COMMENTARY


Corporate Access, Investor Targeting and Stock Selection


An empirical assessment of the effectiveness of industry and fundamental targeting approaches to predicting future stock initiation.


BY BRENDAN FITZPATRICK M


any investor relations (IR) professionals and corporate access profes- sionals at investment banks are interested in identifying potential new investors for the securities they represent, a practice known as investor targeting. One popular targeting approach is to rank potential new


investors by a portfolio’s exposure to a security’s industry, on the assumption that high exposure predisposes an investor to make a subsequent investment in the same industry. Alternatively, many practitioners, guided by the theory that portfolio


managers diversify their portfolios across industries to maximize portfolio returns, target potential investors using a fundamentals-based approach, looking for alignment between a security’s growth, valuation and other fundamental attributes and a portfolio’s emphasis on those factors, independent of the security’s industry.


Summary Findings Our research demonstrates the following: A fund’s exposure to an industry, provided a fund has at


least some exposure, is negatively correlated with subsequent initiation in the industry. Conversely, a fund’s fundamental alignment with a security


ni ri .org/ irupdate IR UPDAT E ■ S P R I NG 20 2 5 3 9


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