The Three Types of Wall Street Analysts

Wall Street analysts make their living by evaluating companies and industries for investment opportunities. Leveraging their expertise and interpretation of current market conditions and historical data, the analyst develops a recommended course of action for a specific security. The recommended course of action might be to buy or sell the security or track it for future actions. There are several types of Wall Street analysts that serve different functions for various types of clients.

Sell-Side Analyst

A sell-side or “equity research analyst” works for a brokerage firm and to analyze companies for future earnings potential and worthiness for investment. A sell-side analyst conducts what is often referred to as primary research to make recommendations on stocks and other securities (e.g. “buy”, “sell”, or “hold”).
Sell-side research will detail any competitive advantage the company may hold along with its financial and managerial strength and the stock’s current valuation. The sell-side analyst’s research is meant to “sell” investment ideas and is made available to investors who have accounts with the firm or for purchase to third parties.

Buy-Side Analyst

Buy-side analysts are employed by money management firms, like mutual funds, hedge funds, and pension funds to analyze stocks and make recommendations to buy or sell. Unlike sell-side reports, which are meant for the clients of a brokerage firm, buy-side recommendations are not meant for distribution outside of the firm. Reports from buy-side analysts are used to identify those investment opportunities that can improve the performance of the firm’s portfolio.

Independent Analyst

Independent analysts are not employed by either brokerage houses or money management firms. Instead, the independent nature of these analysts enables them to provide “unbiased” research to either institutional or independent investors. Even so, every research report provided by independent analysts is required to include a disclaimer to disclose the nature of the relationship (if any) between the research firm and the company being analyzed. Independent analysts are compensated for their services by the institutional or independent investor.

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The above information is educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a financial or tax advisor.

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