The following is an interview conducted by Richard G. Lipstein, a U.S. based executive search consultant with Gilbert Tweed International specializing in financial services recruiting.
Bob Hoehn, currently Director of Equity Research at Sterne Agee CRT, joked with me during our recent sit down that nine of the ten firms in which he has worked as either an analyst or Director of Equity Research over the course of an over three-decade long career are no longer in existence.
He has repeatedly risen from the ashes, he said.
Hoehn, who has managed research departments at six of his employers, displays the same enthusiasm for his profession that he had when I first met him close to twenty years ago when he was an equity analyst covering Healthcare Services and HMO’s. The business has changed tremendously during this period, according to Hoehn.
While equity research continues to be an integral part of Wall Street, Hoehn feels that the various regulatory changes have made the job more difficult without necessarily making the professional better at what he or she does.
An analyst should never tailor his or her opinions to win investment banking business but he feels that the separation of the two has diminished their ability to better understand the companies they cover. There was no better way to get into the bowels of a company, Hoehn stated, than during the IPO process.
However, the separation of banking from research has meant that the analyst now has considerably more time to do actual research. If you functioned either as a quasi-banker or were the mouthpiece for corporate management, you will not make it in today’s environment, he believes. Fundamental research and marketing to your clients is how you spend your time today.
Reg FD and Reg AC have not facilitated making investment conclusions any better, either. The key to success is understanding what’s important to your clients and making relevant opinions about each company based on that need. It’s still about predicting the future, though.
Hoehn began his career as an Analyst and Portfolio Manager at the former Philadelphia National Bank (eventually gobbled up by Wells Fargo) and then moved to the sell side where he has remained ever since first covering healthcare and then moving into research management with ING Barings in 2000. At this point in his own career, Hoehn gets great satisfaction at helping improve the quality of his analysts’ work.
He listed several ways analysts can do a better job:
- improving their marketing and writing
- expanding industry knowledge,
- paying more attention to company management capabilities (and what they say and don’t say)
- expanding management access and industry knowledge and
- getting better at picking stocks.
Not everyone can do all these things well. Each analyst has to determine in which area they can best stand out.
Who does Hoehn admire himself?
He cited three research veterans – Ivy Zelman, the former Credit Suisse analyst who has established one of the most successful independent boutiques; Ed Hyman, who has been ranked as the number one II-ranked economist for the past thirty five years and whose firm ISI recently merged with Evercore; and Charles Maxwell, the veteran oil analyst with whom Hoehn had worked at his first sell side employer, C.J. Lawrence. Hoehn touted Maxwell’s strong relationship with Middle East oil sheiks as key to his market savvy.
Looking back on his own career, Hoehn indicated that he had no interest in Wall Street until he took a course in investments during his last year at Villanova University. He was then hooked.
Hoehn considers himself an average guy of average intelligence who found something he really likes to do.
As we finished up our conversation, I asked Bob the quintessential question – what advice would you give to analysts, either aspiring or those already doing it?
He responded that you should never be intimidated by those smarter than you – because there will always will be someone smarter than you- just don’t let anyone outwork you because that’s the key to success in this very rewarding but difficult profession.