Though Pay Is Down, Elite Stock Analysts Are Hot Commodity
Stock research analysts have been upgraded to a buy.
Tarred by a scandal that drove down their pay, they aren't making money like before. Yet many aren't doing too badly.
Jim Covello, Goldman Sachs Group Inc.'s up-and-coming semiconductor-equipment analyst, was lured to Citigroup Inc. earlier this month with an annual package of about $2.5 million, people familiar with the matter say. After a day or two on the job, he was heading back to Goldman, which offered him about $3 million a year after top executives Henry M. Paulson Jr. and Lloyd Blankfein discussed his defection at a meeting with other managers.
It has been a rough few years for stock analysts, who have been under regulatory scrutiny over allegations that they issued overly optimistic stock research to win lucrative investment-banking business from companies they were supposed to analyze independently. Ten big Wall Street firms, including Citigroup and Goldman, last April agreed to pay $1.4 billion in fines and penalties to settle civil charges by securities regulators.
A handful of top analysts, including Citigroup's Jack Grubman and Merrill Lynch & Co.'s Henry Blodget, were implicated by e-mails in which they privately disparaged stocks they had touted to investors. Mr. Blodget paid $4 million to settle regulatory charges, and Mr. Grubman paid $15 million. Neither men nor the firms admitted or denied guilt.
Regulators forced firms to separate their banking and research divisions and barred them from paying analysts based on investment banking -- a once-common practice. Thereafter, the market for stock research analysts dried up and pay sank.
Many firms curtailed their research efforts. Morgan Stanley now covers 751 U.S. listed companies, down 18% from two years ago. At Merrill, that number has dropped 15% to 980. Coverage at Goldman has fallen 7% during the past year to 765 companies. Citigroup doesn't track the number of U.S. companies it covers but it covers 2,300 world-wide, down 23% from two years ago.
As a result, the market for junior analysts remains stagnant. But the recent pickup in the U.S. stock market has increased big firms' appetites for hotshot analysts, though their pay likely will never reach Internet-bubble levels again.
Late last week, Bank of America Corp. hired a team of researchers led by senior UBS AG bank analysts John McDonald and Ken Usdin. Earlier this month, Morgan Stanley's London office hired Patrick Wellington and Ed Hill Wood, renowned media analysts from Citigroup.
"Some of it is just window dressing," says Alan Johnson, a Wall Street compensation expert. "The firms want these analysts on TV and to get quoted in the papers....The equities business is returning and they want it to be known that they have smart, well-known people on board."
Analysts with five years of experience make between $400,000 and $500,000, one-third of what they might have commanded in 1999, Mr. Johnson says. But top Wall Street research executives say the annual pay it takes to lure a top analyst today is about $2.5 million, up from approximately $1.5 million a year or so ago.
"Even the guys who are really hot will get $2 million and a two-year guarantee today versus $3 million and a three-year guarantee a few years ago," he says. By comparison, Mr. Blodget's compensation topped $8 million in 2001, and Mr. Grubman made about $20 million a year during his last four years at Smith Barney.
Mr. Covello, the semiconductor-equipment analyst, made his name on Wall Street for bold calls and for aggressively pushing his viewpoint with institutional investors. "I give him the highest marks for having the courage of his convictions," says Marc Klee, a co-manager of John Hancock Technology Fund. "He made somewhat controversial calls and he was very out there with them."
Mr. Covello is unconventional, focusing on macroeconomic trends driving the companies he covers. Other analysts emphasize company-specific issues, such as new products and management.
One reason he's worth millions is because his industry is among the most heavily traded. Applied Materials Inc., the industry's biggest name, is the ninth-most-traded stock in the Standard & Poor's 500-stock index, with more shares changing hands each day than companies seven times its size.
While analysts can no longer be used to generate investment-banking business, they can earn their keep by attracting trades from institutional investors.
Mr. Covello's stock-picking record is mixed, though his calls on the overall industry have been better. He went positive on the industry in July 2002, and though the stocks kept falling, the industry ultimately beat the market. On Feb. 2, he downgraded the sector to a hold. While he may turn out to be right, the call was late for one of its largest companies: A week earlier, Novellus Systems Inc. fell 14% in a day after the company warned earnings would be lower than expected.
There's a catch in Mr. Covello's decision to head back to Goldman. His contract with Citigroup prohibits him from moving to another firm for at least 90 days, so for now he is sitting at home.
精英股票分析师正成为抢手货
股票分析师的评级已被上调至买入。
受一宗丑闻影响，股票分析师的薪酬和以前相比有所下降，但他们中的一些人目前日子过得仍不错。
据知情人士透露，高盛集团(Goldman Sachs Group Inc., GS)的半导体设备分析师Jim Covello近期被花旗集团(Citigroup Inc.)以约250万美元的年薪挖走，但没过几天他又被高盛以约300万美元的年薪挖了回去。
过去的几年，股票分析师的日子很不好过，由于被控发布过于乐观的股票研究部报告以从那些预计将由他们进行独立分析的公司处获得投资银行业务，监管部门一直在对他们进行调查。
监管部门要求有关公司将银行和研究部门分离，并禁止这些公司向与投资银行业务有关的分析师支付报酬。从那时起，对股票分析师的市场需求开始减弱，他们的薪酬也开始下滑。
但美国股市近期的回升使各家大型经纪行对著名分析师又开始看重，但他们的薪酬可能永远也无法回到互联网泡沫达到顶峰时的水平了。
华尔街赔偿案专家Alan Johnson表示，那些招募知名分析师的经纪行只是想装饰门面，由于股票业务正在复苏，它们希望这些分析师在电视和报纸上频频亮相以提高自身在公众中的知名度。
Johnson指出，具有5年经验的分析师年薪为40万至50万美元，是1999年可能获得的年薪的三分之一。但华尔街经纪行的高级管理人士称，目前它们用来吸引顶尖分析师的年薪为250万美元左右，高于大约1年前的150万美元。
