What are the chief roles of Equity and Commodity Research Analyst?
Research is gathering of information from a range of sources and then Analysis - processing of data to take decisions.
Data and information is very important to the role of the research analyst. Research analysts need information relevant to the investment being assessed.
This would comprise information about the macro and micro economic factors, industry relatedinformation and company related information.
Economic information can be gathered from government statistics and data provided by the Reserve Bank of India.
Data on global aspect can be gathered from International agencies such as the International Monetary Fund (IMF), Asian Development Bank (ADB) and other Global Development Financial Institutions.
Industry related journals and publications can be utilized to gather information on industries/sectors.
Company related information can be gathered from a range of sources including the financial statements filed by the companies as part of regulatory compliance needs, officials of the company authorized to provide it and other sources such as plant visits, surveys and interviews.Analysis and decision-making progression are a mixture of perceptive qualitative aspects that affect functional performance, such as competence of operations, business plans and work principles of the management among the others, the quantitative characteristic such as costs, revenues, profitability and risks to these financials.
Hence, Risk analysts spend lot of time interacting with companies and others, build up data, analysing it and arriving at a buy, hold or sellcall.
Research Analysts can be categorised by the nature of analysis they do, the coverage, and use of the recommendations they provide. Below mentioned are a few:
Sell-side Analysts-They characteristically publish research reports on the securities of companies orindustries with precise recommendation to buy, hold, or sell the subject security.
These recommendations comprise the analyst’s expectations of the earnings of the company and future price performance of the security (“price target”). These analysts work for firms that offer investment banking, broking, advisory services for clients.
Buy-side Analysts- They in general work for money managers like mutual funds, hedge funds,pension funds, or portfolio managers that purchase and sell securities for their own investment accounts or on behalf of their clients.
These analysts make investment recommendations for their internal consumption viz. use by the fund managers inside organization.
Research reports of these analysts are in generaldispersed among the top management/investment managers of the employer firms as these reports contain recommendations about which securities to buy, hold or sell.
Independent Analysts- They work for research creator or boutique firm’spart from full-service investment firms and sell their research to others on a subscription basis. Their clients could be investors, regulators, stock exchanges, fund managers,institutions, investment bankers, etc.
They also offer customized research reports on the businesses on specific requests. The intention of these market analysis reports could vary from investment activity to aware the competition to mergers and acquisition etc.
Apart from these three chiefcategories, entities such as newspapers, media and consolidators of information also provide research reports.
To summarize, role of a research analysts is that of a selector - to do a comprehensive study of companies, evaluate their past performance, analyse how a company is predicted to perform in the future to make guidance based on this analysis.