Vadim Zlotnikov
Chip & PC analyst
Sanford C. Bernstein
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From FORTUNE magazine:
The only thing rarer than an unconflicted analyst is a chip researcher with a value philosophy. Meet 40-year-old Vadim Zlotnikov, who covers semiconductor and PC stocks for Sanford C. Bernstein--he's both. For a decade, this self-deprecating Ukraine-born electrical engineer has been a contrarian in a momentum universe.
A former captain of his high school math and chess teams and the holder of a master's degree from MIT and an MBA from Stanford, Zlotnikov thrives on science--and the chance to disprove popular theories about valuations.
At the height of the tech bubble, for example, with the Nasdaq rolling toward 5,000, he warned that tech valuations were so stretched that a major shakeout was inevitable. That was blasphemy to analysts in the sector. But his argument was backed by months of channel checks with companies up and down the supply chain, followed by a grueling quantitative analysis. The conclusion: Wireless handsets would have to become as sought-after as, say, food in order to justify the share prices. "I just didn't see that happening," he says.
Among those sky-high stocks was Qualcomm, then at $180. Zlotnikov calculated that to justify Qualcomm's multiple of 400 or so, two-thirds of the earth's population would have to own a CDMA handset in a decade. As more high-profile analysts were screaming buy, Zlotnikov quietly told his clients to get out. The stock peaked that month and began a 75 percent descent.
Last September the researcher, who was recently promoted to chief strategist, scored big with bullish calls on semiconductor equipment makers like Applied Materials, Lam Research, and KLA-Tencor when valuations were below average despite improved fundamentals. Shares soon rallied. He then downgraded the sector just before another 15 percent pullback.
This remains a market in which investors need to avoid losers by focusing on valuation and sales growth, he says.
Craig West and Alex Hittle
Biotech analysts
A.G. Edwards
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From FORTUNE magazine:
Meet Craig West and Alex Hittle, the bio-twins, as they're known at A.G. Edwards' home office in St. Louis. Since teaming together two years ago, the two have compiled a record that is unmatched by the 99 other biotech analysts.
Think of West, 35, as the right brain, with a background in molecular biology and an MBA. Hittle, 39, is the left brain, a history major with a master's in international relations and economics. The two joined A.G. Edwards as associate analysts in 1996 and became fast friends. When the firm decided to expand its biotech coverage, they argued that a team approach would allow for more in-depth research. The concept seems to have worked, in part because the two are so willing to share ideas.
They've got some compelling arguments. They believe that biotech investing has gone through three stages--exuberance, despair, and now opportunity to buy workable concepts at low prices. After two years of falling shares, many stocks are trading below the value of their cash on hand. Any drug that is successfully brought to market would be a boon to the stock's valuation. True, it's not like valuing General Motors, but then this is biotech, a sector in which investors are being asked to buy into something that might not be proven for a decade. The requirement, therefore, is to be careful.
They believe owning a basket of biotechs in a diversified portfolio is the safest approach.
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