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An analyst's approach to stock volatility

In this article:
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Yahoo Finance's Jared Blikre talks to Yahoo Finance Editor-at-Large Brian Sozzi about his analyst background that he developed early in his career and how it helps him cover the current market volatility.

Video transcript

BRIAN SOZZI: We're kindred spirits, Jared. I always joke around about Hindenburg omen patterns--

JARED BLIKRE: Don't even get me started.

BRIAN SOZZI: --his bulging bicep indicators. I mean, it's all ridiculous. And I like to have a good time with it. But any time-- I've tried to bury my analyst career. And it was awesome, you know? It was an awesome time in my life. It's where I started right out of school.

It gave me absolutely tremendous skills that we can go into at some point. But the more I try to outrun that decade-plus in my career, the more I realize that I should just be embracing it. And I do embrace it every single day. I started off as an independent research analyst at Wall Street Strategies, Inc. And my job was to produce coverage.

I considered myself a sell side analyst for coverage that would ultimately get used by the big-- [STAMMERING] bulge bracket firm. So Goldman Sachs, Morgan Stanley, you name it, I made the reports. Those analysts there and those traders and investors used what I did. So at one point-- and maybe this isn't a surprise to you-- I covered 75 companies! I was publishing research on 75 companies!

Now what the hell does that mean? I mean writing reports every single day, playing around with Excel models. 75 companies ranging from, let's say, 50 retailers such as Walmart and Target, to Electronic Arts and the video game space. And at one point I even covered oil companies. It was just a fascinating time in my life and career.

But again, being an analyst, you learn skills that you can't get anywhere else. And that has always been my secret sauce, the ability to get on TV and talk about numbers in an interesting, fun way. And I love it.

JARED BLIKRE: I know you do. And you bring your enthusiasm and your A-game to the stream every day. I want to ask you, we're talking about some of your terms and some of the things you did as an analyst. You do a lot of street research. Every Thanksgiving you are in the stores. You are at Walmart or Target-- a lot of these retailers-- and you're judging things like foot traffic, and, I don't know, how many shopping bags people are carrying. Tell me about some of that kind of research.

BRIAN SOZZI: You are really, really digging up my past. I'm waiting for you to come out and say, hey, I remember what you ate back in college. But that was one of the benefits. So when you would cover retail stocks, you covered Walmart, and when I was doing this you covered American Eagle, Abercrombie. I always told my team, and I always told the investors and the traders that, ultimately, my research went to-- the story is always told in the store.

When I started out-- and I guess I'm dating myself, and this is weird, I'm now starting to say I'm dating myself-- the internet was still emerging. When I was starting out doing this stuff in 2004, and a lot of retailers that I covered didn't even have a website. And there were retailers that had a website, but it wasn't transactional. I believe at one point, Movado-- one of the watch companies-- they didn't have a transaction website, which, now you think back and you're like--

JARED BLIKRE: Now they've got NFTs.

[INTERPOSING VOICES]

BRIAN SOZZI: Yeah, can you believe that?

JARED BLIKRE: A lot of stuff has changed.

BRIAN SOZZI: But still, I went, and it was-- and it's not just me, a lot of great analysts do this too as well, I guess I'm calling myself great-- but we went into the stores and we were tracking foot traffic in stores during the holiday shopping season. But that was really a byproduct of efforts every single day. I was in the malls obsessively on the weekend, counting clothes on racks, looking for sizes that were not sold, touching and feeling coats like my life depended on it. Seeing if a retailer took out certain costs out of the product, and maybe they'll meet an earnings number, or a margin target, because they're selling cheaper crap, but that might cause consumers to leave-- it was a whole web of craziness.

But it was so fun, the ability to go into a retail store. And certainly, you go to one retail store, you go to another one, and then suddenly you're starting to put together a piece to a puzzle on the economy, on a specific company, how they're doing. Then you put pen to paper, you publish a research report, and then before you know it, you're out in front of a potential major move in the stock price up or down.

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