Performance of the buys and sells


New York – Yesterday we reviewed the overall returns of research companies, asserting that the return of the buy portfolio minus the return of the sell portfolio was the most appropriate way to look at overall returns. Today, we look at the individual buy, sell and hold portfolios to assess who gets the buys right, who gets the sells right and who gets the holds right. The data for this analysis comes from the Investars database, and the analysis and conclusions drawn are those of Integrity Research Associates.

The top ten research providers in the buy recommendation area are presented in the table below.

Performance of the Buy Recommendations of the Tracked RPs

Period Ended June 30, 2007, in basis points per day

Rank Research Provider Buy Return
1 American Microcap Institute 24.2
2 Taglich Brothers 20.1
3 Emerging Growth Equities 16.9
4 Independent II Research 13.6
5 Ladenburg Thalmann & Co. 13.5
6 Pacific Crest 12.3
6 First Analysis 12.3
8 Kevin Dann & Partners 11.9
9 Cantor Fitzgerald 11.6
10 Copell Financial 11.5

Seven of the top ten research providers are investment banks while three are from the alternative research space. Of note, American Microcap research topped the list. American Microcap had only long recommendations in its portfolio over the year and is a paid-for research provider.

Performance of Hold Portfolio as measured by the Least distance from the S&P 500 average return
Period Ended June 30, 2007, in basis points per day

Rank Company Hold Return S&P Return Absolute Difference
1 Sabrient Systems 6.67 6.65 0.02
2 Ford Equity Research 6.74 6.65 0.09
3 Redchip Independent 6.78 6.65 0.13
4 Brean Murray Carret 6.79 6.65 0.14
4 Columbine Capital 6.51 6.65 0.14
6 Rochdale 6.51 6.65 0.17
7 Price Target 6.82 6.65 0.20
8 BB&T Corp 6.44 6.65 0.21
9 Raymond James 6.88 6.65 0.23
10 Channel Trend 6.89 6.65 0.24

The hold recommendations of the research providers are not included in the overall performance calculations of Investars, but are of interest in their own right. Since the hold portfolios, in terms of the research recommendations, tend to be stocks that the RP treats as “market perform” the closer the hold portfolio returns are to the market average, the better the research firm is in selecting holds. We measure the difference between the RP’s hold portfolio return and the S&P 500 return over the year ended June 30, 2007 and then turn this into a positive score (absolute value).

The quantitative firms look excellent under this microscope, taking 6 of the top ten positions. The top firm, in this regard, was Sabrient Systems which missed the S&P average by a tiny .02 basis points per day.

Performance of the Sell Recommendations of the Tracked RPs
Period ended June 30, 2007, in basis points per day

Rank Company Sell Return
1 BWS Financial -18.6
2 ICAP -18.2
3 Morgan Joseph & Co. -17.2
4 MDB Capital Group -15.2
5 Cohen Brother & Co. -12.0
6 Hilliard Lyons -9.5
6 Global Crown Capital -9.5
8 Merriman Curhan Ford -8.7
9 Dougherty & Co. -8.5
10 Blue Water Asset Mgt -7.0

The sell returns are also dominated by the boutique investment banks, with the IBs taking 8 of the top 10 research providers. This being said, the two alternative research providers took the top two spots. For the record BWS Financial is the old Behind Wall Street.

Tomorrow we will look into the batting averages of the Investars research providers.

Note: The data used in this report is form the Investars web site as of June 30, 2007, the conclusions and analysis in this report are those of Integrity Research Associates.

Comment by David Miller:
I still urge you to develop your own ranking metrics. Investars is a good company, but their performance calculation system has not kept pace with a market increasingly dominated by derivative instruments like options.

We would love to list with them, but they have no idea how to ‘rank’, for example, a long position offset by a put hedge. Or even a long equity position combined with a short call option (covered call).

Until Investars improves their system or someone comes up with an alternate you are willing to use, your rankings will not cover a large amount of research providers — especially independents and alternatives.


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