Hall of Fame 20 - Robert Farrell
Coming of age in post–World War II America, Robert Farrell took his father’s advice and abandoned his engineering ambitions to follow the money to Wall Street. Farrell, 79, graduated with a bachelor’s degree in economics and finance from Manhattan College. Figuring an Ivy League degree would make him more marketable, he studied under Benjamin Graham and David Dodd, authors of the researchers’ bible, Security Analysis, at Columbia Business School, emerging with a master’s in investment finance in 1955. After a two-year stint in the U.S. Army, Farrell entered the analyst-training program at Merrill Lynch. Despite his studies in fundamental value under Graham and Dodd, he became a technical analyst. Farrell credits mentor and head of research William Dunkak with teaching him about the markets.
Farrell decided to focus on something that would be useful to institutional investors: market commentary. At first targeted for internal use only, by 1971, Farrell’s reports began to be published outside Merrill Lynch. “I wrote in a didactic style, explaining how I came to my conclusions and how contrary thinking was useful,” recalls Farrell, who earned first place when Market Timing (which became Technical Analysis) was introduced as a sector in the All-America Research Team, in 1976. “My whole experience on the economy has been, if the majority of economists agreed on something, I knew I had to watch for something different.”
By 1980, when Farrell was in his fifth year on the first team, II attributed a large measure of his success to his attention to the psychology of market players, or sentiment indicators, rather than business cycle indicators. Working at the largest U.S. brokerage, with its vast database, also meant he had a handle on what the bulk of investors were feeling. Farrell, then 47, admitted that “Merrill Lynch data is a big help,” noting that structural changes in the market, such as options and arbitrage transactions, were making public information less valuable.
After 16 years as a first-teamer, Farrell gave up technical analysis in 1993 to write reports on investing themes such as the aging population and the technology boom before retiring ten years later. Like many successful analysts, Farrell stresses the importance of good communication. “I started out being a terrible speaker, and I didn’t know how to write,” he says, “but I learned from practice.” As for his advice today, Farrell has a sell signal on Wall Street. Today’s college grads should consider a career in manufacturing, he says. “The financial business is in a down cycle.”