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Authors: Dan Reingold
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Stanley’s institutional sales force that afternoon, I feared that I was going to slip up somehow, or that I’d made the wrong call on the stocks. In this job, I’d get my report card quickly, when the next day’s stock market would make clear whether people thought I was a bozo or a brainiac. I made it through my presentation, but during the Q&A that followed, Bill McElroy, an astute salesman, stopped me cold with the most innocent of questions.
“Are you saying that investors should be underweighted or overweighted in the sector?”
Whaaaa? I froze. I was not prepared for such a basic but reasonable question, focused as I was on all the obscure details. What he was asking was whether one should put a higher percentage of one’s assets in telecom stocks than they represented as a percentage of the overall market. Basically, he wanted to know if I thought the Baby Bell stocks would perform better than the market. I glanced over at Ed, sitting in the fifth row center, who was calmly mouthing “under, under.”
“Underweight,” I blurted, trying to sound confident.
Once finished, I raced back to the office for the next phase of releasing a report. I called as many buy-side clients as I could to further explain my position to them and to make that “personal contact” I was learning was so very important.
After ten months of sweating bullets, the whole thing was something of an anticlimax. The salespeople were moderately but not overly impressed. I was just another analyst making just another report. And the stocks themselves? They didn’t budge. It was a humbling experience.
I eventually realized three things: first, I was covering slow-moving stocks that didn’t fluctuate a lot; second, I was brand-new and no one was going to invest money on my recommendations yet; and third, I had presented an entirely well-reasoned but entirely unsexy report. It didn’t have any juice, any pop, any emotion, any insider-type info. Other than “Max Headroom,” its title, it didn’t even have any catchy phrases. Those were the calls they loved, the calls that moved markets.
Ed consoled me. “Your job is not to move stocks the first day,” he said. “It is to get yourself recognized as someone who knows the industry. Your job is to get Fidelity and Capital Research and Alliance Capital Management to call you before they decide to buy or sell telecom stocks.” These were the huge mutual funds that were Morgan Stanley’s biggest trading clients, as well as the biggest owners of stocks and bonds in the world.
I knew Ed was right, but for years, I couldn’t help but stare hopefully at the screen the morning after I announced a change in ratings or put out a new report. Sometimes, particularly after I became known on the Street, my reports moved stocks immediately. But if I had interpreted an event or news report as bearish and Bell Atlantic or PacTel closed up 50 or 25 cents, I took it personally. Why was someone at Putnam or Fidelity buying when I’d laid out such a well-reasoned argument against doing so? Eventually, I calmed down, but it always struck me that, unlike many people in the corporate world, investors and their advisers got graded every day. If I missed some news or made a bad call, I’d hear about it immediately, first from the trading prices of the stocks and then from an unhappy money manager who’d followed my advice or a Morgan Stanley salesman who’d pitched it hard.
The month after my piece came out, Jack Grubman wrote a quarterly update report, mentioning that those who were looking at regulatory “headroom” were looking at the wrong issue. He meant me. It was a personal shot, yet I got some satisfaction from the fact that I had at least gotten some attention and free advertising from a competitor who had confidently predicted my failure.
“We Do Not Make Negative or Controversial Comments About Our Clients.”
Over time, I acclimated myself to this whole new world. Yes, I had to sell
“Are you saying that investors should be underweighted or overweighted in the sector?”
Whaaaa? I froze. I was not prepared for such a basic but reasonable question, focused as I was on all the obscure details. What he was asking was whether one should put a higher percentage of one’s assets in telecom stocks than they represented as a percentage of the overall market. Basically, he wanted to know if I thought the Baby Bell stocks would perform better than the market. I glanced over at Ed, sitting in the fifth row center, who was calmly mouthing “under, under.”
“Underweight,” I blurted, trying to sound confident.
Once finished, I raced back to the office for the next phase of releasing a report. I called as many buy-side clients as I could to further explain my position to them and to make that “personal contact” I was learning was so very important.
After ten months of sweating bullets, the whole thing was something of an anticlimax. The salespeople were moderately but not overly impressed. I was just another analyst making just another report. And the stocks themselves? They didn’t budge. It was a humbling experience.
I eventually realized three things: first, I was covering slow-moving stocks that didn’t fluctuate a lot; second, I was brand-new and no one was going to invest money on my recommendations yet; and third, I had presented an entirely well-reasoned but entirely unsexy report. It didn’t have any juice, any pop, any emotion, any insider-type info. Other than “Max Headroom,” its title, it didn’t even have any catchy phrases. Those were the calls they loved, the calls that moved markets.
Ed consoled me. “Your job is not to move stocks the first day,” he said. “It is to get yourself recognized as someone who knows the industry. Your job is to get Fidelity and Capital Research and Alliance Capital Management to call you before they decide to buy or sell telecom stocks.” These were the huge mutual funds that were Morgan Stanley’s biggest trading clients, as well as the biggest owners of stocks and bonds in the world.
I knew Ed was right, but for years, I couldn’t help but stare hopefully at the screen the morning after I announced a change in ratings or put out a new report. Sometimes, particularly after I became known on the Street, my reports moved stocks immediately. But if I had interpreted an event or news report as bearish and Bell Atlantic or PacTel closed up 50 or 25 cents, I took it personally. Why was someone at Putnam or Fidelity buying when I’d laid out such a well-reasoned argument against doing so? Eventually, I calmed down, but it always struck me that, unlike many people in the corporate world, investors and their advisers got graded every day. If I missed some news or made a bad call, I’d hear about it immediately, first from the trading prices of the stocks and then from an unhappy money manager who’d followed my advice or a Morgan Stanley salesman who’d pitched it hard.
The month after my piece came out, Jack Grubman wrote a quarterly update report, mentioning that those who were looking at regulatory “headroom” were looking at the wrong issue. He meant me. It was a personal shot, yet I got some satisfaction from the fact that I had at least gotten some attention and free advertising from a competitor who had confidently predicted my failure.
“We Do Not Make Negative or Controversial Comments About Our Clients.”
Over time, I acclimated myself to this whole new world. Yes, I had to sell
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