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Sun 1 May 2011 02:52 PM

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Why it's time to lift the veil on analysts

Wall Street is littered with tales of companies that have been ravaged by the whims of analysts, writes Anil Bhoyrul

Why it's time to lift the veil on analysts
Qatari investor stock exchange
Why it's time to lift the veil on analysts

What would be your dream job? Astronaut? Rock star? Footballer?

We can all dream I guess, but realistically, none of the above will ever be on the radar for most people. Though there is one group of individuals who I have always envied. They are truly living the dream, able to do and say as they please, and rarely held to account. And bringing in big bucks. I’m talking about analysts.

As the great Warren Buffett once so eloquently said about them, “Wall Street is the only place people ride to in a Rolls Royce to get advice from people who take the subway”.

Wall Street, and for that matter most of the world’s stock markets, are littered with tales of companies that have been ravaged by the thoughts and whims of analysts. The Gulf is no different — I know of several CEOs who have told me off the record their complete bewilderment at the reports many analysts put out on their companies, often to devastating effects.

But what about the analysts themselves? What would happen if you took their advice in the last year? This week we have attempted to find out, by focusing on the UAE real estate and construction sector. Using data compiled by Bloomberg, we have studied the one-year returns (up to midday on Monday 25 April) on the various companies they track. And we have also decided to name every single one of them.

The result speak for themselves, with nine of the eleven analysts featured showing negative returns over this period. The lowest is -23.02%. Just two of them have been able to deliver a better return than you would get by sticking your money in the bank. As for the rest, you would have been better off sticking the cash under your mattress.

(I should add that we approached each of the eleven analysts named for an official response. Six of them, normally so willing to rush out their thoughts to us, chose not to.)

The man with a plan

One of the pleasures of this job is every once in a while, you get to meet someone truly inspiring. That happened to me last Monday, when I met Giancarlo De Nadai. If you’ve never heard of him, that’s because the 68-year-old boss of the massive Unifrutti Group has never given an interview in his entire life before.

And I guess he has never needed to: headquartered in Dubai for the past three years, his company is now one of the world’s biggest fruit production and selling operations. Seventy million cartons of fruit produced a year, 22,000 hectares of farms around the world and 7 million cubic feet of vessels to transport the products to every location on the planet. In the GCC alone, Unifrutti commands a hefty 15% of the market.

But what I found most fascinating about De Nadai was his commitment to social welfare. And by that, not some flowery ideas to change the world, but action. In the Philippines, where he employs 7,000 people, every single one of his staff also has the school fees for their children paid up. The same for his workers in India, while in South Africa he has funded the building of schools close to his farms. For every box of fruits produced, five cents is channelled into his welfare programmes.

There have never been any hype about this, no awards to speak of and no hunger for self-promotion. He only mentioned this to me in passing at the end of the interview.

“I think every company should do this,” he told me.

Fat chance of that. But I salute, and we should all salute, this remarkable man.

Anil Bhoyrul is the Editorial Director of Arabian Business.

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Ahamed 8 years ago

Anil,

It seems you wanted to praise Giancarlo De Nadai of Unifrutti Group and that you got an opportunity to interview him.

And you churned out a report on analysts' performance and tied this to him. You are an editor and you yourself have no idea about where the article started and where it ended.

Read it and reread it ......

Ahamed

charles 8 years ago

Anil an interesting article. As Editorial Director of AB you have a very clear position with analysts: publish their musings or not. I suggest you take your first thoughts of this article and tell them you will not publish anything until you have checked their past record for a degree of accuracy, not rambling. That should ensure that there are quite a few less articles by "analysts" we have to read on AB each day, and enable your team to produce more investigative work that we all crave so badly! Here's hoping Anil. Thanks.