Rookie question

I am an Economics / Finance student with an interest in all things trading. In reading some equity research reports on Factset, I was puzzled as to why a firm would release a report that they paid an analyst good money to put together. For example, if Keybank releases a report on a stock, gives its valuation, target price, and recommendation, why would they make this (essentially) public information? Does Factset pay them for this information? Why even hire your own analysts if you can read others reports? I understand that investing is as much an art as a science, but if there are other companies already paying somebody 100k a year to publish these reports, couldn't there be some sort of opportunity for a firm to use these reports for itself? Why not just look through the reports, see which ones jump out, and invest based off of that? I understand this is probably an elementary question with a very simple and logical answer, but I am a bit puzzled by the motivation behind this. I appreciate any help.

 

There i s buy side and sell side research.

Buy side is for internal use by the company' investment teams. If you want to be a BSD trader/PM, you go buyside.

Sell side research is for redistribution by stockbrokers and investment bankers to attract money. If you want to be a Master of the Universe investment banker, you go sell side.

 

Because you are a student, you have not been taught to reason, probably. When tis occurs you will get into critical thinking.

In the financial industry, some corporations write white papers. These are distributed to others. Usually if a recipiet acts on the information a fee is paid the the corporate writer.

As an amateur in trading and living in Greenwich, Conn, I was asked to review white papers before they were released. The reason was that I was a specialist (amateur) in four market sectors.

Later I spent time as faculty at top tier MBA. I did meet students in MBA programs. Your current orientation and proclivities will eliminate you from working in the financial industry.

In the world culture the heirarchy is money to power to information. Information is paid for with money. Free information is such that there is no transaction to obtain it because it has no value. You are spending time dealing with free information. The time you pay can be assessed. Your time spent is relatively worthless.

My time is free time that I have. I am an amateur who trades parasitically off the information generated by the financial industry. As such I use leading indicators of the dependent variables of the market. Thus, my classification is as a technical anticipator. My profit segments are "pushed" by those who use the dependent variables to trade.

Were I you, I would change majors. Try organic chemistry; it is very orderly.

 

I would first like to thank you for your precious time. I am in anticipation of an itemized bill, which I’ll be more than happy to pay in full. I would like to express my utmost gratitude for the response, and I must say it is quite an honor to have brushed shoulders with such a brilliant man, albeit solely through one unpleasant, hostile cyber exchange. I have taken your invaluable advice, and accepted that university in general is unfitting for my derisory reasoning skills coupled with my lack of a logical mind, and have decided to instead pursue a career in HVAC. I suppose my dreams of life as a financier were a bit grandiose, and truth be told I had hopes of making the most out of my limited mental capacity. I really strived to be the classic example of someone who is “falling up”. I am also elated to know that you were involved in a top tier MBA program, and feel empowered knowing that you resided in Greenwich, Connecticut. I’m sure the patronization of your students in the program did wonders for their self esteem, and I assume the vast majority of them really looked to you for advice. Your mother must be a very proud woman. (How couldn’t she be?) I would like to, if at all possible, follow up my previous senseless question with a few more. Perhaps due to my inability to intelligently articulate my inquiries, incapability to think critically, indolent habits, or sheer stupidity, I did not expand upon my original query adequately. Perhaps my question arises from a simple lack of understanding of how FactSet works in itself. Using my previous example, if KeyBank releases a report signaling a buy recommendation on stock XYZ, how EXACTLY does KeyBank profit from this? Is the report simply purchased by FactSet? If I read said report on FactSet, go to my broker, and order 500 shares of XYZ, how is KeyBank compensated? Are clients involved in some sort of exclusivity agreement requiring them to make all transactions through FactSet Data Systems, the broker-dealer which falls under their corporate umbrella? They could then conceivably give a kickback to KeyBank. If this is the case, isn’t there quite a bit of potential for subscribers to “go over the head” of FactSet, and act on recommendations via other broker-dealers without paying more than their subscription fees? In short – when is Key paid, and how? Are they paid merely a flat fee for the report, or is there an additional commission paid on transactions made on the basis of that information? If there is some sort of kickback, how does FactSet ensure that one acknowledges the fact that their trade was made based off of the data disseminated by them and their affiliates? I must admit, I was looking at a FactSet subscription that was made available to a friend who is pursuing his finance degree at another university, so I am not much in tune with how much it costs, the terms of usage, and so forth. I must also confess that I wasn’t thinking critically (per usual) when writing the original question, as KeyBank is obviously making money by selling these reports, so their motivation for this is clear. However it begs a similar question – why not trade using these (ostensibly) smart individuals’ valuation models? I concede that this is quite a verbose message when I am essentially asking but a few simple questions, I believe I am doing what’s known as “thinking out loud.” On the bright side, this may serve as a good exercise in logical thinking, which I could undoubtedly use more than the average Joe. Allow me to itemize my questions so you’re able to methodically explain to me why my thinking is flawed, and my intelligence lacking.
1) When is KeyBank paid, and how is that payment structured (flat fee, commission, hybrid)?
2) If there is some sort of commission paid on trades made on the basis of this information, how is it structured?
3) Is it common for traders (excluding institutional investors or high net worth individuals, but those working for some sort of investment firm – bank, hedgefund, prop trading firm, etc.) to trade based entirely off of this information, without performing analysis of their own? (I understand this requires a bit of speculation, however you seem to have a wealth of knowledge as vast as the Andes.)
I hope I do not bore you with such elementary questions, and assume you’re able to find mental stimulation elsewhere in your busy, exceptionally important life. While whether or not the expansion upon my original rudimentary post warrants a response from such brilliant man is yet to be seen, I will most assuredly be reading more from you in the future. Probably in the Wall Street Journal. Potentially on a milk carton. I am unsure of which. You see, I am not much good with speculation, or I would have sold my UGL shares in 2011. I also would have looked elsewhere for a quick, informative response to a very simple question.
Best,
Robert (that’s my full name, they even patched it onto my dull blue uniform for me)