Starting a financial career as an analyst can offer a multitude of opportunities, allowing for experience in multiple industries and setting analysts up for future success. There are a variety of ways in which this can happen, and research can be an especially fruitful path, providing a strong foundation and potential for growth in multiple areas.
In a recent Bloomberg-sponsored conversation, Jim Covello, Global Co-Head: Single Stock Research at Goldman Sachs, shared his own observations, lessons he’s learned, and advice he has for those at the start of their career journeys.
Differentiating yourself
When asked what he’s looking for as a manager when evaluating young analysts to hire, Covello brought up curiosity and flexibility as key traits. “People can learn new and different industries, even the more technical ones. Obviously, there are some areas where it helps to have a background, like biotech or software. But, if you look across Wall Street, there are great analysts in those sectors that didn’t have experience beforehand,” he said. “As a director of research, I’m looking for people who are incredibly passionate about the market, who have a strong work ethic and desire to succeed, and who have the willingness to be different and create differentiated research, which is going to help our clients.”
For young analysts, building a brand is crucial, says Covello. “When you’re a sell-side research analyst, you are the brand, and you need to be known for something. It starts with being committed to producing differentiated research,” he explained. “The biggest mistake newer people in this industry make is making a recommendation based on things a lot of other people are writing. The key to research has always been to write differentiated analysis that helps our clients make money on stocks. Those fundamentals haven’t changed. They key is being committed to finding something that’s different.”
Covello outlined several ways to approach this:
- Analysis being used
- Type of data
- How data is being acquired, such as big data
- Incorporating newer metrics, like ESG scores and parameters
“It’s critical to find what your niche is, and how you’re different from the rest of your competitors,” he said.
Data skills
“One of the beauties of this job is there are a lot of ways you can be good at it,” Covello said. “Some people are great stock pickers; others are great modelers. Some people are great industry experts; others have great relationships and connectivity. You can be a great sell side analyst leveraging any one of those characteristics. Obviously, the best analysts leverage multiple.”
Effectively using and interpreting data is undoubtedly important for all analysts, and can offer a way to set yourself apart. Coding skills in particular can be a real asset. “Being able to populate your research with data automatically is absolutely key,” he said. “We’ve done Python training internally, for younger people and those in management, and it was incredibly well received and over-subscribed.”
“It’s a critical skill set, being able to automate manual tasks and work more efficiently. And it’s the actual skills that matter across the board, as opposed to accreditation or certifications,” Covello explained. “We don’t qualify or disqualify anyone based on accreditation. We’re looking for how you bring those skills into your work experience and how you apply them.”
Covello expressed equal enthusiasm for financial modeling, but with a caveat. “For anyone who’s not an expert modeler yet, don’t be intimidated by doing this job. You can learn modeling, and you will, because it’s critical,” he said. “Ultimately, what differentiates your stock call is that it’s higher or lower than the consensus, so you having an accurate, differentiated model is the centerpiece where all research starts. Understanding product cycles and industries and having great relationships – all of that ultimately feeds into your model.”
Learning from mistakes
As analysts seek to differentiate themselves and publish new, compelling research on companies within their sectors, there will inevitably be wrong calls.
“Intellectual honesty is key as a sell side analyst,” Covello said. “You’re not fooling anybody when you’re wrong about a stock. Trying to hide from that is not the right way to go about it.” Instead, Covello says owning your mistakes is one of the central components in being a great sell side analyst.
“It’s important to remember: if you get it right six out of ten times, you’re doing a phenomenal job for your clients, adding value to the market. But that also means you’re failing four out of ten times, and that can be difficult, mentally and otherwise,” he said. But, at the same time, holding yourself accountable for both right and wrong calls speaks to credibility and helps to build an analyst’s reputation.