US investment researcher StarMine, a subsidiary of Thomson Reuters, recognizes the world’s top-performing stock pickers. In 2019, Metzler's Equity Research team was once again very successful at forecasting the performance of German equities. Guido Hoymann, Head of Equity Research at Metzler Capital Markets, took first place twice – for his analysis of equities in both the Diversified Industrials sector and the Utilities sector. Holger Schmidt, Equity Analyst for the Tech, Software and Telecoms sectors, also took first place for his recommendations on shares in the Software & IT Services sector. We talked to the two Metzler analysts about the reasons for their success.
What serves as the basis for your successful research?
Hoymann: We focus exclusively on German equities. Nevertheless, it’s important to take a detailed look not only at the company and its respective sector but also at the overall economic climate beyond Germany's borders and the impact it may have. For this, precise knowledge of the sector is essential: the company, the products, the business models and the people involved. It is also important to keep an eye on legal changes that are relevant for assessing a stock.
What is your analytical approach? Is your research based on certain principles?
Schmidt: We conduct detailed research to find out whether the business models of the companies we analyze are fully plausible and can remain competitive. We also maintain direct and regular contact with the companies and their competent management representatives in order to form our own well-rounded impression.
Were there any particularly successful forecasts or ones that proved to be very accurate in retrospect?
Hoymann: About three years ago, we very accurately predicted the recovery of the previously badly shaken Utilities sector which persists to this day.
Schmidt: We also recognized early on that construction software specialist Nemetschek would continue on its strong organic growth path, thus boosting its share price significantly.
Mr. Hoymann, you have been Head of Equity Research at Metzler Capital Markets for six years now. How big is your team and how is it structured?
Hoymann: We have ten analysts who specialize in different sectors. In each sector, we analyze the entire spectrum of companies ranging from global DAX-listed enterprises to emerging small and micro companies quoted on the stock exchange. This helps us identify new trends and developments early on, as they sometimes arise first in the smallest of companies.
There are about 800 companies listed on the stock exchange in Germany. It’s nearly impossible to scrutinize them all. What are the focal points of your analysis?
Schmidt: When examining small and medium-sized companies, we aim to seek out the ones with the most promising business models. As a specialist for Germany, we also provide our clients with regular assessments of most larger enterprises.
Your analysis deliberately focuses on German stocks. Are there any sectors in Germany that you consider particularly promising – ones that you therefore watch more closely?
Hoymann: Many industries are confronted with major, sometimes disruptive changes, and they certainly shape these changes themselves. Examples of this include new technologies for energy production, upheaval due to digitization, and the development and testing of new drive systems in the auto industry. Thanks to intensive contacts to the management of the companies and also to renowned research scientists, we always have not only a good overall view, but also a vision.
Mr. Schmidt, Mr. Hoymann, you have both worked in equity analysis for about 20 years. What do you enjoy most about your work?
Schmidt: The variety. As analysts, we record and evaluate products, corporate strategies, financial reports, economic interactions, and competitive and market structures in order to be able to make good investment recommendations early on.
Hoymann: We can gain good insight into everything that shapes the markets of tomorrow. It’s exciting to follow the latest developments, to incorporate them into valid investment recommendations for the companies concerned and thus be on the cutting edge.
What does receiving the StarMine award mean to you?
Schmidt: Equity analysis has always been highly competitive. When we receive top ranks, we see this as an affirmation of our well thought-out research approach.
Hoymann: With the implementation of the MiFID II guidelines, institutional investors are demanding more concrete benefits from paid company analysis reports. These awards provide us with additional transparency with regard to the long-term success and sustainability of our analysis activities. Irrespective of this, we are naturally very pleased about the praise!