Parth Verma I The Valuation School

CHAPTER 12

QUALITIES OF A GOOD RESEARCH REPORT

Learning objectives

• Essentials of a good research report

• Checklist based approach to writing research reports

12.1 QUALITIES OF GOOD RESEARCH REPORT

To excel as a research analyst, it's not about having exclusive data because more or less
everyone has the same information i.e annual reports, quarterly reports etc. but about how
you communicate insights; a well-crafted presentation is as vital as the analysis.

Writing research reports is a creative process where analysts take complex numbers and
turn them into clear insights. While there's no one-size-fits-all answer, there are some
basic rules to make a great report

- Clarity of Idea
- Simplicity of delivery
- Presenting the argument clearly
- Narrative structure
- Create customised reports according to the reader type

Writing a good research report - Planning, Drafting and Editing:

• The report covers essential aspects such as company analysis, peer comparison,
shareholding details, strengths, concerns, industry overview, financial indicators, and
overall financials.

• It's important to plan how to approach each section and set deadlines, maintaining
discipline, especially during busy times like quarterly results season.
 Parth Verma The Valuation School

Fact-based sections in research report View-based section in research report

Peer group analysis, shareholding Company Business, Key Strengths, Key

pattern, company fundamentals, key concerns, Industry Overview.
financial indicators and
financials.

Source of information: Annual reports, Source of information: Communication with

quarterly reports, calculations. management, Personal Understanding of
the business and industry

Things To watch Out for!

Reports often go unnoticed post-results season due to factors like :

- Unnecessary details
- Long sentences
- Complex language
- Inconsistent views
- No proper structure

Rating Convention

• Analysts use rating conventions like "buy," "overweight," "hold," "underweight," and
"sell" to convey their views on a stock's expected returns.

• Recommendations indicate the analyst's outlook on a security's performance relative to

the market or peer group, with varying definitions among research agencies.

• Additional terms like 'accumulate,' 'reduce,' 'outperformer,' 'performer,' and

'underperformer' signal expectations related to stock performance triggers.

• Ratings such as 'overweight,' 'equal weight,' and 'underweight' describe a stock or

sector's performance compared to the market.

• It's crucial to fully understand the analyst's message within the recommendation before
taking any action.
 12.2 CHECKLIST BASED APPROACH TO RESEARCH REPORTS

• In a world with too much information, it's important to make decisions consistently,
especially when information is conflicting.

• Analysts can use checklists, like pilots do for safety, to be more systematic and consistent
in their research and decisions.

Simple rule: Being organised and disciplined often pays off in the world of investing.

Advantages of Checklist

• Checklists serve as a reliable tool to prevent oversights, minimizing the chances of lazy
mistakes or shortcuts while ensuring disciplined and intentional actions.

• By providing a systematic approach, checklists contribute to objective decision-making

based on facts, promoting a thorough and methodical analysis.

• Additionally, they create a documented trail of decisions, offering the opportunity for
modification and correction over time, which is valuable for continuous improvement and
learning.

In a popular book "The Checklist Manifesto", author, Dr. Atul Gawande makes a distinction
between errors of ignorance (mistakes made out of ignorance), and errors of ineptitude
(mistakes made because of incorrect use of knowledge). He argues that errors of second type
can be avoided to a large extent by following a checklist approach to literally everything in
life."

-Example from the book

Parth Verma The Valuation School

12.3 A SAMPLE CHECKLIST FOR INVESTMENT RESEARCH REPORT

Parth Verma The Valuation School