SPONSORED RESEARCH
PROGRAMS DESIGNED TO PROVIDE EQUITY RESEARCH COVERAGE TO UNDERSERVED COMPANIES
An Issuer-Commissioned Service to Address a Growing Void
In recent years, many companies with smaller market capitalizations and low trading volumes have seen a dramatic decline in the number of firms that provide them research coverage; brokerage firms simply cannot economically provide that service to companies with these characteristics. This dynamic is particularly frustrating because many smaller companies have outstanding investment theses that may allow investors to earn an appropriate risk adjusted return, but these businesses lack the exposure necessary to get their message to the investment community.
In response to this trend, Sidoti instituted two sponsored research programs: the Company Sponsored Research (CSR) program in 2016 and Lighthouse Equity Research (Lighthouse) in 2024.
The CSR program is where the issuer commissions our seasoned analysts to provide equity research. CSR now represents about 50% of our coverage universe. We have found CSR to be a model that allows independent brokerages, such as Sidoti, to provide quality securities research to underserved small and microcap companies. This model is not unfamiliar to investors. For decades issuers have commissioned firms such as Moody’s, S&P and Fitch for debt ratings and research. See examples of our Company Sponsored Research here.
Lighthouse will service the specific research needs of companies with stocks not conducive to traditional valuation metrics such as earnings and cash flow or that have difficulty obtaining analyst coverage due to perceived political risk or other factors. Lighthouse leverages the reputation Sidoti has earned as Wall Street’s leading independent small and micro-cap research provider since 1999 and will advance companies’ access to Sidoti’s 1,500 institutional relationships and growing investor network. Lighthouse fills a critical void in the market for companies seeking to improve visibility and gain investor outreach through high-quality research that is free of undisclosed conflicts of interest. Lighthouse research will be made publicly available through Sidoti’s website and across leading financial data outlets such as FactSet, Bloomberg, Capital IQ and Refinitiv.
Companies participating in either sponsored research program, can also take advantage of other Sidoti or Sidoti-affiliate outreach vehicles, including non-deal roadshows or attending in the firm’s eight annual virtual investor conferences.
10 Basics of Quality Equity Research
Professional and objective analysis of a company’s long- term investment potential; not promotional, unreliable or misleading findings full of hype.
Well written and edited, held to highest standard and with full and clear disclosures.
Analysts do not pander to management teams and have real veto power that requires the confidence in an investment thesis to put their name on the research.
Timeliness; as soon as possible after EPS announcements and other news.
Regularity; research should be issued at least 8x per year.
Provides complete financial models, including cash flow projections and assumptions for future financing needs.
Price targets tied to business fundamentals and not relative valuations or obscure data.
Not all stocks should be rated BUY all of the time.
Effective distribution.
Management of subject companies recognizes investment potential can withstand objective, independent analysis and that research is very different than investor relations.
BENEFIT FROM OUR 25+ YEARS OF EXPERIENCE COVERING THE SMALL AND MICROCAP UNIVERSE
Credibility, Independence, Respect
Since 1999, Sidoti has focused on supporting small and microcap companies through publishing equity research (currently about 150 names under coverage), providing corporate access through our investor conferences and non-deal roadshow activities, and otherwise leveraging our sales and trading relationships with approximately 500 institutions in North America. Over those 20+ years, Sidoti has earned the respect of institutions, and established a record of credibility and independence, such that the buyside cares not who ultimately pays for our research services, just that we are the provider.
SIDOTI’S CSR IS VIRTUALLY IDENTICAL TO OUR TRADITIONAL RESEARCH OFFERING
SAME QUALITY, SAME ANALYSTS, WIDER DISTRIBUTION
Sidoti’s commissioned research product is substantially the same as our traditional research, as we believe that smaller, less visible companies should receive the same high-quality service as larger and better-known issuers. Our CSR and traditional research is replete with earnings estimates included in consensus, price targets, and investment commentary. CSR only differs from our traditional research in that we replace an investment rating (BUY/NEUTRAL*) with a risk rating (Moderate/High). And, unlike our traditional research, which is distributed only to our institutional clients, CSR is available to all classes of investors after its publication.
*Because a BUY for an institution may not mean BUY for a retail investor, we believe it best to provide the reader our analyses and estimates, but not offer them an investment opinion. This makes it more likely that each investor will make an investment determination based on his or her own specific circumstances in consultation with an investment advisor.