Love hearing these guys thoughts.
https://youtu.be/UmztSIQGiME?si=unwbZam_zOS3-5wN

About half a year ago, I posted some thoughts on alternative career paths with limited feedback: https://www.reddit.com/r/SecurityAnalysis/comments/1evjra1/alternative_career_paths_for_equity_analysts/

Today, I want to discuss some of my reflections on the career path for research analysts. For background reading, you might view this on Bloomberg, sorry that it's behind a paywall: https://www.bloomberg.com/news/features/2025-01-08/wall-street-analyst-pay-drops-30-as-banks-slash-equity-research?sref=ClWOCq5H

These thoughts are really intended for myself, 15 years earlier. I don't think I would have changed anything though because the work is deeply satisfying on an intellectual level. The ability to learn effectively "how the world works" is unparalleled. Alice Schroeder (who wrote "The Snowball") once explained how Warren took her to the Nebraska Furniture Mart and would walk through the store with her explaining all the pricing dynamics and nuances of what was on sale and so on with a real passion/excitement. With time, an analyst can be that excited as they learn about things around us that many of us take for granted, but the insights come with a lot of time and experience. I'm not giving my own examples for privacy, but one doesn't have to look too far :)

That said, I would remind my 15 year younger self of the challenges. There are a few challenges that people should be aware of:

1. The industry continues to decline in headcount due to passive flows. This is a really big deal in my opinion because it sets you up to be in a bad environment with a long-lasting toxicity as people are grappling to hang onto their jobs and careers, especially those who are 30 years in and don't want to change careers in their 50s or 60s. It also means that if your employer closes up shop or cuts headcount, you have added career risk finding a new role. No one has a solution either, just listen to Munger on the topic: https://www.youtube.com/watch?v=cZmi92vyUvw
2. This toxic behavior also pushes positioning towards closet indexing. It's not the "purist" view you'd get after you read Security Analysis, Margin of Safety, and the countless other real business-like books. The closet indexing is a necessity, but detracts from "real" investment decision making and would weigh on any passionate analyst.
3. As a consequence of 1 and 2, time horizons become shortened. It's very easy/routine to replace actively managed funds with a passive product, so fund managers can't underperform for too long and still have a job. In this way, it's better to closet index, and instead of focusing on the long-term of a business, just keep it to the next 1 quarter to 2 years and call it a day. If you look beyond that time horizon, consider it more on the fringe of your research. This is disappointing for those of us with a deeper curiosity or interested in real fundamental valuation as opposed to short term pops/declines. Secondarily for this topic, think about how a portfolio manager should have behaved in the run up to 1929. Looking back, you'd have looked like a genius if you were more in cash because you felt equities were overpriced or that banking was unsound (or that corporate disclosures were so bad some published their "10K" on a 3x5 notecard. But if you underperformed a passive benchmark for the years leading up, in today's environment, you'd have been given the boot before that came to fruition. To be rational can be very different than what a client wants, which is performance.

This leads to a key point: Many investors select their exposures for what they need based on various processes like SAA, their time horizon (ALM), etc. In this method, they're focused much less on the price and more just on the "right" product. In this context, they compare each fund to a passive alternative and don't allow for that much independent thinking across asset classes, geographies, or whatever creativity you may have. If you're running a small cap US fund, you have to stay in that space even if you think it's overvalued, you can't find ideas, or whatever you may think. This is rather different than what Peter Lynch and Peter Cundill espoused (see their books for examples of how they use convertible bonds or foreign govt bonds in their equity portfolios).

I wonder if we will ever see funds emerge with a "business like" mentality that don't care as much about benchmarks, but focus on just finding decent opportunities wherever they may emerge. This doesn't fit the process for most today unfortunately. I think it would be a hard sales pitch for most.

One of the final conclusions I came to is why Buffett is right yet again. By setting up Berkshire the way he did, and creating the right culture, he and the firm are most likely to manage all these various cycles. With his insistence, for example, on underwriting insurance policies that at least break even on their own (100% combined ratio or lower), you are not required to make investments that could later cause trouble - by keeping the insurance book profitable on its own, you can be patient and business-like with your approach to investing. Most firms cannot do this because everything revolves around predictable or at least growing revenue over time - he is such an outlier. The same goes for being able to hold cash or take advantage of market dislocations such as when high-yield bonds blew up in the late 90s or early 00s. You can't do that easily as a fund manager if you're not in that specific space when it happens.

I wish I had a more positive message for my past self or future analysts. This is a challenging field, but if someone can prove me wrong, please do so. I do not believe cycles are gone, and I believe in the next decades, there will be times where it rains gold to use Buffett's words. An independent analyst should be able to take advantage of those and find some great deals, but I wish I knew how people could more soundly make it a career without short term time horizons, closet indexing, and so on.

Hi everyone,

I interviewed some fantastic candidates when I posted here last year, so I thought I’d give it another shot and share this year’s internship opportunity at Excela on here. If you're passionate about investing and looking to learn and potentially work here full-time, please check out the full details below:

Position: Investment Analyst

Location: New York, NY

Employment Type: Full-Time Paid Internship

About Excela Capital:

Excela Capital is a global, long-only public equities investment firm focused on long-term investing. We are long-term business owners committed to finding and investing in the extraordinary potential of a select few businesses in the world.

Time, in our strategy, is an invaluable ally. We believe the most exceptional companies not only withstand competition but thrive, expanding their market strength over time. These high quality businesses consistently grow faster, longer, and more profitably than the average business.

Portfolio Manager Background:

William Jung is the founder and managing partner of Excela Capital.

Before establishing Excela Capital, William worked as a senior analyst at Viking Global, overseeing investments in multiple industries for the global equities fund. Prior to that, he was an analyst at Meritage Group, leading investments across various sectors. Earlier in his career, he spearheaded investments in telecom, healthcare, and business services at Sansome Partners. Mr. Jung’s foundational experience began at Himalaya Capital, a value investing firm focused on opportunities in Asia.

Position Overview:

We are seeking a highly analytical and detail-oriented Investment Intern to join our team. The ideal candidate will have a strong interest in investing, a foundational knowledge of accounting and business analysis, and a proactive mindset. This internship offers a unique opportunity to gain hands-on experience analyzing investment opportunities, conducting market research, and supporting the firm’s decision-making process. This internship is expected to convert to a full-time role based on performance. We are actively seeking applications from those who are passionate about building a career in public markets investing. This is a full-time paid internship expected to begin in Summer 2025.

Key Responsibilities:

• Conduct detailed analysis of investment opportunities, including financial modeling.

• Monitor and analyze economic, industry, and market trends to inform investment decisions.

• Support the due diligence process for potential investments.

Qualifications:

• Already graduated or current student with strong knowledge of financial accounting (self-taught or through coursework)

• Relevant coursework or internship experience in financial modeling, analysis, or an investment-related field (e.g., investment banking, private equity, or hedge fund).

• Excellent communication skills, both written and verbal, with the ability to present complex information clearly and concisely.

• Intellectual curiosity about investing and businesses

How to Apply:

Qualified candidates are invited to submit their resume by email at hr at excelacapital.com. If you have an investment pitch prepared as well, please send that along too (not required however).

You must have US work authorization to apply. Please include “Investment Internship Application” in the subject line.

Application Deadline: March 1st, 2025

Excela Capital is an equal opportunity employer.

Question and answer thread for SecurityAnalysis subreddit.

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Japex, or Japan Petroleum Exploration (TSE:1662) owns basically all of the domestic oil and gas production in Japan (which isn't much), along with some shale fields in the US, some acreage in an oil field in Iraq, three liquid natural gas import terminals, 500 miles of natural gas pipelines inside Japan, and 4% of the common stock of Inpex (TSE:1605), which is worth $600 million at current market prices, along with a boatload of cash and very little debt.

Market cap is $1.9 billion, with $680 million in net cash, for an enterprise value of $1.5 billion. In the last 12 months, it generated $380 million in operating income, $320 million in net income, for a trailing PE of 5.9X, or 4.7X if you exclude cash. If you treat the Inpex shares as "as good as cash", then you might even value the business at a PE of 2.8X.

The company forecasts are super pessimistic, in typical Japanese style, so they use an assumption of an oil price of $50 for 2026 forecasts. Even with this (IMO unlikely) $50 oil forecast, they are estimating 30 billion yen or $191 million in operating profit (using a 157 UDSJPY rate) for 2026, which would be a 2-year forward PE of 12.6, or 10X excluding cash.

I usually start from an assumption that the NY Strip pricing is the best estimate of future commodity prices. December 2026 futures show a future price of $66 per barrel, which would probably put net income closer to $250-300 million, putting the forward PE anywhere from 3-7.6X, depending on how you discount the cash and Inpex stock on the balance sheet.

One of the big questions with any Japanese company is what are they doing with the cash? Well, they have been slowly ramping up buybacks, from $1 million in FY2021, to $30 million in FY2022, to FY$32 million in 2023, to FY$52 million in 2024, to $130 million in the LTM period. This consistent acceleration in the pace of buybacks signals to me management has been experimenting with buybacks and gradually growing more comfortable, and might return a substantial portion of the cash hoard to shareholders.

Will they sell the Inpex shares and use the cash to buy back stock? Well, they have been gradually selling off the stock since 2021.
https://www.inpex.co.jp/english/news/assets/pdf/20211105_d.pdf

The Japex stake was more like 5% prior to this sale, and it seems like they sold off around 1%, leaving 4% of Inpex on the balance sheet.

I don't think Japex is likely to ever completely get rid of its shares, because Inpex is a major upstream supplier - they liquefy natural gas in Australia and sell it to Japex's LNG import terminals. However they might reduce the stake by another 1-2% over time.

I think the extensive portfolio of assets, cash, and market securities (shares in Inpex), provide some good downside protection, while offering some upside in case of higher oil prices.

https://underhood.substack.com/p/a-perceived-value-trap-with-asymmetric