Wall Street's Rising Stars

Experience counts. But a great stock call or rewarding insight can also come from someone who is relatively new to the scene. So, it's a good idea to keep an eye out for gifted newcomers, and get the benefit of their thinking before they burst forth on TV news shows and start moving the market.

That's why we took a special look at the data from our Analyst Rankings -- Equity 2000 survey to identify the best up-and-comers in the areas they follow. We asked our voters -- institutional investors -- to nominate rising stars by filling in a box on their email ballots. The basic requirement: The nominee has been a senior analyst for three years or less.

The Winners

By name By category By firm Best stock pickers Best firms

These up-and-comers may be new to Wall Street, but many are by no means kids. Instead of taking the conventional path -- getting an MBA and then spending dues-paying years crunching numbers and doing heavy-lifting for a Street veteran -- these analysts are career-switchers. A number of them started out as professionals or managers in the industries they now cover.

Here, we highlight some of the rising stars and share some of their industry outlooks and favorite stock picks.

Amy Butte, Diversified Financial Services

Amy Butte

"Her work ethic is great, and with a little more seasoning she will move to the top of the class," is one voter's assessment of 32-year-old Amy Butte. The Bear Stearns analyst developed trading systems technology at Bridge Information Systems and Merrin Financial before joining Merrill Lynch in 1997 and departing for Bear two years later.

Butte, who received fully half of the votes cast for newcomers in diversified financial services, is especially valued for her proactive stance: "She makes an effort to keep clients informed on the working part of the companies she follows," says a voter. Voters also noted her courage in making "controversial" calls. An example: While most analysts were recommending Knight Trimark Group (NITE Quote - Cramer on NITE - Stock Picks), Butte initiated coverage on Jan. 26 with an "unattractive" rating, citing increasing competition. The stock fell from 33 5/8 to a low of 26 1/16 on May 23. It is now around 30.

Butte, who has a B.A. from Yale and an MBA from Harvard, anticipates 12% to 15% annual revenue growth for the sector over the next three to five years. She cites the development of European capital markets, technology's favorable impact on trading volume, and the growing presence of retail investors as factors.

But finding the real winners means homing in on companies able to leverage tech know-how. And that's where Butte says her background gives her an edge. "I understand how technology changes the work flow and impacts the business," she says.

Butte's top pick: Charles Schwab (SCH Quote - Cramer on SCH - Stock Picks). She has continually supported the stock even as it fell to a split-adjusted 18 in October. It rose to 45 in March and is now around 34. (Bear Stearns has done no recent underwriting for either company.)

Nathaniel Cohn, Semiconductors

Nathaniel Cohn

Semiconductor analyst Nathaniel Cohn was an electrical engineer at Raytheon before he earned an MBA at Wharton and headed to Wall Street in 1998. Cohn "knows his companies backwards and forwards," says a voter. "He always does his homework."

The 31-year-old Goldman Sachs analyst believes that his technical background allows him to stay on top of a challenging industry. "I go down deep within the companies while also articulating the bigger picture and making it tangible," says Cohn, who, one voter says, is noted for his "excellent industry pieces."

Cohn, who received twice as many votes for top newcomer as the runner up in semis, maintains that the 40-year-old industry is still in its infancy. "More and more people will be connected, so there will be more traffic, more equipment, more chips," explains Cohn. "The companies I cover have been posting growth even beyond our forecasts."

Cohn's current favorite is PMC-Sierra (PMCS Quote - Cramer on PMCS - Stock Picks), which he recommended in December at a split-adjusted price of 50. It closed on June 22 at 203 3/8. Citing the company's exceptional grasp of the networking infrastructure markets and ability to provide appropriate products, Cohn says now that his forecast of 91% growth for the company in 2000 will prove conservative. (Goldman Sachs has done no recent underwriting for the company.)

Richard Evans, Pharmaceuticals

Richard Evans

Richard Evans' competitive edge has been honed by the sheer variety of jobs he has held. With both a veterinary degree from North Carolina State and an MBA from Yale University, the Sanford C. Bernstein pharmaceuticals analyst has done everything from large animal medicine to venture capital to planning policy for the Roche Group.

Evans initiated coverage of the drug giants at Bernstein in September 1999, and investors in our survey rave about his "great potential." "Having been on the inside," Evans notes, "I don't have to wonder or imagine what goes on inside those companies."

What he does know makes Evans cautious. He expects pharmaceutical pricing to come under increasing pressure and industry earnings to decelerate to 10% over the next five years.

In his view, the only reliable source of top- and bottom-line growth is the introduction and aggressive marketing of innovative medicines. And that is expensive. "There are definitely going to be winners and losers now, with the losers consolidating defensively," he warns.

But Evans, 37, does have a remedy: Pfizer (PFE Quote - Cramer on PFE - Stock Picks). With a potent, patent-protected product line and a real opportunity for healthy sales and earnings growth, the company has the sector's best top-line dynamics, he says. Evans began recommending Pfizer in January at 36 1/2; today it's at 47. (Sanford Bernstein has done no underwriting for the company.)

Up and Comers on The Street
Analyst	Firm	Category
Christine Arnold	Morgan Stanley Dean Witter	Managed Health Care
Michael Bruynesteyn	Prudential	Prudential Automobiles
Amy Butte	Bear Stearns	Diversified Financial Services
Lloyd Byrne	Morgan Stanley Dean Witter	Oil & Gas Exploration & Production
Nathaniel Cohn	Goldman Sachs	Semiconductors
Tim Dolan	Deutsche Banc Alex. Brown	Application Software
Eric Ende	Lehman Brothers*	Biotechnology
Richard Evans	Sanford C. Bernstein	Pharmaceuticals
Scott Gill	Simmons	Energy Equipment & Services
Robert Hopkins	DLJ	Health Care Equipment
Geoffrey Jones	DLJ	Broadcasting & Cable TV
Rosalind Looby	DLJ	Banks
Don MacDougall	J.P. Morgan	Industrial Conglomerates
Scott Merves	Bear Stearns	Paper & Forest Products
Leah Modigliani	Morgan Stanley Dean Witter	Portfolio Strategy
Gillian Munson	Morgan Stanley Dean Witter	Computer Storage & Peripherals
Ken Posner	Morgan Stanley Dean Witter	Consumer Finance
Phokion Potamianos	DLJ	Integrated Oil & Gas
Toni Sacconaghi	Sanford C. Bernstein	Computer Hardware
Alkesh Shah	Morgan Stanley Dean Witter	Telecommunications Equipment
Sergey Vasnetsov	Lehman Brothers	Diversified Chemicals
Kenneth Weakley	Bear Stearns	Health Care Facilities
Glen Yeung	Deutsche Banc Alex. Brown**	Semiconductor Equipment

*Now at Banc of America **Now at Salomon Smith Barney

Rosalind Looby, Banks

Rosalind Looby

Rosalind Looby, banks analyst at Donaldson, Lufkin & Jenrette, is the favorite newcomer of the most influential institutions we surveyed. (Please see the discussion of our voter pool in our methodology article. After graduating from Vassar College in 1993, Looby entered the training program at J.P. Morgan where she got a close look at all aspects of banking operations. "People think I'm a real geek," says Looby, "but I find the banking industry very exciting."

One voter, a fund manager with a similar banking background, says that Looby's experience gives her a distinct edge: "Analysis is an art, and having gone through it, she has a real feeling for the way banks work." Another investor who singled out Looby commends her painstaking way with numbers: "She is diligent in mid-cap banks, where you really need diligence." A third fan describes Looby as "an absolute dynamo whose focus and energy place her consistently ahead of the curve."

The 29-year-old NYU MBA says she believes the regional mid-cap bank sector is in the throes of wrenching, Internet-driven change. New competitors -- notably brokerage firms, portals and retailers -- are targeting these banks' core transaction account customers, while larger banks are pursuing national strategies and encroaching on regionals' turf.

To be successful, says Looby, regional mid-caps need to have a unique strategy or a catalyst, such as a restructuring or spinoff. She's a longtime fan of City National (CYN Quote - Cramer on CYN - Stock Picks) in Beverly Hills, the "bank to the stars," whose focus on high-end customers in the entertainment industry gives it an above-average deposit growth, Looby says.

Looby initiated coverage in January with a buy at around 33; it is now trading around 36. She also likes Zion Bancorporation (ZION Quote - Cramer on ZION - Stock Picks), whose digital web-security business, Digital Signature Trust Company, will likely be spun off in the next year or two, she says. Recommended in April at 41 with a price target of 50, it's now trading around 48. (DLJ has done no recent underwriting for either company.)

Leah Modigliani, Portfolio Strategy

Leah Modigliani

Though she joined Morgan Stanley Dean Witter only five years ago, Leah Modigliani, 35, has considerable economic experience. After completing a degree in economics at Oberlin College, she spent six years at start-up The Marsoft Group, a company that provides analysis and services to the maritime industry.

While earning her MBA from Harvard, Modigliani spent summers working at the World Bank. With her grandfather, Nobel Prize-winning economist Franco Modigliani, she has done influential work on volatility in mutual funds, providing a new measure of risk-adjusted performance.

Modigliani received 100% of the newcomer vote in portfolio strategy, with voters praising her for "exceptionally good, high-level work," and "reliability." "I can trust her," says one fund manager.

As co-manager of Morgan Stanley's U.S. model portfolio with Byron Wien, Modigliani is worried about valuations right now. They increased the portfolio's cash position at the beginning of the year and are now recommending a balance of old and new economy stocks. "The economy is slowing more than people think," she warns. Underweight in tech stocks, she currently likes the energy sector and some pharmaceutical companies.