Bell Helicopter wins a $2 billion contract to build V-22 aircrafts for the Army. L3 Communications acquires Titan Corp. and goes from a $7-billion to a $9-billion company overnight. More combat on the streets of Baghdad boosts demand for General Dynamic’s armored vehicles.
In a renovated firehouse in downtown Newport, JSA Research Inc. analyzes such major developments in the aerospace industry – and few are better at it.
Rhode Island's Market Has Changed. Developers, Builders, Investors and Sellers Must Change With It.
By Emilio DiSpirito IV License Partner | Engel & Völkers Oceanside Leader | The DiSpirito…
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“I decided that I would do something that not too many others had tried, but I was aware that some others had done it with success,” said Paul H. Nisbet, president and CEO of JSA, talking about how he took his career from Wall Street to Mill Street in Newport.
Nisbet, 73, summered in Newport for three years before deciding to start his own aerospace research firm in the tourist hamlet. He left his job of 13 years at Prudential Securities Inc., where he was a first vice president, and began talking to past customers about whether they would be interested in purchasing his research.
Some were. So he teamed up with Joseph Schneider, founder of aerospace researcher JSA Partners Inc. in Boston, and opened shop in January 1993. Nisbet co-owns the firm with Schneider – who he sees about twice a year – and runs the two-man operation with Vice President Peter J. Arment, who began working at the firm in 1993, shortly after earning a bachelor’s degree in economics from the University of Rhode Island.
Between the two analysts, they provide institutional investors – such as Fidelity Investments – with individual quarterly studies on the top 24 companies in the aerospace industry. They also give additional updates to their clients if, say, one of those companies wins a large military contract or acquires a competitor, Nisbet explained.
Nisbet, a 30-year veteran analyst, tracks large-cap aerospace corporations such as Boeing, Lockheed Martin and Raytheon. Arment follows companies in the industry that report less than $5 billion in annual earnings.
Their reports – which range from about 15 to more than 60 pages depending on a company’s size – measure things such as cash flow, outstanding debts and streams of income, Nisbet said. They look at each covered company’s stock valuation, rate of growth, price-to-earnings ratio, and make five-year forecasts of companies’ standing in the marketplace.
“Then we determine whether the stock is a buy, a hold, or a sell,” Nisbet said.
JSA’s Web site details the two analysts’ success in picking stocks. The Wall Street Journal placed Nisbet on its “All-Star Analysts Survey” in 1997-98, 2000 and 2002-03. Arment earned the same honors from 1999 to 2001, and in 2004. He was the list’s top-rated aerospace analyst in 2001, when his stock picks earned an average 55-percent annual rate of return. The Reuters Survey and StarMine, a national analyst rater, have also recognized their work.
Nisbet views JSA’s distance from Wall Street as an advantage over his competition at large securities firms. He recalled his own days working on Wall Street, spending more than half of his time traveling to meet with prospective clients, making sales calls and fielding calls from customers.
“There was a lot more forced types of activities that were necessary for analysts to participate in, such as assisting investment bankers,” he said.
Investment bankers would provide bonuses to analysts for their good counsel, Nisbet said, which eventually became viewed as a conflict of interest. “You had analysts recommending a buy of Enron weeks before it went belly up, and that was due to the bias from the incentives program.”
“We don’t do any investment banking,” Nisbet noted, comparing JSA to larger firms. “We might spend 10 to 15 percent of our time marketing, so I like to think that we are efficient and put more emphasis on research than a larger brokerage firm.”
Nisbet also enjoys the work atmosphere in Newport better than the hustle and bustle of Manhattan. “It’s like being on permanent vacation, looking at it from a personal perspective,” he said.
Advances in computer technology have also helped make Newport a comfortable location for the firm. Nisbet said in the early ’90s his brick-walled office was filled with file cabinets that stored paper records on each company. Now, the file cabinets are mostly gone and the reams of information reside in his computers.
In addition, Nisbet said, JSA is able to get updates on the stock market via the Internet rather than from the $5,000-per-month Bloomberg ticker tape devices that were once required equipment for research departments.
“With the age of the computer,” Nisbet said, “you can do what we’re doing from almost anywhere.”
