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How to get sell side research?


vinod1
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Does anyone know how to get access to sell side research? I am thinking if this would be a quick way to get acquinted with a company, especially its long term performance.

 

I got this idea after looking at Pershing Square's persentation on Kraft. I have painstakingly compiled the profit margins of its competitors in various categories just to see what kind of margin expansion is likely and saw that this is exactly what is already available in Pershing Square's presentation. I do not think I have seen any sell side research before other than Alice's BRK report and wanted to see how I would be able to get access to such reports. Do I need to have an account with a full service firm? Or is there an alternate way to get access to such reports.

 

I am mostly interested in the data and could care less about the actual recommendation or price target.

 

Thanks

 

Vinod

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you have to have an account with them, or know someone that does that will let you access through their username and password. Used to be, you could access a few of the majors for free through a little workaround, but they closed that loop about 2 years ago.

 

You can still access price targets for all the brokerages free, but not the reports.

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Vinod your best resource is probably this board.  I'm sure there are some members of the board that would be willing to track down a report every once and a while if you had something specific.

 

I have also been finding more and more on Scribd. 

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Most sell-side research won't give you the long term historicals you are looking for...most models only go back 2 or 3 years as everything they do is forward looking. If you are trying to normalize historical spreads and margins you are much better off with a VL tear sheet or an S&P Outlook tear sheet. Only other quality way to get this info. is through Bloomberg/Capital IQ/Factset...but those are expensive, and still have errors (but at least there is heavy support behind those products to fix any errors that you discover).

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Remember Buffett:

 

“I don’t read any analyst reports. If I read one, it’s because the funny pages weren’t available. I don’t know why anyone does it.”

 

I think that quote is an over-generalization. I have a feeling that Buffett is really referring to ignoring analyst recommendations. After all, Buffett got his Korean flour mill net net investments from a book put together by Citi.                             

 

Sometimes sell-side research can be pretty awesome. I remember reading one about a regional bank, where the analysts got into a car and visited areas around Ohio where they were having their biggest loan losses, to give a more clear picture of what was happening.

 

Since I'm based in Texas, that kind of research can be helpful.

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Remember Buffett:

 

“I don’t read any analyst reports. If I read one, it’s because the funny pages weren’t available. I don’t know why anyone does it.”

 

vinod wants the reports for for their time-saving data & crunching. as he says, he could care less about the recommendation. i think he's entirely justified if thats what he he's interested in. not every one has enough hours in the day to start from scratch on numerous co's you want to compile a history of with an eye to seeing if there's an investment thesis there. when used as an initial filtering device, those kinds of short cuts are invaluable.

 

edit...i also meant to give a plug to morningstars combo of analyst reports & some very nice data history tables

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Thanks all for the comments. I am mostly interested in the raw data, so it looks like I might not find it in the sell side reports.

 

I subscribe to VL reports but it goes only about 18 years and some of the data is available only for the last 12-13 years. I bought up old S&P 500 guide books to get data all the way back to 1984. I am looking for 40-50 year data, primarily for the "near inevitables" like PG, JNJ, KO, AXP to get a better sense of how their margins have evolved and what factors might have contributed to it. It looks like I have to find the information the hard way.

 

Vinod

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I can't understand why 40 to 50 year data on a particular company could really be that useful.  (On the other hand, 40 to 50 year data, or 200 year data, on the overall market, for that I could see some value.)  For any specific company, aren't there so many different variables, between management and the market opportunity and so on, that this data would simply be useful only to predict the past, rather than the future?

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I can't understand why 40 to 50 year data on a particular company could really be that useful.  (On the other hand, 40 to 50 year data, or 200 year data, on the overall market, for that I could see some value.)  For any specific company, aren't there so many different variables, between management and the market opportunity and so on, that this data would simply be useful only to predict the past, rather than the future?

 

This is what I thought.

 

Which brings us to another Buffett quote.

"Wait for a fat pitch and then swing for the fences."  Do you really need to know the weight to know someone is fat.

 

But it all depends on how much capital you are managing. Kraft seems like a fine deal if you are running hundreds of millions or want to hold onto your money. If you are building it I would look elsewhere.

 

With that said sale side research can be helpful for us working stiffs (not in the investment community). Great summary of an idea. I used some with regard to Coastal Energy.

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I can't understand why 40 to 50 year data on a particular company could really be that useful.  (On the other hand, 40 to 50 year data, or 200 year data, on the overall market, for that I could see some value.)  For any specific company, aren't there so many different variables, between management and the market opportunity and so on, that this data would simply be useful only to predict the past, rather than the future?

 

Graham frequently uses 30 years of data in many of his examples. Here is what he has to say on this topic

 

"The soundness of a security purchase is determined by future developments and not by past history or statistics. But the future cannot be analyzed, we can only seek to anticipate it intelligently and to prepare for it prudently. Here the past comes in - through the back door, as it were - because long experience tells us that investment anticipations, like other business aniticipations, cannot be sound or dependable unless they are closely related to past performance."

 

Businesses are characterized by periods of ups and downs especially when measured over decades and profit margins are one of the most mean reverting of all in a capitalist economy. I think a good knowledge of profit margins and the business factors that contributed to them would be of great help in evaluating a company.

 

I tried to reverse engineer some of Buffett's purchases and from what I found given the same information (without hindsight) I would not have made those purchases - because they looked too expensive. Many of Buffett's home runs involved expanding profit margins from their historical low levels. Of course you need to know the business cold to assess why there might be an opportunity to increase profit margins.

 

Take PG for example, its profit margin averaged around 4.7% as recently as the 1984-1988 period and is now triple that during the most recent 3 year period. There are many factors why the profit margins have expanded but if you look at their 40 year data, you have many such reversions of profit margins. None of this implies that profit margins are going back to those low levels, but should give you a good indication of the narrowness of margin of safety at this time when compared to other periods of lower margins.

 

All this might be a waste of time - but I find it entertaining anyway and hope if an opportunity comes my way I would be much better prepared knowing the long term record.

 

Thanks

 

Vinod

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Okay, I guess this makes sense for a subset of industries/companies, which happen to line up well with the types of stocks (industries) that Buffet has traditionally been interested in (very predictable, long-standing businesses).

 

Yes, this is just for the near "inevitable's".

 

Vinod

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Investext has nearly all sell-side reports.

LexisNexis gives you the most recent two from Investext.

Proquest gives you virutally all annual reports.

 

You can gain access to the above via universities/libraries.

Some Uni's gives internet access.

 

Regarding the 20-30 yrs financial history, I would recommend reading Graham's 40+ yrs analysis of U.S. steel., his 15 yrs analysis of American Radiator and Buffett's 15-20 yrs analysis of Geico trends. I also know he read all of KO's annuals from the beginning - that is 100+ yrs. I hold KO's financials since 1919 and reading what happened during the roaring 20s and through the Great Depression gives you priceless insight into the NARTD industry economics throughout the big cycles, and, I would claim, to several other industries with similar characteristics.

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The bigger question is why would you want sell-side research?  What i've viewed from most firms over the last

20 years has been some of the worst, most slanted recommendations around.

 

They make too much money in M&A.  Read about John Olson and Enron and what Merrill did to the guy!

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It's a little too easy to say "all sell side research is a joke".  There are plenty of very intelligent sell side analysts.  Don't just listen to Buffett/Munger and parrot their comments.

 

And no I'm not a sell side research analyst I just get tired of people making blanket statements about them or anyone else for that matter.

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Regarding the 20-30 yrs financial history, I would recommend reading Graham's 40+ yrs analysis of U.S. steel., his 15 yrs analysis of American Radiator and Buffett's 15-20 yrs analysis of Geico trends. I also know he read all of KO's annuals from the beginning - that is 100+ yrs. I hold KO's financials since 1919 and reading what happened during the roaring 20s and through the Great Depression gives you priceless insight into the NARTD industry economics throughout the big cycles, and, I would claim, to several other industries with similar characteristics.

 

Where can you find Graham's analysis of US Steel and American Radiator? Is that in Security Analysis?

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Investext has nearly all sell-side reports.

LexisNexis gives you the most recent two from Investext.

Proquest gives you virutally all annual reports.

 

You can gain access to the above via universities/libraries.

Some Uni's gives internet access.

 

Regarding the 20-30 yrs financial history, I would recommend reading Graham's 40+ yrs analysis of U.S. steel., his 15 yrs analysis of American Radiator and Buffett's 15-20 yrs analysis of Geico trends. I also know he read all of KO's annuals from the beginning - that is 100+ yrs. I hold KO's financials since 1919 and reading what happened during the roaring 20s and through the Great Depression gives you priceless insight into the NARTD industry economics throughout the big cycles, and, I would claim, to several other industries with similar characteristics.

 

Thanks!

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I can't understand why 40 to 50 year data on a particular company could really be that useful.  (On the other hand, 40 to 50 year data, or 200 year data, on the overall market, for that I could see some value.)  For any specific company, aren't there so many different variables, between management and the market opportunity and so on, that this data would simply be useful only to predict the past, rather than the future?

 

 

Check out WEB's largest holdings.  They've all been in existence doing basically the same things for over one hundred years.  :)

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Regarding the 20-30 yrs financial history, I would recommend reading Graham's 40+ yrs analysis of U.S. steel., his 15 yrs analysis of American Radiator and Buffett's 15-20 yrs analysis of Geico trends. I also know he read all of KO's annuals from the beginning - that is 100+ yrs. I hold KO's financials since 1919 and reading what happened during the roaring 20s and through the Great Depression gives you priceless insight into the NARTD industry economics throughout the big cycles, and, I would claim, to several other industries with similar characteristics.

 

Where can you find Graham's analysis of US Steel and American Radiator? Is that in Security Analysis?

 

US Steel - annex to Security Analysis (1951) and in "Financial Statements from the Viewpoint of the Financial Analyst" (an article you can get via libraries - I've talk about it here: http://www.buysidemetrics.com/?p=5429 - in Hebrew).

 

American radiator - lecture 5 here: http://www.wiley.com/legacy/products/subject/finance/bgraham/index.html

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