Introduction to Investment Research Reports

​​When it comes to investment research, the sources range from highly professional to totally amateurish. Not every investor can afford the best research out there, but every investor needs to avoid worthless advice that can cost lots of money in investment losses.

Investment research reports help, but investors need to understand what they're reading

The institutional investors, such as various investment funds, get access to highly detailed and meticulous research performed by industry experts and financial analysts with long experiences and CFA designations. Often, this research is combined with brokerage services provided to institutional clients. Many financial institutions that invest money have their own researches as well as economists. Others buy it. Also, wealthy clients, who rely on premium banking and advisory services, get premium research.

A professional research report usually contains a summary with an investment recommendation, followed by a review of a company, its competitors, industry, plus risk factors. The research report is also supported with historical data and financial forecast. Since valuation models are used to support the conclusion, these models will often be explained so investors can see how the analyst has come to his or her conclusions.

For regular retail investors, who don’t invest millions of dollars, access to the best research resources is limited. But not all is lost. The fact that many mutual fund managers can’t beat the market averages shows that their research is not all that matters.

Quality online brokerage houses also provide various research reports to their clients. This is where retail investors get investment research, typically for free, as part of the offer to the clients. This research may not be as detailed as the research professionals get, and is often based on standard templates. Still, a lot can be learned from such research reports.

One example of a research report provided to retail clients that is quite professional is the “CFRA Stock Report,” which is powered by data from S&P Global. At the top, a recommendation is given. It is based on five stars, with one star the lowest, and five stars the highest ranking. For instance, four stars represent a “buy” recommendation.

The report also shows the price of a stock as of the time it was issued, as well as a 12-month price target. Additionally, it contains a chart and five years of financial data including revenues and earnings per share (EPS). Moreover, it contains highlights, investment rationale, and risk factors. Furthermore, there’s a business summary and sub-industry outlook with a comparison table including competing companies. On top of these, there are quantitative evaluations that contain fair value rank, valuation, and calculation.

Another example of a research report is “Stock Reports +” provided by Thomson Reuters. This report uses indicators such as earnings, fundamentals, relative valuation, risk, price momentum, and insider trading. Financial performance, technical factors, and comparison to competitors are used to derive a score and an outlook (positive, neutral, or negative).

Yet another example of a research report is Market Edge’s "Second Opinion Weekly." It contains an opinion (such as Long), a comment, and a variety of technical indicators such as price and volume analysis.

Among the reports, the first one relies on fundamental analysis, the second is a mix of fundamental and technical analysis, while the third one is mostly based on technical indicators.

There are also paid research services such as Zachs Investment Research. And there are free stock research resources.  

Some individual investors and traders also provide their own research services, including stock lists. This is where investors need to be extra careful. Most of these “reports” are issued by complete amateurs without much investment success. There are a few, just a few, exceptions. One of them is Tim Sykes. He has turned $12,000 into more than $4 million in a matter of years, and now trains his students and offers stock lists that are both for ultra-short-term trading as well as for longer term investing.  One of his students, who became a multi-millionaire as well, also provides his own research.


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