Goldman, Sachs & Co. analyst Robert Hottensen delights in uncovering industries that are not getting a lot of attention from Wall Street.
His latest find: specialty finance companies that lend to businesses that banks shun.
The lenders include Associates First Capital and Heller Financial, companies that are emerging as "unique investment opportunities," Mr. Hottensen said.
His skill at following these companies is apparent in Mr. Hottensen's standing in American Banker's latest Wall Street Sharpshooters survey. Based on the accuracy of his earnings estimates, Mr. Hottensen finished first among five specialty finance analysts, with picks that included Heller Financial and Associates First. The survey is draws from earnings estimates collected by First Call/Thomson Financial.
Mr. Hottensen prides himself on being ahead of the curve during his 18 years with Goldman.
He developed the firm's reporting on the savings and loan industry in the early 1980s, before many other analysts took up coverage.
He was also one of the first analysts to begin following the government- sponsored enterprises Fannie Mae and Freddie Mac.
Sensing opportunities is high on Mr. Hottensen's list of priorities.
"I enjoy participating in the debut of exciting companies in the financial services arena," Mr. Hottensen said. "It's rewarding to see these businesses develop and create tremendous shareholder value for investors."
Mr. Hottensen came to Goldman after a stint as a loan officer with Irving Trust Co. At Goldman, he said he "leverages knowledge and interest in the banking industry developed through first-hand experience."
Mr. Hottensen "really tells it like it is," said Stephan Ban, investor relations chief at Heller Financial. "He tells you what he thinks, what his clients will think, and what the broader market is likely to think."
Mr. Hottensen's assessment of the company "'is on the mark," Mr. Ban said. "He brings a wide body of experience to his coverage."
Mr. Hottensen said he spends much of each day working the phones, keeping in touch with executives at the companies he follows, and calling on institutional clients and Goldman's own salespeople.
Lenders in the nonbank financial services industry are staking out formidable places for themselves beside general banking companies, Mr. Hottensen said.
The specialty lenders "have proven themselves innovative and creative in gaining market share," Mr. Hottensen said.
The nonbank finance companies have grown by being big securitizers of their loans, which provides a steady stream of capital to lend, Mr. Hottensen said.
His top picks among specialty finance companies include Associates, which, he said, has evolved into "an enterprise that distributes products and services through multiple channels and geographies."
Associates has created "a very durable and predictable earnings model," Mr. Hottensen said.
He also likes Heller Financial, saying it is "a beneficiary of improved expense ratios, excellent credit quality, strong originations, and a value- added franchise."
Household International is also high on Mr. Hottensen's list. The company "has growing appeal as it increasingly emphasizes building its home equity and consumer finance businesses and energizing its private-label business," Mr. Hottensen said.
Household "has had an impressive pattern of growth over the past five years and we see more of the same for the future," Mr. Hottensen said.
