Security Analyst

finance a la shmoop what is a sell side analysts all right well they're the

brains of a stock brokerage more or less brokers essentially rent those brains to [Brain in a jar]

by side investors like hedge and mutual funds and wealthy family office

investors hoping that the genius insights of that sell side analysts will

entice the buy ciders to invest through the brokerage generating kindly loving [Bysider people standing by brain in a jar]

Commission's for the brokers got it in practice much investment banking and

corporate finance work is also generated via the reports created by that vaunted [Investment banking report document appears]

sell-side analysts and you can imagine if you're the CEO of itty bitty city

Corp comm and you read a glowing report from a sell side analysts who views your

stock today as a bargain at 12 bucks a share and puts in writing that they

think it'll be over a hundred bucks a share in three years if you were in fact

to do an offering like a selling stock or debt in your company well you'd

probably hire the firm who loved you above all other banks [Love hearts appear from bank building]

pushing you to hire them right that is you'd hire the bank who had a strong buy

on your stock long before you'd hire the one telling Wall Street to short you

well sell side analysts in theory are the investing whisperer of Wall Street [Young girl whispers in girls ear]

they don't actually pull the trigger and actually invest and live or die by their

own investment decisions instead they simply point out observations they've

made with dotted line recommendations to their constituency meaning the people

who read their reports as to what stocks to buy sell or hold well until

Regulation FD or full disclosure came along which required broad and full

disclosure of company information to their entire investing community all at

once sell side analysts were actively courted by the buy side so that the buy [Phone rings]

cider would be the first phone call from that sell side analysts when they were

gonna upgrade or downgrade a given security and then that buy cider could [Hedge fund manager answers phone]

buy it ahead of the rest of the world and make a quick buck or a few points

you know here and there the role was largely lambasted by regulators when it

came to light that some 95% of all investing recommendations

were a buy or strong buy with the sell-side analysts being urged [Cash placed on table by brain in a jar]

aggressively by the investment bankers who paid her to write glowing loving

things about the companies she covered well the result was more or less the end

of the sell-side analysts as a trusted respected role on Wall Street today

those once lucrative many million dollar-a-year jobs now receive anemic [Cash appears]

pay with anemic influence in a world where the buy-side simply stopped

trusting and/or listening to the recommendations of its brokers and [Girl cries and man walks away]

viewed the structure of the relationship as purely a utilitarian functionary one

where the job of the broker was to get the buyer the block of stock at the [Man with sack of stocks]

cheapest price possible that's it no frills so ya sell side analysts aren't

what they used to be which you know if you were on the itty-bitty City

Committee [Man throws cash into trash can]