WORLD’STOP ANALYSTSFINANCIAL TIMES SPECIAL REPORT | Friday May 14 2010

www.ft.com/top­analysts­2010 | twitter.com/ftreports

Taking stock in tough times

It is particularly hard to besuccessful as an equity ana-lyst in times of grave eco-nomic, political and financial

uncertainty, such as the worldhas witnessed over the past yearor two.

So the individual stock pickersand earnings estimators – and thebroking houses – that haveemerged on top in the 2010 FT/StarMine Awards for the world’sleading analysts have particularreason to congratulate them-selves.

The FT/StarMine Awards, now

in their third year, recognise theachievements of analysts whowere best in their sectors aroundthe world in the calendar year2009. The awards for US winnerswere presented at a dinner heldlast night at the New York StockExchange.

StarMine, part of Thomson Reu-ters, is a research analytics com-pany that has pioneered the quan-titative measurement of researchperformance and employs a meth-odology respected and widelyused by investment banks andfund managers.

The awards cover three regions– the US, Europe and Asia – andare given to individual analysts intwo categories: “stock picking” –how their “buy” and “sell” recom-mendations on particular compa-nies have performed relative toothers; and “earnings estimation”

– how accurate their forecasts ofcompany earnings announce-ments have been, compared withthose of their peers.

There are also awards in eachregion for the top overall stockpickers and earnings estimators,irrespective of their sectors.

The awards are rounded outwith prizes for the top brokinghouses in each region, ranked bythe number of individual awardseach firm has racked up.

There are separate awards forthe “most productive” brokinghouses. This category, introducedin 2009, is meant to allow somesmaller boutiques or regional bro-king houses, which do not have asmany analysts as their big coun-terparts, to compete more equally.It divides the number of awardsthat each firm has won by thenumber of analysts it employs.

Unlike some rankings of ana-lysts, which judge the brokers onsubjective criteria, such as fundmanagers’ perceptions of theirvalue, the StarMine figures arederived from an objective compu-tation of precisely how well indi-viduals have performed relative toindustry benchmarks.

So what trends emerge from the2010 awards? The first is the sheerdifficulty of picking winning andlosing stocks when the environ-ment in which industries areoperating was so volatile, and sosubject to political decisions bygovernments intervening in mar-kets in a manner unprecedentedin recent times.

In the US, for example, the S&P500 index, which had fallen 39 percent in 2008, rose 24 per cent in2009, ending 65 per cent above itsMarch low. In Europe it was a

similar story, with the Eurofirst300 index ending up more than 25per cent on the year, bouncingback from nadirs reached inMarch.

It was a year, therefore, inwhich getting macro-economicassumptions right may have beenalmost as important as detailedanalysis of the merits and weak-nesses of individual companies.

For example, a belief that Chinawas going to ride out the eco-nomic storm relatively well willhave helped propel some metalsand mining analysts up thetables.

In a year of such extreme vola-tility, analysts who had strongsell recommendations on somestocks, as well as buy recommen-dations on others, are likely to

Leading equity analystsacross the world can patthemselves on the backafter a challenging year,writes Martin Dickson

Things are looking up: traders at the New York Stock Exchange earlier this week, as stocks surged in response to a €750bn package to tackle the eurozone’s debt problems Getty

Continued on Page 3

2 FINANCIAL TIMES FRIDAY MAY 14 2010 FINANCIAL TIMES FRIDAY MAY 14 2010 3

ContributorsMartin DicksonDeputy Editor

Robert BuddenDeputy Markets Editor

Robin KwongTaipei Correspondent

Masa SerdarevicWall Street EquitiesReporter

Andrew BaxterSenior Writer, FT Reports;Commissioning Editor

Steven BirdDesigner

Andy MearsPicture Editor

For advertising details,contact: Hope Kayetel +1 212 641 6548fax +1 212 641 6545e­mail hope.kaye@ft.comor your usual FinancialTimes representative

In This Issue

Volatility and debt pose stiff testEUROPE A highly volatile period of hugeeconomic and financial uncertainty madeanalyst stock picks particularly tough,writes Robert Budden Pages 4­5

Analyst of the yearRichard RepettoGetting the big picture right,experience of previousdownturns and strongteamwork have all played

their part in the award tothe Sandler O’Neillanalyst Page 7

Steering through peaks and troughsUS In volatile markets, spotting potentialfallers as well as risers – and taking leaps offaith, too – are the keys to success foranalysts, writes Masa Serdarevic Pages 6­7

Taking a ‘bearishcontrarian view’PROFILE Roberta Ciacciaof Exane BNP Paribasaims to ‘think out ofthe box to examinethings that may not beobvious at first sight’.Pages 4­5

World’s Top Analysts World’s Top Analysts

In­depthknowledgehelps pickwinners

Last year was one ofsharp changes forAsian stock mar-kets. While overall

they enjoyed their best yearsince 2003 on the back ofthe global economic recov-ery, the first few months ofthe year were marked by asharp fall in stock prices, asanxiety over the extent ofthe US financial crisisgripped investors.

For the region’s best ana-lysts, picking the winnersand losers during this roll-er-coaster ride required in-depth knowledge of themanagement strategy of thecompanies they coveredand figuring out how myr-iad factors – from changingmacroeconomic conditionsto government interven-tions – would all cometogether.

To do that, Asia’s topstock pickers and earningsestimators put on theirjournalist shoes, left theiroffices and spoke to regula-tors, economists and execu-tives to get the full picture.

Bertram Lai, head ofHong Kong and Chinaresearch for CIMB Securi-ties and this year’s topstock picker, recalls goingon roadshows with the topexecutives of Skyworth,Techtronics and CombaTelecom, three of his bestpicks last year. Skyworth,in particular, rose from

HK$0.59 to HK$7.98 and out-performed its industrypeers by a remarkable 1,174per cent while he kept a“buy” call on it.

Mr Lai says his confi-dence in Skyworth camefrom five years’ of experi-ence covering the stock,and his conviction that theywere among the best Chi-nese TV makers at adaptingforeign technology to thedomestic market.

To arrive at this conclu-sion, he had also visited ajoint-venture TV assemblyplant between Skyworthand Korea’s LG Display,during which “I was able tosneak into the LGD plantby pretending to be a Sky-worth employee,” he says.

Credit Suisse’s Seok Yun,the top earnings estimator,says his success in pinningdown the earnings ofKorean insurance compa-nies came partly from gain-ing an understanding ofmacroeconomic develop-ments from Credit Suisse’seconomists.

“Getting the right macroassumptions was the mostimportant factor . . . Lastyear was a macro-drivenyear [and] CS has been oneof the believers” in a globaleconomic recovery, he says.

Overall, Citi InvestmentResearch had the mostawards in the two Top Tens

with five, and Credit Suissecame second with threegongs. After last year’s Asiaawards were dominated bybig global investmentbanks, this year saw anumber of smaller broker-ages with analysts in thetop 10, including NH Invest-ment & Securities, UOBKay Hian and SBI E2-Capi-tal Securities.

Overall, including all theawards in industry seg-ments (see table atwww.FT.com/top-analysts-2010), the situation wasreversed, with Credit Suissewinning 11 awards and CitiInvestment Research nine.

Mr Lai says one of theadvantages of working at asmaller regional brokeragesuch as CIMB is that hewas given much greaterfreedom in choosing whatstocks to cover.

UBS’s David Pow, whocovers utilities across theregion, says he engaged in a“series of discussions withdifferent sources, [and with]other companies that werenot listed or within my cov-erage, to get a more solidgrounding for my thesis.”

This was that China’sstrong economic growthand its growing emphasison cleaner energy sourceswould benefit natural gascompanies.

Mr Pow’s “buy” calls on

China Gas and Xinao Gas –as both more than doubledtheir share prices – helpedpropel him to the numbertwo spot in the stock pick-ing awards.

Mr Pow says that, once hehad formulated that thesis,the big challenge was stick-ing to his convictions in avolatile market. This wasthe case when the marketwas in retreat and “sud-denly the stock price wasfalling apart on the back ofno new news”, but it was

even more so when marketshad recovered and the stockprices of gas utilities beganto shoot past their historicpeaks, he says.

Ben Lin, the region’s topinsurance stock picker, sayshis team at Nomura lastyear “took a very disci-plined approach in ourstock picking process”because of the market vola-tility.

“We focused on pickingstocks that we believed hadbeen mispriced due to ‘fear’

AsiaAnalysts went theextra mile to spotbig trends, writesRobin Kwong

‘You’ve got to . . .have a very goodfeel for what themanagementis all about’

It’s a topsy­turvy world:a roller­coaster at theUniversal Studios themepark in Singapore Reuters

Top 10 Stock Pickers – AsiaRank Analyst Broker Industry

Excess Return (%)

Primary Coverage Industries

1 Lai, Bertram CIMB Securities 31.6 Machinery & Materials; Telecommunications; Computers & Communications Equipment

2 Pow, David UBS 28.1 Utilities3 Yuan, Jason UOB Kay Hian 21.8 Consumer Goods & Services; Food, Household

& Personal Products4 Santoso, Ben DBS Vickers 19.9 Food, Household & Personal Products5 Cleary, Matt Deutsche Bank

Securities18.1 Semiconductors; Electronic Equipment

6 Chua, Julian1 Citi Investment Research

16.6 Banks; Financial Services; Media

7 Ramachandran, Anand Citi Investment Research

16.37 Telecommunications

8 Qiu, Helena and Tsang, Kennedy

SBI E2-Capital Securities

16.36 Healthcare

9 Lin, Ben2 Nomura 15.6 Insurance10 Li, Victoria Credit Suisse 14.9 Machinery & Materials

Top 10 Earnings Estimators – AsiaRank Analyst Broker Primary Coverage Industries

1 Yun, Seok Credit Suisse Insurance2 Esson, Christopher Credit Suisse Banks; Insurance3 Hong, Sung Su NH Investment & Securities Consumer Goods & Services4 Perera, Chehan KAF Seagroatt & Campbell Banks5 Lau, Pierre Citi Investment Research Utilities; Machinery & Materials6 Park, Ally Citi Investment Research Consumer Goods & Services; Food, Household &

Personal Products7 Yoon, Sarah Woori Consumer Goods & Services; Food, Household &

Personal Products; Machinery & Materials; Media8 Kong, Robert Citi Investment Research Banks; Transportation9 Sim, Wei Macquarie Research Equities Transportation

10 Lee, Jae-won Tong Yang Securities Machinery & Materials; Utilities1Now at Nomura. 2Now at Morgan StanleySource: StarMine, a Thomson Reuters company

Top Brokers – AsiaCompany Number of Awards1 Credit Suisse 112 Citi Investment Research 93= BofA Merrill Lynch Global

Research 73= DBS Vickers 73= Macquarie Research

Equities 76 UBS 67= Deutsche Bank Securities 57= Orient Securities 59= Goldman Sachs 49= RHB Research Institute 4Source, StarMine,a Thomson Reuters company

Takingstock intoughtimes

have done well. For exam-ple, Gabe Moreen of Bank ofAmerica Merrill Lynch, theyear’s top US stock picker,had buy recommendationson several high performingenergy companies, but alsosell calls on a significantnumber.

In Europe, Roberta Ciac-cia, of Exane BNP Paribas,second in the regionalstock-picking rankings, hadbearish calls on lotteryoperators in Greece andItaly, correctly predictingthat cash-strapped govern-ments would see them asfat revenue-raising targets.

Top-down attitudes bybroking house manage-ments may also have playeda role in the results. Forexample, Bank of AmericaMerrill Lynch, which hasan unusually high ratio of“underperform” calls onstocks, did very well in thestock-picking category in2010, coming first in theoverall tables in all threeregions, albeit tied inEurope and Asia.

William Herkelrath, sell-side specialist at ThomsonReuters, notes that “glo-bally, 23 per cent of BofAMerrill Lynch’s universe iscurrently set to ‘underper-form’, which is striking inan environment in whichonly 10 per cent of recom-mendations on the Street asa whole are bearish”.

Goldman Sachs, whichled the overall US broker-age rankings, with 23awards, got 15 from earn-ings accuracy, which mightpartly reflect a top-downsensitivity to earnings revi-sions at that house.

There is also a trend inthe US for the awards to bedistributed more broadlyamong brokers. Mr Her-kelrath notes that in 2008,47 per cent of all awardswere won by the 10 firmswinning the most trophies,but this year that is downto 36 per cent.

The point is underlinedby the fact that in 2010, forthe first time, two regionalbrokers have been placed inthe top five US houses,alongside Wall Streetgiants.

Highlights of the awardwinners in each region arelaid out in the articles onthe following pages, but agreat deal more informationcan be found online atwww.ft.com/top-analysts-2010, as well as details ofthe methodology thatStarMine uses to reach itsresults.

or ‘risk aversion’,” says MrLin, who now heads Mor-gan Stanley’s Asia insur-ance research team.

Anand Ramachandran,deputy head of research atCiti Investment Researchand head of its Asian tele-communications research,made his mark by makingthe right calls – initially a“sell” that he laterupgraded to a “buy” – dur-ing the taking private ofHutchison Telecommunica-tions International in HongKong. Mr Ramachandranwas Asia’s best telecomsstock picker and seventhoverall last year.

“You’ve got to know thenumbers, have a very goodfeel for what the manage-ment is all about, and havea very firm handle on whatmanagement and share-holders’ respective strate-gies are,” he says.

To do that, “you need tobe very close to the compa-nies and have a very bot-tom-up approach,” he adds.

Ben Santoso of DBS Vick-ers, Asia’s top stock pickerin food, household and per-sonal products, says thatlast year had been precededby the biggest price dropfor commodities since theAsian financial crisis.

While DBS’s economistsalready expected a V-shaperecovery based on Asia’s

resilience, Mr Santoso alsohad to take into account awide array of factors – suchas the “supply side impactof La Niña [an ocean-atmosphere phenomenonthat is the counterpart of ElNiño] on soya bean andpalm oil prices, which alsopointed to a price recov-ery,” he says.

Looking ahead to thisyear, Mr Lai at CIMB sayshe is “actually fairly nega-tive about the tech indus-try . . . I think it is a veryvalid assumption that thegovernment in China needsto tighten [its policies], andthere is also the problem ofthe renminbi’s value ris-ing.”

Instead, he has his eyeson a little-known softwaremaker called King Dee,which provides enterpriseresource planning softwareto exporters in the PearlRiver Delta region.

Citi’s Mr Ramachandransays that, as the worldeconomy normalises and astelecom markets becomemore mature and stable,“you’ve got to be more crea-tive and a lot more discern-ing to come up with stockrecommendations.”

Asia’s top stock picker Bertram Lai of CIMB SecuritiesBertram Lai, the top stock picker for Asia inthis year’s FT/StarMine Awards, made whathe called a “pretty bloody­minded” decisionback in 2005.

Mr Lai, head of Hong Kong and Chinaresearch for CIMB Securities, had beencovering a little known Chinese TV makercalled Skyworth Digital Holdings. Skyworthwas doing well – until Hong Kong’s anti­corruption agency prosecuted HuangHongsheng, its former chairman, in late2004 and Skyworth’s Hong Kong­listedshares were suspended indefinitely.

In an unusual move, Mr Lai decided hewould continue coverage of Skyworth “eventhough there was no money to be madefrom it . . . I got clients into it and I couldn’tjust abandon them. They would want toknow what happened should the companycome back [to trading],” he says.

“Also, I couldn’t see how I could havebeen that wrong about the company,” headds.

His perseverancepaid off, asSkyworthbecame hismost lucrativecall last year.He kept an‘outperform’onSkyworthfrom lateFebruary tothe end of theyear, as thestock rocketed1,253 per cent

in value and outperformed industry peers by1,174 per cent.

Mr Lai was the only analyst coveringSkyworth as it rebounded to become one ofChina’s top TV brands. Now, there are 10analysts covering the company, according toBloomberg.

Mr Lai says the level of access andunderstanding he had from covering thestock for five years was crucial to being ableto identify it as a likely winner when Chineseconsumers decided to trade in their old,bulky CRT televisions for sleek flat­screenTVs en masse last year.

A more important reason, says Mr Lai,who joined CIMB from Lehman Brothers, isthat being at a smaller brokerage gives hima lot more freedom to cover what hewanted.

“The problem, I think, with much of sell­side research is that there is a lot ofturnover, and [the view is that] if you’re notgenerating revenue for the company, thenthere is no point in covering that stock,” he

says. “At CIMB, I have a lot more latitudeto do something different, and there is a

lot less pressure on you to show yournumbers in terms of revenues.”

Robin Kwong

ASIA KEY POINTS

● 1,070 stock pickers and1,099 estimators qualified inat least one awards categoryby covering a sufficientnumber of stocks.● Stock pickers on averageunderperformed theirindustry benchmarks by0.19 per cent.● Stock pickers added themost value in theConstruction andEngineering industry with anIndustry Excess Return of5.2 per cent.● 83 brokers had at leastone analyst who qualified fora stock­picking award.● The Asia awards coveredthe following countries:China, Hong Kong, SouthKorea, Malaysia, Singaporeand Taiwan

Continued from Page 1

‘I got clients into[Skyworth, a little­known Chinese TVmaker] and I couldn’tjust abandon them’

Bertram LaiCIMB Securities

More on FT.comThere is expanded coverage of this year’s World’sTop Analysts on the web. The rankings datainclude, for each continent, tables of the topthree analysts in business sectors ranging fromaerospace to wireless telecoms. There are penportraits of the analysts, too, and – to come –video interviews by Reuters Insider from lastnight’s awards dinner at the New York StockExchange. And there is an article by StarMine’sMary Morgan on the rankings’ methodology.www.FT.com/top­analysts­2010

4 FINANCIAL TIMES FRIDAY MAY 14 2010 FINANCIAL TIMES FRIDAY MAY 14 2010 5

World’s Top Analysts World’s Top Analysts

Most Productive Brokers*Company Number of Awards/Number of AnalystsAsia1 Orient Securities 0.3332 BofA Merrill Lynch Global Research 0.2593 Credit Suisse 0.256Europe1 Canaccord Adams 0.32 BofA Merrill Lynch Global Research 0.253 MM Warburg/SES Research 0.22US1 BB&T Capital Markets 0.532 Goldman Sachs 0.513 Morgan Keegan 0.45

*Firms must employ a minimum of 10 senior analysts to qualify for thisaward. Source: StarMine, a Thomson Reuters company

Top Brokers – EuropeCompany Number of Awards1 BofA Merrill Lynch Global

Research 152 Cazenove 113 UBS 104= Credit Suisse 84= RBS 86= CA Cheuvreux 76= Goldman Sachs 78 Deutsche Bank Securities 69= SG Securities 59= JP Morgan 59= Citi Inv. Research 59= Oppenheim Research* 59= Natixis Securities 59= Morgan Stanley 59= ESN Partnership 5

*Oppenheim Research becameMacquarie Research Equitieson April 1 2010.

Source, StarMine, aThomson Reuters company

Top 10 Stock Pickers – EuropeRank Analyst Broker Industry

Excess Return (%)

Primary Coverage Industries

1 Murdock-Smith, Carl Cazenove1 37.3 Telecommunication Services; Media2 Ciaccia, Roberta Exane BNP Paribas 36.8 Personal & Luxury Goods; Hotels & Leisure3 López Diaz, Santiago Credit Suisse 32.6 Banks4 Fernández, David La Caixa 31.0 Banks5 Soikkeli, Jarkko2 eQ Bank3 30.3 Food & Household Products6 Celerier, Clément Natixis Securities 30.0 Chemicals7 Lunde, Frederik Carnegie Investment

Bank28.0 Energy

8 Strand, Peder SEB Enskilda 27.2 IT Services; Technology Hardware, Software & Internet Services; Telecommunication Services

9 Hackett, Damien Canaccord Adams 26.99 Metals & Mining10 Besson, Thomas BofA Merrill Lynch

Global Research26.97 Automobiles

Top 10 Earnings Estimators – EuropeRank Analyst Broker Primary Coverage Industries

1 With, Henrik DnB NOR Markets Transportation; Energy2 Dobbing, Andrew Cazenove1 Energy3 Gamez, Sergio BofA Merrill Lynch Global

ResearchBanks

4 Ramirez, Antonio Keefe, Bruyette & Woods Banks5 Erskine, Alan UBS Food & Household Products6 Brauneiser, Rochus Kepler Capital Markets Metals & Mining7 Kleibauer, Thilo M.M. Warburg/SES Research Non-Food Retail; Personal & Luxury Products;

Food & Staples Retail8 Betts, Mike2 J.P. Morgan Construction & Materials9 Parry, Graham BofA Merrill Lynch Global

ResearchPharmaceuticals

10 Heimbürger, Hans-Joachim

CA Cheuvreux Machinery; Industrials; Transportation

1Cazenove is now part of J.P. Morgan. 2Currently inactive. 3eQ Bank is now part of Swedbank SecuritiesSource: StarMine, a Thomson Reuters company

Awards per head US out in frontBrokerages in the US getthe most out of theiranalysts, judging by thistable of the most productivebrokers.

Dividing the number ofawards won by the numberof analysts employed, thetop three US brokerages areout in front, led by BB&TCapital Markets. The firmhas no entries in the overallUS Top 10s but nine namesin the firsts, seconds andthirds across industrysectors (published online at

www.ft.com/top­analysts­2010).

In Europe, the mostproductive broker isCanaccord Adams, thecapital markets division ofCanada’s CanaccordFinancial. The Asian list isheaded by Hong Kong­based Orient Securities,while BofA Merrill LynchGlobal Research appears inboth the Asian andEuropean top three.

Andrew Baxter

Taking a ‘bearish contrarian view’ Roberta Ciaccia of Exane BNP ParibasRoberta Ciaccia did not take adirect route to becoming an analyst.After graduating in economics, shestarted her career as a consultantat Bain & Co before moving intoinvestor relations at Amga, aregional utility in Italy.

But, since 1999, she has workedexclusively as an analyst – coveringmostly telecoms – at a number ofbanks including UniCredit andKepler Equities. She joined ExaneBNP Paribas two years ago and isnow based in Milan, from where shecovers European mid­cap stocks butwith a particular expertise in thegaming sector.

She says she tries “to think outof the box to examine things thatmay not be obvious at first sight”,working with three internal teams at

Exane constantly to seek togenerate new ideas.

Over 2009 this led to hertaking a “bearish contrarianview”, with negative callsgenerating her strongoutperformance against

benchmarks.Ms Ciaccia bet on a share

price underperformance fromBenetton, the fashion retailer,in 2009, believing that rivalsH&M and Inditex – owner of

Zara – were betterpositioned. This was

a bet that paid off.

In addition, she was bearish onAntichi Pellettieri, a maker ofhandbags and small leather goods,which over 2009 lost 72 per cent,underperforming its benchmark by asizeable 97 per cent. Ms Ciaccia feltthat the company’s business modeland brand suffered from a veryweak positioning against the overall– and also weak – consumerenvironment.

And her advice for youngeranalysts just starting out?

“Have a good senior to learn fromand do not be afraid to take non­consensual views,” even though“you do get nervous when they aregoing against you. Just don’t benon­consensual for the sake of it.”

Robert Budden

Volatility and debtfears pose challenges

Predicting the impactthat cash-strappedgovernments wouldhave on certain

industry sectors, appreciat-ing the power of gearing inan upturn, or simply calcu-lating that growth in Chinawould surpass consensusexpectations.

These are just some of thebroader themes spotted bythe winning European ana-lysts in StarMine’s 2010awards that helped themoutperform their peers in2009, one of the most event-ful and challenging yearsfor stock market investorsin recent history.

Over the calendar year2009, European stock mar-kets rose more than 25 percent as measured by theEurofirst 300 index. But thismasks a highly volatileperiod of huge economicand financial uncertaintywhich made analyst stock

picks particularly tough. Inthe first two months of theyear, equities fell almost 20per cent before bouncingback with conviction fromtheir nadirs reached inearly March.

In this tough environ-ment, Carl Murdock-Smith,analyst at JPMorgan Caze-nove, earned the title of topstock picker in Europe.Mr Murdock-Smith, whomainly covers telecomscompanies with a strongfocus on the UK, describes2009 as “a year of massiverecovery in markets wherepeople started looking atgrowth again”.

He outperformed his

benchmark by 37.3 per centwith his best call an “out-perform” for the entire yearon KCOM Group, a providerof communications solu-tions to businesses and con-sumers in the UK.

Despite a background as amanagement accountant intelecoms, having worked atBT Group, the UK telecomsoperator, he says he tries“to be holistic” and “not tohide behind the numbers”.

Last year was character-ised by fears over compa-nies with high debts. ForMr Murdock-Smith, thisfear represented an oppor-tunity; just because compa-nies were heavily indebted

did not necessarily meanthey were bankruptcy tar-gets “if they had strongcash flows”.

So when, in October, heinitiated coverage on heav-ily indebted Virgin Media,he began with an “outper-form” rating – despite analready strong run in thecompany’s shares sinceMarch. Since then, theshares have gone up 32 percent versus a fall of 14 percent in the European tele-coms index, which has beendragged down by the likesof OTE in Greece and Por-tugal Telecom.

Roberta Ciaccia, an ana-lyst at Exane BNP Paribaswho covers European mid-cap stocks, came second inthe StarMine stock-pickingTop 10 for Europe. But MsCiaccia, who mostly coversItaly and Greece, generatedher outperformance byselecting companies thatwould perform poorly com-pared to their peers.

Very early in 2009, MsCiaccia made negative callson the lottery operators inGreece and Italy, fearingthat indebted governmentscould take steps againstthese companies to shoreup their finances.

“The consensus view wasthat these [companies] hadhigh earnings stability,”she says. “But I thoughtthat cash-strapped govern-ments would take actioneither through higher taxa-tion on earnings or throughthe introduction of higherpay-outs for new licences.”

She was right. Lottomat-ica, Italy’s largest gamingcompany, was hit with acharge for running itslucrative scratchcards busi-ness and, in July last year,Opap, Greece’s lottery oper-

ator, was hit with “a big taxon gaming that was totallyunexpected”, Ms Ciacciaexplains.

Such calls, including abearish stance on Italianfashion group MariellaBurani, helped her outper-form her benchmark by 36.8per cent.

Santiago López Diaz ofCredit Suisse, the thirdranked StarMine analyst,generated outperformanceof 32.6 per cent, on calls onbanks.

His best pick was Spain’sBanco Santander, whichduring his 10-month “out-perform/marketweight”position gained 68 per centversus the industry bench-mark of 32 per cent. Andthroughout 2009, he took abearish call on Banco deSabadell, another Spanishbank, which fell 15 per centover the year, underper-forming its benchmark by51 per cent.

EuropeRobert Budden onhow the continent’sbest analysts beattheir benchmarks

Some analysts’ strongstock picks were driven notjust by close company anal-ysis but also by taking aglobal view on economicrecovery.

For Damien Hackett, glo-bal head of metals and min-ing research at CanaccordAdams, 2009 was partlycharacterised by his viewthat China would continueits strong growth trajectory.

“China was probablygoing to survive because ofits central control,” he says.“The country was probablynot going to be distractedfrom its longer-term goal ofindustrialisation.”

This helped him take abullish stance on miner RioTinto at a time when someanalysts were advisinginvestors to sell because ofthe company’s sizeable debtburden.

“Rio Tinto was one stockthat made me look differentfrom a lot of people,” he

recalls. “Rio Tinto wasnever going to go belly-up.Based on reasonable long-term commodity prices, thecompany was always goingto be able to manage itsdebt.”

Of course, 2009 was partlycharacterised by a resur-gent China and its contin-ued voracious appetite forcommodities, helping propelthe prices of a range of com-modities from iron ore tocopper and crude oil and inturn supporting the shareprices of miners across theglobe.

But what was a concernin unstable markets – RioTinto’s debt burden –became a driver of shareprice outperformance in theupturn, as the companywas aided by its high levelof gearing.

This call was one of anumber that helped MrHackett, deliver outper-formance of 26.99 per cent

EUROPE KEY POINTS● 2,033 stock pickers and 2,252 estimators qualified in atleast one awards category by covering a sufficient number ofstocks.● Stock pickers on average outperformed their industrybenchmarks by 2.8 per cent.● Stock pickers added the most value in Biotechnology, withan Industry Excess Return of 10.1 per cent.● 155 brokers had at least one analyst who qualified for astock­picking award.● The Europe awards covered the following countries: Austria,Belgium. Denmark, Finland, France, Germany, Greece, Iceland,Ireland, Italy, Liechtenstein, Luxembourg, Netherlands,Norway, Portugal, Spain, Sweden, Switzerland and the UK

Paper profits: despite a tough environment for stock pickers and earnings estimators, spotting the right trends brought success Alamy

Analysts areprepared foranother trickyyear in 2010,but a bullishmood prevails

against his benchmark,placing him ninth in theStarMine ranking of Euro-pean analysts and markinghim out as the number onestock picker in the miningand metals sector.

When it comes to 2010,the analysts are preparedfor another challengingyear. But a bullish moodprevails.

Mr Hackett is dismissiveof fears of a bubble burstingin China: “Since the mid-1990s, people have specu-lated that China will over-heat and they have beenwrong ever since,” he says.“Growth may slow, but itwill still be markedlyhigher than we have in thewest.”

And Mr Murdock-Smith,the 2010 winner, predicts“growth will come back”.The challenge, he says, is“identifying when investorswill start paying attentionto the good news again.”

Thinking out ofthe box:Roberta Ciaccia

6 FINANCIAL TIMES FRIDAY MAY 14 2010 FINANCIAL TIMES FRIDAY MAY 14 2010 7

World’s Top Analysts World’s Top Analysts

Top Brokers – USCompany Number of Awards1 Goldman Sachs 232= BofA Merrill Lynch Global

Research 152= Stifel Nicolaus 154= Citi Inv. Research 134= Credit Suisse 134= Robert W. Baird 137= Barclays Capital 127= RBC Capital Markets 127= UBS 1210 Raymond James 11

Source, StarMine, aThomson Reuters company

Top 10 Stock Pickers – USRank Analyst Broker Industry

Excess Return (%)

Primary Coverage Industries

1 Moreen, Gabe BofA Merrill Lynch Global Research

26.4 Oil, Gas & Consumable Fuels; Gas Utilities; Capital Markets

2 Ward, Peter Barclays Capital 24.8 Oil, Gas & Consumable Fuels; Metals & Mining3 Torres, Lauren HSBC 21.4 Beverages4 Liebowitz, Gary Wells Fargo

Securities20.7 Aerospace & Defence

5 Ward, Michael Soleil – Ward Transportation Research

19.1 Auto Components; Specialty Retail; Automobiles

6 Roy, Richard Citi Investment Research

18.9 Oil, Gas & Consumable Fuels; Construction & Engineering

7 Harmon, Jim Barclays Capital 18.8 Gas Utilities8 Twigg, Weston Pacifi c Crest

Securities17.4 Semiconductors

9 Adkins, J. Marshall and Rollyson, James

Raymond James 17.36 Energy, Equipment & Services; Oil, Gas & Consumable Fuels

10 Blanton, Alexander Ingalls & Snyder 16.7 Machinery; Electronic Instruments

Top 10 Earnings Estimators – USRank Analyst Broker Primary Coverage Industries

1 Leopold, Simon Morgan Keegan Communications Equipment; Construction & Engineering

2 Salinsky, Mike RBC Capital Markets REITs3 West, James Barclays Capital Energy Equipment & Services4 Dietert, Jeff Simmons & Company Oil, Gas & Consumable Fuels; Independent Power

Producers5 Marshall, Brian Broadpoint Gleacher Computers & Peripherals; Communications

Equipment6 Gunderson, Thomas Piper Jaffray Healthcare Equipment7 Sprague, Jeffrey1 Citi Investment Research Electrical Equipment; Industrial Conglomerates;

Aerospace & Defence; Machinery8 Fassler, Matthew Goldman Sachs Specialty Retail9 Sokol, Ariel Wedbush Morgan Securities Consumer Services

10 Miller, Mark William Blair & Company Food & Staples Retailing; Multiline Retail; Oil, Gas & Consumable Fuels; Specialty Retail

1Now at Vertical Research Partners.Source: StarMine, a Thomson Reuters company

Getting thebig pictureright pays off

A consistently outstandingperformance as the USequity markets havesurged, crashed and ralliedagain over the past decadehas earned Richard Repettothis year’s FT/StarMineaward for excellence ininvestment analysis.

Mr Repetto, a formerhelicopter pilot in the USmilitary and now aprincipal and analyst atSandler O’Neill, a boutiqueWall Street investmentbank, is delighted to win,describing it as “a veryfulfilling and satisfyingmoment” in his career.

But he is quick tohighlight the importance ofhis team’s hard work inwinning the award, whichis the equity analyst’sequivalent of the Oscar fora lifetime’s achievement.

“It’s not just me,” hesays. “We have a greatteam, with two verytalented analysts workingon the models. It’s really ateam effort to get thenumbers right.”

Mr Repetto, who coversthe diversified financialservices and capitalmarkets sectors, has beenanalysing internet financialstocks since 1997. Hethinks his experience ofthe dotcom crash gave himan advantage over many ofhis competitors, when themarkets fell sharply 18months ago.

He says: “I think I wasfortunate to have seen twobig downturns during mycareer. It helped us stayahead of the game lastyear.”

The experiencemay have helped,but there wasplenty of hardwork involved aswell. As themarkets troughedand peaked in2008 and last year,he and his teamcame in to workat weekends toupdate theirmodels.

“Thenumberswere

changing so fast. We werejust trying to catch up andbe current.”

In a big downturn, themost important thing is tofocus on the big pictureand get that right, heargues. “Most stocks in asector generally movetogether. The job then is todifferentiate between thegood and the bad ones,aiming to be the first to doso, and the most accurate.”

Evidently, the effortspaid off for his clients. Inaddition to winning thelifetime achievementaward, Mr Repetto wasthis year also top-rankedin the earnings estimatescategory for the diversifiedfinancial services sectorand in second place for thecapital markets sector inthe US.

In fact, every year since2004 he has been ranked byStarMine as one of the top

three US earningsestimators or stock pickersin one or both of hissectors. In 2006, he wasranked the best earningsestimator and stock pickerfor the diversified financialservices sector.

Before joining SandlerO’Neill in 2003, Mr Repettocovered the internetfinancial services sector atPutnam Lovell. Between1997 and 2000, he was atLehman Brothers, wherehe established the firm’sresearch coverage of thatsector.

His career has not beenexclusively in finance.Before graduate school, MrRepetto worked in MobilOil’s sales and marketingdivision.

He holds a BSc ingeneral engineeringfrom the USMilitary Academyat West Point, andan MBA in financefrom the WhartonSchool of the

University ofPennsylvania.

Analyst of YearRichard RepettoExperience ofdownturns helpedthe Sandler O’Neillanalyst, writesMasa Serdarevic

Ahead ofthe game:RichardRepetto

‘We have a greatteam, with two veryexperiencedanalysts workingon the models’

Winners steer steadycourse throughtroughs and peaks

The difficult task ofpicking stocks andestimating earningswas made that

much more demanding lastyear with the US equitymarkets staging one of theirsharpest turnrounds ofrecent times.

Following a 39 per centfall in 2008, the S&P 500index ended last year 24 percent higher and 65 per centabove its low in March.

The US markets entered2009 still reeling from thecollapse of Lehman Broth-ers, the Wall Street invest-ment bank, in September2008 and shocked by thescope of the government’sintervention in the finan-cial system. Commentatorswere arguing that the finan-cial world had entered anew era, a “new normal”.

When asked what thisnew era might look like,

most seemed certain onlythat the outlook was veryuncertain.

“It took a leap of faith tomake stock recommenda-tions while the world wasmelting down,” laughsGabe Moreen, rememberingthe time. “One questionsone’s sanity.”

The leap of faith paid offfor Mr Moreen, an analystat Bank of America MerrillLynch, as his calls outper-formed their benchmarkby 26.4 per cent, rankinghim the top US stock pickerin this year’s StarMineawards.

His most successful calllast year was the year-long“buy” rating on TargaResources Partners, a pro-vider of midstream naturalgas services, that gained 264per cent over the period andoutperformed its bench-mark by 242 per cent.

Similarly, his calls onDCP Midstream and Mark-West Energy outperformedtheir benchmarks by 204per cent and 160 per centrespectively.

Mr Moreen, who coversgas utilities and master lim-ited partnership (MLP)stocks, says a combinationof attractive underlyingfundamentals, low exposureto commodities prices andrelatively minor capitalneeds helped them weatherthe seizure in the capitalmarkets. This persuadedhim to recommend thestocks to his clients in late2008, even as the equitymarkets were tumbling.

Although Mr Moreen’sthree most successful indi-vidual calls were all “buy”recommendations, he alsohad “sell” recommendationson a significant number ofstocks in his ratings distri-bution.

With the markets rallyingas much as they did lastyear, it is perhaps a littlecounterintuitive to see this,notes William Herkelrath,director of research proposi-tion at Thomson Reuterswhose subsidiary StarMinecompiles the rankings.

But, he says: “Youcouldn’t win the award byjust being indiscriminatelybullish last year. You hadto differentiate, have a mixand find names that wouldgo down as well as up.”

A similar logic is evidentat the broker-level. Bank ofAmerica Merrill Lynch ana-lysts won more stock pick-

ing awards in the US thisyear than analysts fromany other broker, whilehaving a higher proportionof “underperform” recom-mendations than any otherbulge-bracket broker.

Peter Ward, who took sec-ond place in StarMine’soverall stock-picker rank-ings and was its numberone stock picker in the met-als and mining sector, sayshis 16 years in equityresearch were crucial tooutperforming his bench-mark by 24.8 per cent.

“Prediction is a veryhumbling occupation andeveryone makes mistakes.

USIn volatile markets,spotting potentialrisers and fallers isthe key to successfor analysts, writesMasa Serdarevic

Through experience, youlearn not to repeat a lot ofthem,” says Mr Ward, ametals and mining analystat Barclays Capital, for-merly at Lehman Brothers.

His most profitable callwas a year-long “over-weight/positive” on Free-port McMoRan Copper &Gold, which outperformedits benchmark by 171 percent.

“We have long had anabove-consensus bullishview on copper,” he says.“We felt there was far toomuch of a sceptical outlookfor copper discounted in theshare price.”

Happily for his clients,copper was one of the year’sbest performing commodi-ties, with its price morethan doubling, and Free-port’s stock price soaring229 per cent higher.

Barclays Capital has thedistinction of being the onlybroker with more than onetop-10 rated stock picker.

Jim Harmon, who hascovered energy stocks foralmost 20 years and wasalso formerly at Lehman,won seventh place and wasthe top rated stock pickerin the gas utilities sector.

Extensive experience andbreadth of perspective arecrucial, says Mr Harmin,whose team has covered thediversified natural gas sec-tor since 1991.

Mr Harmon says: “Overthis period, we have seeneconomic, energy price andregulatory cycles givingwhat we believe to be abroad backdrop to makevaluation comparisons andrelate them to cyclicalevents.”

His most successful calllast year was a year-long“underweight/neutral” rec-ommendation on PiedemontNatural Gas, which under-performed its peers by 42per cent.

Given that the Top 10stock pickers list is domi-nated by analysts coveringcommodities-related stocks,Lauren Torres’ third placeparticularly stands out.Covering the global bever-age sector at HSBC, lastyear she outperformed herbenchmark by 21.4 per centand was number oneranked stock picker in thebeverage sector in the US.

Ms Torres, who has cov-ered the sector since 2002,says: “I think there is a lot

of opportunity for growth inthe sector, particularlywhen looking by region.The consumer was actuallyquite strong in some coun-tries last year.”

One of those countrieswas Brazil, where AmBev, abeer and drinks group andPepsi distributor, holds adominant market position.

“AmBev was in the rightmarket, had the rightbrands and was managingcosts effectively. We saw agood opportunity in termsof relative valuation,” MsTorres says. She had a year-long “overweight” rating onthe stock, which outper-formed its benchmark by109 per cent.

The highest ranked ana-lyst from a small brokeragewas Michael Ward ofSoleil-Ward TransportationResearch, who covers autoand auto component stocks.He came fifth overall, hav-ing outperformed his bench-mark by 19.1 per cent.

Simon Leopold, whocovers telecommunicationsequipment stocks at Mor-gan Keegan, was the high-est rated earnings estimatoroverall in the US, as well asin his sector. He spent 12

years in the telecommunica-tions industry beforebecoming an equities ana-lyst.

The accuracy of Piper Jaf-fray’s Bob Napoli in analys-ing financial stocks wonhim three top spots thisyear – the number onestock picker and earningsestimator in consumerfinance, as well as thenumber one stock picker indiversified commercial serv-ices.

“This is remarkable,given the sheer number ofanalysts that compete inthis space and the overallinterest level that thefinance space tends to com-mand in the market,” saysMr Herkelrath.

Lasan Johong at RBCCapital Markets also stoodout for his dominance inthe independent power pro-ducers and energy traderssector, coming first in theearnings accuracy andstock picking categories.

Hot metal: ‘We have longhad an above­consensusbullish view on copper,’says Peter Ward ofBarclays Capital Bloomberg

US KEY POINTS● 1,806 stock pickers and 1,819 estimators qualified in at leastone awards category by covering a sufficient number ofstocks.● Stock pickers on average outperformed their industrybenchmarks by 2.1 per cent.● Stock pickers added the most value in Oil, Gas &Consumable Fuels with an Industry Excess Return of 12.0 percent.● 182 brokers had at least one analyst who qualified for astock­picking award

‘It took a leap offaith to make stockrecommendationswhile the world wasmelting down’

Gabe Moreen,BofA Merrill Lynch