of a company relative to its shareholders’ equity. A higher ROE indicates that the company is effectively utilizing its resources to generate profits, making it an attractive investment option.

These ratios, along with others such as Current Ratio, Gross Margin, and Dividend Yield, provide valuable information about a company’s financial position and help me make informed decisions when evaluating stocks.”

3. How do you determine the intrinsic value of a stock?

Equity analysts are expected to provide insights and recommendations on stocks, and a key aspect of that process is determining the intrinsic value of a stock. By asking this question, interviewers seek to assess your understanding of valuation methods, your analytical skills, and your ability to make informed decisions based on financial information. Additionally, it helps them gauge your ability to think critically and communicate complex ideas effectively.

Example: “To determine the intrinsic value of a stock, I primarily use the discounted cash flow (DCF) method. This approach involves projecting the company’s future free cash flows and discounting them back to their present value using an appropriate discount rate, which reflects the risk associated with the investment.

I start by analyzing the company’s financial statements, historical performance, and industry trends to forecast its revenue growth, operating margins, and capital expenditures. Based on these projections, I calculate the expected free cash flows for a specific period, usually five to ten years. After that, I estimate the terminal value, representing the company’s value beyond the projection period, using either the perpetuity growth model or exit multiple method.

Once I have the projected free cash flows and terminal value, I discount them back to the present using a weighted average cost of capital (WACC) as the discount rate. The sum of the present values represents the intrinsic value of the company’s equity. Finally, I divide this value by the number of outstanding shares to arrive at the intrinsic value per share. Comparing this figure to the current market price helps me identify potential undervalued or overvalued stocks in my analysis.”

4. Describe your experience with using financial modeling tools.

As an equity analyst, you’ll be expected to create accurate, detailed financial models to analyze and evaluate investment opportunities. These models help guide investment decisions and recommendations. Interviewers want to ensure you have a strong grasp of the necessary tools and techniques to perform this key aspect of the job. Your experience and proficiency with financial modeling tools will demonstrate your ability to contribute effectively to the team and company goals.

Example: “Throughout my career as an equity analyst, I have gained extensive experience using various financial modeling tools to analyze and forecast company performance. My proficiency in Excel has been instrumental in building complex models that incorporate historical data, industry trends, and macroeconomic factors to project future cash flows, earnings, and valuations.

I am also familiar with specialized software such as FactSet and Bloomberg Terminal, which provide valuable insights into market data and help streamline the research process. These tools have enabled me to efficiently gather information on companies’ financials, competitors, and industry dynamics, ultimately enhancing the accuracy of my investment recommendations. This combination of technical skills and practical experience allows me to create robust financial models that support informed decision-making for portfolio managers and clients.”

5. What is your preferred valuation method for analyzing stocks, and why?

Hiring managers ask this question to gauge your understanding of the different valuation methods and your ability to apply them effectively in real-world situations. They want to see that you have a strong grasp of financial principles and can explain the rationale behind your preferred valuation method, as well as how it can help you make informed decisions when evaluating stocks. This demonstrates your analytical skills and knowledge of the field, which are essential qualities for an equity analyst.

Example: “My preferred valuation method for analyzing stocks is the discounted cash flow (DCF) analysis. I find this approach particularly useful because it focuses on a company’s intrinsic value by estimating its future cash flows and discounting them back to their present value. This allows me to assess whether a stock is overvalued or undervalued based on its fundamentals, rather than relying solely on market sentiment or technical indicators.

The DCF method also encourages a long-term perspective, as it takes into account the company’s growth prospects and sustainability of cash flows over an extended period. Additionally, it provides flexibility in incorporating various assumptions about the business, such as revenue growth rates, operating margins, and cost of capital, which helps create a more comprehensive understanding of the company’s financial health and potential risks. While no single valuation method is perfect, I believe that the DCF analysis offers a solid foundation for making informed investment decisions.”

6. Explain the concept of beta and its significance in portfolio management.

The concept of beta is a vital piece of financial knowledge for an equity analyst, as it measures a stock’s volatility in relation to the overall market. Understanding and effectively explaining beta highlights your ability to analyze risk and make informed decisions when building and managing portfolios. Interviewers ask this question to gauge your understanding of key financial concepts and your ability to apply them in real-world situations.

Example: “Beta is a measure of an individual stock’s or investment’s volatility in relation to the overall market, typically represented by a benchmark index such as the S&P 500. It helps investors understand how sensitive a particular security is to fluctuations in the broader market. A beta value greater than 1 indicates that the security is more volatile than the market, while a beta less than 1 signifies lower volatility. A beta equal to 1 means the security moves in line with the market.

In portfolio management, beta plays a significant role in risk assessment and diversification strategies. Portfolio managers use beta to construct portfolios that align with their clients’ risk tolerance levels. For example, conservative investors may prefer a portfolio with a lower overall beta, indicating lower volatility and reduced exposure to market fluctuations. On the other hand, aggressive investors might seek higher-beta investments for potentially higher returns, albeit at increased risk. Additionally, understanding beta values allows portfolio managers to balance high- and low-beta securities to achieve optimal diversification and manage overall portfolio risk effectively.”

7. How do you assess the competitive advantage of a company within its industry?

As an equity analyst, you’re expected to have a keen eye for the factors that set a company apart from its competitors. Evaluating a company’s competitive advantage is essential to understanding its long-term prospects and investment potential. By asking this question, interviewers want to gauge your analytical skills, industry knowledge, and ability to identify key success drivers that contribute to a company’s competitive edge in the market.

Example: “When assessing a company’s competitive advantage within its industry, I first analyze the firm’s position in relation to its competitors using Porter’s Five Forces framework. This helps me understand the barriers to entry, supplier and buyer power, threat of substitutes, and competitive rivalry within the industry.

Then, I examine the company’s unique selling propositions (USPs) and core competencies, such as proprietary technology, strong brand recognition, or efficient supply chain management. These factors can contribute to a sustainable competitive advantage if they are difficult for competitors to replicate or substitute.

Furthermore, I evaluate the company’s financial performance by comparing key financial ratios like return on equity, profit margins, and revenue growth with those of its peers. A consistent track record of outperforming competitors may indicate a durable competitive edge. Combining these qualitative and quantitative analyses allows me to form a comprehensive understanding of the company’s competitive advantage within its industry.”

8. What factors do you consider when conducting a SWOT analysis on a company?

Analyzing a company’s strengths, weaknesses, opportunities, and threats (SWOT) requires a deep understanding of various factors impacting the business. Interviewers want to know if you can identify and evaluate these factors, demonstrating your ability to think critically about a company’s performance, market position, and potential risks. This skill is essential for an equity analyst to make informed recommendations and support investment decisions.

Example: “When conducting a SWOT analysis on a company, I consider various factors that fall under the four main categories: Strengths, Weaknesses, Opportunities, and Threats. For strengths, I analyze the company’s competitive advantages, such as strong brand recognition, efficient supply chain management, or proprietary technology. Additionally, I assess their financial performance, including profitability ratios, cash flow generation, and return on equity.

For weaknesses, I evaluate areas where the company may be lagging behind its competitors, such as high debt levels, outdated technology, or weak management. This involves examining financial metrics like debt-to-equity ratio and analyzing qualitative aspects like corporate culture and leadership effectiveness.

Opportunities are external factors that can potentially benefit the company. I look at market trends, potential for expansion into new markets or product lines, and any regulatory changes that could positively impact the business. It’s essential to understand the industry landscape and identify growth drivers that the company can capitalize on.

Threats involve external factors that pose risks to the company’s success. These include increased competition, economic downturns, regulatory challenges, and geopolitical events. To assess threats, I monitor industry news, track competitor developments, and stay informed about macroeconomic indicators that might affect the company’s performance.

Considering these factors in a comprehensive manner allows me to form a well-rounded understanding of the company’s position within its industry and make informed investment recommendations based on the SWOT analysis.”

9. Describe a time when you made an investment recommendation that outperformed the market.

By asking this question, interviewers aim to assess your analytical abilities, investment strategies, and decision-making skills. They want to understand how you approach researching stocks, evaluating companies, and identifying potential winners in the market. This information helps them gauge your ability to generate strong investment returns and contribute positively to the team’s overall performance.

Example: “During my tenure at XYZ Investment Firm, I was responsible for analyzing the technology sector. In early 2019, I identified a mid-cap software company that had been consistently growing its revenue and expanding its product offerings. After conducting thorough research, including financial statement analysis, management interviews, and industry trend assessments, I became convinced that this company was undervalued by the market.

I presented my findings to our investment committee, highlighting the company’s strong competitive position, innovative products, and potential for significant growth in the coming years. Based on my recommendation, we decided to add the stock to our portfolio. Over the next year, the company continued to outperform expectations, leading to a substantial increase in its share price. This resulted in an impressive return for our clients, significantly outpacing the broader market performance during that period. My ability to identify promising opportunities through diligent research contributed to the overall success of our team and the satisfaction of our clients.”

10. How do you stay updated on current market trends and news relevant to your coverage universe?

Staying informed about market trends and relevant news is a key part of an equity analyst’s role, as it can impact valuations and investment recommendations. Interviewers want to ensure that you have the necessary research habits and dedication to continuously gather and analyze information, which will help you make informed decisions and better serve your clients and company.

Example: “Staying updated on current market trends and news is essential for an equity analyst, as it directly impacts our analysis and investment recommendations. I use a combination of resources to stay informed about my coverage universe. First, I subscribe to financial news outlets such as Bloomberg, The Wall Street Journal, and Financial Times, which provide timely updates on market developments and company-specific news.

Furthermore, I follow industry-specific publications and attend conferences or webinars to gain insights into emerging trends and technologies within the sectors I cover. This helps me understand the broader context in which companies operate and identify potential opportunities or risks that may impact their performance.

Another valuable resource is engaging with sell-side analysts, who often have deep knowledge of specific industries and can offer unique perspectives on market dynamics. Regularly participating in earnings calls and reviewing company filings also keeps me up-to-date on individual companies’ performance and strategies. Combining these various sources of information allows me to maintain a comprehensive understanding of my coverage universe and make well-informed decisions for clients.”

11. What role does macroeconomic analysis play in your equity research process?

Understanding the broader economic context is essential for equity analysts as it directly influences the performance of individual companies and industries. By asking this question, interviewers want to gauge your ability to consider macroeconomic factors such as interest rates, inflation, and GDP growth when making investment recommendations. They’re looking for someone who can assess how these factors could impact the stocks they’re analyzing and ultimately, the overall investment strategy.

Example: “Macroeconomic analysis plays a significant role in my equity research process, as it helps me understand the broader economic environment and its potential impact on individual companies and industries. I begin by analyzing key macroeconomic indicators such as GDP growth, inflation, interest rates, and unemployment levels to gauge the overall health of the economy.

Once I have a clear understanding of the current macroeconomic landscape, I assess how these factors may influence specific sectors or industries. For instance, rising interest rates could negatively affect capital-intensive industries with high debt levels, while an expanding economy might benefit cyclical sectors like consumer discretionary. This macro-level perspective allows me to identify potential tailwinds or headwinds for various industries, which then informs my bottom-up stock selection process.

With this context in mind, I delve deeper into company-specific analysis, considering factors such as financial performance, competitive positioning, and management quality. The combination of macroeconomic insights and detailed company analysis enables me to make well-informed investment decisions that take into account both the broader economic trends and the unique characteristics of individual stocks.”

12. Can you discuss a recent merger or acquisition that caught your attention? Why was it significant?

Financial professionals are curious to hear your take on relevant industry events as it demonstrates your level of interest, knowledge, and ability to analyze the market. In this case, discussing a recent merger or acquisition showcases your understanding of the factors that drive such decisions and their potential impact on the market. By sharing your insights, you prove your ability to stay informed and provide valuable input on financial trends and decisions.

Example: “One recent merger that caught my attention was the acquisition of Slack by Salesforce in December 2020. This deal was significant for several reasons. Firstly, it represented a strategic move by Salesforce to expand its product offerings and strengthen its position in the enterprise software market. The integration of Slack’s communication platform into Salesforce’s CRM system allows them to provide a more comprehensive solution to their clients, enhancing collaboration and streamlining workflows.

Moreover, this acquisition highlights the growing importance of remote work and digital collaboration tools, which have become increasingly vital due to the COVID-19 pandemic. As businesses continue to adapt to new ways of working, the demand for such platforms is expected to rise, making this merger particularly timely and relevant. In summary, the Salesforce-Slack deal not only demonstrates a strategic business decision but also reflects broader trends in the industry and the evolving nature of work.”

13. How do you handle situations where your investment thesis is challenged by new information or market developments?

This question is essential because it assesses how you, as an equity analyst, adapt to change and maintain a level-headed approach when faced with unexpected developments. The financial markets are dynamic and often unpredictable, so interviewers want to gauge your ability to think critically, reassess your assumptions, and make informed decisions based on new information, all while maintaining your composure under pressure.

Example: “As an equity analyst, I understand that the market is dynamic and new information can emerge at any time. When my investment thesis is challenged by new developments or data, I approach the situation with an open mind and a willingness to reevaluate my initial assumptions.

I start by thoroughly analyzing the new information to determine its relevance and impact on my investment thesis. This may involve conducting additional research, consulting industry experts, or discussing the matter with colleagues to gain different perspectives. If the new information significantly alters my original analysis, I adjust my thesis accordingly and communicate these changes to relevant stakeholders.

It’s essential to remain adaptable and unbiased in this field, as clinging to outdated ideas can lead to poor decision-making. Embracing change and continuously updating my knowledge allows me to provide well-informed recommendations that align with current market conditions and contribute to the overall success of our investment strategies.”

14. What is your approach to managing risk in your investment recommendations?

Evaluating your ability to manage risk is crucial for interviewers, as it’s a key aspect of an equity analyst’s role. Your approach to risk management demonstrates your understanding of market fluctuations, economic factors, and company performance. By showcasing your risk assessment abilities, you prove your capacity to provide well-informed investment recommendations that consider both potential returns and potential losses, ultimately aiding in the firm’s financial success.

Example: “As an equity analyst, managing risk is a critical aspect of my investment recommendations. My approach involves a combination of thorough research and diversification strategies to mitigate potential risks.

Initially, I conduct in-depth fundamental analysis on companies, examining their financial statements, industry trends, competitive landscape, and management team. This helps me identify strong businesses with solid growth prospects and reasonable valuations. Additionally, I consider macroeconomic factors that may impact the company’s performance, such as interest rates, inflation, and geopolitical events.

To further manage risk, I advocate for portfolio diversification across different sectors, industries, and geographical regions. This ensures that clients’ investments are not overly concentrated in any single area, reducing the impact of adverse events on the overall portfolio. In summary, my approach to managing risk combines rigorous research with strategic diversification to provide well-informed and balanced investment recommendations.”

15. Describe your experience working with large datasets and data visualization tools.

When evaluating potential candidates for an equity analyst position, it’s essential to know that they are comfortable working with large amounts of data and have experience using data visualization tools. These skills are necessary because equity analysts need to analyze complex financial data, identify trends, and present their findings in a clear and concise manner. Demonstrating your ability to manage and interpret large datasets while utilizing visualization tools effectively will showcase your proficiency in handling the critical tasks associated with the role.

Example: “During my time as an equity analyst, I have frequently worked with large datasets to analyze financial performance and identify investment opportunities. My experience includes using tools like Excel for data manipulation and cleaning, as well as more advanced software such as Python and R for statistical analysis and modeling.

For data visualization, I am proficient in using Tableau and Power BI to create interactive dashboards that effectively communicate insights to stakeholders. In one project, I developed a dashboard that allowed portfolio managers to monitor key performance indicators of various companies in real-time. This enabled them to make informed decisions on potential investments and track the progress of their existing holdings. The combination of strong analytical skills and effective data visualization has been essential in supporting my work as an equity analyst and driving value for my clients.”

16. How do you prioritize your research efforts when covering multiple companies or industries?

Time management and the ability to prioritize are essential skills for an equity analyst, who often has to juggle multiple tasks and stay on top of industry trends. By asking this question, employers are looking for insight into your decision-making process, how you approach research, and whether you can balance multiple responsibilities while still producing high-quality work. Demonstrating your ability to effectively allocate time and resources is key to proving you’ll be a valuable addition to their team.

Example: “When covering multiple companies or industries, I prioritize my research efforts based on a combination of factors such as deadlines, market events, and potential investment opportunities. First, I ensure that any upcoming deadlines for reports or presentations are met by allocating sufficient time to the relevant companies or sectors. This helps me stay organized and maintain a good reputation with my team and clients.

Simultaneously, I keep an eye on market events and news that could significantly impact the companies or industries I’m researching. For instance, if there’s an earnings release or regulatory announcement, I’ll prioritize analyzing its implications on the company’s financial performance and valuation. This allows me to provide timely insights and recommendations to our portfolio managers and clients.

Furthermore, I continuously assess potential investment opportunities within my coverage universe. If I identify a company or industry with strong growth prospects or attractive valuations, I’ll allocate more time to conduct in-depth research and build detailed financial models. This approach ensures that I focus my efforts on areas where I can add the most value and contribute to the overall success of our investment strategies.”

17. What is your opinion on the efficient market hypothesis?

Exploring your views on the efficient market hypothesis (EMH) allows interviewers to assess your understanding of financial markets and your analytical approach to investing. EMH is a fundamental concept in finance, and your opinion on it can reveal your investment philosophy, your ability to critically evaluate financial theories, and your overall market awareness.

Example: “While the efficient market hypothesis (EMH) suggests that all available information is already reflected in stock prices, making it difficult to consistently outperform the market, I believe there are certain limitations and exceptions to this theory. In my experience as an equity analyst, I have observed instances where markets may not be fully efficient due to factors such as investor psychology, behavioral biases, and information asymmetry.

For example, investors can sometimes exhibit herd mentality or overreact to news events, causing temporary mispricing of stocks. Additionally, some companies might have limited coverage by analysts, leading to less dissemination of information and potential inefficiencies in pricing. These situations present opportunities for skilled analysts to identify undervalued or overvalued securities and generate alpha through active management strategies.

However, I do acknowledge that EMH holds true to a certain extent, particularly in well-developed markets with high levels of liquidity and transparency. This emphasizes the importance of conducting thorough research, utilizing both fundamental and technical analysis, and continuously refining our investment approach to stay ahead in a competitive landscape.”

18. Can you provide an example of a time when you identified an undervalued stock?

Financial employers want to see that you have a strong understanding of the stock market and a keen eye for uncovering promising investment opportunities. Sharing an example of when you successfully identified an undervalued stock demonstrates your analytical skills, market awareness, and ability to think critically—all of which are essential for an equity analyst role. The answer you provide will also reveal your thought process and the specific criteria you consider when evaluating potential investments.

Example: “Certainly, a few years ago, I identified an undervalued stock in the renewable energy sector. The company had recently undergone a management change and was investing heavily in research and development to improve its solar panel technology. At that time, the market seemed to be overly focused on short-term challenges faced by the company, such as increased competition and temporary fluctuations in raw material prices.

I conducted thorough fundamental analysis, including financial statement evaluation, industry comparison, and discounted cash flow (DCF) modeling. My analysis indicated that the company’s long-term growth prospects were strong due to their innovative approach and commitment to R&D. Additionally, the increasing global demand for clean energy solutions suggested a favorable outlook for the entire sector.

Based on my findings, I recommended the stock to our portfolio manager, who decided to include it in our investment portfolio. Over the next two years, the company successfully launched new products with higher efficiency rates, leading to significant revenue growth and a substantial increase in the stock price. This experience reinforced the importance of conducting comprehensive research and not being swayed by short-term market sentiment when identifying potential investment opportunities.”

19. How do you incorporate ESG (Environmental, Social, and Governance) factors into your analysis?

Incorporating ESG factors into analysis has become increasingly important in the world of finance, as investors are more conscious of the impact their investments have on society and the environment. Interviewers ask this question to gauge your understanding of ESG principles and to ensure you’re capable of evaluating companies not only based on their financial performance but also on their commitment to sustainability, ethical practices, and corporate governance. This showcases your ability to provide well-rounded investment recommendations that align with modern responsible investing values.

Example: “When incorporating ESG factors into my analysis, I start by gathering relevant data from company reports, third-party research, and industry benchmarks. This helps me understand the company’s performance in terms of environmental impact, social responsibility, and governance practices.

I then integrate these ESG factors into my financial models to assess their potential impact on the company’s valuation and future cash flows. For example, I might adjust a company’s projected revenue growth based on its commitment to sustainable practices or consider potential regulatory risks associated with poor governance. Additionally, I analyze how well the company manages ESG-related risks compared to its peers, which can provide valuable insights into management quality and long-term competitiveness.

This holistic approach allows me to better evaluate investment opportunities by considering not only traditional financial metrics but also the sustainability and ethical aspects of a company’s operations. In turn, this helps identify companies that are more likely to outperform over the long term due to their strong ESG performance and risk management capabilities.”

20. What is your view on active versus passive investing strategies?

Opinions on investing strategies are crucial for an equity analyst, as they shape the way you approach stock analysis and investment recommendations. By asking about your stance on active versus passive investing, interviewers want to gauge your understanding of different investment philosophies and see how well your approach aligns with their firm’s investment style and clients’ needs. This question also helps assess your critical thinking skills and ability to make informed decisions.

Example: “As an equity analyst, I recognize the merits of both active and passive investing strategies, and I believe that each approach can be suitable depending on an investor’s goals, risk tolerance, and investment horizon.

Active investing involves selecting individual stocks or other securities with the aim of outperforming a benchmark index. This strategy requires in-depth research, analysis, and expertise to identify undervalued or high-potential investments. Active management can potentially generate higher returns than passive strategies, especially during periods of market volatility when skilled managers may capitalize on mispriced assets.

On the other hand, passive investing focuses on replicating the performance of a benchmark index by holding a diversified portfolio of its constituents. Passive strategies typically have lower fees and require less hands-on management, making them attractive for investors seeking cost-effective exposure to broad market trends. Additionally, passive investing has gained popularity due to evidence suggesting that many actively managed funds fail to consistently outperform their benchmarks over the long term.

In conclusion, both active and passive investing strategies have their place in the investment landscape, and the choice between them should be based on an investor’s specific objectives and preferences. As an equity analyst, my role is to provide valuable insights and recommendations that support either approach, helping clients make informed decisions aligned with their financial goals.”

21. Have you ever disagreed with a senior analyst or portfolio manager about an investment recommendation? If so, how did you handle the situation?

Navigating disagreements and showcasing your ability to respectfully present your point of view is essential in the world of equity analysis. Interviewers want to see that you can stand by your research and convictions, while still being open to feedback and collaboration. Handling such situations with tact and professionalism is vital for maintaining healthy working relationships and ultimately contributing to the success of the team.

Example: “Yes, there have been instances where I’ve disagreed with a senior analyst or portfolio manager about an investment recommendation. In one particular case, I had conducted extensive research on a company and believed that it was undervalued in the market. However, my senior analyst held a different view based on their assessment of the industry’s outlook.

To handle this situation, I first made sure to thoroughly understand their perspective by asking questions and discussing their concerns. Then, I presented my findings and analysis, highlighting the key factors supporting my recommendation, such as strong financials, competitive advantages, and growth potential. I also provided alternative scenarios to address the risks they identified.

While maintaining a respectful and professional tone throughout the discussion, we engaged in a constructive debate, weighing the pros and cons of each viewpoint. Ultimately, the senior analyst appreciated my diligence and willingness to challenge assumptions, which led to a more comprehensive evaluation of the investment opportunity. Although our final decision aligned more closely with their initial stance, the process strengthened our working relationship and improved our overall decision-making.”

22. Describe your experience presenting investment ideas to clients or colleagues.

Being able to clearly articulate your investment ideas and recommendations is a vital skill for an equity analyst. You must not only have the ability to thoroughly analyze financial data and draw conclusions, but also effectively communicate those findings to clients or colleagues who rely on your expertise for decision-making. Interviewers ask this question to gauge your experience and comfort level in presenting complex financial information in a way that is both informative and persuasive.

Example: “During my tenure as an equity analyst, I have had numerous opportunities to present investment ideas to both clients and colleagues. One notable experience was when I identified a promising mid-cap company in the healthcare sector that showed strong growth potential. After conducting thorough research and analysis, I prepared a comprehensive report highlighting the company’s financial performance, competitive advantages, and future prospects.

To effectively communicate my findings, I created a visually engaging presentation that included charts, graphs, and key data points to support my investment thesis. During the meeting with our portfolio management team and some of our high-net-worth clients, I confidently presented my analysis, addressing any questions or concerns raised by the attendees. My ability to articulate complex information in a clear and concise manner helped build trust and credibility among my audience.

As a result, the portfolio management team decided to include the stock in our recommended list, and several clients chose to invest in the company based on my analysis. This experience not only demonstrated my expertise in equity research but also showcased my ability to effectively convey investment ideas to diverse audiences.”

23. How do you monitor the performance of your investment recommendations over time?

Keeping an eye on the long-term performance of your investment recommendations is a key aspect of being an equity analyst. Interviewers want to know if you have a reliable and systematic approach to tracking your investment decisions. This showcases your ability to learn from past experiences, adapt your strategies, and ensure that your clients receive sound advice based on current market conditions and historical performance data.

Example: “As an equity analyst, it’s essential to continuously monitor the performance of my investment recommendations to ensure they remain aligned with clients’ objectives and market conditions. I use a combination of quantitative and qualitative methods to track their progress.

Quantitatively, I regularly review key financial metrics such as revenue growth, earnings per share, and return on equity, comparing them against industry benchmarks and historical trends. Additionally, I keep an eye on stock price movements and any significant changes in trading volumes that may signal shifts in investor sentiment.

Qualitatively, I stay informed about company developments by following news releases, attending earnings calls, and monitoring management changes or strategic initiatives. This helps me understand how external factors like regulatory changes, competitive landscape, and macroeconomic events might impact the company’s future prospects.

If I notice any deviations from my initial expectations or if new information arises that could affect the investment thesis, I reevaluate my recommendation and communicate these findings to clients promptly, ensuring they have up-to-date insights for making informed decisions.”

24. What resources do you use to conduct industry and company-specific research?

It’s essential for equity analysts to be well-informed and up-to-date on industry trends, market movements, and company financials. Interviewers ask this question to gauge your resourcefulness, diligence, and ability to gather relevant information. They want to ensure that you are using reliable sources and have the necessary skills to analyze the data effectively to make informed investment recommendations.

Example: “As an equity analyst, I rely on a combination of resources to conduct comprehensive industry and company-specific research. For industry analysis, I utilize databases such as Bloomberg, FactSet, and S&P Capital IQ to gather financial data, market trends, and key performance indicators. Additionally, I follow reputable news sources like The Wall Street Journal, Financial Times, and CNBC for real-time updates on market movements and economic developments.

For company-specific research, I start by examining the company’s annual reports, 10-Ks, and 10-Qs to gain insights into their financial health, management strategies, and risk factors. Furthermore, I attend earnings calls and review investor presentations to understand management’s perspective on the company’s performance and future outlook. To complement my findings, I also analyze sell-side research reports from investment banks and brokerage firms, which provide valuable opinions and forecasts on the companies under consideration. This multi-faceted approach allows me to develop well-informed investment recommendations based on thorough research and analysis.”

25. Can you explain the concept of a discounted cash flow (DCF) model and its importance in equity analysis?

The ability to understand and apply financial valuation methods like the DCF model is a fundamental skill for an equity analyst. By asking this question, interviewers seek to assess your knowledge of this essential concept and gauge your proficiency in using it to determine the intrinsic value of an investment. This insight is critical for making informed recommendations on stocks and ultimately contributing to the overall success of the firm’s investment strategies.

Example: “A discounted cash flow (DCF) model is a valuation method used to estimate the intrinsic value of an investment or company by projecting its future cash flows and discounting them back to their present value. The DCF model takes into account the time value of money, which means that a dollar received today is worth more than a dollar received in the future due to its potential earning capacity.

The importance of the DCF model in equity analysis lies in its ability to provide a fair estimation of a company’s value based on its projected cash-generating capabilities. This helps analysts determine whether a stock is overvalued or undervalued relative to its market price. Additionally, the DCF model allows for adjustments based on various factors such as growth rates, risk premiums, and discount rates, enabling analysts to conduct sensitivity analyses and assess different scenarios. Ultimately, this information aids investors in making informed decisions about buying, holding, or selling stocks.”

26. What is your approach to analyzing companies with complex capital structures or financial statements?

As an equity analyst, you’ll be expected to dive deep into a company’s financial statements and capital structure to evaluate its overall health, growth potential, and investment value. The question aims to gauge your ability to navigate complex financial information, apply critical thinking skills, and make informed judgments. Your response will demonstrate not only your technical expertise but also your ability to simplify and communicate complex concepts effectively.

Example: “When analyzing companies with complex capital structures or financial statements, my approach involves breaking down the complexity into manageable components and focusing on key drivers of value. First, I thoroughly examine the company’s financial statements, including balance sheets, income statements, and cash flow statements, to gain a comprehensive understanding of its financial health.

I then identify the critical factors that impact the company’s performance, such as revenue streams, cost structure, debt levels, and potential growth opportunities. This helps me assess the sustainability of the business model and evaluate the risks associated with the company’s capital structure.

To complement this analysis, I also consider qualitative factors like management quality, competitive landscape, and industry trends. Finally, I use various valuation methods, such as discounted cash flow (DCF) analysis and relative valuation techniques, to estimate the intrinsic value of the company. This holistic approach allows me to form well-informed investment recommendations based on both quantitative and qualitative aspects of the business.”

27. How do you evaluate management quality when researching a company?

Assessing management quality is a key aspect of evaluating a company because strong leadership can have a significant impact on the company’s performance and long-term prospects. Interviewers want to know about your approach to dissecting management teams, including the factors you consider, such as experience, track record, communication with shareholders, and strategic vision. This question helps them determine if you have a comprehensive understanding of how management quality influences investment decisions.

Example: “Evaluating management quality is a critical aspect of researching a company, as it can significantly impact the organization’s performance and long-term prospects. One approach I use to assess management quality involves analyzing their track record in terms of strategic decisions, financial performance, and industry reputation.

I start by reviewing the management team’s background, including their education, experience, and previous roles within the industry. This helps me understand their expertise and how well-suited they are for their current positions. Next, I examine the company’s historical financial performance under the current management, focusing on metrics such as revenue growth, profitability, and return on equity. Consistent improvement in these areas often indicates effective leadership.

Furthermore, I pay attention to the company’s corporate governance practices, which can provide insights into management’s commitment to transparency, accountability, and ethical conduct. Lastly, I consider any available third-party assessments or analyst opinions on the management team, as well as feedback from employees through platforms like Glassdoor. Combining all these factors allows me to form a comprehensive view of the management quality when researching a company.”

28. Describe a time when you had to quickly adapt your research process due to changing market conditions.

Adaptability is a key skill in the world of finance, especially for equity analysts, who must constantly navigate the unpredictable ebb and flow of the market. By asking about a time when you had to adapt your research process, interviewers are looking for evidence of your ability to think on your feet, make informed decisions under pressure, and remain resilient in the face of uncertainty—all essential qualities for a successful equity analyst.

Example: “During my tenure as an equity analyst, there was a time when the market experienced sudden volatility due to unexpected geopolitical events. This situation required me to quickly adapt my research process to account for these new factors and their potential impact on the stocks I was covering.

I immediately shifted my focus from long-term growth prospects to short-term risks and opportunities arising from the changing market conditions. I increased the frequency of monitoring news sources and economic indicators to stay updated on any further developments that could affect stock prices. Additionally, I reached out to industry experts and company management teams to gather insights into how they were responding to the situation and adjusting their strategies.

This proactive approach allowed me to provide timely updates and recommendations to our clients, helping them navigate the uncertain market environment and make informed investment decisions. The experience taught me the importance of being adaptable and responsive in the dynamic world of equity analysis.”

29. What role does technical analysis play in your investment decision-making process, if any?

Employers want to gauge your ability to incorporate technical analysis into your investment decision-making process. They’re interested in understanding the extent to which you rely on this method, as well as how you balance it with other types of analysis, such as fundamental or quantitative approaches. This insight will help them determine if your investment research style aligns with their company’s investment philosophy and strategy.

Example: “Technical analysis plays a complementary role in my investment decision-making process. While I primarily focus on fundamental analysis to evaluate the intrinsic value of a stock, technical analysis helps me identify entry and exit points for investments.

I use technical indicators such as moving averages, relative strength index (RSI), and support and resistance levels to gauge market sentiment and trends. These tools help me determine if a stock is overbought or oversold, which can be useful when deciding whether it’s an opportune time to buy or sell. However, I always ensure that my decisions are grounded in strong fundamentals, with technical analysis serving as an additional layer of information to optimize timing and manage risk.”

30. In your opinion, what are some key challenges facing the equity research industry today?

Equity research is an ever-evolving industry, and interviewers want to know that you’re aware of and can navigate the challenges it faces. This question is designed to gauge your understanding of current market trends, the impact of regulation, and other factors that could affect the industry. Your ability to identify and discuss these challenges demonstrates your ability to think critically and adapt to an ever-changing landscape, which is a valuable skill for an equity analyst.

Example: “One key challenge facing the equity research industry today is the increasing reliance on passive investment strategies, such as index funds and ETFs. As more investors shift towards these low-cost alternatives, demand for traditional equity research may decline, potentially leading to reduced revenues for research providers.

Another challenge is the impact of regulatory changes, particularly MiFID II in Europe, which has increased transparency requirements around research costs. This has led to a greater focus on unbundling research fees from trading commissions, making it harder for sell-side firms to monetize their research offerings. Consequently, this has resulted in cost-cutting measures and consolidation within the industry.

These challenges have prompted equity analysts to adapt by providing more specialized, value-added research that can differentiate them from competitors and justify their fees. Additionally, there’s an increasing emphasis on incorporating alternative data sources and advanced analytics into the research process to generate unique insights and stay ahead of market trends.”

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Equity Research Interview Questions

Discover essential equity research interview questions and expert answers to increase your chances of landing that job.Prepare for equity research interviews with confidence by researching key questions and comprehensive answers.

How to Ace Your Equity Research Interview: Answers to the 30 Most Common Questions

Equity Research Interview Questions With Answers Explained In Detail

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Equity Research Interview Questions With Answer In Detail

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Equity Research Analyst Internship Program 2025 New York

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Turn information into insight

Barclays’ award-winning Equity Research team provides expert knowledge to enable both internal and external clients to make informed investment decisions. Covering over 2,500 companies globally, our Equity Research team offers actionable insights and innovative products, every day. Want in? Join us as a summer analyst.

Real responsibility, right away

As a summer analyst, you’ll spend the summer with our Equity Research team, gaining valuable experience and having a genuine impact on our business. Under the direction of a senior analyst, you’ll contribute ideas and insights to investment theses and reports. You may:

• analyze industry macro trends and company financials
• build and maintain financial models and industry databases
• gather, synthesize and interpret data from publications and other sources
• assist in writing research reports and notes
• develop marketing materials for clients, with the opportunity to participate in client meetings.

A place where you can thrive

At Barclays, you’ll be surrounded by people who will help you achieve your ambitions. Our collaborative, supportive environment gives you the chance to build solid relationships with senior leaders and peers alike. During the program, you’ll also:

• participate in formal and informal training
• connect with junior and senior mentors
• attend dedicated networking sessions and other program events
• receive detailed performance feedback
• give back to the community through volunteer events.

And if you really impress us, this could be the beginning of an incredible career. We invite top-performing, eligible summer analysts to join us as full-time Equity Research analysts after graduation.

To be considered for this program, you must:

• be an undergraduate student with an anticipated graduation date between December 2025 – June 2026

Ideally, you would also have:

• a GPA of 3.2 or above
• a strong interest in business and finance, though no specific major is required
• resourcefulness, team-orientation, enthusiasm and an entrepreneurial spirit, demonstrated through participation in extracurricular activities

Salary / Rate Minimum: $110,000 Salary / Rate Maximum: $110,000

The minimum and maximum salary/rate information above include only base salary or base hourly rate. It does not include any another type of compensation or benefits that may be available.

Candidates may be invited to interview onsite at a Barclays office or virtually.

For further information about Barclays, please visit our website home.barclays

To learn more about careers at Barclays, visit search.jobs.barclays

It is the policy of Barclays to ensure equal employment opportunity without discrimination or harassment on the basis of race, color, creed, religion, national origin, alienage or citizenship status, age, sex, sexual orientation, gender identity or expression, marital or domestic/civil partnership status, disability, protected veteran status, genetic information, or any other basis protected by law.