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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.

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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

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Key Concepts

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

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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.
1

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.
2

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).
3

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.
4

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.
5

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.

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Deliverables Summary

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

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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.

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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.

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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