Sutro's West L.A. branch aims to be key player in stock issues.

A new Sutro & Co. is coming out of the blocks in 1997, invigorated by an employee buyout that closed late last year.

"The entire organization is reacting," said Tom Weinberger, now executive vice president and director of investment banking for the 139-year-old securities brokerage.

"It sounds like platitudes, but it's true. There is a lot more enthusiasm, an entrepreneurial spirit, and people are acting like owners, not employees," he said.

Weinberger should know. Sutro's entire investment banking operations are based in West Los Angeles. As a senior manager, and owner, Weinberger has laid plans - and has the power to implement same - for Sutro's L.A. offices to become a juggernaut in regional securities offerings, mergers and private placements of capital.

Last Nov. 29, Boston-based John Hancock Financial Services Inc. sold San Francisco-based Sutro to employees and other investors because of changes in industry rating standards that penalized insurers for owning brokerages.

In the employee buyout, Weinberger, 52, played a once-in-a-lifetime role: He was the investment banker for himself and his clients (Sutro employees), which included an investment banking operation.

"There were a lot of players in the deal," he said. "I was one of several."

Nevertheless, with Weinberger firmly in command of corporate finance activity, Sutro is gearing up following the buyout - and is hiring apace.

"We are up to 22 professionals (bankers), and we are hiring as we speak," he said.

Bankers hired in the last two weeks include John Morris, formerly of Wedbush Morgan Securities Inc.; Joseph Boystack, formerly of Trouver Capital Partners; and Andrew Murray, from Ryan, Beck & Co. Inc.

Coming aboard soon from brokerage Seidler Amdec Securities Inc., in a generalist capacity, will be Mark Tunney, son of former U.S. Senator John Tunney, said Weinberger.

With the recent hires, Sutro's L.A. office has one of the largest collections of investment bankers and analysts outside New York. The firm also maintains 21 retail offices - warrens for stock brokers on the West Coast.

Weinberger's troops have been busy, executing 22 transactions in 1996, including six public offerings, five private placements and 11 mergers and acquisitions assignments.

Already in 1997 they have filed four initial public offerings. A $100 million IPO is in the works, though Weinberger won't say for what company.

Sutro's ability to sell stocks and bonds - ultimately, the key to successful investment banking - will be bolstered by a reinvigorated relationship with Sutro's institutional group in downtown Los Angeles, known as L.A. Trading.

Under Hancock ownership, Weinberger's group did substantial institutional trading through a Hancock subsidiary. Now with Hancock out of the picture, Sutro is free to work more closely with L.A. Trading, Weinberger said.

The institutional trading house will help Sutro sell larger offerings to big buyers.

The new game plan, according Weinberger, is to find and service West Coast companies, particularly in Southern California, that need investment banking services, and then move the resulting product, be it bonds, stock, or private placements, into the hands of institutional investors, such as insurance companies, mutual funds and money managers.

Weinberger likes the plan - and the market.

"I probably shouldn't say this out loud, but Los Angeles, or what I call the Los Angeles basin, is under banked," said Weinberger, referring to the small number of investment bankers, particularly from major wire houses, in the region.

Of major brokerages, only Donaldson, Lufkin & Jenrette Inc., in something of a historical anomaly, maintains a large presence in Los Angeles, and that office is really a national operation. (DLJ picked up dozens of bankers who did not want to move east following the demise of Drexel Burnham Lambert Inc.)

The lack of competition puzzles Weinberger all the more because the state economy is on the mend. "I think the turnaround is more substantial than generally recognized," he said. "We even see that in office rents. We are looking for more space, and believe me, the rents have gone up in West Los Angeles."

The vast sea of middle market companies in Southern California is a rich lode for investment bankers, due largely to growth companies, and wave after wave of industry consolidations, said Weinberger.

"We are targeting four areas: technology, health care, financial services, and consumer leisure activities," he said. Included in financial services are real estate investment trusts, or REITs.

An industry veteran, Weinberger has emerged as a leader at Sutro as much for his people skills as his broad knowledge and professional experience, say colleagues.

Weinberger exudes intelligence, but is quick to say "I don't know," when asked a question outside his ken, and easily defers to others. "I like to build consensus. You can't run an organization like this as an autocrat," he said.

Noted Managing Partner Michael Brown: "Tom's unusual in that he is a complete investment banker. He can get the deal done, but he is also an excellent administrator."

Weinberger, said Brown, "builds consensus and has confidence in his people. He gets involved when something requires him to get involved."

Weinberger has experience on "both sides of the fence" - running companies as well as financing them. His job history includes a stint in the military as a hospital administrator and as a product manager of New York-based medical products company Pfizer Co. Inc., as well many years at brokerages L.F. Rothschild and Oppenheimer & Co.

"My background in industry gives me a different perspective. I learned there's a big difference between saying you are going to do something and actually getting it done," he said.

Weinberger is intrigued by stock market behavior of the last two to three years, in which large companies, as a group, have outperformed smaller companies.

For example, the Dow Jones Industrial average, a group of 30 large cap stocks, rose 26 percent in 1996, vs. 16.5 percent for the Russell 2000, which has many small cap stocks.

That's a reversal of a historical norm.

"There's probably not a day that goes by that this (large cap stock performance) is not a topic of discussion in my house my wife is a money manager," he explains.

Large companies have definitely become more efficient, he noted. But he expects small companies to lead the economy again eventually. "Large cap stocks are trading for higher valuations than small cap companies," he said. "But I think it will rotate back in due course."

At A Glance

Sutro & Co.

Founded: 1858

Company headquarters: San Francisco

Offices: 21; in California, Nevada, Arizona, Colorado

Employees: 650

Operations: Full service; retail, public (municipal), investment banking, institutional trading