AART 2012 The All-America Research Team
Hall of Fame october 15, 2012 The All-America Research Team october 16, 2012 The All-America Sales Team october 16, 2012 The All-America Trading Team october 16, 2012 Come January, thousands of money managers will descend on the Westin St. Francis hotel in San Francisco for J.P. Morgan’s Annual Healthcare Conference. Among those planning to be there is a buy-side participant in the All-America Research Team who directs health care investments for a state teachers’ pension fund. This manager has attended the conference every year since 2008, because it provides an opportunity for him to meet the people who guide the companies in which he invests — or is thinking of investing in.
“In a face-to-face meeting, you can get a sense of the quality of management by how they answer questions, and their body language,” he explains. “Getting the same information over the phone or even a video conference is more difficult.”
What this manager observes at the conference influences his investment decisions. “I do usually come home and make changes to our portfolio after the meeting,” he says.
An overwhelming majority of investment professionals share his assessment. Institutional Investor asked participants in the 2012 All-America Executive Team survey — our exclusive annual ranking of the nation’s best CEOs, CFOs, investor relations teams and IR professionals — to indicate the extent to which their stock selections are influenced by their views of company leaders. An eyepopping 90 percent of buy-siders said those selections are either “somewhat” or “very much” affected by their opinions of the executives. Sell-side respondents were even more emphatic: Ninety-five percent of them said their position on a stock reflects their opinion of company managements. (We keep confidential the identities of the survey respondents and their firms to ensure their continuing cooperation.)
To Michael Weinstein, a coordinator of the J.P. Morgan conference who has racked up nine first-place finishes to date in the Medical Supplies & Devices sector on the All-America Research Team, these results are not surprising. “There are a number of money managers that won’t invest in a name until they’ve met management,” he says. “Access is critical.”
It’s also one of the services that investors most appreciate about the sell side. This year, for the first time, we asked those who cast votes in the research survey to tell us which firms provide the best access to company leaders. J.P. Morgan takes the top spot in our inaugural ranking of America’s Top Corporate Access Providers, with ten positions across 19 industry sectors. Bank of America Merrill Lynch, Barclays and Morgan Stanley tie for second place, with seven positions each. Deutsche Bank Securities comes in fifth, with six.
“J.P. Morgan does a great job with corporate access, whether it’s through conferences or management road shows,” says one analyst with a Philadelphia-area money management firm. “When it comes to conferences, they make sure to stay in front of me with registration, setting up management meetings and keeping me updated on any changes to the schedule. They do a great job of knowing what I as a client focus on and care about.”
Our questionnaire also invited respondents to identify individuals who excel at providing access. Two J.P. Morgan analysts are among the ten singled out for recognition: Lisa Gill, who is No. 1 in Health Care Technology & Distribution for a third year running; and Weinstein, who has appeared on the team 14 times since 1998.
He says the conference — the single-largest such event for institutional investors — effectively kicks off the year in health care. “Each year an increasing number of companies use the conference not only to preannounce their fourth-quarter results but also to give initial guidance for the coming year,” says Weinstein. “There are an astounding number of one-on-one meetings, plus lunches, cocktail receptions and a large number of dinners every night where investors get to interact with senior management and ask them questions.”
Nearly 400 companies — 94 percent of which were represented by CEOs or presidents — participated in the 2012 event, which drew more than 8,500 attendees, the analyst says. Those figures are up more than 30 percent over the past five years, he adds.
“But it’s not only about access to management,” Weinstein explains. “It’s about access to other investors, both public and private. It’s a huge event for venture capital and private equity. It’s simply the biggest networking event of its kind.”
In fact, it can be a bit overwhelming. “I had so many meetings that I had to cancel some to maintain my sanity,” says the attendee from the state teachers’ pension fund. “I had ten or more one-on-one meetings per day. I generally was able to get all the meetings I was interested in obtaining.”
Demand for such meetings is on the rise, according to Citi’s Gregory Badishkanian, who repeats in first place in Leisure and is considered among the best at providing corporate access. (His firm ties for sixth place, with Credit Suisse, on the roster of America’s Top Corporate Access Providers; it wins two positions, including first place in Leisure.)
“Corporate access has become increasingly important to the buy side over the last five years,” he says. “Given the market dynamics, investors are looking to increase their understanding of the business models and value drivers for the companies they cover. Most investors are also looking for insight around competitive forces impacting the landscape.”
In addition to participating in nondeal road shows, tours of company headquarters and individual meetings, Badishkanian helps coordinate Citi’s annual Global Consumer Conference. This year’s event, which was held in New York in June, attracted 64 companies and more than 800 money managers.
“Investors have limited time, so attending conferences is an efficient means of speaking with a large number of company management teams,” he notes. “While much of the information discussed in meetings can be learned through reading the company filings or listening to the quarterly earnings calls, it is still critical for larger institutions to meet teams face-to-face. First, some firms have investment guidelines that require portfolio managers to meet management teams prior to buying shares of the stock. Also, investors want to read the management teams’ body language to feel comfortable that they actually believe in what they are saying publicly.”
Morgan Stanley’s Stephen Maresca, No. 1 in Master Limited Partnerships (for a second straight year), No. 3 in Natural Gas and considered among the best at providing access to leaders of the companies he covers, points to another advantage. “It’s not just about looking the executive in the eye,” he maintains. “The energy sector is being shaped by big ideas and big trends — oil and gas are flowing in different directions now — and executives of these companies are at the forefront of what is next and what is possible. Clients want to get ahead of this investing curve, and view meetings with management teams as crucial to their investing process.”
Annual events that Maresca helps host include an MLP and Diversified Natural Gas Corporate Access Summit, held this year in March in New York and attended by more than 30 companies and roughly 175 investors — twice as many as last year; and a Houston bus tour, held each January, in which the analyst takes clients to meet a dozen or so of that city’s energy-company executive teams.
“Clients are looking for a better understanding of current sector fundamentals and company prospects within the industry,” Maresca contends. “Given their perch atop large energy companies, executives can offer big-picture insights into trends that are likely to shape the industry over the next three to five years.”
Meeting attendees have something to offer too. “Management teams find these [events] an efficient and productive use of their time,” notes Michael Bossidy, who oversees Americas research distribution for J.P. Morgan. “We consistently arrange high-quality interactions and, in many cases, potential additions to their shareholder bases.” • •