Our quarterly reports on client portfolio risk are available for $100 per company per year. The service is priced minimally for two reasons:
- so that new clients will give it time to work
- so that the work has a diverse subscriber base.
We bill after the first report. At that time, new clients have the option of not paying the invoice and canceling. The research will often offer different conclusions from a client’s own.
Almost all investment research is based on conjecture or opinion about the future. “Company A may not be much now, but wait until next year.” There is a role for that analysis, but the role of this research is to be as concise, clear and thorough on the subject of portfolio risk as indicated by both current situation and emerging financial statement trends, based on facts with a minimum of conjecture about the future.
The pricing is based on the following additional logic:
- On the one hand, the value of this research is that it offers conclusions that are often different from those reached by our clients. On the other, a business, the fundamental purpose of which is to provide analysis contrary to the views of its clients, is going to experience client turnover.
- Our analysis generally takes time (generally one month to one year) to be reflected in stock prices.
Clients can update the stocks — change the company names — we analyze quarterly.
One of the characteristics of this research is that the more a client emphasizes quality (high return on capital, low debt, low capital expenditure requirements, ability to compound real cash earnings) and risk avoidance in his or her stock (or bond) selection, the more our conclusions will be in harmony with their own. This does not diminish its value to investors who use it to understand emerging trends in distressed, cyclical or out-of-favor securities, but as its central purpose is to understand risk, it does penalize higher-risk securities. The research can be summed up as understanding the risk inherent in a company’s current position, including competitive position and financial structure, with adjustment for emerging positive or negative trends.
A major part of our role is to act as a counter to confirmation bias, which Wikopedia defines as:
Confirmation bias, also called confirmatory bias or myside bias,[Note 1] is the tendency to search for, interpret, favor, and recall information in a way that confirms one’s preexisting beliefs or hypotheses. It is a type of cognitive bias and a systematic error of inductive reasoning. People display this bias when they gather or remember information selectively, or when they interpret it in a biased way. The effect is stronger for emotionally charged issues and for deeply entrenched beliefs. Wikopedia