Being a sell-side analyst is all about predicting the future. After all, your job is to figure out what a company will do in 3 to 6 months. This gives your company the idea of whether or not to invest in that company. This is a much more difficult task than it sounds.
Take for example a famous company like Apple or Google, how can you predict what it will do in 6 months? The answer is difficult, especially if you think about the stock price.
Technology has certainly helped sell-side analysts and made their job much easier. There are technologies that help predict market trends and what will happen to stock prices in the coming months.
These trends can be general and specific. For example, the trend might tell you that oil companies will have a lower stock price due to current market conditions. This gives you a good idea of what you can do with the oil company stock that your company owns.
While technology has helped analysts on the sell-side, there is still a long way to go. After all, their predictions are what can drive the economic boom or bust. For example, a sell-side analyst should be able to forecast a housing crisis in the near future.
They can see the signs (slightly lower prices, too many houses on the market, declining percentage of population growth, more unemployment) and predict what will happen. It is these predictions that cause people to celebrate by buying lots of stocks or lament by selling quickly and generating mini-panic.
Analysts are also involved in the biggest trades that investment banks and other companies can make. When you go through a big trade, it is important to recognize the implications of the trade for your company. How much profit will you make? How confident are you that you can successfully complete the trade? The investment bank’s job is to convince Person A, or Company A, to buy Company B stock. The analysts will plead your case.
The analysts will make their case and show data to support the purchase (or non-purchase) of certain stocks. While companies and individuals have their own analysts, an investment bank’s analysts are always considered experts in their field.