Start-Up Idea “Research Firm”
Hi everyone! I’m a college undergraduate student and developed a fictional business idea. As I am by far not as experienced as most forum users here (I guess), I would like to hear your honest thoughts about it.
Problem: The problem of conformity among Wall Street analysts poses a significant challenge to the investment community as it undermines the accuracy and objectivity of financial analysis. This is because analysts often conform to the opinions of their peers, rather than relying on independent research, in order to avoid standing out and potentially putting their job at risk.
Problem 2: Wall Street firms are usually not looking at small, micro or nano cap companies as much as they analyze mid- and blue-cap companies, due to a lack of investor demand, because the relatively small market capitalization is unsuitable for the majority of institutional investors.
Impact: The impact of conformity among Wall Street analysts, and not covering companies with a relatively small market capitalization is that it results in a lack of independent thinking original analysis and market inefficiencies. This can lead to missed investment opportunities for non institutional investors. Furthermore, it can also lead to a herd mentality in the investment community, which can also support market inefficiencies and suboptimal investment decisions for smaller and private investors.
Proposed Solution: The proposed solution is to create a business that prioritizes independent research and analysis in the stock market for smaller and private investors. This business will cultivate a culture of original thought and encourage analysts to be independent and unconstrained in their analysis. This will result in the dissemination of more accurate and objective financial information, leading to better investment decisions and improved market outcomes for their clients who may were using the same information which is provided to institutional investors before.
Why would you not utilize the research you are generating to trade for yourself or an LP base in a hedge fund style?
your line of reasoning (which is not inaccurate) that smaller companies are undercovered and have greater opportunities for independent analysis/research is the basis behind a variety of buyside hedge funds that have launched (see Alta fox at its start).
If the research is actually strong, don’t sell it, act on it
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