Matt Levine’s Money Stuff: It’s Tough to Be a Research Analyst (Correct)

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A crude model for sell-side equity research might go something like this:

1. There are a lot of buy-side investment firms — mutual funds, asset managers, etc. — each of which can invest in the same large universe of thousands of companies.
2. They all try to do research, understand the companies, and invest in the good ones.
3. It is hard for one person to really understand more than one or two sectors, and more than a couple of dozen companies, in great depth.
4. A typical medium-size asset manager can’t really hire hundreds of analysts to get to know every company ...