WSJ NYU Fellowship

We’re pleased to report that finalists for the fellowship have been selected. Emails will be going out soon to everyone who applied. The winner will be announced in the next few days.

I’m afraid applications have now closed for the fellowship, and finalists will be notified by March.

Those who don’t get selected, or didn’t get their application together in time, will have a chance to submit next year. This website will be up, and updated, in the interim, so please continue to keep an eye out. Those of you who feel you don’t match the criteria now have plenty of time to fill in the gaps. Remember: initiative, ingenuity and a readiness to fill in the gaps of experience and knowledge are all highly regarded qualities, not just for this fellowship, but for journalism in general.

Any questions: please fill in the form.

Here’s a piece written by one of the fellows, Serena Ng, written while she was an intern at The Wall Street Journal. More to follow in coming days.

`Channel Checkers’ Sniff About for Trends

By Serena Ng

8 August 2005

The Wall Street Journal

(Copyright (c) 2005, Dow Jones & Company, Inc.)

A FEW WEEKS ago, nine recent business-school graduates and one retired businessman based in eight states set out on one big mouse hunt, collectively visiting more than 70 Chuck E. Cheese’s restaurants across the country.

Along the way they chatted with store managers, noted customer traffic, staff attitudes, and cleanliness of the restaurants, known for their kid parties and games presided over by the eponymous gray mouse. After each stop, the Pizza Ten sent detailed reports of their findings to J.P. Mark, president of Farmhouse Equity Research, in Newport, R.I. Mr. Mark studied their notes and concluded that the chain’s same-stores sales would be flat to slightly lower for the second quarter. He quickly relayed that hunch to his client, a hedge fund that had hired him to check out Chuck E. Cheese’s, owned by CEC Entertainment Inc.

Four days later, on July 26, CEC reported flat second-quarter earnings and a 2.1% drop in same-store sales, which compares business at locations open in the current year’s period to the same time a year earlier. That performance was below Wall Street’s consensus forecast, and it sparked a selloff in the New York Stock Exchange-listed shares of the Irving, Texas, company.

Mr. Mark doesn’t know whether his client acted. But it appears the hedge fund had a Street-beating view of the stock because of the "channel checks" performed by his foot soldiers, who earn $20 to $75 an hour, depending on experience. Mr. Mark hires locally so his researchers don’t need hotel rooms, but he also covers transportation, telephone and other sundries. (The Pizza Ten each also had a $12 per diem for dining at Chuck E. Cheese’s, but most declined that perk.)

Channel checks — collecting data from a company’s customers, suppliers, employees and even rivals to find out how a business is really doing — have always been part of a stock analyst’s duties. But with most Wall Street firms unable or unwilling to devote significant resources to this qualitative and often time-consuming process, a growing number of independent research outfits are making a living out of this niche. The work involves more networking and investigative reporting than analyzing balance sheets and income statements. The channel checkers go out and kick the tires, in the parlance, rather than staying in the office to scan securities filings or call investor relations departments. The idea is to spot a trend before it is widely known.

Money managers — and increasingly, venture-capital and private-equity firms — are turning to independent analysts who can provide such research, hoping for key "data points." Demand has surged since the Securities and Exchange Commission in 2000 put in place its Regulation Fair Disclosure, which prohibits selective disclosure of material corporate news and led many companies to sharply curtail communications with Wall Street.

"Any Wall Street analyst can build a `discounted cash-flow model’ for valuing stocks, but not many can find massive amounts of raw data and turn that into metrics that can affect a stock’s price," says Doug Atkin, chief executive of New York-based Majestic Research, a two-year-old independent research firm.

The classic channel checks are conducted on companies with a retail presence — where researchers can walk into stores and talk to employees about the business. While these checks don’t usually generate statistics, they are sometimes the most accurate indicator of a company’s performance.

At the Chuck E. Cheese’s outlets, Mr. Mark says, sentiment from restaurant managers made it clear there would be no upside for the group’s second quarter, and same-store sales would be flat at best. "We didn’t make any prediction or projection per se, but we garnered enough data to know directionally which way the quarter went," he says. Mr. Mark, formerly director of research at Wells Fargo Securities before starting Farmhouse in 2002, recruits mainly graduate students, M.B.A. degree holders and industry veterans across the country to do his legwork.

Some channel checkers are more sedentary, but still do their jobs differently than their counterparts at the big banks and brokerage firms. They work the phones, but do so to tap into networks of industry contacts, including buyers, suppliers or other middlemen in a subject company’s supply chain. "We trade information with them and promise we won’t quote their names in our reports," says Jon Gates, director of research of Off The Record Research, a California firm that employs more than 200 "reporters," channel analysts and data gatherers around the world.

To be sure, channel checks don’t always work, and they are trickier for certain industries with diverse business segments or customer bases, like banks and utilities. And kicking the tires is more accurate than Web surfing, it seems: Earlier this year, an RBC Capital Markets analyst lowered his view on Google Inc. based on channel checks that suggested the Web company’s paid-search business had softened. That wasn’t the case, and the analyst had to revise his forecasts.

"It’s hard to rely solely on channel checks because you can end up with assessments that are way off if you don’t talk to enough people," says Michael Mayhew, chief executive of Integrity Research Associates, a research consulting and advisory firm in Darien, Conn.

Peter Fenton, chief executive of Detwiler, Mitchell, Fenton & Graves, a technology research provider in Boston, calls channel checks "a piece of the puzzle." That is why independent researchers often offer only their findings and let the client decide whether to buy or sell the stock, he adds.

A reminder to those who haven’t submitted their application forms: There’s still time, but remember that the deadline of January 20 is for applications to be received. So give yourself plenty of time mailing it. The address, by the way, is

Cathy Panagoulias
Deputy Managing Editor
The Wall Street Journal
200 Liberty Street
New York, NY 10281
USA

One more month to go until deadline for the fellowship. Here’s the timeline.

Some of you have asked about what the fellowship covers, and what it doesn’t.

The fellowship will cover costs of two of the three semesters; those who have received the fellowship have found the resources themselves to cover the last semester, and none have regretted it.

But I should add that please don’t not apply because you’re worried about whether and how you might cover the last semester. In some cases we’ve only selected one winner, in which case all three semesters are covered.

If in doubt, apply anyway!

Some of you have asked whether there is an application form. There isn’t. All that is needed is listed here, although all applications should be accompanied by a cover letter.

Some of you have asked whether you need to get a place at NYU’s BER programme first before applying for the WSJ Fellowship.

The answer is no; those notified that they are among the finalists, by March 2009, must then apply for the program.

Check out more on the eligibility page.

Here’s a testimonial from Eva Woo, the first recipient of the award and the first from mainland China.

For the last ten months I have been following (literally) the financial crisis as it spread from West to East; from New York to Beijing—after spending two years in New York, I moved back to Beijing a week before the Olympics.

On top of that, I’ve been lucky enough to see another equally important story of our time unfolding: the changing dynamics of capital flow, political power and communication around this world.

I say that because at Caijing magazine, a leading economic and financial publication in China where I work, we cover that story every single day. More interestingly, we are a part of the story ourselves–simpl by providing a platform for communication and understanding between the two worlds.

Luckily I am equipped to tell that story and be a part of that story with what was taught at the BER program: The inverted yield curve I first learned at the macro class two years ago predicted the recession long before anyone had a sense of it. The Foundation of Finance class taught me some of the perfect models behind the current bubble, one of the biggest in financial history.

The tricks to dig out financial details of companies and the techniques to tell a compelling story on a relatively "boring" subject taught at the journalism classes all came in handy…

Some of you have asked whether your applications will be rejected if you work for a rival to Dow Jones. The answer: definitely not.