Goldman Sachs Tops FT/StarMine Analyst Rankings
Goldman Sachs is the big winner in the inaugural annual Financial Times/StarMine rankings of best equity analysts.
In each region, awards are presented to the top three stock pickers and earnings estimators in each industry, to the top 10 stock pickers and earnings estimators overall, and to the 10 brokerage firms that have won the most individual analyst awards. The Top Global Broker award goes to Goldman Sachs, which racked up the most individual analyst awards across the world.
As the credit squeeze has put investors’ nerves and portfolios under severe strain, research has experienced a resurgence in importance that looked unlikely after the Enron-era research scandals, the FT says. But the very conditions that have given research new-found prominence have also made the analyst’s job more difficult.
A striking feature of the StarMine results is that the US and European analysts who performed best in the changing markets of 2008 were less likely to be from “bulge-bracket” investment banks that have the most financial muscle.
In Europe, for example, six of the top 10 earnings forecasters and eight of the top 10 stock pickers came from independent regional firms, often covering medium and small cap companies.
Indeed, Europe’s top five stock pickers came from CA Cheuvreux, KBC Securities, Natixis Securities, Carnegie Investment Bank and Öhman Fondkommission.
Cheuvreux’s Philipp Bumm, rated Europe’s best stock picker, earned his status with bold calls on Q-Cells, the German solar panel company, and the renewable energy companies CropEnergies and Conergy.
The US displayed a similar pattern, with five of the top 10 stock pickers coming from outside the bulge bracket.
Analysts from firms such as the San Francisco-based boutique JMP Securities, Simmons & Company, an investment bank specialising in the energy sector, and Sterne, Agee & Leach, a century-old privately-held investment bank, outperformed colleagues from household names such as Credit Suisse, UBS and Morgan Stanley.
However, bulge bracket firms took seven of the top 10 spots in the overall US league table, which adds up all the awards won by each firm – a sign that size and breadth of coverage are still an important part of a bank’s research arsenal.
Big banks also dominated the overall table in Asia, a reflection of the fact that the region still lacks a robust breed of independent investment firms.
Nevertheless, Terry Smith, former head of UK research at UBS Phillips and Drew and chairman of Collins Stewart, the UK stockbroker, says the good showing by independent firms is evidence that the tighter conflict of interest rules that followed the Enron-era excesses have “neutered” bulge bracket firms.
“Their greater degree of compliance has cut them off from market intelligence. The bulge bracket also attracts more ‘me-too’ analysts who produce formulaic research,” he says. “[Independent firms] are just clearer about what analysts can do. It’s not that the people in smaller firms have lots of inside information. They are just less hidebound by what they can do.”.
For full details, see the FT’s special online report here, or a PDF of the FT’s print supplement here.
(via FT Alphaville.)
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