The newest class of inductees to the All-America Research Hall of Fame has a plethora of sage advice for those just starting out in the industry: Question the conventional wisdom. Don’t worry about the sector you cover — skills learned in one are easily transferable to others. In this business, credibility is key.
In 2023, three analysts join the elite group of those who have earned a No. 1 ranking ten times or more. Making the Hall of Fame remains a rarefied achievement: This year brings the total number of such analysts since Institutional Investor introduced the survey in 1972 to only 77.
Two of the three are at JPMorgan Chase, which takes second place in the overall survey. One of them, Matthew Boss, who covers retailing department stores and specialty softlines, credits his all-star status to multiple years on the buy side covering consumer at a hedge fund. “It has provided me with a differentiated perspective, having put dollars behind investment decisions and independently created alpha, leveraging proprietary fieldwork and a foundational process,” he says. His colleague Dubravko Lakos-Bujas has buy-side experience as well, having worked at Deutsche Bank in asset management as a portfolio manager and research analyst before joining JPMorgan in 2010 to oversee the equity macro strategy group and the Latin America equity research department. Lakos-Bujas takes first place in both portfolio strategy and quantitative research.
James West has spent the entirety of his nearly 23-year career in research, joining Evercore ISI in 2014 covering the oil services and equipment sector. He asserts that the best analysts can see patterns that others do not. “The market is three-dimensional chess in real time, and one must see the whole board, including the macro,” he explains.
Read on to find out how these Hall of Famers have repeatedly earned plaudits from the investors who rely on them for best-in-class research.
Matthew Boss, JPMorgan
Retailing Department Stores & Specialty Softlines
What’s the best call you’ve ever made?
Our upgrade of Lululemon to overweight at $64 per share in January 2015. We made the controversial and nonconsensus call that Lululemon had a sustainable performance growth engine tied to investments in technical innovation, as well as expansion opportunities in areas such as men’s clothing, accessories, and international. With the investment thesis of the company moving from a mall-based specialty yoga retailer to a dual-gender global brand in an expanding active/athletic market, shares of Lululemon are up 500 percent versus the S&P 500’s gain of 110 percent since the call.
What’s the worst call you’ve ever made?
Our October 2011 overweight initiation on JCPenney at $31 per share. Ahead of activist involvement and a management transition, we outlined top-line white-space opportunities and quantified other potential general and administrative efficiencies. Subsequently, new CEO Ron Johnson announced a vision for change and confirmed a $100 million-plus SG&A opportunity supporting our overweight initiation analysis. That sent shares up 40 percent (versus the S&P’s 11 percent rise). Although our work laid out the qualitative and quantitative foundation, among other things, we underestimated the near-term execution risk tied to pricing and promotion, along with changes for the company’s low- to middle-income core consumer. In November 2012, we moved to neutral when it was clear the long-term vision was impaired, then downgraded the stock to underweight in August 2018 based on balance-sheet work that pointed to ongoing risk.
If a client needed to know one thing about your area of coverage, what would it be?
The pace of structural change underway in retail/discretionary is reshaping the consumer landscape permanently. Our work is laser-focused on the interplay between online/digital and brick-and-mortar stores; the value proposition of off-price versus full-price retail; the importance of convenience with technology investments accelerating “floor to door”; the importance of market share in a “zero sum” retail landscape; and balance-sheet flexibility. Said differently: Our primary focus is on the structural decisions management is making today to drive sustainable market share, which in our view will separate the winners from the losers across the retail/discretionary space.
What advice would you give to someone starting out in sell-side research?
Long-term success requires a differentiated process, which must constantly evolve. My approach is rooted in my background in accounting — I have a CPA and a master’s in accounting — which provides the tools to tackle head-on and dive deeper into key issues in the sector. In addition, proprietary value-add research is critical to maintaining relevancy, with our team constantly in stores and assessing new and innovative data sources to understand consumer behavior and real-time company-specific initiatives. In addition, credibility is key in this business; many times, your best stock calls are the “soul search” moments when an investment thesis changes.
What makes an all-star analyst in 2023?
An all-star analyst in my view does not just “cover” a sector. An all-star analyst works to shape the future of their sector though deep-dive analysis, thoughtful insights and advice to their corporates, and a 24/7 approach to own the narrative and be ahead of the fundamental inflections for their clients. With increased access to information and data, an all-star analyst today leaves no stone unturned in their analyses, putting themselves constantly in the shoes of their clients.
Dubravko Lakos-Bujas, JPMorgan
Portfolio Strategy
Quantitative Research
What’s the best call you’ve ever made?
Timing the bottom of the Covid-induced market crash in late March 2020 and pushing back against consensus to forecast the S&P 500 would exhibit a V-shaped recovery, hitting a new high by year-end. We recognized early on that monetary and fiscal stimulus would be very aggressive in combating a “no one’s fault” recession.
What’s the worst call you’ve ever made?
Sticking with the value call for too long and maintaining it through the 2018–2019 period. Our analysis and research framework pointed to excessive crowding into growth and low-volatility stocks, while value was indiscriminately sold and trading at unreasonably cheap valuations (for example, in the energy sector).
If a client needed to know one thing about your area of coverage, what would it be?
The increasing importance of macro and geopolitical factors that are influencing the global economy and financial markets. For example, sticky inflation and higher rates for longer are making many investment frameworks that were built on data from the past ten to 20 years questionable.
What advice would you give to someone starting out in sell-side research?
Stay at the forefront of change — whether it is covering industries and companies that are growing market share or looking at data in more novel ways (for instance, using machine learning and artificial intelligence techniques) to add value for investors. Additionally, fearlessly ask questions and don’t just accept but question the conventional wisdom.
What makes an all-star analyst in 2023?
The ability to marry fundamental, macro, and quantitative research disciplines, and being able to convert complex analysis into simplified views and actionable trade ideas.
James West, Evercore ISI
Oil Services & Equipment
What’s the best call you’ve ever made?
That’s easy. We upgraded energy in general and oilfield equipment and services specifically in November 2020 after the group hit an all-time low as a percentage of the S&P 500 and an all-time valuation low versus the broader market.
What’s the worst call you’ve ever made?
When I was a young analyst, I focused on small-cap oilfield services companies. Tetra Technologies caught my eye because of its offshore maintenance and repair business in the Gulf of Mexico, as well as its plans to backward-integrate its completion fluids business. The offshore business did very well during most third quarters, as hurricane season would batter infrastructure in the Gulf. My first year “on my own,” I pitched Tetra to anyone who would listen and successfully got a lot of investors involved. I believed the stock would surge when the company reported third-quarter earnings, as a hurricane had torn up the Gulf, and I believed third-quarter earnings per share would double the second quarter’s and be roughly $0.50 per share. It ended up at $0.00. The stock plummeted almost 30 percent that day, and I thought my career as a sell-side analyst might be over. It was an excellent lesson and made me a better analyst.
What one thing should clients know about your area of coverage?
Don’t underestimate the operating leverage of the oil services and drilling group when an up cycle comes on strong.
What advice would you give to someone starting out in sell-side research?
Don’t worry about the sector you cover; every sector is fascinating and has nuance, and the skills you learn covering one sector are transferable to others.
What makes an all-star analyst in 2023?
Someone who can absorb the massive amount of information that is flying around every day and see patterns that others don’t. The market is three-dimensional chess in real time, and one must see the whole board, including the macro.
