Three independent short ideas research firms are hosting an in-person New York conference this coming Thursday as the environment for short ideas has blossomed. Having survived a long period of central bank-fueled bull markets, short ideas research firms are back in vogue.
Recent entrant Bedrock AI, which uses natural language processing to identify accounting anomalies, and activist hedge fund Bleecker Street Capital are joining veteran short ideas research firm Vision Research in presenting four $1 billion+ short ideas in Rockefeller Center, NYC on Thursday September 29th. To register, go to https://calendly.com/rprather/short-ideas-research-tips.
We recently profiled Bedrock AI, a Toronto-based startup that launched last year. The firm uses natural language processing to extract qualitative red flags such as ‘goodwill impairment’ buried in regulatory filings. Activist hedge fund Bleecker Street Capital also began last year, founded by Chris Drose, a former analyst at short-biased hedge fund Kingsford Capital.
Unlike the other two firms presenting, Vision Research suffered through the decade-long period when stocks were propelled by massive infusions of central bank liquidity. Founder Robert Prather reports that demand for the company’s US and European fundamental short research resumed nine months ago and client counts are back near their peak. The firm was helped last year by the timely launch of a short-oriented service focusing on SPACs (aptly named ‘Voodoo SPAConomics’).
The SPAC product is still generating short ideas for Vision despite recent consolidation in the marketplace. “Just last month we wrote a report on a de-SPAC that has a $1 billion+ market cap, trades more than $10 million per day, and has less than 10% short interest,” said Prather. “Consensus estimates called for $12 million in revenues this quarter, but the company reported negative revenue. I have been an equity analyst for over 20 years and not sure I have ever seen negative revenue.”
Dallas-based Vision Research employs four research professionals, including an analyst based in Barcelona, and a CFO/COO.
Sell recommendations from bank research are scarce. Investment banks issued nine buy recommendations for every sell during 2021, according to an analysis we performed earlier this year. In contrast, independent research firms in the study averaged a relatively even distribution between buys and sells. Short ideas research firms go a step further, seeking out the most vulnerable stocks with faltering or fraudulent businesses.
Short ideas firms fill an important niche in the research landscape and the upcoming Vision Research conference signals that the segment is back in demand.