Introduction to Investments

Financial Analysts Prof S G Badrinath

Financial Analysts

 Individuals typically knowledgeable about areas such as retail, pharmaceutical, airlines, defence
 Mostly sell side, their efforts are geared towards making individual investors purchase stocks
 Issues research reports and make recommendations
 Analyses are a complex amalgam of financial reports, press releases, an assessment of the strength
of the company’s relationships with supplier, with product markets
 They tend to have some expertise (work experience, technical knowhow, access) in the industries of
their specialization
 Their rankings range for strong-buy, buy, hold, sell, strong-sell although other gradation is now
common place
 They generate orders for the sales force in the investment banking companies who employ them,
guide institutional clients, listen to pitches from investor relations (hence sell-side)
 Introduction to Investments
Financial Analysts – How good are they? Prof S G Badrinath
Financial Analysts

 Every major institutional firm has retail analysts, entertainment analyst and such
 In the US, a magazine called Institutional Investor rates the quality of each sector analyst on the
strength of their past recommendations, with the successful ones being rated “star” analysts’ who
are essentially the go-to people for that sector
 Still there are conflict of interest issues, since the sell-siders work for the same people who have
other interests –investment bankers, brokerage division etc
 In the late 1990’s, Regulation Fair Disclosure was mandated by the SEC requiring financial analysts to
disclose all information simultaneously to all investors
© All Rights Reserved.
This document has been authored by Prof S G Badrinath and is permitted for use only within the course “Introduction to
Investments" delivered in the online course format by IIM Bangalore. No part of this document, including any logo, data,
illustrations, pictures, scripts, may be reproduced, or stored in a retrieval system or transmitted in any form or by any means –
electronic, mechanical, photocopying, recording or otherwise – without the prior permission of the author.