TRADING IN INFORMATION Rockville firm seeks to be one-stop shop for investment data

One can almost see the light bulb flashing over the heads of Robert Levy and Spero Kripotos, a couple of young investment "quants" before the term "quantitative analysis" was coined.

They had managed to make a modest living in the late 1960s and early 1970s applying the theories they developed in graduate school about how financial markets work. In the course of their own investing, they gathered information about other institutional investors: what stocks they held, and in what amounts.


The light switched on when they found that others wanted that information, too, and were willing to pay for it. It became more profitable to compile and sell data than to trade securities. That insight led to the rebirth of Rockville-based Computer Direction Associates.

Today, with about $20 million in revenues, almost 120 employees in six offices and thousands of customers around the country, CDA Investment Technologies Inc. is one of the nation's most successful, and one of its quietest, investment information firms.


Last month CDA, now a subsidiary of Canadian publishing giant The Thomson Corp., took another step toward its goal of becoming a one-stop shop for investment professionals: It bought a Fort Lauderdale, Fla., firm called the Invest/Net Group Inc., which tracks stock purchases and sales by "insiders," or the officers and directors of public companies.

The Invest/Net acquisition brought to a half dozen the number of product groups CDA offers to brokers, mutual fund managers, investment advisers and financial planners.

"At the risk of sounding a little silly, everybody in the trader world uses [CDA]," said Stephen C. Keeble, who was hired as the company's chairman two years ago.

If that's true, it's a tribute to the power of information in the financial markets. Mr. Levy and Mr. Kripotos, who since have sold their interests in CDA, first recognized that trend when they were managing money for their Swiss backer, Overseas Investment Services.

Another of OIS's clients was a New Yorker named Arthur Lipper, who was selling information about institutional stock holdings and bought CDA's raw data. Mr. Lipper strayed from that line of work in favor of performance analysis, a line of business his brother, Michael, has turned into a nationally known firm called Lipper Analytical Services Corp.

CDA picked up the business Mr. Lipper discarded, dispensed with the performance analysis aspect of it and packaged the information on stock holdings as their flagship product, Spectrum.

The quarterly Spectrum book, which now is primarily accessed on-line by investment firms around the nation, was based on the filings mutual fund managers were required to submit to the Securities and Exchange Commission.

Two events in the 1970s sparked the growth of CDA. In 1974 the U.S. Comptroller's Office required federally chartered banks to report their investment holdings as well, and Section 13(f) of the Securities Act of 1975 required similar quarterly reports from all money managers with more than $100 million in equity investments.


"That's a filing that really put CDA in the data business in a big way," Mr. Keeble said.

Section 13(f), when it became effective in 1978, required a whole new world of investors to file public quarterly financial reports, including insurance companies, most private investment advisers and even internally managed funds, such as those for foundations, pensions and endowments. But the SEC needed an outside contractor to process all those filings electronically, and "spit it out in the form they wanted," Mr. Levy recalled.

"In order to assure ourselves we would get [the SEC contract], we bid zero," he said. "Not surprisingly, we got it." CDA had decided the value of the data far outweighed the cost of processing it for the SEC. Since then, the company has been the manager of both the SEC's 13(f) filings and the 13(d) form, which investors must file when they intend to acquire 5 percent or more of a company's stock.

In December 1986, Mr. Levy and Mr. Kripotos sold the company to a British firm, which promptly decided to divest, and in turn sold it a year later to Toronto-based Thomson, a public company that is 70 percent owned by the Thomson family. They both spend one or two days a week at CDA -- Mr. Levy only when he can find time between his law school classes.

CDA operates within Thomson's Financial Services group, alongside other well-known information providers, such as the American Banker and Bond Buyer newspapers, and Sheshunoff Information Services, a Texas company that analyzes U.S. and international financial institutions.

In the meantime, CDA's product line and customer base has expanded. T. Rowe Price Associates Inc., in Baltimore, is a customer of the flagship Spectrum product, according to Richard Whitney, a vice president who manages the company's Balanced Fund and Equity Index Fund.


Mr. Whitney uses Spectrum to analyze the investments of portfolio managers in a variety of fund groups. "I want to know where the

competition is," he said.

Using Spectrum, CDA developed a related product called Bullseye, which took the institutional holdings information and packaged it for corporate investor relations managers.

McCormick & Co Inc., the Hunt Valley food and spice company, uses Bullseye to find out who owns its stock and who doesn't, according to Chris Kurtzman, the assistant treasurer.

McCormick also subscribes to CDA's Cadence service, which does performance analysis for the company's pension investments. Cadence serves primarily small to midsize banks, and a few hundred private money managers, Mr. Keeble said.

CDA's Wiesenberger division publishes mutual fund performance reports, and competes most directly with Lipper and Chicago's Morning star Mutual Funds, an up-and-comer in the fund performance field.


Gary Fearnow, a managing director at Alex. Brown Inc., uses information from all three companies as head of the firm's special products department, which researches and markets Alex. Brown's eight funds, and the world of non-proprietary mutual funds.

Unlike Morningstar, CDA does not target individual investors. And it eschews the consulting work that Lipper does for the companies that develop mutual funds. Instead, its market in the mutual fund arena has been primarily those who sell funds, especially private investment managers.

"CDA is probably the most institutionally oriented, where you are getting money managers rather than the general public using their products," said Tal Daley, vice president and director of funds marketing at Legg Mason Inc.

But some wonder whether CDA's longtime strength, cranking out the data with little regard for analysis, may come back to haunt them. The institutional holdings data is becoming more readily available to smaller and smaller investment advisers, according to Terrence Woulfe, of Oxford Capital Management in Towson, a customer of CDA's performance analysis service.

With the SEC moving toward an electronic reporting system called EDGAR, CDA may lose part of the edge it has as the agency's outside contractor for the 13(f) and 13(d) filings.

But Mr. Keeble defends CDA's decision to stick to its knitting. "We believe we will continue to grow and thrive because we do add value beyond simply collecting and collating the data," he said.