Independent Research

As the Chief Executive of a successful New York-based investor relations firm, I am besieged with phone calls from independent research firms that would like to publish research reports about our clients. I usually receive quotes of $25000-$50,000 for these reports. For ten years now, I haven't been able to figure out the value of these literary pieces. They're not really research reports, they're literary pieces.

When approached, I always react the same way, "If you can convince me that you have a following and that the research report is more than just a fluff piece for the pr package, I'm willing to listen."

This is not to say that these companies are not legitimate organizations, I just hesitate identifying their work as research reports. Whenever I read one of these things, I look for 2 things that allow me to quickly determine what value I would attach to one of these reports in doing my own research about a public company. First of all, is there any contact information on the report. I am looking for a company, phone number and name of analyst. If this information isn't available, I look no further. If it's available, then I contact the analyst. Let's just say, for example that the company's main product is serial cards. I will make up a question. Something like, "What about Dell?" If the response is something like, "I didn't know Dell makes serial cards", then you know your obviously dealing with someone that has no real knowledge of the company's market. If the analyst replies by saying, "Dell doesn't make serial cards", can you see why this analyst would have much more credibility. It's an easy thing to do and I highly advise it. If the company is working on a drug for rheumatoid arthritis, I'll say something like, "What about Merck's product?" If the analyst says, "I didn't know Merck has a product", then that research report isn't worth the paper it's printed on. Maybe 2 points in the round file (garbage folks) but that's about it.

It is very important that I mention the following. About a year ago, I visited with Taglich Brothers with one of my clients. After presenting to the person that we met with, the guy said to us that he would gladly produce a report but he couldn't assure a buy rating or even a hold on the stock. In fact, he said, "We just don't take your money and for a fee, give you a buy rating." My client was insulted but I was extremely impressed. I would say that Taglich Brothers is one of the few credible equity research organizations in the marketplace that produce research reports for a fee. Their buy ratings, in my opinion, are not just rubber stamps.