Corporate Canada and the institutional investor crowd have very different views of what makes a good analyst, according to the latest research rankings out of Brendan Wood International.
For 40 years, consulting firm Brendan Wood has canvassed the buy side of the Street - the money managers - to find the "Top Gun" analyst in every sector. For the financial crowd, these awards hold considerable sway, as an all-star rating can translate into all-star compensation.
This year, Brendan Wood freshened up the format, asking both portfolio managers and executives at public companies to rank the sell side's analysts. The broadened approach courts controversy, as recent Wall Street scandals highlight the perils of linking research coverage to corporate finance assignments. However, in talking to all the sources of revenue for a dealer, Brendan Woods is acknowledging the way the industry really works.
In theory, an analyst should be able to bridge the needs of institutions and corporate clients by providing unbiased insight. In practice, analysts and dealers struggle to square this circle. There's an unavoidable conflict between the dealer's role of sales agent on corporate transactions, such as stock sales, and purveyor of investment advice. The best analysts, in simple terms, do the best job of handling this conflict.
Brendan Wood's work shows the majority of analysts, intentionally or accidentally, choose to favour either investors or corporate clients. Knowing a great many analysts, I'd say the move tends to be unconscious. The consulting firm found that a select few have fans in every camp.
In its latest survey, a quarterly update that features "Top Guns" in 11 sectors, Brendan Wood names a total of 66 analysts. (Traditionally, the consulting firm produced just one ranking each year, naming the top three analysts in 30 sectors, all nominated by the buy side.)
Only 14 analysts were highlighted as among the top three by both institutions and corporations. Brendan Wood called these the "SuperLeague" analysts:
Gold & Silver: Tanya Jakusconek, National Bank Financial; Barry Cooper, CIBC World Markets.
Forestry: Richard Kelertas, Dundee; Sean Steuart, TD Securities.
Industrial Products: Randy Cousins, BMO Nesbitt Burns.
Income Trusts-Royalty: Gordon Tait, BMO Nesbitt Burns; Roger Serin, TD Securities.
Oil & Gas (Exploration & Production): Martin Molyneaux, FirstEnergy Capital.
Utilities: Linda Ezergailis, TD Securities.
Insurance: Tom MacKinnon, BMO Nesbitt Burns.
REITs: Michael Smith, Macquarie; Sam Damiani, TD Securities.
Telecom: Greg Macdonald, National Bank Financial.
High Tech: Michael Urlocker, GMP Securities.
SUNCOR'S SYNCRUDE STAKE
The premium price Sinopec paid to buy into the Syncrude oil sands project has kicked off speculation that Suncor Energy might sell its 12-per-cent stake in the project.
Sinopec, the state-owned Chinese energy company, became a player in the oil sands in April by dropping $4.65-billion (U.S.) for a stake in Syncrude owned by ConocoPhillips.
In the wake of that deal, top-ranked RBC Dominion Securities analyst Greg Pardy came out with a report on Monday that said: " Suncor Energy is not actively marketing its 12 per cent interest in Syncrude, but based on our dialogue with the company, we think a part of that interest could be sold over time at the right price."
If a buyer were to pay the same valuation on Syncrude that ConocoPhillips received, Suncor would take in $6.2-billion. The RBC analyst said the most likely scenario is that Suncor sells 7 per cent of Syncrude, a stake worth $3.6-billion. "In terms of potential buyers, we would point to Chinese and other national oil companies wishing to build or expand their footprints in the oil sands, as well as strategic industry purchasers," Mr. Pardy said.
The idea that Suncor would part with a its stake in Syncrude, for a premium price, fits with the disciplined and well-respected management ethic at Suncor, the country's largest energy company. Under CEO Rick George, Suncor has never shied away from tough decisions, or been wedded to any one property.
See Andrew Willis's Streetwise Blog at ReportonBusiness.com
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