What is it about Sociéte Générale? Not only has the French bank spawned the “rogue trader” Jerome Kerviel, currently on trial for alleged fraud in Paris, and the deep-thinking global strategist James Montier (author of a QFINANCE viewpoint article).
Now it has delivered a leftfield, maverick investment analyst whose outsider's perspective could revolutionize equity research.
Marc Mozzi, a real-estate analyst with Sociéte Générale in London, differs from his peers in that he gives no credence to the “spin” provided by investor relations departments and turns a blind eye to the earnings guidance issued by corporate managements.
Like certain successful fund managers I know, he prefers not to even attend meetings with IR people and corporate managements, for fear this would distort his thinking. But perhaps most importantly, Mozzi also completely ignores the opinions of his analyst peers.
Being isolated from the herd, a sort of loan ranger of investment analysis, helped Mozzi enormously last year. While his peers were optimistic the sell-off of commercial property stocks was overdone, Mozzi took a dimmer view.
His more bearish stance enabled him to accurately forecast the share price performance of companies in the sector and thereby land the top spot in the 2010 FT/StarMine analysts’ awards, presented in New York last month.
Investment analysis was not particularly easy last year. Even though the FTSE 100 index put in its strongest rally in 12 years, there were large pockets of volatility and uncertainty. It was his bearish calls on the likes of British Land and Segro that enabled Mozzi to haul in the accolade.
He maintained a “sell” stance on Land Securities throughout the first half of 2009, a time when the shares fell by 39%. His most profitable call was a “sell” recommendation on Segro for more than two months as the stock lost 64% of its value, helping him outperform his benchmark by 30%.
But not everyone that believes that Mozzi’s detached approach represents the way forward for equity research. Sri Srikanthan, senior lecturer in finance at Cranfield School of Management, told the Financial Times that equity analysts are unwise to ignore earnings estimates provided by the firms they cover:
“You have to start from somewhere. You can question the management but to completely ignore them seems a bit risky in my view.”
Mozzi told the Financial Times that the trouble with company guidance is that it is innately biassed towards bullishness and that boards of directors have a predisposition to view future prospects through rose-tinted spectacles. Mozzi said:
“From experience I know that management are all the time late to adjust the forecasts to the market conditions. Guidance from a company is never a good indicator.”
Paradically, Mozzi was head of investor relations at the Paris-based integrated property group Nexity from 2004-07. Perhaps that is where he learnt to distrust the spin issued by finance directors and investor relations departments?
He has been with Société Générale since July 2007, previously worked as an analyst at Exane BNP Paribas and has an MBA in banking and financial engineering from Ecole Superieure de Commerce de Toulouse.
Further reading on alternative approaches to new equity research
- Viewpoint; James Montier, Only White Swans on the Road to Revulsion
- Using Financial Analysis to Evaluate Strategy, by David Sadtler
- The Changing Role and Regulation of Equity Research, by Simon Taylor
Tags: equity research , fund management , investment analysis , Marc Mozzi , real estate , Sociéte Générale