In what has become an autumnal tradition on the Street, Institutional Investor on Friday published its "1998 All American Research Team" ranking of the top stock analysts in their fields.
Oh, you can scoff, as many on the Street do, and call it a "beauty contest." But, make no mistake: a First Team ranking at "II" is the ultimate trophy on the desk of stock analysts.
And this year:"Supertanker America" bull Abby Joseph Cohen at Goldman Sachs was named top portfolio strategist; Merrill's market-mover Judah Kraushaar on the money center banks; Microsoft insider Richard Sherlund at Goldman; early Internet stock picker Mary Meeker at Morgan Stanley Dean Witter; and yes, Thomas Kurlak, Merrill's brazen semiconductor analyst leads in his volatile sector.
Making it to the top of the ranking of equity research analyst can mean millions - literally - to some of these folks. A stellar ranking means perhaps even more to the banks, which busily promote the anointed.
Banks typically stud biographies of analysts with II rankings - as if they were Golden Glove infielders - in pitch books used to lure clients on big deals. And fielding an award can launch a career or keep it alive; it gets noticed when a perennial winner gets benched.
Investors should take note; a sudden buy or downgrade from a top II analyst can move the stocks they cover. Citigroup's stock climbed 7 percent on the heels of a supportive report on July 8 from Merrill's Kraushaar.
The magazine queried research directors and chief investment officers of major money management firms in the U.S., Asia and Europe to build the list, and sent questionnaires to analysts and portfolio managers. In all, II said it mailed ballots to 625 institutions and tapped the opinions of nearly 1,800 individuals, representing approximately 88 percent of the 100 largest U.S. equity managers.
Over the last few years, the top five firms garnering the most selections have been about the same, with Merrill Lynch topping the list four out of the last five years and Donaldson, Lufkin & Jenrette, Goldman Sachs and Morgan Stanley Dean Witter in the top five since 1995.
- Goldman Sachs' Abby Joseph Cohen, tapped top analyst for Portfolio Strategy, was praised for auguring economic turmoil in Asia in early 1997, II said. She distinguished herself by spotting "hot sectors such as financial services and high technology while underweighting all commodities." A noted bull, Cohen surfaced as a key foil to Prudential's Ralph Acampora's by-now famous call for a downturn in the Dow this summer. PaineWebber's Edward Kerschner rose to the second spot; he forecast the big cap rally. Third is Michael Goldstein at Sanford C. Bernstein.
- Solomon Smith Barney's Jack Grubman, Wireline Telecom Services winner, led the pack for his industry knowlege . He was credited for keeping portfolio managers in WorldCom (MCI Communications) and Qwest Communications International and away from the Baby Bells and AT&T . For his efforts, Grubman is handsomely paid - an annual compensation reportedly worth around $10 million plus stock over two years, the magazine reported.
- Controversial chip analyst Thomas Kurlak got the nod from the money managers for his hard call on weakness in chip demand and pricing. Merrill's Kurlak is remembered for his downgrade of Micron Technology last August and then downgrading the whole sector nine days later. Morgan Stanley's more bullish Mark Edelstone rose to second this year, praised for bringing in Rambus and ARM Holdings.
- Joseph Bellace, Merrill's Telecom Equipment analyst, made the team for the eleventh time and was lauded for his copious and frequent reports, and for working the phones aggressively to get the word out. Notable calls were sticking with Lucent Technologies and pounding the tables on Ciena Corp..
- Merrill's Server & Enterprise Hardware analyst Steven Milunovich takes top seed for the 10th straight year. Timely buy ratings on EMC Corp., Lexmark International Group and Sun Microsytems drew him praise from the buy-side. Goldman's Laura Conigliaro, an IBM specialist, remained in second.
- Five-year winner Richard Sherlund, Merrill's PC Software analyst, received kudos for his accurate numbers and deep industry knowledge of Microsoft , which he had helped bring public 11 years ago. He remained bullish on the software giant throughout the Department of Justice inquiry, II notes. Michael Kwatinetz at CS First Boston rose to second, sending Morgan Stanley's Mary Meeker to third place.
- Gunnar Miller, at Goldman, topped in Semiconductor Capital Equipment for leading buy-siders through a difficult period with the sector. He trimmed his buy list to two companies: Applied Materials and Teradyne after a trip to Asia. Morgan Stanley's Jay Deahna took second. Deahna created the "deep-ultraviolet-photolithography food chain index" to track performance of photolithography equipment makers. While his picks have been flat, they've at least outperformed the Philadelphia Stock Exchange's chip index, II notes.
- Michael Kwatinetz, who led the stunning migration from Deustche Bank Securities to Credit Suisse First Boston this year along with 17 tech analysts, led in PC Hardware. Clients praised his downgrade of Compaq Computer Corp. in January. Some two months later, he upgraded the stock to a trading buy at 25 and the stock rose to 35. Kwatinetz placed second in PC Software.
- On the Internet, which now includes "new media" companies, Mary Meeker at Morgan Stanley Dean Witter was singled out for her call on Amazon.com last September, which then rose 530 percent through July and beginning coverage of Yahoo!.
Written By Emily Church