Institutions

Superior Equity Research

Superior Equity Research

Dynamic Equity Research

When discussing the role of equity research in today's market dynamic, it is important that we establish the clear distinction between what we refer to as “Wall Street” equity research and other equity research. “Wall Street” equity research is that which is provided by the key brokerage firms and investment banking giants active in the global financial centers like New York, London, Tokyo and Hong Kong. “Other” equity research is generated by independent equity research practices, smaller boutique brokerage firms and second-tier investment banks.

This distinction is significant. Firstly, over time, Wall Street equity research is now mainly focused on large cap, highly liquid stocks and generally disregards the majority of stocks that are publicly traded. This rather narrow-minded concentration on a relatively small number of stocks is the culmination of steady deregulation and industry consolidation. In order to preserve and drive profitability, the Wall Street players have concentrated their administrations on large-cap stocks with a view to producing highly-lucrative investment banking deals centered around mergers, acquisitions and proprietary trading profits.

The corporates that are likely to be involved in the large investment banking deals are those which are regarded as deserving of the market’s attention. Though these equity research firms will never admit as such, the stock's long-term investment potential is largely a secondary consideration. Another significant reason to differentiate Wall Street equity research from other equity research is that much of the blame for the irrational exuberance of the last bull market is, somewhat justifiably, placed at Wall Street’s door.

So-called “other” equity research is plugging the information vacuum unwittingly created by Wall Street. Smaller boutique brokerage and investment/wealth management firms like Royston Carr Asset Management, boutique investment banks and smaller independent research firms are generating equity research on the stocks that have largely been disowned by Wall Street.