U.S. Markets closed

Goldman Expands Company Research as Others in Industry Pull Back

Lu Wang

(Bloomberg) -- Goldman Sachs Group Inc.’s research group is stepping up its efforts to cover individual companies at a time when many of its counterparts on Wall Street are scaling back such work.

The New York-based bank has recently hired Bonnie Herzog from Wells Fargo & Co. to follow the beverage and tobacco industry while tapping Amit Hazan from Citigroup Inc. for medical technology. The hiring is part of a plan to increase the universe of coverage to 1,200 companies by the end of 2020. Two years ago, Goldman analysts followed fewer than 1,000.

The expansion stands in contrast to an industry trend where a growing number of firms are either exiting equity research or cutting back as commission fees dwindle and Europe’s MiFID II market rules force brokerages to separate the charges for research from trading. The retreat by rivals creates a pool of talent to draw from and an opportunity to grab more market share, according to Jim Covello, Goldman’s global co-head of single-stock research.

“One of the dynamics you’re seeing is that our clients are consolidating their spending and their consumption with fewer brokers,” Covello said by phone. “And one of our goals in the counter-cyclical investing push is that we will be one of the brokers that our clients consolidate with. The idea is, we can get a bigger piece of what is overall a smaller pie.”

The broader industry is retrenching. Last month, Macquarie Group Ltd. cut about 100 equity research and sales jobs. There have been a large number of analyst dismissals at Citigroup Inc. while lenders including Deutsche Bank AG and Barclays Plc are also slashing costs in equities this year.

Goldman’s buildup may come under new leadership. Steve Strongin, global head of research, is among a group of partners across the firm expected to leave in coming months, according to people briefed on the discussions.

Goldman has built up its industry research ranks, adding airlines and homebuilders during the past year. A push deeper into biotech is also notable, with the number of analysts more than doubling in recent years as the list of companies under coverage grew more than fourfold to about 90.

Amid the expansion, diversity has been sought as women accounted for three of the last four senior hires, Covello said. The additional hiring hasn’t led to higher expenses as some senior management in the research division left and the company shifted the resources to single-stock research, he said.

(Specifies that the shift in resources is occurring in the research division.)

--With assistance from Sridhar Natarajan.

To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net

To contact the editors responsible for this story: Brad Olesen at bolesen3@bloomberg.net, Richard Richtmyer, Chris Nagi

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.