The future of equity research

As an owner of an independent research firm supporting hedge funds, mutual funds, and other Wall Street clients, I believe the future for independent research is very bright. For those firms that can bring real value to their clients, there is clearly demand and opportunity for research services in the area of industry analysis, financial modeling, and due diligence work.

Clearly, just 'hanging out the shingle' is not a path to success. In order to be successful, a firm must provide something unique in the way of analysis, or bring 'deep insight' by specializing in a specific industry or sector.

My firm has seen tremendous growth by following a specialization strategy. And we are not alone. Other firms are growing and profiting with this same strategy.

Most importantly, unlike the statement in the article ("a lowly regarded niche"), our firms and firms like us are highly regarded for our ability to provide unique insight and depth for the industries and sectors we cover. We are valued for our ability to go beyond simple P&L analysis to understanding the fundamental industry dynamics, competitive strategies, and how these dynamics and strategies will affect future performance.

In 2006 I began marketing the Covenant Review research service, which analyzes high yield bond terms. The buyside shops, small and large, are definitey looking for - and willing to pay fairly for - unique research.