It was her ability to decipher a story behind the numbers that put her in an enviable position
Captain Eddie Rickenbacker was a demi-god during the fifties. This American Ace of Aces was not just a celebrated fighter pilot (26 aerial victories in just two months of combat flying), but also a race car driver, airline executive and wartime adviser.
At an analyst meet, during his tenure as President of Eastern Airlines, a question was thrown to him from the audience: "Captain, I've figured out the company's earnings three ways, based on the three different depreciation schedules."
Heads turned in disapproving wonder to see who dared question this aviation idol. More so, the voice was female!!
That was Muriel Siebert, an entry-level research analyst in the U.S., at a time when women were a non-entity on Wall Street and the patriarchs in the aviation industry were larger-than-life characters.
An aircraft, like most physical assets, exhibits a depreciation profile whereby its current market value depreciates to a residual value over time. Siebert read a footnote in the annual report stating that the company depreciated its aircraft three different ways: 5 years for taxes, 4 years for stockholders, 7 years internally. Incidentally, the accounting strategy was all legal. Hence her statement.
Siebert’s diligent observation and courage to sidestep the fact that she was a female analyst venturing into unchartered territory impressed the Captain. He magnanimously paid her the highest compliment by loudly declaring: "Young lady, are you permanently employed? If not, there's a job for you at Eastern Airlines."
Siebert’s gumption and confidence rested on a solid foundation of an inherent grasp of numbers and the diligence to delve into a repository of knowledge.
Her love for math turned out to be her biggest asset. She often commented to journalists, “I was always good at math. The numbers light up the page for me. I understood financial statements from day one.” Indeed, it was her ability to decipher a story behind the numbers that put her in an enviable position.
At one time, she looked at National Cash Register’s annual report and saw that it depreciated its computers fast: 40% (1st year), 30% (2nd year), 20% (3rd year), 10% (4th year). Any revenue after that was all profit, with no depreciation expenses. After playing around with the numbers, scrutinizing every publicly available piece of information, and visiting the company, she figured the stock was cheap.
At that time, Chase Manhattan Bank had a large holding and approached her to sell. She stuck to her hypothesis: The company was not in the forefront of new technology but had a huge number of computers in the field, which meant earnings were going to pop as the installed units became fully depreciated. They changed their stance and decided it would be unwise to offload right then. She estimated that the firm she worked for probably lost $2,00,000 in commission on that sale, but she earned their trust and friendship.
She developed the motto of “know a lot about a little”. She zeroed in on a handful of companies (not more than 20) and delved deep. She studied the industry. Spent time with executives, kept up to date on all contracts, cancellations, slowdowns and bids, and studied everything there was to know about the management, production, suppliers, customers, competition, research and labour conditions.
When she heard rumours about a new development at Kodak, she chatted with the salesmen of two camera stores on Wall Street. She learnt that the company was planning to introduce a drastically different model in a few months – the instamatic. She took one of the models to a Christmas party. When she saw it was a hit, she visited the company and studied the numbers. The stock was priced without reflecting any new developments. She recommended the stock which turned out to be a multi-bagger.
She gave a Buy on Boeing at a time everyone was giving a Sell. Boeing had the 707 jet (a commercial edition of the military jet tanker) and the 3-engine 727. The new 737 was a 2-engine jet that could get into smaller airports and could make money with fewer passengers. A senior official from United Airlines told her that the Boeing plane had passed every performance test it had been given on the day it was delivered. Another from Western Airlines gave her the brochure showing the interchangeable spare parts that could be used for different planes in the fleet, thus lowering the operating costs. She boldly took a stand and the institutions that bought it tripled their money.
After amassing such in-depth knowledge backed with numerical data, she was well positioned to ask the right questions to arrive at the accurate answers. If a company had a disappointing quarter, she had no problem figuring out if it was a systemic problem in the organization or something beyond its control.
At one time, she saw that movie industry accountants were immediately depreciating movies. She took a critical stance on that practice because she had the vision to see the long-term value movies had for the then new medium of television. It led to a recommendation on the value of a totally depreciated film for television. Investors who followed her advice bought the stocks of movie studios that had libraries of old movies. Those studios racked up big profits when TV paid high prices to run those old films.
She believed that recognising a capacity for calculated risk is a key to success in investing.
She knew her numbers, studied the information, assessed liability, asked tough questions, and then was brave enough to make a decision. In an interview in 1999, she expressed her scepticism of the dot.com boom: “I don't like the craziness that anything that has "dot.com" can just zoom. I want to see revenues. I want to see a position in an industry.” She cautioned investors about the 2-tiered market where some companies were vastly overpriced, while others vastly underpriced. Her advice was to pay deep attention to the numbers and the cash flow.
Muriel Siebert was given a lot of titles. Pioneer. First lady of Wall Street. Trail blazer. And rightly so. But it was Huffington Post that nailed it by calling her a Total Badass.
She was told that as a woman she would not be able to handle the rough language of the Wall Street traders where every other word had to be a 4-letter one. She admitted that the language got rough and she learned all her foul language at the trading post. “It doesn’t mean a thing to me. They’re just words. I remember telling some guys to go do the physically impossible to themselves,” she told the author of Forbes Greatest Investing Stories.
She became the first woman to serve as superintendent of banking for New York State in 1977. She joked that "Superintendent of Banking" stood for "S.O.B." and concluded that yes, ''a woman can be a S.O.B.''
She lied about her lack of a college diploma (she had studied accounting and finance at Western Reserve University) to land a job in the equity research department of Wall Street's Bache & Co. brokerage in 1954.
She turned the Street upside down when she became the first woman to own a seat on NYSE on December 28, 1967. Till then, women were only permitted on the trading floor only as clerks and pages to fill shortages during World War II and the Korean War. She made history and newspapers feted her as the Belle among the Bulls and Bears. When asked how long she was the only woman on the floor, she said, “for 10 years, I could say: 1,365 men and me.”
She once narrated an incident where she spotted the chairman of the stock exchange at a restaurant. She went over to say hello and he retorted in front of his guests: “Muriel, some men object to your being on a floor. Why don't you ABC your seat to a man?" Her response: “Mr. Lasker, the day I ABC my seat to a man for a reason not to my liking, I will hold the goddamn biggest press conference the city of New York has ever seen."
[An ABC Agreement is a contract between a purchasing member with a seat on the NYSE and the brokerage firm for which they work. The Agreement states that the employee of the firm can: transfer their seat to another employee in the same firm; retain ownership and purchase a new seat for another delegate of the firm and sell the seat and transfer any gains to the firm.]
In the mid-1980's, she testified in Congress that junk bonds should be labelled as ''hazardous to your financial health.'' Fred Joseph, the CEO at Drexel Burnham Lambert, sent her a letter telling her she didn't know what she was talking about.
When talking to a journalist about women in Wall Street, she frankly noted that “you might have to play the game to get in because you don't want to look too aggressive. But once you've made a certain amount of money, you don't have to wear little navy suits and little bow ties.” (According to Washington Post, to avoid being mistaken for secretaries, women had to wear ridiculous-looking bow ties with their $600 Paul Stuart suits and carry briefcases instead of purses.) Indeed, she adopted a more flamboyant dress sense only after she started working for herself.
When analyst meetings were held at luncheon clubs where women were banned or not allowed through the front door, she entered through the kitchen.
She established her own investment firm and in 1975, when fixed commissions for brokers were ended, she transformed it into a discount brokerage firm. Muriel Siebert & Co. emerged as a pioneer in the discount brokerage business, way before anyone had heard of Charles Schwab.
Siebert proudly claimed that she “didn’t create my business simply by pounding on the door and saying ‘I’m a woman.” This woman truly slugged it out with the boys and paved the way for women on Wall Street.
This article was published on August 28, 2017 in Morningstar