< The 2015 All-America Research Team
Christopher Senyek
Wolfe Research
First-Place Appearances: 6
Total Appearances: 9
Analyst Debut: 2007
After a year at No. 2, Christopher Senyek of Wolfe Research rebounds to post his sixth top finish since 2009. “Chris uses his accounting background and acumen to provide unique and differentiated research ideas in the underserved segment of spin-offs and special situations,” one fund manager attests. “In addition, his quarterly earnings-quality scores serve as an objective check by identifying companies that use aggressive accounting practices.” Designed to identify potential balance-sheet and cash-flow problems and predict likely underperformers over a six- to 12-month time frame, Senyek’s proprietary earnings-quality modeling factors in a company’s accrual ratios, growth in net operating assets, cash-margin trends and capital-expenditure dynamics — among other metrics — to arrive at an EQ score from zero to 100, with lower values representing poorer quality. In his report on first-quarter 2015 results, the 40-year-old researcher cautioned that many corporations may be “masking deteriorating business fundamentals through various accounting maneuvers such as cookie jar reserves, cost capitalization, aggressively recognizing revenue or changing depreciation policies.” He strongly recommends that fund managers avoid names whose EQ scores are below ten and whose stocks bear elevated levels of short interest, implying a bearish investor sentiment. “The market overall is going to favor higher-quality names over the next six to 12 months than in 2010, when the recovery was in its early stages,” explains Senyek. Clients should steer clear of several housing-related stocks and companies in the media and entertainment industries that meet the screening criteria, he advises, and especially avoid energy, industrial and materials players with significant commodities exposure. “While much of Wall Street is focused on telling investors what to own”— 70 to 80 percent of stocks have a buy rating, he asserts — “we think it’s important to tell investors what not to own.”