Institutional Investor’S Selection of the Brokerage Analysts Who Have Done Outstanding Work During the Past Year Ranks 343 Researchers from 19 ﬁrms in 71 Sectors

COVER STORY

LEFT TO RIGHT: Vivek Juneja, Mortgage Finance; Robin Farley, Leisure; Mark Connelly, Paper & Forest Products PHOTOGRAPHED ON AN OVERPASS ON WEST 39TH STREET, NEW YORK CITY, SEPTEMBER 18, 2003.

Institutional Investor’s selection of the brokerage analysts who have done outstanding work during the past year ranks 343 researchers from 19 firms in 71 sectors. THE All-America RESEARCH TEAM wo years of investigations, disciplinary actions and internal CONTENTS crackdowns have drastically changed the life of Wall Street secu- THE LEADERS 70 OVERALL RESEARCH STRENGTH 98 rities analysts. Before the bubble burst researchers celebrated WEIGHTING THE RESULTS 98 their unprecedentedly high stature and compensation; now the WHAT INVESTORS REALLY WANT 100 T PICKING THE TEAM 106 dominant emotion inside most research departments is panic. Greed has THE BEST ANALYSTS OF THE YEAR given way to fear. BASIC MATERIALS 73 “People are scared,” says a 13-year veteran sell-side researcher, who in- CAPITAL GOODS/INDUSTRIALS 74 sisted that he and his firm not be identified. “That includes myself, my CONSUMER 78 sisted that he and his firm not be identified. “That includes myself, my ENERGY 85 colleagues here, other analysts I know elsewhere on the Street. Even if FINANCIAL INSTITUTIONS 88 you’re completely honest, you’re scared that everyone’s watching and ready HEALTH CARE 90 MEDIA 94 to pounce on every little thing you say or do, whether it’s the regulators, TECHNOLOGY 96 the plaintiffs’ lawyers, the press or even your own compliance people.” TELECOMMUNICATIONS 100 MACRO 102 Fear can be a mixed blessing. On the positive side, the backlash against INDEXINDEX 108 108

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Institutional Investor’s research teams are sponsored by Reuters. All contents of this article, including the reproduction rights to the art, are the exclusive property of Institutional Investor magazine. Reproduction of this article, whether in whole or in part and by any means whatsoever, is prohibited without the express written permission of Institutional Investor. The 2003 All-America Research Team

THE LEADERS

RANK TOTAL TEAM POSITIONS FIRST TEAM SECOND TEAM THIRD TEAM RUNNERS-UP 2003 2002 FIRM 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 1 2 Lehman Brothers 50 52 7 9 13 7 13 6 17 30 2 5 Morgan Stanley 36 42 8 9 8 13 9 6 11 14 3 2 Merrill Lynch 35 52 9 11 7 12 10 9 9 20 4 1 Smith Barney Citigroup 34 53 8 14 10 7 6 15 10 17 5 8 UBS 32 20 8 4 5 2 6 3 13 11 6 4 Credit Suisse First Boston 27 44 5 8 5 6 2 9 15 21 6 6 Goldman, Sachs & Co. 27 36 5 5 8 8 4 6 10 17 8 7 Bear, Stearns & Co. 23 29 6 6 4 8 3 5 10 10 8 11 J.P. Morgan Securities 23 16 4 3 1 0 3 5 15 8 10 8 Deutsche Bank Securities 18 20 1 1 3 4 3 6 11 9 11 12 Banc of America Securities 14 12 4 1 2 3 2 2 6 6 11 10 Prudential Equity Group 14 17 1 4 4 5 4 2 5 6 13 13 Sanford C. Bernstein & Co. 11 9 2 1 1 1 4 2 4 5 14 14 International Strategy & Investment Group 3 3 2 1 0 1 1 0 0 1 15 16 U.S. Bancorp Piper Jaffray 2 1 0 0 0 0 0 0 2 1 conflicts of interest — which culminated in this year’s $1.4 billion ly better opinion of research quality than in recent years. Of those proposed settlement between regulators and ten firms accused of expressing an opinion, 28 percent said research had improved in publishing overly bullish stock research to win investment bank- the past year, compared with only 19 percent who said so in 2002. ing business — is prompting analysts to go back to basics, pro- Asked to rate the overall quality of research on a 1-to-10 scale, ducing more rigorous, intellectually honest research. This work is with 10 representing the highest quality, investors who responded helping investors make money and, just as important, avoid losing gave the sell side a 5.67 this year, up from 5.55 one year ago. it. But there are negatives. Some investors are carping that analysts If their views of research shifted only modestly, investors’ opin- have become even more afraid to take controversial stances — es- ions of individual firms changed dramatically, as they chose to pecially bullish ones — for fear of running afoul of regulators. shake up the ranks of America’s top research firms. For the first “Research has gotten markedly better,” says Peter Tuz, a port- time in more than a decade, Lehman Brothers takes first place, folio manager at Chase Investment Counsel Corp., a Char- culminating a dramatic march back from 13th in 1995 (see story, lottesville, Virginia, fund management boutique overseeing about page 56). Lehman finished second in 2002. $2 billion. “The onus is off working for the investment bankers, Most firms have fewer ranked analysts this year than they did and people are calling it as they see it much more frequently.” in 2002, owing to a number of factors. First, to reflect market One example of old-fashioned analytical rigor’s comeback is changes, II reduced the number of categories in which it ranks Kenneth Weakley of UBS. Last October the 37-year-old health analysts, from 77 to 71. Additionally, dozens of previously care facilities analyst warned of problems with Medicare payments ranked researchers have left the profession, disenchanted by the at Tenet Healthcare Corp., which he downgraded from hold to regulatory backlash. Others have been let go as their firms tried reduce. Bad news followed, including reports of a federal investi- to cope with drastically smaller budgets. In many cases, those ex- gation into allegedly unnecessary surgeries by two doctors at one perienced people were replaced with new analysts, or not at all. of the company’s hospitals in California. Shares of Tenet collapsed Smith Barney Citigroup, last year’s leader with ranked analysts in from 47 on the day of Weakley’s call to 14 in just two weeks. Now, 53 sectors, sinks to fourth this year with only 34. At Merrill with its shares still mired in the teens, Tenet’s Medicare payments Lynch, which tied for second with Lehman last year, the number and other financial practices are being probed by the Securities of rankings drops from 52 to 35, as its overall standing slips to and Exchange Commission. Thanks to his clear-eyed analysis, third. Those that could limit defections, hire away ranked ana- Weakley jumps from runner-up last year to first in his sector in lysts or develop them from within perform comparatively well. this magazine’s annual poll of the best brokerage firm analysts. Morgan Stanley, for instance, loses six team positions from last Another sharp nonconsensus call came from Steven Binder, year yet still rises from fifth to second place. UBS surges from who tracks aerospace and defense electronics contractors for Bear, eighth place last year to fifth, just three places behind No. 2 Mor- Stearns & Co. Despite widespread investor euphoria over what gan Stanley, knocking Credit Suisse First Boston out of the top seemed to be exponential growth in the U.S. defense budget, five. It gains 12 team positions. Binder concluded in January that growth in defense spending Lehman, which eschewed cutbacks, loses only two of its 52 would not be remotely as robust as fiscal year 2003’s 19 percent. team positions from 2002. Its lead over Morgan Stanley — 14 Investors profited from his timely bearish call on defense contrac- positions — is the most commanding of any No. 1 firm in the tors, voting Binder, 45, the first-teamer in his sector for the fifth survey since 1983, when Merrill bested First Boston by 43 to 27. year running in the All-America Research Team. The widespread trepidation in Wall Street research depart- Investors responding to the 2003 survey demonstrate a slight- ments, of course, is having other effects on analysts and the in-

70 INSTITUTIONAL INVESTOR OCTOBER 2003 LEFT TO RIGHT: Adam Frisch, Computer Services & IT Consulting; Donald Carson, Chemicals/Commodity; Glen Santangelo, Health Care Technology & Distribution; Ed Hyman, Economics; Leone Young, Environmental Services; Mika Toikka, Equity Derivatives PHOTOGRAPHED AT MARK’S RESTAURANT EQUIPMENT, 302 BOWERY, NEW YORK CITY, SEPTEMBER 16, 2003.

vestors they serve. If some analysts appear to have been scared ing to get it right despite these pressures. An analysis by Hobo- straight by the regulatory backlash and are unafraid to be vocally ken, New Jersey, research performance measurement ﬁrm Inves- bearish when it’s called for, others have been what might be called tars.com, using data provided by Reuters Research, shows that scared bland. More than a few investors complain that as a result the average recommendation of sell-side analysts (excluding those of enforcement actions and private lawsuits brought against ana- at independent firms) handily outperformed the Standard & lysts who were wrong during the bubble, researchers are increas- Poor’s 500 index in the third quarter of 2003. — Justin Schack ingly loath to make controversial bullish calls. Some fear they’ll be accused of being shills for banking or the companies they cover. For a more in-depth look at this research team, be sure to visit “It’s true that sell-side analysts are more free to be bearish now, www.institutionalinvestor.com. There you will ﬁnd, among other data, without the kinds of consequences they used to face,” says one our rankings of the best analysts in several activities, including analyst at a mutual fund complex. “But there are also an awful lot recommendations, industry expertise and written reports; and the 49 of them that are afraid to make a controversial or nonconsensus up-and-coming equities analysts. Results of our seven other research call if it’s bullish.” teams are also available on the site. Maybe so, but there’s at least one sign that analysts are manag-

OCTOBER 2003 INSTITUTIONAL INVESTOR 71 LEFT TO RIGHT: Steven Galbraith, Portfolio Strategy; Carl Seiden, Pharmaceuticals/Major; Simon Flannery, Telecom Services/Wireline; Robert Koort, Chemicals/Specialty; Maykin Ho, Biotechnology; Benjamin Reitzes, Imaging Technology; Colin Devine, Insurance/Life; Timothy Luke, Telecom Equipment/Wireless PHOTOGRAPHED AT CONSOLIDATED EDISON POWER PLANT, AVENUE D, NEW YORK CITY, SEPTEMBER 12, 2003. The 2003 All-America Research Team Thebest analysts of theyear BASIC MATERIALS

Chemicals/Commodity Vasnetsov is “better on the fundamen- percent on Praxair and 33 percent on Energy Co. at 8 and Peabody Energy DONALD CARSON tals than on stock picks.” Ecolab by September 2003. Corp. at 26; by early September they were MERRILL LYNCH at 12.5 and 30, respectively.

SECOND TEAM Graham Copley Chemicals/Specialty Metals & Mining Sanford C. Bernstein ■ THIRD TEAM ROBERT KOORT MICHAEL GAMBARDELLA Paper & Forest Products Sergey Vasnetsov Lehman Brothers ■ GOLDMAN SACHS J.P. MORGAN SECURITIES MARK CONNELLY RUNNERS-UP Andrew Cash UBS; SECOND TEAM Robert Ottenstein Morgan SECOND TEAM Anthony Rizzuto Jr. CSFB P.J. Juvekar Smith Barney Citigroup Stanley ■ THIRD TEAM Jeffrey Cianci UBS Bear Stearns ■ THIRD TEAM Daniel Roling SECOND TEAM Chip Dillon Smith Barney ■ RUNNERS-UP David Begleiter Deutsche Merrill Lynch ■ RUNNERS-UP John Tumazos Citigroup ■ THIRD TEAM Mark Wilde even-time winner Avi Nash’s retire- Bank Securities; Jeffrey Zekauskas Prudential Equity Group; Peter Ward Deutsche Bank Securities ■ RUNNER-UP Sment from Goldman last November J.P. Morgan Securities Lehman Brothers Richard Schneider UBS provided an opening for Merrill’s Donald Carson to seize the top spot this year — oldman first-time first-teamer Robert fter declining in line with the Standard inning praise for “excellent navigat- and he does. A second-teamer in 2001 GKoort exchanges places this year A& Poor’s 500 index in 2002, the Wing through complex markets,” and 2002 and No. 1 in the old Agricul- with two-time winner Robert Ottenstein metals and mining sector enjoyed a CSFB’s Mark Connelly climbs to the top tural Chemicals category in 1998 and of Morgan Stanley. In a volatile sector sensational 25 percent surge in the first from third. He is known for bold calls — 1999, Carson, 49, is “insightful about buffeted by gyrating energy prices, eight months of 2003. In both years for example, sticking with his March how to make money in difficult times,” Koort, 35, impressed clients with his J.P. Morgan’s Michael Gambardella 2000 buy on small-cap Albany Interna- says an investor. One of his insights: September 2002 buy recommendations demonstrated “encyclopedic knowledge” tional Corp. at 13, believing that it had the Pinpointing beneficiaries of strong agri- on industrial-gas producers Airgas and and “extraordinary market savvy” for discipline to effectively reduce debt and cultural commodity prices, the re- Praxair as well as his willingness, in the clients. The 46-year-old repeat first- control capacity. At 31 as of early Sep- searcher upgraded Canadian fertilizer words of one client, “to pan companies.” teamer reiterated his long-standing buys tember 2003, the supplier of fiber for pa- supplier Potash Corp. of Saskatchewan Koort, a University of Texas grad and for- on copper producers Freeport-McMoRan per production was up 49 percent this in February at 59. Potash shares, which mer chemical engineer, liked Airgas, then Copper & Gold and Phelps Dodge Corp. year alone, versus an 18 percent rise in also got a boost as a new, low-cost ni- at 13, because of a recent restructuring, as they coped with reduced domestic de- the CSFB paper index (2 percentage trogen plant in Trinidad went online, had and Praxair, at 52, because it had just mand and focused more attention on points better than the S&P 500). The 40- jumped to 72 by early September. An- brought in new management. By late Au- fast-growing China. The stocks rose from year-old MBA from New York University’s other Canadian fertilizer recommenda- gust, when Koort reduced Praxair on val- 12 and 31, respectively, when Gam- Leonard N. Stern School of Business, tion, Alberta’s Agrium, rose from 10 to uation concerns, the stocks were at 19 bardella upgraded them in November who joined CSFB from J.P. Morgan in ear- 13 between Carson’s August 2002 up- and 64, respectively. Airgas eased to 18 2001, to 31 and 49 in early September ly 2000, also watched Boise Cascade grade and September 2003. Investors and Praxair was unchanged by early 2003. “He stuck with them, and the num- Corp., suffering from lackluster demand, appreciate Carson’s “deep thinking” and September. Koort also helped steer in- bers speak for themselves,” marvels one slide from 33 to 26 last year and then to “honest analysis.” One complaint lodged vestors clear of danger. In November supporter. Others cite Gambardella’s May 22 in July. He then slapped on a buy, on against Carson and all of the leading 2002 he threw cold water on Great Lakes 2003 upgrade to overweight of Alcoa at news that the company had agreed to pur- chemicals analysts: missing this year’s Chemical Corp. at 25 on concerns about 22; by early September it had reached 28. chase superstore chain OfficeMax — a 13 percent rally by bellwether Dow its operating efficiency. In July, after a Bear Stearns’ Anthony Rizzuto Jr. repeats smart strategic shift into a higher-return Chemical Co. Climbing from runner-up corporate restructuring and with Great at No. 2, praised by one partisan for pro- business, he said. The shares reached 27 to second is Graham Copley of Sanford Lakes at 20, Koort raised it to neutral; by viding “the best-detailed global commod- by September. Clients say Smith Barney C. Bernstein, whom one client praises early September the shares were at 21. ity analyses.” Investors laud Rizzuto’s Citigroup’s Chip Dillon, who slips from as “extremely knowledgeable.” His bear- Although he slips a notch, Ottenstein January report, “Selectively Optimistic on first to second, is unmatched for “broad ishness, however, yielded mixed results. clearly hasn’t lost favor with investors: the Metals,” for clearly explaining why the knowledge.” His endorsements in 2002 Growing concerned about certain chem- He has a “high level of moral integrity,” weakening U.S. dollar was benefiting of major wood producers proved prema- icals companies’ exposure to higher oil says one. The researcher’s “frank” June U.S.-based exporters and why copper ture but paid off this year: Georgia Pacific prices last December, Copley downgrad- study of executive benefits, options ex- and nickel wouldn’t suffer from oversup- fell last year from 26 to 16 but recovered ed to underperform plastics maker East- pensing and insider share ownership was ply as other metals did. In March, Rizzuto to 24 in September; and Weyerhaeuser man Chemical Co., then at 40, as well as much appreciated. His cautious stand on upgraded Canadian nickel miner Inco slipped from 55 to 48 in 2002 before Dow, at 29. By early September, East- Crompton Corp. also paid off: The heavi- at 20; by early September it had ad- climbing to 60. Falling a notch to third, man had dropped to 35, but Dow was ly indebted plastics maker plunged from vanced to 25. “He zeroes in on opportu- Deutsche Bank’s Mark Wilde, who dubs up to 34. Still, says one customer, Cop- 10 last July, when Ottenstein lowered his nities other analysts seem to miss,” says himself “Dr. Paper,” is “the most acces- ley at least “sticks to his guns.” In this estimates, to below 6 this September. a follower. Third-teamer Daniel Roling of sible analyst of the group,” says a client. revamped lineup, Lehman’s Sergey Vas- Jumping from runner-up to third, UBS’s Merrill, another repeater, has crusaded Adherents cite “concise and organized” netsov, another former runner-up, ad- Jeffrey Cianci is admired for sticking by for greater financial transparency: In the voice mail and e-mail updates and “con- vances to third for what an investor says market-share-dominant companies with wake of Roling’s criticisms, steelmaker sistency of message.” But consistency is is “outstanding client service.” Vas- “positive growth characteristics, as op- Nucor Corp. began this year to disclose a two-edged sword: Wilde has a buy on netsov has a “How’m-I-doin’ style” that posed to plain cyclical industrials,” says its earnings in far more detail than before, International Paper Co., up from 35 to 40 incorporates a lot of client feedback in a customer. For example, Cianci has just as U.S. Steel Corp. had done in 2002. this year into September; he also recom- setting the agenda for his monthly con- backed Praxair since March 2000 and in- “He’s on top of these companies’ report- mended it through 2002, when it fell ference calls. “He’s very intellectual dustrial cleansers and pest-control prod- ing practices,” observes one impressed from 40 to 35. “You don’t go to him nec- about chemicals,” asserts one buy- ucts maker Ecolab since June 2001. client. Other devotees highlight Roling’s essarily for stock recommendations,” sider, who nonetheless cautions that Investors who heeded him gained 75 February picks of coal producers Massey carps one investor.

OCTOBER 2003 INSTITUTIONAL INVESTOR 73 The 2003 All-America Research Team Capital Goods/Industrials

CAPITAL GOODS/INDUSTRIALS

Aerospace & Defense Electronics increases. Little wonder, then, that the His October 2002 poll showed that half of its defense group, had just become STEVEN BINDER 45-year-old is a five-time first-teamer. of Americans surveyed favored higher CEO. From Wood’s upgrade through early BEAR STEARNS “Steve has an ear for Washington-ese,” spending, down from 80 percent a year September, Raytheon had climbed from says a grateful client. Also appreciated: earlier, leading Shapiro to downgrade the nearly 30 to more than 32. SECOND TEAM George Shapiro Smith Barney Citigroup ■ THIRD TEAM Binder’s long-standing endorsement of defense group. “He’d been bullish on de- Heidi Wood Morgan Stanley ■ United Technologies Corp. for its con- fense for years, so you had to pay atten- Airfreight & Surface Transportation servative accounting practices and em- tion,” notes an institutional investor. The RUNNERS-UP Byron Callan Merrill Lynch; EDWARD WOLFE Joseph Campbell Jr. Lehman Brothers; phasis on cost-cutting. Shares of UTX, subsector fell by 26 percent through BEAR STEARNS maker of Pratt & Whitney jet engines, March, at which point Shapiro upgraded Joseph Nadol J.P. Morgan Securities SECOND TEAM Gary Yablon CSFB ■ rose from 62 to 78 this year through ear- it as undervalued; through early Sep- THIRD TEAM James Valentine Morgan he U.S. defense budget for ﬁscal year ly September; that helped propel the tember the group had rebounded 15 Stanley ■ RUNNER-UP Scott Flower T2003, which ended last month, in- aerospace group to a 17.5 percent ad- percent. Morgan Stanley’s Heidi Wood Smith Barney Citigroup creased by a hefty 19 percent. But in Jan- vance, while defense stocks, reflecting advances to the third team after two uary, even as the nation was getting on a the federal budget trend, declined by 3 years as runner-up. Supporters praise s war loomed in Iraq, Bear Stearns’ war footing, Bear Stearns’ Steven Binder percent. Repeating at No. 2 is George her “multifaceted approach” — atten- A Edward Wolfe checked his history warned of future reductions in the growth Shapiro of Smith Barney Citigroup, tion to fundamentals, market momen- books. The resulting January report rate. Bull’s-eye: A month later the presi- whose annual survey of public attitudes tum and even product performance. She showed that in the six months preceding dent’s ﬁve-year budget projection includ- toward defense spending is hailed as a turned bullish on Raytheon Co. in May, in the Gulf War in 1991, transportation ed progressively smaller, single-digit “leading indicator of budgetary changes.” part because William Swanson, a veteran stocks did worse than the S&P 500 (–20

LEFT TO RIGHT: Steven DeSanctis, Small Companies; Lauren Rich Fine, Publishing & Advertising Agencies; Samuel Buttrick, Airlines; Daniel Niles, Semiconductors; Howard Mason, Specialty Finance; Louise Yamada, Technical Analysis; Daniel Khoshaba, Packaging PHOTOGRAPHED AT LERNER & BEAR, 246 WEST 38TH STREET, NEW YORK CITY, SEPTEMBER 18, 2003. The 2003 All-America Research Team Capital Goods/Industrials percent versus –16 percent). But in the of Career Education Corp., a Chicago- Cornell, who has had a buy on Tyco since before second-quarter earnings releas- six months after combat, they outper- based operator of more than 50 schools December 1999 at 30, wins raves for a es, when Allied and Waste Manage- formed (11 percent to 8 percent), mainly like American InterContinental Universi- 76-page analysis of that company in ment missed their numbers. All three because of a decline in oil prices. “You ty Online. Career Ed shares had more April, when the stock was at 13. One crit- stocks fell 20 percent or more over the would almost think he should be a chief than doubled, to 44, by early Septem- icism: Cornell is not “one for field trips next two months. economist somewhere,” says one client ber. Cappelli’s rise knocks last year’s and conferences or group get-togethers.” of the 37-year-old first-teamer, who rises winner, Bear Stearns’ Andrew Steiner- For those, investors can count on Merrill Machinery from second. Wolfe has made some man, into second place. “He initiates third-teamer John Inch, who was No. 2 DAVID RASO strong picks — shares of trucker UTI coverage on these really great compa- in Multi-Industry last year. Backers ap- SMITH BARNEY CITIGROUP Worldwide, for example, jumped 100 per- nies no one is following,” says a client. plaud Inch’s November 2002 excursion SECOND TEAM David Bleustein UBS ■ cent in the year since he upgraded them Case in point: Steinerman last October to six North Carolina industrial plants. THIRD TEAM Gary McManus J.P. Morgan to outperform last September — and he produced his first report on document “It was exhausting,” says one tourist, Securities ■ RUNNERS-UP John McGinty doesn’t hesitate to change course. In Au- storage company Iron Mountain, which “but we got to see factories and distri- CSFB; Stephen Volkmann Morgan Stanley gust he sharply downgraded the truckers until then had never generated free bution centers of Danaher and Grainger because of rising driver pay, weakening cash flow. Expecting growth in corpo- and others, which gave a perspective stute timing, based on what one in- demand and higher insurance costs. “He rate archiving, Steinerman rated it out- you can’t get from typical high-level ex- Avestor calls “down-and-dirty re- isn’t afraid to rock the boat,” says one perform; the stock had climbed from ecutive meetings.” search,” earns Smith Barney Citigroup’s portfolio manager. Wolfe did just that in 28 to 37 by September. “He is proac- David Raso top honors for the third January when he downgraded Expeditors tive — he’ll call you unsolicited,” says Environmental Services consecutive year. Last October, with ma- International. The logistics company ac- an investor. Lehman’s Adam Waldo re- LEONE YOUNG chinery stocks down 19 percent, Raso, cused Wolfe of losing his objectivity and peats at No. 3. He named the Corpo- SMITH BARNEY CITIGROUP 33, upgraded the sector to overweight; refused to answer his phone calls. (The rate Executive Board Co. his top by early September it had advanced by SECOND TEAM Amanda Tepper stock had risen a solid 15 percent by ear- small-cap pick at year-end 2002. The J.P. Morgan Securities ■ THIRD TEAM 55 percent. Another solid piece of work: ly September, although it trailed the sec- company offers best practices and Thomas Ford Lehman Brothers ■ His May survey of equipment dealers tor’s average gain of 26 percent.) Wolfe benchmarking consulting services; in RUNNERS-UP Alan Pavese CSFB; prompted Raso to reiterate his buy on supplants his onetime boss at the old the wake of the Sarbanes-Oxley Act, Trip Rodgers UBS Ingersoll-Rand Co., a Bermuda-based Schroeder Wertheim & Co., Gary Yablon, Waldo saw this business model ready maker of Bobcat forklifts and loaders; who drops to second. At CSFB since to explode. The stock had climbed or the third straight year, investors say by early September it had risen to 56, 1999, Yablon, a 12-time winner in this from 33 at the start of January 2003 to Fthat Smith Barney Citigroup’s Leone from 41 at the time of his initial January and other transport categories, “knows 45 by early September. Young is their first stop for insight into 2002 upgrade. “He doesn’t give you the this stuff better than anybody,” asserts a the environmental services business. same information as everybody else,” buy-sider. One example: his January pre- Electrical Equipment & Multi-Industry Young, 42, “has been around the longest, says an investor. Rising a notch to sec- diction that FedEx Corp., with aggressive JEFFREY SPRAGUE has a good perspective and a depth of ond place, David Bleustein of UBS im- cost-cutting, would outperform United SMITH BARNEY CITIGROUP knowledge; she knows the space really presses with “nimble stock picking,” Parcel Service. FedEx shares had risen well,” says a customer. Such proprietary one investor says. His February up- SECOND TEAM Robert Cornell Lehman 23 percent through early September, and Brothers ■ THIRD TEAM John Inch Merrill research as her sector overview, “Solid grades of Ingersoll-Rand at 40 and UPS stock treaded water. Repeat third- Lynch ■ RUNNER-UP Don MacDougall Waste ABCs,” and a landfill study — both Caterpillar at 45 on favorable capital teamer James Valentine of Morgan J.P. Morgan Securities biennial — gives buy-siders a compre- spending trends worked well for clients; Stanley “has the most thorough data,” hensive view of this tightly contested in- Caterpillar had climbed to 70 by Sep- says one follower. He made a deft call on mith Barney Citigroup analyst Jeffrey dustry, and her detailed cash flow reports tember (although Bleustein was too CSX Corp. in March: The rail stock had SSprague, No. 1 last year in both the make sense of companies’ financials. quick to downgrade Cat — he moved to climbed 28 percent by September. Electrical Equipment and Multi-Industry Young’s overweight stance on the group neutral at 52 in April). The “invariably sectors, retains that rank as the two cat- during the year worked well, as the sec- responsive” Bleustein is also lauded for Business & Professional Services egories are combined this year. The 42- tor modestly outperformed. Her top pick, his twice-yearly dealer surveys; the July GREGORY CAPPELLI year-old downgraded the overall sector Republic Services, rose by 30 percent edition led him to put a buy on Deere & CSFB to market weight in late September 2002 through early September 2003, follow- Co. at 46; by September it had surged because of the continuing slump in capi- ing an August 2002 upgrade on lever- to 56. J.P. Morgan’s Gary McManus, SECOND TEAM Andrew Steinerman Bear Stearns ■ THIRD TEAM Adam Waldo tal spending; in June, encouraged by low age that is low compared with its peers’, praised for his extensive coverage uni- Lehman Brothers ■ RUNNERS-UP interest rates, tax breaks on dividends stable cash flows and increased earn- verse, garners third place. “He covers a Kelly Flynn UBS; Christopher Gutek and the weaker dollar, he upgraded to ings visibility. J.P. Morgan’s Amanda lot of smaller names,” says a client. Mc- Morgan Stanley overweight. Between those ratings Tepper debuts in second place. “She Manus, a 2002 runner-up, has held changes, the average sector stock gained does strong written work and gets to the some ratings for years: He’s been nega- regory Cappelli “doesn’t react in 20 percent, in line with the S&P 500; from issues quickly,” says an investor. A for- tive on industrial tool supplier Milacron Gthe heat of the moment,” says a June to early September, the sector aver- mer investment banker, Tepper believes since 1995; the stock fell from 16 in client, but he has taken full advantage age jumped 10 percent and the broader that the waste management business is January 2002 to 3 in early September of the recent surge in the business market was up 3 percent. Praised for his cyclical and doesn’t buy the prevailing 2003. And he’s maintained a long- services sector. Unranked in this cate- “clear thinking” and “differentiated per- wisdom that a small group of trash standing endorsement of construction gory in 2001 and a second-teamer in spective,” Sprague wowed followers with haulers is gaining oligopoly pricing pow- and mining equipment maker Terex 2002 — and twice a first-teamer in the his contrarian July 2002 upgrade of Tyco er, clients say. Her “Trash Scoop” month- Corp., which dropped last year from 17 defunct Educational Services category International at 8, after Edward Breen ly and quarterly reports support that view. to 11 before rebounding to 22 as of — CSFB’s Cappelli, 36, finishes first Jr. became CEO of the scandal-ridden A well-received May industry report — early September. this year by a slim margin. “He goes company. Tyco had reached 21 by Sep- “Why Isn’t Cash the King of Trash?” — the extra mile in his due diligence,” tember. Lehman’s Robert Cornell, gar- argues that earnings, not cash flows, Packaging says an investor, notably by surveying nering second as he did in Electrical drive waste management stocks, using DANIEL KHOSHABA clients of temporary-staffing compa- Equipment last year, is hailed as a “solid as an example the performance of Allied DEUTSCHE BANK SECURITIES nies. These outsourcing businesses fundamental analyst, of the old school.” Waste Industries. Another newcomer, SECOND TEAM George Staphos Banc tend to prosper as the economy comes Last September, noting that Emerson Lehman’s Thomas Ford, finishes in third of America Securities ■ THIRD TEAM out of recession, and Cappelli has been Electric Co. was changing from “a com- place. “He has the ability to get to the Ghansham Panjabi Lehman Brothers promoting the group — stocks such as ponent manufacturer to a supplier of crux of a situation very quickly,” says a Manpower and Resources Connection technologically based solutions,” Cornell fan. Ford wins points for cutting his aniel Khoshaba of Deutsche Bank — for the past year. He hit the mark last upgraded the shares to overweight at 44. earnings estimates on Allied Waste, Re- Dsends George Staphos, a first- October with an upgrade to outperform By this September they jumped to 56. public and Waste Management last July teamer in this sector since 1999, pack-

76 INSTITUTIONAL INVESTOR OCTOBER 2003 The 2003 All-America Research Team Consumer ing as he moves up from second place lems,” the analyst recalls, “but we felt took a transition this year. In May he Loyal clients laud Staphos’ thoughtful (Khoshaba had been No. 1 from 1994 like it was unduly sold.” The specialty moved from Smith Barney Citigroup, research and excellent contacts. “He’s until 1998). As Khoshaba notes, the packager rose to 47 by July, at which where he was an associate research di- one great package,” says an investor. packaging sector has been a “mixed point Khoshaba thought the stock was rector, to BAS. That month he initiated Lehman Brothers newcomer Ghan- bag” this year, down 3.4 percent overvalued relative to its peers. Sealed coverage of rigid-container supplier sham Panjabi impressed investors through early September, even as the Air closed in early September 2003 at Ball Corp. with a buy at 44. Staphos with his recommendation of small-cap S&P 500 has gained 16 percent. “He 50. Also applauded: Khoshaba’s thor- predicted that when the Bush dividend Aptar Group at 27 last November. The has a good track record of stock pick- oughness, access to company man- tax cut passed, the company would maker of pumps used in perfume bot- ing,” says one investor. Khoshaba, 44, agement and perspective. “He has use its cash flow to increase its divi- tles had suffered a falloff in revenues, upgraded Sealed Air Corp. to a buy covered the sector for a long time, so dend — which it did, by almost 70 but the stock came back, as Panjabi last November at 27. “The stock had he has a wealth of information,” one percent in the second quarter. The predicted it would. Aptar closed in ear- sunk on concerns over asbestos prob- investor notes. George Staphos under- stock traded at 53 in early September. ly September above 38.

CONSUMER

Airlines Apparel, Footwear & Textiles Autos & Auto Parts vestor says. Apparently, he wasn’t alone: SAMUEL BUTTRICK ROBERT DRBUL STEPHEN GIRSKY Magna’s stock climbed by 51 percent, to UBS LEHMAN BROTHERS MORGAN STANLEY 77, from January to early September.

SECOND TEAM Glenn Engel Goldman Sachs SECOND TEAM Margaret Mager Goldman SECOND TEAM Gary Lapidus Goldman ■ THIRD TEAM Michael Linenberg Merrill Sachs ■ THIRD TEAM Jeffrey Edelman UBS Sachs ■ THIRD TEAM John Casesa Merrill Beverages Lynch ■ RUNNERS-UP Garrett Chase ■ RUNNER-UP Dennis Rosenberg CSFB Lynch ■ RUNNERS-UP David Bradley WILLIAM PECORIELLO Lehman Brothers; Susan Donofrio J.P. Morgan Securities; Darren Kimball MORGAN STANLEY epeat first-teamer Robert Drbul’s Deutsche Bank Securities; William Greene Lehman Brothers; Rod Lache Deutsche SECOND TEAM Andrew Conway CSFB ■ Morgan Stanley; James Higgins CSFB; Runrivaled knowledge of the apparel Bank Securities; Saul Rubin UBS THIRD TEAM Michael Branca Lehman James Parker Raymond James business was on display this year in his Brothers ■ RUNNERS-UP Marc I. Cohen coverage of Columbia Sportswear Co., tephen Girsky is the Rolls-Royce of Goldman Sachs; John Faucher alk about a white-knuckle flight. Air- say investors. In late January, Colum- Sauto analysts in the eyes of investors J.P. Morgan Securities; Caroline Levy UBS Tlines shares stabilized in October bia executives indicated that cautious who have now placed him atop this cate- 2002 after a 40 percent decline, rose retail ordering meant flat sales for the gory for 12 years in a row. Last June the n an upset, Morgan Stanley’s William sharply and then plummeted back to second half of 2003. The Lehman ana- Morgan Stanley researcher “basically IPecoriello unseats eight-time winner the October lows in early March. A lyst, 32, a longtime bull on the stock, said, ‘take your money and run’” from Andrew Conway of CSFB. “Pecoriello weak global economy, fears of hijack- thought that management was being the Big Three automakers, explains one can be neurotic, but he’s on top of every ings, the war in Iraq and speculation conservative but realistic. He main- client. Girsky, 41, argued that Detroit’s detail,” notes one appreciative client. about imminent bankruptcies all jostled tained his overweight rating and at the rampant price incentives had revved up The beverages sector underperformed the stocks. “It has been a bumpy ride beginning of February urged clients to sales at the expense of margins. In the the market this year through early Sep- but also an exciting one,” says UBS’s buy the shares on any weakness (they 12 months through early September, tember, up only 3.3 percent, versus the eight-time winner Samuel Buttrick, 44. had dropped by 7 the day after the an- General Motors Corp. shares dropped S&P 500’s 16 percent gain. Investors, Throughout, Buttrick was fearless. In nouncement), citing strong long-term by 13 percent, DaimlerChrysler was off betting on a recovery, rotated into more March, when many investors were con- growth prospects in Europe and oppor- 9 percent and Ford Motor Co. stock de- economically sensitive stocks. Even so, vinced that AMR Corp., owner of Amer- tunities in the footwear sector. From clined by 0.3 percent. “I should have lis- the 38-year-old Pecoriello, who received ican Airlines, would file for bankruptcy February through early September, the tened to him sooner,” moans one GM his B.S. from Boston University and his protection, he bet that the carrier would shares rose 44 percent. “I don’t think shareholder. Girsky did find a silver lin- MBA from the Wharton School, man- steer clear of court. The stock, he in- any other analyst gets Columbia,” says ing in the automakers’ misadventures: aged to find some winners. He initiat- sisted, was a great buy at 1.41. The an investor. Buy-siders elevate Gold- Strong car and truck sales benefited ed coverage of Dean Foods Co., which company did avoid bankruptcy, and the man’s Margaret Mager a notch to sec- Lear Corp., which supplies air bags and processes and distributes dairy prod- shares closed just below 13 in early ond for being “in tune with the industry leather seats to carmakers. Since his No- ucts, with an overweight in January at a September. “We were on the edge of dynamics that determine companies’ vember 2002 bullish report on Lear, split-adjusted 26. “The company is in selling [AMR], and he convinced me success and failure.” Mager started Girsky has repeatedly pushed the com- the early stages of transforming itself in- not to — the rest is history,” says one covering German footwear company pany as it has expanded its sales to to a brand,” he says. The stock traded at pleased client. Buttrick, says another, Puma AG Rudolf Dassler Sport in April Japanese and European automakers; 29 in September, up 14 percent from the makes good use of his 15 years’ expe- 2003 with an outperform rating at €76 through early September Lear shares start of the year, reflecting solid revenue rience: “He figures things out and on strong designs, rising sales, the re- had risen 57 percent. Supporters of growth and successful cost-cutting. Al- makes his bets. He’s one of the more purchase of its Japanese footwear li- Goldman’s Gary Lapidus, who repeats at though he ceded the top spot, CSFB sec- profitable analysts we talk to.” Gold- cense and a sound balance sheet. No. 2, especially praise his February ond-teamer Conway is still lauded by man’s Glenn Engel jumps from third Puma’s first-half 2003 sales rose 47 per- “Motown Breakdown” report, in which clients. “Lots of analysts have a hidden place to second with a call on regional cent, and the shares had shot to €105 he warned that Detroit’s auto sales were agenda — his analysis seems straight- carrier Mesa Air Group. He upgraded by September. One customer says that “supply-driven” and that overcapacity in forward and unbiased,” an investor says. the stock in April at 5, when the com- he talks to Mager first “when I need a the industry as well as increased imports Conway, bullish on Anheuser-Busch pany renegotiated its pilot contracts brain dump about what’s going on in the would put downward pressure on prices. Cos., reiterated his outperform in and US Airways Group, for whom Mesa industry.” Climbing one step to third is Says a buy-side admirer, “He’s someone March at 48. The beer manufacturer flies planes, emerged from bankruptcy. UBS’s Jeffrey Edelman. “He’s a sea- who not only has useful data but uses boasts a 50 percent market share, and As of September the stock had climbed soned veteran of the industry and the data to come to thoughtful conclu- its Bud Light is the fastest-growing to 12. Michael Linenberg advances a knows the management teams,” says a sions.” John Casesa of Merrill, who light beer, Conway says. The shares rung to No. 3 for his recommendation client. Edelman stuck with outdoor-ap- again claims third place, put a buy on had reached 52 by early September. of Frontier Airlines, which is undergo- parel maker Timberland Co. last October Canadian auto-parts supplier Magna In- Lehman’s Michael Branca wins praise ing comprehensive restructuring. In at 29, despite weak earnings compar- ternational in January, noting that $496 for his “willingness to go against con- May the Merrill analyst upgraded the isons in the first half of 2002. Edelman’s worth of Magna mirrors, frames and in- ventional thinking,” says one investor. stock to a buy at 6.26; it traded at 18 in own research showed appropriate in- terior materials go into every North The analyst upgraded PepsiCo at 36 in September. “If I have a problem, he ventory levels and improving sales. American car — and that that average July 2002 on renewed faith in its calls me right back. He’s my eyes and Timberland shares had risen to 44 by should rise to $546 by year-end 2004. snacks division, Frito-Lay. The stock ears into the industry,” says one client. early September. “That report really caught my eye,” an in- closed at 44 in early September.

78 INSTITUTIONAL INVESTOR OCTOBER 2003 LEFT TO RIGHT: Meredith Adler, Retailing/Food & Drug Chains; Victor Miller IV, Radio & TV Broadcasting; Jason Goldberg, Banks/ Midcap; Ivy Zelman, Homebuilders & Building Products; David Raso, Machinery; Richard Sherlund, Software; Lori Appelbaum, Banks/Large-Cap PHOTOGRAPHED AT HODGSON’S FARM & GARDEN CENTER, UNION SQUARE GREENMARKET, EAST 17TH STREET, NEW YORK CITY, SEPTEMBER 17, 2003.

Cosmetics, Household & Personal alyst. Also lauded: a “constant flow” Food pable of consolidating the fragmented Care Products of in-depth research and candid analy- ANDREW LAZAR private-label food industry,” Lazar notes. CAROL WARNER WILKE sis. “She calls it like she sees it and, LEHMAN BROTHERS RalCorp had climbed 14 percent by Sep- unlike her peers, will show what levers tember. Lazar upgraded Hershey Foods MERRILL LYNCH SECOND TEAM John McMillin Prudential SECOND TEAM Amy Low Chasen management is pulling to actually Equity Group ■ THIRD TEAM David Nelson Corp. last July, convinced that the com- Goldman Sachs ■ THIRD TEAM make numbers,” says one investor. CSFB ■ RUNNER-UP Eric Katzman pany’s CEO would further expand mar- Ann Gillin Lefever Lehman Brothers ■ Repeating in second place is Amy Low Deutsche Bank Securities gins. By chance, his upgrade came two RUNNERS-UP Andrew McQuilling UBS; Chasen, who “knows the industry, as days before management announced Wendy Nicholson Smith Barney well as the psychology of the Street,” ehman’s Andrew Lazar ends John its intent to sell the company. The sale Citigroup; William Steele Banc of according to a client. The Goldman re- LMcMillin’s five-year stretch in first was later dropped, but Hershey shares America Securities searcher cooled on Gillette Co. in April, place. Lazar, No. 2 last year, is most ap- jumped 20 percent by this September. “I arguing that the company would face preciated for the depth of his fundamen- like John McMillin just the way he is — fter several years of outperforming intensified competition from its rival tal research. “He does a great job looking cynical and opinionated,” says one sup- Athe S&P 500, the gloss on cosmet- Schick since it has been acquired by at cash flow and how efficient companies porter of Prudential’s second-teamer. ics shares started to dull this spring. Energizer Holdings. Gillette’s shares are at using it,” says a client. It has been McMillin’s skepticism helped keep clients Investors were more taken with cyclical subsequently underperformed the sec- a tricky market for food shares: These de- out of Kraft Foods last year. In April 2002 stocks. Three-time first-teamer Carol tor through early September. Climbing fensive plays did relatively well last year he turned negative on the shares at 40, Warner Wilke of Merrill responded by a notch to third place, Lehman’s Ann by remaining flat, but their 3 percent gain deeming them overpriced in light of low- narrowing her buy list to just a few Gillin Lefever wins praise from clients through early September has lagged this er-than-expected sales. After a second- companies. One winner: Avon Prod- for her responsiveness and insights. year’s rallying market. Still Lazar, 37, quarter 2003 earnings disappointment, ucts, a Warner Wilke favorite that rose Concluding in June 2002 that Colgate- with an MBA from Columbia Business Kraft fell to 29 by September. Repeating nearly 19 percent in 2003 through early Palmolive Co.’s tooth-whitening prod- School, has pinpointed some winners. in third, CSFB’s David Nelson gets raves September and her top pick for several uct would increase revenues in the Expecting growth in private-label sales, for his “prolific and timely analysis.” Fo- years running. “Despite challenges in second half of the year and into 2003, he initiated coverage in late January on cusing on category-dominating compa- Latin America, Avon’s top-line growth Gillin Lefever upgraded the shares; the RalCorp Holdings, which makes cereals, nies, Nelson is a long-term backer of continues to be stronger than the rest stock had gained 7 percent by early jellies and snack nuts, with a buy. “It’s the soybean processor Bunge, up 27 percent of the group,” says the 37-year-old an- September 2003. only large, well-capitalized company ca- year-to-date through early September.

80 INSTITUTIONAL INVESTOR OCTOBER 2003 The 2003 All-America Research Team Consumer

Gaming & Lodging a 16 percent rise in the S&P 500. On the Clients also appreciate Farley’s “thought ishness on P.F. Chang’s China Bistro MICHAEL RIETBROCK other hand, shares of homebuilding pieces,” such as her study of spending since its December 1998 IPO at 12. SMITH BARNEY CITIGROUP products makers, facing tough competi- patterns onboard cruise ships. Lehman’s “When most analysts downgraded the tion from China and other low-wage Felicia Rae Kantor takes second again. stock because it appeared expensive on SECOND TEAM David Anders Merrill Lynch ■ THIRD TEAM Harry Curtis J.P. Morgan countries, were flat. CSFB’s Ivy Zelman, “Her level of knowledge and helpfulness a price-earnings basis, Meyer stuck with Securities ■ RUNNERS-UP Marc Falcone 37, the No. 1 hard hat for five straight in answering questions is quite good,” it due to its differentiation and promis- Deutsche Bank Securities; Steven Kent years, earns special praise for her bullish says a client. One lucrative call: Kantor’s ing growth,” says a client. P.F. Chang’s Goldman Sachs call on WCI Communities, a construction February upgrade of toy maker Hasbro at rose nearly 60 percent, to 48, in the 12 services company. (Such enterprises es- 12, based on its renewed emphasis on months to early September. Lehman re- mith Barney Citigroup’s Michael sentially act as general contractors; they such classics as G.I. Joe and Play-Doh. searcher Mitchell Speiser “thinks like SRietbrock, 34, repeats in first place, may also own mortgage companies.) In The stock had gained 54 percent by Sep- a buy-sider more than a traditional sell- winning praise for the “depth and February, when WCI was trading below tember, easily beating the S&P 500’s 21 sider,” zeroing in on such operational breadth of his knowledge.” One example book value at 9.26, Zelman upgraded it percent gain in that time. Buy-siders also details as menu pricing and cost-cutting, was his upgrade of lottery services and to outperform. The stock traded at 17 in enjoy Kantor’s periodic “Tales from the says a follower of the repeat third- equipment provider Gtech Holdings early September. The analyst calculated Road” reports on Harley-Davidson. “She teamer. One example: Speiser’s Decem- Corp. in September 2002 at 24. Riet- that WCI’s year-end 2002 equity value of does dealer visits and surveys and gains ber 2002 upgrade to equal weight of brock expected Gtech to benefit as state $663.5 million understated its worth by valuable information on sales trends,” McDonald’s Corp. at 16 because new governments ramped up lotteries to approximately 40 percent because in- says one reader. Winning praise for thor- CEO James Cantalupo was shifting close widening budget gaps. The stock vestors didn’t give sufficient weight to its ough channel checks is Dean Gianoukos, away from deep discounting. McDon- had jumped 79 percent, to 43, nearly a Florida properties. Aside from her stock- J.P. Morgan’s three-time third-teamer. ald’s shares had advanced by 49 per- year later. Investors also laud Rietbrock’s picking prowess, investors like Zelman’s “He goes out of his way to dig into what’s cent, to 23, by early September. willingness to “hold a dialogue, versus detailed statistical reports. “She is one of important,” says an investor. Gianoukos just telling you his views,” as one investor the best analysts on the Street,” says a upgraded toy maker Mattel to overweight Retailing/Department Stores & Broadlines puts it. “With him, you can throw ideas client. Repeating in second place, Smith in October 2002 at 16, reasoning that the DANIEL BARRY around.” Merrill’s David Anders moves Barney Citigroup’s Stephen Kim touted market had already discounted the likeli- MERRILL LYNCH up a notch to second place. “He’s partic- Hovnanian Enterprises, a single-family hood of a weak holiday season. The SECOND TEAM Deborah Weinswig ularly good on hotels,” notes one buy- home and condominium builder, which shares rose to 21 by April, at which point Smith Barney Citigroup ■ THIRD TEAM sider. Anders maintained buys on Hilton he upgraded to a buy in February at 32. Gianoukos downgraded on concerns George Strachan Goldman Sachs ■ Hotels Corp. and Starwood Hotels & Re- Particularly attractive: three-year rev- about Mattel’s slowing margin improve- RUNNERS-UP Shari Schwartzman Eberts sorts Worldwide even as lodging stocks enue growth of 39 percent and three- ment and increasing competition for its J.P. Morgan Securities; Michael Exstein sold off on concerns about a double-dip year earnings-per-share growth of 43 key franchise, Barbie. Mattel traded at 20 CSFB; Wayne Hood Prudential Equity recession in October 2002 and on war percent. By September the stock was at in early September. Group; Emme Kozloff Sanford C. Bernstein fears in March 2003. He downgraded 64. Newcomer Margaret Whelan of UBS both to neutral in June 2003 on valua- made a shrewd call on building products Restaurants halk up an eighth straight victory for tion. Hilton rose 18 percent in 2002 and company Masco Corp., upgraded to a JOSEPH BUCKLEY CMerrill’s Daniel Barry, 62. “He really an additional 9 percent, to 14, in 2003 buy in December at 20. Masco was fac- BEAR STEARNS does a good job of viewing things through the downgrade; Starwood fell ing lawsuits claiming that some exterior through the eyes of institutional in- SECOND TEAM Janice Meyer CSFB ■ THIRD 19 percent last year and then rebounded woodcoatings were especially suscepti- TEAM Mitchell Speiser Lehman Brothers vestors,” says a client. Believing its 28 percent, to 30, through the down- ble to mildew. Whelan met with manage- ■ RUNNERS-UP Andrew Barish Banc of post–9/11 sales surge was over, Barry grade. Hilton rose to 15 and Starwood ment and determined that the litigation America Securities; Mark Kalinowski downgraded the group from August climbed to 34 by early September. was not a risk to the company. (It was Smith Barney Citigroup 2002 through April 2003 but favored a (Lodging stocks fell 9 percent in 2002 later settled.) By September the stock “Defensive Dozen” — five of which and climbed 26 percent in 2003 through had topped 25, up almost 30 percent. oseph Buckley’s hunger for knowl- were broadlines, including J.C. Penney early September.) A runner-up in 2002, “She is a smart analyst, and she knows Jedge keeps him atop the restaurant Co., Kohl’s Corp. and Wal-Mart Stores Harry Curtis of J.P. Morgan takes third her companies well,” says an investor. sector for a third year. “When he travels — whose sales would weather a slow- this year. “Curtis brings experience in the country, he makes it a point to visit down best. The dozen fell by 2.3 per- Vegas and tenure in the gaming indus- Leisure as many restaurant chains as possible, cent, compared with a loss of 3.5 try,” says an investor, noting that Curtis ROBIN FARLEY to personally test quality, service and percent for the S&P 500 in that time; is a visiting professor at the University of UBS presentation, going beyond the call of Merrill’s index of a wide range of retail Nevada–Reno, where he teaches casino any analyst,” says a grateful investor. stocks fell almost 11 percent. Barry’s SECOND TEAM Felicia Rae Kantor Lehman managers how Wall Street values their Brothers ■ THIRD TEAM Dean Gianoukos The Bear Stearns researcher, 49, has best pick: Dollar Tree Stores in April at companies. Curtis was on target when he J.P. Morgan Securities ■ RUNNERS-UP been pushing casual-dining establish- 24 on valuation and expected sales im- started covering Choice Hotels Interna- Scott Barry CSFB; Jill Krutick Smith ments over fast food: The former cate- provements; it had gained 54 percent by tional with a buy in October 2002 at 21, Barney Citigroup gory rose 9.1 percent and the latter fell early September. Clients also like Bar- based on anticipated earnings growth as 17 percent in the 12 months to early ry’s quarterly “Vital Signs,” forecasting more independent hotel operators con- ogent analysis of the merger of September 2003. Buckley argues that indicators including sales and profit per vert to Choice brands, such as Comfort Ccruise giants Carnival Corp. and P&O casual dining offers more room for square foot. Smith Barney Citigroup’s Inn. Since the call, Choice had climbed to Princess helps UBS researcher Robin growth and caters to consumers’ ma- Deborah Weinswig makes her category 33 by early September. Farley, 33, repeat in first place in an un- turing tastes. Nonetheless, investors debut at No. 2 (she was a 2001 Bear changed lineup. “She thought it was say that his breakout recommendation Stearns runner-up in Retailing/Food & Homebuilders & Building Products strategically positive and that any pres- was a mid-December outperform on Drug Chains). Praised for weekly notes IVY ZELMAN sure on the combined company’s stock fast-food conglomerate Yum! Brands at and conference calls with industry ex- CSFB presented a buying opportunity,” says 22 for its growth rate and success in perts, Weinswig is “not afraid to give an one investor. Sticking to her thesis, Far- opening restaurants that offer several opinion,” says an investor. She scored SECOND TEAM Stephen Kim Smith Barney Citigroup ■ THIRD TEAM ley reiterated her buy on Carnival several of its fast-food brands under one roof. with a July upgrade of BJ’s Wholesale Margaret Whelan UBS times over the past 12 months, reason- Yum! had climbed 36 percent, to 30, by Club at 16, though many investors had ing that booking disruptions caused by early September. In an unchanged line- lost confidence in it. After a June visit, ith mortgage rates near 45-year the U.S. war with Iraq and highly publi- up, CSFB’s Janice Meyer holds second Weinswig was impressed with BJ’s new Wlows for much of the past year, the cized incidents of cruise-ship stomach flu place for a third year. “Her knowledge CEO, expanded procurement team and construction industry has been hum- wouldn’t last long. Carnival eased 7 per- of industry dynamics has led her to see plans to offer more prepared foods. The ming. Homebuilding stocks jumped 40 cent in 2002 but rocketed 38 percent through short-term volatility in stocks,” shares had hit 22 by September. Gold- percent through early September, versus higher in 2003 through early September. says one investor. An example: her bull- man’s George Strachan repeats in third

82 INSTITUTIONAL INVESTOR OCTOBER 2003 The 2003 All-America Research Team

place, credited for company knowledge Retailing/Hardlines due to perceived credit risk [from auto- equal weight since August 2002, in July and access to and understanding of ARAM RUBINSON mobile installment lending],” Rubinson he raised his second-quarter earnings es- managements. Clients say he’s active BANC OF AMERICA SECURITIES explains, “but I viewed the company as a timate to $0.71 per share, 2 cents above on stock picking, but one complains rare opportunity in retail for open-ended the Street’s consensus and closest to SECOND TEAM Alan Rifkin Lehman that he never “pounds the table.” Stra- Brothers ■ THIRD TEAM Gary Balter UBS ■ growth.” The shares traded at 35 in early the $0.75 that the company reported. chan upgraded the sector to neutral on RUNNERS-UP Matthew Fassler Goldman September 2003. Investors appreciate Since the estimate increase the shares January 30 because it was historically Sachs; Dana Telsey Bear Stearns Rubinson’s reality-TV-style DVD, “Joe had risen 26 percent, to 55, by early cheap compared with the broad market; Contractor,” in which he interviews pro- September. Gary Balter, who slips a now he says that he should “have gone e brings original thought to the fessional contractors about national notch to third, impressed clients with his straight to attractive”: It was up 43 per- “H group and thinks like a buy-sider, home centers, for which they constitute April upgrade of pet supplies retailer cent by early September. looking for coming change rather than an important market segment. Lehman’s Petsmart at 15 because of its store re- reporting it,” says a proponent of BAS’s Alan Rifkin, who climbs two rungs to modeling program; it had risen to 23 by Retailing/Food & Drug Chains Aram Rubinson, who leaps two slots to No. 2, has strong convictions. “If I love a September. Balter, who joined UBS from MEREDITH ADLER first. Rubinson, 33, a Tufts University stock, I will have the highest [earnings] CSFB in March, is bullish on the sector, LEHMAN BROTHERS grad, went against the ﬂow with his bull- numbers on the Street,” he says. His believing that hardlines’ earnings growth ishness on used-car retailer Carmax, “love” for home store Lowe’s Cos. for its will hold up well in an uncertain econo- SECOND TEAM Mark Husson Merrill Lynch ■ THIRD TEAM Lisa Cartwright Smith which he originally recommended in Au- “masterful job” at entering competitor my; in the 12 months to September, hard- Barney Citigroup ■ RUNNERS-UP gust 2001 at 16 while at his previous Home Depot’s major markets is a perfect lines gained 25 percent as the broad Stephen Chick J.P. Morgan Securities; employer, UBS. “Investors were wary example: Although he had rated the stock market rose by 4 percent. John (Jack) Murphy CSFB

he’s very good on qualitative is- “S sues, especially regarding management teams,” says one investor of Lehman repeat first-teamer Meredith Adler, 49. For example, Adler got vocal in backing drug retailer CVS Corp. in April at 24 because its executives were cutting corporate overhead and other expenses to tackle Medicaid pressures and slowing sales. She officially upgraded the stock in June at 28; it had advanced to 31 by early September. Clients say Adler’s background as a commercial lender and high-yield bond analyst gives her a unique balance sheet perspective on retailers that are sometimes leveraged or even in danger of bankruptcy. Backers of Merrill’s Mark Husson, who climbs a rung to No. 2, appreciate his European perspective. In August, Husson, a Briton, became team coordinator of Merrill’s new global retail research. Investors laud him for his convictions: “He doesn’t ﬂip-ﬂop his ratings at the turn of a hat,” says one. Husson got the relative strength of food retailers right. Positive on Kroger Co. throughout the past year and Safeway since mid-December 2002, Husson had a sell on Albertson’s until August 2003. Kroger and Safeway offered lower prices and boasted stronger market shares and brand franchises than their competitors; they lagged the S&P 500 by 7 percentage points and 3 percentage points, respectively, through early this September. Meanwhile, the sell recommendation, Al- bertson’s, underperformed the S&P 500 by 33 percentage points through mid- August. Despite dropping a slot to No. 3, Smith Barney Citigroup’s Lisa Cartwright is appreciated for her quick notes on breaking news, followed by in-depth reports, and her unbiased calls. Cartwright upgraded her three food retailing stocks — Albertson’s, Kroger and Safeway — last November, with Kroger her favorite because it had progressed furthest in cutting prices and increasing promotional activities. By early September, Kroger had topped her universe’s 17 percent gain by 12 percentage points.

84 INSTITUTIONAL INVESTOR Energy

Retailing/Specialty Stores serve in-store activity at the consumer in April at 21 after the women’s clothing at which point Adelman went positive DANA TELSEY level. Investors laud her for her steady chain hired a former Banana Republic again. He believed that tobacco shares BEAR STEARNS positive stance on Coach. Telsey, who design guru, Jerome Jessup, to update had dipped too low on news of an Illi- first recommended the stock in March its relatively staid line; other analysts nois lawsuit alleging that the term “light SECOND TEAM Dana Cohen Banc of America Securities ■ THIRD TEAM 2001 at 14, reiterated her outperform at were concerned about revenue growth. cigarette” was deceptive. From the up- Stacy Pak Prudential Equity Group ■ 54 in July 2003, in part because of the The shares had jumped to 32 by early grade through early September, tobacco RUNNERS-UP Mark Friedman Merrill Lynch; luxury-goods purveyor’s prospects for September. Clients praise repeat third- shares had risen 22 percent, compared Kimberly Greenberger Lehman Brothers Japanese expansion. The stock had teamer Stacy Pak for her unconvention- with a 17 percent gain for the S&P 500. risen to 57 by early September. Telsey’s al and independent approach. During The University of Chicago Graduate he is nonstop,” says an admiring initial Coach call made her a 2002 the 2003 severe acute respiratory syn- School of Business MBA is praised for “S client of Bear Stearns’ Dana Home-Run Hitter (Institutional Investor, drome outbreak, investors worried that his “perspective and patience and abili- Telsey, 40. Telsey’s broad knowledge April 2003). In this unchanged lineup retailers’ Asian clothing factories would ty to look beyond the near-term uncer- and passion for retail set her apart, lead- Dana Cohen garners second for a fourth shut down, resulting in product delays tainties,” as one client says. Although ing to her fifth straight first-place finish year, based on “her ability to stay fo- during the key back-to-school season. he drops to second place after four — by a wide margin. Known for haunt- cused on her objective in a very volatile The Prudential Equity Group researcher years in first, Merrill’s Martin Feldman ing malls and retail stores to gather in- sector,” according to an investor. The arranged a May client conference call is lauded for his upgrade of Altria formation firsthand, Telsey exposes BAS researcher demonstrates this with with a Harvard University epidemiolo- Group (formerly known as Philip Mor- customers to her hands-on approach her disciplined coverage of AnnTaylor gist. “We learned that SARS is actually ris Cos.) in April at 32, based on more- during “field trips” that allow them to ob- Stores Corp., which she recommended very difficult to spread, easing our fears favorable outcomes in tobacco suits and regarding plant shutdowns. Ultimately, stepped-up discounts, coupons and the back-to-school season was posi- other promotions for Altria’s premium- tive,” says one investor. cigarette brands. The stock rose to 47 in early July before pulling back to 42 Tobacco as of early September. “He called that DAVID ADELMAN one,” says a client. Investors also ap- MORGAN STANLEY preciate Feldman’s University of Cam- bridge law degree and his knowledge SECOND TEAM Martin Feldman Merrill Lynch ■ THIRD TEAM Bonnie Herzog of foreign tobacco companies. Smith Smith Barney Citigroup ■ RUNNER-UP Barney Citigroup researcher Bonnie Robert Campagnino Prudential Herzog repeats in third place. “She’s Equity Group the best stock picker,” says an investor. One profitable call: Herzog’s “willingness to lean against the downgrade of R.J. Reynolds Tobacco Awind,” as one investor puts it, helps Holdings in September 2002 at 53 be- Morgan Stanley’s David Adelman, 35, cause of increased promotional ex- ascend a step to claim the top slot for penses in the second half of 2002. The the first time. One example: his Sep- stock closed in early September at 35, tember 2002 downgrade of the sector down 34 percent. Customers also prize to neutral over concerns that discount Herzog’s fundamental assessments: manufacturers would pressure prices. “Her reports on the competitive land- Tobacco shares dropped 20 percent scape and her survey of wholesalers from September through mid-March, are very helpful,” says one.

ENERGY

Electric Utilities in Utilities” report, created jointly with STEVEN FLEISHMAN ﬁxed-income and convertibles analysts, MERRILL LYNCH was also well received. “His valuation framework is good, and he has lots of ex- SECOND TEAM Daniel Ford Lehman Brothers ■ THIRD TEAM Kit Konolige perience,” says a backer. Lehman repeat Morgan Stanley ■ RUNNER-UP James (Jay) second-teamer Daniel Ford “has good Dobson Deutsche Bank Securities judgment in separating the oversold stocks from distressed situations,” says errill seven-time ﬁrst-teamer Steven a client. For example, Ford recommend- MFleishman turned positive on utili- ed PG&E Corp. in September 2002 and ties last fall as power makers sold assets, Public Service Enterprise Group in De- cut dividends, shuttered risky energy cember, asserting that their default risks trading units and generally put their bal- were less than their shares indicated. The ance sheets in better shape. His timing stocks had risen 107 and 41 percent, re- was impeccable: The sector dropped by spectively, by September 2003. Investors 43 percent in 2002 through early Octo- also praise Ford’s thoughtful industry re- ber, then spiked up 31 percent by early ports, including a March review of dis- September 2003. Fleishman, 34, empha- tressed situations and a May quantitative sized stocks such as Dominion Re- look at the power-generation industry’s sources, an existing buy that he put on cash flow and earnings calculations. Merrill’s focus list in December 2002 at Credited with “good experience and wide LEFT TO RIGHT: James Wicklund, Oil Services & Equipment; 50, and TXU Corp., upgraded in March industry knowledge,” Morgan Stanley’s Ronald Barone, Natural Gas; Stephen Girsky, Autos & Auto Parts; at 16 after it closed its troubled Euro- Kit Konolige moves from runner-up to Dana Telsey, Retailing/Specialty Stores; Kenneth Weakley, Health pean unit. The stocks had reached 61 No. 3. Investors like his focus on compa- Care Facilities; Jonathan Litt, REITs; Michael Weinstein, Medical and 22, respectively, by early Septem- nies with both regulated and unregulated Supplies & Devices ber. April’s “Capital Structure Investing businesses, such as American Electric PHOTOGRAPHED AT WALMIR MEAT, 839 WASHINGTON STREET, NEW YORK CITY, SEPTEMBER 12, 2003. INSTITUTIONAL INVESTOR 85 The 2003 All-America Research Team Energy

Power Co., which he recommended in bulls on oil in late 2002. Like Ting, he en- and 1996). Barone, 60, who rises a notch higher gas prices and post-restructuring January at 26 on its strengthening bal- couraged investors to take advantage of from 2002, “has got great models,” says efficiencies. The shares rose 31 percent ance sheet and low cost structure; the seasonal moves in refiners and mar- another admirer. “He’s very smart, and from January 2002 to September 2003. shares traded at 29 in September. De- keters. His December “Straw Hats in he’s highly available for someone so sen- Morris joined BAS from Smith Barney tailed models for each segment of a Winter” report called the move in refining ior.” Last year Barone focused on the im- Citigroup in March 2003. Lehman three- company allow Konolige to generate and marketing names such as Valero En- pending gas-supply crisis, predicting time second-teamer Thomas Driscoll is “earnings estimates [that] are more ac- ergy Corp. and Premcor, up 32 percent with almost perfect accuracy during the noted for detailed gas storage work and curate than others’,” says a client. and 24 percent, respectively, through the summer of 2002 that the full-year aver- an annual study of E&P share price driv- first quarter of 2003. (Through early age composite spot price for gas would ers. Published in April, the report evalu- Integrated Oil September their gains were more mod- be $3.00 per million BTU; the actual aver- ates reserves, cash flow and production PAUL TING est: 20 percent and 18 percent, respec- age came in just slightly higher, at $3.10. per share, which Driscoll views as the key UBS tively). Terreson remains bullish on their In February 2003 he upgraded Dominion determinants of stock prices. “He’s good prospects for 2004–’05. Goldman’s Ar- Resources at 55 as a play on gas (it had at picking stocks, and he’s very accessi- SECOND TEAM Douglas Terreson Morgan Stanley ■ THIRD TEAM jun Narayana Murti climbs a notch to acquired Consolidated Natural Gas Co. in ble,” says a customer. Driscoll, too, fa- Arjun Narayana Murti Goldman Sachs ■ third. The former buy-sider wins points 2000) and on rising electricity prices. The vored Burlington Resources, which RUNNERS-UP Mark Flannery CSFB; for directness: “He says what he means,” stock closed at 61 in early September. jumped 25 percent after his February call Frederick Leuffer Bear Stearns; says a client. Murti downgraded Amera- Maintaining a cautious stance on the before pulling back in early September. Michael Mayer Prudential Equity Group; da Hess Corp. last September, when it group because of volatility, Prudential Eq- “Lloyd Byrne is more of a portfolio man- Steven Pfeifer Merrill Lynch was still near 70, convinced that the uity Group’s M. Carol Coale helped in- ager’s analyst” than are most of his stock price did not reflect the company’s vestors “stay away from the disasters,” competitors, says a client of Morgan ix-time first-teamer Paul Ting, who overreliance on North American and says a customer. For example, the ana- Stanley’s repeat third-teamer. “He’s a Smoved from Smith Barney Citigroup North Sea oil. Amerada Hess announced lyst downgraded Duke Energy Corp. from good stock picker and has done a good to UBS in May, continues to impress in- asset write-downs and pension charges buy to hold in July 2002 at 29; through job of calling the timing of price moves.” vestors with his proprietary research and over the next two quarters, and the early September 2003 the shares had lost Investors laud Byrne’s report on com- active approach. “He calls me on his shares had fallen to 48 by September. 36 percent (adjusted for dividends). panies that allocate cash flow well, such own,” says a supporter. Generally cau- Coale, who falls one notch to second as Apache Corp. and Pogo Producing tious on the integrated oil stocks over the Natural Gas place, publishes comprehensive and Co. Apache, a long-standing recom- past year, Ting, 53, accurately forecast RONALD BARONE well-received reports, including a June mendation, rose 16 percent in 2002 and that OPEC would not cut production at its UBS review of the energy traders that pre- had gained another 16 percent through June 2003 meeting. He also wisely ad- dicts that they will revive over the next early September. Pogo, recommended SECOND TEAM M. Carol Coale Prudential vised clients to trade the refining and Equity Group ■ THIRD TEAM Scott Soler 18 to 24 months. Morgan Stanley’s in April 2002, had climbed 39 percent marketing segment of the group season- Morgan Stanley ■ RUNNERS-UP Scott Soler takes third. Tying for second by early September. ally, owning the stocks in the first quarter Anatol Feygin J.P. Morgan Securities; in Building & Building Products in 2001, of the year, when refining margins are Richard Gross Lehman Brothers; he began covering energy merchants in Oil Services & Equipment usually strong, but selling before second- David Maccarrone Goldman Sachs June 2002 and pipelines in October 2002. JAMES WICKLUND and third-quarter troughs. In the first A former auditor, Soler’s models and BANC OF AMERICA SECURITIES quarter of 2003, refining shares beat the aving followed the natural-gas busi- quantitative skills win points with in- SECOND TEAM James Stone UBS ■ THIRD S&P 500 by 1.3 percentage points, but Hness for 32 years, UBS analyst vestors. Clients appreciated his Novem- TEAM Terry Darling Goldman Sachs ■ they lagged the broad market by more Ronald Barone “knows every little thing ber 2002 underperform on El Paso Corp. RUNNERS-UP James Crandell Lehman than 2 percentage points in the second that happens in the industry,” a client at 8.55 on legal issues stemming from Brothers; Ole Slorer Morgan Stanley quarter. Morgan Stanley’s Douglas Ter- says. Barone has also achieved a rarity: energy trading and the company’s settle- reson, second for a sixth year, is credited Capturing first place in three different ment with the state of California; the no-nonsense approach and deft sec- for being among Wall Street’s biggest decades (his previous wins were in 1989 shares sank to 3.33 in February, rebound- Ator calls keep BAS’s James Wick- ing to 7.73 by early September. lund, 49, in the top slot for a second year. “He has a good understanding of the de- Oil & Gas Exploration & Production tails, and he’ll give it to you as it is,” ex- ROBERT MORRIS plains one investor. Wicklund timed the Patricia McConnell,, AccountingAccounting && TaxTax PolicyPolicy BANC OF AMERICA SECURITIES group perfectly in the past year, growing cautious last September because he ex- PHOTOGRAPHED OUTSIDE NEW YORK FILM ACADEMY SECOND TEAM Thomas Driscoll Lehman (FORMERLY(FORMERLY TAMMANYTAMMANY HALL),HALL), 100100 EASTEAST 17TH17TH STREET,STREET, Brothers ■ THIRD TEAM Lloyd Byrne pected uncertainty about an economic NEW YORK CITY, SEPTEMBER 11, 2003. Morgan Stanley ■ RUNNERS-UP recovery to lead to a drilling lull. The sec- William Featherston UBS; tor was little changed through early De- John Herrlin Jr. Merrill Lynch cember, when, as fears about returning recession eased and a frigid winter set in, nvestors apparently don’t like to mess he told investors to go overweight by the Iwith success. In an unchanged lineup, end of January. Although other analysts BAS’s Robert Morris, 41, takes first saw drillers boosting spending by 3 to 5 place, praised for his consistently and percent, Wicklund predicted that the U.S. correctly bullish stance. Overweighting rig count, driven partly by driller spend- the group starting in July 2002, Morris ing, would rise 22 percent in the first half argued that natural-gas prices in 2003 of 2003; it actually increased by 27 per- would rise higher than the Street was cent, and the group surged 31 percent. forecasting. By June the consensus had Lauded for extensive field studies, new- caught up to Morris, and he downgraded comer James Stone of UBS takes sec- to market weight the following month. ond. His monthly “PatchWork” survey From July 2002 through June 2003, E&P of oil field operating personnel provides shares rose 20 percent, outstripping the investors with a unique boots-on-the- S&P 500s 7 percent gain. From July to ground perspective on future operating early September, E&P shares gave up 1.2 activity and pricing. He put a strong buy percent, and the S&P gained 4 percent. on Halliburton Co. in February 2002 at Among his top picks: longtime favorite 16, convinced that the market was over- Burlington Resources on a boost from estimating Halliburton’s asbestos liabili-

OCTOBER 2003 The 2003 All-America Research Team Financial Institutions ty. He foresaw an asbestos settlement, No. 3, Goldman’s Terry Darling “can analyst to predict Halliburton’s asbestos used in oil and gas drilling; he termed it a which in fact occurred in December read through what a company says to settlement. Another score: his Novem- “near-pure play on the recovery in North 2002. By early September the stock determine what it is really saying,” as ber recommendation at 13 of Lone Star American gas drilling.” The stock peaked had hit 25. Although he slips a notch to one investor says. Darling was the first Technologies, a maker of steel tubing at 25 in June, easing to 16 by September.

FINANCIAL INSTITUTIONS

Banks/Large-Cap October, the stocks had already lost 14 combination of industry knowledge ish after switching from Bear Stearns in LORI APPELBAUM percent in the previous three weeks. But and stock-picking savvy. McVey re- April. Investors praise his January GOLDMAN SACHS Goldberg argued that expected Federal mained bullish on Lehman Brothers analysis of the effects of the Bush ad- Reserve Board rate cuts would eat into Holdings, encouraging investors in ministration’s tax proposals on life in- SECOND TEAM Ruchi Madan Smith Barney Citigroup ■ THIRD TEAM Michael Mayo net interest income, further depressing February to stick with the stock when surers. “He said that it could be terrible Prudential Equity Group ■ RUNNER-UP share values. “A month earlier on that it was trading in the low 50s, despite for annuities, but he thought that new Brock Vandervliet Lehman Brothers call would have been better,” says one the conventional wisdom that no more provisions would soften the blow,” says buy-sider. But another investor says, “A profits were to be wrung from the one reader. Kligerman raised his rating ver the past year, as interest rates lot of analysts expected midcaps to out- bond market. By June, Lehman shares on Prudential Financial to outperform in Oeased to historic lows — and then perform, when instead they’ve kept in had reached the mid-70s; they traded December 2002 when the stock was at abruptly shot up — Goldman’s Lori Ap- line with the overall market.” The 30- in the high 60s in September. Guy 31.84. He was enthusiastic about the pelbaum has been out front in assessing year-old analyst also impressed clients Moszkowski, who jumped from Smith company’s strong capital base and its the impact on banks and large-cap finan- by reiterating his overweight on TCF Fi- Barney Citigroup to Merrill in March, is acquisition of insurer American Skan- cials. In November 2002 she argued that nancial Corp. in May at 37, in part be- No. 2 for the third straight year. “With dia, announced that month. Shares fell further rate cuts would not boost bank cause TCF is a top Visa card co-issuer. the brokers, there are so many moving below 30 in March but had climbed profit margins as they had in the past be- In addition, the full-service bank had re- parts,” says one admirer. “Guy helps back to 36 by early September. Merrill’s cause banks had less room to lower their duced its mortgage-backed securities you get comfortable with what really Edward Spehar pulls into the third slot deposit rates, and she was right about holdings, a shrewd move before inter- drives the stocks.” Moszkowski upgrad- from runner-up and receives most praise that. Appelbaum, who repeats in first and est rates started to climb. TCF gained ed Morgan Stanley from neutral to buy for several of his mid-April recommen- ranks third in Banks/Midcap, saw Bank 27 percent by September. “He was per- last November, retreated to neutral in dations. “He highlighted the companies of America Corp. jettisoning risky assets sistent, and for the right reasons,” a April and restored a buy in early July. that had equity market exposure, and and stabilizing net interest margins, and customer says. Late last year Smith The stock climbed from 38 at his first they’ve subsequently done very well,” she recommended it as an outperformer Barney Citigroup’s Keith Horowitz, who upgrade to 45 at the time of the down- says an adherent. Three of his picks, in November. By August, when she re- jumps a notch to second, wisely favored grade, dropped to 42 by the end of June Hartford Financial Services Group, Lin- moved the stock from Goldman’s list of large-caps with improving credit out- and had surged to 49 by early Septem- coln National Corp. and Nationwide Fi- outperformers, it had risen 15 percent, looks. He stuck to a few midcaps, ber. Sanford C. Bernstein’s Brad Hintz, a nancial Services, had advanced by 35, versus an 8.5 percent gain in bank though, such as First Tennessee Na- 2002 runner-up, rises to third place. As 22 and 13 percent, respectively, through stocks. Says one client, “She puts to- tional Corp. “People just didn’t see the investors struggled last winter to under- early September. gether detailed analyses of loan behavior big picture around the stock, and Keith stand the full scope of potential losses and credit quality, and she gives you a explained how the overall franchise was in Morgan Stanley’s aircraft leasing Insurance/Nonlife good understanding of the risks a bank strong,” a client notes. Horowitz raised business, Hintz discovered that the iden- JAY COHEN faces.” Ruchi Madan at Smith Barney it to a buy last July, and the stock ad- tification numbers of all the firm’s planes MERRILL LYNCH Citigroup climbs a notch to No. 2. Unlike vanced 10 percent, to 40, in April, at were publicly available. Hintz then hired SECOND TEAM Alain Karaoglan many of her peers, Madan made a bull- which point he lowered it to neutral, be- a consultant to evaluate the aircraft and, Deutsche Bank Securities ■ THIRD TEAM ish case for J.P. Morgan Chase & Co. last lieving that the mortgage refinancing unlike his rivals, estimated the losses Todd Bault Sanford C. Bernstein ■ December, even as Enron Corp.–related boom would soon peter out. It did, of based on first-hand information. RUNNERS-UP Thomas Cholnoky Goldman woes pummeled its stock. “That call paid course, but not right away: The stock Sachs; Ronald Frank Smith Barney off,” an investor says. Michael Mayo climbed 17 percent higher by June be- Insurance/Life Citigroup; Charles Gates CSFB “makes me think,” says a buy-sider. The fore falling back to 41 in early Septem- COLIN DEVINE Prudential analyst falls one rung to third. ber. Goldman’s Lori Appelbaum, who SMITH BARNEY CITIGROUP here’s a new face atop the nonlife Mayo’s sell on Citigroup last August takes the top spot in Banks/Large-Cap, insurance category. Two-time first- SECOND TEAM Andrew Kligerman UBS ■ T missed the stock’s heady 12-month slips a rung here to No. 3. One of her THIRD TEAM Edward Spehar Merrill teamer Alice Schroeder of Morgan Stan- climb of more than 50 percent, but a PNC smart calls: a November downgrade of Lynch ■ RUNNERS-UP Eric Berg Lehman ley stepped down in May to write a book Financial Services Group downgrade in North Fork Bancorp at 39; it was trad- Brothers; Nigel Dally Morgan Stanley; about investing legend and Berkshire August on corporate governance con- ing at 35 in early September. Vanessa Wilson Deutsche Bank Securities Hathaway CEO Warren Buffett. In her cerns prefaced a 17 percent drop, and an place is Merrill’s Jay Cohen, who fin- October upgrade captured a 30 percent Brokers & Asset Managers mith Barney Citigroup four-time ished second in 2001 and 2002. The 37- gain through September. The mixed HENRY MCVEY Sfirst-teamer Colin Devine is a con- year-old Columbia Business School MBA record doesn’t dampen the enthusiasm MORGAN STANLEY trarian — and more often than not, he’s was characteristically bullish through- some investors have for Mayo: “Even right. In April the 44-year-old analyst out 2002 and into 2003 as shares of SECOND TEAM Guy Moszkowski Merrill when he’s dead wrong, I want to hear Lynch ■ THIRD TEAM Brad Hintz Sanford upgraded UnumProvident Corp. to out- nonlife companies mostly tracked the what he has to say,” says one. C. Bernstein ■ RUNNERS-UP Mark Constant perform. The company had recently an- ups and downs of the S&P 500. His Lehman Brothers; Glenn Schorr UBS nounced moves to improve its capital major thesis: Nonlife insurers were Banks/Midcap structure. Because it was trading at on- able to increase their prices post–9/11, JASON GOLDBERG organ Stanley’s Henry McVey was ly 0.4 times book value, Devine thought and therefore their profits were likely LEHMAN BROTHERS Monly six years old on May Day the stock was a good buy. It had surged to improve — which they did. “Jay 1975, but the four-time winner boasts 51 percent by early September. “Wall knows the industry extremely well,” SECOND TEAM Keith Horowitz Smith Barney Citigroup ■ THIRD TEAM a grizzled veteran’s knowledge of the Street had little faith in management says a supporter. One of Cohen’s long- Lori Appelbaum Goldman Sachs ■ financial services industry. “Other and hated the stock, but so far Devine standing buys, W.R. Berkley Group, RUNNER-UP Rosalind Looby CSFB guys have been around longer and seems to be right,” says an investor. which has carved out a niche in spe- have more institutional memory, but “He’s able to look at a company and say cialty lines of business such as fitness hen repeat first-teamer Jason Henry has a better feel for the stocks,” that it has what it takes to survive,” says centers, was a winner. The stock WGoldberg of Lehman downgraded notes one supporter. Buy-siders report another supporter. Andrew Kligerman climbed steadily from the low 30s the midcap-banks sector to neutral last that the analyst offers an invaluable at UBS maintains his second-place fin- when Cohen recommended it in July

88 INSTITUTIONAL INVESTOR OCTOBER 2003 The 2003 All-America Research Team Health Care

2002 to more than 50 by early Sep- duce its susceptibility to interest rate turned out to be too conservative — Mason, 40, vaults from runner-up last tember 2003. Second-teamer Alain cycles. The stock hit 71 by September. REIT shares rose 23 percent this year year to the top of the heap in 2003. Karaoglan of Deutsche Bank also as- Rising a notch to second is Lehman’s through early September — his clear “Howard has reverse-engineered the cends one step. Karaoglan was similarly Bruce Harting, a 17-year sector veteran and consistent message helps lift the strategies of the financial services com- bullish, recommending large-caps and and second-teamer in Specialty Fi- team at Smith Barney Citigroup two panies like no other analyst,” says a especially Hartford Financial Services nance. Admirers appreciate his Octo- notches to first place. (Not everyone is client of the former Deutsche banker, Group, noting that its price-to-book val- ber advice to remain overweight on a fan: Trizec Properties has sued Litt who holds an MBA from Harvard Busi- ue had sunk to 0.8, versus an average of Golden West Financial Corp. Other an- and Citigroup Global Markets, alleging ness School. “He has the time, God 1.8. The stock jumped more than 40 alysts downgraded the thrift, worried that Litt defamed the REIT and its bless him, and he digs out a rational percent. “Hartford is a very high-quality that its substantial exposure to ad- chairman, Peter Munk, during an Au- [evaluation] of companies that are out company in the industry, and Alain said justable-rate mortgages would hurt in- gust 2002 earnings conference call and of favor when other analysts are jump- it should be trading at a higher book terest revenue and new-loan volume as in a subsequent research report. A Citi- ing on the negative bandwagon,” notes value,” a follower says. Making his de- rates plummeted. But Harting theo- group spokeswoman said that Trizec’s the customer. For example, another in- but, third-teamer Todd Bault, a San- rized that Golden West would be able claims were without merit and that Litt vestor relates, Mason stuck with Ameri- ford C. Bernstein analyst, impresses to preserve volume growth by aggres- acted in the best interests of investors.) can Express Co. when economic growth investors with his 12 years’ experience sively marketing ARMs as historically a Clients also like Litt’s model REITs port- was slowing and others believed that the as an insurance actuary and his status better bet than fixed-rate mortgages. folio, instituted at the beginning of stock was expensive. He upgraded as a fellow of the Casualty Actuarial He was correct. It did, and the stock 2003; it rose 25 percent by early Sep- AmEx in December 2001 at 32, in part Society. In a February report the ana- had climbed from 70 one year earlier to tember, beating the sector by almost 2 for its cost-cutting program. The shares, lyst recommended Chubb Corp., as- 86 in early September. Morgan Stanley percentage points. Lehman Brothers’ flat throughout last year, rose 27 per- serting that investors were overly third-teamer Kenneth Posner makes team, led by David Shulman, who is- cent, to 45, through early September concerned about a Chubb reserve his first appearance since a 2000 sued several bearish reports this year 2003. “We listened to him, held the charge. By early September the stock runner-up showing. Investors praise and last, falls to No. 2. “He’s probably stock and are glad we did,” says an ap- had shot up nearly 40 percent. his thorough reports. “Whenever I’m going to say he’s early,” says an in- preciative shareholder. Bruce Harting looking for a new idea in the sector, a vestor who nevertheless appreciates of Lehman Brothers advances two Mortgage Finance company that I’m looking at for the first Shulman’s “deep contrarian streak” notches to second place this year. VIVEK JUNEJA time, I want to read what Ken has writ- and his willingness to “call it like he “Bruce is good at anticipating issues J.P. MORGAN SECURITIES ten about that company,” says a client. sees it.” Shulman initiated coverage of and foreseeing the consequences,” “He goes into great detail, breaks out Rouse Co. last December with an says an investor. Customers likewise SECOND TEAM Bruce Harting Lehman Brothers ■ THIRD TEAM Kenneth Posner each division in his models, and I find overweight at 31 for its changing focus praise Harting, who also ranks second Morgan Stanley that very helpful.” — then unrecognized by the market — in the Mortgage Finance category, for from midmarket malls to high-end deft footwork on AmEx. He advised nvestors value analysts’ industry REITs malls. It had climbed to 41 by Septem- selling it as overpriced at 55 in 2000; Iknowledge above all, so it’s no secret JONATHAN LITT & TEAM ber. The Morgan Stanley team, led by impressed like Mason with its cost- why J.P. Morgan’s Vivek Juneja wins in SMITH BARNEY CITIGROUP Gregory Whyte, falls a notch to third. cutting, Harting went to a strong buy this complex category for the second Like Litt, Whyte trod a middle course, in September 2002 at 32, and clients SECOND TEAM David Shulman & team consecutive year — and the third time Lehman Brothers ■ THIRD TEAM say investors who particularly like his who followed reaped the benefit. Al- in the past four years. “He is like a walk- Gregory Whyte & team Morgan morning e-mails. “I delete most of the though dropping two slots to third ing encyclopedia of mortgage finance,” Stanley ■ RUNNER-UP David Kostin & team others,” says one. place, CSFB’s Moshe Orenbuch gets says a customer. And clients appreciate Goldman Sachs credit for standing by Capital One Finan- that he renders mortgage arcana acces- Specialty Finance cial Corp. and MBNA Corp. — even as sible. That’s particularly important in eal estate investment trust analysts HOWARD MASON the two credit card giants were con- tracking government-sponsored enter- Rhave faced a tough call over the past SANFORD C. BERNSTEIN tending with a soft economy over the prises such as Freddie Mac, whose re- year. On one hand, if higher rates had past year. Orenbuch “made a good call. SECOND TEAM Bruce Harting Lehman cent accounting restatements show that arrived, overheated real estate markets Brothers ■ THIRD TEAM Moshe Orenbuch Those stocks have doubled off the bot- “the companies you’re dealing with in might have tumbled. On the other, REITs’ CSFB ■ RUNNERS-UP Michael Freudenstein tom,” an investor says. Also on the this sector can be awfully opaque,” as outperformance, high dividends and the J.P. Morgan Securities; Caren Mayer mark: Orenbuch’s September 2002 another client says. Among Juneja’s resilience of underlying property mar- Banc of America Securities; downgrade of used-car financier Ameri- more-appreciated recommendations: kets have made it hard to give the Kenneth Posner Morgan Stanley Credit Corp. at 14. The company was Initiating coverage on Countrywide Fi- shares up. Steering a middle course, trying to raise new equity despite a nancial Corp. with a buy last October at Smith Barney Citigroup’s Jonathan Litt, lthough he has barely two years as weak stock price. AmeriCredit shares 43, citing nascent market share gains 39, argued that investors should main- A a fully fledged analyst under his then dipped below 2 before rebound- and steps the lender was taking to re- tain a market weighting. Although that belt, Sanford C. Bernstein’s Howard ing to 11 in early September 2003.

HEALTH CARE

Biotechnology faster Food and Drug Administration for his stock picking skills. “He’s got his out,” as one client puts it. One recipient MAYKIN HO drug reviews, favorable drug approval finger on the pulse,” says an investor of her steadfastness was Genentech. GOLDMAN SACHS news and improved earnings and sales who appreciated Ende’s early bullish- Chovav’s initial strong buy rating last figures. Ho releases two invaluable an- ness on MedImmune. In October 2002, June at 35 began to look suspect when SECOND TEAM Eric Ende Merrill Lynch ■ THIRD TEAM Meirav Chovav UBS ■ RUNNER-UP nual references: a 1,700-page tome on with the stock at 22, he raised his earn- the company’s cancer drug, Avastin, David Molowa J.P. Morgan Securities drug-biotech alliances and a 600-page ings projections and price target for proved unsuccessful in September volume on products from 320 biotech the shares, forecasting higher-than- 2002 breast cancer trials. Chovav be- he’s like an encyclopedia,” says a companies. One of her favorite stocks expected penetration for FluMist, the lieved that Avastin would work with “S supporter of Goldman repeat is Amgen, in part for its strong cancer company’s flu vaccine, which hadn’t colorectal cancer. Sure enough, on ﬁrst-teamer Maykin Ho, 50. Clients call drug lineup. She has recommended it yet received FDA approval. The FDA May 19, 2003, Genentech announced her knowledge crucial to keeping pace since resuming coverage in July 2002 okayed FluMist in June 2003; by early that Avastin had extended the lives of with this volatile, product-driven busi- at 33 after a hiatus caused by Gold- September the stock was trading at 34. colorectal cancer patients in clinical tri- ness. Biotechnology shares tumbled 42 man’s banking relationship with Amgen; Ascending a rung to third place is als; the stock jumped 45 percent, to percent in 2002, then shot up 39 per- it traded at 67 in early September. Mer- UBS’s Meirav Chovav, who is credited 55, that day and by early September cent through early September, fueled by rill’s Eric Ende repeats at No. 2, lauded for her “willingness to stick her neck had surged to 81.

90 INSTITUTIONAL INVESTOR OCTOBER 2003 Health Care Facilities KENNETH WEAKLEY UBS

SECOND TEAM Adam Feinstein Lehman Brothers ■ THIRD TEAM A.J. Rice Merrill Lynch ■ RUNNERS-UP John Hindelong CSFB; Lori Price J.P. Morgan Securities; Gary Taylor Banc of America Securities

e made, in my view, the No. 1 re- “H search call on Wall Street,” says an investor of UBS first-teamer Kenneth Weakley’s warning last October on hospitals operator Tenet Healthcare Corp. Weakley, 37, a 2002 runner-up, cau- tioned investors that Tenet’s Medicare “outlier payments” — extra payments for unusually costly cases — were un- sustainably high and downgraded the shares from hold to reduce on October 28, 2002; they fell from 47 to 43 that day. Under a stream of bad news, including a federal investigation of allegedly unnecessary surgeries by two doctors at a Tenet California hospital, the stock sank to 14 by November 11, rebounding to just 16 by early September. Tenet replaced its top management and paid $54 million to settle the unnecessary-surgery matter; the Securities and Exchange Commis- sion is investigating the company. “It was a once-in-a-decade call,” a client says. Weakley is a Rhode Island College grad with an MBA from the State Univer- sity of New York at Buffalo. Lehman second-teamer Adam Feinstein rises from third place. “He probably works harder than most if not all his peers,” says an investor. Clients cite his management contacts and close analysis of SEC fil- ings and court documents. One investor lauds Feinstein for his July upgrade of long-term-care provider Kindred Health- care at 23 on expectations of improving Medicare reimbursements; Kindred had LEFT TO RIGHT: Michael Rietbrock, Gaming & Lodging; Daniel Barry, Retailing/ hit 32 by September. Dropping one posi- Department Stores & Broadlines; Aram Rubinson, Retailing/Hardlines; tion to third is Merrill’s A.J. Rice, whose Aram Rubinson industry knowledge remains widely re- Andrew Lazar, Food; Anand Iyer, Convertibles; Richard Bernstein, Quantitative spected. One investor praises his avoid- Research; Steven Fleishman, Electric Utilities ance of HealthSouth Corp.: “And of PHOTOGRAPHED AT STRAND BOOK STORE, 828 BROADWAY, NEW YORK CITY, course it blew up something awful, so SEPTEMBER 15, 2003. good for him.” Rice had been neutral on the outpatient-care provider since 1999, downgrading it to a sell in March when tangelo, 34, had to leave Smith Barney improving core businesses; the shares Clients rely on his thorough models and the SEC charged HealthSouth with ac- Citigroup in June for allegedly distribut- hit 41 in late April 2002, easing to 35 by return-on-invested-capital metric. They counting fraud. The stock dropped from ing research externally before approval. September 2003. Lehman’s Lawrence also praise his buy, in place since a May 3.91 to almost zero before rebounding The Villanova University grad with an Marsh drops to second after three years 2001 offering at 24, on laboratory equip- to 3.25 in September. MBA from NYU’s Stern School of Busi- in first, but investors still praise his writ- ment supplier Fisher Scientific Interna- ness joined SoundView in July. “It was ten work, particularly his annual “Health tional for its strong earnings growth. The Health Care Technology & Distribution an interesting transition,” says Santange- Care Distribution and Technology Guide- shares traded at 40 in September 2003. GLEN SANTANGELO lo, declining to comment further. In- book.” As one says: “If you ever want the SOUNDVIEW TECHNOLOGIES GROUP vestors laud his sangfroid; a summer nitty-gritty, he has every detail.” Another Managed Care 2002 federal investigation into drugmak- praises Marsh for standing by distribu- SECOND TEAM Lawrence Marsh Lehman CHARLES BOORADY Brothers ■ THIRD TEAM Robert Willoughby ers’ payments to pharmacy benefit man- tor Henry Schein in February, though the SMITH BARNEY CITIGROUP ■ agers worried buy-siders, but he kept shares had fallen to 35 after a poor earn- Banc of America Securities RUNNERS-UP SECOND TEAM John Rex Bear Stearns ■ Raymond Falci Bear Stearns; backing the group. The sector’s 10 per- ings report. Earnings came back: Schein THIRD TEAM Joshua Raskin Lehman Christopher McFadden Goldman Sachs cent 2002 loss beat the S&P 500’s 23 reported a 17 percent year-on-year in- Brothers ■ RUNNER-UP Christine Arnold percent decline; its 20 percent advance crease in second-quarter earnings per Morgan Stanley len Santangelo has experienced through early September 2003 bested the share. The stock reached 57 in Septem- Gboth the highs and lows of Wall S&P 500’s 16 percent gain. One winner: ber. Robert Willoughby, who migrated anaged care was one of 2002’s few Street research this year. Clients elevate a March 2002 buy on distributor and soft- from CSFB to BAS with three colleagues Mbright spots, rising 16 percent in a him from runner-up to No. 1. Yet San- ware provider McKesson Corp. at 30 on earlier this year, falls a notch to third. dismal market. Although the S&P 500

92 INSTITUTIONAL INVESTOR OCTOBER 2003 Health Care

33, who climbs two steps to No. 1. An- other client lauds the Georgetown Uni- versity grad’s “understanding of the fundamentals of the business.” Buy- siders appreciate Weinstein’s December 2002 recommendation of cardiovascu- lar-device maker St. Jude Medical on the company’s new-product pipeline for 2004–’05. As of early September the stock had risen 45 percent, to 53. An- other favorite: Boston Scientific Corp., which Weinstein ﬁrst upgraded last Feb- ruary on the potential of its drug-eluting stents. As of September the stock was at 59, up some 170 percent since his original call, which earned him a place among II’s Home-Run Hitters of 2002 (Institutional Investor, April 2003). Clients value Morgan Stanley’s Glenn Reicin, who repeats in second place, for being an “independent thinker” and for his “willingness to take a contrarian view.” They also praise his detailed analysis, extensive modeling and “skepticism of management statements.” Rei- cin is known as the leading bear on Baxter International, which he downgraded to equal-weight in October 2002 at 26, citing concerns about its 2003 earnings outlook. Since then Baxter has lowered guidance three times and in Ju- ly announced an SEC probe into its re- peated warnings. The shares dipped to 19 in April but had rebounded to 29 by early September. Investors still value Merrill’s third-teamer Daniel Lemaitre, who drops from first place a year ago, for his two decades-plus of experience. He is close to both the investor and clinical communities and has a “cult following on Wall Street,” says an admirer. Also a bull on St. Jude, which he favors for its position in the implantable deﬁb- rillator market, Lemaitre gets bonus points for being personable: “He’s a terrific person to talk to,” says one client. “He is enjoyable, listens and doesn’t dominate a conversation.”

Pharmaceuticals/Major CARL SEIDEN J.P. MORGAN SECURITIES

SECOND TEAM C. Anthony Butler Lehman was up 16 percent this year through early September the stock was at 49. Boorady vestor, who applauds the analyst’s fre- Brothers ■ THIRD TEAM Jami Rubin Morgan September, managed care beat it again, recently downgraded the sector, forecast- quent company visits and well-designed Stanley ■ RUNNERS-UP Timothy Anderson gaining 21 percent. Repeat first-teamer ing less-attractive returns. Bear Stearns’ industry surveys. One winner: Raskin’s Prudential Equity Group; Richard Evans Charles Boorady of Smith Barney Citi- John Rex advances one step to second. recommendation of Anthem in 2001 on Sanford C. Bernstein; James Kelly group has delivered, too, “providing clear “He’s the guy I call when I have a crazy, its market share and low cost structure; Goldman Sachs; Kenneth Kulju CSFB; insight with a tremendous level of detail detailed question or project and I have to the stock rose 27 percent in 2002 and an Joseph Riccardo Bear Stearns; and knowledge regarding the companies explain how one company is doing rela- additional 19 percent by September. Barbara Ryan Deutsche Bank Securities; in the space,” as one client says. Even in tive to others,” says a portfolio manager. Stephen Scala SG Cowen a rising sector, Boorady, 39, was able to Rex is always “willing to review his in- Medical Supplies & Devices pinpoint laggards last year — notably, vestment stance and make a value-added MICHAEL WEINSTEIN ajor pharmaceuticals have tradition- Cigna Corp. He downgraded the health change,” another investor says. Clients J.P. MORGAN SECURITIES Mally formed a trusty defensive sec- and retirement benefits provider at 69 in will have to choose between Rex and tor. No more. Shares fell 15 percent in SECOND TEAM Glenn Reicin Morgan early October on reduced enrollment ex- Boorady going forward. Unlike the first- Stanley ■ THIRD TEAM Daniel Lemaitre 2001 and a further 22 percent in 2002 be- pectations. Within weeks the shares fell teamer, Rex suggests overweighting the Merrill Lynch ■ RUNNER-UP Frederick Wise fore edging up a scant 4 percent in 2003 to the mid-30s, after an earnings warn- group and forecasts 20 percent earnings Bear Stearns through early September. J.P. Morgan’s ing. Boorady also caught Cigna’s upside. growth in 2004. Diligence pays off for Carl Seiden, 44, repeats in first place, in He upgraded in July at 42, when the Lehman’s Joshua Raskin, who climbs a e’s a terrific stock picker, which is part because he steered investors clear company announced it was considering notch to third. “I think everybody there “H a rarity these days,” says a devo- of one of the big drags on the group, disposing of its pensions business. By must work 27 hours a day,” says one in- tee of J.P. Morgan’s Michael Weinstein, Schering-Plough Corp. The company

OCTOBER 2003 INSTITUTIONAL INVESTOR 93 The 2003 All-America Research Team Media took a hit in 2001 when its allergy drug, to third place, Morgan Stanley’s Jami Ru- BAS in March, is “not afraid of making a legal expert on staff, hosts periodic Claritin, went off patent. After a brief up- bin wins support for a shrewd Pﬁzer call. controversial recommendations,” says conference calls on lawsuits between grade in 2002, Seiden went underweight Rejecting the consensus view — a strong a client. Indeed, the analyst is best makers of generic and branded drugs and then neutral on Schering, repeating buy recommendation based on healthy known for his early warnings on Irish that are contesting patents. Admirers his warning four times this year because earnings per share — she advised selling drugmaker Elan Corp. before it blew up also appreciate his May 2002 upgrade of the company’s dependence on Claritin the stock at 35 last November, shortly be- in the first seven months of 2002. “He of generic-drug manufacturers Alphar- and hepatitis-C treatments, which also fore it fell to 30. Pﬁzer’s solid earnings, is also very good at assessing the mar- ma, Ivax Corp., Mylan Laboratories and face growing competition. Despite a new she reasoned, were mostly attributable to ket potential of new products,” says an Teva Pharmaceutical Industries as at- CEO, Fred Hassan, Schering’s stock had its acquisitions, and its product pipeline investor. Particularly appreciated was tractively valued and poised for earn- lost 32 percent this year through early didn’t look particularly robust. The shares his bullishness on Alcon, whose lead- ings gains in 2003. The four stocks had September. Lehman’s C. Anthony Butler, traded at 31 in early September. ing share in the ophthalmic-products risen an average of 61 percent through who jumps from runner-up to No. 2 this market continues to grow. Maris initi- early September 2003. (Valiquette no year, gets around. He scores points with Pharmaceuticals/Specialty ated coverage with a strong buy in longer follows Alpharma.) Investors investors by taking them on company DAVID MARIS April 2002, while he was at CSFB, and give Smith Barney Citigroup’s Angela visits and allowing them to listen in on BANC OF AMERICA SECURITIES says he “went into hyperdrive” on Al- Larson points for her “willingness to conference calls. “He’s especially client- con in July 2002 when it dropped to 28 tell it like it is” and for tracking which SECOND TEAM Steven Valiquette UBS ■ oriented,” a portfolio manager says. Al- THIRD TEAM Angela Larson Smith Barney — well below is March IPO price of 33. drugs doctors are prescribing. The re- though he has picked some winners and Citigroup ■ RUNNERS-UP Corey Davis The stock rocketed 91 percent through peat third-teamer is also lauded for made a well-timed downgrade of Eli Lily J.P. Morgan Securities; Gregory Gilbert early September 2003. UBS’s Steven pounding the table on generic-drug & Co. before it briefly tanked last year, Merrill Lynch; Marc Goodman Morgan Valiquette debuts in second place. maker Barr Laboratories in spring Butler, a molecular biologist, is most Stanley; Richard Silver Lehman Brothers Customers especially praise his atten- 2002 when it traded in the mid-40s, respected for his scientific knowledge. tion to detail: “He does his work before because of its offerings in the fast- “He’s better at giving scientific insight ndependent thinking helps BAS’s he talks,” one client says. A particular growing nonbranded oral contracep- than he is at making timely stock picks,” IDavid Maris win the laurels for a strength is Valiquette’s research on tives market. The stock had risen to 69 says another investor. Moving up a notch third year. Maris, 35, who left CSFB for patent litigation. The analyst, who has through early September 2003.

MEDIA

Cable & Satellite Comcast,” on which he has been neutral and that’s what people look at.” Morgan & Marketing Services (where she reigned RICHARD BILOTTI since November 2002 at 25; for Zia, the Stanley’s Richard Bilotti takes second for five years) with Publishing & Infor- MORGAN STANLEY benefits of an improving credit market for the fourth consecutive year (he also mation Services. Advertising spending balance the risks of increased competi- wins in Cable & Satellite). Investors vari- remained weak over the past year, and SECOND TEAM Karim Zia Deutsche Bank Securities ■ THIRD TEAM Raymond Katz tion. Zia is currently taking time “to think ously extol his “extremely detailed work” even bulls called what little corporate Bear Stearns ■ RUNNERS-UP Jason Bazinet about what the next stage of my career and the “good job he does getting infor- earnings guidance they could glean J.P. Morgan Securities; Aryeh Bourkoff should be.” In third place (his slot for five mation,” but his original perspectives are “uninspiring.” In that grim environment, UBS; Jessica Reif Cohen Merrill Lynch; years in Cable), Bear Stearns’ Raymond what make him truly special. “Bilotti will with publishing and advertising stocks up Niraj Gupta Smith Barney Citigroup; Katz wins praise for the “pretty notable come up with joint research with a col- only 5 percent by early September 2003, Douglas Shapiro Banc of America industry pieces he’s done, like the work league from another sector, like telepho- investors value Fine’s ability to identify Securities; Lara Warner CSFB on media ownership — he’s dialed into ny, twice a year,” explains a client. “Stuff the companies, especially in the crowded the political scene.” And his November nobody else does.” In June, he recom- newspapers group, that are potential knack for identifying industry themes 2002 recommendation of Cablevision mended AOL Time Warner because he standouts and those that are merely Awins Morgan Stanley’s Richard Systems Corp. for its efforts to reduce its thought its traditional media properties treading water until the advertisers re- Bilotti the top spot in this new category, debt has worked well; the shares had would continue to shine and America turn. She recommended E.W. Scripps Co. combining the Cable — which Bilotti, 41, risen 34 percent by early September. Online would be stabilized. The shares at 77 in March 2002 for its “fairly aston- ruled for six years — and Satellite Com- had climbed 9 percent by September. ishing” revenue growth and increasing munications sectors. Investors praise his Entertainment Lehman’s Stuart Linde leaves the sector diversification into television markets. understanding of how cable continues to JESSICA REIF COHEN on a high note, repeating in third place. Scripps traded at 87 in September 2003. evolve beyond television into video-on- MERRILL LYNCH “He’s always objective,” says a cus- CSFB analyst William Drewry takes sec- demand and other services. “He’s full of tomer. Investors praise his July down- ond. (He was top-ranked in Publishing & SECOND TEAM Richard Bilotti Morgan good ideas on how these companies in- Stanley ■ THIRD TEAM Stuart Linde grade of Six Flags at 6 after the theme Information Services in 2002.) Loyalists teract with” satellite, telecommunications Lehman Brothers park operator blamed the weather and praise his willingness to raise the red flag and the media producers themselves, the economy for weak attendance; the on a stock in trouble, and his expanded says one supporter. (Bilotti ranks sec- ine-time winner Jessica Reif Cohen shares dipped to 4.40 before rebound- coverage of ad-dependent broadcasters ond in Entertainment.) One pick, Com- Nof Merrill leads an unchanged lineup ing to 5.85 in early September. Linde’s gives him a broader view of ad spending: cast Corp., climbed from 27 at his this year. Clients again commend her broad-based approach apparently pleas- “He knows how the Web sites affect clas- February upgrade to a high of 35 in “good rapport with management teams” es his bosses too — he’s been promot- sified spending,” says a client. One win- June; the biggest player in an underval- and access to all levels of companies. ed to run Lehman’s U.S. equity research ning call: Drewry has been a long-term ued group, Comcast can mine its large Others praise her timely alerts and abili- (see story, page 56). backer of financial information provider subscriber base for new revenue and ty to put the day’s news into context. Co- FactSet Research Systems for its re- use it as leverage in negotiations with hen, 47, scored high marks for her Publishing & Advertising Agencies silience in the face of layoffs among its content producers. The shares traded at September 2002 recommendation of LAUREN RICH FINE securities-industry subscriber base. In 30 in September. Karim Zia — who re- Spanish-language TV network Univision MERRILL LYNCH the 12 months after he recommended the signed from Deutsche Bank in early Sep- Communications at 21 on its cash flow, stock in September 2002, FactSet shares SECOND TEAM William Drewry CSFB tember — takes second place (his 2002 radio business and potential takeover ■ THIRD TEAM William Bird Smith Barney doubled, to 50. Smith Barney Citigroup’s Cable rank). Zia’s understanding of premium. A year later the shares had Citigroup ■ RUNNERS-UP Kevin Gruneich William Bird garners third (where he fixed-income securities is invaluable in risen 75 percent. Another Cohen pick, Vi- Bear Stearns; Alexia Quadrani ranked in Advertising Agencies & Mar- covering debt-heavy cable and satellite acom, is off 1 percent since her October Bear Stearns keting Services in 2002). Customers companies. “These are sensitive capital 2002 recommendation, but clients are praise Bird’s valuation techniques and de- structures, but he’s especially good at patient. “The game’s not over,” one says. errill’s Lauren Rich Fine, 43, takes liberately contrarian approach; they cite looking beyond equity,” says one backer. “The stock could jump tomorrow. She Mfirst place in this newly combined his winning October 2002 downgrade of Clients note that he was “pretty right on has been very helpful over the long term, sector, joining Advertising Agencies Scholastic Corp. When everyone else

94 INSTITUTIONAL INVESTOR OCTOBER 2003 The 2003 All-America Research Team loved the company because of its Harry Commission and Congress, urging the knowledge and extensive contacts. “He’s Potter franchise, Bird viewed its account- relaxation of rules restricting cross- well connected in the media industry and ing as “aggressive.” Three months later ownership among companies with media knows all the players, including midlevel the company said that, even including the properties. (So far, Congress has resis- operating people,” says a supporter. As Potter backlist, overall revenue was not ted his pleas.) A client recalls the analyst’s chief media analyst, Marcus presides meeting forecasts; the shares fell from forceful argument that Vivendi Univer- over Deutsche Bank’s “can’t miss” June 46 to 29 by early September. sal’s sale of warrants for InterActive media conference, which is so “high en- Corp., which had sold most of its media ergy” that “stocks really react to the me- Radio & TV Broadcasting and entertainment assets to Vivendi while dia companies’ presentations,” investors VICTOR MILLER IV remaining the owner of Home Shopping say. Clients also appreciate Marcus’s BEAR STEARNS Network and Ticketmaster, made Inter- “vast amount of work on Viacom.” Lift- Active a good buy. The stock had fallen to ing William Meyers into the No. 3 spot SECOND TEAM Andrew Marcus Deutsche Bank Securities ■ THIRD TEAM 22 on February 12, 2003. In his February from runner-up is unflagging stamina. William Meyers Lehman Brothers 13 report, “Warranting a Look,” the ana- One example offered by investors: the ■ RUNNER-UP Paul Sweeney CSFB lyst issued a target price of 42, which In- Lehman analyst’s quarterly “Ratings Re- terActive hit on July 14. “Miller is very port Card,” which tracks listenership for o analyst understands Washington, tied in to what goes on in Washington, 8,000 radio stations in 280 U.S. markets. ND.C.’s TV and radio regulatory maze and he’s a pretty decent stock picker, His annual corporate governance report better than repeat first-teamer Victor too,” summarizes an investor. Deutsche is especially well read. “Others look at the Miller IV of Bear Stearns. Miller, 39, tes- Bank’s repeat second-teamer Andrew big picture but he crunches the num- tiﬁed before the Federal Communications Marcus deploys encyclopedic industry bers,” a source says.

TECHNOLOGY

Computer Services & IT Consulting demand for the company’s processing the subtleties of EMS players,” Smith ADAM FRISCH services. By early September, ADP trad- Barney Citigroup researcher Michael UBS ed at 40. Bear Stearns’ James Kissane Morris leapfrogs from runner-up to sec- slips one rung to No. 3. He is known for ond place. “Stable but not exciting” is SECOND TEAM David Togut Morgan Stanley ■ THIRD TEAM James Kissane providing investors with different angles how Morris characterizes 2003, a tran- Bear Stearns ■ RUNNERS-UP on the companies he tracks. In addition sitional year for a sector recovering Patrick Burton Smith Barney Citigroup; to praising his “overall solid perform- from a two-year slump. Morris is also a Gregory Gould Goldman Sachs ance” and “strong fundamental grasp” of longtime Jabil booster, based in part on the group, investors credit Kissane for the discipline the company displayed here’s nothing like starting at the top. going neutral on EDS. during the downturn. For third-teamer TAn early warning on Electronic Data Thomas Hopkins of Bear Stearns, it is Systems Corp. helps UBS’s Adam Frisch Electronics Manufacturing Services high-level access to management that debut as an All-American on the first LOUIS MISCIOSCIA impresses many investors. As one says, team. “The EDS call really put him on the LEHMAN BROTHERS “Without him picking their brains for map,” says one investor. Frisch initiated me, approaching sector pickups or SECOND TEAM Michael Morris Smith coverage of EDS with a hold in April 2001 Barney Citigroup ■ THIRD TEAM slowdowns are not always visible.” at 56, expressing concerns about the Thomas Hopkins Bear Stearns ■ Hopkins, also a runner-up last year, re- growing gap between net income and op- RUNNERS-UP Roger Norberg J.P. Morgan iterated his outperform on contract erating cash flow at the IT outsourcing Securities; Christopher Whitmore manufacturer Sanmina-SCI Corp. in Oc- giant. He followed up with reports scruti- Deutsche Bank Securities tober 2002. At 1.80, the shares were nizing EDS ﬁnancials every quarter; then, trading at half their tangible book value, on September 18, 2002, the company an- ccess and the ability to relay the and Hopkins expected them to at least nounced that it was lowering its third- “A right information at the right time,” match that. They did even better, rising quarter earnings guidance by 80 percent. as one investor puts it, earns Lehman’s to 9.35 by early September. EDS fell from 36 to 17 in 24 hours; a year Louis Miscioscia his third consecutive Imaging Technology later it had recovered a bit to 22. A for- first-place finish. Miscioscia, 42, was mer HMO consultant with a BA from Cor- neutral on electronics manufacturing BENJAMIN REITZES UBS nell University and a master’s in public services stocks through most of 2002 administration from New York University, and into this year before going positive SECOND TEAM Caroline Sabbagha Lehman ■ Frisch, 32, joined UBS six years ago as a in early August. That was late — the sec- Brothers THIRD TEAM Craig Ellis Smith health care analyst before moving to tor had already risen 68 percent in 2003 Barney Citigroup computer services in 2000. Investors al- — but Miscioscia needed convincing epeat first-teamer Benjamin Reit- so praise him for a “Transaction Process- that the technology business cycle had Rzes of UBS “makes some pretty ing Summit” he organized earlier this indeed hit bottom. The good news: The brave calls,” says an appreciative fund year on debit card transaction fees. Al- stocks jumped an additional 20 percent manager. The 31-year-old, winner by a though he slides a notch to No. 2, Mor- from his call through early September. commanding margin, relies heavily on Lexmark shares to 77 by mid-July. Vin- gan Stanley’s David Togut is valued for One winner: Miscioscia stuck by his channel checks — visits to retail out- dication came on July 21: The compa- “the strength of his service,” bolstered March 2002 upgrade of Jabil Circuit at lets — gathering data to enhance the ny issued an earnings warning that with relevant and timely blast voice mails. 22 on an improved earnings outlook voluminous reports and news blasts sliced its share price to 59. One in- The 13-year veteran “does a great job of from new contracts and a strengthen- that his followers crave. A case in vestor also notes Reitzes’ “nice calls bringing the companies to the investors,” ing economy. Jabil was up to 29 by ear- point: Reitzes’ December 2002 down- on Xerox” — he upgraded it to a buy hosting summits in New York, New Jer- ly September. Investors also laud grade of Lexmark International from in July 2002 at 6.20, with a target sey and Boston, says a customer. Togut Miscioscia for insights gleaned over ten buy to neutral at 63. Expecting that range of 10 to 12, and stuck with it as went neutral on EDS in July 2001 and years with IBM Corp. and his ﬁeld trips Hewlett-Packard Co.’s price cuts would Xerox Corp. slipped to 4.20 last Octo- rated Automatic Data Processing under- to global EMS centers in China, Europe hurt Lexmark’s aftermarket sales of ber. When the stock hit 11 in April perform in January 2002 at 56, when his and Mexico. Singled out for what a printers, Reitzes held his rating 2003, Reitzes shifted to hold. In early payroll manager survey showed weak client describes as his ability to “convey through the technology rally that drove September it was trading at 10.53.

96 INSTITUTIONAL INVESTOR OCTOBER 2003 LEFT TO RIGHT: Robert Morris, Oil & Gas Exploration & Production; Louis Miscioscia, Electronics Manufacturing Services; Robert Drbul, Apparel, Footwear & Textiles; Anthony Noto, Internet; Paul Ting, Integrated Oil; Steven Binder, Aerospace & Defense Electronics; David Maris, Pharmaceuticals/Specialty PHOTOGRAPHED AT DEPARTMENT OF SANITATION CONSTRUCTION SITE, DISTRICT 4/4A/7 GARAGE, 650 WEST 57TH STREET (COURTESY OF GATEWAY DEMOLITION AND BOVIS LEND LEASE), NEW YORK CITY, SEPTEMBER 15, 2003.

Lehman’s Caroline Sabbagha ad- Ellis of Smith Barney Citigroup gains Internet lysts know the feeling and absorbed even vances from runner-up to second place third place in only his first year as a ANTHONY NOTO more abuse for much of 2002. Already as clients laud her accessibility and full-fledged analyst. Investors hail his GOLDMAN SACHS battered in 2000 and 2001, the group fell mastery of company data. One sup- detailed spreadsheets and blunt calls. 46 percent in 2002 through October. SECOND TEAM Charles (Lanny) Baker porter cites her criticism last October “He doesn’t sugarcoat things,” one Smith Barney Citigroup ■ THIRD TEAM Then it surged 136 percent through early of Eastman Kodak Co. management for says. In each of the three quarters be- Jeetil Patel Deutsche Bank Securities ■ September 2003. One survivor is Gold- underestimating the eventual impact of fore Lexmark’s July warning, Ellis’s es- RUNNERS-UP Mary Meeker Morgan Stanley; man’s Anthony Noto, 35, a graduate of digital camera sales on its traditional timates were above — and more Safa Rashtchy U.S. Bancorp Piper Jaffray the U.S. Military Academy and the Whar- film business. Although Kodak’s stock accurate than — the company’s earn- ton School of Business, who rises a rose from 28 at the time of her warnings guidance. “It’s a secretive organi- p until last October the Internet notch to ﬁrst. “There’s a reason why he’s ing to 40 in January, it had retreated to zation,” notes a buy-sider. “Ellis was “U was left for dead at the side of one of the last ones standing — deep the high 20s by early September. Craig doing the math.” road,” says one investor. Internet ana- knowledge of the space,” explains a

OCTOBER 2003 INSTITUTIONAL INVESTOR 97 The 2003 All-America Research Team Technology

OVERALL RESEARCH STRENGTH WEIGHTING THE RESULTS o determine which brokerage firms have the greatest overall re- n this table firms are ranked by assigning a rating of 4 to a first-teamer, Tsearch clout, we combined the results of the All-America Fixed- I3 to a second-teamer, 2 to a third-teamer and 1 to a runner-up. Income Research Team (Institutional Investor, September 2003) with RANK RANK those of this poll. Here are the top finishers. IN LEADERS BY WEIGHTED WEIGHTED TABLE FORMULA FIRM TOTAL TOTAL TOTAL TOTAL RANK TEAM EQUITY FIXED-INCOME 1 1 Lehman Brothers 110 2003 2002 FIRM POSITIONS POSITIONS POSITIONS 3 2 Merrill Lynch 86 1 1 Lehman Brothers 85 50 35 2 3 Morgan Stanley 85 2 3 Credit Suisse First Boston 60 27 33 4 4 Smith Barney Citigroup 84 3 7 J.P. Morgan Securities 53 23 30 5 5 UBS 72 3 2 Smith Barney Citigroup 53 34 19 6 6 Goldman, Sachs & Co. 62 5 5 Morgan Stanley 52 36 16 6 7Credit Suisse First Boston 54 6 9 UBS 49 32 17 8 8 Bear, Stearns & Co. 52 7 3 Merrill Lynch 48 35 13 8 9 J.P. Morgan Securities 40 8 6 Goldman, Sachs & Co. 41 27 14 11 10 Banc of America Securities 32 9 8 Bear, Stearns & Co. 38 23 15 10 11 Deutsche Bank Securities 30 10 10 Deutsche Bank Securities 33 18 15 11 12 Prudential Equity Group 29 13 13 Sanford C. Bernstein & Co. 23 client. Indeed, Noto first started com- combines enterprise hardware cover- 14 14 International Strategy menting on the Internet sector’s fast- age — which Sacconaghi, 38, led last & Investment Group 10 growing revenues and rising broadband year — with the personal computer 16 15 SoundView Technologies Group 4 penetration in September 2002, then up- segment. Sacconaghi’s strength, says graded the sector in May. He recom- one investor, is “getting it right on the mended his top pick, online auctioneer biggest names in the sector, IBM and Semiconductor Capital Equipment plied Materials to outperform at the end EBay, in October 2002 at a split-adjusted Hewlett-Packard.” In a December 2002 JOHN PITZER of July 2002, when the stock was at 14. 25 on increasing online auction activity; report, Sacconaghi asserted that CSFB As of September it had climbed 50 per- the shares hit 53 by early September. Hewlett-Packard Co. was trading at a cent. Mark FitzGerald of BAS, who slips SECOND TEAM James Covello Goldman Meanwhile, Smith Barney Citigroup’s “material discount” to IBM Corp. He Sachs ■ THIRD TEAM Mark FitzGerald from second place to third, lowered his Charles (Lanny) Baker climbs a step to underscored his bullish outlook in Banc of America Securities ■ RUNNERS-UP rating on the sector at midyear. “He has No. 2 with his small-cap coverage. “Sure February, when HP reported disap- Steven Pelayo Morgan Stanley; been saying since late June that investors he made some really good calls on Ya- pointing quarterly earnings and the Edward White Jr. Lehman Brothers; have bid the stocks too high and that the hoo!,” says a supporter, “but he also gave stock was trading in the midteens; the Glen Yeung Smith Barney Citigroup Street has to lower estimates for ’04 top- us ValueClick and a few other names no analyst estimated that HP was under- line growth,” notes a follower. FitzGerald, one else covers.” Following a December valued relative to IBM by as much as epeat first-teamer John Pitzer of whose annual 300-page tome is consid- 2002 conference call with the Internet 40 percent. By September HP shares RCSFB “is practically our eyes and ears ered the sector’s bible, estimates that ag- advertising technology company’s CEO, had reached 20, up roughly 30 percent, in Asia,” explains one portfolio manager. gregate revenues will grow next year by Baker reiterated his buy, partly because and IBM was at about 87, just 11 per- “He goes there at least once a quarter and about 20 percent, 10 percentage points the shares at 2.7 were trading below cent above its February level. Second- gives us a feel for the health of the indus- below the Street consensus. cash value. ValueClick had risen to 9.11 teamer Richard Gardner of Smith try food chain.” Through midyear the 32- by early September. Deutsche Bank’s Barney Citigroup, who was formerly year-old analyst saw little to indicate any Semiconductors Jeetil Patel debuts in third. One investor No. 1 in PC hardware coverage, also firming of demand for the companies that DANIEL NILES says that Patel, a 2002 Home-Run Hitter wins praise for being bullish on HP supply equipment to computer-chip mak- LEHMAN BROTHERS for his Amazon.com recommendation back in February. One client extols ers. Yet he has maintained outperform SECOND TEAM Mark Edelstone Morgan (Institutional Investor, April 2003), has Gardner’s “in-depth analysis of the po- ratings all year on two big winners in the Stanley ■ THIRD TEAM Joseph Osha “an ability to soothe our nervousness in tential market for Apple Computer’s sector: Novellus Systems, because of its Merrill Lynch ■ RUNNER-UP Adam Parker a space that is hard to read.” For exam- ITunes music store” in an April report: growth in the DRAM chip market, and Sanford C. Bernstein ple, in December 2002, with EBay trading Gardner upgraded Apple to market Teradyne, on the strength of market share at about 33 on slower listings and sales, weight from underperform when it gains. Novellus is up 39 percent since ehman’s Daniel Niles repeats in first Patel urged clients to hang on because was trading at 18; by September it was January, and traded at 37 in early Sep- Lplace on the strength of what one the lull was seasonal. The shares re- up 27 percent. Finishing a close third tember, and Teradyne, at 20, is up 55 per- supporter calls “his willingness to make sumed their rise in January. — the same position he held last year cent. In the past few months, equipment a case for turning more positive at in the IT Hardware/Enterprise catego- stocks have generally outperformed midyear last year and sticking with it — IT Hardware ry — is Merrill Lynch’s Steven those of their chip-producing customers and not trying to time every short-term A.M. (TONI) SACCONAGHI Milunovich, who was relatively cau- — historically a leading indicator of eco- market move.” Indeed, Niles rated Intel SANFORD C. BERNSTEIN tious on tech stocks throughout the nomic recovery. But Pitzer says that he Corp. a buy at 15 in September 2002, year. “We think that was a good call won’t turn unabashedly bullish on the “even though, based on earnings at the SECOND TEAM Richard Gardner Smith Barney Citigroup ■ THIRD TEAM relative to other sectors,” says one sector until “we see further acceleration time, it didn’t look cheap,” says the 36- Steven Milunovich Merrill Lynch ■ supporter. Milunovich concedes that of IT demand and sustainable price in- year-old. But a year later the semicon- RUNNERS-UP Laura Conigliaro Goldman he was too quick to downgrade HP in creases from the chip companies.” Ad- ductor bellwether was at 29, and Niles Sachs; Daniel Niles Lehman Brothers April after the stock had had a “nice vancing from runner-up to second team, sees further upside for the sector. He cit- run.” Longer term, he is sticking with Goldman’s James Covello gets high ed demand for wireless chips in raising .M. (Toni) Sacconaghi of Sanford C. buys on IBM and Dell as the leading marks from a supporter “for his in-depth Texas Instruments from his lowest rat- ABernstein is a runaway favorite in players, respectively, in the solutions work on the cyclical nature of the sector.” ing to his highest in July at 17; by early IT Hardware, a category that now and commodity areas of the sector. Another praised Covello’s upgrade of Ap- September, TI was at 25. Niles “gives us

98 INSTITUTIONAL INVESTOR OCTOBER 2003 The 2003 All-America Research Team Telecommunications

WHAT INVESTORS REALLY WANT or the sixth year in a row, institutional investors rate industry knowledge as the single most important attribute of an equity research ﬁrm, Ffollowed by integrity/professionalism. Independence from corporate ﬁnance falls from sixth place last year to eighth.

RANK BY U.S. EQUITY ASSETS UNDER MANAGEMENT OVERALL $75 BILLION $30 BILLION $10 BILLION $5 BILLION $1 BILLION LESS THAN RANK ATTRIBUTES OR MORE TO $74.9 BILLION TO $29.9 BILLION TO $9.9 BILLION TO $4.9 BILLION $1 BILLION 1 Industry knowledge 11 1 1 1 1 2 Integrity/professionalism 33 3 2 2 2 3 Accessibility/responsiveness 22 2 3 3 3 4 Useful & timely calls & visits 55 5 5 5 4 5 Management access 44 6 4 4 8 6 Special services 66 4 7 6 6 7Written reports 98 8 8 7 5 8Independence from corporate ﬁnance 77 7 6 810 9 Communication skills 79 8 9 9 7 10 Financial models 10 10 10 10 10 8 11 Stock selection 11 13 11 12 12 11 12 Earnings estimates 13 11 13 13 11 12 13 Quality of sales force 12 12 12 11 13 13 14 Market making/execution 14 14 14 14 14 14 15 Primary market services 15 15 15 15 15 15

a theme we can latch on to,” says an in- on the group in February as his research was cleared when Morgan Stanley’s Heather Bellini — she was third in Ap- vestor. “We don’t need an analyst to tell showed inventories at multiyear lows. Charles Phillips Jr., nine-time victor in plications Software in 2002, before join- us when a P/E is getting fairly rich. We “He missed the bottom by a little, but Infrastructure & Systems Management ing UBS in March from Smith Barney can make that decision on our own.” In that was still a pretty good call, based on Software and its predecessor cate- Citigroup — offers a counterpoint to contrast with Niles, Morgan Stanley’s solid research,” a customer says. gories, joined Oracle Corp. in May.) Best Sherlund. She has remained neutral on Mark Edelstone, who climbs to second known as the ax on Microsoft Corp., the group, partly based on surveys team from third, is much more the mar- Software Sherlund drew some sell-side criticism showing that “corporations are still pret- ket timer. “He has a real feel for when RICHARD SHERLUND this year for backing the software giant; ty cautious about IT spending,” a follow- prices get ahead of fundamentals,” a GOLDMAN SACHS through early September, Microsoft’s er says. That hasn’t stopped her from client says. Edelstone upgraded the shares were up 10 percent, trailing the picking some winners: Taking note of SECOND TEAM Heather Bellini UBS ■ group last October, downgraded it in ear- THIRD TEAM Charles DiBona Sanford sector’s 43 percent gain. Sherlund, how- what she termed “seasonal weakness, ly December following a 58 percent gain, C. Bernstein ■ RUNNER-UP Neil Herman ever, again demonstrated his ability to nothing fundamental,” Bellini upgraded upgraded it again in February after an 18 Lehman Brothers read trends accurately. In February he Intuit in late July at 41. By early Septem- percent slide and downgraded it to “in “clearly said the lack of IT spending was ber the financial software company’s line” with the S&P 500 in mid-June fol- e has “the best feel for industry persisting,” recalls a customer. “That stock was at 47. Third-team newcomer lowing a 49 percent rise; from June to Htrends on the Street, bar none,” says kept us from trying to time the bottom Charles DiBona of Sanford C. Bernstein early September the sector gained 20 one unabashed admirer of Goldman an- in the group.” At midyear, though, Sher- wins plaudits for his “longer-term think percent, versus the S&P 500’s 4 percent alyst Richard Sherlund, 49, who reigns lund grew more bullish, expecting rising pieces” on companies such as Microsoft advance. Moving into third from runner- supreme atop this newly consolidated IT outlays. Although the evidence is still and Oracle that will likely benefit most up, Merrill’s Joseph Osha wins praise for Software category after nine years as anecdotal, reports of stronger corporate from increased corporate spending. “He his quarterly supply chain roundup, No. 1 in Applications Software. (His tech spending have helped boost the does excellent work on the broader compiled since 2000. He turned positive biggest potential obstacle to the top spot shares in recent months. Second-teamer trends,” a supporter says.

TELECOMMUNICATIONS

Data Networking & Wireline Equipment knows the industry from the inside, hav- 73 percent in 2003 by September. But He thought the proﬁtable, underfollowed NIKOS THEODOSOPOULOS ing worked at AT&T Corp. for ten years. clients respect his integrity: “When he stock was cheap at 7, considering the UBS One client says his fortnightly “Global changes his stance, I don’t doubt his mo- company’s 7.90 per share in cash.

SECOND TEAM B. Alex Henderson Telebits” report excels at “describing tives,” avers a backer. One client praises Lehman third-teamer Timothy Luke Smith Barney Citigroup ■ THIRD TEAM where [capital expenditure] is going and Smith Barney Citigroup second-teamer turned bullish on Cisco Systems in April Timothy Luke Lehman Brothers who will receive it.” In March he recom- B. Alex Henderson for “the newness at 14 on prospects for growth in new ar- mended Corning at 5.70 on its liquid and value” of his information. Hender- eas such as Internet telephony and wire- thick Rolodex and independent stock crystal display glass division’s strong son — 2002’s Data Networking winner less networks. In September the stock Acalls win UBS’s Nikos Theodoso- proﬁts and possible future revenue from — and his colleagues mine phone com- traded at 30. Luke, No. 1 in Telecom poulos, 41, top honors in this new cate- local phone company fiber-optic con- panies’ quarterly reports to track capital Equipment/Wireless, was second last gory, consolidating Data Networking and tracts; the shares had hit 8.76 by early expenditure plans and forecast equip- year in Data Networking. One client cites Telecom Equipment/Wireline (where he September. Investors have one caveat: ment demand. One winner: Internet trafﬁc Luke’s industry knowledge: “He does a ranked third and first, respectively, in Theodosopoulos has been neutral on the management solution provider Radware, good job analyzing the whole telecom 2002). Theodosopoulos sports electrical sector since late 2002 because of slug- up 191 percent, to 20, in September food chain: from chips to contract manu- engineering and business degrees and gish revenue, even though the group rose since Henderson’s October 2002 buy. facturing to service providers.”

100 INSTITUTIONAL INVESTOR OCTOBER 2003 The 2003 All-America Research Team

Telecom Equipment/Wireless Uzdelewicz for tracking the link between ary Nextel Communications upgrade, as margin this year, again impressed clients TIMOTHY LUKE mobile service subscription growth and worries about its subscriber levels abat- with a prescient bearish sector call, in LEHMAN BROTHERS handset sales. Deutsche Bank’s Brian ed, also proved prescient. By September, April. In light of the group’s prior strong Modoff climbs a step to third, acclaimed Nextel was up more than 52 percent. performance, Flannery argued, in- SECOND TEAM Wojtek Uzdelewicz Bear Stearns ■ THIRD TEAM Brian Modoff for his industry knowledge and contacts Morgan Stanley’s Luiz Carvalho climbs creased pension liability disclosures, the Deutsche Bank Securities ■ gleaned from 12 years in the telecom from runner-up to No. 2. Clients cite his FCC’s inability to promulgate reforms fa- RUNNERS-UP Timothy Long CSFB; industry. Clients say that his publication December 2002 sector upgrade on effec- voring the Baby Bells and other factors Jeffrey Schlesinger UBS “Signals to Noise,” which features tive cost-containment by providers. His warranted caution; from April through product tests, is required reading — insights were also appreciated: “He point- early September, the sector gained less ehman’s Timothy Luke wins the lau- Qualcomm CEO Irwin Jacobs sub- ed out that PDAs and cell phones will than 7 percent, lagging well behind the Lrels for a fourth year by racking up scribes. Another oft-cited report is his never merge because you’re never going S&P 500 index’s 17 percent jump. Flan- frequent-flier miles visiting European skeptical look at third-generation cell to want to hold a PDA up to your ear or nery, an early skeptic about Qwest Com- and Asian wireless equipment manufac- phone technology that will enable video type on a cell phone. Sounds simple, but munications International’s accounting turers. The 36-year-old Briton — also telephony. Modoff believes that 3-G- it has huge implications for companies practices, continues to earn praise for No. 3 in Data Networking & Wireline driven wireless infrastructure spending like Nokia and Research In Motion,” says his scrutiny of reported financials. Equipment — calls a November 2002 won’t accelerate until 2004, when it will an investor. In late August, after Institu- “Some analysts make clients money,” Asian trip particularly fruitful: “We no- benefit gear manufacturers. tional Investor’s cut-off, Carvalho handed observes one admirer. “He saves them ticed that inventories of handsets were his research duties to colleague Simon money.” Goldman’s Frank Governali, high,” says Luke, who feared incipient Telecom Services/Wireless Flannery, the top-ranked Telecom Ser- climbing two rungs to second place, oversupply, particularly from China. He LINDA MUTSCHLER vices/Wireline analyst. Carvalho, a 1984 knows how to run a conference. Last had been neutral on the group since Au- MERRILL LYNCH Olympic swimmer for Brazil, is taking on October, FCC chairman Michael Powell, gust 2002 but turned cautiously opti- a client role. Prudential’s Christopher speaking at a Goldman confab, en- SECOND TEAM Luiz Carvalho Morgan mistic in the spring as consumers began Stanley ■ THIRD TEAM Christopher Larsen Larsen slips one notch to third. Even so, dorsed a shift in policy toward encour- buying color and camera phones. He up- Prudential Equity Group ■ RUNNERS-UP investors praise his March report on the aging new entrants into local phone graded Swedish phone maker L.M. Colette Fleming UBS; Thomas Lee risk to Nextel as competitors replicate its markets to string their own wire rather Ericsson Telefonaktieblaget in April at J.P. Morgan Securities; Michael Rollins popular push-to-talk feature. Nextel’s than rent access from local carriers at 6 and Motorola in June at 8; by Septem- Smith Barney Citigroup shares held up when Verizon Communi- government-set rates. “That was a water- ber they were trading at 17 and 11, re- cations introduced its PTT technology in shed for the [regional Bell operating com- spectively. Backers also praise Luke’s here’s a reason the views of Merrill August. Still, Larsen thinks Nextel’s ebit- panies], and [Governali] provided the management access. For example, his Tfirst-teamer Linda Mutschler res- da could drop by as much as 12 percent forum,” says an investor. Already bullish Ericsson bullishness was based partly on onate with investors for the sixth consec- in 2004 as PTT competition intensifies. on RBOCs, especially Verizon Communi- an early 2003 meeting in Sweden with utive year. Mutschler, 39, scored with an cations, Governali began pounding the Carl-Henric Svanberg, Ericsson’s new early 2002 bearish call on the group, Telecom Services/Wireline table. Verizon hit 43 by January, up from CEO, which convinced Luke that the com- which tumbled 60 percent last year. In SIMON FLANNERY 32.5 at the time of Powell’s speech, al- pany’s cost-cutting and restructuring January, however, she softened her neg- MORGAN STANLEY though it had fallen back to 36 by Sep- plans would work. A long-term outlook ative stance after reviewing more upbeat tember. UBS’s John Hodulik, a 2000 SECOND TEAM Frank Governali Goldman occasionally leads Bear Stearns three- retailer surveys by her lieutenants Wendy Sachs ■ THIRD TEAM John Hodulik UBS runner-up in the now discontinued In- time second-teamer Wojtek Uzdelewicz Liu and David Janazzo. “She was one of ■ RUNNERS-UP Blake Bath Lehman ternet Infrastructure & Services catego- to make contrarian calls. He was positive the first to go negative last year, and that Brothers; Robert Fagin Bear Stearns; ry, makes his wireline debut at No. 3. on beleaguered Ericsson even before was dead-on. So it was a significant mo- Adam Quinton Merrill Lynch Investors rely on Hodulik’s forecasts. Luke — upgrading the shares in October ment” when she became more opti- “His earnings numbers are much more 2002 at 3. Uzdelewicz, whom one in- mistic, says a client. Mutschler saw sk buy-siders about Morgan Stanley accurate, especially with respect to the vestor lauds for not getting “caught up possible fourth-quarter 2002 upside sur- Arepeat first-teamer Simon Flannery, effects of pensions or UNE-P [the rates in the hype,” was confident that Erics- prises in net subscriber additions that, in- and you will hear: “absolute standout”; RBOCs can charge local competitors for son’s dominant market position ensured deed, materialized. The group rose 35 “miles above the rest”; “way ahead of the bundled packages of network elements] its survival. Another investor praises percent by September 2003. Her Febru- curve.” Flannery, 41, who wins by a wide changes,” says a supporter.

MACRO

Accounting & Tax Policy companies voluntarily expensing stock one slot to third, excels at “explaining a year’s winners, the Goldman Sachs duo PATRICIA MCCONNELL options (most of which had adopted the complicated subject to nonaccountants,” led by Scott Lange. Iyer, 48, and com- BEAR STEARNS practice since last July); she updated it says an investor. Clients value the fact pany “couple the fundamental research this July. The study offered no conclu- that the firm’s sector analysts use Har- with convertible analysis particularly SECOND TEAM David Zion CSFB ■ THIRD TEAM Trevor Harris Morgan Stanley ■ sions, but none of the companies seemed ris’s research in their own work. His pop- well,” says an investor. Others are im- RUNNERS-UP David Hawkins Merrill Lynch; to have suffered from the switch. Back- ular December report, “From Mineﬁelds pressed with the group’s strategy pieces, Robert Willens Lehman Brothers ers appreciate her “access to FASB,” to Potholes,” highlights the most impor- especially a February recommendation where she’s on the advisory council. tant accounting issues and how compa- that investors pile into mandatory ear Stearns’ Patricia McConnell is Newcomer David Zion of CSFB garners nies could suffer earnings or cash hits. convertibles, the most equity-like con- Bthe hands-down winner in this cate- second place, impressing investors with vertible structure, on the view that gory — her 13th consecutive year in ﬁrst his pensions work and what one cus- Convertibles companies would continue to clean up place. Her secret? Thoroughness and tomer calls his “ability to break down ar- ANAND IYER & TEAM their balance sheets and that consumer skill at making “dollars-and-sense of is- cane calculations into an understandable MORGAN STANLEY confidence was at or near a trough. “It sues” by demonstrating how accounting format.” Backers praise his accessibility was very bullish and very right,” a SECOND TEAM Scott Lange & team practices should be handled in analysis, and willingness to “go the extra mile.” In Goldman Sachs ■ THIRD TEAM backer says. One issue in the basket as one investor puts it. Buy-siders laud a March report, Zion examined the poten- Venu Krishna & team Lehman recommended, American Electric Pow- the 54-year-old analyst’s “user-friendly” tial impact of a proposed change in Fi- Brothers ■ RUNNER-UP Jeremy Howard er’s 4.625 percent ’05 notes, was up model that enables them to estimate pen- nancial Accounting Standards Board & team Deutsche Bank Securities 45.5 percent as of early September. sion expenses for any company just by rules that would require companies to ex- Boosters unanimously praise the team’s reviewing its 10-K and making a few pense options: For 13 companies in the y the narrowest of margins, Anand Web site, convertbond.com. Goldman’s macroeconomic assumptions. In Febru- S&P 500, earnings would disappear. BIyer and his four Morgan Stanley Lange and his colleague Dan Sommers ary she published a report with a list of Morgan Stanley’s Trevor Harris, slipping colleagues wrest the top spot from last (a third researcher left over the sum-

102 INSTITUTIONAL INVESTOR OCTOBER 2003 LEFT TO RIGHT: Michael Gambardella, Metals & Mining; Gregory Cappelli, Business & Professional Services; Jeffrey Sprague, Electrical Equipment & Multi-Industry; Carol Warner Wilke, Cosmetics, Household & Personal Care Products; Edward Wolfe, Airfreight & Surface Transportation; Jessica Reif Cohen, Entertainment PHOTOGRAPHED AT WILLIAMSBURG BRIDGE, DELANCEY STREET, NEW YORK CITY, SEPTEMBER 17, 2003. The 2003 All-America Research Team mer) produce “rigorously quantitative” from runner-up to third place for offer- trade above their fair value premium research that is particularly appreciated ing “a combination of good forecasting, they signal future downturns in the eq- for its focus on hedge fund arbitrage excellent presentation and formatting uities market. Among Merrill’s other opportunities, says one investor. Al- and superior client service,” says one strengths: index analytics. though clients say that there are fewer investor. While colleague Hyman focus- of these opportunities as the number of es on the broad economic outlook, Portfolio Strategy players grows, hedge funds remain the Lazar zeroes in on how the macroecon- STEVEN GALBRAITH prime movers in the converts market. omy influences the stock market. To MORGAN STANLEY As such, Lange’s group has a devoted this end, she analyzes ISI Group com- SECOND TEAM Richard Bernstein Merrill following even among traditional in- pany surveys that track discrete eco- Lynch ■ THIRD TEAM Vadim Zlotnikov vestors. “I need to know what the hed- nomic sectors. A capital goods survey Sanford C. Bernstein ■ RUNNER-UP gies are doing so that when I’m getting in August, for example, showed an Thomas McManus Banc of ready to do a trade, I’m not walking in- uptick in equipment expenditures over America Securities to a buzz saw,” says a portfolio manag- the past year — a solid indicator of re- er. Lehman’s trio, led by Venu Krishna, covery. Lazar ensures that “nothing ast year Morgan Stanley’s Steven Gal- rises a notch to third place with an slips through the cracks,” says an in- Lbraith was credited with correctly eclectic and original approach. For ex- vestor, by covering “both U.S. and in- warning clients off large-cap stocks. This ample, he uses six-sigma methodology ternational economics.” year he repeats as Wall Street’s top — a statistical technique made famous strategist for timing to near perfection the by General Electric Co. as an approach Equity Derivatives upturn in equities and the downturn in to quality control — to rank beaten- bonds. In fact, the 40-year-old considers MIKA TOIKKA & TEAM down software company convertibles. CSFB his recommended reduction in bond The eight “busted” converts recom- weighting from 35 percent to 20 percent SECOND TEAM Joanne Hill & team mended in July 2002 — including on June 16 his “best call in ten years.” In Goldman Sachs ■ THIRD TEAM Benjamin Symantec Corp.’s 3 percent and BEA Bowler & team Merrill Lynch ■ a matter of days, the Fed abruptly shifted Systems’ 4 percent, both ’06 issues — RUNNERS-UP Wing Chow & team from expressing concerns about defla- had returned 26 percent through early Bear Stearns; Seth Weingram & team tion to cutting rates by 25 basis points September 2003. Deutsche Bank Securities; Murali less than expected. The result: Ten-year Ramaswami & team Lehman Brothers Treasury yields proceeded to post their Economics steepest rise in four decades. Galbraith’s ED HYMAN redit-spread research has grown from bond call followed a similarly accurate INTERNATIONAL STRATEGY & Can arcane derivatives specialty to a prediction in March that a stock rally was INVESTMENT GROUP mainstay of equity portfolio analysis in imminent. The S&P 500 jumped 20 per-

SECOND TEAM Stephen Roach Morgan the past three years. Consider the rise of cent by early September. In second again Stanley ■ THIRD TEAM Nancy Lazar CSFB’s Mika Toikka: The 36-year-old re- this year, Merrill’s Richard Bernstein International Strategy & Investment searcher’s use of credit spreads to pre- “went out on a limb” in 2002 to say that Group ■ RUNNERS-UP Maury Harris UBS; dict stock prices caught the attention of even after two years of declines, stocks David Malpass Bear Stearns enough volatility traders to win him and were still overvalued. “He was right,” his colleagues third place in 2002. A notes a grateful buy-sider. Investors have SI Group’s Ed Hyman snags the top broader following this year helps vault also done well by following Bernstein’s Iprize for a record 24th consecutive the four-member U.S. team to the top instincts on energy. “It’s still our favorite year. The 58-year-old forecaster, who spot. “Widening spreads have proven to sector,” says the analyst. Though it un- wins handily, gets “the right direction be a leading indicator of equity markets derperformed the S&P 500 by 9 percent- and knows when to change,” says an heading for trouble,” says a client. An- age points from April into September, it admirer. ISI Group’s regression model, other customer praises CSFB’s work on beat the benchmark by 5 points over the crunching, oil prices, unemployment correlation among stocks; the team, he previous year and by 30 points since claims, real wages, home prices and says, really stood out in its guidance af- March 2000. “When it comes to invest- Group of Seven short-term rates pro- ter major combat in Iraq ended. At that ing, Rich Bernstein is more relevant” than jected a 3 percent annual U.S. GDP point, the prewar market’s tendency to others, says a fan. Going against consen- growth rate for the first half of 2003; the move en masse started to break down, sus, third-teamer Vadim Zlotnikov over- actual numbers came in at 1.4 percent and investors could again focus on pick- weighted technology stocks, especially in the first quarter and 3.3 percent in the ing individual stocks. “In terms of know- small-caps, last October. The Sanford second. Hyman, seeing a continuing ing when to focus on market risk and C. Bernstein analyst’s daring paid off: pattern of “more growth, less inflation,” when to shift our focus back to single Through early September large-cap tech declared in August that the recovery had stocks, they were very helpful,” the client stocks rose 38 percent, versus the S&P helps explain why the 45-year-old taken hold. Morgan Stanley’s Stephen notes. Goldman’s 11-member group, led 500’s 28 percent gain, and the average strategist wins the laurels as the top Roach rises from third team to second, by perennial All-American Joanne Hill, name, including small-caps, surged 98 quantitative research practitioner for praised by followers for being “on the takes second place again. One investor percent. Zlotnikov, unranked in this cate- the ninth year running. (He also takes forefront of the deflation call.” In August appreciates the group’s willingness to of- gory last year, is “not afraid to take bold second place in Portfolio Strategy.) 2002, Roach warned that a supply over- fer trading ideas “customized to our positions,” says an appreciative client. Throughout 2002 Bernstein — who hang — especially in information tech- holdings.” Another lauds U.S. derivatives was and is a bear on U.S. equities — nology — and increasingly globalized research chief Sandy Rattray and col- Quantitative Research pushed higher-quality, dividend-paying trade could cause prices to collapse, league Ingrid Tierens for their accuracy RICHARD BERNSTEIN companies in sectors such as health undermining any U.S. recovery. Back- in predicting changes in the Russell MERRILL LYNCH care, which his proprietary Alpha Sur- ers appreciate Roach’s sense of humor; 1000 index ahead of its annual reconsti- prise Model pegged a likely winner. (A SECOND TEAM Edward Keon Jr. Prudential one calls him “the best writer by far.” tution. Team Merrill climbs a notch to Equity Group ■ THIRD TEAM Keith Miller stock selection tool, the model factors And he’s prolific, producing three to third. Leader Benjamin Bowler “just has Smith Barney Citigroup ■ RUNNER-UP the valuation of a company and the dif- four e-mail reports a week. Roach is a level of rigor that is above and beyond Vadim Zlotnikov Sanford C. Bernstein ference between Merrill’s and consen- “quite provocative,” says a reader. “And his peers’,” says a buy-sider who over sus earnings estimates to ascertain sometimes the best money can be the past year worked for months with errill Lynch’s Richard Bernstein the validity of a company’s profit pro- made by going against consensus.” ISI Bowler on a customized study that M“puts his models to work, and he jections.) Until the end of May 2003, Group economist Nancy Lazar climbs found that when stock index futures makes money,” says one investor. That the model worked well — health care

104 INSTITUTIONAL INVESTOR OCTOBER 2003 LEFT TO RIGHT: Jay Cohen, Insurance/Nonlife; Thomas Gallagher, Washington Research; Henry McVey, Brokers & Asset Managers; Charles Boorady, Managed Care; Nikos Theodosopoulos, Data Networking & Wireline Equipment; Joseph Buckley, Restaurants; A.M. (Toni) Sacconaghi, IT Hardware PHOTOGRAPHED AT SOUTH STREET SEAPORT, 251 WATER STREET, NEW YORK CITY, SEPTEMBER 16, 2003.

shares gained 11 percent — although war in Iraq loomed, Keon predicted Small Companies March call, in which he argued that Bernstein admits that it has underper- that the market would hit bottom dur- STEVEN DESANCTIS small-caps and tech stocks should be formed since, with the sector down 1 ing the conflict; in March he pushed PRUDENTIAL EQUITY GROUP overweighted because of compelling val- percent through early September. Still, high-beta-1 stocks, such as technolo- uations and potentially strong earnings SECOND TEAM Satya Pradhuman Bernstein’s reputation is stellar among gy shares. As major combat wound Merrill Lynch ■ THIRD TEAM James Furey growth. Through early September the investors, and “he’s earned it,” says down, share prices rose: From March Lehman Brothers technology portion of the Russell 2000 one buy-sider. Edward Keon Jr. of through early September 2003, the had risen 60 percent, and the entire index Prudential Equity Group gets “to the technology sector outperformed the rudential’s Steven DeSanctis is a self- had gained 42 percent. Also appreciated: point,” says a supporter. “He has been S&P 500 by 8 percentage points. Re- Pdescribed “statistics geek.” The re- DeSanctis’ quantitative Torpedo Model, more bullish than most.” Rightly so, it peating in third place this year is Keith peat first-teamer does a “fabulous job which screens stocks and helps identify seems: In October 2002 the repeat Miller. In August 2002 the Smith Bar- helping us understand what’s going on in possible portfolio blowups and break- second-teamer reported that stocks ney Citigroup researcher favored small caps,” says a client. Acclaimed for outs. Merrill’s Satya Pradhuman retains were undervalued and their risk pre- growth names over value stocks, and his analysis ahead of the annual Russell second place, performing the “best job miums extraordinarily high. He weight- his timing was superb. Over the next 2000 index rebalancing, he assists clients with fundamentals and technicals,” as ed his model portfolio toward high- year, growth stocks trumped value in evaluating the potential effects on their one client puts it. He wins plaudits for beta-1 stocks and sectors, which shares — outperforming them by 3 portfolios. Backers laud DeSanctis, 35, prescience and persistence in advancing would benefit as investors’ appetite percentage points — for the first time for accessibility, responsiveness and the appeal of small caps. Last November, for risk revived. The same month, as in three years. custom research. Admirers highlight his for example, he overweighted broadcast-

OCTOBER 2003 INSTITUTIONAL INVESTOR 105 The 2003 All-America Research Team Macro ers on improving revenue and earnings reign for a third year, knows how to ex- technical ranking system for clients’ port- tember. ISI Group also predicted — four trends. From then through early Septem- plain complicated charting concepts in folios and his monthly “Twice and Thrice months in advance — that the Supreme ber, small broadcasters’ stocks were up simple English. She also knows how to Blessed” report, evaluating Prudential’s Court would uphold a Maine law requir- 13 percent and microcap broadcasters read the market. After three years of bear- equity universe on technical, quantitative ing prescription drug discounts for unin- — names like Crown Media Holdings and ishness, she became more positive on and fundamental factors. Acampora has sured consumers. That May 19 decision TiVo — had gained 84 percent, versus 26 stocks last November; the S&P 500 had been very bullish since April and believes triggered a 4.5 percent drop that day in percent for the Russell 2000. Clients climbed 13 percent by the following Sep- that the Dow Jones industrial average — health care stocks. Charles Gabriel Jr. praise his “useful” growth and contrarian tember. In May she restated her enthusi- up 12 percent from then to early Septem- and the five-member Prudential team models and detailed, monthly microcap astic gold call from last year — just ber — can reach 12,000 by 2005. There’s drop from first place to second. Their index. Newcomer James Furey joined before a respectable 10 percent run. Also one big caveat to his forecast: relative January message that a quick end to ma- Lehman Brothers in May 2002 but is a appreciated: Yamada’s “Tech@lert” re- stability and peace in the Middle East. jor combat in Iraq would boost stocks market veteran who has worked in insti- ports that in February highlighted bio- proved accurate: The S&P 500 jumped tutional sales and equity research. The medical stocks, which rose 70 percent by Washington Research 14 percent in the second quarter. The third-teamer turned positive on tech September. An investor lauds her “histor- THOMAS GALLAGHER & TEAM team also stated in January that lower stocks in a November report, sensing a ical perspective” that draws on her 22 INTERNATIONAL STRATEGY & dividend taxes would reduce the tax ad- recovery in capital spending, and has years of research experience and Smith INVESTMENT GROUP vantage of debt over equity, encouraging

stayed the course. Through early Sep- Barney Citigroup’s 204-year data history. SECOND TEAM Charles Gabriel Jr. & team companies to deleverage. Repeating at tember the S&P small-cap 600 informa- What’s next? “A pause of consolidation Prudential Equity Group ■ THIRD TEAM No. 3, the 16-person Schwab Washing- tion technology index had gained 45 in an ongoing rally” and “continued lead- Edward Garlich & team Schwab ton Research Group team, led by Edward percent, compared with the 27 percent ership in small- and midcaps,” she says. Washington Research Group Garlich, wins praise for connecting gain posted by the entire S&P 600. Lehman three-time second-teamer Jef- “what’s happening in Washington with frey deGraaf is praised for his daily alerts scending one step to ﬁrst place, ISI how it affects the markets.” For example, Technical Analysis and deft use of his vast store of informa- AGroup’s Thomas Gallagher, 49, and at a September 2002 FDA advisory com- LOUISE YAMADA tion. He doesn’t believe that equities’ tra- Andy Laperriere “do such a great job on mittee meeting, Garlich’s team sensed an SMITH BARNEY CITIGROUP vails are over, especially in the absence the economic side that their research al- improving climate at the agency for ap- of a major “liquidation event” that would ways makes it onto my desk,” says a provals of new medications, including SECOND TEAM Jeffrey deGraaf Lehman Brothers ■ THIRD TEAM Ralph Acampora clear the way for an improved market; in- client. At year-end 2002 the duo said that cancer drugs from AstraZeneca of the Prudential Equity Group ■ RUNNERS-UP stead, he’s looking for trading rallies. One the Fed would not raise the funds rate U.K. and Millennium Pharmaceuticals. Richard Bensignor Morgan Stanley; great call: Last October DeGraaf recom- during 2003, although the Eurodollar fu- They thought Mark McClellan’s appoint- Richard McCabe Merrill Lynch; mended Amazon.com at 17; the online tures seemed to be pricing in a hike. The ment as FDA commissioner that fall Edward Nicoski U.S. Bancorp bookseller traded at 47 in September, and Fed cut rates in June and in early August might reinforce the trend. A year after the Piper Jaffray DeGraaf thinks there’s still room for it to assured markets that it didn’t expect to September AstraZeneca call, the shares rise. Ralph Acampora rises to third from raise them. The owner of a call option on had climbed 42 percent; and since their mith Barney Citigroup’s Louise Ya- runner-up. Buy-siders laud his insightful Eurodollar futures would have gained 48 December note on Millennium, its stock Smada, who extends her first-place weekly conference calls, his customized percent from January through early Sep- had gained 72 percent. PICKING THE TEAM o select the members of this year’s All-America Analysts who changed firms after August 1 are ment Software into one Software category. Imag- Research Team, Institutional Investor sent cited at their previous organizations. This year, at ing Technology now appears within the Technology Tquestionnaires covering 71 industry groups least three analysts changed jobs or job functions group. In Telecommunications we have combined and investment specialties to the directors of re- after the cutoff. Cable & Satellite second-teamer the Data Networking and Telecommunications search and chief investment officers of major mon- Karim Zia left Deutsche Bank Securities in early Equipment/Wireline categories to form Data Net- ey management institutions. Included were those September; Telecom Services/Wireless second- working & Wireline Equipment. managers on the II 300, our ranking of the largest teamer Luiz Carvalho remains with Morgan Stanley The identities of the survey respondents and the institutions in the U.S., as well as other major U.S., but is taking on a client role; and Entertainment institutions that employ them are kept confidential European and Asian investors and key members of third-teamer Stuart Linde of Lehman Brothers was to ensure their continuing cooperation. We tapped our ranking of hedge fund managers, the Alpha promoted to direct U.S. equity research at the firm. the opinions of more than 3,700 individuals at ap- Hedge Fund 100. Directories and industry data Sectors are organized within broad groups: Basic proximately 640 firms — including more than 90 sources were tapped to ensure that the survey uni- Materials, Capital Goods/Industrials, Consumer, En- percent of the 100 largest U.S. equity managers. verse was complete. We also contacted selected in- ergy, Financial Institutions, Health Care, Media, Tech- Our reporters spent weeks talking to voters to stitutional clients from lists submitted by Wall nology, Telecommunications and Macro. Institutional learn more about the analysts they had selected. Street research directors and sent questionnaires Investor determined the sectors in consultation with Many of the winners were also contacted to clarify directly to analysts and portfolio managers at many research directors from the buy side and the sell side. points their clients raised. top institutions. In total, we mailed ballots to more We’ve made a few changes to the individual Our ranking of the best brokerage firm analysts than 900 institutions. sectors this year to reflect the changing market- in 71 investment areas was compiled by Institution- Rankings were determined by using the numer- place. In Capital Goods/Industrials, we have creat- al Investor staff under the direction of Assistant ical score each analyst received. Scores were pro- ed a single Electrical Equipment & Multi-Industry Managing Editor for Research Lewis Knox and Se- duced by taking the number of votes awarded to an sector subsuming the two old sectors bearing nior Editor Jane B. Kenney with Associate Editor individual analyst and weighting them based on the those names. Within the Media group, we united Sivert Hagen, Researcher Michele Bickford and the size of the voting institution and the place that the Cable and (from Telecommunications) Satellite Editorial Research Department. Senior Writer Justin respondent awarded to the analyst (first, second, Communications, to form Cable & Satellite; and we Schack, Staff Writer Rich Blake, Contributing Edi- third, fourth). For Convertibles, Equity Derivatives, merged Publishing & Information Services and Ad- tors John Hintze, Ben Mattlin and Scott McMurray REITs and Washington Research, votes for all ana- vertising Agencies & Marketing Services to form and Contributors Pam Abramowitz, Dick Gamble, lysts covering those fields at each firm were com- Publishing & Advertising Agencies. In Technology Arthur Goldgaber, Greg Joslyn, Rochelle Kass, Leslie bined; in the commentary we highlight the head of we combined the old Enterprise Hardware and PC Kramer, Karen Kroll, Suzanne Lorge, Priya Malhotra, the team. Teams and individuals were designated Hardware sectors into a single IT Hardware cate- Rachel Markus, Scott Martin, Craig McGuire, runners-up when their scores fell within 35 percent gory; likewise, we merged last year’s Applications Michael Rudnick, Will Swarts, Paul Sweeney and Al- of the third-teamer’s score. Software and Infrastructure & Systems Manage- ison Zomb wrote the sector reports.

106 INSTITUTIONAL INVESTOR OCTOBER 2003 The 2003 All-America Research Team

INDEX Banc of America Patricia McConnell Andrew Conway Susan Donofrio Gregory Gould C. Anthony Butler Securities accounting & tax policy, 1 beverages, 2 airlines, R/U computer services & IT pharmaceuticals/major, 2 consulting, R/U Andrew Barish Victor Miller IV William Drewry Marc Falcone Joseph Campbell Jr. restaurants, R/U radio & TV publishing & advertising gaming & lodging, R/U Frank Governali aerospace & defense broadcasting, 1 agencies, 2 telecom services/ electronics, R/U Dana Cohen Jeremy Howard wireline, 2 retailing/specialty Alexia Quadrani Michael Exstein & team Garrett Chase stores, 2 publishing & advertising retailing/department stores convertibles, R/U Joanne Hill & team airlines, R/U agencies, R/U & broadlines, R/U equity derivatives, 2 Mark FitzGerald Alain Karaoglan Mark Constant semiconductor capital John Rex Mark Flannery insurance/ Maykin Ho brokers & asset equipment, 3 managed care, 2 integrated oil, R/U nonlife, 2 biotechnology, 1 managers, R/U David Maris Joseph Riccardo Charles Gates Eric Katzman James Kelly Robert Cornell pharmaceuticals/ pharmaceuticals/ insurance/nonlife, R/U food, R/U pharmaceuticals/ electrical equipment specialty, 1 major, R/U major, R/U & multi-industry, 2 James Higgins Daniel Khoshaba Caren Mayer Anthony Rizzuto Jr. airlines, R/U packaging, 1 Steven Kent James Crandell specialty finance, R/U metals & mining, 2 gaming & lodging, R/U oil services & John Hindelong Rod Lache equipment, R/U Thomas McManus Andrew Steinerman health care autos & auto Robert Koort portfolio strategy, R/U business & professional facilities, R/U parts, R/U chemicals/specialty, 1 Jeffrey deGraaf services, 2 technical analysis, 2 Robert Morris Kenneth Kulju Andrew Marcus David Kostin & team oil & gas exploration Dana Telsey pharmaceuticals/ radio & TV REITs, R/U Robert Drbul & production, 1 retailing/hardlines, R/U major, R/U broadcasting, 2 apparel, footwear retailing/specialty Scott Lange & team & textiles, 1 Aram Rubinson stores, 1 Timothy Long Brian Modoff convertibles, 2 retailing/hardlines, 1 telecom equipment/ telecom equipment/ Thomas Driscoll Wojtek Uzdelewicz wireless, R/U wireless, 3 Gary Lapidus oil & gas exploration Douglas Shapiro telecom equipment/ autos & auto parts, 2 & production, 2 cable & satellite, R/U wireless, 2 Rosalind Looby Jeetil Patel banks/midcap, R/U Internet, 3 David Maccarrone Adam Feinstein George Staphos Frederick Wise natural gas, R/U health care facilities, 2 packaging, 2 medical supplies John McGinty Barbara Ryan machinery, R/U Margaret Mager Daniel Ford William Steele & devices, R/U pharmaceuticals/ major, R/U apparel, footwear electric utilities, 2 cosmetics, household Edward Wolfe Janice Meyer & textiles, 2 & personal care restaurants, 2 Seth Weingram & team Thomas Ford airfreight & surface Christopher McFadden products, R/U transportation, 1 equity derivatives, R/U environmental John (Jack) Murphy health care technology services, 3 Gary Taylor retailing/food & drug Christopher Whitmore & distribution, R/U health care facilities, R/U Sanford C. Bernstein chains, R/U electronics manufacturing James Furey & Co. services, R/U Arjun Narayana Murti small companies, 3 James Wicklund David Nelson integrated oil, 3 oil services & equipment, 1 Todd Bault food, 3 Mark Wilde Ann Gillin Lefever insurance/nonlife, 3 Anthony Noto cosmetics, household Robert Willoughby Moshe Orenbuch paper & forest products, 3 Internet, 1 & personal care health care technology Graham Copley specialty finance, 3 products, 3 & distribution, 3 chemicals/commodity, 2 Vanessa Wilson Richard Sherlund Alan Pavese software, 1 Jason Goldberg Charles DiBona environmental insurance/life, R/U Bear, Stearns & Co. banks/midcap, 1 software, 3 services, R/U Karim Zia George Strachan Steven Binder cable & satellite, 2 retailing/department stores Kimberly Greenberger Richard Evans John Pitzer & broadlines, 3 retailing/specialty aerospace & defense pharmaceuticals/ electronics, 1 semiconductor capital stores, R/U major, R/U Goldman, Sachs & Co. equipment, 1 International Strategy Joseph Buckley Richard Gross Brad Hintz Dennis Rosenberg Lori Appelbaum & Investment Group restaurants, 1 banks/large-cap, 1 natural gas, R/U brokers & asset managers, 3 apparel, footwear Thomas Gallagher & textiles, R/U banks/midcap, 3 Bruce Harting Wing Chow & team Emme Kozloff & team equity derivatives, R/U mortgage finance, 2 retailing/department stores Paul Sweeney Amy Low Chasen Washington research, 1 cosmetics, household specialty finance, 2 Robert Fagin & broadlines, R/U radio & TV Ed Hyman broadcasting, R/U & personal care Neil Herman telecom services/ Howard Mason economics, 1 wireline, R/U products, 2 software, R/U specialty finance, 1 Mika Toikka & team Nancy Lazar Thomas Cholnoky Raymond Falci equity derivatives, 1 economics, 3 Felicia Rae Kantor Adam Parker insurance/ leisure, 2 health care technology semiconductors, R/U & distribution, R/U Lara Warner nonlife, R/U cable & satellite, R/U Raymond James Darren Kimball A.M. (Toni) Sacconaghi Kevin Gruneich Marc I. Cohen & Associates autos & auto parts, R/U IT hardware, 1 Gary Yablon beverages, R/U publishing & advertising James Parker agencies, R/U airfreight & surface Venu Krishna & team Vadim Zlotnikov transportation, 2 Laura Conigliaro airlines, R/U convertibles, 3 portfolio strategy, 3 IT hardware, R/U Thomas Hopkins quantitative research, R/U electronics manufacturing Ivy Zelman Lehman Brothers Andrew Lazar services, 3 homebuilders & building James Covello food, 1 Credit Suisse First products, 1 semiconductor capital Meredith Adler Raymond Katz Boston equipment, 2 retailing/food Stuart Linde cable & satellite, 3 David Zion & drug chains, 1 entertainment, 3 Scott Barry accounting & tax policy, 2 Terry Darling James Kissane leisure, R/U oil services Blake Bath Timothy Luke computer services & IT & equipment, 3 telecom services/ data networking Gregory Cappelli Deutsche Bank consulting, 3 wireline, R/U & wireline equipment, 3 business & professional Securities Glenn Engel telecom equipment/ Frederick Leuffer services, 1 David Begleiter airlines, 2 Eric Berg wireless, 1 integrated oil, R/U chemicals/specialty, R/U insurance/life, R/U Mark Connelly Matthew Fassler Lawrence Marsh David Malpass paper & forest James (Jay) Dobson retailing/ Michael Branca health care technology economics, R/U products, 1 electric utilities, R/U hardlines, R/U beverages, 3 & distribution, 2

108 INSTITUTIONAL INVESTOR OCTOBER 2003 Index

William Meyers Jessica Reif Cohen David Bradley Don MacDougall Christine Arnold William Greene radio & TV cable & satellite, R/U autos & auto parts, R/U electrical equipment managed care, R/U airlines, R/U broadcasting, 3 entertainment, 1 & multi-industry, R/U Stephen Chick Richard Bensignor Christopher Gutek Louis Miscioscia Eric Ende retailing/food & drug Gary McManus technical analysis, R/U business & professional electronics manufacturing biotechnology, 2 chains, R/U machinery, 3 services, R/U services, 1 Richard Bilotti Martin Feldman Harry Curtis David Molowa cable & satellite, 1 Trevor Harris Daniel Niles tobacco, 2 gaming & lodging, 3 biotechnology, R/U entertainment, 2 accounting & tax IT hardware, R/U policy, 3 semiconductors, 1 Lauren Rich Fine Corey Davis Joseph Nadol Lloyd Byrne publishing & advertising pharmaceuticals/ aerospace & defense oil & gas exploration Anand Iyer & team Ghansham Panjabi agencies, 1 specialty, R/U electronics, R/U & production, 3 convertibles, 1 packaging, 3 Steven Fleishman Shari Schwartzman Roger Norberg Luiz Carvalho Kit Konolige Murali Ramaswami electric utilities, 1 Eberts electronics manufacturing telecom services/ electric & team retailing/department services, R/U Mark Friedman wireless, 2 utilities, 3 equity derivatives, R/U stores & broadlines, R/U retailing/specialty Lori Price Nigel Dally Henry McVey Joshua Raskin stores, R/U John Faucher health care insurance/ brokers & asset managed care, 3 facilities, R/U Gregory Gilbert beverages, R/U life, R/U managers, 1 Alan Rifkin pharmaceuticals/ Anatol Feygin Carl Seiden specialty, R/U pharmaceuticals/major, 1 Mark Edelstone Mary Meeker retailing/hardlines, 2 natural gas, R/U semiconductors, 2 Internet, R/U David Hawkins Amanda Tepper Caroline Sabbagha Michael Freudenstein Simon Flannery Robert Ottenstein imaging technology, 2 accounting & tax specialty finance, R/U environmental services, 2 policy, R/U telecom services/ chemicals/ David Shulman Michael Gambardella Michael Weinstein wireline, 1 specialty, 2 & team John Herrlin Jr. metals & mining, 1 medical supplies REITs, 2 oil & gas exploration & devices, 1 Steven Galbraith William Pecoriello & production, R/U Dean Gianoukos portfolio strategy, 1 beverages, 1 Richard Silver leisure, 3 Jeffrey Zekauskas pharmaceuticals/ Mark Husson chemicals/ Stephen Girsky Steven Pelayo specialty, R/U retailing/food & drug Vivek Juneja specialty, R/U autos & auto semiconductor capital chains, 2 mortgage finance, 1 parts, 1 equipment, R/U Mitchell Speiser Morgan Stanley restaurants, 3 John Inch Thomas Lee Marc Goodman Kenneth Posner electrical equipment telecom services/ David Adelman pharmaceuticals/ mortgage finance, 3 Brock Vandervliet & multi-industry, 3 wireless, R/U tobacco, 1 specialty, R/U specialty finance, R/U banks/large-cap, R/U Daniel Lemaitre Sergey Vasnetsov medical supplies chemicals/ & devices, 3 commodity, 3 Michael Linenberg Adam Waldo airlines, 3 business & professional services, 3 Richard McCabe technical analysis, R/U Peter Ward metals & mining, R/U Steven Milunovich IT hardware, 3 Edward White Jr. semiconductor capital Guy Moszkowski equipment, R/U brokers & asset managers, 2 Robert Willens accounting & tax Linda Mutschler policy, R/U telecom services/wireless, 1 Joseph Osha Merrill Lynch semiconductors, 3 David Anders Steven Pfeifer gaming & lodging, 2 integrated oil, R/U Daniel Barry Satya Pradhuman retailing/department small companies, 2 stores & broadlines, 1 Adam Quinton Richard Bernstein telecom services/ portfolio strategy, 2 wireline, R/U quantitative research, 1 A.J. Rice Benjamin Bowler health care facilities, 3 & team equity derivatives, 3 Daniel Roling metals & mining, 3 Byron Callan aerospace & defense Edward Spehar electronics, R/U insurance/life, 3 Donald Carson Carol Warner Wilke chemicals/ cosmetics, household commodity, 1 & personal care products, 1 John Casesa autos & auto parts, 3 J.P. Morgan Securities Jay Cohen Jason Bazinet insurance/nonlife, 1 cable & satellite, R/U

OCTOBER 2003 INSTITUTIONAL INVESTOR 109 The 2003 All-America Research Team Index

Glenn Reicin SG Cowen David Raso UBS Colette Fleming Richard Schneider medical supplies machinery, 1 telecom services/ paper & forest & devices, 2 Stephen Scala Gary Balter wireless, R/U products, R/U pharmaceuticals/ Michael Rietbrock retailing/hardlines, 3 Stephen Roach major, R/U gaming & Kelly Flynn Glenn Schorr economics, 2 lodging, 1 Ronald Barone business & professional brokers & asset Smith Barney Citigroup natural gas, 1 services, R/U managers, R/U Jami Rubin Michael Rollins pharmaceuticals/ Charles (Lanny) Baker telecom services/ Heather Bellini Adam Frisch James Stone major, 3 Internet, 2 wireless, R/U software, 2 computer services & IT oil services & consulting, 1 equipment, 2 Ole Slorer William Bird George Shapiro David Bleustein oil services & publishing & advertising aerospace & defense machinery, 2 Maury Harris Nikos Theodosopoulos agencies, 3 economics, R/U equipment, R/U electronics, 2 Aryeh Bourkoff data networking John Hodulik & wireline Scott Soler Charles Boorady Jeffrey Sprague cable & satellite, R/U managed care, 1 telecom services/wireline, 3 equipment, 1 natural gas, 3 electrical equipment Samuel Buttrick Patrick Burton & multi-industry, 1 airlines, 1 Andrew Kligerman Paul Ting Douglas Terreson insurance/life, 2 integrated oil, 1 integrated oil, 2 computer services & IT consulting, R/U Deborah Weinswig Andrew Cash retailing/department Caroline Levy Steven Valiquette David Togut chemicals/ Lisa Cartwright stores & broadlines, 2 commodity, R/U beverages, R/U pharmaceuticals/ computer services & IT retailing/food specialty, 2 consulting, 2 & drug chains, 3 Louise Yamada Meirav Chovav Andrew McQuilling technical analysis, 1 cosmetics, household Kenneth Weakley James Valentine biotechnology, 3 Colin Devine & personal care health care airfreight & surface insurance/life, 1 Glen Yeung Jeffrey Cianci products, R/U facilities, 1 transportation, 3 semiconductor capital chemicals/ Chip Dillon equipment, R/U Benjamin Reitzes Margaret Whelan Stephen Volkmann specialty, 3 paper & forest products, 2 imaging technology, 1 homebuilders & building machinery, R/U Leone Young Jeffrey Edelman products, 3 Craig Ellis environmental Trip Rodgers Gregory Whyte & team apparel, footwear imaging technology, 3 services, 1 environmental REITs, 3 & textiles, 3 services, R/U U.S. Bancorp Piper Scott Flower Jaffray Heidi Wood airfreight & surface SoundView Robin Farley Saul Rubin aerospace & defense transportation, R/U Technologies Group leisure, 1 autos & auto parts, R/U Edward Nicoski electronics, 3 technical analysis, R/U Ronald Frank Glen Santangelo William Featherston Jeffrey Schlesinger insurance/ health care technology oil & gas exploration telecom equipment/ Safa Rashtchy Prudential Equity Group nonlife, R/U & distribution, 1 & production, R/U wireless, R/U Internet, R/U Ralph Acampora Richard Gardner technical analysis, 3 IT hardware, 2 Timothy Anderson Niraj Gupta pharmaceuticals/ cable & satellite, R/U major, R/U B. Alex Henderson Robert Campagnino data networking tobacco, R/U & wireline M. Carol Coale equipment, 2 natural gas, 2 Bonnie Herzog Steven DeSanctis tobacco, 3 small companies, 1 Keith Horowitz banks/midcap, 2 Charles Gabriel Jr. & team P.J. Juvekar Washington research, 2 chemicals/ commodity, R/U Wayne Hood retailing/department stores Mark Kalinowski & broadlines, R/U restaurants, R/U Edward Keon Jr. Stephen Kim quantitative research, 2 homebuilders & building products, 2 Christopher Larsen telecom services/ Jill Krutick wireless, 3 leisure, R/U Michael Mayer Angela Larson integrated oil, R/U pharmaceuticals/ specialty, 3 Michael Mayo banks/large-cap, 3 Jonathan Litt & team John McMillin REITs, 1 food, 2 Ruchi Madan Stacy Pak banks/large-cap, 2 retailing/specialty Keith Miller stores, 3 quantitative research, 3 John Tumazos Michael Morris metals & mining, R/U electronics manufacturing services, 2 Schwab Washington Research Group Wendy Nicholson cosmetics, household Edward Garlich & team & personal care Washington research, 3 products, R/U

OCTOBER 2003 INSTITUTIONAL INVESTOR 111