Bernstein Flashcards
Bernstein info
Premier sell-side research and brokerage firm
Best known for equity research, consistently ranked no1 for in-depth analysis and forecasts on companies, industries and markets
“The blackbooks” provide unbiased, differentiated insights
Works with leading investment managers, pension funds, endowments, foundations, and corporations
Combines high-quality research with global trading distribution to service clients worldwide
Values
Invest in one another
Strive for distinctive knowledge
Speak with courage and conviction
Act with integrity – always
Recent cool news story regarding Bernstein
- Bernstein recently launched a new AI-driven research tool called GARP Bot that uses natural language processing to generate investment ideas by analyzing transcripts, reports, and alternative data sources. This showcases Bernstein’s innovation in leveraging AI technology.
Cool story regarding oil and gas
- Insight report from Bernstein from Senior Analysts
- recent conflict in Israel and Gaza has raised concerns about impact on the oil complex and the threat it poses to the global economy and markets.
- Despite this, supply of oil has remained relatively stable, with no capacity taken offline and no moves by major players to take market share.
- While the supply and demand for oil are both expected to grow in the future, the most significant “market-moving” question has shifted to the potential for a direct confrontation between Israel and Iran.
Examples of ability to manage deadlines and priorities
- Situation - the jobs and tennis balancing uni
- Task – how do I maintain my degree being my priority, especially with getting a good grade
- Action - working through my schedule and prioritising tasks which I know need to be put first
- Result - 2.1 degree whilst winning our league (haha)
Ability to work as a team
In my exec roles and team captain for tennis at durham university – skills learnt: communication, adaptability, motivation
Currently working as a team in SIA
- Situation – SIA background – team of 5 meeting establishing our investment philosophy and objective. However, international student, really nice girl from china, didn’t understand all of what we were saying
- Task – not only making sure she understood, but also shared her input as likelihood is I would say something that isn’t correct – I am 100% no expert on stocks
- Action – downloading an live audio translator and adjusting the way we spoke. Asking her for her opinion and making sure she knew that if she did have any questions, she could whatsapp us afterwards
- Result – Very productive discussion where we were able to receive her opinion on the investment philosophy and what sectors she was particularly interested in.
Time showing leadership
- Captain of tennis team currently but most important moment of leadership was during county cup finals
- Captained the Surrey team (I was oldest and knew the team very well)
- Task – how to motivate the team when we (surprisingly) lost our tie to Leicester and were at risk of going out at group stage of last 8
- Action – at team dinner, emphasising the fact we have to do everything that is in our control – win all our remaining matches – completely support other teams in the group stage which improve our chances of qualifying for the final
- Result – qualified by sets won (!!) for the final, which we won to become national champs
Time showing analytical ability
- AP commodities and current dissertation and the current process and problems encountered with conducting a cost benefit analysis of carbon offsetting projects
- Action – reading on how to quantify the social cost of carbon and how to manipulate the data. Limit to what I can do so organising an out of hours meeting with a lecturer who specialises in this
- Result – Currently using stata programming to convert this into a stastically accurate result
Why Bernstein
- firm’s commitment to providing associates with significant development opportunities, visibility, and incremental responsibility. Small intimate teams - allows responsibility but make meaningful connections which align with how I improve. Meeting the current associates when I had WExp, about the rigorous but constant learning environment make me believe Bernstein would be an ideal place to grow my skills in equity research.
- enthusiastic about the firm’s global presence and the chance to engage with institutional investors and companies worldwide.
- eager to roll up my sleeves and contribute to producing the , in-depth analysis that has made Bernstein the #1 ranked research firm.
- With my passion for unraveling insights, I know I would thrive in this intellectually challenging role. For all these reasons, I am very enthusiastic about the potential to launch my career as a Research Associate with Bernstein.
Why research associate
- allow me to utilize economics background and experience in commodities analysis to contribute to Bernstein’s acclaimed equity research. Producing high-quality equity research and gaining in-depth knowledge of industries appeals strongly to my analytical nature.
- Current dissertation is analysing tourism data and ecotourism, a sector I actually learnt a lot about and its development whilst my work experience with bernstein
- comfortable with quantitative analysis
Questions to ask
- Regarding the joint venture with Societe General - What are the expected impacts on Bernstein’s equity research division from this partnership? Will it lead to expansion into new geographies, access to new datasets, or additions to research coverage?
- Are you confident you will retain your independence of though after SocGen?
Contents of an equity research report
o Industry research (competitors, trends, etc.)
o Management overview and commentary
o Historical financial results
o Forecasting
o Valuation
o Recommendations
- Can also include
o Investment risks – can be operational, financial, or related to regulatory issues or legal proceedings
o ESG – How the company manages the relationships related to ESG
Industry research
- Lots of info on trends and competition in the industry
- Porter’s five forces come in handy to ensure you’ve covered all dynamic of industry
Porter’s 5 forces
The model encourages organizations to look beyond direct competitors when assessing strategy and, instead, consider broader environmental forces.
competitive rivalry, supplier power, buyer power, threat of substitution, and threat of new entry
Management overview
- Necessary to understand the quality of its management team before considering a potential investment in a company
Historical financial results
- One of core jobs
- Compare them to analyst’s expectations
- performance of a stock is largely based on reality vs expectations, so it’s important for an analyst to analyse and understand if the actual historical results were below, at, or above market expectations.
Forecasting
- two main ways of forecasting top-down and bottom up
- Top-down forecasting looks at industry-first (its size, growth, pricing, etc.), then determines how much market share a company is likely to have, and finally, works down to revenue.
- A bottom-up approach starts with the basic drivers of revenue, such as the number of customers, or the number of units sold, and then works up to a revenue forecast.
Valuation
- Takes all the assumptions from the forecast and build on them with even more assumptions, such as discount rate or valuation multiple (both very subjective)
Recommendations
- In the recommendations section, the equity research analyst will have a target price (or price target) which tells investors where they expect the stock to be (typically) a year’s time.
- they will often make an actual recommendation to investors about what they should do. The language varies from bank to bank, but examples include:
o Buy / Overweight / Long
o Hold / Market weight / Neutral
o Sell / Underweight / Short
Three-statement finance models
- Income statement – businesses profitability
- Balance sheet
- Cash-flow statement
- These three statements are informative tools that traders can use to analyze a company’s financial strength and provide a quick picture of a company’s financial health and underlying value.
DCF Models
Discounted Cash Flow analysis helps determine value of an investment based on its future cash flows.
The PV of expected future cash flows is arrived at by using a projected discount rate.
If the DCF is higher than the current cost of the investment, the opportunity could result in positive returns and may be worthwhile.
Companies typically use weighted average cost of capital (WACC) for discount rate as accounts for the rate of return expected by shareholders.
Discounted cash flow formula
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Equities vs bonds vs cash/cash equivalents
Fixed income
You lend money to an entity and, in return, they pay you a fixed amount until the maturity date, which is the date when the money you initially invested (the loan) is paid back to you.
Equities – owning shares
Cash equivalents – Considered very low risk since almost no chance of losing money
Examples of cash and cash equivalents include cash parked in a savings account as well as U.S. government Treasury bills (T-bills)
Derivatives
are financial contracts, set between two or more parties, that derive their value from an underlying asset, group of assets, or benchmark.
- Prices for derivatives derive from fluctuations in the underlying asset.
Examples of derivatives include futures contracts, options contracts, swaps, and forward contracts.
Derivatives can be used for various purposes, such as hedging against price fluctuations, speculating on future price movements, gaining exposure to different markets or assets, or managing risk
