The Review — 31/01/2018 at 10:30

4 a.m. starts: What life’s REALLY like as an analyst on the buy side

by
Baltimore

Baltimore

Have you ever wondered what it’s really like working as an analyst at a big asset management firm?

Meet Joel Grant, a U.S. equity investment analyst covering the automotive sector at T. Rowe Price. After getting his MBA from Stanford, Grant worked at Fidelity International in London for five years before moving to Baltimore to join the $1 trillion asset manager in 2014.

We asked Joel about his typical day. Here’s what he said.

1. What time do you get up in the morning?

I’m definitely a morning person – I wake up around 4:00 or 4:30 and try to get to the gym by 5:00 or 5:30. The market opens at 9, but the news flow gets created overnight, so I try to get to my office an hour or two before the market opens. The hours between 7:30 and 10 or 11 are when I have the clearest thinking and the news flow is usually the most active. I try not to have meetings during that time, because I’m doing research and thinking through investments. I try to use the afternoon for meetings.

2. What’s the first thing you do when you arrive in the office?

It depends. Most of the time I’m reading relevant news items in Automotive News, the Wall Street Journal, the FT and Bloomberg. I absorb the news flow and anticipate what effect it might have on automotive stocks when the market opens up, so if there’s a buy opportunity, then I can take advantage of that.

During earnings season, it’s a little different. I try to get in even earlier, around 6:00 or 6:30, because some companies will announce results even that early, and then I get ready for the conference calls in the afternoon.

3. What’s the most interesting thing you did yesterday?

I got back from the Detroit Auto Show, so I was pulling my notes together from all of the different companies I met with. I’ve been focusing on the evolution of the powertrain with the rise of hybrids and electric motors, figuring out the trends related to the electrification of the powertrain, what different automotive companies are trying to do and, based on my time talking to OEMs [original equipment manufacturers], what that means for the suppliers – what suppliers are saying.

4. What’s the most interesting thing you’ll do tomorrow?

Tomorrow results season starts, and two companies are reporting, Industrial Distributors and Grainger. Over the next few weeks, two-to-four companies will be reporting every day, and I’ll be making sure that our thesis on those stocks is playing out in the results.

5. Which part of your job could you do without?

There’s stuff I would like to automate, but I don’t think there’s anything that isn’t worthwhile. Some is tedious, like looking for changes in diction in annual reports. Even minor changes in wording are often forced by legal teams, so comparing this year’s report to last year’s is worthwhile but tedious. I wish I could automate that somehow. We’ll be getting annual reports coming through soon and trickling out over the next four months. Some are faster than others – small-cap firms usually take longer, sometimes six or seven weeks after the close of their fiscal year.

6. As an automotive analyst, do you get to drive some exciting cars?

I do. I’m lucky to cover Ferrari. They don’t allow you to drive the cars, but they do allow you to be driven around their tracks. They hosted me at the Fiorano Circuit, a Ferrari’s private development and testing racetrack in Fiorano Modenese, near Maranello. The track is a series of tight turns, so our top speed was maybe 130 or 140 or so, but the g-forces going around the curves are massive.

European companies such as BMW, Daimler and Volkswagen let you drive their cars on the Autobahn and that’s when you get up to really high speeds.

It’s also exciting to see the factories, for example, Tesla factories in Freemont and the Gigafactory just outside of Reno, Nevada.

I’d like to do it more frequently – it’s definitely an exciting part of the job.

7. What makes a good automotive analyst?

Fundamentally it’s about being early. A lot of people talk about automotive as being short-sighted, because there’s vehicle sales data in the U.S. and Europe but it’s not material enough to make a lot of money in the sector. You have to look out two years to the electrification trend and churn in European auto volumes leading to their stock trading a lot faster.

It’s about taking risks and identifying trends two or three years in advance, getting out into the field and talking to the OEMs and suppliers. Second- and third-level management are more focused on three-to-five-year trends, whereas conference calls from CEO and CFO are more myopic, short-term-focused. When you engage with people out in the field, having medium to long-term conversations is a lot easier.

8. What are your hot tips for the automotive market in 2020 and beyond?

Given the electrification of the powertrain, looking at the value of a car and how it’s divvied up today will be very different in five-to-10 years. Autonomous driving is coming – driverless cars in the mass market are three-to-five years away, and sometime between 2021 and 2023 you’ll be able to purchase a self-driving car, which will be very disruptive to the industry and will create investment opportunities.

Sooner than that, GM, Google, Tesla and Uber may offer driverless car on a pay-per-mile basis.


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