Pharmaceuticals industry analyst C. Anthony Butler of Lehman Brothers has been leaving most of the number crunching to his deputies since Merck & Co. began fighting product liability lawsuits over its arthritis drug Vioxx in 2005. Instead of churning out earnings notes and other research in his New York office, Butler flew to Angleton, Texas, where he sat through the entire five-week first Vioxx trial. To his fans in the hedge fund community, the calls and e-mails he fired off during trial recesses offered trading ideas that were more important than any longer-term recommendations. Butler attended parts of a half dozen other trials around the country. Their mixed results produced sharp short-term movements in Merck’s shares.
“Tony’s detailed research from the courts was very helpful to us in trying to handicap the outcome of each trial,” says Mariola Haggar, who oversees health care sector investment at New York–based Angelo Gordon & Co., which manages $10 billion in hedge funds. “This is research that was actionable and value-added, not just summarizing published results.”
For hedge funds, which tend to trade with far greater frequency than long-only investment shops, Wall Street research like Butler’s Vioxx reports is invaluable. Butler is the No. 1 Pharmaceuticals/Major analyst among the hedge fund firms that voted in our sister publication’s All-America Research Team ranking of top U.S. analysts. For a fourth straight year, Alpha has recalculated the results from Institutional Investor’s All-America survey — which polls a broad swath of portfolio managers and buy-side researchers — using only the votes from hedge funds. More than 250 hedge fund firms, managing about $650 billion in assets, voted in the survey. That includes more than one half of the Hedge Fund 100, our ranking of the world’s 100 biggest hedge fund firms (Alpha, June 2006).
Like Butler, many analysts who were second- or third-teamers in the II poll move up when just the hedge fund votes are counted. (Butler was No. 3 in the All-America ranking.) Three runners-up from the broader survey jump to No. 1 — Scott Barry of Credit Suisse in Leisure; Goldman, Sachs & Co.’s Laura Conigliaro in IT Hardware; and Robert Willens of Lehman in Accounting & Tax Policy. In total, 164 positions changed, including 26 first teams.
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