Independents & the WSJ Research Awards


Independent research firms took the top two spots in the latest WSJ Research Awards, but overall independents were under-represented in the rankings. Investment bank research, which tends to be more biased toward buy ratings than independent research, performs well in bullish environments.

Morningstar placed first in the latest WSJ Best on the Street survey, with 16% of its analysts qualifying for awards.  Fully 10% of its analysts were top in their sectors, an impressive feat.  Morningstar’s research is historically oriented toward retail investors, but Morningstar has been gaining traction with institutional investors, particularly smaller asset managers poorly serviced by investment banks.

Standard & Poor’s Capital IQ was second, with 9% of its analysts qualifying.  S&P’s equity research has finished in the top ten of the WSJ survey eight times in the last eleven years.

Other than the top two finishers, independents were relatively scarce in the overall results (see table below).  Sidoti & Company, a leading small cap specialist, placed ninth.  Independent research firms represented only 9% of the 69 firms recognized in the awards, a significant drop from the 2012 survey in which 30% qualified.

The 2012 survey reflected the difficult market environment in 2011, when sell orders were key in performing well.  But in 2012, with the stock market moving higher, buy recommendations were king.  Investment banks, which are quick to say buy and loathe to say sell, performed much better in the 2012 environment.

The survey measures the performance of BUY and SELL recommendations, which generally ranks low on the list of attributes that are important to institutional investors.  However, recommendations are valuable for retail investors, so it is fitting to see retail-oriented providers such as S&P Capital IQ and Morningstar garnering multiple awards.


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