II’s motto over most of the past three decades has been “good financial journalism doesn’t have to be dull.” This applies to our dinners as well, apparently. I’d like to thank Mr. Spitzer for his thought-provoking remarks this evening. Institutional Investor magazine has always sought out energetic debate regardless of how unsettling or painful it may be on important issues. It’s in this spirit that we invited the attorney general here to speak with us tonight.
Let me underscore that we at Institutional Investor are proud of our awards. We are proud of the criteria we use to select them; we are proud of those analysts who have won our awards this year and for the past 31 years. Our awards are picked by institutional investors, and they are intended for institutional investors, who are our audience.
Brokerage firms should completely and honestly disclose the criteria used in the selection of these awards. What sensible person could disagree with such a notion? Having said that, I think it’s important in attempting to reform a damaged system--not to simplify. Consider the great mania of the recent past. I am not entirely sure that the retail investing public rushed out to invest based on the recommendations of the top II-ranked chemical analyst, heavy machinery analyst or environmental services analyst during the tech stock mania. Other forces were at work.
It wasn’t so long ago that Wall Street’s biggest firms were frightened that they would be disintermediated by mom-and-pop investors who abandoned them to trade online based on what they read in chat rooms or overheard in taxicabs. Indeed, I’d welcome the attorney general to take a stroll with me one day in Washington Heights, where I grew up. If we can find anyone there who bought a stock because it was recommended by an II-ranked analyst, I will be glad to buy him lunch. [Applause.]
In the spirit of full disclosure and transparency proposed by the attorney general, I should also say that we at Institutional Investor have been working with Investars for three months ourselves on a project. We wanted to see how Wall Street’s stock recommendations have performed over the past few years. According to Investars data, you should all be very happy, as should your clients. Here’s what the data shows.
From March of 2000 until today, Wall Street’s top firms substantially outperform in stock-picking prowess the major benchmark indexes: the S&P 500, the Nasdaq and the Dow Jones industrial average. They also substantially outperformed the S&P 500 from August of 1998 until today. And that’s when Investars’ data is still good. In some cases, this outperformance was by 10 or more percentage points. This raised our eyebrows, and we are still testing this data before we publish it.
It is now my pleasure to present our award for the best overall research team, which recognizes the breadth and depth of a firm’s coverage. Tied for second place this year are Merrill Lynch and Lehman Brothers. [Applause.] Repeating in first place, the winner for 2002 is Citigroup/Salomon Smith Barney. Accepting the award on behalf of this winning team is Sallie Krawcheck, chairman and chief executive of Smith Barney. Sallie, would you please come on up?
For recent articles on Wall Street research, its history and conflicts, please go to www.institutionalinvestor.com/research.
