Hall of Fame Honors Japan's Best Analysts

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Sales Team April 8, 2013 The All-Japan Trading Team April 8, 2013 Japan's Top Corporate Access Providers April 8, 2013 Twenty years ago this month, Institutional Investor published the first All-Japan Research Team. To mark the occasion, II introduces the All-Japan Research Team Hall of Fame, which honors those analysts who have amassed at least ten first-place appearances in their sector or sectors during a very difficult time for Japanese stocks.

The article accompanying the 1994 roster noted that, in spite of a lengthy and severe recession, money managers were convinced that “Japan’s economic recovery will start at midyear.” In retrospect, it seems significant that the article did not specify the year in which said revival was expected to begin.

Easy credit in the 1980s — and real gross domestic product growth that averaged 4 percent annually — had fueled a real estate boom that sent Japanese housing and stock prices soaring. The Nikkei 225 index, which had vaulted some six-fold during that decade, reached its highest close, 38,916, on the last trading day of 1989. By the end of the following year, the index had plunged nearly 39 percent, to 23,849.

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Hall of Fame The 20-Year Leaders

Weighted Leaders

Most No. 1 Appearances

Most All-Time Appearances  

  Early on, market observers believed that the downturn was simply a correction — albeit a dramatic one — because no single event had precipitated the fall, as could have been expected in the case of a market crash. But the index has yet to reverse course, closing 2012 at 10,395, some 73 percent below that 1989 high. Although the general trend was downward, the market experienced wild swings in the interim. Over the 23 years from 1990 through 2012, the Nikkei index ended in positive territory ten times — spanning from a miniscule 0.7 percent advance in 1995 to a stunning 40.2 percent gain in 2005 — and on a negative note 13 times, degrees ranging from a 2.3 percent dip in 1996 to a 42.1 percent plummet in 2008. Its longest winning streak? Four straight years of annual gains from 2003 through 2006. But it also endured a trio of three-year losing streaks: 1990–’92, 1996–’98 and 2000–’02.

Through all the ups and downs — the hope of an upsurge presaging a permanent rally, the disappointment when the seemingly inevitable sell-offs began — portfolio managers have been remarkably consistent regarding which firm they think provides the best investment advice and market insights. Nomura Securities Co. has led or co-led the All-Japan Research Team a remarkable 18 times in the past 20 years, slipping to second place only twice: in 2001, when Morgan Stanley topped the roster, and in 2009, when Daiwa Institute of Research claimed first place. Nomura has shared the winner’s circle on three occasions: in 2003, with Nikko Citigroup; in 2010, with Daiwa Securities Group; and in 2011, with BofA Merrill Lynch Global Research. Not surprisingly, it has amassed far more total team positions over the years — 459 — than any other firm. In second place when sell-side institutions are measured by this metric is Citi, with 281, followed by UBS, with 272. (These totals include positions won by predecessor firms later absorbed by the entities cited.) Investor opinions about the best analysts have been fairly stable too. Only 518 individuals have been voted on to the team since its inception; by comparison, the All-America Research Team has polled roughly twice the number of sectors over twice the number of years and produced results whose cumulative total of ranked individuals was 15,000 as of last year. One reason for the vast difference may be that analysts at domestic Japanese firms tend to move around less. As II noted in 1994, “Nomura has announced that its analysts from now on will stay in one industry for at least five years, instead of being rotated among sectors.”

Many of the nation’s most highly regarded researchers have been covering their industries for decades. Toshinori Ito, who left UBS last year to launch his own firm, Tokyo-based Ito Research and Advisory Co., began following energy companies back in 1984. Citi’s Hidemaru Yamaguchi has been a health care analyst since 1988. UBS’s Toshihiko Okino has been reporting on the real estate sector since 1993.

These three analysts are among a select group of ten — or less than 2 percent of the total — who meet the hall of fame eligibility requirements. Eight of the ten are still publishing investment research; seven of those eight take the top spots in their sectors again this year. Among the milestones that the honorees claim:

* Kenichiro Yoshida, with 30 appearances, has ranked more often than any other analyst; he last made the team in 2010 on behalf of Goldman Sachs (Japan).

* Toshihiko Okino has appeared more often than any currently ranked analyst; the UBS researcher has logged 27 appearances, including two this year: first place in Housing & Real Estate and runner-up in Construction.

* Naoto Hashimoto holds the record for most first-place appearances, with 16; eight of those were in Energy & Utilities (or predecessor sectors) and eight were in Transportation — and all were on behalf of Nomura Securities Co.

* Among currently ranked analysts, there is a four-way tie for most first-place finishes: Jun Harada of UBS (Transportation), Katsushi Saito of Nomura (Machinery), Nobuyuki Saji of Mitsubishi UFJ Morgan Stanley Securities Co. (Economics) and Hidemaru Yamaguchi of Citi (Health Care & Pharmaceuticals) have each appeared at No. 1 a dozen times and counting — all four are sector leaders this year.

* Harada is the only Hall of Famer to have displaced a fellow Hall of Famer as sector champion; the UBS analyst snapped Hashimoto’s eight-year winning streak in Transportation in 2002.

* Hidemaru Yamaguchi has the highest ratio of first-place finishes to total appearances of any Hall of Famer, landing at the top 12 out of 13 times.

* UBS lays claim to the highest number of Hall of Famers, with four: Harada, Toshinori Ito (who left the firm last year to launch his own boutique), Okino and Atsushi Yamaguchi.

* Only three Hall of Famers — Hashimoto, Okino and Yoshida — are among the ten analysts with the highest number of overall appearances on the team.

* Hashimoto and Ito are the only Hall of Famers who ranked on the inaugural All-Japan Research Team, in 1994; Hashimoto debuted in first place in Transportation and in Utilities, while Ito led a team that tied for third place in Basic Materials.

* Hashimoto, by consistently dominating two sectors, achieved Hall of Fame status faster than anyone else; he claimed his tenth first-place finish in 1998, in just his fifth year on the team.

II will induct new members into the Hall of Fame each year as they meet the eligibility requirements. Only one analyst is a likely contender for next year: Daiwa’s Takaaki Yoshino, now in his ninth visit to the winner’s circle in Quantitative Research.

To view the full list of firms ranked by total team positions, click on The 20-Year Leaders in the navigation table above.

To view the list of analysts who have ranked on the team ten or more times, click on Most All-Time Appearances.

To view the list of analysts who have won first place six or more times, click on Most No. 1 Appearances.