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Survival Kit for an Equity Analyst

       The Essentials You Must Know

       Shin Horie

This edition first published 2021 Copyright © 2022 by John Wiley & Sons, Ltd.

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      Disclaimer: The views stated herein do not necessarily reflect the views of Goldman Sachs.

      Library of Congress Cataloging‐in‐Publication Data

      Names: Horie, Shin, author.

      Title: Survival kit for an equity analyst : the essentials you must know / Shin Horie.

      Description: Chichester, West Sussex, United Kingdom : John Wiley & Sons, 2022.

      Identifiers: LCCN 2021031903 (print) | LCCN 2021031904 (ebook) | ISBN 9781119822448 (cloth) | ISBN 9781119822455 (adobe pdf) | ISBN 9781119822462 (epub)

      Subjects: LCSH: Corporations—Valuation. | Business enterprises—Valuation. | Corporations—Finance. | Business enterprises—Finance. | Investment analysis.

      Classification: LCC HG4028.V3 H67 2022 (print) | LCC HG4028.V3 (ebook) | DDC 658.15—dc23

      LC record available at https://lccn.loc.gov/2021031903LC ebook record available at https://lccn.loc.gov/2021031904

      Cover Design: Wiley

      Cover Image: © Tarchyshnik/Getty

To Makiko, Waka and Hana

Preface: Why I Wanted to Write This Book

      What do equity analysts do? When I was asked to explain what I do by my parents, who are not familiar with the financial industry, I told them: ‘We try to predict the future of a company.’ Simply put, that's what equity analysts do and, in my view, should be doing.

Talking about the past and the present is relatively straightforward. Talking about the future is more uncomfortable as no one likes uncertainty or being seen to be wrong in front of other people, which is why there is significant value in a quality attempt at predicting the future of a company. To do this, analysts need to understand many things that require a lot of research and investigation. This book provides equity analysts with a number of helpful hints and tools to help them navigate the complex research process, particularly when they are early in their careers.

      This is a book for company analysis, not a financial theory book, nor a business school textbook. It aims to be a practical guide on how to survive and thrive during the first few years as an equity research analyst. So, when I refer to ‘we’ or ‘you’ I am referring to new equity analysts. The book contains details of how to discover, analyse, forecast, and evaluate public companies. It has four unique features:

       First, it specifically focuses on company analysis and valuation and does not directly talk about stock investment, although the ultimate aim of our analysis is that the analysis is used for investment decisions. This focus is because we often make the mistake of talking about stock price movement before we fully understand the underlying company value and thus get confused between the two.

       Second, this book does not go into the theoretical definitions of accounting and financial analysis. This is because there are many textbooks available on this subject and most readers have already studied them extensively. Instead, I offer some suggestions and advice on how to implement such metrics in the real world of company analysis.

       Third, a number of specific industries are discussed because characteristics, growth prospects, and valuation methodologies vary substantially by industry. Readers can then apply the content directly to the industries they need to analyse.

       Fourth, by leveraging my background and experience, I tried to make the content as globally applicable as possible. As such, many parts of this book would also be relevant for emerging market analysts.