Equity Research Effortlessly with ChatGPT
It's time to say goodbye to endless hours of data crunching, analysis paralysis, and all sorts of tedious work you have to do in equity research. Let me show you how ChatGPT can streamline your equity research tasks, so you can focus on better understanding businesses and their stock movements.
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Writing
As a language model, ChatGPT can help us in the realm of writing big-time. Since its release, ChatGPT has become my reliable proofreader for my weekly blog articles.
Simply instruct ChatGPT to "proofread the following:" and then paste your rough draft; it will provide a revised version. However, make sure to fine-tune the output to maintain your unique writing style, which is often part of your brand. Even if you know your writing has poor grammar, feed it into ChatGPT and see what it comes up with. Review it, adding or removing as needed, and repeat the process until you arrive at the final form.
You can also ask ChatGPT to summarize anything, even specifying a word limit for the summary. For instance, when compiling speaker bios for your analyst's client conference, manually pulling data from proxy statements or company websites and summarizing them to the same length can be time-consuming. Now, just ask ChatGPT! Feed in the blurb from the company's proxy statement, ask for a summary with your desired word limit, and your job is done.
For ChatGPT Plus users, you can even feed a URL of a document as input, unlocking the possibilities of summarizing 10-Ks, earnings calls, or any industry-related text.
Want to generate an article quickly? Say, "Write an article using the info below:" and paste your gathered data points. ChatGPT will provide a draft of the article, and you can fill in the missing pieces.
Most YouTubers are likely experimenting with ChatGPT for video idea generation. Why not use it for research note idea generation too? For example, if you cover semiconductor and want 20 note ideas on how to generate deep-dive content on AI that can engage clients, just ask ChatGPT.
Another handy feature is generating emails. You can ask ChatGPT to compose an II begging email, tailored to your liking. Remember, for important communications, a human touch might still be necessary, so use this feature with caution.
ChatGPT can also help you soften your tone when delivering feedback to juniors or crafting diplomatic responses to supervisory analysts late at night. We just want to get the note approved and get the fuck outta there, so we will pretend to be nice with the help of ChatGPT.
Stock Research and Analysis
Many of my Instagram followers praise ChatGPT's ability to generate suitable comparables or competitors for the stocks they analyze, often surpassing real-time data vendors. So take advantage next time when your analyst or PM asks you to put together a quick comp sheet.
You can even feed an income statement or a KPI table from a 10-K into ChatGPT to get a summary. I am old school so I rather spread the numbers and do my own growth and margin calculation. However, you may still find value in ChatGPT's quick 3-year financial ratio trends for a company.
One impressive application is asking ChatGPT for data sources that might explain revenue trends for a particular company. This can be especially handy for sectors with significant stock movements due to macro or industry data news flows. For instance, you could ask ChatGPT what data points you might need to monitor a name or explain revenue growth for a homebuilding company, considering factors like new builds versus remodels, which impact different companies in the homebuilding value chain.
It's worth noting that while ChatGPT can provide insights on a business's moats, it's always best to supplement this information with your own expertise. Here I am asking ChatGPT to assess moats in the context of the 7 Powers framework for Copart, an online salvage car auction platform with consistent 20%+ ROIC.
If you're initiating coverage on a sector or conducting an industry deep dive for your PM, you can explicitly ask ChatGPT to map out the industry, providing you with a good starting point.
Additionally, ChatGPT can help identify the key risks of a company you're interested in, though be sure to focus on company-specific risks rather than generic ones.
Technical
If you forget how to calculate a less frequently used financial ratio, just ask the machine.
Similarly, if you need help implementing a logic in Excel, ChatGPT can assist you.
Before I conclude, a few points:
Never fully rely on a machine; always consider its limitations and potential errors.
Ensure compliance with your firm's policy on inputting MNPI into an AI model.
ChatGPT has a word limit of 3,000 words, so consider breaking up larger inputs to avoid altering the takeaway in summaries.
Keep in mind that AI-based summaries of certain events, like earnings calls, may not capture all qualitative insights experienced investors look for.
Always use ChatGPT as a tool to enhance your research and analysis, but never replace your expertise and judgment with it entirely.
How have you used ChatGPT to save time in your stock research and analysis? Comment below to share your tricks on ChatGPT so we can all learn from you.
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