Why Cuts in Analyst Coverage May Be Good for Investors
If you are looking for some good stock research about the auto industry, chemical companies or even health care, Wall Street may not have much to offer.
Cutbacks by the major brokerage firms have slashed analyst coverage of even well-known companies, leaving investors in the dark when they are trying to figure out whether to buy or sell a stock. And those cuts have been particularly harsh in humdrum industries where it is harder for firms to make money through trading commissions or investment-banking work, according to a new survey of corporate executives.
But what is bad news for companies may be good for investors who are willing to do a little legwork. With Wall Street research cutting back, it could now be easier to spot good investments before the rest of the market.
In the survey by consulting firm Greenwich Associates of more than 800 corporate executives at mostly large companies, 29% said their company had lost at least some analyst coverage this year. In some industries, the loss has been particularly severe. Executives at 45% of companies in the chemicals industry, for instance, say they have lost analyst coverage, while 40% of the companies in the health care and auto and auto-parts industries have fewer analysts following their stock, according to the Greenwich survey.
"Our view is the research departments on the sell side are concentrating on names that can generate trading revenue," says Jay Bennett, a managing director at Greenwich Associates . "And they'll cover you if they believe you've got a story that can interest institutional investors and move markets, but they have to know what that story is."
The changes in Wall Street analyst research stem directly from cost cutting and regulatory pressure. In the past, positive analyst coverage was a way for Wall Street firms to bring in lucrative investment-banking business such as stock and bond underwriting and mergers-and-acquisitions advice. Now, following the regulatory crackdown, the only real payback for analyst coverage is the stock-trading commissions typically paid by institutional investors that use the analyst research to trade on the stock.
"It used to be if these guys have a sniff of a chance to issue stock, we'd need to cover them," Mr. Bennett said.
Not surprisingly, many of the executives who say they have lost analyst coverage operate in industries where stock-trading volume is below average. In other words, they aren't technology companies, where trading volume is often far higher than the rest of the market.
According to Reuters Research, the average stock in the Standard & Poor's 500-stock index is covered by 15 analysts. Companies covered by 15 or fewer analysts trade 1.6 million shares a day, on average, while stocks covered by more than 15 analysts trade 5.5 million shares a day, according to Reuters. Tech stocks in the S&P 500 trade an average of 8.6 million shares a day, so it's no surprise that they are covered by an average of 19 analysts. The trend could be shifting though. Executives at 37% of tech companies said they lost coverage.
Executives from every industry but one -- oil & gas -- said they lost analysts this year, with insurance, media and the food, beverage and tobacco categories saying they lost the least coverage. Oil & gas companies are almost as popular with analysts as tech stocks, largely because there is a group of small and midsize investment banks focused on the energy business. Among the largest companies, those in the Fortune 300, only 17% said they lost coverage, while 22% of the companies in the Fortune 500 said they lost coverage. In addition, Wall Street seems to have abandoned more troubled companies -- 20% of those whose debt is rated investment grade said they lost coverage while 37% of those rated below investment grade said they are now covered by fewer analysts than last year.
While tech stocks have rewarded analysts with great performance this year, most still are way down from their peak. But some industries that lost coverage did well, too. The Dow Jones Auto Parts index, for example, is up 29% this year, well ahead of the market. And some little-covered stocks have been among the market's best performers, including Novell, up nearly threefold with only two analysts, and PerkinElmer, up 98% with four analysts.
Adding to the growing dearth of information, company executives say they are less likely to provide earnings guidance to investors. That will likely be a good thing because it will divert attention from the long-running game where companies keep their earnings estimates low and then beat them, eliciting cheers from analysts. Of the companies surveyed, 71% offer earnings guidance and 18% of those say they will slow or stop the information in the coming year. Not surprising, in technology, where earnings guidance is a pro sport, 84% of companies give guidance, but only 8% will cut back, the survey says.
The loss of coverage has changed the thinking at some big companies. Chris Curtis, who is now a vice president at consulting firm Ashton Partners, was the director of investor relations at R.R. Donnelley & Sons, the big Chicago printing company, when its analyst cover fell from nine to two. Donnelley then went directly to investors to pitch its stock, rather than relying on analysts to do so.
The Greenwich survey also asked the executives about their expectations for deal-making. They said they would likely do more deals in the coming year than at this time in 2002, when the stock market was struggling. "In talking to these guys they were more optimistic looking into 2004 about the acquisition side of the business," Mr. Bennett said. Of the executives surveyed, 46% said they expect to use outside bankers for mergers and acquisitions in the coming year. Last year that number was 39%.
Still, the survey found that some executives remained pessimistic. "The Eeyores have not gone away completely, Mr. Bennett said. The survey was conducted over the summer, so even those naysayers may have turned by now.
The three categories where M&A activity should be particularly strong are pharmaceuticals; food, beverage and tobacco; and metals and mining. Seven out of 10 executives in the latter group expect to hire merger advisers in the coming year.
股票研究报告减少未必是坏事
如果你希望得到一些有关汽车业、化工业甚至保健业的股票研究报告，华尔街可能提供不了多少。
随著大型经纪公司纷纷缩减研究范围，分析师跟踪研究的股票数目逐渐减少，即使是一些著名公司也被排除在外，这使得投资者作出买卖股票决定时，陷入迷茫境地。
对公司管理人士的一项最新调查显示，对于那些很难获得交易佣金，或投行业务的了无生气的行业，经纪公司忍痛割爱的情况尤为严重。
但这些对某些公司来说的坏消息，对于希望自行做一些调研的投资者来讲，也许却是好消息。随著华尔街股票研究报告的减少，抢在市场其他投资者前面发现好的投资机会的可能性增大了。
咨询公司Greenwich Associates对主要来自一些大公司的800多名管理人士进行的调查显示，其中29%的管理人士表示今年以来，至少有部分分析师不再跟踪研究他们公司的股票了。
这种现象在一些行业中表现得尤为严重。Greenwich调查显示，化工行业中45%公司中的管理人士称，跟踪研究其股票的分析师在减少；而保健、汽车和汽车配件行业中有40%的公司存在这种现象。
Greenwich Associates董事总经理杰夫?班纳特(Jay Bennett)认为，卖方分析师们目前将精力放在了那些能够为他们带来交易收入的公司身上。"如果他们认为你能够引起机构投资者的兴趣，并推动市场走势，他们才会研究你。"
造成华尔街分析师这种转变的直接原因就在于削减成本的需要，以及来自监管机构的压力。过去，分析师有利的追踪研究是赢得业务的一种途径，比如股票和债券的承销，或并购咨询等。但在监管机构加大对这种行为的打击力度之后，分析师研究报告能够为其带来的唯一真正回报，就只剩下使用其报告进行交易的机构投资者支付的交易佣金这一种了。
班纳特表示，过去的情况是，如果分析师觉察到某公司可能将发行股票的蛛丝马迹，他们就会去做这些公司的股票研究报告。
并不意外，那些声称研究其股票的分析师数量减少的管理人士中，多数所处的行业为股票交易量低于平均水平行业。换而言之，这些公司都不属于科技公司，科技股的交易量往往远高出其他类股。
据Reuters Research提供的数据，每只标准普尔500指数成份股平均有15位分析师跟踪研究。其中被15位及不足15位分析师研究的股票的日均成交量为160万股，而被15位以上的分析师跟踪研究的股票的日均成交量则为550万股。
标普500指数中，科技股的日均成交量为860万股，因此一只科技股平均被19位分析师跟踪研究也就不足为奇了。不过，这种趋势有望扭转。37%的科技公司的管理人士称，跟踪研究他们股票的分析师有所减少。
除石油和天然气行业外，来自其他所有行业的公司管理人士都声称今年跟踪研究他们股票的分析师有所减少，其中保险、媒体、食品、饮料和烟草领域的公司管理人士表示失去的分析师较少。石油和天然气类股在分析师中受欢迎的程度与科技股几乎不相上下，其原因主要在于有相当一批中小型投资银行致力于能源企业的业务。
在那些规模最大的公司当中，《财富》(Fortune) 300强企业中只有17%的公司表示，跟踪他们股票的分析师减少，而《财富》500强中有22%的公司称有这种情况发生。除此之外，华尔街似乎舍弃了那些处境较为艰难的公司，那些债务评级为投资级别的公司中，只有20%声称跟踪他们股票的分析师减少，而评级低于投资级别的公司中，却有37%的公司表示跟踪他们股票的分析师比去年减少。
虽然科技股今年有上佳表现，为分析师带来了丰厚回报，但多数科技股目前股价距其巅峰时期依然相去甚远。但一些遭到分析师摒弃的类股却依然走势喜人。例如，道琼斯汽车配件分类指数今年上涨了29%，遥遥领先于大盘。一些几乎没有分析师跟踪的股票亦位居市场表现最优行列，其中包括网威(Novell)，上涨了将近300%，只有两位分析师跟踪该股；PerkinElmer上涨98%，只有4位分析师跟踪。
信息的日益匮乏暂且不论，火上浇油的是，公司管理人士现在亦声称，他们向投资者提供业绩预期的愿望也在下降。这也有可能会是一件好事，因为这意味著分析师和上市公司之间长期以来所玩游戏可能将结束了，上市公司倾向于将业绩预期维持在一个较低水平，然后最终超过预期。
在接受调查的公司中，71%的公司提供业绩预期，18%的公司称他们来年将放慢或停止这一信息的披露。不出所料，调查还表明，科技公司中，84%的公司提供业绩预期，但只有8%的公司将减少提供。
分析师跟踪研究股票的减少目前已改变了一些大公司的思维方式。咨询公司Ashton Partners的现任副总裁克里斯?柯蒂斯(Chris Curtis)以前曾经担任芝加哥印刷企业R.R. Donnelley & Sons的投资者关系负责人。当时，跟踪该公司股票的分析师从9位减少至2位。该公司于是直接向投资者推荐其股票，而不是依赖分析师来做这项工作。
Greenwich调查亦提出了有关交易方面的问题，管理人士认为，他们来年可能会进行更多的交易。班纳特说，在与公司管理人士的交谈中，管理人士对于2004年的收购业务前景表现出更为乐观的态度。在接受调查的管理人士当中，46%的管理人士预计会在来年的并购业务中借助外部银行家的力量。这一数字去年为39%。
调查发现有一些管理人士依然持悲观态度，不过，调查是在今年夏季进行的，因此，即便是那些很悲观的人，目前或许也已改变了他们的立场。
并购行为可能尤其强劲的3个领域：医药；食品、饮料和烟草，以及金属和矿业领域。金属和矿业领域的10位公司管理人士中，有7位预计将在来年聘用并购业务顾问。
