About Me

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Avram Fisher, Founder & Portfolio Manager of Long Cast Advisers, is a former equity analyst at CSFB and BMO covering industrials and business services. He has prior experience in private equity; as a corporate governance analyst; as a writer; reporter and private investigator; and as a lifeguard and busboy (I still clear plates when my kids don't). This blog is an open book of ideas about patient investing and about starting up a small-cap focused RIA. It is part decision-diary, part investment observations and part general musings. Nothing on this blog is a solicitation for business nor a recommendation to buy or sell securities. It is simply a way to organize and share thoughts with an expanding audience of independent, patient and talented small cap investors. www.longcastadvisers.com

Monday, February 18, 2013

My client relationships are like my marriage

A great compliment from a client: "The minute I disagree with your competitors, the conversation stops. But the minute I disagree with you, the conversation starts." I think that reflects my 10-years married to an attorney.

Friday, February 15, 2013

More Sell Side Layoffs ...

Last week a "bulge bracket" investment bank laid off its 3-person team of analysts covering the same industry - Engineering & Construction - that I covered at my last job. It was part of a headcount reduction that included several teams of analysts. The labor trend on the street, while unfortunate for me and my peers,  validates my views ...

There are way too many analysts on the street. Wall Street cannot continue to support the headcount and infrastructure with trading commissions at a few cents a share. The situation has baffled me since I graduated business school.

The sell side work is not viewed as value add. The concierge stuff, the management visits, the race to be the first to re-write an earnings release and the models with 15% CAGR always hewing close to guidance, is a race to the bottom in my opinion, and that always ends with a bump. 

Where the sell side converges with entertainment and media, it becomes a slippery slope. Being a talking head on TV is fun and it reinforces the image of importance, but it's not necessarily the best way to deliver information to clients. 

... it took OTB 20 years after the advent of the Internet to go out of business and it will take institutional equity research at least that long to follow suit if it continues its race to the bottom.

However, I think it can avoid that same fate by leading with its strengths ... 

It is legal. Wall Street sell side is research is highly regulated. You will not end up doing the perp walk talking to a Wall Street analyst as you might using the "expert networks" or other off Wall Street research. 

It scales. An industry expert can attend a conference, talk to sources, be intimate with management, its personalities, its self identities, understand its drivers and passions, and give clients perspective and history faster than a buyside client can replicate that on their own.

Over time, analysts become experts and this cannot be automated or quickly replicated. The value of an analyst comes from their ability to understand the nuances of the business via independent research, so they can verify what management is saying, ask questions on behalf of shareholders and provide perspective to clients. 

... there are many good analysts on the street doing great thinking and great research on industries, companies and their valuations. But so much is drowned out and crowded out by news and noise.

The business I think would do well to get back to its roots as a sleepy profession one step up from accounting (apologies to accountants, but you're all preparing taxes now anyway). And better still if it could devolve a bit away from earnings notes and 6AM starts and other artifacts of the FAX days, and just focus on the perspective and information that clients need to make better decisions about the thousands of stocks they cover in their funds.