Quiz: How Much Time Are You Wasting? (It Could Be Costing You Money)
We all have the same 24 hours in a day, but I find some analysts use it much more effectively than others. Based on my experience I don’t sense the level of a person’s time management skills has anything to do with their intelligence, professional experience or even their degree of ambition. It comes down to their level of self-discipline for staying focused.
To help get your attention, let me pose the issue this way: If an analyst is being compensated $100,000 per year, and he wastes just 30 minutes of a typical 10-hour day, that amounts to a loss of $5,000 per year. What would you do with an extra $5,000 a year?
To help frame the issue, let’s take a quiz:
- Which of the following is a waste of time for typical buy-side or sell-side equity research analysts?:
a. Reviewing emails and voicemails from individuals who are not among the analyst’s trusted information sources
b. Reviewing news or other widely disseminated, publicly-available data
c. Reading research created in response to something that did not change consensus expectations for one of the companies in the analyst’s assigned universe
d. Fine tuning financial forecasts based on new public information
e. Initiating non-work activities during business hours (e.g. looking up sports scores, personal discussion conversation, etc.)
f. Two of the above
This is a trick question because I didn’t offer the real answer: “g. All of the above.” Before you fire back in disagreement, let me dig my heels in further and say these are also usually wastes of time:
- Participating in widely-attended conference calls/meetings/field trips arranged by company management or the sell-side
- Reading company regulatory filings/press releases to get a general understanding of the company and its performance
To clarify my position, I define “waste of time” to mean activities that do not advance your professional goals. Most buy-side analysts have the goal to generate alpha and most sell-side analysts to help their clients generate alpha. Viewing the quiz question through this lens, the overwhelming majority of time spent on the activities above does not generate a unique, out-of-consensus insight; and yet it’s where I find most analysts spend their time.
Most activities that do not advance your professional goals are a waste of time
As part of our time management workshop, Maximize Your Time for Alpha Generation, we ask participants to prioritize 40 typical equity research activities and we find they respond that a good portion of their days are consumed by these activities above (which do not generate unique insights).
The strongest opposition I receive to my view above comes as “Jim, I need to do these activities in order to know enough about my companies so I can develop unique insights.” I get it; you need to know the basics to get to the complex. But how much of the basics do you need to know? This is where I find the great analysts don’t get stuck in the weeds, but instead are building basics only where it’s likely to lead to a unique insight. Viewed another way, great analysts question every minute spent on the activities above asking “How is this going to help me pick a stock?” (or “Help my clients pick a stock?” if a sell-side analyst).
By using this discipline to stay focused, analysts free up time, sometimes 30 minutes a day…other times 4 hours a day. Just for fun, try the math by taking your annual compensation and multiply it by 5% and 40%. Would you change your focus if you knew that amount of reward was at risk?
If you’re interested in learning about how to be more disciplined in the use of your professional time as an analyst, take our on-demand workshop Maximize Your Time for Alpha Generation.
This Best Practices Bulletin™ targets the following activities within our GAMMA PI™ framework:
#1. Generate Informed Insights
©AnalystSolutions LLP All rights reserved. James J. Valentine, CFA is author of Best Practices for Equity Research Analysts, founder of AnalystSolutions and was a top-ranked equity research analyst for ten consecutive years