Investment Advisory Services
Investment Advisory Services
Frank N. Magid Associates’ investment advisory services focus on leveraging our deep consumer knowledge and tools to inform investment strategies. Magid provides investment and strategic counsel to investment firms looking at consumer-facing investments, particularly in media, entertainment, technology, retail, and consumer packaged goods.
We work closely with hedge funds, private equity firms, investment banks, and venture capital firms to identify and analyze investment opportunities based on broader consumer trends, or focused on specific company due diligence analyses, including work on over $25B in due diligence engagements. We provide unique value through our perspective on evolving consumer trends - informed by a constant pulse on consumer and advertiser attitudes and behaviors.
Investment Thesis Due Diligence: Magid leverages our relationships with industry experts and our cutting-edge consumer research to test the foundation of investment theses. Our due diligence process includes reviewing and hypothesis testing offering materials, discussing investment goals, applying Magid’s proprietary consumer/advertiser data to central questions, and interviewing industry experts and thought leaders to glean valuable insights. Due diligence projects often include custom research with current/prospective consumers, including advertisers or other B2B customers.
Bespoke Consumer Research: Magid’s subject matter experts and PhD analysts collaborate with your team to create a custom questionnaire to conduct qualitative research (such as advertiser or other B2B executive interviews) or quantitative research, such as online surveys with a large sample of consumers. Critical to this process is the perspective of our internal experts that informs the types of questions we ask, our approach, and our final analysis. The process yields an in-depth understanding of a specific company, group of companies, or industry’s value proposition, brand strengths/weaknesses, competitive positioning, product/service momentum, business model, and other factors that are key indicators of current and future performance. This research is proprietary to the client.
Specific Sector Seminars: Magid offers in-depth analyses of specific industry sectors or companies based on Magid’s proprietary consumer research, operational knowledge, relationships with industry thought leaders, and experience working with leading brands. We use this perspective to identify specific segments and types of companies that are best positioned for success, given consumer/advertiser behaviors and other key trends. These customized seminars include a presentation and report, usually quarterly, along with monthly calls to provide clients with perspective regarding any top of mind questions.
Monthly Knowledge Retainer: Magid also offers on-going in-person and phone consultations and regular access to our team of industry-leading analysts and operators regarding key industries and companies in media, technology, and other consumer-facing areas.
Ad Tech Due Diligence Highlights Investment Risks For Private Equity Firm
Objective: A leading private equity firm was considering an investment in an advertising technology provider and hired Magid to quickly and confidentially perform due diligence aimed at validating the original investment thesis, providing an objective view of the company’s competitive positioning, and exploring ad tech’s primary trends and future growth forecasts.
Approach: Magid performed a thorough review of the validity of the operating and financial assumptions put forth in the target company’s offering book. We then worked with the PE firm to design and construct an interview guide that would accurately and confidentially assess the target’s investment prospects. Magid interviewed 30 C-level executives at advertisers/agencies, publishers, and ad tech competitors, as well as experts and thought leaders that we knew in the ad tech space to gain valuable insights into the target company’s value proposition, positioning, and growth potential.
Results: Magid determined that the target company faced a number of substantial threats to its business, including better competitors, technological disruption, and shifting advertiser behaviors and preferences. Magid delivered these findings to the client, and the PE firm decided to drop out of the bidding for the target and put its capital to better use elsewhere. As of now, the proposed target company has yet to find a buyer.
Magid Leads Two Hedge Funds To Foresee Green Mountain Coffee Roasters Stock Crash
Objective: The rapid adoption of Green Mountain Coffee Roaster’s (GMCR) single serve coffee brewing system, together with decreasing transparency by management and uncertainty about the future impact of increasing competition, raised questions about the sustainability of GMCR’s business. Two prominent New York hedge funds hired Magid to analyze the health of GMCR from a consumer perspective.
Approach: In conjunction with the hedge funds, Magid designed a quantitative survey of 1,145 consumers, focused on Keurig machine owners and those likely to purchase a Keurig machine. The detailed survey established consumer-based benchmarks for GMCR’s installed base, attachment rates, intended consumption, and new concept testing that the clients could compare to both Wall Street analyst estimates and GMCR management guidance.
Results: Magid’s report clearly indicated that the single serve coffee market was more mature than GMCR and its competitors had suggested, specifically that penetration was greater, the true market opportunity was smaller, and demand for GMCR’s K-Cups was weaker. Basically, our findings suggested the “growth story” was over for GMCR. In announcing earnings, GMCR’s CEO confirmed the findings of our report nearly verbatim. The stock instantly sold off, wiping out nearly half of GMCR’s market value.
Magid Helps Hedge Funds Profit Off Netflix’s 2012 Stock Decline
Objective: The rapid adoption of Netflix’s subscription DVD and streaming services, together with a significant price increase on September 1, 2011, raised questions about the sustainability of Netflix’s historical growth. Magid was engaged by a small group of hedge funds to analyze the consumer-focused impact of Netflix’s now-infamous September 2011 price increase.
Approach: To evaluate the accuracy of market expectations, Magid and the hedge funds designed two quantitative surveys of 1,064 and 1,005 consumers, focused on Netflix subscribers, lapsed subscribers, and potential subscribers. The in-depth surveys established consumer-based benchmarks for subscriber churn and growth over the next 12 months. This included an evaluation of motivational drivers, satisfaction, and current/intended use of rival services.
Results: Magid’s findings showed higher churn and weaker growth than investors were expecting. Within days of the report, Netflix announced subscriber growth would fail to meet expectations in 3Q11, sending shares lower by 38% over a four day period.
Magid Proprietary Research Helps Hedge Fund Identify Emerging Social Media Investment Opportunities
Objective: Amidst nascent business models and new investment opportunities, social media investors are challenged to decipher fact from fiction in terms of consumer trends and monetization opportunities. In order to gain an in-depth understanding of key consumer social media trends, business model realities, and near-term opportunities in the space, a leading TMT hedge fund partnered with Magid to provide key social media insights based on emerging consumer trends.
Approach: Magid’s robust social media practice is driven by a team of internal experts who consult with leading social networks on product strategy, providing the backbone for our in-depth consumer-focused social media research tracked over the last several years. Magid leveraged the perspective of these experts, along with its proprietary consumer research, to provide the hedge fund with critical insights regarding the near-term opportunities and challenges facing the broader social media landscape, along with the specific strengths/weaknesses of FB, TWTR, and other emerging leaders in the space. This detailed analysis included analyzing the current and future competitive positioning of a variety of social media businesses in the areas of user engagement, advertising, online video, mobile devices, TV, news, and commerce.
Results: Magid’s social media insights helped the hedge fund quickly get up to speed regarding major trends that would impact the space in the near-term, along with specific insights that helped test hypotheses regarding the strengths/weaknesses of FB, TWTR, LNKD, and other leaders. The hedge fund also worked with Magid on a similar engagement focused on the smartphone/tablet market.
Magid Insights Lead Hedge Fund To Get Ahead Of Multiple Gaming Trends
Objective: The gaming business is changing rapidly, with emerging trends like smartphone and tablet gaming, next-generation console adoption, and free-to-play games shifting the investment landscape and creating significant opportunity for profit. A leading technology-focused hedge fund engaged Magid on a monthly agreement that would give the fund regular access to Magid’s internal gaming experts, as well as provide it with Magid’s most up-to-date research on all aspects of the gaming industry.
Approach: Magid’s gaming experts have frequent conversations with the hedge fund’s analysts, discussing Magid’s perspective regarding game software and hardware developments and upcoming game launches, as well as specific game company performance. Magid also routinely sends the hedge fund relevant proprietary research, including an annual gaming industry study.
Results: As a result of the insights provided by Magid, the hedge fund has been able to successfully position itself ahead of several important trends – both broader and company-specific – in the gaming space, and has profited as a result.