How Can You Learn and Make Equity Research Reports?

Ever wondered how do you get those buy-sell recommendations regarding securities on the business news channel or your daily newspaper? Well, let’s take you behind the scenes to know better how and who does the magic there.

What are equity research reports?

If you want to learn to make equity research reports you are in for a treat as you’ll be explained in detail what equity research reports are. Equity research reports are detailed documents constructed by equity research analysts, the emphasis of the research could be a specific stock of a company, any given currency, commodity or fixed-income instrument, or any given industry.

Research reports mostly have actionable investment strategies, like whether to buy or sell or hold a given stock. The main objective of conducting this kind of complex analysis is to help channel investment into profitable ventures.  The equity research report provides a subject of communication from a securities firm to its prospective clients with a very precise purpose of resource allocation.

The equity research reports broadly talk about an array of things that includes the investment thesis, financial information and valuation, associated risk & disclaimer and the final recommendation. In addition to this, the equity research report digs a little deeper into the functioning of the business by providing a detailed overview of the business including subject matters like the industry it operates in, its management team, the financial performance, risks, and the target price point.

How to make equity research reports?

Creating an equity report varies to a great deal on what kind of equity report you are preparing. The general equity research reports begin with a thought-provoking headline around the subject and go on to talk about factors like target price & recommendation, stock vs. index graph, investment report summary, stock data, business description, industry overview, and competitive positioning, Valuation, financial analysis, and the associated business risk. The variation can range from initiation report and sector report to strategic and result reports etc.

Initiation reports are the reports that are generated in the very initial stages when the company takes the case for the firm being researched. Being the first detailed research report from the brokerage/ equity firm it is a lengthy one and is generally in the range of 20-50 pages. In addition to the stock details, it also takes into account factors like overall competition, industry dynamics, etc.

The industry or sector report gives major emphasis on Industry dynamics, firm’s competitors, government policies and regulations and key forecasts. It provides the client with a holistic knowledge of the industry ecosystem and peers in the sphere. The strategic or economic reports include information on general macroeconomics, the currency movements, commodities, etc. reports are especially useful for portfolio managers to take the decision on country-specific fund flows.

Broadly it can be concluded that the equity reports start with an overview of what the company does, followed by the recent performance and projections for the future. The report also includes the growth prospects and the risk associated with the business supported by some relevant data.

Dos and Don’ts of equity research reports

It’s important to follow the standard writing techniques while preparing such reports as it's for a specific purpose and should do nothing more than the intended outcome. The reports should not summaries the finding in the very beginning. It should be clear consie and to the point, as the decision-makers are bounded by time constraints.

Time is of the essence here, the equity research reports induce the investor to invest in a particular stock or security, given the highly volatile nature of the stock market and the financial industry in general, timely updates are paramount, any delay is a strict no-no here!

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