SAN FRANCISCO -Nick Pirsos, insurance analyst at Sandler O'Neill & Partners LLC, New York, was the best stock picker last year, the Nasdaq Starmine Top Analyst Awards show.
Mr. Pirsos had an absolute return of 48.3% from the companies he follows, according to Starmine, a San Francisco-based financial services company. It tracks Wall Street analysts' buy/sell recommendations and ranks the analysts on their stock-picking ability based on the return for all the recommendations.
Analysts are often judged on their buy recommendations, but one of Mr. Pirsos' recommendations was a sell. The stock of SCPIE Holdings Inc., the parent company of a group of insurance and insurance-related companies providing medical malpractice insurance, declined 64% during the year. One of his strong buys, Hilb, Rogal and Hamilton Co., which places various types of insurance with underwriters on behalf of its clients, was up 37% for the year.
A tough year
Mr. Pirsos said he is honored with the selection but "we weren't working to achieve any honors, we were just trying to get the stocks right and let the names come out where they should." He follows 17 companies, and acknowledged that 2002 was a tough year for most sectors, including insurance-related companies. "Last year the group was down along with the entire market; we just wanted to keep our noses to the grindstone. "
David Lichtblau, Starmine vice president, said a leveling mechanism was used to compare analysts covering diverse industry groups to adjust and compensate for dispersions of underlying returns. In the case of the top stock pickers, he said a portfolio was created replicating the buy recommendations and shorting the sell recommendations.
The other stock pickers in Starmine's top 10 were, in order: Richard Repetto, diversified financials analyst at Putnam Lovell Securities Inc.; Steven Labbe, insurance analyst at Langen McAlenney Co.; William Leach, food products analyst at Banc of America Securities Inc.; Paul H. Nisbet, aerospace and defense analyst at JSA Research Inc.; Richard C. Moore, real estate analyst at McDonald Investments, now known as KeyBanc Capital Markets; Peyton N. Green, banking analyst at FTN Financial Securities Corp.; Richard C. Close, commercial services and supplies analyst at SunTrust Robinson Humphrey, a division of SunTrust Capital Markets; Janice L. Meyer, hotels, restaurants and leisure analyst at Credit Suisse First Boston LLC; and Michael S. Scialla, oil and gas analyst at A.G. Edwards & Sons Inc.
Some of Mr. Repetto's stock picks were almost counter-intuitive following the collapse of the Internet bubble in 2000. Among his top buys in 2003 were online financial service providers, including LendingTree Inc. and NetBank Inc.
"Both are definable businesses that were focused on mortgage generation last year," said Mr. Repetto. "As interest rates dropped, mortgage refinancing never stopped and even accelerated. Both these companies are Internet based and are changing the way we see traditional organization and lending models work."
Paul Nisbet, aerospace and defense analyst at JSA Research Inc., a Newport, R.I., independent provider of aerospace equity research for institutional investors, had to be more nimble with his recommendations. He maintained his buy recommendation on Lockheed Martin Corp. as it increased in price most of the year until late in the fourth quarter, when he issued a sell recommendation before it started to slide.
He said Lockheed Martin benefited from the rush to defense stocks in the pre-war months. The company also was helped by winning lucrative contracts to produce the F-22 fighter jet and to develop the F-35 Joint Strike Fighter.
Richard C. Close, who follows the education services industry for SunTrust Robinson Humphrey in Nashville, said the student population growth and increasing popularity of online education providers contributed to his success in 2002.
"In general the group has done well since March of 2000." He said one of his recommendations, Corinthian Colleges Inc., a for-profit educational institution operating 63 colleges in 21 states, was up nearly 70% for the year. Another positive name on his list of success stories in 2002 was Apollo Group Inc., which was up nearly 46% in 2002, he said.