L AUGUST 10
Montreal-based firm, estimates the total number of analyst reports being produced will fall by at least 20 per cent as investment banks reshape operations to adapt to the popularity of indexing.
“Portfolio managers are increasingly relying on algorithms to track any changes in a stock, not a human doing a report,” said Evan Pondel, president of Los Angelesbased investor relations firm PondelWilkinson Inc.
OVERLOOKED BUYS Portfolio managers who conduct their own research into uncovered small-cap stocks say that it provides a greater justification for annual fees that are often far higher than passive funds.
Laird Bieger, a Portfolio Manager at New York-based Baron Funds, said he began meeting with executives at Impinj Inc, a maker of radio frequency identification devices with $1 billion market cap, when there were no sellside analysts covering the firm. Five analysts now cover the company, whose shares are up nearly 40 per cent year-to-date.
“This is something that is way below other people’s radars and at a point in their growth cycle when they are the most open to meeting with us,” he said. Once companies reach market values of $3 billion and above, they typically have much more formalised investor-relations teams that block access to executives.
Eric Marshall, a fund manager at Dallas-based Hodges Capital, said he is looking at uncovered companies in out-of-favour industries such as industrials and financials to find mispriced stocks. He owns shares of Hallmark Financial Services Inc, an insurance company with a market value of $203 million, in part because it is “virtually unheard of,” he said. Shares of the company are down 4.2 per cent this year.