When Dorfman Talks, the Investment World Listens : Stocks: Media market guru has won a legion of followers with his strong predictions. But critics say he’s a rumormonger who caters to ‘short sellers.’
Dan Dorfman jabs a finger at the camera and, in a voice as rough as sandpaper, uncorks a torrent of reasons why investors should avoid a medical company. By afternoon, the stock is falling.
A day later, the host of “The Dorfman Report” on the CNBC cable network turns his daily three-minute spotlight on an aluminum company he says is bursting with promise. By evening, its shares jump 3%.
Dorfman, a bantam of a journalist with a legendary--some might say notorious--reputation for hot predictions, is moving the market again.
At 63, with an all-elbows style that speaks much of a rough childhood in Brooklyn, he’s no pretty TV face. By his admission, he doesn’t write well and could “probably use a speech therapist.” In the esoteric, MBA-populated world of the stock market, he’s a self-taught high school graduate.
Yet when Dorfman anoints a company with his gravelly praise or barks out his qualms, stocks jump. In the game of stock-picking, few others wield such clout.
“When a guy yells, ‘Dorfman’s on!’ everybody mans his machines,” said Dan Hogan, a senior trader at First Albany Corp. “It’s Dorfman time. You shouldn’t be off the desk, you shouldn’t be off having a sandwich.”
Despite his following, Dorfman has more than his share of critics, perhaps because of his scrappy style, perhaps due to the nature of his work.
Companies accuse him of airing rumors. Irate investors stop him on the street to berate him for their losses. Critics also say he’s used by profiteers, especially “short sellers” banking on a stock’s decline.
“If you do a negative story, you’re the tool of the shorts. If you do a positive story, you’re a tool of the bulls. You can’t win,” retorted Dorfman during a recent interview sandwiched between a broadcast and a business dinner.
He said, for the fourth time in an hour’s talk, “I’m just a reporter.”
Dorfman maintains that, contrary to what many think, he’s not a stock picker, but simply reports what “bright minds” tell him.
“They could be right, they could be wrong,” said Dorfman, a short, trim man with a pug face. “What I don’t want is to have people go out and buy or sell stocks based on what I say.”
But they do.
Dorfman is a veteran, having written for The Wall Street Journal, New York magazine and Esquire. For the past eight years, he’s written columns for USA Today and Gannett News Service, but will switch to Money magazine in January.
Other journalists also move the market. Yet none do so as frequently as Dorfman, who reportedly earns $500,000 a year.
His clout partly stems from his immediacy. About 500,000 people a day watch his report, first broadcast live at midday and then repeated or redone several times.
“Once upon a time, he was doing pieces on CNN after markets closed in relative obscurity,” said Larry Moscow, CNBC’s director of news programming. “Now as CNBC has grown, his importance and visibility have grown.”
More importantly, people tune in because Dorfman has a reputation for being right. He’s had numerous scoops, including the SEC investigation of arbitrageur Ivan F. Boesky.
Day to day, it’s hard to judge his accuracy, since many reports involve projections about a company’s earnings or a product’s success.
Nonetheless, a legion of traders and small investors act on his advice--effectively moving the stock in the direction he indicates it will go.
“Everybody’s shooting orders based on what the guy is saying,” said Hogan of First Albany. “Nobody sorts out the details, right, wrong or indifferent. . . . It’s a super, super short-term buck.”
A study by The Washington Post found that during an 18-month period, 95% of his recommended stocks quickly jumped an average 13%. Bloomberg Business News found investors who followed his picks in March, 1992, could realize a 21.4% profit.
The Chicago Stock Exchange was so disturbed by the avalanche of trading following “The Dorfman Report” that it recently ruled that stock he discusses be traded manually, rather than by computer, to lessen the chaos.
How long his influence lasts is another question.
On a recent segment, Dorfman quoted a medical newsletter as saying federal approval for Summit Technology’s laser device to correct nearsightedness will be long in coming, if at all.
“If you own Summit, you’ve been afflicted with investment blindness,” Dorfman shouted into a camera near his overflowing desk at USA Today.
That day, Summit stock fell $1.75 to close at $28.25. But a day later, the stock rose to $30.25, after an analyst upgraded its rating.
Such changes show that stock prices are influenced by a broader picture of figures and reports, experts say.
“There’s so much information out there that can correct what (Dorfman) does,” said Sam Hayes, a professor of finance at Harvard Business School.
The ire Dorfman inspires, however, is often not so short-lived. His reports anger not only companies and stockholders, but those who say his reports are thin.
“Here’s a man who has a wide exposure in the press, one of the widest, and has to come up material daily,” said James Melcher, president of Balestra Capital, a $75-million fund in New York. “A lot of it is inevitably not well-researched.”
Companies also complain he gives them little time to respond.
“Usually Mr. Dorfman will write this story and then call me five minutes before he’s going on the air,” said Mary Hagan of Epitope, a Beaverton, Ore.-based company that makes an HIV saliva test that Dorfman has criticized.
His response: He does the best he can given his daily deadline.
“I’m on every day. I can’t spend two months researching,” said Dorfman, who said he normally has no idea what he’ll report when he arrives at work.
He also said “99% of the time” he calls companies more than 30 minutes before a show to ask for a response.
For Dorfman, the thrill of his life is breaking news. And he doesn’t intend to slow down.
Divorced and the father of a 29-year-old daughter who makes jewelry and manages a band, his life is his work. He eats breakfast and dinner most days with sources, and grabs lunch at his desk.
Always on the run, he reaches into a cluttered drawer just before air time to choose among an array of crumpled ties to don for the camera.
“There’s this unrelenting drive to prove myself every day of the week to myself,” said Dorfman, who says he grew up in foster homes after being abandoned at the age of 1 by his parents.
Outside work, he stays away from stock-picking. He said he last traded a stock three or four years ago and tells his employers about his investments.
For fun, he listens to music or takes people to “restaurants where I know I’ll never meet anyone I know.”
But escaping from the public eye is proving harder.
“I like getting away from myself,” Dorfman said wistfully. “I find it’s not that easy to do anymore.”
