tsc article. Make sure you at least read the final line.
The Market According to Amy Butte
By Gregg Wirth
Staff Reporter
2/15/00 12:52 PM ET
In a sector typically covered by prudent, close-to-the-vest types, Bear
Stearns' (BSC:NYSE - news) upstart securities industry analyst Amy Butte is
making the kind of calls that show she's no Wall Street wallflower.
Indeed, she's going through the sector like a whirling dervish in pearls. During
the past month, she launched coverage of Merrill Lynch (MER:NYSE - news)
by saying it would be a likely takeover target, and pummeled market maker
Knight/Trimark (NITE:Nasdaq - news) by initiating coverage with an
unattractive rating. In addition, Butte, 32, in January "broke" the news of
several critical details of Instinet's online brokerage plan.
As a result, Butte's opinions have plenty of investors talking about her, often
arguing whether she's an up-and-comer or another low-profile analyst trying
to gain fame with high-profile calls.
"Amy Butte moves stocks," quips one
Chicago hedge fund manager who
specializes in financial services stocks.
"After her report, we were sitting here just
watching Merrill go up. It really is
something. She is hot right now and is
really making some creative and aggressive
calls."
On Feb. 8, she initiated coverage of Merrill
with an attractive rating based on the
firm's appeal as a takeover target and the
stock rose more than 3%. (The Amex
Broker/Dealer index was down about 3%
that day, although shares of some of the
larger brokerages rose.) Merger rumors
surrounding Merrill are nothing new --
the company has been linked with
everyone from American International
Group (AIG:NYSE - news) to Chase
(CMB:NYSE - news) to Schwab
(SCH:NYSE - news) -- but Butte went
so far as to call an acquisition of the firm a
"likely scenario." She suggested potential suitors could be Chase, Bank of
America (BAC:NYSE - news), HSBC Holdings or a number of "highflying
technology companies." A Merrill spokesman declined to comment. Bear
Stearns has not done any underwriting for Merrill Lynch.
Chasing Amy
In the past month, reports by Bear Stearns' analyst Amy Butte moved Merrill
Lynch and Knight/Trimark Securities in very different directions.
Merrill Lynch: Tuesday, Feb. 8
Knight/Trimark Securities: Wednesday, Jan. 26
"I think these calls stand apart because I have a different perspective on these
companies," says Butte, who spent about 18 months at Merrill before joining
Bear. While at Merrill, she was the analyst on Knight's IPO, on which Merrill
was the co-lead underwriter.
Brian Kirkpatrick, director of research at Bridges Investment Counsel in
Omaha, Neb., says news of Butte's call on Merrill sent him running for the Bear
Stearns report. His fund owns Merrill shares. "I thought Merrill was attractive
until it got into the 90s," Kirkpatrick says. "But I want to see what that report
says." He admits, however, that he was not familiar with Butte's name before
the Merrill call.
But with these calls, that might be changing. Although Butte is unranked and
less well known than last year's Institutional Investor's No. 1-ranked
brokerage analyst Sallie Krawcheck of Sanford Bernstein, the magazine did
identify her as an up-and-comer. With Krawcheck moving up to her firm's
management ranks, there's a spot open on the starting team.
The attention the Merrill takeover call brought, however, was seen by some as
the latest example of what's wrong with Wall Street's research culture. "There
is clearly a scramble among analysts to be the most vocal, the most
controversial voice to be heard above the din," says Scott Sipprelle, head of
Midtown Research Group, an independent research firm.
PaineWebber's (PWJ:NYSE - news) unranked telecom analyst Walter Piecyk
was skewered for that very reason in late December when he initiated coverage
of Qualcomm (QCOM:Nasdaq - news) by setting a 1000 price target.
(Following Piecyk's call, Qualcomm stock reached 800, then split 4 for 1. The
stock has fallen about 35% since and closed Monday at 127 1/8 per
split-adjusted share.)
Butte says a quest for fame isn't what's driving her calls. "The reason for my
calls and reports is to bring attention to research Bear Stearns has been doing
in this space," she says. "My intention is not to stir controversy for
controversy's sake, but rather provide a different insight, which is based on a
lot of time and research."
That might be a tough point to sell Knight/Trimark CEO Ken Pasternak. He still
bristles upon mention of Butte's negative Jan. 26 report, which drove down
Knight's stock almost 9% that day.
Butte's report on Knight, titled "A Dimming Light," said the firm couldn't
sustain its market share growth because of increased competition, chiefly from
electronic trading platforms. In the report, she attached a 12-month price
target of 20 a share. The stock closed the day of the report at 30 3/4, down 2
7/8. Bear Stearns has not done underwriting for Knight/Trimark.
Pasternak says he still gets "thousands of emails" about Butte's negative rating
on the company. "We have 10 firms covering us and she is the only negative
one," he adds. "It's a little bit frustrating."
So much so, he jokes, that traders at Knight have hung a handwritten sign
near their desks. It says: "Amy Butte -- Unattractive." |
