FDS - Factset Data Systems

[sleepydragon]

last time I checked they bought a smaller company at 10x revenue, so I passed.

I think their service is pretty sticky though. Fund managers that used their data to construct portfolios can't easily switch to another vendor because the data may be slightly different and will result in a slightly different portfolio. They are also cheaper than bloomberg.

There are some fun company party videos on youtube. The culture is a little odd...

[glorysk87]

As a former customer, I don't think I'd ever buy this company. Their whole pitch is that they're a cheaper alternative to Bloomberg. But there are a few caveats.

 

First - their pricing structure is set up in a way that the first license is extremely expensive (~$20k), and then every subsequent license after that is very cheap (Like $680 if I recall correctly).  So basically, if you're running a small fund with only a few analysts, Factset is just as expensive if not more so than Bloomberg. To me, this makes no sense. Smaller funds are exactly the customer group that wants an alternative to Bloomberg, since they don't have the scale to cover costs of that magnitude.  Larger funds/managers/banks/etc are much more able to afford something like Bloomberg and thus aren't likely to be the core market for Factset.

 

Second - their product (as of 1.5 years ago when I was using it) was just not very good. They had countless data reliability issues, they published erroneous numbers, their speed to update companies' new financials was abysmally slow, they had next to no data on fixed income securities, and they have none of the really useful features that Bloomberg has (the variety of calculators, IB, LLKU, etc I could go on forever).

 

Third - their core addressable market is being penetrated by MUCH lower cost alternatives like Sentieo and Money.net - these providers do much of what Factset does but at an ACTUAL low price that smaller funds and managers can afford.

 

So basically, Factset seems to be in the worst competitive position. Their product isn't up to par with things like Bloomberg, but their price point is being undercut by providers like Sentieo.

 

Dunno. This could be colored by the fact that Factset was a daily source of irritation and angst for me when we were using it. We switched to Bloomberg and I don't think I could ever bring myself to switch back to Factset.

[abitofvalue]

dont own Factset and am unlikely to own it given emerging threats.. but as a counter-point to glorysk87, think Factset likely to gain share near-term atleast. Bb is exp and lots of banks are looking to reduce # of licenses. Think a few boutiques already have gone to factset on desktop and a couple of Bb terminals on floor model rather than giving each employee Bb on their desktops... expect this to spread to the bulge brackets too which will add a nice chunk of new users (in ibanking)..

 

On the research side MiFiD is going decimate research budgets and suspect move to FactSet from Bb will increase. Already hearing from friends that their banks are starting these FactSet pilots etc. typically its a FactSet + Reuters type solution since as you point out Bb is so much better in a head-to-head. What i am hearing is stick with Bb on trading floor / sales & fixed income but for equity research analysts, ibankers, assorted operations guys etc dont need to be spending $$$ on Bb.. when $$ for Factset will do.

[sleepydragon]

On the other hand, I was looking at this company 5,6 years ago, and didn't invest because of all these negative points stated above. The company hasn't really changed much these past few years yet the stock has done well. 

Another company I looked at is MSCI. They own Barra, which is very sticky. Nobody want to change their risk models. But the stock is expensive.

[glorysk87]

dont own Factset and am unlikely to own it given emerging threats.. but as a counter-point to glorysk87, think Factset likely to gain share near-term atleast. Bb is exp and lots of banks are looking to reduce # of licenses. Think a few boutiques already have gone to factset on desktop and a couple of Bb terminals on floor model rather than giving each employee Bb on their desktops... expect this to spread to the bulge brackets too which will add a nice chunk of new users (in ibanking)..

 

On the research side MiFiD is going decimate research budgets and suspect move to FactSet from Bb will increase. Already hearing from friends that their banks are starting these FactSet pilots etc. typically its a FactSet + Reuters type solution since as you point out Bb is so much better in a head-to-head. What i am hearing is stick with Bb on trading floor / sales & fixed income but for equity research analysts, ibankers, assorted operations guys etc dont need to be spending $$$ on Bb.. when $$ for Factset will do.

 

Yea, you make really good points. I will reiterate though that for a research analyst, Factset is vastly inferior compared to Bloomberg. So I suspect many of the banks that switch their research guys to Factset will likely switch products again after using Factset for a couple months/years (whether that's back to Bloomberg or to another platform I don't know).

[winjitsu]

dont own Factset and am unlikely to own it given emerging threats.. but as a counter-point to glorysk87, think Factset likely to gain share near-term atleast. Bb is exp and lots of banks are looking to reduce # of licenses. Think a few boutiques already have gone to factset on desktop and a couple of Bb terminals on floor model rather than giving each employee Bb on their desktops... expect this to spread to the bulge brackets too which will add a nice chunk of new users (in ibanking)..

 

On the research side MiFiD is going decimate research budgets and suspect move to FactSet from Bb will increase. Already hearing from friends that their banks are starting these FactSet pilots etc. typically its a FactSet + Reuters type solution since as you point out Bb is so much better in a head-to-head. What i am hearing is stick with Bb on trading floor / sales & fixed income but for equity research analysts, ibankers, assorted operations guys etc dont need to be spending $$$ on Bb.. when $$ for Factset will do.

 

Yea, you make really good points. I will reiterate though that for a research analyst, Factset is vastly inferior compared to Bloomberg. So I suspect many of the banks that switch their research guys to Factset will likely switch products again after using Factset for a couple months/years (whether that's back to Bloomberg or to another platform I don't know).

 

CapitalIQ is another competitor, which for standard deals, cap table, and equity info does the job quite well. I can vouch that several of my investment banking analyst friends use it. At my firm [PE/VC] we use a couple shared BB terminals but mostly rely on CapitalIQ seats [easily 4x the number of licenses].

 

From my limited experience using factset as a student a few years back, the only big differentiator between factset and capiq was factset had better portfolio management tools / pre-done analysis. Both suck for FI data -- for that you'd need BB.

[tede02]

Interesting conversation.  Factset has always interested me.  My "Peter Lynch" radar always picks it up.  What I mean by that is I see it everywhere.  I've looked at the financials a number of times and it is enormously profitable with very attractive ROE/ROIC metrics. 

 

One reason I haven't ever owned it is I have not used the software personally.  Furthermore, I get mixed messages about the product when I talk with users.  I've heard some of the same things others have described here.  A friend told me when he used it at Fidelity, it seemed really slow.  But again, I constanty run into firms that use it and it seems like the vast majority of financial media site Factset for their source of data (WSJ in particular). 

 

A mutual fund manager told me once that his perception was that Bloomberg is much more common on the fixed income side and Factset on the equity side (not sure how true this is but it does seem consistent with what I see). 

 

The business model of these data providers certainly seems lucrative.  What isn't clear to me is how durable the moats are of these companies.  Bloomberg seems to have some kind of secret sauce.  The other company in this space that has interested me is Morningstar.  Also very attractive financials.  Morningstar also seems to have a very strong brand, especially with the general public. 

 

I remain interested in all of these companies but personally need to learn more about the competive landscape.