An Insider’s Look at Brokerage Research
by Mike Mayo
Mike Mayo, a top-ranked bank analyst, authored “Exile on Wall Street: One Analyst’s Fight to Save the Big Banks From Themselves” (John Wiley & Sons, 2011). He recently talked with me about how investors should approach analyst stock research and a company’s own assessments.
—Charles Rotblut, CFA
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Charles Rotblut (CR): Could you explain what the role of a sell-side analyst is and what exactly a sell-side analyst does?
Mike Mayo (MM): I’m a sell-side bank analyst, and my job is to analyze large banks, write reports about those banks, offer an opinion about whether those banks are doing well or poorly, and offer an opinion on the stock of those companies—either to buy a bank stock or sell a bank stock.
More generally, a sell-side analyst publishes reports on companies in any industry. What’s unique about a sell-side analyst is that the research gets distributed to those managing money. I don’t actually manage money myself but, in effect, I advise those who do. Something else unique about my position is that I will continue to follow a company whether I think it is a buy-, hold- or sell-rated stock, whereas those who manage money, once they sell the stock, sometimes they might not have the same level of analysis as they would if they actually owned the stock. So there is a continuity of analysis and oversight that I have in my job that you might not always have with those on what’s called the buy side, or those actually managing the money.
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Discussion
You talk about "trust" in your relationship with a bank...just who are you trusting? An individual? a branch? a reputation?
posted 8 months ago by Ken Zanca from California
I am mainly trusting my experience and the experience of those who recommended my bank and investment firm many years ago. I have continuously doing business with these two institutions for the last 40 years, and I am doing business with both of them right now. They don't pay the highest interest, and they don't charge the lowest fees I have seen, but early in our relationship they proved they could be trusted, so I am going to happily stick with it until something leads me to believe this has changed. Our relationship also gives me an example and an incentive to be honest with them, which also helps me to be a better person.
It's not just about the money -- our current fiat money system is greatly based on basically trusting the person/system on the other end of the line to deliver a service or a payment, and I think this fact is often completely ignored when people talk about money supply or regulations or whatever as the glue that holds our system together.
Thanks for the article.
posted 8 months ago by Victor Bradford from Colorado
Oops! My mistake -- second sentence in my last post should read "done" rather than "doing."
posted 8 months ago by Victor Bradford from Colorado
The argument makes sense. No one can doubt that virtually all analysts reports weigh positively. The advice to read and anakyze the CEO's preface probably is the best tool for the investor on the outside.
posted 7 months ago by John Goodell from Maryland
