Independence Day

All research is not created equal. Hardly something that should have been included in the Declaration of Independence, but still it’s important to us.

Wall Street analysts produce research for their clients, of which large investment management firms are one of their biggest. Their teams of intelligent analysts cover specific companies within an industry.

Their reports shine at reporting the quarter to quarter details. When you (if you) listen to a quarterly corporate results conference call, it’s the Wall Street analysts getting called on by the company to ask questions. Their resulting reports tend to focus on whether or not a given company “beat” or “missed” quarterly expectations for earnings and sales growth.

Notice I keep using the word “quarterly”.

To be honest, we don’t place a lot of stock (so to speak) in quarterly reports aside from the industry commentary some companies provide. Issues that we think investors should pay attention to – protecting capital from permanent loss, assessing competitive threats and estimating business value over the long run – rarely get addressed on these calls.

So, we don’t read what Wall Street has to say to us. Instead, we spend our most valuable asset, time, doing our own research. Reading annual reports and proxy statements. Finding everything we can get our hands on about the industry our companies compete in. These sources help us develop our own estimate of company value as well as assess if company management is on our side as an “owner-operator”.