1. Develop proprietary opinions based on primary research. Regularly check with competitors, customers, and suppliers of each of your companies. Develop unique approaches to financial analysis. Perform proprietary surveys. Avoid at all costs simply repeating guidance or management opinions unless you disagree with them.
2. Be proactive. Strive to be the first to market with any new idea or piece of information–if we aren’t, our competitors will. All information becomes a commodity very quickly. Each analyst should be in front of the institutional sales force no fewer than two to three times per week.
3. Be provocative. Playing it safe turns into a loser’s game over time. It dulls our senses and results in lackluster analysis with no impact on our clients.
4. Follow and publish regularly on at least 12-15 institutional-quality stocks with market caps generally in the $300 million – $3 billion range and with an average daily volume greater than 200,000 shares. Write all research with an eye to the institutional market–it can always be encapsulated for the retail client.
5. Launch coverage on at least one new stock per quarter, pruning unproductive names from the list as required.
6. Maintain an above-average stock picking performance. According to a Nelson’s survey, the average Wall Street analyst is right about 55% of the time; our goal should be to be right 65%-70% of the time.
7. Develop a following with our top accounts. Each focus account should be contacted at least once per month. This list will be developed with the sales force and will be monitored regularly.
8. Cooperate with corporate finance. Every idea generated by corporate finance deserves our attention, but be sure to operate within the regulations that require a gatekeeper to be present for most conversations.
9. Expand our relationship with retail. Only a small amount of retail’s equity business is in our names, and it can be much higher with a modest amount of additional effort. Treat the brokers that have substantial positions in your stocks as you would an institutional client—add them to your contact list. Talk to April Langel regularly about your stocks, maintain an active Focus List, and speak to the entire retail department periodically about your group and your best ideas. Return all calls from brokers within 24 hours. There should be regular visits to the branches, with a goal of 5 – 10 visits per year. Take company management to the major branches and arrange field trips to local companies.
10. Keep trading informed about anything that you think will impact a stock’s price and any clients who have indicated an interest in your stocks. Keep tabs on our positions in your stocks. If you believe that there are events that will substantially impact the price of a stock in the very near term, be sure that the desk is either flat or on the right side of the trade, being very careful not to front run the public disclosure of material, insider information.