A small team of Nashville-based researchers has quickly found success testing the idea that people will in fact pay for quality information.
Kathryn Thompson, Chris White and John Fink launched Thompson Research Group in May after leaving Avondale Partners. They also recruited senior analyst David Wells and have since focused on selling in-depth research on the building materials and related industrial sectors to a select group of asset managers that includes names like Fidelity, Soros and Wellington.
Playing into their hands is an industry trend that was growing before the financial crisis but has gathered a lot of steam in the past 18 months. Large investment houses that — despite the market’s 45-percent run since March — have suffered serious losses in recent years. As their executives seek to cut costs, they are reassessing the quality of their research sources, both internal and external, and increasingly sticking only with providers who add value.
“Research is no longer a loss leader,” Thompson said. “We think it can stand alone.”
In launching TRG, the Avondale veterans – whose résumés also include stints at J.C. Bradford, Drexel Burnham Lambert and what is now FTN Equity Capital – are part of a wave of new independent research firms relying solely on their analysis and opinions rather than housing themselves inside a larger investment bank. Further evidence of the rise of stand-alone analysis came last week, when FTN’s parent, First Horizon National, said it is selling its research arm to a New England private-equity firm.
Perhaps best-known among this new crop of researchers is Meredith Whitney, a former Oppenheimer bank analyst who made a name for herself two years ago by calling out Citigroup before the financial crisis erupted in full. Other new firms have made a name for themselves by focusing on the retail and home-building sectors.
Thompson and her team, who work from 2525 West End space formerly occupied by BB&T Capital Markets, say they can stand out from the crowd with their deep-drilling approach built on a network of industry and government sources that provide on-the-ground insights into a sector that gets a large amount of its revenues from public sources.
They have signed up almost 40 paying clients, the smallest of which manages about $1.5 billion, have been profitable since their first month in business and carry no debt on their books. While Thompson wouldn’t reveal revenues, she did say she and her partners “expect to make more this year than in [their] best years” elsewhere.
They’re also growing their shop. Owen graduate Jamie Baskin joined the firm last week as research associate and will help ramp up the team’s coverage universe – now at 12 companies – to about 30 by the end of the year. Thompson said among the areas of focus are construction equipment companies, engineering firms and residential building suppliers.