This story is part of our weeklong series, Unsung Heroes. Please see our introduction.
* * * * *
In the rough-and-tumble world of Wall Street, working for the
firm means you belong.
, senior analyst at
, neither works for a white-shoe firm nor gets much respect from his colleagues. "Piper Jaffray isn't in the same class as we are," sniffed one Wall Street analyst.
But this year, Kumar is establishing himself as a computer hardware and semiconductor analyst who cannot be ignored. Why? He often passes along valuable information to clients faster than just about anyone.
The Minneapolis-based analyst has the luxury of making calls without worrying about offending clients because he works at a research-oriented firm outside the regimented world of the Street. In other words, he isn't concerned about the niceties of investment banking.
"Underwriting is of secondary importance to me," says Kumar, a former sell-sider at
. On occasion, his quick-to-the-draw style has led him to jump the gun on a prediction, but Kumar has taken on the big players in techland and lived to tell about it.
"I'm more intrigued with someone who is willing to take a negative slant on a big company because that means to me that they are intellectually honest," says Jeff Matthews of
, a money-management firm in Greenwich, Conn. "It takes cojones to do it -- that's why I like Kumar."
Kumar showed some serious guts this summer when he went against the consensus on
. In June, analysts were expecting more strong earnings from the No. 4 computer maker. After all, Gateway had handily whipped analyst estimates in the previous two quarters, and it was alerting analysts about a "record response" to its new
Kumar wasn't buying it. His numbers suggested that all was not well. His earnings estimate of 40 cents a share put him 4 cents below the consensus, and he warned his clients in a report that even his estimates were probably too high.
"If this scenario holds out, earnings will come in 2 cents below our reduced estimates," he wrote. Gateway's top management was not pleased and tried to persuade him to alter his opinion, according to Kumar, though the company denies it pressured him to change his thinking.
As it turns out, Gateway's third-quarter earnings came in 6 cents below the consensus, just as Kumar had warned. The stock promptly fell 10%.
This was no lucky guess. After attending the
Indian Institute of Technology
in Madras, Kumar moved to the U.S., where he worked at
as an engineer and marketer before becoming an analyst at Southcoast. Any regrets about leaving India? "There, you have nepotism from top to bottom, so it's rather hard to get ahead," he relates. "Here, you're limited only by your potential."
The 34-year-old analyst says he's happy at his Midwestern location because Piper is a research-oriented firm. "I came here because I really enjoy what I do, only I wish I had more time to see my family," says the hard-working Kumar, who says he works "well north of 12 hours a day."
If consistency is, in fact, the key to an analyst's success, Kumar is coming into his own. Take the September earnings period on Intel. Kumar was the first to spot an upside to what turned out to be a robust third quarter for Intel. (Kumar has a strong buy rating on Intel and a buy on Gateway. Piper Jaffray hasn't done any underwriting for Gateway or Intel.)
On Aug. 21, Kumar raised his Intel rating from a buy to a strong buy, noting that computer manufacturers were asking for more chips. That meant extra revenue for Intel, and Kumar quickly upped his earnings estimates. Three weeks later, Intel said revenue would be higher than expected in its September quarter. "The herd instinct is in place so no one can claim that they were wrong," says Kumar, who watched much of the Street raise its numbers after the preannouncement.
But some of Kumar's calls have rankled fellow analysts, and at least one rival accused Kumar of grandstanding. "He has made some
really good calls lately, but I think he's working a little too hard to make a name for himself," says a West Coast analyst, pointing out that Kumar wrote in June that
was thinking of buying
Advanced Micro Devices
. That deal hasn't come to fruition.
"There are going to be some calls that don't transpire or are beyond my control," Kumar explains. "I do my due diligence, and sometimes you hit it and sometimes you don't." He adds that what matters is to be "directionally right," meaning that he wants to push clients in the right direction before the herd catches up.
While institutional clients tend to look for a big-picture analysis of the future of a stock, Kumar gives his clients a more near-term outlook. "He's been willing to go against the grain," says the analyst who said Piper wasn't in the same class as his own firm. "I have to admit that sometimes he can really add some value."
Though he is gaining the grudging respect of Wall Street, Kumar says he keeps both feet on the ground. Except when he is running marathons, of course. "Running gives me time to put things into perspective, to realize that we are not the glorified people we like to think we are," he says. "What we do is pretty minuscule when you think about it."
Although he ran in the
last year, he's not running this year, presumably to continue hustling past the best analysts on Wall Street. Let's just hope he doesn't decide to join them.