Finding The Best U.S. Small Cap Research Providers


New York, NY – Since the peak of the technology boom in 2000, small cap stocks (defined as stocks with a market cap below US $2 billion) have posted stellar returns, outperforming other segments of the equity markets by a wide margin, especially since 2003.  As a result, demand for small cap research among both retail and institutional investors has increased markedly in recent years.

Despite this increase in demand, many small cap companies remain uncovered or under covered for a number of reasons.  Consequently, Integrity Research has developed a comprehensive new ResearchFocus report to assist investors in identifying high quality providers of small cap research.
The Current Market for Small Cap Research

Approximately half of all small cap companies have no analyst coverage whatsoever; those that do are usually covered by only a handful of analysts.  Although demand for small cap research has increased in recent years, many sell-side and independent research firms have struggled to make small cap research commercially viable. In recent years, many research firms have actually reduced coverage of small cap companies.

There are many reasons why this has happened—the rise of Commission Sharing Arrangements and Client Commissions Arrangements (CSAs/CCAs); a decline in the overall number of IPOs; falling equity commissions; and regulatory changes have put cost pressures on sell-side and independent research firms, affecting their ability to continue producing high quality small cap research.

The principal role of equity research is to help investors determine the fair price of the equity of public companies, and thereby aid in the efficient allocation of capital in the financial markets.  Fundamental equity research analysts traditionally evaluate a company’s financial statements, business strategy, management team, competitive environment, and future prospects to arrive at the fair value for a company’s share price. Investors, in turn, use this information to identify appropriate investments and maximize their returns.

The lack of information and objective research on small cap companies creates a market environment in which shares are often mispriced. This can create attractive investment opportunities for investors that have the ability to fairly value small cap companies.  As research coverage on small cap companies has declined in recent years, many investors have had increasing difficulty locating reliable information and analysis on firms with a market cap below US $2 billion.

Integrity’s ResearchFocus: U.S. Small Cap Research

For this reason, Integrity Research Associates is now releasing a comprehensive new report on small cap equity research, thoroughly analyzing and identifying the top providers of small cap research in the United States.  This Small Cap Research report is the second in an ongoing series of ResearchFocus reports on some of the most interesting segments of the investment research industry.  The following Press Release discusses this new report in more details.


Regionals and Independents Top Sources of Small Cap Research Demand For Small Cap Research Grows As Supply Shrinks New York—September 10, 2007—Regional investment banks and independent research firms are the top providers of equity research on small capitalization stocks in the U.S., according to Integrity Research, a specialist research firm covering the investment research industry. In its latest edition of ResearchFocus, which reviews the research industry, Integrity identified the research providers with the greatest small cap prowess.  The five most highly valued firms in the study were Robert W Baird & Co., William Blair & Co., Sidoti & Company, Friedman Billings Ramsey, and Canaccord Adams, which each received Integrity’s 2007 Top Pick for Small Cap Research designation.  Evaluations of the research providers are based on inputs from institutional investors and Integrity’s own assessments. “Small cap investors look for seasoned analysts who know their companies inside out and have expertise in their sector.  They particularly appreciate research providers which provide them with access to company management and have demonstrated an ongoing commitment to small cap research,” said Michael Mayhew, founder of Integrity Research and lead analyst on the study.  Despite shrinking analyst coverage, over 223 sources of investment research on small capitalization stocks remain in the U.S., Regional investment banks and independent research firms have helped to fill the void left by declining coverage of small cap stocks by Wall Street analysts.   “The research market is resilient.  As the largest investment banks cut back their coverage over the last five years, alternative sources of research have emerged,” said analyst Will Greene, who co-authored the study. Demand for small cap research has increased as small cap assets under management have grown from $86 billion in 2005 to $102 billion in 2007, according to Greenwich Associates. Meanwhile, the supply of Wall Street small cap research has declined as analyst coverage and small cap IPOs have shrunk.  Approximately half of all small cap companies have no analyst coverage; those that do are usually covered by only a few analysts. Although there are alternative sources of small cap research, pressures on research providers continue.  Regional investment banks include some of the best current sources of small cap research because they tend to cover smaller companies more closely and consistently than the largest investment banks.  However, the equity departments of regional investment banks are under pressure as institutional trading flow is consolidating to fewer counterparties and shifting to electronic networks.   Integrity’s 104 page ResearchFocus report includes analysis of the top providers of small cap research including the leaders in each industry sector and Integrity’s Top Picks for Small Cap Research, reports on forty-seven firms providing small cap research and an overview of small cap research.  For additional information on the current edition ResearchFocus go to or contact Tom Rossman at 212.710.2603. About Integrity ResearchIntegrity Research Associates, LLC is the only research firm focused on the fast-moving investment research industry itself.  Integrity Research’s analysts cover 1,500 research firms and other sources of investment research in the U.S., Europe and Asia, collecting information on performance, analytic resources, business strength, research style, coverage and potential conflicts.  Integrity’s clients are research directors, analysts and portfolio managers within money management firms and hedge funds.  Additional information about Integrity can be found at
For further information contact:Michael Mayhew
Sanford Bragg


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