In the current market environment, having a competent analyst provide research coverage has never been more important. Companies that have at least one sellside analyst following them and writing about them tend to have:
- Much better trading liquidity
- A broader and more diversified shareholder base, both domestically and internationally
- A fairer valuation in the market
- Easier and more attractively priced access to additional capital
- Higher institutional ownership
In light of these important benefits, it’s not surprising that the management of most public companies would like to have research coverage. However, declining commission revenues and new regulations related to investment banking have led to a reduction in sellside research budgets. As a result, sellside coverage universes are shrinking, and fewer companies are getting the research coverage they deserve. To address this issue, corporate leaders have been increasingly commissioning “fee-based” research coverage, which is typically available in the market for $20,000 - $35,000 per year.
Fee-Based Research – A Historical Perspective
Historically, the fee-based research business has carried somewhat of a stigma in the market. Given that the old model tended to highly compensate research analysts who worked for traditional investment banking firms, most of the top talent has not been writing fee-based research. As a result, the “analysts” who did write fee-based research were more stock promoters than researchers, or were otherwise engaged as money managers or semi-retired professionals. The net result of this system was that fee-based research tended to be promotional, poorly written and presented, and lacking in true analytical thought.
Although this type of research coverage may positively impact the unsophisticated investor’s appraisal of a company’s situation and its fair value, it tends to have the opposite effect with sophisticated investors. Savvy individuals and institutional investors can usually infer the quality of a research piece after quickly looking through it. And when savvy investors do take the time to closely read such research, their suspicions of poor quality are usually confirmed, by the presence of typos, poorly organized and articulated thoughts, and superficial company and industry analysis.
Because of these quality issues, the entire fee-based research business has picked up a stigma in the market – a stigma that is evidenced by a prevailing belief that high quality companies don’t need to pay for research. However, we believe that in some cases this belief is entirely inaccurate, and given structural changes occurring in the equity research industry, it is clearly now in quality companies’ best interest to make sure that they have high-quality research coverage – regardless of whether such coverage is really paid for through investment banking fees, or more directly through research coverage enrollment fees.
Breaking the Mold – Insightful and Expertly Articulated “Fee-Based” Research
Unlike the traditional fee-based research companies, Harbinger Research is committed to providing only the highest quality research coverage. Specifically, this means that our research excels in terms of:
- Depth and insightfulness of analysis
- Professionalism of presentation
- Organization of thought
- Clarity of articulation
Our research looks, feels, and reads on a level equivalent with the very highest caliber research available, which is immediately apparent to sophisticated investors, and has powerful implications about the quality of the subject firm.
To see for yourself how our research is different and superior in terms of quality, click here.
Our introductory offering price for a one-year enrollment in our research coverage program is US$25,000, and includes the preparation of our Coverage Initiation report (including full financial models), our analysts’ time when they speak to institutional investors, and the issuance of event-driven update reports. Events that can lead us to release “research notes” and updates include corporate earnings releases and other important company announcements.