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Yearn to Learn: Molding the Rising Stars of Wall Street

Progressing from associate to junior to senior analyst is an obstacle course. Here are some lessons from some of this year’s finest young talent.

  • Carolyn Koo

From All-America Research Team Rising Stars 2016 ranking

Chinedu Christian Bolu, a three-time Institutional Investor Rising Star of Wall Street, earned a degree in chemistry at the University of Reading in the U.K. Today, despite his focus on brokers, asset managers and exchanges as a Credit Suisse analyst, he remains a scientist at heart. “I am a knowledge geek,” says Bolu. “I enjoy nothing more than trying to get a deep understanding of a company, its dynamics, the competitive landscape and trying to understand what it means for a company’s valuation relative to what the market thinks.” New York–based Bolu became a lead analyst in 2013 after working as an associate with former All-America Research Team No. 1 Howard Chen.

The yearn to learn is a hallmark of the Rising Star. Asked what he’s seeking when hiring junior analysts, Nicholas Rosato, the head of North America Equity Research at J.P. Morgan, which triples its Rising Star count to nine and stays steady at No. 4 on the leader board, says, “We look for candidates who love to learn, are intellectually curious, are comfortable working on small teams and have a passion for markets and helping others.”

J.P. Morgan’s Brian Ossenbeck, a two-time Rising Star in Airfreight & Surface Transportation who was promoted to senior analyst in 2015, is a prime example. “When I do an interview [with would-be analysts], I try to look for people with a natural curiosity to learn and to comprehend and then to be able to look forward and see how trends might evolve, what people might be missing because they just haven’t dug deep enough,” says New York–based Ossenbeck, 36. “That’s probably what I like most, because you’re not going to be bored. There’s going to be something challenging waiting for you each day and your job is to learn.”

For her part, Courtney Rosenberger at Washington D.C.–based Strategas Research Partners, thought she was set for a career in supply chain management until an informational interview at the end of her senior year at the University of Kentucky changed her course. “I fell in love with the job. What really attracted me to it was how policy and Washington touched every industry, so you really get to learn about so many different things and how government interacts with business. It’s just never boring. There’s always something going on, especially this year,” says Rosenberger, 24.

For associates or junior analysts with the right skills and drive, there are nearly always paths to becoming lead analysts; all the Rising Stars interviewed for this article served as junior analysts before launching their own coverage. “Training our juniors to become capable senior analysts is an essential part of our management philosophy,” Rosato says. “Promoting from within has been a key element to our success and helps us retain our top talent, build a strong culture and maintain long-held client relationships.”

Today, getting promoted has evolved from an informal to a more formal process, such as a bake-off, where juniors are evaluated on how they would tackle sector coverage, from the type of research they would pursue to the products they would put out. Citigroup, which quintuples its share of Rising Stars on the roster to ten this year and jumps five notches to No. 2, is evidence of this shift.

“In many other firms, what you’ll find is that when an associate is ready to start covering stocks, they simply do so because the analyst indicated that they’re ready,” says Jonathan Rosenzweig, Citi’s New York–based head of Americas equity research. “At this firm, we try to make sure the associate is ready to take that next step, recognizing that there are certain skill sets that are different between analyst and associate roles. For associates that want to get promoted and who feel they’re ready and their [lead] analyst feels they’re ready, we put them through a review process to make sure that those additional skill sets are there.”

Citi typically runs reviews twice a year, although Rosenzweig indicates reviews are also done on a more ad hoc basis. Associates tell their analysts when they feel they’re ready. If the analyst doesn’t agree, she provides feedback on skills that need improving. If the analyst gives the go-ahead, the associate goes through an interview process, according to Rosenzweig, who resisted revealing too many details.

Once associates become full-fledged analysts, they receive more mentoring, with tutorials on subjects ranging from video training and client relationships to writing and time management. Newly minted analysts are also subject to “a fairly strict set of expectations in terms of what they’re meant to achieve in both the short and intermediate term,“ adds Rosenzweig.

New analysts who had been associates have probably already covered a handful of small- and mid-cap companies on their own, building and updating models and speaking with company management, clients and salespeople.

But senior analysts generally “spend more time traveling and marketing to investors than junior analysts do,” says Rosato. “Seniors are generally on the phone more and tend to do more long-term and strategic planning around what kind of written research to produce, how often to publish, when and how to perform client outreach, and how to manage their team.”

New analysts face other challenges. “There’s a process. When you’re starting on your career, you want to figure out how you’re going to differentiate yourself and what your focus is going to be in terms of how you’re going to understand one stock differently from others,” says Citi’s Corinna Van der Ghinst, a two-time Rising Star who began solo coverage of department stores and specialty softlines in 2014.

Van der Ghinst, who’s based in New York, distinguished herself from the competition by starting a women’s activewear business between stints at Citi. “It gave me a much better understanding of the supply chain, obviously building an e-commerce business, how omnichannel works and the complexities of distribution,” says Van der Ghinst, who ran the startup for three years. “When I talk to company management or people in the industry, I do have a perspective on how they’re running their business.”

Her experience as an associate on Citi’s consumer team also helped when she launched coverage of Skechers U.S.A., the Manhattan Beach, California-based footwear and lifestyle-product company. “A lot of analysts at the time who covered the stock were more small-, mid-cap focused, but because I came from covering some of the larger-cap names when I was an associate, I was able to leverage that information as well as understand the broader sector view,” she says.

Margaret Kaczor, a Rising Star who covers medical supplies and devices at William Blair & Co., tries to make her work distinctive by doing what she calls “real research,” which she characterizes as getting “the freedom, the time and the flexibility to really come up with a thesis and support it, and in six, 12 or 18 months I’ll find out pretty quickly if I’m right or not. There’s pressure that comes with it, but that’s part of the fun.”

When she’s preparing to delve into a company, she strives to take “a differentiated view, something that isn’t being talked about that you think should be talked about,” says Chicago-based Kaczor, 28, who became a lead analyst last year. For example, Kaczor tackled Nevro Corp., a Redwood City, California medical-device company specializing in pain management, which had received a Food and Drug Administration superiority claim for a device. Kaczor researched market-share gains for a handful of devices that had received similar claims of superior performance in the last decade and found they often were followed by a boost of anywhere between 35 and 90 percent over five years.

Strategas’ Rosenberger notes that she and her firm prefer to stand out by examining “data and more factual analysis when we’re looking at the election, just because we think investors really are the most interested in the stock-market effect.” She’s been involved in constructing Democratic and Republican portfolios that identify industries and stocks with the most to gain or lose in the election. For example, alternative energy could benefit if the Democrats win, given the party’s concern over climate change, which would manifest itself by raising fossil-fuel production costs and lowering those of renewables.

Bolu points out that data providers have supplanted sell-side research analysts for certain types of information. But, he adds, the “barriers to entry are somewhat lower for newer analysts because deep, thoughtful research has never been more important.”

An omnipresent reality is pressure. “One of the challenges is when you’re new at this job, you tend to second guess yourself more or have doubts about calls that you’re putting out into a very, very public atmosphere,” Van der Ghinst says. “There’s always been a high level of stress involved with this job. You want to do right by your clients, whether that’s internal clients like our sales and trading desk or clients of the firm. And there’s always news flow. There’s always changing information, and you’re covering a lot of companies as well, so there are a lot of balls to juggle.”

Justin Patterson, a San Francisco–based Internet analyst at Raymond James Financial, says it’s crucial for him to spend time “filtering out signals from noise. The challenge of technology, and the Internet in particular, is that there are just countless data points day after day, so filtering out which ones really influence a critical factor in an investment thesis versus what is fairly immaterial is a constant challenge.”

Models and assumptions can get upended when “exogenous factors happen,” says Patterson, 32. “Very few of us saw Microsoft purchasing LinkedIn, so the goal is to focus on what I can control and recognize that from time to time acquisitions or other pieces may happen that cause some thesis to be reassessed.”

Preparing analysts for the pressures and challenges of taking on the responsibilities of a senior analyst requires a clearly delineated promotion procedure. “It protects the individual, protects the associate, protects certainly the firm, the analyst and our clients because that person is really ready to cover stocks,” Rosenzweig says. “If that associate goes out covering stocks and really doesn’t do a good job, it risks damaging that associate’s career.”

Visit the 2016 All-America Research Team ranking for more.