How to Shine On Your Equity Research Internship
I want to share my advice that helps you make the most out of your sell-side equity research internship.
You Will Have Many Customers
Your number one customer in the summer will be your immediate sector team. Your top priority is to add value to your team in all ways possible.
FILO: First in, last out. Come into the office earlier than your team and leave later than them.
Take the initiative: Ask for work. When there is downtime and your team is too busy to give you work, read and summarize articles that might be of interest to your team.
Show great attitude: Do the grunt work that your team does not want to do (if it makes you feel better, the junior full-timers will do what you are right now when you leave the internship).
Offer to get coffee or lunch for the team: Remember this is another opportunity to demonstrate attention to detail by getting the orders right. As a rookie, even LeBron James had to carry equipment for more senior teammates.
Get face time: If the firm offers hybrid work, try to be in the office as much as you can, even if your team doesn't go into the office. It gets you noticed and gives you chance to network. A follower told me he got extensive facetime with the Director of Research precisely because he was one of the few associates who went into the office.
Your number two customer is research management. There is usually a director of research and a deputy director of research. You need to make a good impression in front of them.
Finally, network with people outside your team. This is a great transition to the next section.
Ultimately, your MD and your immediate team’s feedback matters the most to your full-time prospect. To a lesser extent, research management’s impression of you and the hidden decision influencers, such as other sector analysts, can have an incremental impact on your full-time prospect.
Making People Like You
If there is one thing you should take away from this article, it is: MAKE EVERYONE LIKE YOU.
As an intern, you were hired by the bank and not by a particular team. So outside the team, you will be on, you need to win over external parties. If you came into this internship thinking mastering the technical skills will win you the return offer, you missed a big point.
What does this mean? You should network with other sector analysts. One, you can uncover things you don’t know about your immediate team. Two, you build relationships with sector experts – I don’t see how that can hurt. Three, you never know who are the hidden decision influencers that help you secure the return offer. Most people don’t tell you about the last point.
How to network? Learn about their background, prepare good questions, and have an engaging conversation. The only thing to note is to keep it balanced, and meet only a few new people every 1-2 weeks. Over a 10-12-week internship, you should make a lot of strong connections if you are consistent.
The same goes for the associates from other sectors. Set up coffee chats and introduce yourself. The associates have the best tips on how to do well in the profession. They also go on to work in investor relations, corporate, or the buy-side. They are good connections to have who can show you the ways of what comes after equity research if you don’t plan to be a lifer.
Asking Good Questions
Before you ask questions, try your best to figure it out on your own: A lot of times, simple Googling will do.
Specifically, before you head into that one-on-one with the research management, prepare good questions to show you respect their time.
General tips:
It’s human nature that people like to talk about themselves. So ask them about their career.
How was their transition from an associate to become an analyst?
How to communicate ideas concisely with salespeople?
Ask about the direction of the research department.
How does the firm differentiate from competitors?
What do they think about the future of the profession?
What three pieces of advice do they have for associates?
Read up on MiFID II, it is the biggest news buzz since Reg FD. Ask about how they think about the impact of MiFID II on the firm.
Most, if not all Director of Research used to be a research analyst. Read up on the sector they used to cover and ask their views on the sector
Crushing The Final Presentation
At many shops, you will do a final internship presentation in front of your immediate team, research management, and other sector analysts in attendance (depends on how many analysts you have built relationships with, see my point on making people like you?)
Make sure your final projects are interesting and relevant:
Interesting: Sell-side is about selling. One of the ways sell-side research adds value is to make clients think. Come up with an original idea, even it’s crazy (flying cars, plant-based meat, etc). Take a look at how the private companies in your sector are disrupting, that’s a good hint on what problems remain to be solved (or can be done better.) Your team can help you frame the argument and put some numbers around it – size up the opportunity and how the economics will work. I remember the intern on the Industrial team during my internship pitched something about hydraulic drilling, and the director of research fell asleep, you do not want that.
Relevant: All the data gathering and work product that you created that led to your final presentation should be usable by your team after you leave the internship. If you do a stock pitch, it should be something the team can initiate on. If it’s a thematic deep dive, it should be a note that the client might be interested in learning more about.
General Tips
Mentor: You will likely be given a formal mentor. If they are straight shooters like me, you are in good shape. If they are very formal and promoters of the firm, get your own mentor within the department, preferably an alum who can tell you what the department, your MD, and your immediate team are really like. You need to know the real inner working, not some sugar-coated corporate messaging.
Avoid mistakes: Print out your work and triple-check it. You don’t have any insights or know what drives businesses yet. The best you can do is to prove you are dependable. Keep a mistake log. If you make a mistake, at least you create the perception that you are learning not to make the same mistake.
Have a good time: Enjoy the experience. Don’t just focus on trying to convert to a full-time offer. Don’t think about your fellow interns are enemies playing a zero-sum game. Make friends with the people in equity research and your fellow interns within and outside equity research. A lot of you will go on to do great things regardless of which company you work for or which career path you pursue.
Rules
Because you will not be licensed, your name will not show up on research reports. You cannot talk to clients or other external parties about your analyst’s views on covered stocks.
In general, HRs are not your friends. I would think twice about escalating any work-related situation to HR first. Instead, talk to your mentor (preferably the informal one) on how to navigate workplace conflict or mistreatment. Obviously, escalate if you are physically assaulted or sexually harassed.
During my internship, one of the undergraduate interns was poorly treated by his manager who is a pompous VP type. The intern has a liberal arts background so he could’ve used some hand-holding on technical skills, but this manager did not want to train and was very impatient. So the intern escalated it to HR. The HR notified the MD of the team, and the MD became the intern’s manager to babysit him and the entire department knew about it. In the end, that intern did not get a return offer.
FAQs
What is the best way to introduce yourself to your sector when you start?
Reading the initiation reports and any industry primer your team has put out (if they ever did one) are the best ways I can think of.
If you need a primer for your sector, email me, and I can see what I can do. I have a pile of primer PDFs.
Any indication of the types of tasks that are assigned to interns? Do you have any tips to excel at them? Any tips on avoiding mistakes on these tasks/deliverables?
Typical tasks: Three buckets: modeling, writing, and data crunching. Data crunching is just a broad term that is about making some exhibits out of the data stored in a spreadsheet that can be used in whatever notes the full-timers are working on. Just generally be useful.
Tips on excelling at them: I would not stress so much about the writing, because sell-side writing is really about conforming to your MD’s style. Unless the team is working on an initiation, you will likely do data entry for quarterly results and forecast based on historical trends. That's the extent of modeling you will do. I suggest understanding how three statements tie together and the best way is to build one from scratch: start from the income statement, flow that into a balance sheet, and then create a cash flow statement and tie that into the balance sheet.
Tips on avoiding mistakes:
Print out your work and triple-check
If unsure, don’t assume, and instead ask to clarify – but save up your questions so you can ask at once, instead of asking one question every 15 minutes
Keep a mistake log – obviously try your best to not make mistakes, but we are human, if you do, at least don’t make the mistake twice.
How would you go about preparing for an internship where you don't know which industry/analyst you'll be working with?
Yeah, that’s impossible, to be honest. However, at least you can self-teach financial modeling. On the industry analysis side, practice analyzing any industry using Porter’s Five Force framework so you have a general framework going in about how to think about your industry:
Is the industry concentrated or fragmented?
Is the industry a high barrier to entry? What is that barrier (or barriers)? Is the barrier the learning curve? Scale? High capital requirement? Network effect? Switch cost? etc.
Who controls most of the value in the value chain? Ie. do the customers have the most bargaining power? Do the suppliers? For a $100 product, how much gross profit does each player in the value chain keep? This question gives you a sense of who creates the most value, hence deserving the the highest gross profit.
What are the substitutes for the products/services this industry provides?
I have read your post about the different types of shops (BB/MM/Boutique). Could you elaborate on the differences between a BB and a top boutique (e.g., Bernstein)?
The big difference is top boutique does not have investment banking services. It’s unspoken but almost everyone knows equity research promotes the investment bank’s issuer clients (companies going IPO or doing secondary offerings).
Boutiques don’t have IB services and they charge clients a subscription fee to access research, so they are more incented to create objective analysis instead of promotional pieces (where the rating is “pre-determined”, wink wink, a buy).
At my firm, the analyst one gets assigned to during the internship generally differs from FT. Is this a common practice on the street? How are candidates picked from the intern class to fill full-time openings?
Yes, it is common practice. I cannot speak for all firms because it depends. For the two firms I have been with, once you receive the full-time return offer, the HR will tell you which teams have full-time openings by the time you start, so you can rank which analyst you want to start your full-time with.
I don’t know this for sure, but for some firms, the full-time hiring teams might even interview you, which is great because you get to know their work style before signing up with them.
With that, I wish you the best this summer.
Thanks for reading. I will talk to you next time.
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