This case is about  LEADING TEAMS

PUBLICATION DATE: November 03, 2004

10 Uncommon Values (R): Optimizing the Stock-Selection Process Case Solution

In 2003, Steve Hash, research director at Lehman Brothers, prepared to begin the company’s “Ten Uncommon Values” stock picking process for the year. An investment committee had to decide the 10 best stocks from about 100 stock notions presented by the company’s analysts. The functionality of the stocks chosen for the Ten Uncommon Values had been powerful–an investment strategy to acquire the recommended stocks and hold them for one year would have outperformed the S&P 500 for 39 of the last 54 years. Nonetheless, during the most recent three years–2000 to 2002–the recommendations had performed badly, generating an average yield of -22.5% vs. -11.7% for the S&P 500.

Hash pondered several issues: What was the significance of the Ten Uncommon Values for its clients and Lehman Brothers? How much effort and time should the company put into the process of choosing stocks for the report? How many members should be who should be selected, and on the Investment Policy Committee? What should the procedure for selection be? Should analysts whose stocks were chosen be compensated for their picks? Finally, should they continue the procedure?

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