It takes that one voice,
Just one voice,
Singing in the darkness.
All it takes is one voice,
Shout it out and let it ring.
When he released
in 1979, it's hard to imagine
envisioned what Wall Street would look like 20 years later. Similarly, it's hard to imagine some investors aren't at least a little confused by the multiplicity of voices speaking for some firms, a trend exacerbated by recent mergers.
Salomon Smith Barney's
recent annual outlook press luncheon featured no less (but no more) than five speakers.
Here's a quick recap:
A. Marshall Acuff Jr., portfolio strategist at the firm, sees the world economy slowing and likes "domestic, capital-intensive" medium-cap growth stocks such as
Union Pacific Resources
The strategist also likes
Abercrombie & Fitch
Meanwhile, equity strategist John L. Manley Jr. favors financials such as
, dubbing them "growth with value."
While warning "the more
expectations rise, the harder the bogey is to outperform," Manley stands by recent favorites such as pharmaceuticals and technology.
are top picks.
How much would you expect to pay for analysis like this? Well, institutions with favored trading relationships with a brokerage firm usually get them for free. Other clients pay varied amounts for different reports, depending on their length and content, according to Salomon Smith Barney.
But wait, there's more.
L. Keith Mullins, Salomon's small-stock strategist, complained about all the "hostile" emails but remains tied to the periscope of the small-cap U-boat. He sees similarities between today and 1990, when small stocks embarked on their last period of sustained outperformance. He likes
in particular and commodity-based companies in general.
Louise Yamada, director of technical analysis, sees technology, telecom and drug makers "extended" and ready to pass the leadership mantle to "depressed areas" such as cyclicals. However, she believes current leaders will return to the fore later in the year.
Financials, meanwhile, have shown "early evidence of relative outperformance," Yamada said, confirming her expectations long bond yields will fall to 3.75% to 4% over time and "support a good stock market advance."
Conversely, chief economist Kermit Schoenholtz foresees the U.S economy averaging 3.9%
gross domestic product
growth in 1999 while "momentum outside the U.S. is picking up."
As a result, Schoenholtz expects bond yields to ratchet higher toward 6%, "which puts the spotlight on richly valued equities."
In sum, Salomon Smith Barney is recommending medium-cap cyclicals, big-cap drugs and technology (but those technically oriented should wait), plus financials and small-caps. Simultaneously, the firm thinks the world economy is both slowing and expanding and, thus, is alternately bullish and bearish on bonds.
Got all that?
Agreeing to Disagree
This phalanx of prognostication is not unique to Salomon Smith Barney. Over at
Morgan Stanley Dean Witter
, chief U.S. investment strategist Byron Wien and strategist Barton Biggs are notorious for agreeing to disagree. Throw U.S. investment strategist Peter Canelo, chief economist Stephen Roach and chief technical analyst Philip Roth into the mix and you've got quite a melange of viewpoints.
"There is a big issue here of not having one house view," said a source at Morgan Stanley Dean Witter, who requested anonymity. "The philosophy is, institutional investors are smart people -- we give them individual views and they consolidate them and come up with their own answer. People understand and value intellectual freedom and I think the added value comes in having smart people who will stand by their views."
However, "it's different when you're dealing with a less educated and sophisticated pool of investors," such as retail clients and those in emerging markets, the source conceded.
features chief quantitative strategist Richard Bernstein and chief equity strategist Charles Clough, who have not always seen eye-to-eye. Additionally, chief market analyst Richard McCabe and senior investment adviser Robert Farrell aren't afraid to speak their minds, just as technical analyst Walter Murphy isn't afraid to show his charts.
"Within investment theory, there are different disciplines," said Mason Rees, director of private client research at Merrill Lynch. "We choose to employ each of the disciplines, not as a matter of confusion but hopefully more complete analysis. I am frankly pleased that over the years, given the number of disciplines we do support, people have been as much in agreement as they have been
although it's not 100% of the time."
Pros Unruffled by Strategists' Shuffle
The bottom line is, most market pros take this all in stride, although some are bothered that favorable stock recommendations often coincide with a banking relationship. Of the aforementioned, Salomon Smith Barney has done underwriting in the past three years for HNC Software, Union Pacific Resources, Noble Drilling, Transocean Offshore, Raytheon and Chase.
Still, most fund managers say they do their own research, and only use the Wall Street offerings for backup, if at all.
"Most of the stuff is just warmed-over baloney," said Hugh Johnson, chief investment officer at
. "It's fairly obvious when someone is not doing primary research. I don't believe you can do this without crunching the numbers yourself. But some people are able to give you new and useful ways of looking at the world. Those people you have the highest regard for."
Johnson voiced specific admiration for Abby Joseph Cohen, market strategist at
. Ironically (or not), Cohen has been steadfastly bullish in recent years and, thus, right more often than not. In the process, she has become an icon for the bull market and, to many, synonymous with Goldman Sachs, and vice versa.
"The flip side is, if a technician at Goldman were saying the market is going down, you'd have a starker contrast because Abby is such a prominent bull," added Ronny Kraft, CEO of
Gotham Capital Management
, and a former Salomon Brothers employee. "The reality is, a firm like Salomon Smith Barney has a diverse group of clientele. It's in the investors' best interest that each firm offer different opinions."
Not surprisingly, that was pretty much the word from Salomon's public relations department.
"People have different ways they want to invest," a spokeswoman said. "Some only invest by names. Others are much more sophisticated and prefer to have someone who focuses on sectors and is more quantitative. Then there's technical research, which is very different. Together, they complement each other."
Complement? Maybe. Contrast? Sometimes. Confuse? You tell us.