From his office in Manhattan, surrounded by more than a dozen model airplanes that span time and manufacturers — including miniatures of aircraft that never flew, like a United A340 and a Northwest 717, both of which he’d “grab in an earthquake” — Jamie Baker recalls when his fascination with the airlines industry began.
“I actually remember it very clearly,” Baker says in an interview via Zoom. “It was the summer between third and fourth grade, when my parents first took me to California from New Jersey. I’m sure I’ve glamorized it in my head, but in my mind, coming up the escalator at Newark Airport and seeing the rows of aircraft, angels burst into song.”
This early passion for airplanes, and thoughts of becoming a pilot, soon turned into an interest in the business itself. “It was PEOPLExpress, which was one of the first discount airlines in the United States, that really got me interested in the business of aviation,” he says. “I was a teenager at that point — flying alone to look at colleges or visit my sister in college — and I flew PEOPLExpress a lot. The more I flew, the more I wondered things like: Why did they decide to have a Boeing 727 operate today? Whereas when I took this last month, it was a Boeing 737? How did they decide that $49 a ticket was the right price?”
The punchline: PEOPLExpress Airline could not make money at those prices. They went out of business and gave Baker his first front row seat to turbulence in the industry. It would not be his last. As an undergrad at the time, he interned at now-defunct Kidder, Peabody & Co. for a broker, and came across a research report on TWA written by the firm’s airlines analyst. “I didn’t even know that airlines analysts were a thing,” he said. “I didn’t know that facet of Wall Street even existed.”
But the institutional investors of Wall Street are now well aware of Jamie Baker. Not only has he covered the airlines industry as an equity analyst for more than two decades, but this year he makes his tenth career No. 1 appearance on Institutional Investor’s All-American Research Team. Baker is also the only analyst to join the AART’s Hall of Fame this year.
He has been at JPMorgan Chase & Co. since 2001, following a brief detour from Wall Street in the mid-’90s to work for an airline. “I don’t know if it gives me an edge as an analyst per se, but one of the things that I found having worked in the airlines industry is that it’s really easy for me to talk to people in the industry — from pilots to senior management to people in revenue management,” Baker says. “I don’t know if it makes me a better stock picker. It probably doesn’t. But I do find that just being comfortable with the vernacular, it just eases the conversation process with decision makers in the industry. And that does help me do my job.”
As much as sell-side research has changed, Baker is quick to point out the ways it has not. “At the drop of a hat, if something happens in the industry — a deal or merger is announced — I need to be available to my clients. That hasn’t changed in my 20 years,” he says. “It’s a customer-serving business that I’m in.”
Baker attributes many of his career successes to close collaboration with his counterparts in credit research as well as the introduction of Regulation Fair Disclosure (Reg FD) in 2000, which provided a “huge shot in the arm” for improving the overall quality of research.
“Analysts play a lot of roles,” Baker says. “We build models. We pick stocks. We gauge the market. We have to form relationships with management. A lot goes into it. I think there’s a tendency for individuals earlier in their career to think, ‘Okay, I can do everything better than anybody else. I can be number one in each of the areas that make up being a Wall Street analyst.’ I don't think that’s practical. You have to figure out areas you can gain a competitive edge, where you can really make a name for yourself.”
Read more of our interview to find out how Baker made his own name as a Hall of Fame analyst.
Institutional Investor: How has your job changed since you started out?
Baker: I’m not convinced it has. Technology has obviously evolved, and I can accomplish in one day what might have once taken five. But investors still value the same things from analysts: deep industry knowledge, close ties to managements, independent thought, access and responsiveness, nontraditional analysis, and so on. So the tools I’m using have certainly changed, but the priorities I set for myself today really aren’t much different than 20 years ago. Put the client first, ask tough questions of managements, and write in a style that ensures clients will open your email before they look at your competitors’.
II: What’s the best call you’ve ever made?
Baker: American Airlines Group in 2013. American was in bankruptcy, and equities of bankrupt companies tend to be ignored. But then came the proposed merger between American and US Airways. Thanks to my collaboration with the credit research department, I quickly realized that once American creditors were made whole, any further appreciation in US Airways equity would cascade down and accrue at AAMRQ. Basically, if US Airways appreciated at all, AAMRQ was structurally guaranteed to appreciate even more. Looking back, it was a comparatively easy call, but nobody else took the time to figure it out. We put an overweight on AAMRQ at about $3, and by the time the deal closed in December, it was about $30.
II: What’s the worst call you’ve ever made?
Baker: Covid is the first thing that comes to mind, as we initially underestimated the punishing impact on travel demand. But lots of analysts would probably say the same. In terms of single-stock calls, we initiated on Copa Holdings with a neutral. Looking back, I didn’t sufficiently appreciate the quality of the management team, the uniqueness of Copa’s network, and how smoothly the integration of Aero Republica would proceed. By the time we finally upgraded to overweight, we had missed a meaningful surge in the stock.
II: What non–family member influenced your career the most?
Baker: Without question, Mark Streeter, JPMorgan’s credit research analyst covering airlines. Mark approached me my first week at JPMorgan, assuring me we’d work closely together, and all I could think was, “Who is this goofball? I’ve never heard of him.” Short answer: He’s the top-ranked transport credit analyst on Wall Street, and has the II victories to prove it. Mark convinced me that I should look at the entire capital structure of airlines, not just equity. And during Covid, having access to a credit analyst definitely gave me an edge over my equity-only competitors. Mark is also my voice of editorial sanity, and he’s walked me back from publishing some pretty colorful stuff. I wouldn’t have achieved my all-star designation without my co-pilot, Mark.
II: What’s the biggest challenge the sell-side research industry faces?
Baker: I’m an outlier insofar as I cover a sector I’ve long been interested in. But that’s rare. I know it’s not always practical. But the best analysts I know are the ones who are truly passionate about their sectors. Finding and fostering passion has been and remains a significant challenge. Granted, some may argue research is in long-term secular decline, but I think there will always be a market for analysts who truly understand the intricacies of their sectors.
II: What’s the biggest challenge the airlines sector faces?
Baker: The recessionary overhang has punished my stocks, and many long-onlys fled the sector during the downturn. I think the biggest challenge is winning back longer-term investors. I think this is a much bigger challenge than, say, the impact Zoom may have on corporate travel demand. The shareholder base for airlines has to broaden and diversify.
II: What makes an all-star analyst?
Baker: Curiosity and skepticism make the best analysts. Always try to figure things out, and always be willing to push back against managements if needed. The best compliments I receive often come after quarterly conference calls, where investors have thanked me for asking tough questions and holding management’s feet to the fire. And when investors ask a CEO or CFO, “Who should we be talking to on the sell side?,” my hope is they reply, “Jamie Baker.” If you’ve earned the respect of both clients and managements, to me that’s the hallmark of an all-star.