The Giant Killer RAVI SURIA TOOK ON MIGHTY AMAZON.COM LAST SUMMER. IT WAS THE BEGINNING OF THE END FOR THE DOT-COM CROWD.
(FORTUNE Magazine) – FORTUNE's All-Stars are, by definition, equity analysts--stock jocks with the picks to prove it. So on purely technical grounds, Ravi Suria, who covers the less-than-glamorous domain of convertible bonds, doesn't qualify. Still, any ranking of Wall Street's best research talent would be remiss if it didn't give an honorable mention to Suria, who made some of the past year's most prescient calls.
Suria, of course, is best known as the 29-year-old Lehman Bros. analyst who took down Amazon.com. His report last summer detailing the e-tailer's deteriorating credit position sent the stock plunging 20% in a single day and ignited a media maelstrom. Amazon CEO Jeff Bezos took the unusual step of publicly disparaging Suria's work, calling his analysis "pure, unadulterated hogwash." Suria stuck to his guns. In subsequent reports, he picked apart the company's balance sheet, one rotting timber after another. Some of his research was so controversial, in fact, that Lehman refused to release it. But the numbers speak for themselves. Since Suria's first report, Amazon has lost some 90% of its value and even the company's former boosters now worry about its ability to generate cash, a factor they conveniently ignored until Suria's warning.
Amazon was hardly the only on-the-money call Suria made last year. He saved Lehman's clients millions of dollars when he cautioned them about the crushing wave of debt about to envelop the telecom industry, giving them plenty of time to get out before the bubble burst. Investors who followed his advice to put their money in the oil and energy sectors last spring also got rich.
As a convertible-bond analyst, Suria has a broad beat. He roams across different industries and carefully monitors macroeconomic trends. Because convertibles are a strange hybrid--half equity, half debt--he focuses on both a company's upside potential and its downside risk. Suria's approach, though, is unique even among convertible-bond analysts. Most of his rivals are quants, relying on technical trading models rather than fundamental research.
Suria, who left Lehman in March to join famed hedge fund manager Stanley Druckenmiller at Duquesne Capital Management, practices the kind of hardheaded balance sheet analysis that fell out of favor during the late-1990s boom. He communes with financial statements, not esoteric computer models--and certainly not with CEOs. Oh, talking to management has its place, Suria admits, but it comes a distant second to poring over financial statements.
Unlike many of his contemporaries, Suria spurns the limelight. He can be boastful--even arrogant--in private, but he doesn't want to be a CNBC star. And while he'll allow reporters to cite his written reports, he almost never grants on-the-record interviews. (He declined to be interviewed for this story as well.)
Born in Madras, India, Suria studied engineering both at India's Annamalai University and at the University of Toledo, in Ohio, but was soon drawn to business. While working toward an MBA at Tulane in 1995, he analyzed the books of the Shaw Group, a maker of pipes for the oil industry, for a class project. At the time, Shaw's shares had sunk to $2 on a split-adjusted basis. But Suria's analysis convinced him that the company was undervalued. It was his first great pick--Shaw's stock now trades at $60 a share.
After Tulane, he landed at Paine Webber's convertible-bond desk, where he quickly established a reputation as an analyst to be reckoned with. In 1998 he was ranked by Institutional Investor, a distinction that earned him a call from Lehman, where Suria went to head convertible research. There he labored in a small office on the 14th floor of Lehman's headquarters in the World Financial Center. Tucked away between the firm's REIT and gold analysts, the office didn't exactly have a star on the door. And while Suria frequently praised his superiors for supporting his work, clearly there was tension--especially when his Amazon reports called into question the research of Lehman's own Internet analyst, Holly Becker.
Now at Duquesne, Suria feels free to write what he wants. His research may receive less attention, but those who have the privilege of seeing it will certainly be reading closely. Suria has proven time and time again that no one on Wall Street can afford not to.