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footnoted's next chapter

It's official: footnoted is no longer part of Morningstar Inc., and I'm no longer working full time for footnoted. This unfolded over several months, so it's no shock, and I'm already well into figuring out my next steps.

You can read the joint announcement of the change. Michelle, footnoted's founder, also published a blog post about the change on Tuesday. But like so many formal announcements, there isn't a ton of detail. So I thought I'd fill in what gaps I can.

I can't add much to CEO Joe Mansueto's statement that "the footnoted business does not fit into our longer-term strategic plans."

I can say this, however: We accomplished a hell of a lot in 2-1/2 years, particularly at the footnotedPro subscription service for professional investors. I'm proud of what we've done.

I joined footnoted just a few days after Morningstar's acquisition was finalized in early 2010. Since then, we've dramatically increased the number of Pro reports we send out each year, to average more than one a week. We also created an entirely new product for subscribers, called the Red Flag Alert (or RFA). It essentially catalogs all the most interesting material we find over the course of each week. 

But most importantly, we proved that our approach — a combination of proprietary search algorithms and experienced human judgment — is sound. Consistently, we've found significant disclosures that others miss, disclosures that let investment professionals avoid losses or act on new opportunities.

Some examples:

Of 10 companies we flagged as likely M&A targets in January 2011, three were acquired within a few months. Another one or two proved to have been in play, as we suggested, though no deal was ultimately consummated. Other companies that we have flagged as deal candidates have also been acquired.

We're still waiting to see how this year's picks pan out, but we've had success on other fronts, as well. Last fall, when insolvency  was still just a rumor for American Airlines, we identified signals in its disclosures that we called consistent with an impending bankruptcy filing -- a month before the airline actually did file for bankruptcy-court protection. And in an  RFA in December, we flagged a brief new disclosure from Wal-Mart that turned out to reflect the serious bribery allegations that The New York Times published later this spring.

Investors have taken note. We've signed up money managers and analysts from some of the biggest hedge funds and private-equity shops in the country, and we've gotten serious interest from many others. That interest has continued this week, in the wake of this week's separation from Morningstar.

So, no surprise, up until the decision was made to take footnoted independent again, our spring sales were beating projections from our ambitious, two-year business plan, which was approved late last year. We accomplished all this with a small team: Michelle, researcher/reporter Sonya Hubbard and me, with salesman Todd Serpico, at the core, plus a great freelancer (Bhattiprolu Murti) at peak periods and a series of interns. 

Now that footnoted is independent, I'm looking forward to seeing it take the next steps. With some technical improvements, I'm confident that footnoted can continue to grow and thrive.

And I won't just be watching. I'll be writing and doing research for Michelle at least occasionally, both for the blog and for footnotedPro. So stay tuned, keep reading, and let us know what you think as you go. There's a lot more to come.


Note: I edited this post to add Bhattiprolu Murti's name, and to link to his and Todd Serpico's LinkedIn profiles.