What is Lighthouse (LH)?

Lighthouse is a fundamental analysis project of the IEAF aimed at the secondary equity market, and with the backing of BME (Bolsas y Mercados Españoles). However, it is not a conventional project. Why?


Only orphan stocks.

LH limits its coverage to listed Spanish stocks (the Continuous Market and BME Growth Market) not covered by the Sell Side . LH only analyses those stocks that are not covered by the Sell Side, focusing on small and/or illiquid stocks

“No P/L”

LH’s goal is not to build a P/L so its research is not intended to be sold but rather to provide a service to the market.

Coverage with conditions

The necessary condition for LH to cover a stock is that this must be an orphan. Once a stock starts to be analysed by the Sell Side, LH discontinues its coverage.

No advice

LH does not aim to advise investors, but rather to increase the market's knowledge of certain stocks about whose fundamentals it has little or no information. As a result, the stocks will become more liquid and trade closer to their fundamental values.

Other objectives

LH has two other aims : monitoring and following the level of coverage of the Spanish equity market and proposing measures that help to improve market coverage.

Why is a project such as LH necessary?

Lighthouse was created to deal with a serious weakness of the Spanish market: its high level of orphan stocks.

The problem of orphan stocks is universal. All markets have a certain percentage of stocks without coverage. On average (globally) it is estimated that 30-40% of listed stocks are not followed at all by the Sell Side.

In Spain the problem is bigger. On the Continuous Market (approximately 135 companies) there are 40/45 stocks not covered at present (ex LH). In addition, there are those of the BME Growth Market. The non-coverage ratio of the total Spanish market is c. 40% (ex stocks covered by LH).

The impact of Mifid II. Mifid II requires the unbundling of research and execution costs. Managers must choose between absorbing the cost on their P/L or passing this on transparently to their clients. This has affected the coverage of Mid-Small Caps.

Spain is no exception . The Spanish market has also been affected by this situation. Depending on their size and liquidity, we estimate that c.15 companies on the Continuous Market, currently without coverage problems, could have them in the future.

LH is necessary: An absence of analysis causes a lack of liquidity, undervaluation (stocks that are not covered trade below their benchmark multiples) and impedes access to the primary market as a source of funding. LH is necessary because the Spanish market already has a serious problem of lack of coverage that could be made worse by Mifid II.

What are LH’s guiding principles?


No competition

A basic principle of LH is not to compete with the Sell Side. Its aim is to provide a service to the market: the coverage of those stocks that the Sell Side does not cover spontaneously. For this reason, when a stock is no longer an orphan LH will discontinue its coverage.



LH is associated with a prestigious entity within the world of analysis (IEAF) and a logical objective is that its product is of optimum technical quality. Its analysis is not intended to be superficial but in-depth and appreciated by the market.



LH aims to offer the market fully independent analysis without conflicts of interest.



LH was created to provide a permanent and long-term solution for all orphan stocks on the Spanish market.


Just analysis

LH is not a vehicle for selling other investment banking products. The IEAF doesn’t have any and the project does not have this aim in mind. There are no execution, M&A, financing or other services. LH is strictly and solely a project for the analysis of orphan stocks.


Maximum distribution

The project aims to guarantee coverage of orphan stocks but also investor access to this research. The IEAF, through its website, will distribute the research and provide universal access to the product (all investors in all markets). LH’s product will also be freely accessible on the BME website and on the main global market information platforms (Bloomberg, Capital IQ, Factset and Thomson Reuters).


Transparency with the market

LH aims for full transparency with the market.


Good governance

LH is controlled by the Comisión de Servicios de Análisis (Analysis Services Committee) which reports to the Board of the IEAF. The Committee’s main mandate is to control the stocks to be covered by LH, ensuring that the stocks covered are orphan stocks and that LH never competes with the market. The Committee will also propose discontinuing coverage of a stock when it considers that this no longer has orphan status. The Committee will ensure compliance with LH's Code of Conduct.

Which stocks are subject to coverage by LH?

What is an orphan stock?

The companies to be covered will be decided on the basis of a strict criterion. From LH's point of view, we consider an orphan stock to be one that has not been covered by at least one analyst in the previous 12 months.

Where are the orphan stocks of the Spanish market?

In Spain there are three large “pools” of stocks without coverage: the Open Outcry Market, the BME Growth Market and the last third of the Continuous Market (its smallest stocks).

Where to start?

The selection of the stocks to be covered will be made according to objective criteria (size, liquidity, fundamentals) and will be monitored by the Analysis Services Committee.

When is there real coverage?

We consider a stock is being covered by the Sell Side when it is followed on a regular basis. This involves the publication of a yearly update report, of a report on all quarterly results, of reports arising from significant events or events with a significant impact on the stock, and the keeping of updated financial projections with the publication of reports when there is a change in these.

Features of LH’s fundamental analysis

With financial projections

The methodology followed by LH is one of classic fundamental analysis, based therefore on in-depth knowledge of the businesses analysed and good modelling with financial projections. This is not quantitative or technical analysis.

No recommendation or valuation

For LH the value of research (especially for “small caps”) lies in the financial projections and not in the valuation or the recommendation. LH does not issue recommendations (it doesn’t say “buy” or “sell”), and neither does it value or publish target prices. This represents a significant difference with respect to the traditional Sell Side product.

Technical quality

The goal of LH’s product is to be useful to the market. To achieve this all the focus is on the technical quality of the research being optimum.