The Thin Green Line: Differences Between Sell- And Buy-Side Analysts

After spending a few minutes browsing a financial media platform, like Benzinga, you will likely encounter the term "sell-side analyst" and "buy-side analyst."

A common two-part question among new and even experienced investors is what the difference is between the two and why anyone should care.

Sell-Side Analyst

A sell-side analyst is tasked with following a list of companies, most often in the same sector and industry, and follow up with timely research reports that are distributed to clients of the firm.

A sell-side analyst can project valuation models and rely on publicly available data, but many chose to take their research a step further and undertake "fact-finding missions" — commonly referenced as a channel checks in the industry.

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For example, a sell-side analyst that covers restaurant stocks would typically spend part of their time visiting stores and making observations about traffic trends, demographics and the ability of staff to effectively and efficiently do their job. They could also talk to restaurant suppliers to see if there is a trend of a particular chain that has cut down or scaled up their orders for raw materials and supplies.

Buy-Side Analyst

A buy-side analyst typically works for a hedge fund, mutual fund or pension fund. As such, the scope of their research and analysis rarely extends outside of the company and is given to the fund managers of the firm that employs them.

A buy-side analyst's main job is to evaluate an investment's suitability and how it fits in with the fund's overall investment strategy.

Buy-side analysts may also interact with sell-side analysts. As the name implies, a buy-side analyst would typically buy the research reports that the sell-side analyst is tasked with selling to clients. A buy-side analyst could also have multiple sell-side analysts at competing firm.

That isn't to say that a buy-side analyst doesn't do their own analysis, as many in fact do. After all, a buy-side analyst's job is essentially to gather as much information from as many sources possible to make the best possible informed decision.

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