WESTPORT, Conn. – February 26, 2008 – Reports of the so-called “death of the sell side” are greatly exaggerated, a new study from Rivel Research Group suggests, and sell-side analysts are playing a key new role in developing investor interest in public companies – providing access to corporate management.
“Sell-side analysts remain instrumental in creating the formative impressions of a company’s investment appeal that help to drive investor interest,” said Brian Rivel, president. “In their growing role as access facilitators, sell-side analysts have become a highly effective and efficient channel for corporate management teams to connect with qualified investors, and vice versa.”
As part of its ongoing series of national studies among key investment community constituencies, Rivel Research recently conducted in-depth interviews with a representative, random sample of 251 sell-side analysts from national, regional, specialty and independent institutions of all sizes.
The study makes clear the sell-side’s changing role in the wake of Reg. FD and Sarbanes-Oxley. Analysts themselves acknowledge that their function is no longer about generating investment banking business but is much more firmly entrenched in communications and information dissemination.
According to the survey, sell-side analysts see providing access to corporate management as the single most important role they play in today’s investment world. In fact, almost nine out of 10 – 87 percent – insist on meeting with senior management before initiating coverage of a company, and fully one-third place a priority on meeting at least twice.
While one-on-one meetings are the preferred means of enabling buy-side clients to learn about a company’s investment appeal, analysts also see value in field trips/site visits, company-sponsored analyst/investor days and company-sponsored road shows. Presentations at investor conferences are least preferred.
“Interestingly enough, despite this new role for sell-side analysts, there is still a demand for their traditional service of producing investment research reports for institutional investors,” Rivel added. “While it may not carry the same weight as it once did, both formal and informal sell-side research still affords a useful perspective on a company’s investment appeal. Clearly, companies should not overlook the sell-side community when developing an investor relations program – especially smaller-cap companies, for which it can be the single most important means of gaining broader attention from the institutional investment community.”
Among other findings of Rivel Research’s latest study:
- Like their buy-side counterparts, sell-side analysts place more emphasis on a company’s intangibles – management credibility, an effective business strategy and the like – than on earnings or revenue growth.
- Also like the buy-side, 82 percent of the sell-siders believe investor relations has a definitive, even quantifiable, impact on a company’s valuation. “Superb” vs. “poor” IR can account for a range anywhere from a 10 percent premium to an 18 percent discount, according to the sell-side.
- In shaping their investment recommendations, sell-side analysts look to a company’s investor Web site as a source of information and insight far more than other constituencies.
Robert G. Berick, managing director of Dix & Eaton, a communications consulting firm that collaborates with Rivel Research, observed, “These latest findings from Rivel Research underscore the need for companies to look at their investor relations programs as more than a compliance function. Today more than ever, sell-side analysts are looking for compelling ‘stories’ to put in front of their institutional customers. To find those stories, they are relying more and more on corporate Web sites, annual reports and other communications tools. Therefore, the companies that make it easiest for the sell-side to appreciate the tangible and intangible assets that fuel results and create future growth opportunities will have a true competitive advantage in the drive for shareholder value creation.”
Copies of the Rivel Research study are available by contacting Brian Rivel at the number shown above.
About Rivel Research Group
Founded in 1991, Rivel Research Group is the only firm that specializes in delivering marketing research solutions through in-depth measurements of the investment community. The firm’s highly experienced staff provides the well-informed, unbiased and strategically relevant intelligence companies need to understand their investment appeal and effectively communicate with such key constituencies as sell-side analysts, buy-side analysts, portfolio managers, investor relations officers and the financial media. The comprehensive information that Rivel supplies guides companies in evaluating performance, formulating strategy and identifying opportunities.
About Dix & Eaton
Communication has the power to significantly improve performance, and Dix & Eaton partners with client management to harness that power. We specialize in building stronger stakeholder relationships through investor relations, media relations, marketing communications and employee communications. We also help organizations manage special situations with practices focused on crisis management and transaction communications. Founded in 1952, Dix & Eaton is the largest employee-owned PR and IR firm in the United States. For more information, visit www.dix-eaton.com.
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