Equity research: organizational structure, career opportunities, and report writing

“Using the tools of premium equity research reports and skills of a competent research analyst the investor is much better armed to make more prudent and informed investment decisions in the equity market”, says Ebele Kemery, Head of JPMorgan Tech, Data & AI Learning, emphasizing the crucial role of equity research in successful investing.

How exactly can equity research help? What is an equity research report? What are the top equity research companies? The article gives answers to all the questions. 

But let’s start with the equity research definition.

What is equity research?

Equity research is a process of analyzing a company’s financials and market position to assess investment opportunities and provide recommendations on stocks and other securities. It plays a crucial role in helping investors make informed decisions about buying, holding, or selling stocks.

Key tasks of equity research are:

1. Financial research. Analysts scrutinize a company’s financial statements, including balance sheets, income statements, and cash flow statements, to assess its financial health.
2. Industry analysis. Understanding the broader industry context in which the company operates is vital. Analysts examine industry trends, competitive dynamics, the company’s market share, and regulatory impacts.
3. Valuation. This involves estimating the company’s intrinsic value using various financial models such as discounted cash flow (DCF) analysis or price-to-earnings (P/E) ratios.
4. Forecasting. Predicting the company’s future financial performance based on historical data, market conditions, and strategic initiatives.
5. Investment recommendations and report. After thorough analysis, analysts provide actionable advice, recommending whether to buy, hold, or sell the stock. These recommendations are detailed in equity research reports, which are the main output of the entire research process.

The process of equity research is organized by equity research companies. They usually function as divisions within larger financial institutions, like an investment bank.

The research is conducted by a team of equity research professionals, including associates and analysts. Associates typically handle data collection and preliminary analysis, while senior analysts provide strategic insights and final recommendations.

Equity research clients include institutional investors (mutual funds, pension funds, hedge funds, insurance companies), individual investors, investment banks, corporate clients, private equity and venture capital firms, governments and regulatory bodies, and financial advisors and wealth managers.

Best practices for equity research organizational structure

The organizational structure in equity research is relatively flat compared to other areas of corporate finance, with two main positions — associate and analyst.

What does an equity research analyst do? And how is their work different from that of an associate? Let’s explore their respective roles and responsibilities.

Equity research analyst

Equity analysts, positioned at a senior level, specialize in specific industry sectors and focus on analyzing a group of companies within their expertise. Typically, one analyst covers about 10-15 companies in a specific sector. Their primary responsibilities include producing detailed research reports and providing investment recommendations.

Analysts are actively involved in sales and trading activities and collaborate closely with sales and trading teams to effectively communicate their insights to clients and internal stakeholders.

There are sell-side analysts and buy-side analysts. Sell-side analysts work for brokerage firms, providing sell-side research and recommendations to clients, whereas buy-side analysts work for institutional investors, such as mutual funds or hedge funds, focusing on making investment decisions for their clients.

Equity research associate

Associates are junior team members who help analysts. Among the key responsibilities of associates are gathering and analyzing data, conducting initial research under the guidance of a senior analyst, and fulfilling client requests for data and industry analyses. 

They also participate in meetings and calls with clients to discuss coverage of specific stock and provide insights based on their financial modeling and research contributions.

Each equity research division usually has one analyst and 2–3 associates. 

Junior analyst

Often, equity research firms have a junior analyst position. Junior analysts typically assist associates and analysts by handling basic research tasks, maintaining industry databases, and supporting data management. They contribute to the research team’s efforts by compiling charts, graphs, and financial models to support analysis and client presentations.

This structured approach allows equity research teams to leverage expertise across different levels, ensuring thorough analysis and informed decision-making for investors.

How to structure an equity research report?

An equity research report is a document prepared by an equity analyst or financial professional that provides insights, analysis, and recommendations on a particular stock or equity. The main parts of an equity report typically include:

1. Executive summary. The executive summary provides a brief overview of the key findings and recommendations. It includes a summary of the investment thesis, key metrics, target price, and rating (buy, hold, or sell).
2. Company overview. This section offers a detailed description of the company being analyzed. It contains critical information on the company’s business model, products or services, market position, management team, and historical performance.
3. Industry analysis. The industry analysis describes the company within its industry and the broader market. It includes an analysis of industry trends, competitive landscape, market size, growth prospects, and regulatory environment.
4. Financial analysis. This part provides a thorough examination of the company’s financial health. It includes historical financial performance, key financial ratios (such as P/E ratio, EBITDA, ROE, ROA, and debt-to-equity ratio), and revenue and earnings analysis.
5. Valuation. The valuation section determines the intrinsic value of the company’s stock. It uses various valuation models, such as discounted cash flow (DCF) analysis, comparable company analysis, and precedent transactions, to calculate a target price based on these models, including assumptions and scenarios.
6. Investment thesis. This section describes the primary reasons for recommending the stock. It outlines key drivers for growth, competitive advantages, risks, and catalysts that could impact stock performance.
7. Risks. The risks section identifies potential risks that could affect the investment. It includes an analysis of operational risks, market risks, financial risks, regulatory risks, and any company-specific risks.
8. Recommendation. The recommendation section provides a clear and actionable recommendation for investors. It includes the final rating (buy, hold, sell), justification for the rating, and any conditions or triggers that could change the recommendation.
9. Appendices. The appendices supplement the main report with additional data and detailed analyses. This section contains supporting documents, detailed financial models, charts, graphs, and any relevant appendices that provide in-depth analysis.

Report writing requires adhering to several rules, such as: 

• Accuracy and reliability. Data and analysis should be accurate and based on reliable sources.
• Transparency. Assumptions, methodologies, and sources should be clearly stated.
• Comprehensiveness. The report should cover all relevant aspects of the company and its industry.
• Timeliness. Information should be up-to-date and relevant to current market conditions.
• Objectivity. The analysis should be unbiased, providing a balanced view of both positive and negative aspects of the investment.

If you need an equity research report template, you can find examples here and here.

Best equity research firms in 2024

Let’s briefly review the top equity research firms in 2024. 

Large investment banks
1. Goldman Sachs	Goldman Sachs’ Global Investment Research division provides thorough equity research covering about 3,000 securities across 45 economies and all major markets. They create numerous economic, market, and company forecasts and use proprietary indicators to offer clients advanced insights.
2. J.P. Morgan	J.P. Morgan’s Global Research team utilizes cutting-edge technologies and innovative tools to provide clients with top-tier analysis and investment advice. By employing big data analysis, machine learning, and other advanced techniques, their award-winning analysts set industry standards for comprehensive research across macroeconomics, asset classes, sectors, and individual companies.
3. Bank of America	It provides comprehensive insights and analysis across global economics, investment strategy, equity research, credit analysis, ESG themes, rates, currencies, commodities, and ETFs. Their research combines expert analysis with advanced data analytics tools, offering perspectives to individual investors and institutional clients worldwide, including hedge funds and pension funds.
Boutique equity research firms
4. 13D Research	13D Research provides insightful market foresight through a unique approach that integrates perspectives from diverse disciplines such as mathematics, economics, and psychology. They emphasize transparency and unconventional thinking while aiming to simplify complex global trends. With over 38 years of experience, 13D offers comprehensive research delivered through newsletters, digital content, and access to its global analyst team.
5. Fox Advisors	Fox Advisors is a boutique sell-side equity research firm specializing in detailed analysis of electronics supply chains, automotive technologies, and storage products. Their expertise spans component technologies from companies like Corning and TE Connectivity, as well as comprehensive coverage of Transportation-as-a-Service firms and advancements in storage technologies.
6. Bernstein	Bernstein is dedicated to delivering best-in-class research and execution services to institutional investors globally. They aim to set industry standards in research quality, offering a comprehensive suite of global equity services that span research, agency execution, equity derivatives, prime brokerage, and equity capital markets.
Middle-market equity research firms
7. Alliance Global Partners	The company prioritizes high-quality industry research, leveraging a team of professionals with deep sector expertise to support both institutional and retail clients. Their research offerings include daily market updates, long-term macroeconomic perspectives, and insightful opinions across diverse sectors such as healthcare, technology, energy, and transportation.
8. B. Riley	B. Riley, founded over 25 years ago as a small-cap research boutique, continues to excel in differentiated, thematic, and proprietary research. Their firm is renowned for exceptional stock-picking performance and maintains broad coverage with deep expertise across various sectors.
9. GLJ Research	GLJ Research is a specialized research boutique focused on identifying distinctive investment opportunities across various sectors. They offer both long and short recommendations tailored to institutional clients, emphasizing deep-value analysis in sectors such as solar, bulk commodities, electric vehicles, and cannabis.

Career in equity research: requirements and opportunities

Here’s a brief overview of a career in equity research for analysts.

Requirements

Equity research analysts typically hold a bachelor’s degree in finance, accounting, economics, or a related field. Advanced degrees such as an MBA or a CFA (Chartered Financial Analyst) designation are often preferred or required for senior positions.

The skills required for an equity research job include strong analytical skills, financial modeling expertise, and a deep understanding of financial markets and industry trends. Communication skills and the ability to present complex information clearly are also highly valued.

Salary and working hours

Research analysts typically earn a base salary ranging from $89,000-$163,000 annually per year, depending on where they work and who employs them. Including bonuses, commissions, tips, and profit sharing, total compensation can reach between $163,000 and $301,000.

Equity research analysts work, on average, around 60 hours per week, with workload intensifying to over 80 hours per week during peak periods like earnings season.

Career development

The equity research career path for analysts typically involves moving from junior analyst roles to more senior positions with increased responsibilities and coverage areas. Analysts may specialize in specific sectors or industries as they advance.

Professional certifications like the CFA designation can enhance career prospects and credibility. Continuing education and staying updated on market trends are crucial for career development.

Exit opportunities

Equity research analysts often transition to other roles within the financial industry or related fields. Common exit opportunities include:

1. Portfolio management. Managing investment portfolios based on research insights.
2. Investment banking. Moving into roles that involve corporate finance, mergers and acquisitions (M&A), or capital raising.
3. Asset management. Working for asset management firms to manage investments on behalf of clients.
4. Corporate finance. Joining companies in financial planning and analysis (FP&A), strategic planning, or treasury roles.
5. Consulting. Providing financial and strategic advice to businesses and organizations.
6. Private equity. Transitioning to the role of a private equity analyst to research and analyze private companies. Successful analysts can advance to become private equity fund managers, overseeing investment strategies and portfolio performance.

Key takeaways

• Equity research is the process of analyzing a company’s financials, industry dynamics, and market conditions to evaluate investment opportunities and provide recommendations on buying, holding, or selling stocks and other securities.
• Key tasks of equity research include conducting financial and industry research, performing valuation using various models, forecasting company performance, and providing investment recommendations through detailed reports.
• Equity research teams typically maintain a flat organizational structure, comprising analysts and associates who collaborate closely.
• The best equity research firms in 2024 are Goldman Sachs, J.P. Morgan, Bank of America, 13D Research, Fox Advisors, Bernstein, Alliance Global Partners, B. Riley, and GLJ Research.
• Equity research analysts require expertise in finance, strong analytical abilities, and market understanding, earning between $89,000 to $301,000 annually. They often transition to roles in portfolio management, investment banking, or private equity.