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

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Presentation on theme: "The Need for Independent Research Coverage How research & analyst coverage affect valuation and increase investors interest."— 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 32% 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 Number of Industries Covered Company's Average Size Decile* 1Salomon Smith Barney2,595598.2 2Merrill Lynch2,299588.3 3Credit Suisse First Boston2,080578.5 4Morgan Stanley1,980588.5 5Lehman Brothers1,891558.4 6Goldman Sachs1,888578.6 7Banc of America Securities1,747558.1 8UBS Warburg1,739588.3 9CIBC World Markets1,677558.0 10Bear Stearns1,634548.2 11JP Morgan1,627558.4 12Deutsche Banc Alex Brown1,493578.4 13Prudential Securities1,409548.3 14Dain Rauscher Wessels1,168527.7 15AG Edwards1,159558.3 *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 1996-2002

4 Where is the Attention? The number of companies without analyst coverage is significant! Research Groups Number of Companies Covered Investment Banks2,074 Independent Research Firms1,117 Brokerage Only Firms670 Total3,861 *IBES database for period 1990-2000 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 CapitalizationNumber of CompaniesPercentage of Index Market Cap > $1 Billion1,31725% Market Cap < $1 Billion3,92575% Market Cap < $0.5 Billion3,27662%

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 researchproprietary 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 CFAs (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 interpretationsNOT 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 bestrun 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 & Investors Business Daily, etc. Our website has sponsorships with the likes of & Yahoo! to provide excellent opportunity to leverage exposure and get the companys story out to smaller investors Our portfolio managers and department heads have proven track records in INVESTMENT ANALYSIS, MARKETING, & PUBLIC RELATIONS

10 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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