Institutional investors in North America spend more than $6 billion a year on sell-side and institutional researchDisclosure 1 to find the insights that will give their portfolios an advantage and provide favorable returns for their funds.

With so much on the line, institutional investors are looking for more than just an upgrade or downgrade of a stock based on a recent press release or earnings report. It’s what Mary Stroth, head of Equity Sales, Trading & Research at Truist Securities, calls “incremental information and analysis” that provides value to clients and helps them make more informed decisions.

“What clients are looking for is something new or differentiated,” she says. “If someone publishes a report that says they’re downgrading a stock based on a valuation, that’s not very exciting. Clients won’t really need to dive deeper into the research.” 

The value of incremental information

More important to institutional investors can be insights that go beyond valuation or what a company says in a press release. These insights can be hard to come by when publicly traded companies are required to disclose any material changes in public settings and publications.

Stroth says her team’s strength is its ability to pick up on behind-the-scenes developments, such as changes in strategy or growth drivers, through long-term relationships with the company and proprietary analysis. These insights help explain the “why” behind the public information and may indicate whether a change is a blip on the radar screen or indicative of something larger at play.

“Say we’re in a position where we’ve had a tight relationship over the long-term with the CFO, understanding how integral he is to the company’s near- and long-term strategy, and we learn he’s leaving,” she says as an example. “That’s a trigger for us to question if something bigger is going on internally.”

At that point, the Truist Securities analyst will perform their own analysis and write a research report with their view of the CFO’s departure. The long-term relationships that analysts have with the companies they cover can be critical in helping them seek and provide useful information, which can drive increased readership from institutional investors. 

If a research report has credible content and incremental data points, clients want to dig into it more because it may impact their decision whether to buy, hold, or sell the company for the long term.
—Mary Stroth, Head of Equity Sales, Trading & Research, Truist Securities

“If a research report has credible content and incremental data points, clients want to dig into it more because it may impact their decision whether to buy, hold, or sell the company for the long term,” Stroth explains.

Stroth says the value institutional investors place in the data and insights that Truist uncovers is reflected in the scores its analysts receive from clients and the readership of its reports. The number of readers of a Truist Securities report is about 40% higher when data is included, she says. 

Providing information on underrepresented companies

Along with the relationships that lead to a better understanding of the “why” behind a company’s decisions or financials, Truist Securities analysts also cover companies that are underrepresented by other firms. Many research firms focus solely on large-cap companies, which leads to a lack of research on a high percentage of publicly traded stocks.Disclosure 2

While Truist Securities research analysts cover some of these same large-cap companies, they also provide research on many small and mid-cap firms. “That puts us on a short list of true experts covering these small and mid-cap companies,” Stroth says.

That’s critical not only for institutional investors who increasingly want diversified holdings or to better understand the up-and-coming competitors in each industry, but also for the companies themselves who want their smaller organizations covered by more research analysts to educate investors, generate interest in the company, and broaden the shareholder base.

This expertise in companies outside large-cap firms is critical. For example, institutional investors have increased their stake in early-stage firms as they seek new ways to generate alpha.Disclosure 3

Ultimately, information is important whether institutional investors are looking to buy or sell shares in companies. For some, a data point can confirm a decision to exit, while for others, it can push share prices down to an attractive entry point to buy. 

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