October 17, 1997 4:30 PM PDT
The who's who of tech analysts
Institutional Investor has compiled a who's who list in the arena of all-star coverage, releasing the results of its 1997 All America Research Team survey, which highlights the most respected Wall Street voices--including those for tech coverage.
The winners were determined by analyzing some 3,000 responses from more than 300 firms representing research directors and chief investment officers of U.S. mutual funds, pension funds, and other money-management institutions.
For analysts watching the PC hardware sector, it was hard not to pick a winner among the usual suspects: In summer-to-summer results, Dell Computer (DELL), Compaq Computer (CPQ), and Gateway 2000 (GTW) reported growth rates of 500 percent, 183 percent, and 162 percent respectively.
But Michael Kwatinetz, an analyst at Deutsche Morgan Grenfell, held his lead position due to the fundamental reasoning behind his picks--specifically, his contention that PC stocks deserve higher multiples.
Last November, Kwatinetz said those computer makers should be trading at a premium to the big consumer brands like Coca Cola (KO), PepsiCo (PEP), Kellogg (K), and Wal-Mart (WMT), considering that they were growing about four times as fast. But the average valuation for the hardware stock was 15 times forward earnings, compared with 22 times forward earnings for those consumer brands. Months later, those computer stocks zoomed out of their valuation ranges, said the survey.
In the PC software sector, Richard Sherlund of Goldman Sachs held onto his title for his strategy surrounding software giant Microsoft (MSFT). Summer to summer, Microsoft stock gained 150 percent, more than tripling Standard & Poor's 500 index. Microsoft, which didn't have an Internet strategy two years ago, has embraced the Internet and has become one of its biggest beneficiaries, said the survey.
The survey cited investors that appreciate Sherlund's ability to put information into context in his reports, while looking toward milestones that likely will influence the future behavior of Microsoft stock.
Steven Milunovich, an analyst at Merrill Lynch, won for the server and enterprise hardware category. He was praised by his clients for his stability and strategic big-picture themes, said the survey. His thesis that the server market is highly attractive is coming of age, as Sun Microsystems, Silicon Graphics, and Compaq Computer are relying on servers for profits, rather than lower-end personal computers and workstations.
Milunovich also anticipated the shift in demand from individual products to one-stop-shopping solutions, said the report.
Morgan Stanley Dean Witter analyst Charles Phillips Jr. is a four-time winner in the server and enterprise software sector. He is applauded by his clients for being accessible and for regularly attending trade shows and analyst meetings. He is also a crowd-pleaser because of his ability to explain the latest technology intelligibly.
He has stood behind Oracle, which has emerged as a high-end leader for databases, and the stock has gained over 40 percent during the last year. He also has pushed PeopleSoft (PSFT), Baan (BAANF), BMC Software (BMCS), Computer Associates (CA), and Compuware (CPWR), all which have climbed between 35 and 191 percent during the same period, said the report.
Mary Meeker, also at Morgan Stanley Dean Witter, held on to her lead position in the Internet sector. Constituents salute Meeker on her stock picks, like America Online (AOL), which rose 107 from July 1996 to July 1997.
"She's very good at analyzing each company's strategic position within the Internet universe," an ally said in the report. "And she has valued AOL as one would value a cable company, which has enabled her to be constructive on it long-term."