The world of financial research has changed. The article published in New York Business is interesting and proves that wall street is ready for a change. Some of the comments reflect the mood on the street.
"I try to bring information without translating that into opinion," he says. "My aim is to give investors all the raw material they need to make decisions."
"There are no shortcuts to generating a quality investment research team, and every time someone tries, people get hurt," says Nicholas Colas, director of research at Rochdale Securities and a former analyst at hedge fund SAC Capital.
----NY Business Article (in case the link does not work)------
A few choice words from David Jackson could send stocks soaring when he was a Morgan Stanley telecommunications analyst at the peak of the technology mania. But when the market nose-dived in 2002, Mr. Jackson was one of thousands who lost their jobs. Today, Mr. Jackson has found a new vehicle that he hopes will restore some of the clout he once wielded: blogs.
Late last year, he started the Internet Stock Blog, where investors can read his lively analysis about companies such as Google and Yahoo. Although the blog generates only $1,000 a month in revenue, a tiny fraction of what he made on Wall Street, he's excited by the possibilities.
"It's incredibly liberating to be able to say what you think in real time and have people responding to you," says Mr. Jackson, who does most of his work from his Riverdale, Bronx, home after putting his three children to bed. "I want to be the place to go."
He's not alone. About a dozen former Wall Street research analysts have started blogs in the last few months in an effort to strut their smarts before a new audience and revamp reputations that took a severe beating when the stock market bubble popped. The trick for these analysts accustomed to pocketing multimillion-dollar paychecks is finding an audience and earning more than the few dollars that are now dribbling in.
Stock research blogs "are an interesting idea to attract attention," says Allan Rosenstein, a partner at financial services consultancy Capco. "But I have trouble seeing them as a distinct business."
While these nascent research sites might present interesting investment ideas, they also present risks.
Because few bloggers charge for their insights, they have the incentive to talk up stocks they own. It can also be hard to verify whether a blogger is really an experienced investment professional or some mischievous teenager. To some market experts, investment research blogs bear uncomfortable similarities to the Internet chat rooms that proved a breeding ground for unscrupulous promoters touting stinky stocks. The Securities and Exchange Commission eventually filed fraud charges against some of these promoters, though so far it has left blogs alone.
"There are no shortcuts to generating a quality investment research team, and every time someone tries, people get hurt," says Nicholas Colas, director of research at Rochdale Securities and a former analyst at hedge fund SAC Capital.
Mr. Jackson says he's mindful of the risks and does not tout stocks so he can sell them. He says he's turned down requests by chief executives to write about their shares and is careful not to make recommendations or predict directions of stocks.
"I try to bring information without translating that into opinion," he says. "My aim is to give investors all the raw material they need to make decisions."
He turned to the Web because the advantages that made him so valuable to investors at Morgan Stanley vanished with the bubble. He used to tool around in a private jet to meet companies that wanted his firm to take them public and frequently got advance word on corporate earnings. But regulators have since mandated a separation between analysts and investment bankers and now also require that companies disclose news to everyone at once rather than dole it out to selected parties.
Those reforms, however, make blogs possible because they've opened the doors to the same conference calls, press releases and regulatory filings available to brokerage house analysts. Even better, from their new perch bloggers are spared the angst of compliance lawyers scrutinizing their every word.
Stephen Castellano, a former associate telecommunications analyst, started his blog last year in hopes of attracting enough attention to help him land a job after he finishes his MBA in the spring. The strategy seems to be paying off: Recently, he heard from a research firm in India interested in hiring a U.S. sales representative.
"I couldn't go to a potential employer and show them a report with my name on it from 2000," Mr. Castellano says. "People would laugh at me."
Bill Burnham, a venture capitalist and former analyst at Credit Suisse First Boston, says his blog helps put him in touch with entrepreneurs with investment ideas. Even though his blog generated only $15 in revenue from ads last month, it's worth the time because it gives him a chance to pontificate about whatever is on his mind.
"A blog is 100 times better than trying to produce research at an investment bank," he says.
As for Mr. Jackson, he hopes his blog is the start of a new business that will prove as successful as Marketwatch.com, the financial news site that was recently sold to Dow Jones for more than half a billion dollars. He's already brought on two former brokerage house analysts and added two new sites with plans to offer up to 20 more sites, which he hopes will be sustained by ads as traffic increases.
In the meantime, he's managing money for a handful of people and can afford to wait.
"I'm prepared to spend five years on this," he says. "Blogs are successful because of the conversations they foster, and the question is how to apply that to equity research."
