New York—How many analysts are needed to cover
Google? Admittedly, it’s one of the
sexiest stocks out there with a market cap approaching $170 billion (larger
than the GDP of Singapore or Israel, and closing in on Hong Kong’s GDP). But really, does it require over 35 analysts
to follow this stock?
We hear from asset manager clients pleas for assistance
in finding small cap research. There
many under-covered stocks, and money managers know there is value in
researching them. As an aside, in the
debate about the relative performance of large cap stocks versus small caps,
there is not enough attention paid to the fact that small caps have a
structural advantage—the inefficiency of the market in valuing small caps which
is exacerbated by the persistent under-coverage of the small cap sector.
So why the herd mentality with a stock like Google? Mostly it reflects the popularity of the
stock with institutional and individual investors. Most research departments feel they would
lose mind share by not covering it. For
the analysts it is like playing the lottery—the chances of coming up with
something original on Google are minute but the payoff is large.
But mostly the crowd of Google analysts reflects the old fire
hose business model for research. Blast
it out and hope you get commissions in return.
Continued unbundling of research commissions from execution will generate
market mechanisms for aligning the supply of research with demand. If there is an oversupply of Google analysts,
prices paid will go down. The best thing
for Cox would be to follow through on what was promised over a year ago—better commission
transparency guidelines. This would
provide support to market forces which are clearly still nascent—as evidenced
by the supply/demand imbalances in the research market.
Here is the roster of analysts following Google. The list is incomplete because Sanford
Bernstein recently initiated coverage (?!) and because there are a few firms
such as Merrill which refuse to distribute their research through Thomson which
is the source of the list.
Barry, Stewart of Thinkequity Partners
Becker, Robert of Argus Research Corp.
Bolan, Brian of Jackson Securities
Brown, Derek of Cantor Fitzgerald
Chowdhry, Trip of Global Equities Research
Devitt, Scott of Stifel Nicolaus & Company, Inc.
Faber, Hamilton of Atlantic Equities
Friedland, James of Cowen And Company
Garcia, Denise of A. G. Edwards & Sons, Inc.
Greenwald, Todd of Nollenberger Capital Partners
Jain, Pratik of First Global Stockbroking Ltd.
Khan, Imran of J.P. Morgan
Mahaney, Mark of Citigroup
Martin, Laura of Soleil - Media Metrics
Mastin, Troy of William Blair & Company, L.L.C.
May, Mark of Needham & Company
Moran, Clayton of Stanford Group Company
Morrison, William of JMP Securities
Munster, Gene of Piper Jaffray
Noto, Anthony of Goldman Sachs
Peck, Robert of Bear Stearns
Pitz, Brian of Banc Of America Securities
Pyykkonen, Martin of Global Crown Capital
Quarles, Christa of Thomas Weisel Partners
Rohan, Jordan of RBC Capital Markets
Sanderson, Rob of American Technology Research
Schachter, Benjamin of UBS
Squali, Youssef of Jefferies & Co.
Terry, Heath of Credit Suisse
Weinstein, Steve of Pacific Crest Securities
Westerfield, Leland of BMO Capital Markets
Wolk, Marianne of Susquehanna Financial Group
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