What Is Investment Research?
I was reading the NY Times business section today and came across this paragraph in a story about the potential collapse of bond insurers.
Mr. Ackman, who runs a New York hedge fund called Pershing Square and
has bet against the insurers’ shares, issued a report late in the
afternoon predicting that two of the companies, MBIA and the Ambac Financial Group,
might lose $24 billion on complex mortgage investments they have
guaranteed. Such a hole might threaten their survival and touch off a
chain reaction of losses at some of Wall Street’s biggest banks, as
well as raise borrowing costs for states and municipalities.
William Ackman is a well known hedge fund manager and he’s been short these stocks, and has made a lot of money on those short positions. So his "report" on them is interesting to me. Why? Because he’s got a lot at stake.
In the wake of Sarbanes Oxley and Reg FD we’ve gotten broker-based research that is so bland and uninformed that it’s basically useless. The action has moved to the people who actually have positions.
Stock blogs are certainly a big part of this phenomenon and I read a bunch of them daily. But so are these "reports" that big hedge funds are putting out basically touting their positions.
How do I find Ackman’s report? He doesn’t have a blog, at least I couldn’t find it with a Google search. I did a blog search and found a link to this CNBC story. It looks like Ackman’s report was actually a letter sent to the SEC and insurance regulators.
I funded the startup of Multex 15 years ago and watched the internet and technology streamline the distribution of broker research. That is now a $200-500mm annual revenue business depending on how you measure it.
Is there an opportunity to go beyond the brokers and out into the internet to find the more relevant "research". I think so.
UPDATE: Here is Ackman’s letter in pdf format.
Ackman open letter is available online, I posted the link in my blog earlier this morning at http://probtrader.blogspot….Hasn’t Multex been acquired by Reuters? I agree the Internet presents an opportunity for financial data broadcast, but for now the offer is still limited to the old few vendors: Reuters, Thomson, Bloomberg, FactSet are the only ones to offer a comprehensive database.New web data providers I know are portfolio123.com (but it’s Reuters data), Edgar (public reports only, no estimates or price/volume data), stockpickr.com (hedge fund transactions), starmine.com (estimates only), and whispernumber.com, the latter being the only innovative concept IMO.
Thanks AGYes, multex has been acquired and I agree that the existing crew is not pushing the envelopeThat will likely come from a startupfred
This is what we’re doing at Seeking Alpha. We’re convinced that the best insight on the broadest range of publicly-traded stocks is now coming from fellow investors and sector experts.
I agree there’s definitely an opportunity there. Is that not what Monitor 110 and maybe Instant Information are exploring? I have no insight into traction or merits of either service but their web sites describe that opportunity as well. Maybe you’ve got some more insight there via the investment in instant info. As an individual investor I’d be very interested in being able to see what’s “new” on the web about a given ticker. And what’s new could include changes on corp web sites, blog postings, new insider transactions, 13-F changes, regular news. And then since there’s so much volume of changes and noise out there of non-interesting stuff, having a way to filter the wheat from the chaff of all that would be of value too. Right now if you’re not an institutional investor you have to flip from one page to another searching for what is driving a particular stock. The Google Finance chart view with events is nice but doesn’t have enough events or all the right events. For example look at MBIA up there. No info between Oct and Dec 07 yet big slide. Basically what would be desirable would be key event / news / commentary / etc. RSS feed that could also get rolled up at the industry/sector level.
IMO we require a little contents structuring before we can significantly analyze web data. Right now the only thing we’ve got to categorize internet data is keywords. I wonder how Monitor110 is going to rate and categorize plain web contents better than Goggle or another search engine.But the case might exist for online data aggregators republishing data from a number of sources, like starmine.com and whispernumber.com.
<quote>Is there an opportunity to go beyond the brokers and out into the internet to find the more relevant “research”. I think so.</quote>isn’t that what Monitor110 is doing?
Yes, and it is also what our portfolio company infoNgen doeshttp://www.infongen.com/check it out and let me know what you thinkfred
I wish I could say that we’re doing this but TickerHound is more focused on education, rather than information. But I really like what the guys over at Wikinvest.com are doing – wiki-based research reports and stock charts.They really need to cultivate a community of fundamental analysts for the research and a community of technical analysts for the charts and they have a MAJOR hit on their hands.Will be cool to see some of the other guys pushing the envelope in this space at the Money:Tech conference next week – I think Covestor is onto something big too.
Ackman also said he got his data from a global bank that was affected by the mess, and that bank also has a “bearish position” (i.e., shorting the stocks) on the insurers. If that isn’t conflicted, I don’t know what is.On the unstructured financial information scraping from the Web – wonder how do you take into account unpublished conflicts of interest? Guess you don’t.
In a similar vein to the ‘high touch’ research that internal equities analysts have become useless, have you noticed that anything said by any of the pundits on shows such as CNBC have nothing insightful to say? If it hadn’t been repeated a thousand times before, it will be covered and quoted ad nauseum – and ditto for the guests that are, theoretically, leading money managers.What’s needed is self sponsored research that is divorced from the investment banking side if the business, by analysts that focus on fairly narrow chunks of each industry.
In other words – no conflict no interestFred
I can’t wait for the day when more financial (and nonfinancial) data is available in an easily accessible, transparent and computable format – and it’s starting to happen. The static pdf with an argument based on one particular parameter setting of one particular model concocted by a sell-side analyst ought to be a relic by now.Better tools are sorely needed — and to that end, we have been working to build alluvio.net, an focussed information management tool for investment research. Alluvio is going to make it much easier for investors to aggregate, filter, analyze, and share investing ideas and data, and ultimately help them make better decisions that better leverage the niches of expert knowledge buried all over the web.(We still have a little ways to go before a release, but would love to hear from anyone interested in being among the first crop of beta testers.)I’m looking forward to lots more discussion about open source research and related ideas at money:tech next week…
Going out into the Internet won’t give you a competitive research advantage. All the lazy asses have the same Internet connection today. It’s the shops that put physical labor and know how by going out into the world to identify meaningful data that can not be found on the Internet that are making the bucks…