Blue Gem Research is built upon the belief that we can make the market work better.
A structural bottleneck in the South African equity market is the reality that sell-side analysts are incentivized via allocation, trade volumes and related brokerage to cover large, liquid stocks. While this can add value to the market, the law of marginal diminishing returns implies that it adds less and less value as more and more analysts cover the same finite number of stocks (i.e. the Top 40 index on the JSE).
Even the few analysts covering stocks outside this Top 40 index are inadvertently pushed to cover the more liquid counters in this universe in order to effectively monetize their research through the related, generated and allocated trade.
The irony is that the very stocks that would benefit the most from being professionally researched are the very stocks that are also marginalized by these sell-side economics: the dynamic, growing, exciting small cap counters that fall just off this radar.
And so Blue Gem Research was founded to address this critical need in the local market and, by doing so, make our market work better for all participants.
The logic is simple. Research on the under covered small caps cannot really be monetized by brokerage. But the benefit of professional coverage is felt directly by the small cap itself. Hence why not charge the company being covered directly for the coverage and provide the research to the rest of the market for free?
This solves numerous challenges: (1) Investors and the general market can benefit from freely available professional research on these under-covered stocks, (2) the small caps can feel the benefit of professional coverage, and (3) the research is sufficiently monetized to justify the time, effort and expense in building and maintaining it.
Essentially, this is Blue Gem Research’s rationale.
Besides this public-facing research, Blue Gem Research also provides exclusive independent research to certain, invite-only buy-side and related houses. Our client list is limited to a maximum of only five houses. The reality is that the illiquidity of the local small cap market does not lend itself to mass sell-side research and our choice to provide exclusive independent research is based predominantly on the liquidity constraints and alignment of methodologies of the buy-side houses we have allowed onto our subscription list.
Please spend some time familiarising yourself with our approach, ethics and the various channels you can follow, like and subscribe to us and our research.
Firstly, in our Methodology page we go into quite a bit of detail regarding our research approach, valuation techniques and unique insights into the local small cap market. To best understand our research reports, you need to understand our approach to investing. There are links to videos and webinars we have presented and this page also includes some key terminology we use as shorthand in our research reports. The odds are that if anything you read in our research confuses you, you will better understand it after referring to this page as background.
Secondly, in our Frequently Asked Questions page we answer some of the most common questions thrown at us regarding Blue Gem Research, prepaid research and various other details. Perhaps just browse through this page if you have any questions relating specifically to Blue Gem Research.
Thirdly, Blue Gem Research has some firm convictions regarding ethical conduct in the stock market. Besides all the standard ethics applied in the research environment in South Africa (which we strictly apply!), we would like to emphasise three key (and in some sense, unique) ethical principles we also believe in. Read about them in our Ethics page.
Fourthly, our Disclaimer page discloses some of the finer legal details of our research. While it may be a boring read, it is quite important that you understand our global disclaimer. By browsing this website and its research, you are assumed to have read, understood and agreed to this disclaimer.
It must be noted, though, that Blue Gem Research operates with the feel-good intentions of trying to make the market work better. It is our belief that quality research should, as far as possible, be freely available. Please do not distort our good intentions, but take them, interpret them and use them with this in mind. The only people who get rich when “the lawyers” get involved are “the lawyers” and we, personally, would prefer to live in a world filled with poor lawyers.
Finally, besides simply browsing this website and regularly visiting it to see updates, Blue Gem Research can be followed on Twitter and liked on Facebook. We also strongly suggest subscribing to Blue Gem Research by entering your email address into the box below in order to get email updates the moment we publish anything new.
Thank you for all your support in our attempt to make the market work better!