A comprehensive guide to producing a research report in the finance and bankiing sectors. For a full course on the subject, go to Udemy and search for 'Writing an Equity Research Report'.

1. Welcome to
Writing an equity research
report
Alan Barker

2. This is an updated version of an earlier
presentation on Slideshare that has enjoyed
39,463 hits since 2010.
You can now also take an online course run
by Alan Barker and Clare Lynch on Udemy.

3. Vital statistics: your reports in
the market
A large investment broker prints about 1,000
pages of research and about 1,000 pages of
electronic research each week.
A large fund management house receives 7,000
envelopes of research in the mail every Monday
morning.

4. The need to be unique
You are probably competing with up to 500
different brokers and research houses for your
reader's attention.
Every has access to the same information
(presumably).
What will make your report stand out?

5. Time constraints
We’re all busy.
Yet our reports are a vital element
in our client relationships.
How long do you have to create
your report?
You have longer than you think!

6. Why are you writing?
Writer
You've been told to
You are required to
inform
You want your clients to
deal
Client
An investment idea
Market perspective
In-depth analysis
Valuation tools
Impression of direct
contact with corporate
management

7. Why do reports fail?
Client
The reader gets lost
Story-telling
Too much detail
Repeated information
Sentences too long
Lack of structure
Incoherent logic
Writer
Lack of time
Delayed information
Ambiguous information
Managerial or peer
interference
Lack of focus
Confusion between
research
and report writing

8. An effective research report:
persuades the client to deal

9. An effective research
report:
delivers a clear investment
idea
structures its argument
clearly
expresses itself concisely

10. An effective report does not:
tell the client simply what happened
give the definitive history of the subject
act as PR for the company

11. The challenge
A high quality report
vs
Time
constraints

12. How to square the circle?
Adopt a systematic approach
Planning
Drafting
Editing

13. What’s the big idea?
Doing the research Writing the report
Doing the research is not writing the report.
dat
a
information idea
Investment idea
Supporting
idea
Supporting
idea
Supporting
idea

14. Doing the research
Know the company.
Know the industry.
Know the government views about company
and industry (national and international).
Know what the market thinks about the
company and the industry.
Know what your clients are looking for in terms
of investment ideas.

15. Doing the research
Know the company.
Its accounts
Its products and services
Its management
Its selling practices
How well it manages its own business
Its relations with customers and suppliers
Its R&D capacity

16. Doing the research
Know the industry.
Customers
Competitors
The international picture
The emerging names and new entrants
New trends, products, innovation
Who is in trouble and why

17. Doing the research
Know what the government thinks about the
company and the industry.
Political developments
Power shifts
New regulations
The international political dimension

18. Doing the research
Know what the market thinks about the company
and the industry.
What’s the current majority position?
Where are the minority reports?
Who is right and who is wrong?
Why?
How come you know better than the market?

19. Doing the research
Know what your clients are looking for in terms of
investment ideas.
Their strategy
Their recent successes and failures
Their mood

20. Assessing risk
You must assess the risks associated with your
investment idea.
Assess:
economic risks
liquidity risks
political, legal, and environmental risks
business and management risks
financial risks

21. The birth of an investment idea
What are the
market’s
assumptions?
Do I have
new
information?
Do I disagree
with market
assumptions?
Do I believe
the market’s
assessment of
risk/reward?
What is the
key question
arising from
my position?
Answer:
My message
What is it
worth?
Where is it
going?

22. Characteristics of an effective
message
a sentence
expressing a single idea
no longer than 15 words
long
self-explanatory to the
reader
 Use a verb
 Avoid local
humour
 Keep it
short

23. Thinking about planning
You can structure your ideas using a logical
process.
Your thinking must be unique.
– What marks you out from the competition?
– What will make your client take notice?

24. Grouping and summarising
Report formats are designed to help you
group and summarise ideas.
- front page: headline; ‘black box’; summary
paragraphs
- margin comments
- headings and sub-headings
Designing the structure first will save you
time and improve the quality of the report.

25. Anatomy of a front page
Headline: investment idea
summary of investment
case
Key data
Key points

26. Organising ideas coherently
Message
New question:
Why?
Key point Key point Key point Key point

27. SPQR: useful for introductions
Situation What does the reader know?
Problem What has changed?
Question What would the reader ask you as a
result?
Response Your message

28. Argument: core techniques
Deductive
Inductive
You should buy if
the market is failing
to factor element x
into McCrackle’s
share price.
The market is failing
to factor element x
into McCrackle’s
price.
Buy
McCrackle.
(and)
(therefore)
You should
buy
McCrackle.
McCrackle’s new
risk mitigation
system is not
factored into its
current price.
McCrackle is
improving its
debt profile
rapidly.
McCrackle
is expanding
into
profitable
markets.

29. Explanation: six types
Examples
Categorisation
Process
Definition
Cause and effect
Comparison and contrast

30. Drafting: top tips
Write quickly.
Write in your own voice
Write without interruption.
Write without editing.
Keep to the plan of your
outline.

31. Why edit?
To make reading easier
To create quality more quickly
Because you must
(you can’t get it right first time)

32. Editing efficiently
Edit on three levels:
- paragraph
- sentence
- word
Use a colleague
Take a break

33. Readability statistics
Instantly indicate the quality of your writing
Give an objective measure of quality
Not absolutely reliable
Find out how to access readability statistics on Word.

34. Effective paragraphs:
four characteristics
Unity
Topic sentence
Coherence
Adequacy

35. Unity
A paragraph should be about one topic
A topic (Greek topos, ‘place; location’) is your position on
the subject of the paragraph
What do you want to say about the subject?

36. Topic sentences
Key characteristics:
– Single idea
– What you want to say about the paragraph’s
subject
– 15 words maximum
In a draft paragraph, look for a potential topic
sentence at the end

37. Coherence
Create coherence by using transitional devices
For a list of transitional devices, go to the OWL
at Purdue.

38. Adequacy
Use the topic sentence to identify how you will
develop the topic.
Are you arguing or explaining in the paragraph?
What type of argument or explanation are you using?
- argument: deductive or inductive?
- explanation: which of the six types?

39. Adequacy
To develop your topic adequately:
lay out the terms of the argument (deductive or
inductive)
use examples and illustrations
cite data (facts, statistics, evidence, details, and others)
quote testimony (what other people say or write)
use an anecdote or story (but keep it brief)
define terms
compare and contrast
explain causes and reasons, or effects and
consequences
offer the chronology of an event

40. Editing paragraph sequences
Topic sentences should make sense in order
Use topic sentences as
– Margin summaries
– Sequence of sentences in the summary black box
– Supporting text for graphics

41. Managing your sentences
Follow the ‘15-25’ rule
15 words maximum for all messages, key
points and topic sentences
25 words maximum for all other sentences

42. Deal with long sentences by:
cutting long sentences into separate sentences
separating ‘multiple’ sentences
cutting down long sentences
rebuilding complicated sentences
making non-sentences grammatically correct
finding strong subjects and verbs

43. Plain English
Make your average sentence length 15 to 20 words.
Use only the words that your reader is most likely to
understand.
Use only as many words as you need.
Use the strongest, clearest and most specific verbs you can.
Say what you mean.
Punctuate clearly and simply.

44. Active and passive verbs
Active verbs are:
usually shorter
easier to understand
more direct expressions of who did what
The stock has been purchased by the investor.
The investor has purchased the stock.
It is anticipated that additional monitoring may be needed.
We anticipate that managers may need to monitor progress
further.

45. Abstract nouns
Watch for standard endings
-ion
-ment
-ance
-ence
-ity
-ure
-al
-age
Convert to verbs or adjectives

46. Abstract nouns
I shall make my decision on Friday.
>>
I shall decide on Friday.
The measurement of results will begin on Monday.
>>
We shall begin to measure results on Monday.
It is my responsibility to monitor progress.
>>
I am responsible for monitoring progress.

47. Bringing your writing to life
Be precise
Use numbers sparingly
Qualify general statements with specific information
Look forward
Indicate catalysts for change

48. Using numbers
Use numbers very sparingly.
Use no more than one number in any topic sentence of
a paragraph.
Try to use no more than two or three numbers in any
other sentence.

49. Using numbers
Always subordinate numerical information to a non-
numerical idea.
Used vehicle prices have almost certainly
turned the corner. According to the Manheim
Index, prices rose 0.7% in November,
reversing a nine-month decline.

50. Explaining risk
You mustn’t evade your responsibility to clarify the risks
associated with your investment idea.
Consider placing risks together in a clearly headed section
– probably towards the end of the report.
Explain:
economic risks
liquidity risks
political, legal, and environmental risks
business and management risks
financial risks

51. Keeping it legal
unsubstantiated rumours
unsubstantiated reports
flamboyant, gambling or tasteless language
possible compromised analysis
front-running
pre-announcements
promissory wording
Avoid:

52. This is an updated version of an earlier
presentation on Slideshare that has enjoyed
39,463 hits since 2010.
You can now also take an online course run
by Alan Barker and Clare Lynch on Udemy.