ESTING
58/research & rankings THE FUTURIST THE CHARTIST CONTENTS INSIDE II OP
M
INSIDE R&R
Many firms have adapted
to the postcrisis reality of limited resources by asking veteran analysts to pick up
coverage of a second sector — at least until a junior
analyst or new hire proves
ready to take the reins. This
strategy is not without its
risks, of course: Analysts
could become stretched so
thin that the quality of their
work suffers. That doesn’t
appear to be a problem for
members of the All-America
Research Team, though.
Thirteen of this year’s 65 top
analysts also rank in a second
sector. Barclays’s Andrew
Kaplowitz, for instance, not
only captures a fourth
straight first-place finish in
Engineering & Construction
but also is a runner-up in
Machinery — a sector he
began covering in April. ISI
Group’s Omar Saad boasts
similar victories in Apparel,
Footwear & Textiles and
Retailing/Specialty Stores; he
picked up coverage of the
latter sector when he moved
from Credit Suisse last year.
— Thomas W. Johnson
Managing Editor
Thomas W. Johnson
Senior Editors
Tucker Ewing
Jane B. Kenney
Associate Editors
Denise Hoguet
Brian Murphy
Cover photo by
Justin Borucki
The Best
Analysts
of the
Year
BASIC MATERIALS
15.2 percent. Zekauskas, who
follows 36 stocks, is recommending Mosaic Co., partly
on the Plymouth, Minnesota–
based fertilizer provider’s
share-repurchase program.
“Jeff thinks like his clients,”
observes one buy-sider. “He
wants to be right with minimal risk.”
— Ben attlin
M
PAPER & PACKAGING
CHEMICALS
Jeffrey Zekauskas
J.P. Morgan
The buy side says:
“His perspective on chemicals
is superior — Jeff has seen it all.”
I
nvestors credit J.P. Morgan’s
Jeffrey Zekauskas, who
leads the lineup for a second
consecutive year, with providing “grounded, unemotional
assessments” and asking
“insightful questions of management.”The 58-year-old
analyst upgraded Monsanto
Co., a St. Louis–based seed
and pesticide supplier, from
neutral to overweight in
October 2011, at $65.49,
largely on high seed demand
and its new pest-control products.The stock soared 33 percent, to $87.11, and beat the
sector by 6.3 percentage
points, through August. In
November he raised Ashland,
a specialty-chemicals producer
headquartered in Covington,
Kentucky, from neutral to
overweight, dubbing the shares
a bargain after disappointing
quarterly earnings drove the
price down to $49.41. By late
August the stock had jumped
49 percent, to $73.63. During
the same period the sector rose
28.4 percent, to $11.51, and
trailed the sector by 35.1 percentage points. Gambardella’s
advice going forward: Stay
away from this one. He is “the
dean of metals stocks,”
declares one ally, while another
praises the analyst for being “an
independent thinker.” — B.M.
METALS & MINING
Michael Gambardella
J.P. Morgan
The buy side says:
“Mike is rational and thoughtful
with his recommendations in
this historically cyclical sector.”
I
t’s five straight years at
No. 1 for Michael
Gambardella.The J.P. Morgan analyst, who publishes
research on 25 companies, “is
not afraid to take a stand,”
observes one money manager.
Case in point: In September
2011, Gambardella, 55, broke
with the consensus and issued
a valuation-based downgrade
on Molycorp from overweight
to neutral, at $53.01, because
widespread speculation about
new export restrictions in
China had pushed the stock
price artificially high. In early
August, after the stock had
plummeted 69.7 percent, to
$16.07, he reduced it to
underweight, on management’s announcement that the
Greenwood Village,
Colorado–based producer of
rare earth minerals was short
of funds to finance new projects. By the end that month,
the shares had tumbled
George Staphos
Bank of America Merrill Lynch
The buy side says:
“Great insight on industry trends
and individual companies.”
A
ll-America Research
Team Hall of Famer
George Staphos is on top for
a ninth straight year (including
this sector’s predecessors)
and has finished in first place
13 times since 1999. “Being
on the other side of his stock
calls is an uncomfortable
proposition I try to avoid,”
asserts one client. Others
praise the Bank of America
Merrill Lynch researcher’s
long-standing support of
Packaging Corp. of America.
Staphos, 47, launched coverage in February 2009 with a
valuation-based buy rating, at
$11.69, and has stood by the
call ever since. Through
August 2012 the Lake Forest,
Illinois–based corrugatedbox maker’s stock soared
173.9 percent, to $32.02 —
gaining 30.6 percent in the
past year alone. In June the
analyst, who covers 23 companies, reiterated his buy rating on Norcross, Georgia’s
Rock-Tenn Co., when disap-
O C T O B E R 2 012 • I N S T I T U T I O N A L I N V E S T O R . C O M