TOP-TIER Investment Research for the Masses

Tom Lee’s FSInsight delivers

Anyone tuning into CNBC, Bloomberg, Fox Business or following the markets in the major financial press has most likely seen or read about Tom Lee. He founded New York-based Fundstrat Global Advisors in 2014, after more than 20 years and having received numerous accolades as a Wall Street strategist with Kidder Peabody, Saloman Smith Barney and J.P Morgan. Most recently, in 2020, he launched FSInsight as an offshoot company of Fundstrat.

While Fundstrat serves more than 250 institutional clients around the world, FSInsight is a subscription-based service focused on delivering top-level research to registered investment advisors (RIAs), family offices and individual investors. FSInsight has grown quickly in two short years by offering smaller firms and individuals a reasonable price point for the type of quality investment research usually reserved for major banks and hedge funds.

“We’re an independent boutique investment research firm that make clients feel we’re on their side,” Lee told Advisors Magazine in a recent interview.

“Being independent means that we can be a hundred percent unconstrained in our views,” he added. “We don’t trade or have any funds; our business is purely research advice, allowing us to be aligned completely with our clients.”

And that’s very comforting to Lee, who acknowledges that he is able to sleep soundly—which is also the unstated mission of FSInsight.

“I love when I hear that we’ve made a client feel smarter, or that we’ve taken the anxiety out of the market for them,” he said. “Because the stock market can make people so anxious, and we just want them to sleep at night—to trust that their money is going to work for them. To me, that’s probably the most important service we can provide—allowing people to be confident about investing.”

An evolving research perspective
Lee grew up in the Midwest and received his BSE from the Wharton School at University of Pennsylvania with concentrations in finance and accounting. His first job on Wall Street was with Kidder-Peabody in 1993 and he was designated as the firm’s wireless industry analyst.

And as a wireless industry analyst, he had a number of epiphanies that prompted him to view the sector differently than most other equity analysts.

Lee recalled that in the early 1990s, wireless was a fast-growing technology business, but with a very uncertain future. He said that there were just 34 million cell phones around the world in 1993. The wireless companies were not in a strongly capitalized position, and they were operating in a telecommunications market favoring the likes of AT&T.

“Most analysts covering the wireless industry thought the future was bleak,” Lee said, “because they thought cell phones would only become extended cordless phones as part of the traditional telecoms sector.”

Lee closing bell
Lee was young—in his twenties—compared to most equity analyst peers in their 40s. As such, he came to view the wireless industry very differently.

“I saw how it made communication with my friends,” he said, “how it improved our social lives dramatically.”

He explains that most people at that time still left voicemails on home answering machines. They played phone message tag when wanting to get together on weekends, for example. Payphones were still around.

But this new wireless cell phone technology also allowed the sending of text messages in addition to voice calls and messages. And today, that’s how virtually everyone connects and meets up.

“I came to see wireless as being far more transformational,” Lee said, who continued to cover the wireless sector from 1993 through 2007—and has been consistently top-ranked by Institutional Investor magazine every year since 1998.

Reflecting today on those early years, Lee told Advisors Magazine of two major lessons learned.

“A big lesson I learned from my time doing wireless is that the world is driven by young people,” he said.

Lee explains that most businesses are created by those between the ages of 20-40. They are the ones coming up with new ideas, disrupting established players. Social media is another great example. Initially, most people in their fifties thought Facebook, Twitter and more recently TikTok were silly ideas.

“So, as an analyst and a Wall Street strategist, I’ve learned to look at a growth industry through the eyes of someone 20 years old,” Lee said.

His second big takeaway from that early experience was how important credit markets are to funding equities. At that time, wireless companies didn’t make money. But they were borrowing a lot of capital, and they were viewed as having a number of valued positives.

“They had subscribers and the network,” Lee said, “And I realized that the credit markets were generally a good leading indicator for stocks.”

Those two important takeaways paved the way for Lee’s successful career. By age 28 he had been ranked by Institutional Investor as a top analyst—a rare, young age for such recognition. In 1998 he joined Salomon Brothers and was named their youngest research managing director ever at age 29.

The fuel for Fundstrat and the FSInsight genesis
Lee’s years at Salomon and surging reputation as an equity strategist led to his joining J.P. Morgan as a managing director. It was while at J.P. Morgan that the idea for Fundstrat was first hatched.

“J.P. Morgan is a great place,” Lee said with fondness. “But while there, I was realizing that I was about 45 now and hadn’t started an independent business—and my chances of ever doing so were slim. I decided I wanted to start my own business.”

In effect, the early lessons as a wireless analyst drove that decision. He believed that business growth was largely fueled by young people and that most new businesses are started by those in their twenties through forties.

lee teamIn 2014, Fundstrat Global Advisors was created as an independent research boutique and based in New York. Its third-floor office today is located at 150 East 52nd Street.

Fundstrat was founded to serve a broad array of clients, including institutional investors, wealth advisors, pension funds and high net worth individuals. Its mission was and remains to provide the best fundamental, technical and quantitative research with the top priority being clients’ needs and interests.

The approach is data intensive and, as noted on the website, the company “seeks to exploit anomalies to identify sectors and stocks we feel should outperform the market. Our tools are aligned with this focus and helps our clients to make better informed decisions.”

The focus is on delivering analysis, not opinions. And as an independent research provider, its clients are assured that Fundstrat’s work is tailored to provide fresh and innovative intelligence to aid in their investment process.

In fact, Fundstrat is considered by the media to be among the first major Wall Street firms to actually write about cryptocurrencies, according to Lee, who initiated its crypto research in 2017. “We were one of the first to see crypto as a new emerging growth industry that Wall Street would care about,” he said.

“From the start, the Fundstrat business did well,” Lee said. “We noticed we kept getting a lot of inquiries from folks that were family offices or RIAs who wanted to have access to our research—but it was too expensive for them because Fundstrat was priced as an institutional service.”

The decision was made to create a second unit, now known as FSInsight, as the more family office/RIA-friendly enterprise. It was launched in 2020.

“Instead of having a dense and technical research product, we made it a lot more user friendly,” Lee noted. “And we provide sector-investing recommendations as part of a very comprehensive product.”

As for the FSInsight leadership team today, Lee oversees the macro market research work. Head of Technical Strategy is Mark Newton, CMT. The Washington Policy strategist is Tom Block, the former head of government relations at J.P. Morgan. Adam Gould, CFA, is on board as a quantitative strategist. Brian Rauscher, CFA, leads Global Portfolio Strategy and Asset Allocation.

“On top of all that expertise, we actually have a crypto and digital asset research group,” Lee said. Sean Farrell heads that team.

“So, it’s a very comprehensive set of services and we have now about 27 research professionals full time,” Lee added.

“The FSInsight clients feel like we’re giving them an extremely high-quality service that really helps them level the playing field,” Lee said, explaining, “We’re equipping them with a lot of the information that institutions get, but in a way that they can easily access.”

The FSInsight website,, is a subscription-based service, and the top tier of access can be provided for about $2,500 per year, according to Lee.

The original Fundstrat, with its institutional research, is a negotiated contract service and the level of tailored work and customized engagement can vary, depending on the institution’s needs.

Tom’s Takes
Lee’s verified Twitter account shows he’s jovial and armed with a sense of humor. His handle is: Thomas (Tom) Lee (not the drummer) FSInsight @fundstrat.

Advisors Magazine found the same during our recent interview with him. He touched on a number of current market and economic conditions, providing his perspectives:

• On the general U.S. economy…
“I see the underlying economy as still quite strong. There is a lot of excess savings and pent-up demand, and COVID restrictions are ending. I don’t think the economy is busted. I think we’ll eventually emerge from this malaise stronger.”

• On the stock market…
“I think the stock market is in no man’s land at the moment. (Ed. Note: Interview was conducted April 7) “It’s consistent with our research view for this year. We advised clients in December that the first half of 2022 would be treacherous and for all the obvious reasons—the supply chain issues, risk of further inflation, and the Fed’s expected actions. More recently the war in Ukraine amplified all these things. So, until the markets have either discounted in the worst case, or things start improving consistently, stocks are a bit stuck.”

• On President Biden’s recent digital asset executive order…
“It’s really a sign of further legitimizing [crypto]. I think once the rules are fully established, that will open the door for banks and companies to really start plumbing into crypto. And once that happens, then the number of people who use crypto will grow and the amount of crypto as part of commerce in the U.S. will grow.”

• On Bitcoin reaching a value of $200,000…
“Looking at Bitcoin’s value, 97 percent of its price can be explained by just the number of wallets and the activity per wallet; Since 2009, there is a 97 percent correlation between those two variables. If those two variables hold, then Bitcoin could easily get to $200,000—not anytime soon, possibly in 12 to 18 months, with a lot depending on how rules and regulations are properly put together.”

• On what investment to avoid…
“If the CPI over the next two years averages 6 percent, you are going to lose money within your bonds. That’s because the nominal yield needs to be pricing in a real return plus inflation. Even with investment-grade most people aren’t going to make money.”

• On recommended equity sectors…
“Our favorite sector last year was energy and that remains our favorite sector in 2022. We think energy equities are still attractive because there’s a positive tailwind for oil. Also, the equities themselves are underpriced because they’re not discounting for current oil. So, we think there’s a pretty big runway for the energy stocks.”

• On other stocks…
“In the second half of this year, we think the FAANG group of stocks (Facebook, Amazon, Apple, Netflix, Google) is going to be pretty attractive. Because once the worst is priced in, investors in the second half will want to find companies that can grow faster than GDP on a real basis, that have good margins and reasonable P/E ratios. And I think they’re all going to notice and say, for example, ‘You know, Facebook has like a 16 PE right now.’ And I think investors will come back to such stocks.”

• On the crypto sector overall…
“We like crypto. It’s a little bit tied to NASDAQ, but it’s an industry that still has a huge growth ramp in front of it. There will be a lot more penetration, a lot of new services. The actual revenue opportunity is quite large and it’s an under-owned space.”

In fact, Lee and the team at FSInsight produce a quarterly report titled ‘Granny Shots’, which are investment stock picks that aim to outperform the S&P 500.

“It’s a list of 31 stocks that commonly appear in fixed portfolios,” Lee explained. “We run these thematic and quantitative portfolios and the ones that appear the most become our Granny Shots. For four years now it has outperformed the S&P, and this year it’s outperforming by 275 basis points.”

In a nutshell, Lee is confident about the markets and the economy going forward.

“I’m slightly more positive now because I think we’ve just front-loaded so much of the bad news already this year,” he summarized.

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