New York – Research performance is an important element in assessing the overall quality of research of a research provider. In today’s missive, we discuss the overall returns of the Investars’ universe of research providers for the three years ended in the second quarter of 2009. What matters, of course is the combination of long and short positions that combine to create the overall return.
As we have mentioned, most of the returns through 2008 and into the first quarter of 2009 were primarily dependent upon the success of the short recommendations. In the below chart for example, B. Riley & Co. is again the top rated firm in allocating its buys and sells in the year ended Q2 2009. However, in comparison to the results of the first quarter, there are more firms that are leaning upon performance of their buy recommendations.
| Research Provider |
Buy – Sell |
Buy |
Sell |
Buy |
Sell |
| B Riley & Co |
73.86 |
-0.94 |
-74.8 |
-1.3% |
101.3% |
| Taglich Brothers |
17.54 |
0.73 |
-16.81 |
4.2% |
95.8% |
| Sandler O`Neill |
15.89 |
-3.96 |
-19.85 |
-24.9% |
124.9% |
| Ladenburg Thalmann & Co. Inc. |
15.58 |
-6.63 |
-22.21 |
-42.6% |
142.6% |
| Dahlman Rose |
13.79 |
1.78 |
-12.01 |
12.9% |
87.1% |
| MDB Capital Group |
13.78 |
-6.4 |
-20.18 |
-46.4% |
146.4% |
| Nollenberger Capital |
13.53 |
-3.27 |
-16.8 |
-24.2% |
124.2% |
| SMH Capital |
13.07 |
0.62 |
-12.45 |
4.7% |
95.3% |
| Ativo Research |
10.84 |
6.56 |
-4.28 |
60.5% |
39.5% |
| Caris & Company |
10.46 |
-2.18 |
-12.64 |
-20.8% |
120.8% |
| Haugen Custom Financial Systems, Inc |
9.82 |
4.43 |
-5.39 |
45.1% |
54.9% |
| Infinium Securities |
9.52 |
4.03 |
-5.49 |
42.3% |
57.7% |
| Hilliard Lyons |
9.33 |
-1.23 |
-10.56 |
-13.2% |
113.2% |
| Cohen Bros. & Co. |
8.4 |
-0.89 |
-9.29 |
-10.6% |
110.6% |
| Keefe Bruyette & Woods |
8.3 |
-4.1 |
-12.4 |
-49.4% |
149.4% |
| TheBuyList.com |
6.62 |
-2.96 |
-9.58 |
-44.7% |
144.7% |
| BWS |
5.79 |
-2.77 |
-8.56 |
-47.8% |
147.8% |
| Stifel Nicolaus |
5.63 |
-2.01 |
-7.64 |
-35.7% |
135.7% |
| Kevin Dann & Partners, LLC |
5.59 |
1.6 |
-3.99 |
28.6% |
71.4% |
To flush out the firms that are taking advantage of the upswing in the market most responsively, we present the buy returns and the sell returns in columns 2 and 3 respectively. Further, we estimate the percentage contribution of the two recommendation portfolios to the overall return in columns 4 and 5.
In B. Riley’s case, over 100% of its return was generated by its short portfolio. Within the table of 19 research providers, 12 were in the same boat—i.e. their sell recommendations provided more than 100% of the total return, while the buy recommendations detracted from the overall return.
Those firms that were able to generate positive returns on their buy recommendation portfolios were dominated by one firm that had more than 60% of its total return generated by its buy portfolio. The firm was Ativo Research.
We expect that the firms, such as Ativo, that have been able to generate a large proportion of their returns are the same firms that have climbed up the leader board in the past quarter. For example, Ativo climbed from 37th place in Q1 to 10th place in Q2.
On the other hand (I’m still an economist after all) B. Riley & Co. has been the first placed research provider on the Investars performance measurement platform for several quarters, based upon a winning short portfolio. As long as it is working—B. Riley is still 50 basis points ahead of its nearest competitor– why make major changes.
Note: The data for this analysis comes from Investars. The Analysis and conclusions drawn are from Integrity Research Associates.