Michael R. Hughes of Merrill Lynch has won a blue ribbon in American Banker's Wall Street Sharpshooter ranking for the second year running - this time taking honors for coverage of government sponsored enterprises.

Mr. Hughes, last year's winner in the general finance category, was one of five analysts to achieve the best possible score in predicting the quarterly earnings of the Federal National Mortgage Association this year. He was one of only three who made the best possible estimates on Fannie Mae for all of the three quarters reviewed by First Call Corp.

His scores for the Federal Home Loan Mortgage Corp. and Student Loan Marketing Association were close enough to the top to give him an average relative error of 0.191 for his estimates on GSEs.

Steven Eisman of Oppenheimer & Co. ranked second with an average relative error of 0.229, just ahead of Bruce Harting, of Lehman Brothers, with an average relative error of 0.232.

Mr. Hughes credits his success in the American Banker rankings to his diligence in creating earnings models - a practice he traces back to his early days as a research assistant to Jerome Gitt, Merrill's highly respected San Francisco-based thrift analyst.

"Stock picking is easy - if you've got the numbers," said Mr. Hughes, who also works out of the San Francisco office.

Officials of the companies he covers, meanwhile, credit him for working hard to understand their business - and getting the word out to investors.

"Mike Hughes has followed Fannie Mae for seven years. This year Mike was instrumental in helping us penetrate the retail investor market, by getting the Fannie Mae story out to Merrill's vast network of retail brokers," said Ellen Goldberg, a vice president in Fannie Mae's investor relations area.

Paul Scarpetta, shareholder relations vice president at Freddie Mac said Mr. Hughes has a broad understanding of the issues in the mortgage business that allows him to zero in on the issues likely to affect earnings.

"In contrast to other analysts, he doesn't ask me hundreds of questions; he asks the right questions," Mr. Scarpetta said, adding that the ability to focus his thinking enables Mr. Hughes to efficiently cover a broad range of companies.

Mr. Hughes is one of a growing number of former thrift specialists who now cover what he calls "an eclectic list" of consumer-oriented financial companies.

He found it natural to add consumer finance companies Household International and Beneficial Finance Corp. to his list in the late 1980s. And since then, his coverage list as ballooned with specialists in a variety of loan types.

In the 1995 sharpshooter ranking, Mr. Hughes was judged most accurate predicter of credit card and general finance company earnings - categories in which he continued to score well this year.

Indeed, his score for the three credit card companies he covers was slightly higher than any of the analysts who were ranked in the category, covering all four credit card specialists.

Mr. Hughes, noting that Merrill is generally bullish on the finance companies he covers because of their earnings growth records, said he likes the stock of all three GSEs.

He is especially sanguine about Freddie Mac, which he judges to have slightly better near-term growth prospects than the other two.

Sallie Mae, he said, is "in the process of reinventing itself" - a process that could produce good returns.

As his coverage list has become larger and more diverse - encompassing about 25 companies - Mr. Hughes said he has come to rely more on his assistants Mark Constant and Joy Palmer. "There are more companies I could do today if I had the capacity," he said.

He noted that Mr. Constant, who has been doing much of the work on mortgage insurance and title companies, is expected to be assigned primary responsibility for several of the companies, giving Mr. Hughes added flexibility in the year ahead.

And Mr. Hughes already was looking ahead to competing for the top prize next year in the credit card category, having recently added a fourth credit card company, Capital One Financial Corp., to his list.

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