Why Should Companies Want Equity Research Coverage?

There is a fairly common belief that as soon as a company is listed on a major stock exchange (NYSE, NASDAQ, HKEx, AIM, ASX, etc) investors will magically appear, the company will enjoy strong trading volume, widespread visibility, and the stock market will naturally reward its impressive sales growth, margin expansion, and new customer contracts. Any sophisticated investor will tell you, that without proper equity research coverage, this is simply not the case.

Equity research coverage helps keep the stock markets relatively efficient and allows a company’s stock price to reflect its intrinsic valuation and the company’s ability to generate free cash flow. Without competent equity research coverage, many investors may be operating in the dark or worse, may not even know about the existence of a company. Without proper equity research coverage, a company’s stock price may languish and limp along with very limited trading volume. Studies have shown that stock price and trading volume are correlated with the amount of equity research coverage. Beardsley Research believes that without competent equity research coverage, it will be very difficult if not impossible for a company to maximize shareholder value.

Institutional Ownership

Institutional stock ownership in a company implies legitimacy and prestige for that company. Institutional investors can take large positions, increase trading volume, and drive up the stock price. Institutional investors value competent equity research coverage and use it to help them make judicious and careful investment decisions. Today, institutional investors own and control almost 70% of the shares of U.S. corporations and play a critical role in these companies’ liquidity, trading volume, and price movement. Beardsley Research believes that without competent equity research coverage, a company’s prospect of attracting institutional investors is very limited, if not impossible.

Visibility

Beardsley Research distributes all of its research reports through Thomson Reuters’ First Call Service which reaches over 50,000 institutional investors around the world. This global distribution network is augmented by Beardsley Research’s YouTube Video Channel, Twitter, and the company’s website. Each Beardsley analyst is “on call” to both institutional as well as retail investors via phone or email.