New York – In a recent meetings with clients we have come
across a new brand of management position, that of Manager of Taxonomy. In our world, this position is responsible
for putting names to the various methodological approaches that research
providers use to analyze markets.
Indeed, a solid amount of time was originally needed at Integrity to consistently
categorize research approaches.
One constant theme in this debate was whether methodology
should be categorized according to mathematical approach, databases used,
finance theory variant, etc., or whether it should be based on what the client
thought the methodology was.
Of course, the main discourse revolved around the specialized
research category. For your illumination, we attached our definitions of specialized
research methodologies which can be found in the Integrity Research database.
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Behavioral
Finance
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Behavioral
Finance applies scientific research on human and social cognitive and
emotional biases to better understand economic decisions and how they affect
market prices and returns. Sometimes this is called Psychometrics.
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Commodity
Research
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Analysis
of commodities, either by themselves or in terms of how they relate to asset
prices and equity opportunities.
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Corporate
Governance
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Analysis
of the corporate governance of corporations, including the board of directors
and governance procedures, options treatment, analysis of by-laws, etc.
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Distressed/Bankruptcy
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Analysis
of distressed securities and companies in or near bankruptcy. Also called Special Situations.
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Earnings
Quality
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Analysis
of the accuracy of earnings. The primary vehicle is an analysis of accruals,
focusing on the cash flows of a company and looking at trends in working
capital etc.
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ESG
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Social
Responsibility research focuses on the impact of environmental and social
factors on companies. Alongside helping environmentally aware investors,
companies that have high ESG scores may also perform better in the future.
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Forensic Research
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Specialized
analysis focused on ferreting out particular problems with company financials
through rigorous accounting due diligence.
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Industry
Expertise
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Research
Firms that have expertise in particular industries or sub industries.
Typically, industry experts work as consultants to the industry they research
and may or may not offer stock level information.
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Insider
Analysis
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Analysis
of insider purchases and sales, on the assumption that changes in behavior or
magnitude can point to future valuation changes.
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IPO
Analysis
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Analysis
of pending IPO transactions, including projected offering price.
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Litigation
Analysis
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Analysis
of the litigation risk associated with companies and how they may impact
securities valuation.
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Management
Quality
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Assessing
the value that the senior management brings to a company.
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Mergers/Risk
Arbitrage
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Analysis
of the timing and likelihood that announced mergers will be completed.
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Patent
Analysis
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Assessing
the value of a company through an analysis of the number and quality of its
patents in particular areas. One value metric is how many times a company’s
patent number is mentioned in other companies' patent applications.
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Outsourced
Research
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Research
executed by a third party under contract.
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Regulatory
Analysis
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Use
of FOIA requests and other techniques to determine if there enforcement
actions or other regulatory activities which could impact the value of a
security.
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Short
Recommendations
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Research
focused primarily on sell recommendations.
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Spin-Off
Analysis
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Analysis
of the sales and potential sales of parts or divisions of companies.
Typically utilizes sum of the parts analysis, in addition to other valuation
techniques.
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Weather
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Use
of weather patterns to analyze companies or sectors that are weather
sensitive. For example, Six Flags could be affected by long-term weather
patterns.
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Other
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Additional
specialized firms not elsewhere classified.
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Posted at 11:42 am by Thomas Hutchinson
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