initiating-coverage

What is Initiating Coverage?

Initiating coverage is the process of publishing a comprehensive, first-time research report on a company. It is the most substantial piece of work an equity research analyst produces — typically 30-50 pages covering everything an investor needs to know: the business model, competitive position, financial projections, valuation, and an investment recommendation with a price target. At major sell-side banks, initiating coverage is a significant commitment. It means the firm is publicly stating that an analyst will follow this company going forward, producing quarterly earnings updates, maintaining a financial model, and fielding client calls. The initiation report sets the foundation for all future coverage — it is the “textbook” that clients (portfolio managers at mutual funds, hedge funds, pension funds) will reference. The format follows institutional standards established by firms like JPMorgan, Goldman Sachs, and Morgan Stanley: a cover page with rating and price target, an investment thesis section, a detailed company overview (“Company 101”), financial analysis with projections, valuation analysis, and appendices. Reports are distributed to hundreds of institutional investors simultaneously and can move a stock’s price on publication day.

Why It Matters

Initiating coverage is a big deal for several reasons:

Market impact: An initiation from a major bank can move a stock 2-5% on publication day, especially for mid-cap and small-cap names where research coverage is limited
Client value: Institutional investors pay for research (explicitly through commission sharing or implicitly through trading). A high-quality initiation demonstrates the analyst’s expertise and justifies client payments
Analyst reputation: Initiation reports are how analysts build their franchise. Consistent, high-quality initiations lead to Institutional Investor rankings, which drive compensation and career progression
Information foundation: Every subsequent earnings update, thesis revision, and client interaction references the initiation report. Getting it right from the start matters

Key Concepts

Term	Definition
Price Target	The analyst’s 12-month estimate of fair value for the stock, derived from valuation analysis
Rating	Buy/Hold/Sell (or Overweight/Equal Weight/Underweight at some firms)
DCF	Discounted Cash Flow — a valuation method that projects future cash flows and discounts them to present value
Comparable Companies	Valuation by comparing the company’s multiples (P/E, EV/EBITDA) to similar public companies
Precedent Transactions	Valuation by analyzing what acquirers have paid for similar companies in M&A deals
Football Field	A horizontal bar chart showing the range of implied valuations from each valuation method
Sensitivity Analysis	Testing how the valuation changes under different assumptions (growth rate, discount rate)

How It Works

This skill operates in single-task mode. Each task produces a verified deliverable before the next begins. Tasks 1 and 2 can run in any order; Tasks 3-5 have strict prerequisites.

Task 1 - Company Research      ──┐
                                  ├──> Task 4 - Charts ──> Task 5 - Report
Task 2 - Financial Modeling    ──┼──> Task 3 - Valuation ──┘
                                  │
Tasks 1 and 2 can run in parallel

This skill operates in single-task mode only. When the user requests a full pipeline, the skill presents the 5-task menu and asks which task to start with. It never chains tasks automatically.

Task 1: Company Research

Why this matters: Before you can value a company, you need to deeply understand what it does, how it makes money, who runs it, and what threatens it. This is the qualitative foundation for everything that follows.Output: 6,000-8,000 word research document covering company overview and history, management bios (300-400 words each for 3-4 executives), products and services analysis, industry overview, competitive analysis (5-10 competitors), TAM sizing, and risk assessment (8-12 risks across 4 categories).Prerequisites: None — fully independent.

Task 2: Financial Modeling

Why this matters: A financial model translates your qualitative understanding into quantitative projections. It is the backbone of your valuation and price target. Without a model, you have an opinion but not an actionable investment recommendation.Output: Excel model with 6 tabs: Revenue Model (product + geography breakdown), Income Statement (40-50 line items, 3-5 years historical + 5 years projected), Cash Flow Statement, Balance Sheet, Scenarios (Bull/Base/Bear), and DCF Inputs.Prerequisites: Access to company financial data (10-K from EDGAR, or pre-extracted financials).

Task 3: Valuation Analysis

Why this matters: Valuation is how you arrive at a price target. Using multiple methods (DCF + comparable companies + precedent transactions) provides a range that increases credibility. The “football field” chart showing this range is one of the most-referenced visuals in equity research.Output: 4-6 page valuation document with DCF analysis, sensitivity tables, comparable companies (5-10 peers with statistical summary), precedent transactions, valuation football field, price target, rating, and key catalysts. Also adds 4 Excel tabs (DCF, Sensitivity, Comps, Valuation Summary) to the Task 2 model.Prerequisites: Financial model from Task 2.

Task 4: Chart Generation

Why this matters: Charts make complex financial data digestible at a glance. A portfolio manager scanning 20 reports will look at charts first and text second. Professional-quality charts also signal analytical rigor.Output: 25-35 professional charts (PNG, 300 DPI) packaged in a zip file with a chart index. Includes 4 mandatory charts: revenue by product (stacked area), revenue by geography (stacked bar), DCF sensitivity (2-way heatmap), and valuation football field (horizontal bars).Prerequisites: Tasks 1, 2, and 3 all complete.

Task 5: Report Assembly

Why this matters: This is the final, client-facing deliverable. It must meet institutional publication standards — professional formatting, consistent styling, charts interspersed with text, clickable hyperlinks, and rigorous sourcing. A poorly formatted report undermines even excellent analysis.Output: 30-50 page DOCX report with 10,000-15,000 words, 25-35 embedded charts, 12-20 tables, professional formatting, and clickable hyperlinks.Prerequisites: ALL previous tasks complete.

Deliverables Summary

Task	Deliverable	File
1	Research document (.md) — nothing else	`[Company]_Research_Document_[Date].md`
2	Financial model (.xlsx) — nothing else	`[Company]_Financial_Model_[Date].xlsx`
3	Valuation analysis (.md) + 4 Excel tabs — nothing else	`[Company]_Valuation_Analysis_[Date].md`
4	Charts zip file (.zip) — nothing else	`[Company]_Charts_[Date].zip`
5	Final report (.docx) — nothing else	`[Company]_Initiation_Report_[Date].docx`

How to Add to Your Local Context

# Install the plugin
claude plugin install equity-research@financial-services-plugins

Customizing for your firm’s template: If your firm has a specific initiation report template (most bulge-bracket banks do), provide a sample DOCX and edit the skill file to reference your formatting standards:

open ~/.claude/skills/equity-research/initiating-coverage.md

Add your firm-specific requirements: cover page layout, disclaimer text, font choices, color scheme, and section ordering. Connecting to your data sources:

{
  "mcpServers": {
    "sec-edgar": {
      "command": "edgar-mcp-server",
      "args": ["--user-agent", "YourFirm research@yourfirm.com"]
    },
    "bloomberg": {
      "command": "bloomberg-mcp-server",
      "args": ["--api-key", "YOUR_KEY"]
    }
  }
}

Using your firm’s PPT template for charts: To match your firm’s chart styling (colors, fonts, axis formatting), use /ppt-template to teach Claude your layout, then reference it in Task 4.

Best Practices

Complete tasks sequentially: Do not skip ahead. Each task builds on prior outputs, and rushing to the final report without solid underlying work produces a weak product.
Verify prerequisites rigorously: Before starting Task 3, confirm the financial model is complete and accurate. Numbers in the final report must match the model exactly.
Write comprehensively, not summarily: Task 1 requires 6,000-8,000 words. Do not produce summaries or bullet-point outlines. Institutional clients expect thorough, detailed analysis.
Cross-check all numbers: The price target in the report must match the valuation analysis, which must match the financial model. Any inconsistency undermines credibility.
Cite everything: Every data point should trace to a specific source with a clickable hyperlink. This is a non-negotiable institutional standard.

Quality Standards

All outputs meet institutional standards:

Comprehensive: Meet all minimum requirements (page counts, word counts, chart counts)
Detailed: Specific data and examples, not generic statements
Quantified: Lead with numbers and metrics
Cited: Proper sources with clickable hyperlinks
Professional: Institutional-quality formatting
Accurate: All numbers verified and cross-checked between deliverables

Overview

Financial Analysis

Equity Research

Investment Banking

Private Equity

Wealth Management

LSEG

S&P Global

What is Initiating Coverage?

Why It Matters

Key Concepts

How It Works

Deliverables Summary

How to Add to Your Local Context

Best Practices

Quality Standards

​What is Initiating Coverage?

​Why It Matters

​Key Concepts

​How It Works

​Deliverables Summary

​How to Add to Your Local Context

​Best Practices

​Quality Standards

What is Initiating Coverage?

Why It Matters

Key Concepts

How It Works

Deliverables Summary

How to Add to Your Local Context

Best Practices

Quality Standards