Salomon Strategist Drops WorldCom While Analyst Says Buy
By PETER LOFTUS
Of DOW JONES NEWSWIRES
NEW YORK -- Forgive clients of Salomon Smith Barney if they feel they're getting mixed signals from the firm about troubled WorldCom Inc. (WCOM).
A Salomon strategist, Tobias Levkovich, dropped WorldCom from his recommended list Tuesday. He cited continued competition in the telecommunications industry and the Securities and Exchange Commission's probe of WorldCom's accounting practices.
At the same time, Salomon's telecom analyst, Jack Grubman, maintained his buy rating for WorldCom shares. WorldCom shares have fallen 18% since the SEC's probe was disclosed Monday. In 4 p.m. Nasdaq trading, WorldCom shares were off 54 cents at $7.39, on volume of 54.8 million, compared with the daily average of 47 million.
In a research note Tuesday, Grubman said the SEC's letter of inquiry was "unfortunate" and could hurt the stock. But he played down the probe's significance, calling the letter of inquiry "boilerplate." He also said WorldCom's "balance sheet is quite good, its liquidity position is strong," and it stands to benefit from a recovery in demand for telecom services.
The apparently divergent viewpoints were reported Wednesday by The New York Times.
Salomon, a unit of Citigroup Inc. (C), said it wasn't sending its clients mixed signals about WorldCom. Levkovich is the institutional equity strategist at Salomon who holds a broad market perspective. His recommended list typically comprises about 30 stocks spanning numerous industries, representing a fraction of the more than 1,000 stocks followed by Salomon's research team.
It's not uncommon for Levkovich to drop stocks from his recommended list that are still rated buy by the industry analysts who follow them, he said. In the past year, he has dropped at least four stocks from his list that Salomon analysts continued to rate buy, including Bank of New York Co. (BK) and Texas Instruments Inc. (TXN).
Levkovich said WorldCom had been the only telecom stock on his list until he removed it. He hasn't replaced it with another telecom stock; his recommended list now numbers 27 stocks.
"There are a lot of companies we have buys on that aren't on my recommended list," Levkovich said.
Grubman couldn't be reached for comment.
"When Tobias makes calls on market, he's looking at every company, whereas Jack focuses on telecom ," Salomon spokeswoman Mary Ellen Hillery said.
Salomon Smith Barney has a banking relationship with WorldCom and has managed public offerings of its securities.
Levkovich's research note disclosed he owns WorldCom shares. Grubman's note made no such disclosure.
-By Peter Loftus, Dow Jones Newswires; 201-938-5267; peter.loftus@dowjones.com
Updated March 13, 2002 4:44 p.m. EST |
