Our research model is proudly independent. We believe this should mean our clients can trust us. We cannot promise to always be right, but our clients should feel confident they are getting our authentic view. We are never buyers in public and sellers in private.
But what does “independent” really mean? “Free from outside control; not subject to another’s authority.” In financial services, the focus is on conflicts. At The Analyst we add that it’s a mindset and a cultural value – and something we take very seriously.
We are an Independent Research Provider
All firms have to manage their conflicts, but we believe we have less than most.
- We are owned by current and former employees
- We have no investment banking business
- We are not a corporate broker, do not provide investor relations or corporate access services
- We do not have an execution desk
- We are not an activist short seller – we never trade ahead of our recommendations and don’t allow our staff to trade our Short recommendations for their own account
- We do not undertake consulting work for any company we cover or are likely to
- We never give preferred access to our recommendations
Ultimately, we work for our clients and want to be judged based on our work.
We seek to have constructive relationships with all the issuers we cover but our business model doesn’t depend on it
We have constructive engagement with many of the issuers we cover – long or short – and value the understanding they can provide into our process. But management are never the main source of our information.
So, for example, we value the insights from guided tours of company facilities, but we are also happy to mystery shop, check the existence and state of facilities or walk around the perimeter of factories and warehouses.
It’s unfortunate but still common that companies become uncommunicative after we publish a recommendation. Our only incentive is to call the stock price to the best of our ability, with evidence to support our calls. But unlike many firms, losing the relationship does not destroy our business model.
Independence isn’t just about what you write, but what you don’t write
“Don’t look, don’t tell” is probably not found in many investing text books, but we question why some providers don’t deep dive on accounting and governance and why they don’t look to test the representations of management. Maybe its just easier that way?
An analyst or an amplifier?
Most companies are good at advancing their buy case and managing expectations. Connected providers play an important role in amplifying and explaining the messages to investors.
We see the role of Analyst to be more questioning than that. Its not just about being sceptical of the “promotional” or “misrepresented”, an independent view is also about approaching the investment case from a fresh angle or being able to look optimistically beyond the guidance horizon.
Occasionally we discover mid-cap hidden gems where we see an investment case yet to be communicated or management teams in the process of changing their relationship with external investors.
A lonely voice on corporate events
The bigger the deal, the more Banks are off side. The more likely a deal, the greater the incentive to keep on side with the company.
We believe the phase after a company has IPO’d or carried out a major transaction is a critical time for investors. Not all deals are bad but a new addition to the market or a company transformed is a time to step up the research effort – not to step out.
Independence is a sacrifice
Want to be productive? Write down what the company is telling you
Want an easy life? Stick with the consensus, publish what the issuer wants.
Want to make more money? Get paid for doing that.
It’s much harder to be independent, we can’t cross-subsidise and frankly the work is much more expensive to do to the required standard.
It’s a mindset
How to upset one of our analysts in one easy lesson? Order them to have a particular view on a stock…
We recruit analysts who believe in independent research. Our analysts choose to work here because they can publish their authentic view on their coverage.
When it comes down to it, independence is in our DNA.
