What is the mission of AB Analytical Services?
The goal of the company is to serve Registered Investment Advisors and hedge funds by helping them with the research component of their investment process.
So, is the company an "independent research" firm?
Well, in a way yes, but it is very different from the standard approach. Most independent research firms provide a more traditional sell-side style product. Some are very narrowly focused and expert in their domains. Their business model is to do their research and then sell it to as many clients as possible. While many do also offer client-initiated research projects, these tend to be very complex and expensive.
How is your firm different?
AB Analytical Services provides customized buy-side oriented analysis and consulting. We understand the needs and constraints of our clients, and our interests are truly aligned with theirs.
Is there a particular target customer?
Our firm is best positioned to serve small to medium-sized Registered Investment Advisors. These firms typically have smaller staffs and analytical resources due to their size. In many cases, the core competencies of the firm reside in their financial planning and portfolio management skills rather than in security selection. Most, if not all, of the trade execution is done at one firm, which limits access to outside research. However, we have been somewhat surprised that our clients have been somewhat larger than we expected, typically employing 5 or more analysts. We have come to understand that many of these firms value the perspective of an unbiased outsider who can either bring additional focus to an area of the market not well followed, work with younger analysts to help elevate their skills, or provide an opposing view that is sometimes difficult to cultivate internally.
So, how can AB Analytical Services help these small to medium-sized investment advisors?
Our company provides customized services that allow these advisors access to both our insight as well as our analytical tools, all with the goal of improving the security selection process and outcomes. The client can focus on marketing, portfolio management and running the business while accessing high-quality research in an affordable manner, avoiding the high costs of investing in these analytical tools or adding staff.
So, is AB Analytical Services providing "outsourcing"?
Exactly! In fact, I like the term "Free Agent Analysts"
What are some of these analytical tools you mentioned?
Technology is having a huge impact on the investment research industry. Large amounts of data can now be addressed rapidly and intelligently. Most of the tools in which we invest play to that theme. Central to our firm’s offering is Base Line an extremely powerful tool that allows the user to perform complex screening, securities analysis, and many other tasks. Other services allow us to gain insight into insider transactions, review transcripts or to identify potential financial deterioration. Some of the tools aren’t very proprietary, but they do require time and attention that often our clients might not have.
How do you price your services?
Every engagement is different since the work is customized. The business model is 100% fee-based consulting, and, thus, the pricing is directly related to the complexity and time requirements of the project. We do offer a few basic services at a fixed cost.
What are some specific examples of services?
The range of services is very broad. An example of a rather simple but perhaps very helpful on-going project would be the design of an appropriate screen and on-going weekly output of the stocks that meet the criteria. In fact, this is one of the services that is offered at a fixed price ($100 a month, with set-up and the first month free). Portfolio monitoring (for significant news, insider selling or buying, significant short-interest changes, key technical trend changes, etc.) is another example. A more complex task would be a complete review of a potential buy candidate. This is very valuable to advisors who are able to identify themes or sectors in which they would like to invest but aren’t as comfortable with identifying the best security to represent their idea. Actually, sometimes the best information is which stock NOT to buy! That is why we offer a Landmine Detection service for $100 per stock. We are also offering an on-going list of stocks generated by a screen that we run monthly. Unlike our custom screening product, which is geared solely at generating names that meet the very specific requirements of our clients, the subcriptions to this service also include a three-page report on each of the stocks that meet the criteria. For more specific examples, please view our deliverables.
One last question: If your firm is so good at research, why aren't you managing money instead of advising others?
That is a great question that we sometimes hear. The money management business is extremely competitive and requires significantly more than just good stock-picking. Success requires the ability to find new clients. Increasingly, investors want more comprehensive services, including tax advice, financial planning and access to a breadth of products. Anyone working at AB Analytical Services is extremely passionate about the markets and stocks. We do invest on our own (see our disclosure), but we do so without the politics and challenges of working with the "investment committee". Quite frankly, we are analysts at the core. Our clients appreciate that quality, and they value our flexible input without the commitment of hiring us full-time.