4. Objective & Core Competencies
I am pursuing opportunities in Research Product Management, Corporate Access,
Specialist Sales, Corporate Communications, Investor Relations and Financial
Media
My greatest Strengths are being a good listener who can tease out high
Conviction ideas on my own or with others due to my Analyst training and
communicate them effectively across all SPX sectors
My skill sets include generating Thematic Content and leveraging dissemination
into Multi-Product outcomes
Having been at the nexus of both Corporate Communications & Journalism as well
as Research, Sales & Trading, I have well developed abilities which I can bring to
bear on the Communications and Investment processes
5. What do Investors Want?
Analysts must be willing to develop highly controversial, non-consensus positions
on industries and stocks - and be right
Help portfolio managers Outperform: A couple of great ideas a year will put an
Analyst far ahead of peers
Anticipating Change is worth a lot. Analyzing Change is worth much less
Have enthusiasm and communicate that excitement to clients
Being honest and admitting mistakes early increases credibility
Cover exciting smaller cap companies
Source: Morgan Stanley Equity Strategist Byron Wien, 4/26/93
6. What Research can Offer
Good companies can be bad stocks and bad companies can be good stocks
Analysts are valuable when helping determine the attractiveness of a stock by
providing insight about future reality and the market’s likely reaction
Analysts become indispensable because they provide the most insight, not
because their stock picks are always right or their estimates are always perfect
Analysts who provide the most insightful and most proactive Research to
institutional clients are the most valuable to issuers looking to raise Capital
Source: Piper Jaffray Director of Research Tom Schreier, 2000
9. 1.1 Corporate Messaging
MORGAN STANLEY, NEW YORK
Executive Director & Corporate Communications Financial Writer, 2011 - 2012
• Financial Writer of executive communications including speeches, talking points,
internal memos, earnings releases, annual letter to shareholders and proxy
materials
• Also participated in earnings due diligence, draft Volcker Rule response,
corporate Twitter launch, Firm values refresh
• Series 24 Registered Principal compliance officer for communications with the
public by Corporate Communications, Philanthropy and Global Sustainable
Finance
10. 1.2 Writer Best Practices
Clarity, written simply in plain English, at times highly personalized for executives
Proficient: Ability to grasp complex financial issues and translate into a narrative
Seasoned: Articulate in working one on one with members of senior management
Collaborative: Collegial in working with IR on time sensitive or longer lead items
Consistent: Corporate voice and messaging in terms of content, style and format
Manage: Move projects forward in a complex environment
Address potential issues or concerns of multiple stakeholders
11. 1.3 Earnings Releases
Morgan Stanley Reports Third Quarter 2011
• http://www.morganstanley.com/about/ir/shareholder/3q2011.pdf
12. 1.4 Corporate Actions
Morgan Stanley Reaches Comprehensive Settlement with MBIA
• http://www.morganstanley.com/about/press/articles/de933308-080f-47af-
b939-4e9cba3832b9.html
13. 1.5 Annual Shareholder Letter
2012 Annual Letter To Shareholders
• http://www.morganstanley.com/2012ams/Letter-Shareholders.pdf
18. 1.10 Series 24
Compliance for public communications by Philanthropy and Sustainable Finance
• http://www.fastcoexist.com/1679573/how-to-launch-a-skills-based-volunteering-
program-and-make-it-last
19. 1.11 Positive Feedback
2012 Annual Letter To Shareholders
“Looks good” - James Gorman, CEO
“Overall I think it reads very well.” - COO
“I like it. A couple of comments:” - CFO
“Fine by me” - Co-President, Institutional Securities Group
MBIA Settlement Press Release
"Overall this looks very good to me and we have certainly struck the right tone.”
- Global Head of Corporate Communications
Firm Values
"Thanks for all your help. Couldn’t have gotten these speaking points on time
without you!!!!" - VP, Marketing
21. 2.1 Generating Content
DOW JONES & COMPANY, NEW YORK
Columnist / Dow Jones Investment Banker, 2010 - 2011
• Columnist primarily covering the TMT and Consumer/Retail sectors for a
premium subscription service generating sophisticated financial and strategic
commentary for an audience of investment bankers
• Writing insightful, forward-looking columns and hard-hitting, in-depth analyses
that are often accompanied by interactive spreadsheets covering topics such as
M&A, capital raising, regulatory changes, venture capital and private equity
• Coordinated production of the 2011 Deal Predictions representing the editorial
team’s best ideas about which deals could shape or shake up the markets in 2011
and participated in both a virtual press conference and a webinar
• Hewlett-Packard article generated the 1st client subscription for djibanker.com
22. 2.2 Columnist
Idea Generation
Product: A premium subscription service that leverages news and data with in-
depth opinion and analysis
Audience: Investment Bankers, Management Consultants
Commentary: Exclusive analysis which is independent and forward-thinking
Distribution: Proprietary portals, FactSet, djibanker.com, mobile, Twitter
Recognition: Best Online Professional Financial Information Service at the
Software and Information Industry Association’s 2010 Codie Awards
23. 2.3 Coverage
As a Columnist, coverage included:
• Technology • Media • Telecommunications
• Consumer Products • Retail • Fashion
• E-Commerce • Social Media • Restaurants/Spirits
• Airlines/Travel • REITs/Leasing • Non-Profit
• Mergers & Acquisitions • Venture Capital • Private Equity
25. 2.5 Column Best Practices
Columnist, not a Reporter
Entertaining, memorable
The Lead: Opinion of opportunities and pitfalls, without numbers
Nut Graf: Executive summary that sets the scene
Arguments: Compelling commentary written with “swagger”
Valuation: Comparable transactions, trading laterals
Content: PowerPoints, spreadsheets, PDFs, videos and graphics
Avoid unactionable think pieces
27. 2.7 Annotated Filings
How High Will Spirit Fly?
http://sec.gov/Archives/edgar/data/1498710/000119312510212371/ds1.htm
28. 2.8 Graphics Tell the Story
• Where Wal-Mart’s Cash Goes • The Golden Apple
29. 2.9 CEO Interviews
Why Tupperware Is Buyback-Prone And M&A-Shy - March 29, 2011
http://online.wsj.com/video/why-tupperware-is-buybackprone-and-mashy/
20802514-CC67-4846-9E42-15D7B1C81FEC.html
30. 2.10 Hire Announcement
Dow Jones Investment Banker Adds Wall Street Veteran to Editorial Team
• http://www.dowjones.com/pressroom/releases/2010/12102011-DJIB-
Gallagher-0093.asp
NEW YORK (December 9, 2010) – Dow Jones today announced the appointment
of Peter Gallagher to Dow Jones Investment Banker's dedicated editorial team.
Mr. Gallagher joins the New York team as a columnist focusing on the retail, food
& beverage, media, and consumer industries.
“With a deep knowledge of investment banking and corporate finance that can
only be gained working on Wall Street, Peter Gallagher brings a fresh, insider’s
perspective to the investment banking editorial team,” said Rick Stine, senior
editor at Dow Jones Newswires.
Mr. Gallagher has spent more than 21 years on Wall Street in both research and
corporate finance positions. Prior to joining Dow Jones, he was vice president and
content manager for the equity trading desk at Barclays Capital. Earlier, Mr.
Gallagher held positions as a research product manager at Lehman Brothers and
an equity sales specialist at UBS Investment Bank.
32. 2.12 Virtual Press Conference
Quoted extensively regarding HPQ in The M&A Journal Volume 11 Number 4
• http://www.themandajournal.com/
Says Mr. Gallagher: “I think what’s very interesting about Hewlett-Packard is that when the board got actively
involved and forced out the former CEO, the main driver behind it was Mark Andreeson, who has a big
software background.... To some degree, it’s relatively clear that they’re going to focus on growing the
software business, but when you look at HP today, you’ll see that their biggest business is actually their lowest
margin business, and their smallest business—software—is their highest margin business... For HP, it would
make sense to me, and this is a provocative and somewhat contrarian point of view, but if you were to take
the printers, which is profitable and having somewhat of a cyclical rebound, and the PCs, which is kind of a
laggard and losing out to laptops and recently tablets, if they could package those up and reinvest the
proceeds in going big in software and really focus on their enterprise-type business, which is where the future
of the company is, it would be similar to what IBM did over time.”
33. 2.13 Leadership Series Webinar
Featured Speaker
• http://www.dowjones.com/ib/webinars.asp/
34. 2.14 Provocative on HPQ PC’s
We Said: October 8, 2010 - Two Companies Are Better Than One
“But if the Silicon Valley icon is serious about bolstering its position in the
enterprise segment, it must separate its non-enterprise operations. HP's largest
revenue contributor, Personal Systems Group (PCs), has the lowest operating
margins and earnings multiple, while the smallest revenue contributor, Software,
has the highest margins and multiple...Removing Personal Systems Group would
reduce the valuation drag caused by Palm's on-going losses. It would also remove
the risk to HP shareholders that tablets cut deeply into the PC business.” - Peter
Gallagher
What Happened: August 18, 2011 - HP to Evaluate Strategic Alternatives for
Personal Systems Group
http://www.hp.com/hpinfo/newsroom/press/2011/110818xb.html
“HP today announced that its board of directors has authorized the evaluation of
strategic alternatives for its Personal Systems Group (PSG), including the
exploration of the separation of its PC business into a separate company through
a spin-off or other transaction.”
35. 2.15 On Target With SLE
We Said: December 23, 2010 - Sell The Coffee, Not The Company
http://www.dowjones.com/ib/pdf/Dow%20Jones%20Investment%20Banker
%20Ahead%20On%20Saral%20Lee.pdf
“Sara Lee's share price is now at levels where it would take a long time for any
buyer to make a deal accretive. But management ought to seriously consider a
tax-free spinoff of the company's coffee unit to generate immediate shareholder
value along with its existing share-buyback plan. The buyback, combined with a
spinoff of the coffee business should be attractive to current holders, who would
benefit from cash returns, higher valuations, deferred tax events and future
growth. Such a strategy should fend off potential buyers” - Peter Gallagher
What Happened: January 28, 2010 - Sara Lee To Split Into Two Public Companies
“The company is dividing entirely as an answer to recent outside takeover bids.
On Friday, the Downers Grove, Ill., food conglomerate said it plans to split into two
publicly traded companies in early 2012 while unveiling a special dividend of about
$3 a share.” - Dow Jones Newswires
36. 2.16 YUM’s Asian Fusion
We Said: December 2, 2010 - Asian (Con)Fusion
“Take Yum! Brands Inc. It should consider an IPO of its Chinese KFC and Pizza
Hut assets (its restaurants in China are largely company-owned). Alternatively,
Yum! could monetize its domestic Chinese fast-food chain East Dawning by
merging it into Hong Kong-listed Little Sheep Group Ltd., in which Yum! already
has a 27.3% stake.” - Peter Gallagher
What Happened: April 26, 2011 - Yum! Brands Makes Preliminary Proposal To
Acquire China’s Little Sheep Retaurants
http://www.yum.com/company/pressreleases/042611.asp
“YUM! Brands today announced that it has submitted a preliminary proposal to
Little Sheep Group Ltd under which Yum! Brands would offer to acquire all
outstanding shares of Little Sheep, other than a minority interest to be held by the
chairman and other founding shareholders of Little Sheep.”
37. 2.17 RL’s Buyback Capacity
We Said: April 20, 2011 - Can Polo Gallop Any Faster?
“As the company has never had a propensity for major acquisitions, the logical
thing is to return cash to shareholders even faster than the company is at the
moment. At current cash flow rates, Polo could borrow $500 million and draw
down $500 million of cash, bringing it to a neutral net cash position, and still just
brush up against the 2.0x level. That available $1 billion is more than sufficient to
execute the entire $719 million in authorized share buybacks on an accelerated
basis and maintain the new dividend level of $80 million.” - Peter Gallagher
What Happened: May 25, 2011 - The Company's Board of Directors Authorizes an
Additional $500 Million Stock Repurchase Program
http://phx.corporate-ir.net/phoenix.zhtml?c=65933&p=irol-
newsArticle_print&ID=1567576&highlight
“The Company has approximately $972 million remaining under its authorized
share repurchase programs, inclusive of a new $500 million authorization recently
approved by the Company's Board of Directors.”
38. 2.18 A View on GOOG Antitrust
We Said: November 10, 2010 - Google Opponents Should Put Up Or Shut Up
http://www.google.com/press/ita/saying.html
“A competitive threat is not the same thing as an antitrust violation… It is difficult to
make out FairSearch’s precise antitrust arguments. There are alternatives to ITA’s
software: both the GDSs but also upstarts such as the U.K.’s Everbread Ltd.,
which has relationships with 60 low-cost carriers, and Vayant Travel Technologies
LLC of New York. It isn’t clear, therefore, that competition would be reduced even
if Googled didn’t honor ITA’s contracts with other travel companies.” - Peter
Gallagher
What Happened: April 8, 2011 - ITA Software acquisition cleared for takeoff
http://googleblog.blogspot.com/2011/04/ita-software-acquisition-cleared-for.html
“We're excited that the U.S. Department of Justice today approved our
acquisition.”
39. 2.19 Valuing TIVO Litigation
We Said: October 21, 2010 - TiVo's Out-Of-The-Box Appeal
“TiVo's valuation hinges crucially on a suit by EchoStar Corp. challenging TiVo's
patents... Should TiVo prevail, most cable operators will have to strike agreements
with TiVo to allow DVR-enabled set-top boxes. The value of a continuing
relationship with Dish Network Corp. is estimated to be worth $5 to $6 per TiVo
share, or roughly $500 million to $600 million.” - Peter Gallagher
What Happened: May 2, 2011
http://pr.tivo.com/easyir/customrel.do?
easyirid=CA934452BA6418EF&version=live&prid=750426&releasejsp=custom_15
0
“TiVo Inc. (NASDAQ: TIVO), DISH Network Corporation (NASDAQ: DISH), and
EchoStar Corporation (NASDAQ: SATS) announced today that they have settled
all of their ongoing patent litigation. Under the terms of the settlement, DISH
Network and EchoStar agreed to pay TiVo $500 million, including an initial
payment of $300 million with the remaining $200 million distributed in six equal
annual installments between 2012 and 2017.”
40. 2.20 AMZN TV Coverage
Should Amazon Buy Netflix? - May 5, 2011 5:41 PM ET
http://video.cnbc.com/gallery/?video=3000020472
Welcome back to Fast Money. we're live at the Nasdaq market site. Let's put our
ear to a wall in a deal that technogeeks can only dream of, a pairing of Amazon
and Netflix. An article was put out making the case that Amazon and its hulking
$90 billion market cap should buy Netflix to maintain the momentum and avoid
becoming a low margin retailer. Karen, what did you make of this Amazon/Netflix?
41. 2.21 FB Blog Coverage
Goldman’s Facebook plan falls apart - Jan 17, 2011 17:15 EST
http://blogs.reuters.com/felix-salmon/2011/01/17/goldmans-facebook-plan-falls-
apart/
And here’s Peter Gallagher, who notes that Goldman’s boilerplate talks about how
the bank “may at any time further reduce its exposure to its investment in
Facebook through hedging arrangements”. Goldman could write options against
its own Facebook shares and likely has discretion to do so against the fund’s
holdings. In other words, Facebook has a speculative shareholder for the first
time, now that it’s made its decision to get into bed with Goldman. And Goldman
will think nothing of buying puts or selling calls on Facebook shares — or even
dumping its shares outright, if it’s allowed to do so — if that’s what it needs to do
to protect its $450 million investment.
42. 2.22 Market Moving Columns
DJ MARKET TALK: Limited Brands Options Volume Up After LBO Chatter
Tuesday, June 21, 2011 1:47PM
(Dow Jones) Options volume registers an uptick after a report from Dow Jones
Investment Banker that Limited Brands (LTD) could make a peach of a takeout
target if LBO markets improve. Most active are July calls that grant the right to buy
LTD for $38 before expiration; calls to buy the stock for $37 and $39 also seeing
interest. Overall volume is more than three-times daily average, according to
Trade Alert. LTD up 2.8% to $37.32.
Avon Products strength attributed renewed takeover speculation
February 11, 2011 10:06 EDT
http://www.theflyonthewall.com/permalinks/entry.php/AVPid1376780/AVP-Avon-
Products-strength-attributed-renewed-takeover-speculation
Shares of Avon Products are trading higher on renewed takeover chatter following
a Dow Jones Investment Banker article that speculates that Avon may be a
takeover target.
43. 2.23 Contributing to WSJ
If the Tech Works, Buy It
http://online.wsj.com/article/
SB10001424052748703597804576194423391776088.html
When a technology is central to what you do, you want to own it. Partnerships are
like renting the apartment you wish you'd bought.
For example, if Cisco Systems Inc. had bought EMC Corp. instead of joining with it
in November 2009, EMC's virtualization technology likely would have lifted Cisco's
shares, given that the momentum around cloud computing has only increased.
Cisco may want to revisit its relationship with EMC; there are lessons in this for
Microsoft Corp. as well.
44. 2.24 Venture Capital Dispatch
Groupon Risks A Discount By Waiting
http://blogs.wsj.com/venturecapital/2011/01/05/groupon-risks-a-discount-by-
waiting/
Dear Dinky Startup: You're Not Facebook.
http://blogs.wsj.com/venturecapital/2011/01/10/bankers-to-venture-backed-clients-
youre-not-facebook/
Struck Out On Facebook Stock? Maybe Goldman Will Sell You Some Options
http://blogs.wsj.com/venturecapital/2011/01/14/struck-out-on-facebook-stock-
maybe-goldman-will-sell-you-some-options/
Cheap Content Is King: Why LinkedIn's IPO Trumps Pandora's
http://blogs.wsj.com/venturecapital/2011/02/17/cheap-content-is-king-why-
linkedins-ipo-trumps-pandoras/
Why Fusion-io's IPO Could Melt Down
http://blogs.wsj.com/venturecapital/2011/03/24/why-fusion-ios-ipo-could-melt-
down/
45. 2.25 WSJ Deal Journal
Family Dollar: Get a Deal or Take a Discount
http://blogs.wsj.com/deals/2011/02/22/family-dollar-get-a-deal-or-take-a-discount/
Betting on a Turnaround at Jones Group
http://blogs.wsj.com/deals/2011/03/08/betting-on-a-turnaround-at-jones-group/
Did Starbucks Spill a Chance to Buy Green Mountain?
http://blogs.wsj.com/deals/2011/03/16/did-starbucks-spill-a-chance-to-buy-green-
mountain/
Why Amazon Should Buy Netflix or Sony
http://blogs.wsj.com/deals/2011/05/05/why-amazon-should-buy-netflix-or-sony/
A Modest Proposal For Abercrombie & Fitch
http://blogs.wsj.com/deals/2011/06/08/a-modest-proposal-for-abercrombie-fitch/
Could Those Victoria’s Secret Models Be a $10 Billion Buyout?
http://blogs.wsj.com/deals/2011/06/21/could-those-victoria-secret-models-be-a-10-
billion-buyout/
47. 2.27 Review / Farewell Email
You have written a number of very good columns, including some that have drawn
attention. You also have good instincts for significance -- e.g., trends that could
have deal implications (e.g., the consumerization of IT).
You have done a good job coming up to speed on both retail/consumer goods and
the tech worlds, and have balanced the two well.
Your writing has improved markedly... The most recent ones have been well
written and well argued... I appreciate the care with which you review edits. This
inspires confidence in your grasp of the facts.
Peter has contributed much in his year with IB, from the beginning, when was
saddled with the thankless task of corralling the deal predictions last fall.
He has had a knack for calling things right. Not the least of those calls was his
brave – nay, heroic – recommendation a year ago that HP ought to spin off its PC
business. “Sure. Nice argument, but it will never happen,” I told him. Sadly, he
was vacationing in the Adirondacks when HP did the unthinkable last week and
thus wasn’t here to bask in his glory with a string of TV interviews.
48. 2.28 Positive Feedback
“I've never seen a provision like this one in an S-1. What's interesting about the
provision is that it treats the NOLs as though such NOLs were "personal" to the
pre-IPO shareholders, even though it's clear an NOL is a corporate asset. If the
purchasers in the IPO fully appreciate the implications of this provision, it should
affect, adversely, the price they're be willing to pay for the company's stock.”
- II Ranked Institutional Investor's Accounting & Tax Policy Analyst
"This is one of the most thoughtful articles I've read on the topic [HPQ PC's]. I'm
impressed. You're clearly focusing on strategy and not the name calling. Have you
been thinking about why Larry is so voluble on the topic?" - IT Hardware Analyst
For those of us around then, the corporate buybacks were like an Armada entering
the harbor during the '87 crash. As each large cap lined up behind IBM you could
feel the market sentiment shift. Kudos on clearly stating such an important
message. I hope your note reaches Jobs' and Cook's desks.” - Fund Consultant
“Just learned your H-P article that precipitated the first sale of djibanker.com since
its release last week to Bite Comms, sight-unseen - they were called by H-P. Nice
job for a first week!” - Dow Jones Global Director of Investment Banking Solutions
50. 3.1 Commercializing Research
UBS INVESTMENT BANK, STAMFORD
Director & Transportation / Aerospace Defense Equity Sales, 2003 - 2004
• Stamford Trading floor based specialized Research Salesperson / Desk Analyst
providing high Impact Research calls & Trading opportunities of Industrials stocks
to 25 of the firm's top institutional clients with sectorized responsibilities
• Marketing Differentiated Research platform with geographically distributed
Analysts, Breadth of coverage and Global representation by working with Global
Airlines, Transport and Aerospace & Defense Equity Analysts
• Maximizing the intraday Flow between Analysts, Trading and clients while
protecting against Facilitation Costs; Leveraging Research into Convertibles and
Fixed Income to derive relative value across the Capital Structure
• #1 Block Trading volume of Airline stocks in 1Q04 with a 9% market share
51. 3.2 Specialist Sales
Staying on Message
Partners: A premium service that leverages geographically distributed Analysts
as a Complementary overlay with Sales
Depth: Provides industry insights to company specific Research calls and
maintains an ongoing dialogue as Themes unfold
Idea Generation: Draw upon Cash Equities, Derivatives, Converts, Fixed Income
Transactional: Corporate Access to maximize Capital raising for issuers and
Performance opportunities for investors
Feedback: Timely, Consistent Feedback from non-deal roadshows, conferences
Risk: Idea Generation that loses money for the firm through Facilitation Costs
53. 3.4 Analyst Marketing
US Transport & Aerospace / Defense Analyst Marketing
NY: Andor, Balyasny, Chilton, Citigroup, DeAM, Galleon, GIC, GSAM, Jennison,
JPMorgan, Maverick, MSIM, Pequot, SAC, Schroders, TCW, TIAA/CREF, ZBI
Boston: AmEx, Babson, Brookside, Columbia, DeAM, Evergreen, Fidelity, John
Hancock, MFS, Pioneer, Putnam, State Street, Tudor, Wellington, Westfield
Atlantic: AmEx, Gartmore, Lord Abbett, MLIM, State of New Jersey, Sun America,
T Rowe Price, Wellington
London: ABN AMRO, DeAM, MLIM, O’Connor, Sarasin
European Transport & Aerospace / Defense Analyst Marketing
NY: Andor, Balyasny, Brown Brothers, GIC, Jennison, Mackay Shields, MSIM,
SAC, Sierra Global, TIAA/CREF, Trident, ZBI
Boston: Boston Co, Fidelity, Putnam
Atlantic: Franklin, MLIM, T Rowe Price, Wellington
54. 3.5 Morning Call Best Practices
It’s a Sales pitch, not a speech
Attention spans are short
Preparation: Use a bullet point outline for Key selling points
Practice: Speak out loud, so you don’t end up reading
Express Conviction: Use your voice and body language to convey confidence in
your recommendation; Speak slowly, enunciate and project your voice
Don’t give Sales a reason not to make your call: Minimize maintenance
material to Sales, reiterating Research to Sales Traders; Avoid unfocused, lengthy
Content providers
55. 3.6 Earnings Preview & Review
Earnings Expectations: Summary of companies reporting the next day
Ticker, (Recommendation, P/T)
- xQ0y EPS $x.xx Est. vs. $x.xx consensus and $x.xx a year ago
- xQ0y Revs $x.xB Est. vs. $x.xB consensus and $x,xxxMM a year ago
- xQ0y Op Inc $x,xxxMM Est. vs. $xxxMM a year ago
- FY0z Ests. for Revs $x.xB, Op Inc $x,xxxMM & EPS $x.xx vs. consenus $x.xx
- Conference call dial-in, password
Earnings Review: Initial read prior to conference call
- Actual EPS, Revs & Op Inc vs. estimates and consensus
- Key company achievements & management quotes
- Updates to guidance
- Performance in-line or above/below fundamental Research expectations
- Likely stock price reaction
56. 3.7 Sales Commentary
Recommendation Changes
August 2003: All Aboard KSU Upgrade!
- Operations
- Transaction
- Remaining Financing Issues
- Valuation
- Timing
Global Laterals
January 2004: Buy Long Haul, Sell Discount - and an Exception to the Rule
- Ryanair Profit Warning / JBLU Earnings Preview
- Buy Long Haul: US / Europe / Asia
- Sell Discounters: US / Asia
- An Exception to Every Rule: Europe / easyJet
57. 3.8 Cross Product Dinner Ideas
Airlines Cross Instrument Ideas Hedge Fund Dinner, June 2003
• Geared toward clients with a fundamental Equity role who were: long Airlines at a
low cost basis, feared they had missed the move off the bottom looking for
alternative ways to get long exposure and/or going back to shorting the group
• Airline Analyst: Equity Fundamentals:
Bankruptcies for this cycle are behind us
• Head of Equity Derivatives: Best Idea
AMR Stock Replacement: Sell stock and buy 1 x 2 Call Spread
- Lock in gains while maintaining long exposure through the Call Spread position
• Head of Credit Derivatives: Best Idea
Buy Boeing Capital Protection / Sell Boeing Corp Protection
- Capital will Underperform due to leases, more Liquid than Airline credits
58. 3.9 Equity Origination
West Japan Railway $2.3B Secondary Joint Global Coordinator & Book Runner
- International Tranche 20x oversubscribed
- Client received 100% of initial order, 2nd largest allocation
- “Thanks again for JRWest”
GOL Linhas Aéreas
- CFO Stamford Trading Floor Visit
- Specialist Sales IPO Pitch Letter
XJT $137MM Convertible Underwriter
- Deal Team Captain
PACR $145MM Secondary Underwriter
- Deal Team Captain
59. 3.10 Research & Events
I identified ways to leverage Research & events to Capitalize on Change,
establish myself, Differentiate our platform and Drive relationships & Revenue
• Originated Branded CEO Dinner Series with JBLU, DAL, NWAC, CAL, LUV;
Arranged and/or Executed Corporate Access with AMR, ACAI, EZJ, UPS, CSX,
UNP, RTN, LMT, GD, JOYG
• Arranged cross instrument dinner with Airline & Aero Analysts and Equity
Derivatives, Converts & Credit Default
• Arranged Trader dinner with Airline Analyst, Block Traders & Equity Derivatives
and buyside Analysts & Traders; Executed cross sector dinner with Airline, Rail &
Auto Analysts and buyside Analysts
• Supported Aircraft & Transport Conferences, China Transport Supply Chain &
NBAA BizJet Field Trips
60. 3.11 Events & Clients
Dinners
UBS Delta CEO Dinner Series: Andor, CSAM HY, Duquesne HY, Equinox, GLG,
GSPS, Mackay Shields HY, Principaled, T Rowe Price, UBS Prop, Wellington, ZBI
Airlines Cross Instrument Ideas Hedge Fund Dinner: Balyasny, Chilton,
Derchin, Galleon, GSPS, Hunter Global, O’Connor, Pequot, Satellite, Soros
Non-Deal Roadshows & Field Trips
ACAI CEO Boston NDR: Boston Co, Fidelity, Highfields, Putnam, Wellington
AMR New CEO Dallas Headquarters Field Trip: AmEx, Carlson, Fidelity, Lazard,
Lord Abbett, Primecap, Tudor, Waddell & Reed
AMR New CFO West Coast NDR: Brandes, Capital, Primecap
CSX New CFO NY NDR: Jennison, MSIM, PIMCO, Seligman, TIAA/CREF
GD CEO & LMT CEO designate Washington Headquarters Field Trip: AmEx,
Bernstein, Citigroup, GE, Janus, JPMorgan, Maverick, Neuberger Berman,
Principal, SAC, State Street, Wellington
RTN CEO designate & CFO Boston NDR: Fidelity, Putnam
61. 3.12 Events Drive Relationships
I launched the Branded UBS CEO Dinner Series on an ad hoc basis. I solicited
CEO participation either directly or through Investor Relations. Attendees would be
primarily limited to ~10 sectorized Equity clients with large company holdings or
large sector investors who could take/increase positions as well as
~5 Convert/Fixed Income clients to maximize the Dinner Series’ value internally
A highlight of the UBS CEO Dinner Series was held with DAL where board
member Gerald Grinstein was making his first appearance to investors as the
company's new CEO. Feedback from the event included the following email from
Sales: "Kenn just called to tell me how much he enjoyed the dinner you hosted
with DAL this week. He was impressed by your insights and is eager to be kept in
the loop on your thinking. He was gushing really”
In addition to building Strong client relationships, my Performance review
acknowledged the CEO Dinner Series as being Innovative in sponsoring events
and building internal relationships with Converts & Fixed Income
62. 3.13 Change Drives Marketing
In late April 2003, Railroad CSX named Oscar Munoz CFO. I impressed upon him
the value non-deal roadshows provide to clients, managements and the sponsor
firm. Munoz would benefit from exposure to clients who were unfamiliar with him
due to his Changing industries. Clients would benefit from learning how Munoz's
understanding of the digital Internet would apply to improving network returns from
a poorly Performing physical Railroad. UBS would benefit as Corporate Access
is one of the top three services clients value in paying firms
Munoz agreed to have UBS conduct his first non-deal roadshow which was
successfully Executed in early December visiting institutional accounts in New
York. My relationship with the CFO later allowed me to market Commodity
Derivatives as CSX began a fuel hedging program due to rising Crude Oil prices
Beginning in April 2004, CSX reported the first of 16 quarters of yr/yr growth in
earnings and Revenue combined with improved operational efficiency and safety
costs. From $15.46 when named CFO, CSX increased >4x to $70.70 in May 2008
63. 3.14 Deals Drive Roadshows
In late April 2003, KSU announced plans to increase its initial minority stake in
the privatization of TFM to majority control. However, there were significant
uncertainties regarding potential leverage/dilution due to the Mexican
Government's above FMV Put Option to sell its remaining position to KSU.
Separate from the Put, the Government owed a VAT sales tax refund
With the stock trading at $11.56 in early August, UBS Analyst Rick Paterson
upgraded KSU to a Buy with a $14.50 price target based on operational benefits
and a probability weighted scenario of the remaining financing issues and resulting
Capital Structure. The base case assumed that KSU/TFM and the Mexican
Government would offset their obligations, while downside risk of $10 compared to
potential upside of $18
Following the upgrade, KSU's CFO committed to doing their first NDR following
the transaction's quiet period with UBS. The recommendation played out favorably
as the parties later agreed to offset and KSU traded at $18.08 in December 2004
64. 3.15 Controversy Drives Trading
In late July 2003, ACAI announced plans to Change its business model from
being a contract carrier feeding legacy Airlines to being an independent low cost
carrier. UBS Analyst Robert Ashcroft assumed coverage of ACAI in mid August
with a Reduce rating due to his opinion that the company's existing assets where
ill suited for their proposed Strategy. My relationship with the CFO resulted in the
CEO agreeing to a non-deal roadshow visiting institutional accounts in Boston
When MESA launched a bid with a 25% premium in early October to acquire ACAI
and maintain the contract model, Ashcroft reiterated his Reduce rating and
recommended that investors reverse the spread. Cash Trading captured first day
volumes following the hostile offer of 50% for the acquirer and 25% for the target.
When the CEO reiterated his Strategy on the NDR, holders exited the stock while
the firm Dominated market share until the bid was terminated in late December
ACAI launched its Strategy in June 2004. However, the controversial call proved
correct when the carrier filed bankruptcy due to high costs in November 2005
65. 3.16 Conviction Drives Deals
In mid March 2003 with the invasion of Iraq underway and Cash Equity Trading
volumes ~50% of normal, UBS Analyst Sam Buttrick made a high Conviction call
on the Airlines that they weren't all going bankrupt and to "buy the casket". AMR
which was seeking labor concessions was his top pick after trading as low as
$1.25 on March 12
In late April following the fall of Baghdad, AMR promoted President Gerard Arpey
to CEO after negotiations faltered ahead of a May 1 deadline. Buttrick stayed with
his call based on his ongoing discussions with Arpey and his view that the CEO's
investor focus would lead him to opt for bankruptcy only as the last resort. With a
revamped proposal accepted by all unions within days, AMR proceeded to rally to
$7.59 by May 7
Afterwards, Arpey agreed to host a Headquarters Field Trip as the means to
reintroduce himself to the investor community in his new role. UBS later acted as
Lead Manager of AMR's next Secondary Offering in November '05
66. 3.17 Client Penetration
Fidelity 1Q04 Vote
• Peter Gallagher: 5 votes total from 3 different voters
- Transports Equity PM/Analyst (Oct ’03): “Great help on the Airlines. Thanks”
- High Yield Analyst (Aug ’03): “Thanks for the special attention”
- Transports/Defense Sector Analyst
• US Airlines Analyst: 11 votes from 3 voters (incl new Transports Nov ’03)
• US Transports Analyst: 8 votes from 4 voters (incl new Transports Oct ’03)
• European Airlines Analyst: 2 votes from 1 voter (1st Fidelity Boston votes)
• Asian Airlines Analyst: 2 votes from 1 voter (1st Fidelity Boston votes)
• Australian Airlines Analyst: 2 votes from 1 voter (1st Fidelity Boston votes)
67. 3.18 Management Accountability
Weekly Highlights ending 6/13
• Made client calls regarding GD’s acquisition of Veridian
• Contacted clients and Hedge Fund Sales desk following lowered Rail estimates
• Highlighted Sea/Air/Rail/Truck Data Points and risk of Global trade slowing
• Highlighted initiation of Finmeccanica with Hedge Fund, Risk Arb & Prop desks
• Spoke with Risk Arbs regarding GD/VNX, DP/DHL/ABF & KSU/TFM/TMM
• Finalized Airlines Cross Instrument Ideas Hedge Fund Dinner
• Marketed with US Airlines Analyst at MLIM in Princeton
68. 3.19 January 2004 Review
• Excellent knowledge of the industries. Able to leverage this Globally and across the
Capital Structure
• Very proactive in new role, especially internally. Built Strong internal relationships
not only with Equity Analysts, but across many products (Cvts, Fixed Income, etc)
• Successfully supported Stamford Trading. Received excellent Feedback
• Working very well with various Global teams. Played an active role in European
Analyst marketing in the US. Understands our Global mandate
• Successfully supported Analysts in their Drive to get ranked. Helped 'coach' some
'up and coming' Analysts
• Innovative/Creative - Proactive in sponsoring cross-product events (hedge fund
dinners, field trips, etc). Challenges the status quo, always looking for new and
Innovative ways to do business
• Teamplayer - He is unselfish in his pursuit of coordinating and communicating with
many colleagues around the world. He has been very supportive of the Analysts,
always working to improve their ranking. He has acted as a mentor and coach for
some, pushing them to keep Visible
69. 3.20 Recommendation
Robert Ashcroft, former UBS Airline Equity Analyst, October 4, 2009
“I was the Airline Equity Analyst -- Peter was Transportation Sector Sales, in which
role he was excellent, as attested to not only by the sell-side Analysts he
supported but also the buy-sider clients. He fully understood my calls and worked
hard to understand buy-side client requirements and how to marry the two.
Several prominent buy-siders told me Peter was the Best Salesperson who
covered them. From my standpoint, Peter made my life significantly easier. He
was also outstanding at understanding what I should be doing to effectively
communicate my message and coaching me to do so”
70. 3.21 Positive Feedback
“Distribute this commentary out of London and include in tomorrow’s Daily”
UBS Head of European Transportation Research
“Making progress with [Institutional Investor Best of the Buy Side] Wellington PM”
UBS US Regional Airline Analyst
“Client originally said didn’t need Specialist Sales complimented you on DAL call”
UBS Generalist Sales
“You are Transportation”, UBS Generalist Sales
“Thanks for arranging NDR & taking good care of us”, AMR Investor Relations
“My Best sales guy buy a mile”, Fidelity PM/Analyst
“Good on communication so give him my kudos”, T Rowe Price PM/Analyst
72. 4.1 Making Research Actionable
LEHMAN BROTHERS, NEW YORK
VP & Product Manager, Industrials & Materials Equity Research 2004 - 2005
• Responsible for management & distribution of Industrials, Materials & Services
Research across Lehman’s Equity business and into buy side accounts. Present
daily summary of Key ‘calls’ and breaking news to Sales Traders. Partner with
Trading to quickly interpret Information for clients
• Partner with Industrials, Materials & Services Equity Research Analysts - act as a
sounding board in developing Impact calls; Drive Content creation; participate in
Investment Policy Committee meetings for initiations & ratings Changes; provide
Feedback to Analysts; provide Trading color; encourage quick response to events
Industrials, Materials & Services represented 36% of 2004 US Equity and Equity
related issuance, including $9.2B in IPO’s and $42B in follow-ons
73. 4.2 Product Management
Content is King: Trusted Advisor responsible for shaping more Actionable calls
Foster Idea Generation and Drive Themes within & across sectors that can be
Expressed across asset classes & product types
Increase Consistency of high Conviction, Differentiated fundamental Research
Commercialize Actionable Research, minimize maintenance noise
Maximize Information Flow between Analysts, Sales, Trading, investors & issuers
Develop Key franchise stocks with Dominant market shares
Think Strategically, Act Tactically = Think Globally, Transact Locally
Risk: Too closely Aligned with Research rather than independent judgement
74. 4.3 Sector Coverage
As the Industrials & Materials Product Manager, sector coverage included:
• Aerospace & Defense
#3 ranked II Analyst
• Airlines
#2 ranked II Analyst
• Autos & Auto Parts
R/U ranked II Analyst
• Business Services • Chemicals/Commodity
#2 ranked II Analyst
• Chemicals/Specialty
R/U ranked II Analyst
• Diversified Industrials • Educational Services
#2 ranked II Analyst
• Environmental Services
#3 ranked II Analyst
• Homebuilders • Machinery
#2 ranked II Analyst
Metals & Mining
#1 ranked II Analyst
• Multi-Industry
#2 ranked II Analyst
• Paper & Packaging
#3 ranked II Analyst
• Small Cap Industrials
75. 4.4 Daily Routine
Lehman Brothers Before the Bell (“BTB”)
- Sales Trader ‘talking points’ of 2-3 most Actionable Research calls by sector
Lehman Industrials & Materials Catalist (“Catalist”)
- Product Manager commentary
- Technology solution aggregates bullets from Research notes published overnight
- Calendar of Data Points, earnings, conferences and proprietary events
Product Managers speak in Sales Trader Morning Call
Product Management runs Research Morning Call
Idea Generation Bloombergs
Visit Analyst floors regarding Research pipeline
76. 4.5 Research Morning Call
Convince Sales why they NEED to actively call clients to Transact
Recognize Sales may not have read your report or remember your prior stance
Hook Sales: A headline to remember
Lead with Conclusion: Ground Research with what to do with the stock
Key Selling Points: ‘3 reasons’ in short, punchy sentences; Context with
preexisting facts/view; Why call worthy and how Differentiated from consensus
Be Brief: Don’t let your message get lost in too many details; “Less is More”
allows Sales to follow up with questions when their interest is peaked
78. 4.7 Conference Break-In’s
Standardized Conference Feedback with Tear Sheets
• Company (Ticker)
- Speaker, Title
- Location, Time
- Recommendation, P/T, Estimates
• What do we Expect to Hear?
• What did we Learn?
• What to do with the Stock?
79. 4.8 Sector Primers
Key Machinery Vocabulary
- Construction, Agricultural Equipment & Truck Terms, Mining Equipment Types
Machinery Companies End Market Exposure
• Large Cap vs. Small Cap
- CAT, ITW, DE, IR, PCAR, ETN, PH, JOYG, TEX, KMT, URI, MTW, KDN, BUCY
• Early Cycle: Trucks & Engines, Truck & Auto Components, Energy, Aerospace
• Mid Cycle: Power Gen/Electrical, Construction, Rental, Paving
• Late Cycle: Cranes, Mining Equipment
• Non-Cyclical: Refrigeration & HVAC, Food Service, Agricultural Equipment
80. 4.9 GM Event Call
“Strategy Group” Type Product
- Complex Capital Structure
- Lehman articulates Equity and Credit perspective
- Multiple paths to Execution based on client objective and investment conclusion
- GM Convert vs. Common, CDS 5 yr vs. 7yr, GM Credit vs. CDS; F vs. GM Vol
Coordinated Research & Trading Calls
- 3/17: GM Downgraded Underweight; Auto Sales (Auto Analyst; Credit Strategy)
- 3/18: GM Converts Comments (Converts Analyst)
- 5/5: Krikorian Tender; S&P Downgrade (Auto & FI Analysts; Credit Strategy)
- 5/10: Fundamentals; Cap Structure Opportunities (Auto, Convert & FI Analysts)
- 7/14: GM Upgrade to Neutral; Convert Reiteration (Auto & Convert Analysts)
- 7/27: GMAC/BofA Financing; GM/GMAC vs. F/FMCC (Auto & FI Analysts)
- 8/25: Moody’s Downgrades; Reiterate GM vs. F (FI Analysts; Credit Strategy)
- 10/19 Post Earnings Conference Call (Auto, Derivatives, Convert, FI Analysts)
81. 4.10 Breaking News
CD Idea Bloomberg / Morning Sales Trader Comments
• CD breaks into 4 companies disappointing. CD confirmed break-up into 4
separate companies - RE, Travel, Hotels and Car Rental
• Prior to announcement, Business Services Analysts had Expressed a
preference for the prior Strategy of Real Estate and integrating Travel
• However, as part of the break-up announcement, management lowered 4Q05
EPS and FY06 Revenue & EBITDA guidance and withdrew their $2B buyback
target from cash flow & divestitures due to slowing leisure Travel and a weak
Europe
• In my opinion, while Traders will likely bid CD up, investors may sell into
Strength given no upside in break-up value vs. current P/T, weak ops/acqs,
always Changing Strategy and portfolio churn
82. 4.11 Cross Sector Laterals
GM, Auto Parts, Steel & Coal Trading Ideas
- GM FY05 guidance disappointing, mid decade profit goal pushed to right
- Could lower GM production & Steel costs be worse for Auto Parts names?
- AXL (80% GM exposure) earnings, cash flow & cap ex guidance very weak
- Auto exec thinks Steel inflation worse than Lehman’s above consensus view
- POSCO EPS reflect Strong China demand; raising Steel price on material cost
- US Steel prices could decline more gradually on lower imports, high material cost
- Potential negative Lateral for ARM with 23% unprotected Steel exposure
- BTU top Coking Coal pick
- X makes high end Steel Products
83. 4.12 Event Commentary
LMT Georgia Field Trip: Aero Facility Tour & F/A-22 Raptor Program Update
Is there a case to shut the line building the F/A-22 Raptor fighter?
• Judging from enthusiasm, threats and aircraft’s progress, there might be upside
- Company Overview
- Aircraft Operational Requirements
- Current Contract
- Investor Concerns
- Alternatives
- R&D Funding
- Potential Enemy Threat Requirements
- Upcoming Program Milestones/Catalysts
- Sense of Growing Support for Production Increases
84. 4.13 Trade Idea Performance
Trading Ideas Performance Review
Ticker Call Open Price Status Date Last Δ% SPX Last SPX Δ% Over/Under
BA Long 5/11/05 $61.04 Closed 12/30/05 $70.24 15.1% 1166.22 1248.29 7.0% 8.0%
CAT Long 5/11/05 $44.83 Closed 12/30/05 $57.77 28.9% 1166.22 1248.29 7.0% 21.8%
TRW Long 5/11/05 $19.96 Closed 12/30/05 $26.35 32.0% 1166.22 1248.29 7.0% 25.0%
GM Short 5/11/05 $31.53 Closed 12/30/05 $19.42 38.4% 1166.22 1248.29 7.0% 45.4%
GM Short 10/6/05 $28.63 Closed 12/30/05 $19.42 32.2% 1196.39 1248.29 4.3% 36.5%
BA Long 9/21/05 $63.45 Closed 12/30/05 $70.24 10.7% 1221.34 1248.29 2.2% 8.5%
UTX Long 10/19/05 $49.95 Closed 12/30/05 $55.91 11.9% 1178.14 1248.29 6.0% 6.0%
UTX Long 10/27/05 $50.90 Closed 12/30/05 $55.91 9.8% 1191.38 1248.29 4.8% 5.1%
BA Long 10/27/05 $65.10 Closed 12/30/05 $70.24 7.9% 1191.38 1248.29 4.8% 3.1%
LMT Short 10/27/05 $60.07 Closed 12/30/05 $63.63 (5.9%) 1191.38 1248.29 4.8% (1.1%)
CD Short 10/24/05 $20.09 Closed 12/30/05 $17.25 14.1% 1179.59 1248.29 5.8% 20.0%
PCAR Short 10/4/05 $68.34 Closed 12/30/05 $69.23 (1.3%) 1226.70 1248.29 1.8% 0.5%
ARM Short 11/15/05 $17.28 Closed 12/30/05 $14.39 16.7% 1233.76 1248.29 1.2% 17.9%
AMR Long 10/20/05 $12.40 Closed 12/30/05 $22.23 79.3% 1195.76 1248.29 4.4% 74.9%
LUV Short 10/20/05 $15.58 Closed 12/30/05 $16.43 (5.5%) 1195.76 1248.29 4.4% (1.1%)
PNR Short 10/25/05 $36.26 Closed 12/30/05 $34.52 4.8% 1199.38 1248.29 4.1% 8.9%
BOW Short 10/4/05 $28.15 Closed 12/30/05 $30.72 (9.1%) 1226.70 1248.29 1.8% (7.4%)
SBL Long 10/28/05 $8.20 Closed 12/30/05 $12.82 56.3% 1178.90 1248.29 5.9% 50.5%
BXC Short 10/28/05 $12.10 Closed 12/30/05 $11.25 7.0% 1178.90 1248.29 5.9% 12.9%
85. 4.14 June 2005 Review
Peter has done a very good job at developing several Themes in conjunction with
his sector Analysts
Peter does an exceptional job Expressing himself verbally in the 7:05AM Sales
Trader meeting
Feedback on the GM Equity/Debt/Convert coordination was very Strong across
the organization
His thoughts are well organized and well written
Peter has developed additional product industry knowledge by doing joint
marketing with senior Analysts and senior management teams
Global cross border Content has been managed effectively
86. 4.15 Positive Feedback
GM Event Call
- “Is it OK to use your GM Bloomberg in my Daily on Monday?”
European Industrials Sales Specialist
- “Where are F Credit Spreads now vs. earlier? You are doing a great job”
Co-Head of New York Research Sales
- “Completed and submitted your [Cross-Divisional Bonus Pool] nomination”
Head of US Convertible Research
“Good one on CD this AM. If you are not on his Industrials list you are missing out”
Head of Global and US Sales Europe
“You have been VERY helpful with the recent trifecta of Coal/Steel/Auto Suppliers”
Hedge Fund Sales
“Nice job on LMT Field Trip comments - we are still struggling to get a note out”
US Aerospace & Defense Analyst
88. 5.1 Monetizing Content
BARCLAYS CAPITAL / LEHMAN BROTHERS, NEW YORK
VP & Content Manager, Equity Trading Desk Analyst, 2006 - 2008
• Manage market Driven morning Sales Trader meeting, seeking to generate
Content Complementary to published Research based on breaking news and
position Trader insights Expressed through Cash and non-Cash Equity products
• Review Content for Prop opportunities, monitor Risk positions and track
Performance as well as managing Thematic Investing process, evaluating Best
Execution, recommending Trades and monitoring the FID JV portfolio
• The success of Lehman's Desk Analytics model increased Commissions
+8% ($50MM annualized), reduced Facilitation Costs from 30% to 15%
($90MM annualized) and doubled Prop Revenues on the US Cash Trading desk
($80MM annualized)
89. 5.2 Desk Based Analytics
Going to Market Together
Content Driven Revenue model with greater mind/market share & Commissions
Lowers Facilitation Costs through enhanced Risk Taking
Monetizes Idea Generation through customer Trades & Prop positions
Seeks Origination opportunities through Block Trades, Reverse Inquiries,
Secondary Offerings and New Issuance
“Star Alignment”: Shared Research and Trading high Conviction
Risk: Overly focused on Trading P&L rather than selling ideas; Who you sit with is
how you are Aligned and how you are compensated
90. 5.3 Idea Generation
A good Analyst has a top down approach that focuses on major fundamental
Themes, identifies what's incremental to their thesis then selects outlier stocks
that haven't moved yet ahead of specific Catalysts. This includes seeing Laterals
across sub-sectors. Analysts also gain Conviction from sentiment, Flows and
technicals
While having a Strategic framework, a good Analyst is also willing to act
Tactically in Changing his pecking order of top recommendations based on price
movements, to Change ratings when a price target has been achieved and
fundamentals are Unchanged and to move on when circumstances Change
Underlying this top down approach is an Analyst's ability to generate a better
Revenue forecast than consensus on a sector/company basis, as this involves the
most guesswork by the sell side whereas costs are relatively predictable. An ability
to add Alpha can also be enhanced by understanding what Options are pricing in
ahead of events in order to the determine the best way to Express an idea
91. 5.4 Position Announcement
Organizational Announcement - Peter Gallagher, Content Connectivity Manager
Content and idea generation will continue to be a competitive differentiator within
the Equities business. Therefore as part of our efforts to monetize trading
strategies across cash, volatility, relative value and convertible products, we are
pleased to announce that Peter Gallagher will take on the responsibility of
managing content connectivity. This move will draw upon the resources of Desk
Based Analytics, Product Management, published Research and Trading to
position us to take our content and monetization efforts to the next level.
Peter will seek to further leverage the Liquid Markets morning call, facilitate the
development of thematic trading calls that can be expressed across the capital
structure as well as coordinate feedback among position traders and various sales
desks to assist in translating client mind share into trading axes.
Peter brings 15+ years of industry experience spanning corporate finance,
research, sales and trading to the role.
92. 5.5 Trading Morning Call
Flows have Themes, Beget more Flows
Thresholds: High Conviction ideas, Block names, high volumes/market shares
Axes/Flows: Focus on Naturals where they are axed and how they are set up;
Why they are involved and what’s Driving the stock
Themes/Differentiated Data Points: 1 or 2 Thematic reasons regarding a stock/
sector; Data Points that Impact a Global sector value chain; levels where Trading
would provide Liquidity and Laterals which haven’t reacted
Ahead of the Market: Proactive so clients can position ahead of Catalysts rather
than reporting yesterday’s event Driven trade
Broadened Sources: In addition to Research Driven Cash Equity Strategies,
include Vol, Converts, Programs, Fixed Income as alternative ways to Express
93. 5.6 Morning Call Recap
Liquid Markets Morning Call Recap
• Overseas Update
- Asia was generally weaker as Tech rolled over, Shippers declined and
Resource names followed Commodity prices lower. Europe is higher on a
rebound in Banks
• By Sector
- Accounts should consider selling/shorting Retail as a mean reversion trade
following recent Outperformance by the MVRX of +10% in the last 2 weeks and
20% over the last month
- Accounts should consider pairing long BKC / short MCD given BKC’s better
growth rate for a similar valuation and ahead of indications of any negative Impact
on MCD comps from a Stronger US$; BKC recently upgraded
94. 5.7 DBA Conviction Recap
High Conviction Desk Based Analytics Commentary
• New High Conviction Ideas
- Industrials: Buy ETN with upside to the low $80’s as the multiple has contracted
to one of the cheapest in the Machinery/Electrical/Multi sectors. The business
mix has shifted dramatically away from deeply cyclical to Electrical now being
45% of sales. A slowdown’s Impact should be much less than in the past, there
are synergies from 2 large acquisitions and limited downside remaining in their
early cycle Truck business
• Reiterations
- Financials: Remain seller of AIG on expected continued weakness into its
September reorganization review as a bigger portion of Capital raised could come
in the form of Equity
95. 5.8 Equity Synthetics Marketing
Custom Indices can provide better diversification, yield, Liquidity & M&A
exposure than singles stocks or ETF’s
Telecom Index Telecom HOLDRs
Ticker Yield Index Weighting Ticker Index Weighting Yield
FRP 12.0% 7.9% T 28.0% 5.3%
VCG 10.9% 8.8% VZ 24.2% 5.3%
CNSL 10.3% 8.8% BLS 17.6% 3.6%
IWA 9.3% 8.2% S 13.7% 0.4%
CZN 7.9% 7.9% AT 4.5% 2.5%
ALSK 7.0% 9.3% BCE 4.3% 5.6%
CTCO 5.8% 9.0% Q 2.9% 0.0%
T 5.3% 7.6% TDS 1.4% 0.9%
VZ 5.3% 7.8% TDS/S 1.4% 1.0%
BLS 3.6% 8.5% CTL 1.3% 7.1%
AT 2.5% 8.2% LVLT 0.5% 0.0%
S 0.4% 8.1% CBB 0.3% 0.0%
6.7% 100% 100% 3.9%
96. 5.9 CDS Primer
CDS Primer / Glossary
Credit volatility and financial markets interdependence increased interest in CDS
- CDS: Risk Management tool to hedge loan exposure or diversify credit risk
- CDX: CDS indices of investment grade, crossover and high yield bonds
- LCDX: Allows investors to go long or short US leverage loans
- ABX: Allows investors to go long or short US sub-prime residential mortgages
- CMBX: Allows investors to go long or short US commercial mortgages
Daily Performance
Investment Grade High Yield
6/6/07 bp Daily Δ 6/6/07 bp Daily Δ
CDX.IG 8 35 1 CDX.HY.100.8 263 5
CDX.XO 8 146 4 LCDX.8 107 1
7/27/07 bp Daily Δ 7/27/07 bp Daily Δ
CDX.IG 8 75 8 CDX.HY.100.8 527 12
CDX.XO 8 358 13 LCDX.8 367 38
98. 5.11 JV Portfolio Performance
LBO Candidates Thematic Investment JV Portfolio Performance
Ticker Sector Call Open Basis Price Δ% Floor Risk Ceiling Return SPX Δ vs. SPX Comments Shares Cost P&L
ABC Industrial Long 3/14/07 $29.78 $36.99 24.2% $27.00 -27.0% $40.00 8.1% 11.3% 12.9% Adding on Correction 150,000 $4,467,000 $1,081,500.00
DEF TMT Long 3/15/07 $43.40 $49.70 14.5% $38.00 -23.5% $50.00 0.6% 10.6% 3.9% Scaling Out on Spin 95,000 $4,123,000 $598,500.00
GHI Financial Long 4/10/07 $27.95 $30.25 8.2% $26.00 -14.0% $36.00 19.0% 6.2% 2.0% Built on Pullback 450,000 $12,577,500 $1,035,000.00
JKL TMT Long 2/28/07 $5.24 $5.59 6.7% $5.00 -10.6% $8.00 43.1% 9.7% -3.0% Lower Cost on Fall 2,375,000 $12,445,000 $831,250.00
MNO TMT Long 3/28/07 $36.29 $38.36 5.7% $33.25 -13.3% $42.50 10.8% 7.4% -1.7% Adding on Pullback 284,380 $10,320,150 $588,666.60
PQR Industrial Long 5/3/07 $48.46 $50.05 3.3% $45.00 -10.1% $60.00 19.9% 2.5% 0.8% Built on EPS Decline 250,000 $12,115,000 $397,500.00
STU Retail Long 5/10/07 $46.10 $47.58 3.2% $40.00 -15.9% $52.00 9.3% 1.4% 1.8% Profit Taking in CDS 100,000 $4,610,000 $148,000.00
VWX Financial Long 2/5/07 $22.10 $22.45 1.6% $20.00 -10.9% $27.75 23.6% 5.9% -4.3% Lower Cost on Fall 805,000 $17,790,500 $281,750.00
YZA Industrial Long 1/25/07 $33.14 $33.63 1.5% $30.00 -10.8% $40.00 18.9% 6.5% -5.0% Built on EPS Decline 375,000 $12,427,500 $183,750.00
BCD Retail Long 5/25/07 $31.97 $32.10 0.4% $30.50 -5.0% $40.00 24.6% 1.8% -1.4% Adding before BTS 250,000 $7,992,500 $32,500.00
EFG TMT Long 2/13/07 $15.70 $15.57 -0.8% $14.00 -10.1% $25.00 60.6% 7.0% -7.8% Lowered Basis 800,000 $12,560,000 ($104,000.00)
HIJ Retail Long 3/12/07 $33.42 $31.96 -4.4% $29.00 -9.3% $38.00 18.9% 9.4% -13.8% Adding on Correction 350,000 $11,697,000 ($511,000.00)
$123,125,150 $4,563,416.60
Ticker Sector Maturity Open Basis Price Δ% FV + / - FV Horizon Return CDX.IG7 Δ vs. IG7 Comments Call Notional MTM
ABC Retail 7 yr 2/12/07 94 bps 89 bps -5.3% 81 bps 8 bps 203 bps 128.1% 3 bps -7 bps >FV, Consider Equity Long $40,000,000 -$116,000.00
DEF Retail 5 yr 1/29/07 24 bps 13 bps -46.4% 203 bps 1,461.5% 2 bps -13 bps Consider Steepener Long $55,000,000 -$266,062.50
DEF Retail 7 yr 1/19/07 38 bps 20 bps -46.7% 39 bps -19 bps 203 bps 915.0% 1 bps -20 bps Consider Steepener Long $15,000,000 -$152,250.00
DEF Retail 10 yr 1/29/07 47 bps 31 bps -33.3% 203 bps 554.8% 2 bps -18 bps Consider Steepener Long $13,000,000 -$151,125.00
GHI Retail 10 yr 1/24/07 39 bps 41 bps 5.1% 36 bps 5 bps 203 bps 395.1% 2 bps 0 bps Consider Scale Out Long $50,000,000 $93,750.00
JKL Health 10 yr 2/6/07 76 bps 72 bps -5.0% 56 bps 16 bps 203 bps 181.9% 3 bps -6 bps Maintain CDS Long $50,000,000 -$84,375.00
MNO Retail 7 yr 2/8/07 52 bps 62 bps 19.2% 50 bps 12 bps 203 bps 227.4% 4 bps 8 bps Profit Taking in CDS Long $25,000,000 $145,000.00
PQR Industrial 7 yr 1/31/07 82 bps 58 bps -29.5% 68 bps -10 bps 203 bps 250.0% 2 bps -26 bps Consider Steepener Long $40,000,000 -$533,600.00
PQR Industrial 10 yr 2/5/07 105 bps 82 bps -21.9% 203 bps 147.6% 3 bps -25 bps Consider Steepener Long $10,000,000 -$172,500.00
STU Retail 7 yr 2/5/07 83 bps 66 bps -20.0% 66 bps 0 bps 203 bps 207.6% 3 bps -19 bps Consider Exit on B/B Long $50,000,000 -$442,250.00
$348,000,000 -$1,679,412.50
99. 5.12 Financial Fallout Candidates
Identified stocks with varying degrees of risk from a Financial Services slowdown
• By Tier
- Tier 1: Short Recommendations
- Tier 2: Alternative Short Candidates
- Tier 3: Avoid Shorting
• By Sector
- Credit Cards
- Rating Agencies
- Financial Documents & Publishers, Data Providers & Services
- Real Estate Services
- Hardware, Storage, PC’s, Software, ATM’s
- Exec Search & Training, Background Checks, HR & Payroll Outsourcing, Staffing
- Transportation, Other
100. 5.13 Trade Recommendation
Short SLG
• Thesis
- NY Financial Services exposure >50% inclusive of Legal & Professional Services
- GKK investment similar to a CMBS CDO fund
• Catalysts
- Wall Street layoffs due to credit write-downs and reduced IPO and M&A volumes
- Write-downs of direct structured finance investments or GKK carrying value
• Bear Case
- Lower occupancy, scarce financing, fewer transactions, Changing buyer profile
- GKK Revenue stream could run out sooner than expected
• Bull Case
- Dividend is safe, stock buyback authorization
101. 5.14 Trading Call Performance
SLG Trading Call Performance
- 11/30/07: $103.90 Short Potential job cuts, sentiment risk, recovered $10
- 1/11/08: $84.80 Don’t Short Fundamentals haven’t Changed, NAV discount
- 1/14/08: $84.90 Don’t Short Play for bounce ahead of earnings
- 1/16/08: $84.81 Don’t Short Consider alternative short candidates
- 1/28/08: $94.16 Short Short side getting interesting after EPS bounce
- 2/1/08: $98.77 Short High Conviction 3:1 risk/reward on technicals
- 2/19/08: $87.19 Don’t Short Mid year Wall St layoffs could cause revaluation
- 2/26/08: $95.20 Short Stock recovery, IPO and M&A volume declines
- 2/27/08: $95.42 Short VNO mezzanine write-offs, GKK exposure
- 2/28/08: $95.05 Short Stock flat while CMBS widened 27.5 bps
- 3/7/08: $84.00 Short High probability <$80, low probability ~$90
103. 5.16 Strategy
Raising Visibility while Reinforcing Scarcity Value
- Commentary Formats
- Internal / External Distribution Lists
- Morning Meeting Access / Delivery
- Proactive Selling of Idea Generation
Trading Consistency
- Portfolio Managers vs. Risk Managers
- Volatility vs. Losses
- Defined Objectives / Constraints vs. Reference Dependent
- Multi-Sector Portfolio Approach vs. Core Sector Positions
- Track Multiple Security Trade vs. Single Stock Return Software
Applications
- Commentary Portal
- Desktop Analytics Tool
104. 5.17 June 2007 Review
You have taken both the Content captain and idea capture roles to a new and
great level for the Trading and Desk Analyst teams
Morning meeting Content has improved dramatically including topical speakers
from off the floor. Continue to follow your gut on the structure
You have owned the ideas, improved Execution and even raised the P&L Impact
through better structuring
Your role in organizing, filtering ideas and combing two organizations (FID and
EQ) for ideas has been positively noted by members of FID management
105. 5.18 Positive Feedback
Morning Call Meeting / Content / Recap
- “Beneficial since sectorizing to concentrate on what Traders are Anticipating”
NYSE Floor division
- “This awesome”, Co-Head of New York Research Sales
- “This is great today”, Co-Head of Liquid Markets Salestrading
- “We are getting much better ‘tradable’ Content with the new model”; “This piece
is helpful”; “Our group in Dallas are big fans”, various Sales
Idea Generation
- “Feedback from Sales was that this was helpful”, Head of Product Management
- “That’s a good case”, Co-Head of New York Research Sales
- “We would love to do a Swap on this Index”, Head of Equity Synthetics Trading
- “Agree with all... good stuff”, Head ETF Trader
- “Good intraday work”, Hedge Fund Sales
108. A.1 Professional Background
Mr. Gallagher has an extensive Investment Banking career servicing both
Corporate & Government entities including Global experience providing Equity
Research & Offerings, Privatization Advisory, Debt Raising and Structured
Products. He has been responsible for 1) making recommendations to institutional
investors, 2) marketing Global Financial Services including Capital Markets, Risk
Management & Credit Products and 3) structuring Corporate Finance solutions by
combining industry expertise with geographic client coverage & product
capabilities
As an Equity Analyst, Mr. Gallagher’s insights & client service were recognized in
Research votes by firms as diverse as Fidelity and Tiger Management. As a
Corporate Finance Officer, he provided risk/return analysis for new transactions
and negotiated Credit Facilities, Structured Financings and Derivative
transactions. Mr. Gallagher also supervised junior staff and sought to identify
potentially deteriorating situations in order to reduce holdings or improve collateral
His activities have involved advising government entities or their applicants
including the Republic of France, the Government of Sri Lanka, The Export-Import
Bank of the United States and regulators from the Federal Reserve
109. A.2 Equity Research
U.S. BANCORP PIPER JAFFRAY, NEW YORK
Research Analyst, IT Services Technology Equity Research, 2000 - 2001
• Forecast slowing IT spending as consulting engagement sales cycle lengthened
• Developed long term IT Services valuation framework
LAZARD FRERES & CO. LLC, NEW YORK
Vice President & Research Analyst, Airline Equity Research, 1998 - 1999
• Initiated coverage of domestic growth Airlines (“LCC’s”) in Fall 1998
• Provided analysis of pilot contracts for Air France Advisory prior to 1999 IPO
• Provided analytical support for #1 Institutional Investor Distressed Debt team
PAINEWEBBER INCORPORATED, NEW YORK
Associate Analyst, Airline Equity Research, 1996 - 1998
• Associate Analyst to #1 Institutional Investor Airline Equity Research Analyst
• Published notes, maintained earnings models and updated statistical databases
• Conducted due diligence of China Southern Airlines prior to 1997 IPO
110. A.3 Corporate Finance
THE CHASE MANHATTAN BANK, NEW YORK
Associate, Global Aerospace Group/Global Transportation Group, 1992 - 1996
• Corporate Finance Officer with Airline & Aerospace/Defense client relationships
• Structured, negotiated, and documented Privatization Advisory, Aircraft Finance
& Derivative transactions
• Advised Air Lanka’s privatization, Mexican industrialist’s CAL Ch 11 investment
• Financed aircraft for VARIG Brazil, Royal Air Maroc and Cathay Pacific
• Restructured USAir credit in exchange for collateral after 1991 Gulf War
Associate, US Corporate Markets, 1987 - 1991
• Previously as a generalist, coverage included Airlines & Shipping, Real Estate &
REITS, Retail, Home Builders & Building Products, Financials, Pharmaceuticals,
Technology & Telecommunications and HLT’s/LBO’s
• Completed credit training program, prepared new credit approvals and
supervised annual reviews of existing loans
111. A.4 Equity Recommendations
Technology Spending Cycle
Mr. Gallagher began noting anecdotes in July 2000 of lengthening sales cycles for
the underlying Internet-based Technologies IT Services firms were deploying for
their clients. As new IT Services engagements slowed, an initial internal
conference call with Software Analysts indicated no concurrent fall off in bookings.
A subsequent call confirmed expectations of less IT Services engagements
resulting in fewer Software products being recommended, sold & implemented
Reno Air
Mr. Gallagher initiated coverage of Reno Air with a Speculative Buy
recommendation just prior to the company’s acquisition by American Airlines. Mr.
Gallagher had also been quoted in BusinessWeek and his firm named a share
buyback participant
112. A.5 Advisory
Republic of France/Air France
Advisor to the Republic of France for the privatization of Air France and
Underwriter of Air France’s IPO. Mr. Gallagher provided analysis of U.S. Airline
concessionary contracts as a benchmark for seeking labor cost savings during a
pilot strike prior to Air France’s partial privatization. Mr. Gallagher recommended
methods of capital markets distribution and marketed the shares to investors
Government of Sri Lanka/Air Lanka
Advisor to the Government of Sri Lanka’s Public Enterprise Reform Commission to
privatize the national carrier Air Lanka in the midst of an ongoing religious/ethnic
civil war. Mr. Gallagher prepared the Technical Proposal and negotiated the
Contract of assignment milestones & associated fee payments
Continental Airlines/Houston Air
Advisor to Houston Air’s bid for Continental during bankruptcy. Mr. Gallagher
conducted due diligence and provided industry expertise to the M&A deal team
113. A.6 Ex-Im Bank
VARIG Brazil
As Arranger, underwrote Ex-Im Bank guaranteed notes to finance a VARIG Brazil
McDonnell Douglas MD-11 aircraft. The transaction utilized a trust structure
through which the loan notes were securitized and sold into the public capital
markets to institutional investors. Mr. Gallagher’s analysis of VARIG’s credit risks
led to obtaining credit enhancement from the export manufacturers McDonnell
Douglas & General Electric in the form of a subordinated loan tranche to assure
that the purchase obtained Ex-Im Bank’s guarantee commitment. The
manufacturers’ subordinated notes were later sold to international banks
Royal Air Maroc
As Trustee, arranged the private placement of Ex-Im Bank guaranteed notes to
finance two Royal Air Maroc Boeing 737-400 aircraft. Mr. Gallagher negotiated the
mandate letter, term sheet & fee structure and proposed Ex-Im Bank guaranteed
alternatives when the transaction was at risk of failing to close
114. A.7 Aircraft Finance
Cathay Pacific Airways/Wilmington Trust as Trustee
As Agent and Underwriter, provided financing for a U.S. Ownership Foreign Sales
Corporation (FSC) lease financing of a Cathay Pacific Airways Boeing 747-400
aircraft. The borrower was a special purpose grantor trust whose principal asset
consisted of the stock of a foreign sales corporation (FSC lessor) which was
pledged to the lenders as security for the loan. The FSC lessor invested the loan
proceeds by purchasing the aircraft. The aircraft was leased to a special purpose
Bermuda trust and subleased to Cathay Pacific. Mr. Gallagher conducted due
diligence, prepared credit approvals & negotiated documentation and marketed
the loan to international banks
115. A.8 Structured Products
Cathay Pacific Airways
Concurrent with the FSC financing, lenders entered into an interest rate swap to
pay Cathay Pacific fixed payments and receive Libor based floating payments. Mr.
Gallagher analyzed credit, cross default, intercreditor & indemnification risks /
mitigants, prepared credit approvals and negotiated documentation
HK Telecom
Chase participated in the sale and leaseback of an aircraft portfolio that resulted in
the acceleration of foreign source income and the utilization of associated tax
credits. Mr. Gallagher provided industry expertise to accounting & tax deal team
members, conducted due diligence on the structure & related cash flows and
participated in preparing the transaction approval memo
Interest Rate & Fuel Price Hybrid Hedging Strategies
Mr. Gallagher marketed Strategies to lower costs up to 30% through the
correlation benefits of hedging aggregate exposures
116. A.9 Credit
Delta Air Lines
As a Lead Bank, provided a commitment for a bank letter of credit after assessing
that the risk profile would remain Unchanged under an existing credit agreement.
The commitment was required to credit enhance outstanding ESOP notes
guaranteed by Delta pursuant to a trust indenture upon Moody's action
downgrading the credit rating of Delta's long-term senior unsecured debt. Mr.
Gallagher evaluated intercreditor risks and negotiated the commitment letter, term
sheet & credit agreement amendment for a $1 million fee
USAir
As Agent, advised management of the necessity to provide security for its
revolving credit in order to gain covenant relief & financing flexibility in the
aftermath of the 1991 Gulf War. Mr. Gallagher modeled the financial covenants,
evaluated collateral values & indemnification risks, negotiated the amendment &
fleet mortgage and successfully sought the approval of a majority of bank
participants for transaction fees totaling $1.2 million
117. A.10 Risk Management
USAir / Shared National Credit Program
As Agent, Mr. Gallagher met with Federal Reserve Bank examiners to assess
USAir’s creditworthiness, probability of default, collateral as a secondary means of
repayment and the risk of loss during the annual review of syndicated loans
Woodward & Lothrop / Alfred Taubman
As a Lead Bank, Mr. Gallagher assessed Mr. Taubman’s personal guarantee to
secure Retailer Woodward & Lothrop’s seasonal inventory line of credit by
analyzing his balance sheet & the underlying assets which were highly leveraged
& relatively illiquid ahead of the IPO of Mall REIT Taubman Centers
Integrated Resources
As both an Agent & a Lead Bank, Mr. Gallagher raised concerns about the Real
Estate & Annuity syndicator’s increasing cash outflows while reporting slowing
profit growth during the annual review & credit extension process just prior to the
company declaring a debt moratorium and its subsequent bankruptcy & liquidation
118. A.11 Academic Background
BOSTON COLLEGE, CHESTNUT HILL
Bachelor of Arts Degrees in Economics & History, 1983 - 1987
- Gasson Scholar: The 30 most distinguished members of Freshman class
- Ignatian Scholar: Cited for Academic Excellence
- Educational Policy Committee: One of 4 Student Representatives
- University Relations Office: Administrative Assistant writing fundraising speeches
REGIS HIGH SCHOOL, NEW YORK
Jesuit high school which all students attend on full scholarship, 1979 - 1983
Chase Manhattan Bank Corporate Credit Training
Four month program of Financial Risk Analysis & Cash Flow Lending, 1987 - 1988
Boeing Airplane Evaluation Seminar, July 1993
Series 24, 7 & 63, passed Level II CFA
119. A.12 Personal Background
Matrimony, 1993
- Barbara (nee Bucher)
- William born ‘98, Mary Anne born ’01
Citizenship
- US by Birth
- EU via Marriage
Volunteering
- The Leukemia & Lymphoma Society Westchester/Hudson Valley Chapter
- Youth Baseball New Rochelle
Larchmont Shore Club, Member
Tennis, Biking, Skiing
