< The 2015 All-America Research Team
James Covello
Goldman, Sachs & Co.
First-Place Appearances: 9
Total Appearances: 14
Analyst Debut: 2002
Goldman, Sachs & Co. researcher James Covello successfully defends the top position he has secured every year since 2009, and clients heartily cheer his fully informed independence. “He has consistently been one of the best thematic analysts in the space,” one portfolio manager says, offering “quality ideas with a considerable amount of experience.” In particular, another investor recalls, the 42-year-old researcher “downgraded the semiconductors sector in August 2014, before Microchip [Technology] preannounced negatively, Intel [Corp.] had their disastrous first quarter and memory prices started to implode. The downturn of fundamentals in the space is now widely acknowledged — and Jim’s timing could not have been more prescient.” Indeed, a third backer relates, “Jim is a very thorough analyst who knows the semiconductors and semiconductor capital equipment industries very well. He demonstrated courage of his convictions with his sell recommendation on Intel, which turned out to be spot on following a period where he was roundly criticized for this recommendation. I have a great deal of respect for Jim.” Covello forecast last August that the industry was overheating. He noted, for example, that the number of chips shipped in the most recent quarter surpassed normal demand by 5 percent, and semiconductors revenue was growing at a faster clip than the pace set by many of its key end markets. At the same time, he reiterated his three-year-old sell rating on Intel, a Santa Clara, California–based broadline semiconductor manufacturer. Throughout, he has stayed with his buy rating on Freemont, California’s Lam Research Corp. The supplier of wafer fabrication equipment and services to the semiconductors industry is a long-standing favorite among the eight companies the analyst monitors in this space, in part thanks to its relatively low level of exposure to Intel. In the spring he encouraged clients to buy Lam on a dip, advising that it was suffering a knock-on effect of weak semiconductors’ fundamentals and that orders should pick up on an uptick in capital expenditures. He is neutral on this sector but believes that “overall industry capital spending will increase in 2015, driven by technology inflections — in particular, 3D NAND. Semi memory makers such as Samsung [Electronics Co.] and Intel/Micron are starting to aggressively ramp up 3D NAND production, and the semi equipment companies are the primary beneficiaries of this product cycle. Intel has cut capex several times this year, and that is offsetting some of the strength in the market from the 3D NAND transition, but we continue to believe overall spending will increase year over year in 2015.”
