Saul Martinez & team J.P. Morgan First-place appearances: 4
Total appearances: 23
Team debut: 1993 Under the leadership of Saul Martinez, J.P. Morgan’s four-strong squad retains the No. 1 position on this roster. “Saul is one of the most impressive analysts on the sell side, due to his strong fundamental views and market timing,” says one investor. “Very few people have such deep knowledge of the market and such great corporate relationships.” From their bases in New York and São Paulo, the analysts cover 26 regional banking stocks. That group outperformed Latin America’s emerging markets by 9 percentage points year to date through late July, and Martinez readily explains the strong showing. “There have been a combination of factors driving this,” he says, “including good results at Itaú Unibanco [Holding], Banco Bradesco, Banco Santander-Chile, and Credicorp, as well as optimism about political change in Brazil and Argentina — with Argentine banks being by far the best performers year-to-date.” Indeed, as of late July, that nation’s banking shares had rocketed 60.4 percent in 2014. Some names were trading at excessively discounted valuations heading into the year, the 40-year-old team leader adds, such as Bancolombia and Santander-Chile. Looking ahead, Martinez and his colleagues advise investors to be selective in the sector. “We see limited upside for most banks and don’t consider valuations to offer ample upside in most cases,” he explains. The researchers prefer high-quality banks with good earnings momentum and reasonable valuations. Their sole overweight picks are Peruvian commercial bank Credicorp; Itaú Unibanco of Brazil, which is the region’s largest financial institution; and Santander-Chile. J.P. Morgan’s positive outlook on Santander-Chile is an out of consensus view given economic headwinds in Chile, notes Martinez, but his group believes that earnings estimates are far too low for that country’s largest bank, by assets. “We are about 10 percent above consensus,” he adds, “and we feel our 2014 earnings estimates might be conservative.” The analysts expect Santander-Chile to report over 30 percent earnings growth in 2014. “At about 14 times 2014 earnings, which have an upside bias, we see the valuation as attractive,” he concludes.