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 incentivized to cover the more liquid counters in this universe in order to effectively monetize their research.
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 do not feature on this radar due to size, illiquidity or both.
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 be economically monetized by brokerage. But the benefit of professional coverage is felt directly by the small cap itself. Hence we charge the company being covered directly for its coverage and provide the research to the rest of the market for free.
We need to be clear, Blue Gem Research produces commissioned research. But, let us also be clear, all research is indirectly paid for by one or more parties. We are merely being transparent about this fact on this website and in our research disclosures.
Offering the market selective commissioned research of small caps solves numerous challenges:
- Investors and the general market can benefit from freely available professional research on these under-covered stocks (you do not need to agree with every word or conclusion in a research note to take value from the work done and presented in it),
- The small caps can feel the benefit of professional coverage from added exposure in both the investment community and the general public, and
- The research is sufficiently monetized to justify the time, effort and expense of building and maintaining it (it has taken nearly two decades of experience and significant amounts of time to build an individual note).
Essentially, this is Blue Gem Research’s rationale: balancing the risk of commissioned research against the vast potential value-add to the broader market and individual stocks we have chosen to cover.
If you are new to reading professional research reports, some terms and abbreviations may be new to you. Please see our Frequently Asked Questions page we answer some of the most common questions thrown at us regarding Blue Gem Research.
Finally, see 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 (even if you received it in your inbox or via social media), you are assumed to have read, understood and agreed to this disclaimer.
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Thank you for all your support in our attempt to make the market work better!