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Magazine's Top-Analysts List Ignores Some Key Players


Jonathan Joseph has investors' attention: Intel Corp. shares fell 12% Monday after the Salomon Smith Barney analyst cut his profit forecasts for the chip giant.

What Joseph doesn't have is a top position on Institutional Investor magazine's All-America Research Team of top Wall Street analysts.

Ditto for Ashok Kumar, the chip-industry analyst at U.S. Bancorp Piper Jaffray. He won praise after he cut his investment rating on Intel on Sept. 5, less than two weeks before the company said sales would be lower than forecast.

Though Joseph is at least a runner-up in Institutional Investor's rankings, Kumar doesn't appear at all in the latest listing.

Kumar and Joseph are among the less-recognized chip analysts who "certainly are telling good stories and are out in front" of industry trends, said Scott Pape, senior portfolio manager for CastleArk Management in Chicago.

But having the most accurate calls on a stock still doesn't guarantee a spot on the Institutional Investor team, a hot list on Wall Street.

The magazine's rankings are based on "who people like, not necessarily who makes money for them," Pape said. "There's a lot of marketing that goes on," with top rankings often going to analysts who "get out and press the flesh," Pape said.

When Joseph warned July 5 that the semiconductor business cycle seemed to be at its peak and due to decline, "he was ahead of the pack," said Pape. Joseph's call prompted rebuttals from other Wall Street firms and skepticism among many investors at the time.

In the months that followed, many chip stocks have plunged.

Joseph's comments continue to move chip stocks--as on Monday, when his earnings revisions helped push Intel's stock down $4.69 to $35.69.

To be sure, not all investors are impressed with such calls, accurate though they may be.

"They're more like cowboys, gunslingers," said Christian Koch, senior technology analyst at Trusco Capital Management in Atlanta, which has $50 billion under management.

Fundamental research that helps investors assess a company's prospects is more useful, Koch said, than a big call that moves a particular stock or industry.

"How can I go tell my portfolio managers I want to take a couple hundred million out of Intel because so and so thinks growth is slowing?" said Koch, referring to Joseph's call in July. While the call turned out to be correct on the fundamentals, Koch said, it was not helpful in terms of the timing of the change in the industry.

When the prospects for an industry are changing direction, "it's hard to ferret out whether it's a fire or a fire drill," Koch said. "Nine times out of 10 they're fire drills."

For fundamental research help, Koch likes Mark Edelstone of Morgan Stanley Dean Witter & Co., who happens to be the top-rated chip analyst on this year's Institutional Investor All-America team.

The magazine asks 725 money managers to rate analysts in about 90 categories. Analysts, and sometimes a firm's salespeople, campaign for investor votes because a roster of top-ranked analysts can help a firm win underwriting and advisory business. The rankings appear in the October issue of the magazine, which came out last week.

The events that drove this year's rankings are hardly current. The magazine points out that Edelstone "turned more bullish" in December 1999, catching a rise in chip stocks that lasted into the early summer.

The size of an analyst's brokerage plays a role in whether he or she will reach the top tier in the Institutional Investor list. When a money management firm doesn't do much business with a brokerage, such as Piper Jaffray, managers may not know what the firm's researchers are doing.

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