In what felt like the blink of an eye, the decade has come and gone. Following the public market’s worst ten-year performance since the Great Depression, the 2010s witnessed the longest bull run in history.
Beginning the charge forward in March 2009, the latest bull market reached a record length of 129 months in December. Just to compare, there have only been 13 bull markets since 1926, each lasting for 53 months, on average.
During this uninterrupted stock market rally, TipRanks tracked and measured the performance of the stock rating issues by over 6,000 Wall Street analysts. The fintech company recorded that during the past decade Wall Street analysts published more than 625,000 calls.
When measuring the yearly return of an average Buy/Sell rating issued by an analyst, TipRanks found that it had underperformed the S&P by 1.27%
However, the 25 best performing analysts had a success rate — the number of profitable recommendations measured over one year — 67.6%, with their average returns beating the index by 21% in the previous decade.
Bearing this in mind, TipRanks composed a list of the last decade’s top five analysts by success rate and average return per rating, along with their most successful stock pick. Four out of the five covers the tech industry, which is somewhat expected as it was the best performing sector in the 2010s, with one focusing on financial stocks. Taking home the top analyst of the decade title, Joseph Foresi got his start in 1998 as an associate at State Street in Boston, Massachusetts. After working as a portfolio assistant for Brown Brothers Harriman, he accepted an equity analyst position with Janney Montgomery Scott in 2004. Following an 11 year tenure, he came on as a managing director and analyst at investing firm Cantor Fitzgerald.
Over the last ten years, Foresi was able to achieve an 89% success rate. Additionally, his calls generated a 24.3% return, on average.
Topping his list of successful stock picks is fintech company Square Inc. (SQ). From September 12, 2017, through September 12, 2018, his buy-rated choice saw an impressive 231.6% gain.
Back in November, the analyst wrote in a note to clients that his bullish thesis remains very much intact. On top of SQ’s recent earnings release that surpassed expectations, management’s updated 2019 guidance and its positive initial outlook for 2020, he stated, “We are attracted to the company’s increasing market penetration in its Seller and Cash Apps business, which should produce 30%-plus growth with long-term margin potential.”
Based on its increasing market penetration, end-user growth and improving margin profile, driven by SG&A leverage and an increasing margin contribution from other services, Foresi tells investors, “We value SQ at a premium to its peer group for its well-above industry growth rates and potential for further margin expansion.”
As a result, he maintained a buy rating and a $91 price target on SQ. With shares currently trading at $62.57, this suggests an upside potential of 45%. Coming in second place is veteran analyst Richard Davis. Over an eight-year period beginning in 1992, Davis played an essential role at Wessels, Arnold & Henderson, Rauscher Pierce and Tucker Anthony, three firms that were eventually acquired by RBC Capital Markets. He joined Rauscher Pierce from Wessels as a senior manager, primarily focused on the improvement of the firm’s capital markets segment. After a two-year period doing the same thing at Tucker Anthony, he became a managing director at Needham & Co.
In 2010, he left the firm, taking a position of the same title with Canaccord Genuity. As the global head of enterprise software research, the analyst meets and builds relationships with top enterprise software companies. During his ten years with Canaccord, Davis has seen his success rate reach 86%. Most notable, though, is his average return per rating, which comes in at 44.5%.
While this overall performance is remarkable, one recommendation stands out. In January 2017, Davis upgraded his rating on Twilio Inc. (TWLO), a cloud-based communications platform, from a Hold to a buy. In the twelve months after September of that year, the stock gained 299.6%.
Despite recent hurdles, Davis is still confident that Twilio can continue to outperform after its most recent quarterly performance, reiterating the Buy rating at the end of October. Mentioning the 8% pullback that took place after a billing error was reported, the analyst told clients that the slip-up was “an indication of an accounting mistake but not systemic execution challenges.”
While base revenue for the quarter fell below expectations, the company stated that demand remains strong, with the platform boasting 7 million registered developer accounts, up from 6 million in the last few months. Twilio also unveiled Conversations, Ads for Sendgrid and new features for Flex at its yearly user conference, all of which could be possible revenue drivers.
Davis added, “During the quarter, new or expansion agreements were signed with more than 50 of the Global 2000 – this speaks to the strength the company is seeing with Enterprise customers.” Despite lowering the price target from $155 to $125, he still sees a potential twelve-month gain of 16% in-store. Ranked third on TipRanks’ list, Glenn Greene has served as a managing director and senior analyst at investing firm Oppenheimer since 2007, covering business and IT services names. Before that, the NYU Stern School of Business graduate worked at ThinkEquity as a principal and equity analyst for five years, as well as took on a senior equity research analyst position at ABN AMRO Bank.
At 86%, Greene’s success rate matches that of Davis’, with the average return per rating coming in at a respectable 22.1%. So what was his best recommendation of the decade? As it turns out, the analyst’s most profitable rating was for payments giant PayPal Holdings Inc. (PYPL). During the period from January 20, 2017, through January 20, 2018, the return on this Buy rating landed in the triple digits, 101.1% to be exact.
With PayPal already posting a 28% gain in the last year, Greene tells clients that a recent meeting with management has renewed his confidence in the company’s growth and profitability prospects.
“PYPL maintains numerous levers to grow through the eBay conversion (ramps mid-FY20) and appears quite comfortable with its profitability outlook through the transition. The pending acquisition of Honey Science should improve consumer/merchant engagement, and prove growth/profit accretive in FY20/ FY21, respectively,” Greene explained.
Not to mention he sees Venmo and its GoPay acquisition, which expanded the cross-border opportunity with merchants and consumers in China, as key points of strength. “Venmo TPV growth remains strong (64% to $27B in 3Q19), and monetization efforts (e.g., Instant Transfer, Pay With Venmo, Venmo Debit Card) continue to gain traction,” the Oppenheimer analyst commented.
It’s not surprising, then, that Greene left the outperform rating as is. Should the $125 price target be met, PayPal shares are in for a 13% boost. The decade’s fourth-best performer and fellow Oppenheimer managing director and senior analyst, Brian Schwartz has been covering the SaaS/applications software space for more than 20 years. Using a research methodology based on survey-driven micro research on covered companies and macro research on the sector as a whole, he focuses on identifying disruptive software trends. Before tackling his current role, Schwartz was a senior analyst at ThinkEquity, Piper Jaffray, Montgomery and Co., and RBC Capital Markets.
Based on his performance over the last decade, it’s no wonder Schwartz has made his way onto this list. On average, his calls saw a return of 28.7%. In addition, his overall success rate amounts to 77%. Out of all his recommendations, his Trade Desk (TTD) Buy rating notched a return to the tune of 268.6% from May 2018 to 2019.
In terms of the media-buying platform’s long-term growth prospects, Schwartz argues that not much has changed. The company reported third-quarter results that featured deceleration across some metrics that sounded alarm bells. That being said, Schwartz pointed out in a research report that its fundamentals remain strong and it stands to benefit from the many large MSAs it signed in 2019.
“We maintain Outperform on The Trade Desk given numerous drivers that position TTD for strong revenue growth and EBITDA generation in 2020 and over the medium term, including the secular shift to the data-driven programmatic advertisement, ConnectedTV, and International. The company’s technology and efficacy focus should help drive increased spend on the platform, too, making TTD a more strategic vendor to the end market,” Schwartz wrote.
Along with the bullish call, the analyst reduced the price target from $290 to $260, implying a downside potential of 6%. Rounding out the list in the fifth spot is Gerard Cassidy. Calling TipRanks’ top-rated research firm, RBC Capital, home, Cassidy has worked for the firm and its predecessor companies for 31 years covering the U.S. banking space. The analyst is best known for inventing the Texas Ratio, an analytical tool now used by regulators, bank managements and investors to figure out the likelihood of a bank’s failure. In addition to his position at RBC, he serves as the President of the BancAnalysts Association of Boston.
Edging out Schwartz by just a touch, Cassidy’s calls returned 28.9%, on average, during the most recent decade. To top it off, his success rate comes out to 84%.
Taking a look at his most profitable recommendation over the last ten years, his Comerica Inc. (CMA) call dished out the largest return. Rating the financial services company a buy, it saw a 113.8% gain in the twelve months after Feb. 8, 2016.
While shares are down almost 3% in the last year, the retail bank operator can still generate solid returns as regulatory and macro-economic conditions remain favorable, says Cassidy. He argues that even though the company’s updated fourth quarter outlook, which was announced last month, does indicate some rate headwinds, overall trends remain steady. These include stable average loan balances, moderating share repurchase activity and some downward deposit repricing tailwinds.