Elevating Research to New Heights

Current research landscape favors large-cap companies.

Contemporary equity research primarily focuses on large-cap companies. Given their substantial liquidity and high turnover, these stocks are relatively straightforward to trade, resulting in brokerage fees that, in turn, encourage increased analyst coverage. As commission rates remain under pressure, there is a noticeable reduction in research resources allocated to small-cap coverage, which does not yield comparable trading commissions.

The challenges confronting small-cap stocks

Small-cap companies often receive insufficient attention from larger investors, potentially leading to undervaluation. This situation is partly attributable to a lack of comprehensive research and investor education, which results in the phenomenon of "zombie stocks." These stocks typically exhibit limited trading volume, causing their market valuation to fluctuate within a narrow range irrespective of the company's underlying prospects.

Strategies for unlocking value

Our objective is to highlight select small-cap companies with significant growth potential, aiming to enhance the investment community's understanding. Ultimately, we seek to increase analyst coverage and investor education which potentially propels these stocks to achieve their rightful valuation levels.

Investors in small-cap equities

The principal investors in small-cap stocks include family offices, hedge funds, and private equity firms. These entities aim to capitalize on market inefficiencies and invest early to achieve the highest possible returns as the stock approaches its fair value. The significant alpha potential of small caps renders them a compelling investment opportunity for select investors.

Our research process

We assert that consistent research is essential, as reports frequently become obsolete within a few months. Research should encompass an initial company outlook report, followed by earnings review reports and at least one company update report per quarter. Our due diligence with company management, site visits, and other industry participants leads to a more credible product for potential investors.