Making Stock Picking Great Again
Last week the Wall Street Journal finally retired its Ahead of the Tape column.
Does this formerly mark the end of stock picking or signal a coming bottom-up analysis renaissance?
For fifteen years the column tried to anticipate market moves by taking a stance on corporate and economic events before they happened. As expected — results were mixed. Over the columns 15-year run, ending this past December, more than 90% of U.S. equity fund managers trailed their respective benchmarks, according to the S&P Indices Versus Active funds scorecard.
While it’s not the first time the journal has called out the dying business of picking stocks, it’s the timing that is most curious.
The end of the Tape does highlight the conundrum analyst face today: making stock picking great — or at least interesting — again, despite retail and institutional investors flooding into passive investment funds.
Anticipating rising interest rates and market volatility would generate alpha opportunities amongst individual securities, active managers began 2017 with high hopes. Barron’s and Forbes even called 2017 the year active managers would shine.
Maybe the Tape just ran its course, and there’s no real story here. But I can’t help but think as one door closes, another opens.
This isn’t about making a splash, it’s not about the analyst becoming famous, it’s about the power of ideas for our clients. There’s nothing more fun as an analyst than creating an investment insight and seeing it work on the tape.
Candace Browning, Head of Global Research at BofA Merrill Lynch
More than half a million jobs have vanished from the biggest banks since 2008. Perhaps, with strategy and analyst roles under pressure and the industry further turning from stock picking, it creates an opportunity to stand apart.
According to Bloomberg: boring Wall Street analyst notes are out — bold and funny are in.
By replacing long-winded daily market summaries and thinly read single-stock reports with snappy titled primers and thematic thought pieces, it gives analyst with original, anticipatory ideas much-needed opportunities to prove their worth through market insights that are both prescient and memorable.
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