Equity Research Is Easier Than You Think

When we think about equity and stocks, we think about graphs and charts, and risks and rewards, and hopes and fears, and, for the uninitiated, strangely, bears and bulls.

Markets seem beyond comprehension.

But they don't have to be.

New investors are urged to be cautious, to make sound decisions, given their hard-earned money is on the line. But while equity research was indeed grueling in the past, it's quite less so today.

The internet has spawned limitless apps, websites, and other sources of information — most free! — that makes equity research much easier and accessible.

In principle, whether you invest in equity research solutions or do it yourself, making sound, evidence-based claims on the course of a company involves less risk today, since all the information you need is probably just a click or tap away.

In other words, the more you know, the better decisions you make.

Here's where to begin.

The economy/market

The company

The competitors

Network

Modeling/Reporting

The economy/market

First, collect information about the state of the market or the economy.

Of course, this is harder than it sounds. Much harder, since the scope of the information available out there is seemingly infinite.

To make it easier, economy or market research should be broken down into smaller parts. In other words, research must be conducted piecemeal. Ultimately, the information can be combined to have a good understanding of the whole.

The art of market research is imprecise. It will always be since uncertainty is unavoidable. Excellent market research is just keeping that uncertainty as low as possible.

The company

Once you have a good assessment of the market, your equity research can move forward to assessing the company that interests you.

Again, the amount of information out there might be overwhelming. So, it would help to break it down. Begin by identifying the factors that may most impact the company's value.

Broadly, we can divide the factors into two: external and internal.

External factors are events that are not in the control of the said company. These include sub-factors such as social, political, and cultural changes, a natural disaster, or innovations made by its competitors. These, and other myriad factors, directly or indirectly, affect its value. Get hold of them.

Internal factors, on the other hand, are events very much in the control of the company. These include sub-factors such as products, services, finance, management practices, sustainability practices, innovations, workplace culture, and other factors that shape the company as a whole. These factors are the difference between a well-oiled machine and an unwieldy assemblage of incompatible parts.

Which, do you think, would fare better?

The competitors

Next, assess the competitors.

The factors for assessing a company and its competitors are mostly identical. This is because the objective of competitor analytics is to benchmark the said company in relation to its competitors — to figure out its standing or positioning in the industry.

Competitor analysis is a core ingredient of equity research because it helps investors determine the opportunity cost of their investments — the alternate, what-could've-been had they invested in the competitor. 

This awareness of alternatives, the awareness of risks, informs better economic decisions.

Network

Don't put off asking for help. Many experts are very willing to help new investors, thereby expanding their scope of knowledge at nearly no additional cost.

Remember that networking is the oldest and arguably most effective to make decisions. Alone, we make decisions based on very narrow insights. Networking, however, is the connection of smaller brains, experts in different subjects, to form a larger one that offers much broader insights.

Just ask. It's free!

Reporting

Compile everything you have learned into a neat report such that the insights are easily communicable.

To make the most of it, make sure the report has, not vague, but actionable outcomes, such that you always make definitive decisions.

That's all it takes.