Fierce Female Analyst Takes on Citi
All-star stock analyst Meredith Whitney of CIBC World Markets made major waves earlier this month when she presciently predicted the decline of Citi’s stock. According to a recent Business Week article, Ms. Whitney downgraded Citi’s stock to “market underperform” status, equivalent to a recommendation to sell, in an October 31, 2007 report. She bucked the conventional wisdom that Citi was a super-stock that could do no wrong when she concluded that the bank was undercapitalized, despite its huge size, and predicted that it would be forced to cut dividends in order to make up for huge losses related to the subprime mortgage fiasco.
At the time she issued these recommendations, she came under intense fire from the media and other stock analysts. According to articles in the London Times and the Washington Post, she even received death threats from investors in the bank, after her recommendations caused the value of the stock to plunge by $369 billion. Ms. Whitney told the Times, “clients are not pleased with my call and I have had several death threats. But it was the most straightforward call of my career and I’m surprised my peer analysts have been so resistant. It’s so straightforward, it’s indisputable.”
Though the call to downgrade Citi was made on a sound financial basis, few other analysts would dare to tangle with a giant like Citi. Says Ms. Whitney, “No one had the moxie to put in print what I put in print.” According to the New York Post, she certainly took some heat over the call. She described the typical rant from furious investors as “F— you, dumb analyst. I hope you get hit by a truck.” Unruffled, Ms. Whitney says that she has been letting these calls go straight to voicemail.
Turns out, she was onto something. Since her recommendations were made public, Credit Suisse, Morgan Stanley, and Goldman have all changed their recommendations on Citi stock to “sell” and the company has lost $50 billion in value. While Citi has not yet cut back on dividends, the smart money is on Ms. Whitney’s recommendation that they will be scaled back in the wake of Citi’s $6.5 billion debt writedown and 57% decline in third quarter profits.
So who is this female Wall Street oracle, and how did she become both a highly respected stock-picker and a lighting rod for controversy? Credited by bloggers on fiercefinance.com with “making analyst-dom glamorous again” and “raising well-timed bright red flags about the capital positions and dividend implications,” her star has been rising on Wall Street, and she has earned herself quite a following among hedge fund mangers, who stand to profit big-time from her bold visionary calls. Some of her top clients include SAC Capital Partners (of Steve Cohen fame), Fontana Capital, and Denver Investment Advisors. This year, she was rated the second-best stock picker by Forbes.
The 37-year old Ms. Whitney attended Brown University and the Madeira School in McLean, VA and has been working on Wall Street for over 15 years. She started out her career as junior analyst at Oppenheimer and moved on to the hedge fund FrontPoint Partners. After a stint at First Union, which was acquired by Wachovia, Ms. Whitney attained notoriety as a financial commentator on Fox News before returning to the banking world. Now, according to a recent Washington Post profile, she gets up every morning, reads 5 newspapers, goes to the gym, and is at her office making stock picks by 7 am. Now, that’s what we call a Super Woman. If the Glass Hammer gave out awards modeled on Budweiser’s “Here’s to You” advertising campaign, we would give our first one to Ms. Whitney.
It only adds to Ms. Whitney’s flair and mystique that her husband is John Layfield, the 6’6”, 300 pound former professional wrestler turned investment advisor formerly known as “Death Mask.” We at the Glass Hammer certainly admire Ms. Whitney, who describes herself as “no shrinking violet,” and who says, in the wake of the controversy, “I’m more than capable of defending myself.” Meanwhile, the financial world is hanging on her every word.
