Andrew Hamerling

"The Five Dumbest Things on Wall Street This Week - TheStreet
Dec 12, 2003 - ... of the National Association of Securities Dealers, which this week said it suspended Andrew Hamerling, formerly a telecom analyst at Banc of America"

"1. SBC Clearly Now the Rain Has Gone
We at the Five Dumbest Things Research Lab can't find it in ourselves to get outraged over the latest example of a Wall Street analyst privately believing one thing and publicly stating another.

Ham-Handed Research

Maybe we were mellowed by the research lab's annual beer bash. Or maybe we're just sick of it all.

This fresh illustration of What Hath Blodget Wrought comes courtesy of the National Association of Securities Dealers, which this week said it suspended Andrew Hamerling, formerly a telecom analyst at Banc of America Securities.

While the NASD came up with several cases in which Hamerling's published research was materially different from unpublished opinions, we'll focus on just one stock: SBC Communications (SBC) , upon which Hamerling initiated coverage in February 2001.

From his first report on SBC to his last, notes the NASD, Hamerling had a buy rating on the stock. Though Hamerling lowered his target price for the stock on several occasions, that target was always above wherever SBC traded at the time. In other words, Hamerling's research said, "Up, up, up."


Yet privately Hamerling's forecast for the stock was down, down, down, according to findings that the NASD published this week. "Short SBC," he advised one hedge fund manager in September 2001. "It has nothing fundamentally sound going for it..."

Within a week, he emailed another hedge fund, "I'd short a lot of SBC ... the company is clearly overvalued and has to lower its growth rates materially going forward."

Yet despite this apparent egregious dishonesty, we feel a twinge of sympathy for Hamerling. Reason one: A report he issued the same week of those emails did, in fact, raise one bold-faced question about SBC's future: "Overall line growth trends leave us wary about SBC and the Bells' growth prospects going forward," wrote Hamerling, though it was right next to that bold-faced "buy" rating and the $51 price target (implying 15% price appreciation).

Reason two: In its report, the NASD also produces a relevant August 2001 email that one of Hamerling's managers wrote to someone else higher up at BofA:

Hamerling ... determined the company beat the street in the recent quarter through one time stuff, wrote a note stating such, showed it to the company before sending it out, the company has threatened to 1) pull out of the Fall Conference and 2) pull potential corp fin business if he publishes it. His research appears solid, a certain BAS research manager doesn't care about the conference, however a second BAS research manager and the bankers are opposed to losing business .... Hamerling is not good with controversy and will fold to the second research manager and the bankers unless you have a different opinion. Thoughts?
Hamerling's managers, says the NASD, subsequently told Hamerling it was his decision whether or not to publish the draft report.

Neither SBC nor BofA responded to our requests for comment.

Reading this, it's easy for us to imagine the pressures on Hamerling. SBC certainly didn't want to hear anything negative from him. Nor did he get any particular encouragement from his bosses at BofA, according to the NASD; telling him it was his decision whether or not to publish his research -- thus losing the firm millions of dollars in potential banking business -- isn't exactly a show of support.

Which all goes to confirm our suspicions of why research analysts were paid so much money during the waning days of the bull market. It wasn't for their stock-picking. It wasn't for their insightful analysis. No, it was for their ability to publish "buy" ratings while keeping a straight face."

https://www.thestreet.com/opinion/the-five-dumbest-things-on-wall-street-this-week-10131529