Baseball fans are undoubtedly familiar with the iconic image of New York Yankees great Babe Ruth standing at home plate and pointing his bat toward the center field bleachers of Wrigley Field in Chicago. It was the fifth inning of the third game of the 1932 World Series. Moments later, the Cubs’ Charlie Root threw a pitch, the Babe took a swing and the ball went sailing toward the spot that Ruth had just indicated, allowing him to score one of the most memorable home runs in the history of the game.
Did he actually call the shot? Many fans insist that he did; others claim the gesture had no significance until sportswriters connected it to the subsequent home run.
But there’s no disputing that Yohei Osade called his shot when he moved from Bank of America Merrill Lynch in 2012 to direct coverage of pan-Asian equities for Mizuho Securities Group in Tokyo. “I want to make Mizuho a research house surpassing Nomura,” he told Bloomberg. It seemed an audacious claim at the time. On that year’s All-Japan Research Team, his firm tied for ninth place (with Goldman Sachs Japan Co. and Mitsubishi UFJ Morgan Stanley Securities Co.) while Nomura was enjoying its 17th appearance atop the roster. In 2013, Mizuho rocketed to third place as Nomura celebrated another year at No. 1. This year the two firms share the winner’s circle — but when their team positions are weighted to reflect their relative values, Mizuho hits a home run: Its weighted total of 64 puts it ten points ahead of Nomura. (See Weighting the Results.)
“Our goal is to displace Nomura in the leading position, putting us at the forefront of the Japan equity business,” Osade affirms. “Once above Nomura in the rankings, it will be extremely important for us to cement that position and hold our place as the top broker for multiple years, as Nomura has done. We are firmly committed to doing just that. In 2013 we chose to focus on the performance of the analysts we already have rather than adding new ones.”
The effort appears to have paid off. The last time an analyst from the firm was No. 1 was way back in 2007, when Hiroshi Saji led the lineup in Beverages, Food & Tobacco. This year six Mizuho researchers finish in first place: Shinsuke Iwasa (Broadcasting), Masatoshi Kikuchi (Equity Strategy), Hiroshi Matsuda (Ceramics & Glass), Junji Sakurada (Machinery), Norimasa Shinya (Energy & Utilities) and Hidekatsu Watanabe (Health Care & Pharmaceuticals).
Nomura hasn’t shared the survey’s top spot since 2011, when it tied with the BofA Merrill research crew directed by Osade. He joined Mizuho the following year.
“I sensed that Mizuho Securities, and Mizuho Financial Group more broadly, had developed a strong commitment to Japanese equities,” he says. “One major draw for me was the strong and time-tested relationship that Mizuho Financial Group has with the Japanese corporate sector. It seemed to me that Mizuho had deep talent in equity but was not receiving the recognition from the market that it deserved.”
He took steps to address that issue almost immediately. “We have placed an intense emphasis on teamwork in our research, producing a large number of cross-sector, cross-border and cross-asset reports,” Osade explains. In addition, “we have made a concerted push to have many of our analysts spend significant time on overseas research trips with investors. Upon issuing a report our analysts typically receive over 150 pieces of feedback from global investors. This feedback has greatly helped our analysts to continually improve the quality of their output.”
The Mizuho team also increased the number of companies covered from 360 in March 2011 to 440 as of March 2014, he adds.
Osade, 46, earned a degree in economics at Tokyo’s Seijo University and began his career at Daiwa Securities, where he worked in retail sales. “I then spent almost five years at Daiwa Italy, where I worked in Japanese equity institutional sales,” he says. In 1998, Osade moved to Merrill Lynch Japan, where he would spend the next 14 years — six in Japanese equity sales in London and eight in a variety of management roles in Tokyo, including head of corporate access, head of sales and head of research.
As for knocking Nomura off its perch, that won’t be easy. In the 21-year history of the survey, only two firms have bested Japan’s oldest brokerage — Morgan Stanley in 2001 and Daiwa in 2009 — and neither had the winner’s circle to itself for more than a year.
Plus, Mizuho isn’t the only firm that has set its sights on No. 1. “Our firm resumed Japanese equity research operations in August 2010,” notes Kazuharu Miura, Tokyo-based head of equity research at SMBC Nikko Securities. “Last year was our third year, and we believe we’ve made progress in gaining more recognition from institutional investors.”
That’s putting it mildly. SMBC Nikko’s ascension in the ranking is almost as spectacular as Mizuho’s. It debuted (as Nikko Cordial) in 2011 at No. 14, climbed two places in 2012, shot to fifth place last year and this year secures the No. 3 spot, with 19 positions.
“We aim to achieve even higher recognition in 2014,” he adds. To that end this team has also expanded its coverage universe, from 444 stocks in December 2012 to 473 as of December 2013, Miura points out, and last year added three highly ranked equity researchers to its department: Satoru Kikuchi (Software/Business) and Takato Watabe (Chemicals), both of whom left Deutsche Securities, and Kunihiro Matsumoto (Auto Parts), formerly of UBS.
Still, Osade is determined to keep Mizuho on top. “Our aim is to provide investors with the best possible research service, offering value-added investment insights and alpha-generating ideas,” he declares. “We are open to any and all options in pursuit of that goal, including adding more analysts.”
