This is not a cynical
exercise in pumping a stock by an analyst with skin in the
game, however. Instead Abouhossein has held on to stock he
picked up while he was employed by UBS until 2000. His current
employer, JPMorgan, like other banks, has detailed compliance
rules for its analysts. They are not allowed to acquire stock
in companies that they cover, or indeed in their specialist
sector. If an analyst has an existing holding it can be
maintained, but there are rules on when a sale can be executed.
Disposal is only allowed when the analyst has a sell order on
the stock and during blackout periods when the bank is not
putting out coverage of the company.
If Abouhossein wanted to
unload his UBS stock, he had opportunities through the years.
He had an underweight or sell rating on UBS for much of 2006
and 2007, while the firm was pursuing its
disastrous experiment with its
in-house fixed-income hedge fund Dillon Read Capital
Management, one of many trading mishaps.
Abouhossein then switched
to an overweight recommendation in November 2007 with what was
in retrospect poor timing. UBS stock was at SFr49 ($53) at the
time, and Abouhossein predicted it would rise to SFr70. Instead
the price slumped to SFr18 by October 2008 as bank shares
collapsed across the world in the credit crisis.
Abouhossein kept his
overweight rating for UBS in place, but did at least temper his
price target by cutting it back to SFr28. Four years later that
level has still not been seen the price fell below SFr10
after the Kweku Adoboli fraud was unveiled last September
but investors in UBS stock who are following
JPMorgans predictions and working on an exceptionally
long return horizon must be thrilled by some recent price
voluntary downsizing of its investment bank announced on
October 30, its stock blasted all the way through the target
that Abouhossein had in place of SFr13. The analyst was moved
to increase his December 2013 target price to SFr16 and by the
end of November UBS stock looked poised to drive though this
new forecast a full year ahead of schedule. Happy days for bank
shareholders of all types might finally be around the
Abouhossein was a vocal
but measured agitator for change at UBS, producing highly
detailed reports that broke down the benefits the firm could
gain from cutting costs and risk-weighted assets, while
extolling the virtues of its
wealth management arm and relatively high capital base.
analysts risk a slightly more muscular approach, which might
have been a factor in the
recent firing of Citi chief executive Vikram Pandit. Mike
Mayo, a veteran bank analyst who works for CLSA, sees himself
as the guy who tells it how it is among analysts, which is not
saying much given their generally deferential approach to bank
CEOs and CFOs. Mayo, who last year published a book about his
exploits as an analyst called Exile on Wall Street,
long-running feud with Pandit. At times the bickering was
simply petty as when Mayo complained publicly that
Pandit would not grant him an in-person meeting, which led to
an awkwardly orchestrated audience.
But the steady drip of
criticism by Mayo of Pandits execution abilities is
likely to have helped Citigroup chairman Michael ONeill
to gather board support as he planned his ousting of the CEO
and the installation of Michael Corbat as his replacement. In
the weeks since Pandits surprise firing and the
simultaneous removal of his deputy, John Havens, there has been
growing suspicion that ONeill simply thought that it was
time someone named Mike ran Citigroup, and that Corbat might
not be the Mike calling the shots at the firm.
If that was the case, then ONeill received some
covering fire from his fellow Mike at CLSA. Mayo hailed the
firing of Pandit as "a milestone for corporate America", and
there is every chance that Vikram Pandit: my part in his
downfall will feature as a chapter in any future edition
of Mayos book about his adventures on Wall Street.