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The Need for Independent Research Coverage

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Presentation on theme: "The Need for Independent Research Coverage"— Presentation transcript:

1 The Need for Independent Research Coverage
How research & analyst coverage affect valuation and increase investors’ interest

2 Facts: Investors & money managers face abundant information. They often perceive that stocks with little or no analyst coverage are simply unworthy of attention. The absence of research coverage has significant effect on the valuation of companies. > if there is research, companies gain considerably more investor interests, liquidity improves and the spread between the bid & offer price narrows so the shares become more attractive to buyers. > the absence of research shares can be expected to trade % lower than if they had even one analyst following & the spread in the price would narrow by 50%. (According to a study conducted by Equity Development research firm.) Over 4,000 publicly traded companies have no discernable analyst coverage. About 25% of stocks traded on the NYSE have no coverage. (According to Reuters)

3 A Large Pool of Companies are ignored by Wall Street Research Departments
Wall Street Firm Number of Companies Covered Industries Covered Company's Average Size Decile* 1 Salomon Smith Barney 2,595 59 8.2 2 Merrill Lynch 2,299 58 8.3 3 Credit Suisse First Boston 2,080 57 8.5 4 Morgan Stanley 1,980 5 Lehman Brothers 1,891 55 8.4 6 Goldman Sachs 1,888 8.6 7 Banc of America Securities 1,747 8.1 8 UBS Warburg 1,739 9 CIBC World Markets 1,677 8.0 10 Bear Stearns 1,634 54 11 JP Morgan 1,627 12 Deutsche Banc Alex Brown 1,493 13 Prudential Securities 1,409 14 Dain Rauscher Wessels 1,168 52 7.7 15 AG Edwards 1,159 *Company's Average Size Decile is a mean measured of company's size (CRSP decile, 10 is the largest) *IBES Detail Recommendation file compiled between

4 Where is the Attention? The number of companies without analyst coverage is significant!
Research Groups Number of Companies Covered Investment Banks 2,074 Independent Research Firms 1,117 Brokerage Only Firms 670 Total 3,861 *IBES database for period Of the 9,000 publicly traded companies shown on Reuters’ database, about 1/2 of the stocks have any analyst coverage & only 1/3 are monitored by more than 6 analysts

5 Sizing the difference:
Market Capitalization Number of Companies Percentage of Index Market Cap > $1 Billion 1,317 25% Market Cap < $1 Billion 3,925 75% Market Cap < $0.5 Billion 3,276 62%

6 The need for independent research coverage
Many institutional and hedge fund investors rarely get their ideas from Wall Street research coverage Investors & money managers are yearning to get back to the fundamentals of analysis and proprietary studies. They want independent, unbiased, untainted research—proprietary information Data from Investars (independent service tracking performance of analysts’ stock picks) shows that stock picks by six of the better known independent research firms, on average, have outperformed a half-dozen Wall Street firms over the last 5 years Wall Street analysts are dropping away from covering small caps and focusing more on large caps, according to Majestic Research. Since late 2003, the number of smaller companies with any following at all has plunged

7 About our Research? Our team of analysts are highly-qualified and credentialed CFA’s (Chartered Financial Analyst) or MBAs Our analysts focus purely on research and are absolutely independent and indifferent to any other investment services, including investor relations & investment banking. They also do not take any positions in the stocks they cover Research is focused on providing insights and proprietary assumptions and interpretations—NOT storytelling

8 Our Value-added Services:
We offer the complete 3-in-1 package: Investment Research, Marketing, & Investor relations. Our analysts provide the investment research Our marketing and sales team handles the institutional marketing calls and presentation; including handling press releases, making capital raising introductions, and providing strategic inputs to management Our portfolio managers and analysts will field incoming calls for management from potential and existing investors. Our approach is efficient & affordable while allowing management to focus on what they do best—run their company & make money for their shareholders.

9 Value & Efficiency Investment research provided by credentialed analysts. Highly trained marketing and sales team has direct access with reputable hedge funds, brokers, and media groups; including, Fox, CNN, Bloomberg, USA Today & Investor’s Business Daily, etc. Our website has sponsorships with the likes of & Yahoo! to provide excellent opportunity to leverage exposure and get the company’s story out to smaller investors Our portfolio managers and department heads have proven track records in INVESTMENT ANALYSIS, MARKETING, & PUBLIC RELATIONS

10 Fees from Investment Deals
Affordability We offer our companies INVESTMENT ANALYSIS, MARKETING, & PUBLIC RELATIONS services as one package for a fraction of what the competition charges. Cost (Range) Investment Research Reports $25,000 to $35,000 Public Relations $100,000 to $120,000 Marketing Specialists $75,000 to $125,000 Total Package $200,000 to $280,000 Fees from Investment Deals Regional Investment/Brokerage $500,000 to $700,000* *Typical cost in banking fees for $10M deal.

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