When it comes to navigating recent market turmoil, it can make as much sense for institutional investors to look backward as forward.

Unprecedented times — from pandemics to recessions to global instability — are often more precedented than people realize. History does repeat itself, and financial markets are not immune to being highly cyclical.

But when volatility and uncertainties arise, the best research analysts can add value no matter the economic climate. Just ask the newest crop of analysts to earn their first No. 1 positions on Institutional Investor’s 51st annual All-America Research Team.

These 16 analysts — an unusually large group compared with recent years — represent some of the top firms from this year’s ranking. There are two new stars each from this year’s winner, JPMorgan Chase & Co., and second-place finisher BofA Securities. One comes from third-place Morgan Stanley, and two others work at fourth-place Evercore ISI. But the most noteworthy may be the six Jefferies Group analysts, who helped propel the independent research firm’s rise up 2022’s leaderboard.

Read on to find out what their best calls were, as well as what these esteemed researchers have learned from their mistakes. As one of them notes, “This is a humbling industry. The longer you have the privilege of being a sell-side analyst, the humbler you become.”

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Michael Cherny, BofA Securities

The best call of my career was being the first analyst to downgrade Walgreens to underperform in 2018. Our concerns about the ability for the company to improve its operating earnings trajectory in the face of increasing competitive pressures led to the downgrade, with the company since being in the midst of further operating pressures … as well as an attempt to transform into more of a health care–oriented entity that is taking longer to manifest. But being out of consensus as the only negative rating required more work to prove our thesis.

For the sector this year, our best call has been McKesson. We decided to take a number of different angles to dive into the growth algorithm and market characteristics that allowed MCK to evolve from an almost 200-year-old drug distribution business to a more holistic enterprise health care services entity with performance that has outpaced the broader market and the direct peer group.

A call that didn’t work out how we expected it to was launching on a large-cap stock (Express Scripts) with an underperform rating in 2018. [The company] was acquired a week later. Our fundamental view on the business was that the ability to generate outsize stand-alone growth was limited owing to market maturation. However, this taught us that sometimes forces outside your control can outweigh fundamental performance.

Our model has been built on being flexible and delivering clients what they need. Sometimes that is a deep dive on a sector. Sometimes it is a very specific look into a single company. Sometimes it is serving as a sounding board to try to parse out fundamentals versus perception. There is no one-size-fits-all model to being a successful analyst, and being able to react and adapt to what the specific client in front of you needs is the way to add the most value.

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Timothy Chiodo, Credit Suisse

Recommending both Visa and Mastercard as durable compounders despite investor concerns around potential disruption, and quantifying the components of the sturdy growth algorithm, favorable mix shifts, and the relatively contained impacts from perceived threats. Our series of deep-dive analyses led to increased confidence in the relative positioning of the card networks and their many attractive qualities in the current environment — such as GAAP profitability, balanced exposures (discretionary versus nondiscretionary), recovery benefits (travel-related), inflationary impacts, and ability to grow through moderate recessionary conditions.

Underestimating the scale and extent of the upward move in interest rates, which caused the larger-than-expected derating in multiples. This led to an increased focus on certain aspects, including profitability and quality of earnings.

Continue to be at the forefront of key industry debates by producing deep-dive analysis and quantitative industry frameworks to inform the long term, while maintaining a healthy respect for modeling the near term. Analysts can add value by being able to concisely explain and frame sector-level and company-specific topics (for example, market sizing, share gains/loss dynamics, means of monetization, shifting unit economics).

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Thomas Gallagher, Evercore ISI

Our best call was our underperform rating on Unum Group in 2018. We got both the theme and the stock call right. A number of companies took sizable charges for an insurance product called long-term care, and our analysis of UNM showed that their reserves were weak for long-term care. They ended up taking charges for this, which led to the weak stock performance. We flagged this as an issue to watch out for in 2017, and it became a dominant theme across the sector in 2018. 

When MetLife announced its decision to pursue a separation of its U.S. retail business in January 2016, I was constructive out of the gate on that announcement. The first six to 12 months following that announcement, though, were pretty bad for the stock, partly driven by some large accounting losses related to the separation. Longer-term, this decision has worked out for Met shareholders, but I got the timing wrong and the stock didn’t behave well initially.  

I think the best way to add value in a turbulent market is to stay ahead of the key risk factors as they are emerging and also try to identify when those risk factors aren’t properly embedded in certain stocks. Life insurance stocks have generally done well against the broader market and compared to other financials as interest rates have increased from historically low levels. One thing I am watching for is a potential tipping point, when investors begin to shift more attention to credit concerns and away from the improvement that rising interest rates have [brought to] the liability side of things. 

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Sheila Kahyaoglu, Jefferies

Upgrading Heico in 2016 — and upgrading it again in September 2022 will prove to be a great call. The company tends to outperform any year with heavy organic and acquisition contribution (43 percent versus 20 percent on average returns). 

Boeing. Boeing. Boeing. Gone. The rise and fall of this company. The stock has had its lows and highs, and we have been supporters throughout just given our belief aerospace is a secular grower and BA operates in a global duopoly with a significant opportunity for self-help.

Publish, publish, publish. (Full disclosure: We have a waitlist to unsubscribe from our list.) Our job as sell-side analysts is to provide clients with deep knowledge on our coverage. This means writing broader theme pieces [and] conducting surveys, as well as providing clients bespoke information that’s useful for their particular requests. 

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Shaun Kelley, BofA Securities

Realistically, it was the first big call of my career. In August 2008, I downgraded Las Vegas Sands to sell. The stock was about $40 at the time, down materially from its highs, but it was still a stock market and growth darling. The crux of our research was the risk around high financial leverage and covenants given they were developing massive integrated resort projects in Las Vegas, Singapore, and Macao all at once. Once Lehman Brothers collapsed, the debt markets changed and liquidity started to run out. Most everything played out as I envisioned, and indeed much faster. LVS recapitalized in the low single digits, and we upgraded at about $5. There were a lot of lessons out of that call and process, but for this sector, it immediately put me on the map as an analyst doing differentiated work and making calls. Perhaps the best advice I received, though, was afterward — once the call had been realized — [which was] to not get stuck in my ways, but to keep going and understand that companies adapt too. We upgraded and ultimately upgraded LVS again, and in the process, I didn’t lock myself into being just a one-hit wonder or a permabear on what ended up being a great company and stock.

I would say my largest challenges have usually been in letting successful stock stories run for too long. In our sector, there are a handful of truly compounding business models, like lodging franchisors, but there are many cyclical companies where the broader economic or industry cycle dominates the fundamentals. Confusing a stock or situation that is breaking out to a new high or valuation with one that is just peaking cyclically can be very challenging in the moment and has been a lesson that has been frustratingly hard to learn at times, especially in the gaming sector.

No rocket science here, but just being an available and valuable resource for investors. I, in particular, focus on scenario analysis, especially for deeply cyclical stocks and sectors. Investors don’t often expect that you get every call or inflection right in turbulent times. But providing insightful and thoughtful scenarios of the potential paths ahead, how bad things can get, and analyzing and being honest about what could be different than in prior market cycles as the environment changes is usually valuable. If you can do it in a timely manner and with some historical experience, even better, as inflections typically happen pretty fast.

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Chris LaFemina, Jefferies

In April 2020, following the post-Covid collapse in commodity prices, we identified stimulus-driven demand factors and potential risks to mine supply that we believed would shift key commodity markets back into a state of undersupply. We concluded that commodity prices would strongly recover from the downturn, and we recommended that investors buy shares of copper-leveraged miners (Freeport, First Quantum, and Glencore) for maximum leverage to the recovery. Over the subsequent two years, Freeport had a total return of 504 percent, First Quantum had a total return of 458 percent, and Glencore had a total return of 278 percent. The S&P 500 had a total return of 66 percent over this period.

We upgraded Alcoa from hold to buy in November 2021, as we believed the outlook for aluminum had become more positive due to the global push for decarbonization. A higher aluminum price would lead to better cash flows and capital returns for Alcoa. The Alcoa share price, which was $47 at the time of our upgrade, doubled to $95 over the next four months. At that time, there was evidence of global aluminum markets beginning to weaken. We identified that the risk to the Alcoa share price had become more balanced. Instead of downgrading from buy to hold at that time, we effectively doubled down by reiterating our bullish call, right at the peak. The stock subsequently fell back to the $40s.   

Running stress tests and evaluating historic turbulent periods for comparative purposes can be very helpful. History tends to repeat itself, especially in highly cyclical sectors such as mining. It is dangerous to allow emotions to influence decisions, as the most tempting time to sell is at the bottom and the most tempting time to buy is at the top. Counterintuitive conclusions and recommendations based on thorough analytical work are often the most differentiated, insightful, and helpful to investors. Sometimes the market just needs a calming influence.

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Mark Lipacis, Jefferies

Upgrading Nvidia in 2015 on the thesis that the computing industry was seeing a once-in-20-years “tectonic shift” to a parallel-processing computing era, and that Nvidia was poised to become the dominant player in that era.

As a young(er) analyst, downgrading the semiconductor industry to sell in September 2004 on the thesis it would suffer from an inventory correction, and then proceeding to watch semiconductor stocks trade higher as they cut estimates over the next three months. This is a humbling industry. The longer you have the privilege of being a sell-side analyst, the humbler you become.

Drawing comparisons to previous turbulent markets and highlighting similarities and differences with the current one.

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Robbie Marcus, JPMorgan Chase

Upgrading Insulet (PODD) to overweight in mid-2019, just as the company’s nascent transition to the pharmacy channel was taking hold. We not only viewed this as a long-term driver of revenues and new patient growth versus competitors, but we were one of the early believers that Insulet’s unique design as a disposable insulin pump would be allowed to be the sole entrant to the pharmacy, which would provide the company a structural advantage in terms of both access and out-of-pocket cost for the patient. Since then, PODD is up 88 percent versus the Russell 1000 (25 percent) and the S&P 500 index (26 percent).

Ahead of Edwards’ highly anticipated low-risk transcatheter aortic valve replacement (TAVR) data in March 2019, we made the bold call that the trial had a greater than 80 percent chance of superiority versus the control arm. Not only was the degree of confidence a standout versus peers, but the math was backed by a biostatistician’s calculations using our assumptions. So while we correctly called the fundamentals, we didn’t also upgrade the stock to overweight and remained at neutral, missing out on nice outperformance for the balance of 2019 (36 percent versus the S&P 500’s 19 percent).

First, think differently and react to the environment. What was helpful to clients during periods of stability [is] unlikely to be nearly as helpful now. Second, investor sentiment and stock positioning [have] become much more valuable commodities, if not the most valuable, and as a sell-side analyst at the intersection of these discussions, we can help spread the message and help investors rationalize some of these market moves.

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Julian Mitchell, Barclays

At the end of March 2020, we upgraded our sector stance from neutral to positive, and along with that, our rating on Ingersoll Rand moved from equal weight to overweight. We’d been cautious on the sector since our initiation in February 2018, and that was at a time when you had a lot of hype because of the tax cuts in the U.S. yielding talk of a “manufacturing renaissance.” Our view was that you’ve got to be careful of this kind of secular hype. The group underperformed through 2018 and 2019 and then dived with Covid in early 2020. We thought at that point that expectations had been fully reset and the trough in purchasing managers’ indices [a measure of economic trends] would create conditions for the sector to rally. There was a lot of secular skepticism at that point — Ingersoll Rand was at $23 back then, for example. Many share prices in the group then doubled by the end of the year, even though when we had made the change, there was a ton of pushback. 

One bad call was upgrading Johnson Controls in May 2021. We liked it because we thought it’s a longer-cycle, later-cycle business with some secular growth tailwinds from the air conditioning industry, tied to energy efficiency and climate change. There were some interesting things going on at the company in terms of offering a new one-stop-shop integrated solution for nonresidential building customers. We thought there’d be a chance of market share gains within a high-growth industry, which would drive up the top-line growth and valuation as well. That worked for a few months. The stock went from the low $60s up to $80, but it’s $50 now. I’d say we became carried away by secular hype and lost our discipline. At the time we upgraded it, we should have kept a much closer view of historical valuation contexts, as valuations in 2021 were inflated by central bank policies that couldn’t last. 

I cover multi-industry companies, so by nature they’re cyclical. One thing we’re very wary of is touting the notion that “this time is different.” People always like to think that they live in times that are unique and special — that no one on Earth ever experienced anything like that ever before. That’s rarely true, particularly in a sector like industrial manufacturing, where many key drivers — like industrial production and purchasing managers’ indices — are innately cyclical and are a kind of north star for the sector; they have been so for many decades and probably will remain that way for decades to come. It should be our job to try and help clients bifurcate the cyclical versus secular, and also [help with] the weighting of those two concepts.

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David Motemaden, Evercore ISI

Upgrading Progressive to outperform in January 2022. We thought Progressive would have a bounce-back year after underperforming the group in 2021, based on no future consensus EPS estimate cuts (after estimates were cut approximately 20 percent over the course of 2021); future price increases that Progressive was implementing that would turn auto margins sooner than peers; and what we thought was a bottoming on auto unit growth. We were wrong on unit growth bottoming but were right on PGR being the first to see margins stabilize and on forward consensus estimate revisions. 

Being too cautious on the insurance brokers in early 2021. I was too hesitant on valuation despite the stocks underperforming the market and business services stocks in 2020 and underestimated how geared they were to the economic recovery. I also underappreciated how organic revenue growth and margin resilience in 2020 could lead to a permanent rerating of the stocks. Though I was positive on Arthur J Gallagher, both Marsh McClennan and AON were up more than 40 percent in 2021 while we sat on the sidelines.

I think it is important to stay grounded in deep fundamental research at all times, but even more so in turbulent markets. It’s vital to conduct thorough research on risks to the industry and quantify the potential impact on earnings, capital, and valuations. For example, nonlife insurers have lower capital markets sensitivity compared with other financials, but I have found looking for risk areas in their investment portfolios using regulatory financials has been value-additive. The key is to translate this research to actionable conclusions that can help our clients have conviction to act.

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George Notter, Jefferies

Calix. We upgraded the stock in April 2020 at $7.65 per share — the shares hit $80 by the end of 2021 and recently traded at about $60 per share. We were the first to identify the budding Calix Cloud software story and its potential to grow into a big and highly profitable business for the company.  

We were slow to downgrade the smaller-cap, subscale communications equipment vendors going into the difficult supply chain environment. (Others were too.) These were the companies that were toward the back of the “line” at semiconductor component suppliers like Broadcom and Texas Instruments.

We’ve worked hard to help clients better understand the new risk factors that are affecting our individual research companies — factors like supply chain, FX rates, and a potential economic recession. These are relatively new risks that investors haven’t had to focus on in recent times.

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Jean Ann Salisbury, Bernstein

In 2021, I pounded the table for Cheniere Energy based on our strong view that liquefied natural gas markets would get tight within the year, for several years. This setup was very compounded by the Russia-Ukraine war, and Cheniere has had extreme outperformance on these trends. 

Thinking that I understood a “black box” marketing business because some Excel backtesting had worked. There’s a reason that black boxes have valuation discounts!

I’ve found that really going into the details on gas pipelines, macro, and LNG can help to build conviction in the long-term story and help investors look through the current extreme turbulence.

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Samad Samana, Jefferies

I had a view early on that HubSpot had the leadership, technology, and vision to transform from a single-product company into a front-office platform for small businesses over time. The best decision was sticking with the call even as the company faced some challenges in 2019 and the stock suffered. Fast-forward to 2022, and HubSpot is growing constant currency revenue faster than it did in 2019 despite being more than approximately two times the size. The stock has also outperformed the [benchmark] over that time.

The bad calls always stick in your mind longer than the good ones. I had only been a senior analyst for a few months when I made a call that still haunts me: I upgraded Workday the night it reported in February 2014. The price was the stock’s high-water mark (approximately $115) at that point, and it would not return to those levels until November 2017.

We serve many functions for investors even in the best of times — a source for insights, a sounding board for their views, and even a part-time therapist. I believe the best way to add value for clients during turbulent markets is to help them tune out the extra noise that comes along with volatility. The goal is to help investors stay focused on their investment decision-making process and supplement that by providing thoughtful, evidence-based research.

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Chris Schott, JPMorgan Chase

My best call has been Eli Lilly, which has been our top idea since 2019. At the time, the stock was emerging from an extended period of limited earnings growth due to major patent expirations and was a consensus neutral across the Street. However, our work highlighted a future growth profile at LLY that would increasingly deviate from peers as the company’s pipeline came to market. Since that time, we have seen positive data from a number of LLY’s pipeline assets (most notably Mounjaro in diabetes/obesity and donanemab in Alzheimer’s), which has translated to significant upward revisions to consensus expectations. And from a stock perspective, LLY shares have meaningfully outperformed, up approximately 190 percent since the beginning of 2019 (versus approximately 40 percent for the pharma group and 46 percent for the S&P 500).

My worst call was sticking with an overweight recommendation on Valeant as the company overreached on its M&A story. Starting in 2009 and 2010 and continuing through late 2015, Valeant was one of the top-performing names in the industry (shares rallied from approximately $10 to $250-plus at peak) as the company consolidated smaller players within the pharma space. We had been recommending the story as we saw this as an effective way to enhance returns across an inefficient segment of the industry. However, as the pace of acquisition accelerated, the company’s growth became more centered on price increases (versus operating efficiencies) and execution began to falter, [but] we continued to recommend the story and missed several opportunities to lock in profits. To this day, I still think back to Valeant as a reminder to constantly challenge my own views on a story and to make difficult calls when needed.

I see combining deep knowledge (and historical context) for your sector and companies with thoughtful analysis on the major issues our clients are grappling with as a formula to add value regardless of the market environment. And in particular, helping investors better understand and separate out short-term market gyrations from more-fundamental shifts in the industry’s fundamentals seems particularly relevant during these turbulent markets.

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Aniket Shah, Jefferies

Our focus on human capital and corporate culture as a core ESG theme and trend. We decided to focus on this topic to help investors understand an important driver of company value — its people. As labor markets continue to go through significant changes (hybrid work, unionization, the great resignation, wage inflation, and so on), our focus on human capital and corporate culture helps investors better understand corporate strategy and long-term value creation.

We underestimated how significant the Inflation Reduction Act would be for decarbonization prospects in the U.S. After the Build Back Better bill seemed to be going nowhere, we were of the view that most climate policy in the U.S. would continue to happen at the state and local levels, but not the federal level. The Inflation Reduction Act is a major boost for all sorts of decarbonization technologies, and the size and scale of it surprised us to the upside.

Focus on the long term. Most of a company’s equity value is its earnings in the long term, but investors are overly focused on short-term results. ESG analysis allows investors to keep their eyes on the long term, which is what’s needed when markets are turbulent. 

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Michael Wilson, Morgan Stanley

I’d like to hope our best call is still in front of us, but our best call so far is the “fire and ice” narrative [of central bank tightening and disappointing economic growth] we first established in September 2021. At the time, this call was very out of consensus and has generally played out for the reasons we laid out a year ago. In my view, good calls can’t be just “right” but must be out of consensus, analytically sound, easy to understand, and early enough for large institutional investors to adopt. The other reason “fire and ice” has aged well is that it came on the back of our very bullish out-of-consensus call at the time of the Covid lows in March 2020, showing we have a flexible framework and can get it right both ways. 

After correctly calling the correction in 2018, we got dogmatic and failed to turn bullish in early January 2019 with the Fed’s dovish pivot. Unfortunately, we missed this opportunity even though the S&P traded right to our downside target at the 200-week moving average in December 2018. In other words, we strayed from our discipline and ignored this critical technical support level. The good news is we learned from that misstep, and it’s one of the reasons we turned tactically bullish recently.

When markets get volatile, it usually means something is changing in the macro environment. That should be a wake-up call to analysts to increase the rigor of their own analysis and discount what companies are saying. In short, flex your independence and look for the flaws in the consensus views. Most of the time, markets are trending because the macro is stable. We think the era of long stable economic outcomes is in the past and a more volatile economic environment is here to stay. This means you cannot rely on company guidance to the degree we have in the past. It’s the same for the Fed, and this is part and parcel with our hotter-but-shorter-cycle call a few years ago. The good news for the true analyst is that it increases the opportunity to differentiate oneself if he or she is willing to take a stand.

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The 2022 All-America Research Team 

All-America Research Team Hall of Fame: Jamie Baker