'Miracle' player sets big goal at MJSK
Twin Cities Business Journal
In 1980, Robert
McClanahan played on the U.S. Olympic hockey team that beat the undefeated
Soviet Nationals for the gold medal -- a feat recalled in the recent movie Miracle.
Now McClanahan has a
job that some observers say is just as daunting: Turn into a contender in the
institutional brokerage world.
head of trading at the Minneapolis office of ThinkEquity Partners, recently
joined Minneapolis-based MJSK as director of equity capital markets. That puts
him in charge of institutional brokerage and research -- the business of
advising and trading stocks for large institutions. That business accounts for
only $2.5 million of MJSK's $33.6 million in revenue. McClanahan plans to boost
that to $15 million in the not-too-distant future.
Most of MJSK's
revenue comes from its retail brokerage business -- advising and trading stocks
McClanahan said his
plan to shore up the firm's institutional business hinges on increasing the
number of companies the firm follows and bringing in more people to follow them.
going to be very big," McClanahan said. "We're going to grow slowly
and deliberately. ... To use an old Herb Brooks cliche, 'We don't want the best
people, we want the right ones.' "
Two of those people,
also from ThinkEquity, are Steve Dragos and Michael Schemel, who joined MJSK's
equity capital markets group with McClanahan. Reed Anderson, a former analyst
with Arlington, Va.-based Friedman, Billings, Ramsey & Co., will become
director of research.
A veteran trader,
McClanahan's résumé includes stints at Bear Stearns & Co. Inc., Credit
Suisse First Boston and Piper Jaffray & Co.
his career in financial services as an intern at Morgan Stanley while playing
hockey for the New York Rangers.
"I was looking
for something outside of hockey because I knew I was no Gordy Howe (a Hall of
Famer who played 33 professional seasons from 1945 to 1997) and I needed another
line of work," he said.
McClanahan plans to
carve out a niche by covering Midwestern companies.
"We think the
Midwest is an undercovered area right now," he said. "We're not going
to have an impact on Medtronic ... but there are some companies out there that
are not Medtronic's size."
president of The Carideo Group Inc. in Minneapolis and a former MJSK analyst,
said coverage of regional small-cap stocks has indeed dwindled in recent years.
many small brokerage houses doing it like Piper Jaffray, Dain Rauscher, John G.
Kinnard and Equity Securities," he said. But there's a reason why those
stocks are undercovered in the institutional world today. "Big
institutional investors are sometimes reluctant to trade heavily in these stocks
because they are hard to buy without having a tremendous impact on the price and
they are hard to sell without having a tremendous impact on the price."
equity capital markets group covers 40 companies, but McClanahan plans to hit 75
to 100 by the end of the year. In three years, McClanahan's group should consist
of 30 to 40 people.
MJSK's decision to
shore up its institutional brokerage division is in stark contrast to Wells
Fargo & Co.'s Aug. 2 announcement that it would exit the business. Other
firms have cut back their institutional-brokerage operations because of
increasing costs and smaller returns, though Piper Jaffray will open an
institutional-trading desk in Boston.
MJSK executives say
an institutional business makes sense for the company.
number of different legs to the stool makes for a stronger business," said
David Johnson, CEO of MJSK. "What didn't work for Wells Fargo on a national
scale works for us in a smaller environment."
insiders say the forces that led to the close of Well's Fargo's institutional
business will make McClanahan's task at MJSK difficult.
analysts will be expensive -- from $80,000 to $175,000 in base salary per
person. The firm does have some cash from a $10 million damages award it
received in a suit against competitor Northland Securities Inc. in Minneapolis.
Making enough money
to support those analysts is difficult.
"It used to be
that ... brokers would make 5 cents a share to trade those shares, but now if
they get paid a penny or two, they are lucky," Carideo said.
popularity, even among institutions, of trading electronically is another
obstacle, said Jim Ulland of Minneapolis-based Ulland Investment Advisors.
describes himself as aggressive and determined, is aware of these obstacles.
"There's always an inherent risk, for reasons out of our control, that this
task is a little more daunting than we envision," he said. "But I
don't think it is."