Analyze This.They are the E.E Huttons of the insurance industry. When they speak, people listen. Investors listen. Journalists listen. Corporate executives listen.
Wall Street analysts need only open their mouths to draw attention. What they say may not always be pro found, but it often carries a lot of weight. And because so many people are hanging on their every word, they wield tremendous power.
This month's cover story ("Power Play," page 20) paints a picture of the equity analyst as a hard-working, competitive and well-compensated risk taker tak·er
One that takes or takes up something, such as a wager or purchase: There were no takers on the bets.
Noun . When a company's stock is overvalued Overvalued
A stock whose current price is not justified by the earnings outlook or price/earnings (P/E) ratio and thus, expected to drop in price. Overvaluation may result from an emotional buying spurt, which inflates the market price of the stock or from a deterioration in a or a company is moving away from profitability, analysts often have to make gutsy guts·y
adj. guts·i·er, guts·i·est Slang
1. Marked by courage or daring; plucky.
2. Robust and uninhibited; lusty: "the gutsy . . . calls that can send stock prices plummeting. And they'd better be right, or there will be hell to pay.
Analysts sometimes risk their careers on a call. "The reality on Wall Street is that you have to be prepared to put your job on the line," said Colin Devine, managing director in the research division of Salomon Smith Barney Smith Barney is a division of Citigroup Global Capital Markets Inc., a global, full-service financial firm, that provides brokerage, investment banking and asset management services to corporations, governments and individuals around the world. .
While analysts can command an audience, they can no longer have a private audience with company executives when they release financial-related information. Regulation Fair Disclosure The U.S. Securities and Exchange Commission's (SEC's) Regulation Fair Disclosure, also commonly referred to as Regulation FD or Reg FD was an SEC ruling implemented in October 2000 (). , which went into effect last October, put an end to those cozy See COSE. meetings. Under Reg FD, companies are required to release earnings reports, profit warnings and other financial-related information to the public at the same time they release them to analysts.
The regulation was designed to create a level playing field See net neutrality. for both large and small investors. But critics, including some Wall Street analysts, say companies are now more guarded in what they say. (See "Fair and Fewer Disclosures," page 34.)
Reg FD is just one of the many challenges analysts face. Other challenges include extensive travel, long work days and taking the heat for making bad calls.
"I'm waiting for when I make a serious error," said Todd Bault, a second-year analyst with Sanford C. Bernstein & Co. "It's your job to stand up and take it."