Gossip, Sales, Analysis and Power
Merrill Lynch securities analyst Carol Neves spends hours on the phone talking to CEOs. Her questions are pointed. ‘Why is your stock taking it so much on the chin? What’s the rising price of copper going to do to you?’
When Carol Neves was 6, an older sister wanted to give her a doll carriage for Christmas. She preferred an adding machine.
“I still remember that little adding machine,” Neves says. “I haven’t thought of it in years, but it was a red metal one with blue trim.”
The gift is worth pondering these many years later.
Today Neves cradles a telephone in her neck, fingers on the computer, as she talks on the telephone to the chief executive or chief financial officer of the 14 enormous conglomerates she tracks. She is punching numbers as she talks.
Her questions are direct.
“Why is your stock taking it so much on the chin?” she asks one.
“What do you have that would be affected by a recession?” she asks another.
“What’s the rising price of copper going to do to you?” she inquires of a third.
Rarefied Compensation
Neves is a vice president of Merrill Lynch and one of its leading securities analysts, issuing the giant brokerage firm’s opinion on whether to buy or sell the stocks she watches over.
It’s a position of enormous power, rather rarefied compensation, and, as a woman, she was practically a pioneer. The stock market crash, she says, has resulted in fewer telephone calls for her. She believes that the big institutional investors are still taking a wait-and-see position.
Neves, 53, knew she wanted to be a stock market analyst when she was 17 and read a magazine article proclaiming that the field was opening to women.
“The article was a bit premature,” Neves now laughs, but she did it nonetheless. So well, in fact, that Institutional Investor, which each year lists the “All Star Analysts,” has named Carol Neves a winner or runner-up every year in the decade that they have rated her category, multi-industry. This year she was a runner-up, but in the past she has been No. 1, No. 2 and No. 3.
It is a top honor in this Wall Street world where competition is tough. There are about 16,000 securities analysts in the country, 12% of them women.
After graduation from Trinity College in Washington, D.C., she was accepted by Harvard, but back then Harvard only permitted women a year’s taste of the Hasty Pudding. It sent her out armed with only a certificate, not the cherished MBA. She completed her MBA at New York University, and began at Merrill more than 30 years ago for $325 a month.
Taking the Long View
“It took me 12 years to get to follow my own stocks,” she recalls, a lot longer than it took a man. “I had a tough boss, too. We followed 70 stocks. That meant I followed 67 and he followed three.
“I don’t hold that against Merrill. It was the same everywhere. It wasn’t Merrill’s fault I was born too soon.”
Her 20th-floor office has a commanding view of the Hudson River and the New Jersey riverfront. The word processor faces the other way. When she isn’t working on it, she’s taking notes with the compulsively sharpened pencils atop her desk, talking on the phone, sorting through the ever-escalating pile of messages.
As a securities analyst, Carol is partly the soul of discretion, partly a professional gossip, partly a saleswoman, a winner of confidences, a predictor of what a company will earn in the next quarter and the next year, a sleuth who goes on site to sniff the air. She can be a troublemaker whose discouraging word can dump a stock five or six points on the New York Stock Exchange.
Courted by Companies
She is courted by corporations and grilled by institutional money managers. But she tries to keep a good relationship with companies, whether her opinions are favorable or unfavorable.
When she is about to lower or raise an evaluation, she calls the CEO three minutes or so before it’s to hit the wire.
“If it’s a drop, I usually say something like, ‘We’re about to find out if we’re just fair-weather friends.’ Often, they agree with me.”
She does recall that one CEO was furious.
“He kept calling me back, shouting about four sentences and then slamming down the phone,” she says. “Then he’d call back with four more sentences.”
Neves’ Sutton Place apartment, which she decorated herself, has a sweeping living and dining room with a panoramic view of the East River, the planes taking off silently from LaGuardia over the twinkling lights of the bridges.
She also has a home in Sea Girt, N.J., where she often spends weekends. In the summer months she commutes from the shore in her Mercedes.
A senior analyst like Neves earns between $250,000 and $350,000 in salary and bonus, but that’s not the whole story. If she were to introduce Company X to Company Y and X wanted to buy Y, Neves could get a finder’s fee. Or if one of her companies needed to raise cash and she persuaded it to use Merrill Lynch’s investment banking arm, that’s “really big money.” She declined to be more specific, but she’s hardly talking about pocket money.
Full Social Life
Neves never married--”I couldn’t and have this job”--but she has a full social life, playing tennis twice a week, taking vacations in Australia and Hong Kong, skiing and enjoying two 50-yard-line season tickets to the New York Giants home games.
She has a computer at home, where she sometimes works into the evening for a 12- to 18-hour day.
Recently, she had been looking at Allied Signal, a company with nearly $10 billion in annual sales, and decided to upgrade her assessment. Companies are given a numerical grade, A, B, C or D in a generalized rating--A for an investment-grade stock, B for good quality, C for speculative and D for high risk.
She also gives two numerical grades, one for short-term prospects, the second for prospects in one to three years. One stands for buy, two is above average, three is neutral and four, the meanest Neves ever gets, is below average.
Allied Signal had a B-3-2 rating and Neves was thinking of upgrading that to a B-2-2.
When she called the company to double-check a fact, she learned that Fortune magazine was about to print a negative article.
“Oh,” she says. “Maybe I’ll wait until after the article comes out. That might do you more good.”
Privately, she says, “Boo. I’ve wasted an hour.”
Analysts need to be credible. She wouldn’t look good if a damning article came out as she was upgrading.
They also need to be right.
Once Neves had the buy signal out for one conglomerate for so long that she got a bit edgy and slightly downgraded her opinion. The stock promptly slid from 47 to 41.
Just because she says so?
“Well,” says Neves modestly and accurately, “just because Merrill says so.”
The stock began inching back up. When it climbed through 44, Neves put the buy recommendation back.
“One thing we can’t be is wrong,” she says.
Her knowledge of various businesses and components thereof, the market share, the competition seems encyclopedic.
“Carol knows as much about my business as I do, maybe more,” says Ralph Ablon, chief executive of Ogden, a conglomerate with annual sales of $770 million.
Neves has followed more than 400 different companies over the years and some of them are now part of the big companies she tracks: ITT, Gulf & Western, Litton Industries, Tyco, Whittaker, Hexcel, Hanson Trust, Alco Standard, Colt, Ogden, Teledyne, Greyhound and Di Georgio.
She’s open and friendly but once in a while gets her foot in her mouth. Like the time she had had a long and analytic conversation with a reporter about ITT’s divestiture of a telecommunications concern. He finally asked how she would summarize the situation.
“The second ‘T’ in ITT doesn’t seem to stand for anything now,” she joked. Her remark was widely quoted.
ITT was not amused.
One recent morning, Neves arrived at the office before 8 a.m. to go on Merrill’s “squawk box” and report on Greyhound’s doings. This box goes to Merrill offices all over the country and each morning eight to 10 analysts pass the microphone around the table.
A few days after the squawk box report she got a call from one of the institutional buyers.
“What’s that pig dog doing anyway? Is it time to sell short or buy?”
It’s a direct world where people don’t ask about the children and the Mets. “I have to be on a very friendly basis with all these CEO’s, so that if something happens, like the stock suddenly takes off and there seem to be no reason, I can get through to the chief people immediately,” she says.
“I usually don’t know anything about their personal lives. I don’t know if they’re happily married or if they have just remarried. You always have to look at the company, not the individual. And you have to remember these guys are entrepreneurs. They’re more than willing to put their best foot forward.”
The toughest it ever gets was at a meeting when one analyst directly asked the CEO: “How can you justify paying yourself a million dollars a year considering how you run this company?”
“I would never ask that,” she says. “You have to ask tough questions, but it’s more important to listen hard.”
Robert L. Witt, chief executive of Hexcel, a San Francisco-based company mostly in aerospace, jokes with Neves about analysts.
“The hotshots who ask questions about the little footnotes aren’t really hoping they’ll get answers. They’re trying to impress their bosses, the senior analysts. These guys might ask me what Boeing’s decision to use an F-23 fan in the back of the jet means to me,” says Witt, giving a wildly hypothetical situation.
This evening, Witt, as well as the company’s chief financial officer, a Buffalo, N.Y., money manager, and a public relations man take Neves to dinner. The conversation jumps from defense contracts to a new milling machine, to the future of research and development and whether they could be attacked by a corporate raider like Carl C. Icahn. Neves both asks and answers questions.
In a typical week, Neves says she probably spends one day writing reports, two days as a saleswoman and two days talking to corporate presidents, working on the computer and crunching numbers. She spends 80 days a year on the road.
One day she has a call from someone who wants to sell a company that sells $85 million worth of vending machines each year. The question is whether Neves might know a buyer. She returns another call and says, “I’m coming on the free lunch.” That’s a three-day European trip, back and forth on the Concorde, to hear the latest pitches from Hanson Trust, a British-based conglomerate.
A Cincinnati-based conglomerate comes a-courting. It would like Merrill, and Neves in particular, to track them. She goes to Prudential-Bache one day and she is now Neves the saleswoman with a preset half-hour to pitch her stocks.
Is she right or wrong? One thing is for sure: The players want to crib Neves’ notes before they commit millions.
