General Electric Co. insiders were convinced: There must be a mole. How else did Stephen Tusa know?
With the conglomerate in crisis, the JPMorgan Chase & Co. research analyst had an uncanny knack, time and again, for uncovering deep problems before they were public. For years, his research had zeroed in on issues both broad, like management credibility, and detailed, like a flawed fan blade inside GE’s turbines, that kept proving prescient.
His reports, often lengthy and skeptical, warned JPMorgan clients to dump the stock, and seemed to be gaining more influence with each new volume.
Inside GE and its boardroom, as a succession of management teams tried to wrap their arms around problems that kept spooking investors, Mr. Tusa’s calls became a source of speculation.
The board and advisers would scrutinize Mr. Tusa’s reports. GE even launched a hunt for leakers, a board member questioned JPMorgan about the research and the bank conducted an internal review, people familiar with the matter said.
As General Electric ’s profits and stock price shriveled, erasing some $200 billion of market value in 2017 and 2018, Mr. Tusa’s dour attitude won more influence among investors. One former senior GE executive said Mr. Tusa’s reports were painful to read, but were thorough and largely correct. “I tip my hat,” this executive said. “At the end of the day, our problem is not Steve Tusa.”
It seems that every decade Wall Street anoints another star analyst. There was Mary Meeker and her coverage of internet stocks during the 1990s dot-com bubble. More recently, Meredith Whitney gained fame for her warnings on Citigroup and other banks during the 2008 financial crisis. Today, few analysts can claim the name recognition and influence that 44-year-old Mr. Tusa has built around GE.
Wall Street research has long come under fire over perceptions of cozy relationships with companies, especially when it comes to big investment-banking clients like GE. Mr. Tusa has been an outlier—which he’s quick to point out—and moved the stock in the process.
Over the past two years, Mr. Tusa has cut his price target on GE 10 times, to $5 from $27. Each time he’s done so, the stock has underperformed the S&P 500 that day, by an average of more than 3 percentage points. When he upgraded the stock last December to a lukewarm “neutral,” the stock rallied 7%, as people hoped he was calling the bottom.
That hope was short-lived. Before U.S. markets opened April 8, JPMorgan issued an alert that Mr. Tusa was downgrading GE again. The report—over 100 pages—highlighted GE’s challenges and risks but the thrust was that the stock price had gotten ahead of reality. GE’s stock slid 5% as the broader market rose.
With the stock beaten up and Mr. Tusa remaining negative, his opinion remains at odds with new GE leaders who are promising a long turnaround. Some people who credit the analyst for correctly seeing the decline of the company are beginning to question if he’s too committed to his negative view.
The bearish turn on GE was a decade in the making.
As an analyst, Mr. Tusa has followed GE since 2001. A formative event was when another conglomerate, Tyco International Ltd. , collapsed under the weight of an accounting fraud in 2002. The scheme was missed by analysts, and it taught Mr. Tusa to have a healthy skepticism around the companies he covered, according to a person close to the analyst.
In those years, GE struggled to find the regular growth delivered in the decade before. It spent billions of dollars on acquisitions and share repurchases, and continued its reliance on the financial-services business that would almost destroy the entire company in the financial crisis.
In 2008, Mr. Tusa’s downgrade to “neutral” eerily described the internal problems that would contribute to GE’s collapse a decade later. “It would appear as though accountability for hitting targets is the top priority, and some managers might be chasing earnings,” he wrote. “We also think the high bar for success in such a competitive environment could create a scenario in which bad news is not tolerated, making necessary communication with senior level managers a challenge until it’s too late to fix.”
Studies have found analysts to be more positive when they are issuing opinions on larger companies, when they cover many companies, and when the companies generate high-investment banking fees. Mr. Tusa has managed to buck all those trends, said Mark A. Chen, a finance professor at Georgia State University who has studied the investment-research industry.
Mr. Tusa covers 21 industrial companies and JPMorgan has collected an estimated $370 million in banking fees from GE since 2010, according to Dealogic, the most the conglomerate has paid to any investment bank over that period.
Prof. Chen found those biases are so prevalent that investors have baked them into their reactions: A negative call, like Mr. Tusa’s, by an analyst under those circumstances tends to move the stock more. “Clearly this analyst broke the mold in analyst optimism,” Prof. Chen said.
A prime example: In 2015, as JPMorgan’s bankers advised the conglomerate on selling much of its financial-services business, Mr. Tusa had to halt publishing but he continued to do research. Upon returning in May 2016, he surprised investors with an “underweight” rating, JPMorgan’s version of a “sell” rating.
At the time, GE’s problems hadn’t yet emerged and the stock was trading close to $30. In the two years that followed, GE slashed its dividend twice, changed its CEO twice and decided to break itself apart, selling off major units. Shares trade around $10 today.
Despite the success of his “underweight” call, Mr. Tusa was constantly questioning the rating in the first year when the stock stayed near $30, said people close to the analyst.
“He had a lot of nervousness around that,” said Paul DeGaetano, CEO of a cosmetics company, who has known Mr. Tusa since they played ice hockey three decades ago. Friends and acquaintances in the finance industry criticized his aggressive stance in that first year. “It doesn’t surprise me that he would be the ringleader of this sort of thing,” he said.
Charles Stephen Tusa Jr. grew up in Greenwich, Conn., one of the country’s wealthiest towns, home to hedge-fund managers and private-equity partners. As a child, he used to ride bikes with Ian and Shep Murray, who went on to found preppy clothier Vineyard Vines. He attended the elite Brunswick School, following the footsteps of his father Charlie, a founding partner of a prominent law firm in town.
A political science major at Dickinson College in Pennsylvania, Mr. Tusa has said he learned finance on the job after joining JPMorgan in 1998. It wasn’t his first career choice. His dream was to play center for the New York Rangers and Wall Street hasn’t tamed his devotion to ice hockey. In 2014, as the Rangers were making a run in the playoffs, Mr. Tusa grew a mullet. He still laces up his skates regularly with multiple leagues, getting in more than 20 games over the winter. On days when GE is dropping major news, he has worked from the bench.
At GE, there has long been a suspicion that Mr. Tusa had a network of contacts inside the company that fed him information, according to former executives and people familiar with the board. The detailed knowledge of the company in his research notes was seen by some as being suspiciously accurate.
GE conducted a search for leaks and Ed Garden, a GE director and co-founder of activist investor Trian Fund Management, discussed the issue with JPMorgan, according to people familiar with the matter. JPMorgan executives reviewed Mr. Tusa’s work and found nothing the bank was concerned about, the people said.
In looking for leaks, no one was above suspicion, even board members were commanded to keep their mouths shut, the people said, and GE took extra steps to keep any developments under wraps.
complained to a close friend that I hated being on Twitter. It was distorting discourse, I said. I couldn’t turn off the noise. She asked what was the worst that could happen if I stepped away from it.
There was nothing I could think of. And so just after 6 p.m. last Sunday, I did.
.. After nearly nine years and 187,000 tweets, I have used Twitter enough to know that it no longer works well for me. I will re-engage eventually, but in a different way.
.. Twitter has stopped being a place where I could learn things I didn’t know, glean information that was free from errors about a breaking news story or engage in a discussion and be reasonably confident that people’s criticisms were in good faith.
.. The viciousness, toxic partisan anger, intellectual dishonesty, motive-questioning and sexism are at all-time highs, with no end in sight.
.. It is a place where people who are understandably upset about any number of things go to feed their anger, where the underbelly of free speech is at its most bilious.
.. Twitter is now an anger video game for many users. It is the only platform on which people feel free to say things they’d never say to someone’s face.
.. During the 2012 campaign, the first during which Twitter was widely used by journalists and campaign aides, I became something of a scold to younger reporters who I thought misused the medium.
.. Pictures of themselves at events, inside jokes and conversation fragments were all there for the world to see. They should treat their feeds like news platforms, I huffed
.. But Twitter has a staccato allure for those of us who need frequent inputs and have grown accustomed to them in the Trump era, with news cycles that last roughly three hours.
.. Many pointed out errors, but most did it respectfully, and I was appreciative.
.. But the medium has changed. Everyone I follow on the site seems to be tweeting more frequently, so I had to check in more frequently. No matter the time of day or night, I felt like I had to plug back into the Matrix, only to be overwhelmed by the amount of content.
.. instead of engaging in thoughtful debates, I found myself spending an increasing amount of time explaining an errant word or a poorly phrased tweet, and coming off defensive as I did it.
.. On Twitter, everything is shrunk down to the same size, making it harder to discern what is a big deal and what is not.
.. Tone often overshadows the actual news. All outrages appear equal. And that makes it harder for significant events — like Mr. Trump’s extraordinarily pliant performance with President Vladimir Putin of Russia — to break through.
.. More significant is the way Mr. Trump has tried to turn everyone around him, including the journalists who cover him, into part of his story.
And people on Twitter have started to react to me in that same way, treating me as if I am a protagonist in the president’s narrative.
.. He creates the impression that the media is almost as powerful as he is in his incessant, personalized attacks on reporters on Twitter.
.. Twitter is a useful and important platform. It’s a good aggregator for breaking news.
.. The downside is that everyone is treated as equally expert on various topics.