Sizing Up Bonds With a Jaundiced Eye


Carol Levenson's research team at Gimme Credit isn't burdened with the conflicts of other analysts

Carol A. Levenson may be the Simon Cowell of financial research. Reviewing Sears' prospects earlier this year, an analyst at Goldman Sachs gingerly cautioned about rising "profit pressures." A Credit Suisse analyst cut his rating from "outperform" to "underperform." So what was Levenson's take? When pondering Sears' reorganization, the co-founder and research chief at Gimme Credit wrote, "We just can't avoid the cliché, 'rearranging the deck chairs on the Titanic.'"

Such straight talk, often in short supply on Wall Street, comes naturally to Levenson and her team of curmudgeonly analysts. The pack, working in a small, river-view office on West Wacker Drive, routinely fires off scathing analyses of Corporate America's biggest names. Forget the elaborate rating systems some Wall Streeters use or incomprehensible "underweight" and "overweight" recommendations. At Gimme, a company is worth investing in or not—its credit profile is deteriorating, stable, or improving, and its bonds are either a buy or sell. Says Levenson: "We're not sure what a ‘hold' means. We don't give that."

The 56-year-old opera buff, who once aspired to be an American literature professor, has been skewering—or praising—managements since 1994. Back then, she faxed commentaries from her Printers Row home to a tiny audience of investment-house bond buyers. Now she serves more than 2,000 readers at 200 investment institutions, which pay $35,000 to $150,000 a year. Majority-owned by Research Partners, the 28-employee company is chaired by Levenson. New York-based co-founder, economist Arthur Rosenzweig, is president.

Gimme's tart-tongued analysts see themselves as a breed apart from researchers on Wall Street. They claim true independence. They have no holdings in companies they follow. Unlike Wall Street houses, the firm does no underwriting or trading. And unlike the rating agencies, it doesn't depend on fees from the companies it evaluates. "We're completely unfettered," says Levenson, who boasts an MBA from the University of Chicago.

Caustic Views

Gimme does bond research, which explains the dour mindset. Its analysts don't care about share price appreciation. Instead, they aim to shield bondholders from losses. While stock analysts may praise acquisitions, Gimme analysts warn that such moves could hurt bondholders. Levenson is cool on shareholder activists who goad managers into share buybacks that can goose stocks but, "nine times out of 10," hurt credit quality.

Gimme's analysts aren't always right. One thought it unlikely that Alltel and First Data would go through with leveraged buyouts, for example, but the deals took place nonetheless.

Still, Gimme's candor and trenchant analysis remain a hit with subscribers. Robert "Moss" Cartwright, who heads taxable fixed-income trading at William Blair & Co., counseled clients last year to shun bonds from student-loan giant Sallie Mae on the say-so of one of Levenson's teammates—and was proved right when a much touted buyout fell through. At Gimme, he says, "They call it like they see it."

Weber is BusinessWeek's chief of correspondents .

Race, Class, and the Future of Ferguson
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus