NEWPORT -- J.P. Mark's office window looks out on Ocean Drive and offers a framed view of waves lapping on the shore and reeds blowing in the wind.
Sometimes in the afternoons, Mark takes off his headset, grabs his wife and two children, and heads over to the beach for a romp in the sand.
For Mark, who left San Francisco's financial district in 2001 for the quiet of coastal Rhode Island, hitting the beach in the middle of a workday isn't playing hooky -- it's just a better way to do business. His perspective is not surprising, since the company he founded -- Farmhouse Equity Research -- is all about getting out of the office.
Farmhouse Equity Research is a financial research firm, checking the sales claims of public companies. From the fourth floor of Sea Beach, his stately 100-year-old oceanfront home, Mark, 46, marshals a team of 100 part-time employees across the country.
They make sure companies are actually doing as well as they tell investors they are. These investigators -- recent graduate business students, lawyers and other finance and retail professionals -- talk to suppliers, customers and buyers. Farmhouse employees go to restaurants and talk to servers, see if DVDs are selling and see how much shelf space certain products are given at stores.
They send the information back to Mark, who pulls the data into snapshots of the companies' financial health and then sells that data to investment firms and mutual funds considering investing in those companies.
In the finance industry it's known as "channel checking" -- or independently investigating the financial health of a company by validating its business and not simply accepting its claims at face value. To Mark, it's just "good, solid research."
"We want to be the preeminent firm in channel checking," he said.
To Mark, the business is filling a need in the financial-analysis industry and at the same time giving him the chance to work in finance without having to juggle the demanding schedule he faced as director of research for Wells Fargo Securities in San Francisco.
Mark, a Boston native with undergraduate and graduate degrees from Tufts University and an MBA from the University of Chicago, spent years writing about companies for industry newsletters and doing stock research, eventually working up to the director's job.
San Francisco was a "crazy" life, he said. With housing prices out of control, Mark and his wife, Katie, lived in a two-bedroom apartment with 1 1/2 parking spaces -- forced to move the neighbors' cars in order to get their own car out of the driveway, he said.
And with Wall Street operating on East Coast time, Mark got up at 4 a.m. to get to work by 5 a.m. -- 8 a.m. Eastern time -- and worked until 6 p.m., with barely time to eat between conference calls and financial modeling. Bedtime was 8:30 p.m., leaving little time for anything but work, Mark said.
By 2001, his parents had moved to Rhode Island and with his wife pregnant with their first child, it was time to explore other options, he said.
"The more I thought about it, I thought 'I could do research anywhere,' " said Mark.
With no plan other than to be his own boss, Mark and his wife moved into a farmhouse in Portsmouth. He started Farmhouse as a traditional stock research firm, doing financial modeling and tracking on small to midsize companies that weren't being followed by many analysts, such as Rhode Island's GTECH Holdings Corp. of West Greenwich, American Power Conversion Corp. of South Kingstown and KVH Industries Inc. of Middletown.
He was selling research reports to institutional investors, but he was also receiving calls from other analysts looking for specialized research. Responding to demand, by the end of 2004 Mark decided to focus on customized channel-checking.
"You can look at us like a consulting firm," said Mark, differentiating the company from competitors that provide more general research in newsletters.
Stock analysts today have little time to do in-depth research on the companies they cover, he said. With U.S. Securities and Exchange Commission regulations requiring public companies to release the same information to individual investors as well as Wall Street firms, the institutional investors are interested in getting as much independent research about a business as possible, said Mark.
"Why would you want to buy something you already have?" he asked. "It has to be really, really top-notch. This is not easy stuff to do, and it's got to be high caliber. These are extremely demanding people that expect a lot."
This type of independent, investigative research on companies' financials has been around for years, said Jonathan Boersma, director of standards of practice at the Center for Financial Market Integrity at the CFA Institute, a national organization of investment professionals in Charlottesville, Va. Channel checking may not give a complete picture about a company's financial status, but it can validate assumptions and give investors an idea of where the company is going, he said.
"People are looking for any advantage they can as far as research and investment opportunities," said Boersma. "This is turning back to what I consider good old, fundamental investigative research."
Mark recruited investigators from business schools, where students are eager to get into the finance industry. He has hired lawyers and professionals with a strong financial background. Most work from home. It's a virtual business, but one Mark says gives Farmhouse a more comprehensive, national reach.
The research is profitable. Mark charges thousands of dollars for the reports and while he declined to comment on the company's current annual revenue, he says it could eventually grow to be a $50-million company.
"We provide extremely valuable research for professional money managers handling hundreds of millions of dollars," said Mark.
But it's also a competitive industry. And some public companies, not happy with having their employees grilled by consultants and concerned about having unauthorized financial information becoming public, have warned their workers not to talk to researchers such as Farmhouse or respond to unauthorized surveys.
"We think channel checking is perfectly legitimate as long as people aren't misrepresenting themselves," said Boersma. "If investors feel there is true value added, then it's going to continue. If people don't feel like it's added much, people won't spend the money on it and it'll go away."
Mark takes the attitude that public companies should be more open, and the information his employees are gathering helps investors make more-informed choices.
And, he says, it gives his employees, as well as himself, the ability to stay in the finance industry while living a less hectic lifestyle.
"Research can be done anywhere," said Mark. "If I could, with the time change, I'd be in Hawaii."
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