When I started my career in the financial information industry many years ago, someone told me, “the sell-side comes and goes but the buy-side is always there.” The recent volatility in the banking world made me think about that comment recently and take a closer look at some of the stocks I follow. The stock market believes the buy-side is here to stay as well. Three information technology companies that sell their products and services primarily to the buy-side have been rocket ships for the two years. The charts for Advent Software (ADVS), FactSet Research Systems (FDS) and MSCI (MSCI) are below.
IHS (IHS) is another well-performing information company, but the performance of many others has been mixed. It seems that to the extent an information provider or information sevices provider’s revenue is concentrated on the buy-side the higher the multiple the market applies to its revenues. Advent and MSCI trade at over 5 time sales, while FactSet trades at over 6 times sales. ThomsonReuters, with an incredibly diverse set of information assets and customers, some of which are buy-side firms, trades at 2.5 times revenue. Success selling to the buy-side has greater rewards.