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The 2014 All-America Research Team: Quantitative Research, No. 2: Michael Goldstein

< The 2014 All-America Research TeamMichael GoldsteinEmpirical Research PartnersFirst-place appearances: 4

Total appearances: 19

Team debut: 1994

Michael Goldstein celebrates his fourth straight second-place finish on this lineup and third consecutive year at No. 2 in Portfolio Strategy. Across both sectors the Empirical Research Partners researcher has earned an impressive 39 total appearances since his 1994 debut, and clients readily explain his longevity. Goldstein is “a quantitative researcher who is also a strategist, someone who understands the market really well,” one portfolio manager attests. “While other people are looking at the last ten years, he’s using the last 50 to 75 years as a frame of reference. And there’s no gibberish, which is the sign of a really good thinker.” Goldstein’s current recommendations follow two broad lines of thinking. First, his quantitative models indicate that investors are moving toward — but haven’t quite reached — a “late-cycle, growth-driven market,” in which the tendency is “to embrace more ‘growthy’ characteristics in stocks,” he says. In such a climate money managers are well advised to focus “less on valuation and more on the incremental production of cash flows. As we move later into the cycle,” he adds, “companies that can keep their cash flows up will be rewarded.” Favored on these terms are the oil and gas exploration and production and semiconductors sectors. The analyst’s second thesis is to prefer names where activist investors have taken significant stakes — “a hot topic right now,” Goldstein acknowledges. His research shows that companies most likely to enjoy successful turnarounds and subsequent improvements in share prices are those where “the stock is trading at a discount when the activist pounces,” he reports. “The activist can be the catalyst the market needs to wake up to the hidden value in the company.” Recent examples of targets where there is “a decent chance the activist can make a difference,” he adds, include package delivery and freight services provider FedEx Corp. of Memphis, Tennessee; Bentonville, Arkansas–based retailing behemoth Wal-Mart Stores; and Wendy’s Co., a fast-food restaurant chain operator headquartered in Dublin, Ohio.