Institutional Investor's Alpha Magazine - March 2008 - (Page 55) Macro Emerging EMEA Industries EMEA Telecommunications Alexander Kazbegi & team Renaissance SECOND TEAM South Africa Andrew Cuffe & team JPMorgan Equity Strategy/Developed European Markets Teun Draaisma & team Morgan Stanley SECOND TEAM EMEA Chemicals Marina Alexeenkova & team Renaissance Rhys Summerton & team Citi Turkey Idil Dagdelen & team Deutsche Andrew Garthwaite & team Credit Suisse Countries EMEA Utilities Derek Weaving & team Renaissance Countries EMEA Financials David Nangle & team Renaissance SECOND TEAM Ukraine Katya Malofeeva & team Renaissance Macro Bob Kommers, Gyorgy Olah & team UBS France Vincent Laurencin, Jean-Christophe Liaubet & team Exane BNP Paribas SECOND TEAM EMEA Metals & Mining Robert Edwards & team Renaissance SECOND TEAM Russia Roland Nash & team Renaissance SECOND TEAM Laurent Poinsot & team CA Cheuvreux THIRD TEAM James Bennett, Alexei Morozov & team UBS Alexei Morozov & team UBS THIRD TEAM Economics/ Emerging EMEA Markets Arend Kapteyn & team Deutsche Jean-François Delpech & team Oddo EMEA Oil & Gas Alexander Burgansky, Adam Landes & team Renaissance SECOND TEAM Julia Bushueva, Ben Carey & team UniCredit RUNNERS-UP Equity Strategy/ Emerging EMEA Markets Roland Nash & team Renaissance SECOND TEAM Italy Matteo Ghilotti, Stefano Lustig & team Euromobiliare Pavel Kushnir & team Deutsche Alexei Yakovitsky & team Deutsche; Kostantin Chernyshev, Kim Iskyan & team UralSib Alexei Zabotkin & team Deutsche Deutsche shares sixth place with Citi Investment Research, which ranked sixth last year as well, and Lehman Brothers, which rises from eighth place. Morgan Stanley’s ascent to the top has little to do with the lengthiness of its analysts’ reports. More likely, the opposite holds true, as the firm has imposed a new limit: 15 pages, versus the old 25 pages, Uglow says. “If anything, the emphasis we get from our managers is more and more on being concise,” he explains. “And we are being tied more and more into the performance of our clients. That’s the real change — research which is much more directly alpha-driven.” Uglow adds that his fi rm’s research program is also customer-driven. “Hedge funds in particular like the fact that we’re not being dogmatic about our view on valuation but [are] trying to estimate a range of options,” he says. “We have to put in what our margin assumptions, earnings per share and other multiples are in those three scenarios, and it makes for a different, and far more detailed, debate with our clients.” Merrill’s equity research department in London has also been busy, promoting its new series of monthly “most-/least-preferred” reports, in which analysts pick the five stocks they believe will be the best performers in their categories over the next 30 days. That is matched, in pointcounterpoint fashion, with the five they believe will be the biggest underperformers — and potential short sales. The concept was developed by European media analyst Julien Roch, who leads his team of analysts to first place in Alpha’s Media ranking from runner-up last year. Roch’s team published its first most-/least-preferred report in November 2006, in response to client demand. Visit www.alphamagazine.com for more information about the analysts hedge funds most admire, as well as details of how we compiled this exclusive list. “A lot of the hedge funds ask for short ideas, so I said: ‘Let’s do this as a team effort on a regular basis, with a monthly meeting,’” Roch recalls. “After three, four months the performance was really good, and we said, ‘We might be on to something.’” Roch says that as of the end of February, the 12-month return on his 30-day long picks was 33.8 percent. Since inception, Roch says, the return has been 65.9 percent. One hedge fund manager surveyed calls the list “quite good and quite useful.” Simon Greenwell, Merrill’s head of equity research for Europe, the Middle East and Africa, says the list was rolled out gradually to the rest of the equity department in the U.K. over the course of 2007 and that the concept has been picked up by Merrill’s research department in Asia, as well, and is being considered in the U.S. Greenwell praises the most/least strategy for forcing discipline on Merrill’s research teams. “It obliges people to be aware of the catalysts, such as the amount of shorts in the marketplace,” he explains. “In addition, it encourages the analysts to look at derivatives, which are very influential in a different time frame. It also freshens up their thinking on a number of their names, and it encourages debate within the sector teams, especially the large sectors.” Greenwell says Merrill will begin publishing performance results on its 30-day picks in some of its other sectors within the next few months, the goal being to compile 12 months of performance, verified by a third party. A similar product — the Preferred List — is in development at UBS in London. The idea was initiated by Jaime Brandwood, who along with co-leader Mark Shepperd captains the No. 1 team in Business & Employment Services. Nicholas Pink, London-based UBS head of European equity research, says the Brandwood-Shepperd team is the only group so far to have produced a publicly distributed list, with three top buys and three top sells, and each MARCH 2008 • INSTITUTIONAL INVESTOR’S ALPHA • 55 http://www.alphamagazine.com
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