Friday, November 30, 2007

What Makes Research 'Valuable'?

One of the annoying buzz phrases that all independent investment research companies and analysts grapple with is:

What is our value proposition?

While the term itself is cliché and overused, the question is a pertinent one. The simple answer would be to say ‘it’s all relative.’ To some extent, that’s true. Instead of trying to define value, we’re going to outline the questions we (and our analysts) find ourselves grappling with as we develop research that reflects the needs of our clients.

First, does the investor need new, fresh investment ideas? Are they looking for new trends/sectors to look at that they have not paid attention to before?

Does the investor have ideas and just needs to see research that supports or clarifies the ideas? Or does he want research that says the opposite of what he’s thinking/seeing, so that he better understands the full picture?

Perhaps the investor is looking for new, smaller companies who are up and coming? Or insights that are contrarian?

How far ahead do they want to look? Are they long or short term, and are they trying to shift that strategy?

The truth is –it’s simply not a perfect science. Unfortunately, research needs don’t fit nicely into any single one of these boxes.

Perhaps the proper differentiator is much more simplified. What if the analysts are able to tell a story that no one else could possibly tell? For instance, an oil analyst who’s been an oil company CEO, and spent a lifetime in the energy sector; or technical analysts who use a proprietary analytical technique; or analysts who cover 6 times as many companies in a specific sector as most of their competitors?

What better way to ensure that your insights are valuable than to bring to the conversation something that no one else can?

The jury is still out as to whether we’ve re-discovered fire, but, feedback from the StreetBrains ‘Ask the Analysts: 2008 Outlook’ panel yesterday certainly suggests we’re doing something right. (click here for materials from the panel event.)