When Analysts Don’t Talk to Management


Boyd has news today of an analyst at Banc of America Securities, Frank Pinkerton,

who dares to rate companies without meeting with corporate management.

Boyd’s take seems to be that this is a cost-cutting measure: BofA gets to rate

more companies since its analysts aren’t tied up in meetings. And it’s probably

the case that, ceteris paribus, an analyst who doesn’t talk to management

adds less value than an analyst who does talk to management.

But it’s also worth asking who these analysts are really serving. Boyd talks

to one money manager and one hedge fund manager, neither of whom think much

of what Pinkerton is doing. But my guess is that neither of them would pay much

attention to Pinkerton’s research even if he did talk to management.

Rather, Pinkerton’s research is likely to get read much more by BofA’s individual

retail clients – the kind of people for whom his market knowledge and

expertise has a lot of value when it’s applied on a stock-by-stock basis like


Money managers have been complaining for years that they don’t get much value

out of sell-side research. There are two responses to this: the posher sell-side

banks, without a retail network, are cutting back on their printed research

and getting their analysts to spend more time on the phone, one-on-one, with

important clients. Meanwhile, the second-tier firms, like BofA, will start targeting

their research much more at their retail clients. Both responses make sense.

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