(Bloomberg News) Meredith Whitney, the bank analyst who jumped to celebrity from obscurity by correctly predicting Citigroup Inc.'s dividend cut, is having less success divining stock market winners and losers.
Since Whitney founded her own firm last year, about two-thirds of her picks have fared worse than market indexes. Missed calls include Visa Inc., the payments network that fell 14 percent after Whitney called it her "single best buy," and credit-card issuer Capital One Financial Corp., which tripled after she urged clients to sell.
Whitney's recommendation to sell bank stocks propelled her to fame during the financial crisis. Time magazine dubbed her one of the world's most influential people and Fortune put her on its list of the 50 Most Powerful Women. Michael Lewis's best-seller The Big Short" chronicled how Whitney's prediction on Oct. 31, 2007, that Citigroup would lower its dividend helped erase $390 billion of value from U.S. stocks.
"She can move the markets, her opinion is extremely worthwhile, but she does not bat a thousand-nobody does," said Matt McCormick, a portfolio manager at Cincinnati-based Bahl & Gaynor Inc., referring to a measure of baseball perfection. "The calls that she's making may not be the best calls right now, but a year from now, who knows?" said McCormick, whose company oversees $2.7 billion.
On Her Own
Whitney, 40, a graduate of Brown University in Providence, R.I., set out on her own to found Meredith Whitney Advisory Group LLC after leaving Oppenheimer & Co. in February 2009. She didn't respond to requests for comment.
"If you're going to invest in a stock, it's a long-term investment," she said yesterday in an interview on CNBC. "That's how my ratings are based." Whitney's research reports say her recommendations are meant to project where prices are headed over the next 12 months.
Bank analysts struggled to make accurate predictions after the collapse of the subprime mortgage market and ensuing global credit contraction forced Wall Street banks to curtail risk, unwind government bailouts and adjust to the biggest regulatory overhaul since the 1930s.
Even the best-performing Wall Street firms and individual stock pickers failed to predict the fall and rise of most big financial stocks, according to rankings in the November issue of Bloomberg Markets magazine. New York-based Goldman Sachs Group Inc. won the No. 1 spot by making 30 accurate calls on the 79 financial stocks its analysts follow. KBW Inc. analysts, including Sanjay Sakhrani, ranked second. Whitney didn't make the list.
Consistency, Logic
Vince Farrell, chief investment officer at New York-based Soleil Securities Corp., said institutional investors don't expect analysts to be right about stock recommendations most of the time. "What you really want out of the sell-side analyst is more the direction of an individual company," Farrell said in an interview today with Bloomberg Radio's Tom Keene.