Contributing Reporter

A few years ago, analyst Charlotte Chamberlain singled out a little-known thrift based in Santa Monica called FirstFed Financial Corp. with a "buy" recommendation.

FirstFed's own management was puzzled by the pick. "I immediately called her and said, 'Charlotte, what were you drinking this morning?' said FirstFed's Chief Operating Officer Jim Giraldin. "She said, 'I'm looking at the economy and what it's doing, and I really think you guys are a well-run company. You obviously had problems like everyone else, but I think you've gotten beyond them and your earnings are getting back on line.' "

Sure enough, FirstFed's stock moved from $14 at the time to a high of about $40 a year and a half later.

Finding hidden L.A. treasures is something of a specialty for Chamberlain, who is a rarity among analysts she covers banks and thrifts in a city whose biggest financial institutions have all been swept up through consolidation.

That gives Chamberlain, an analyst with the Jefferies Group in West Los Angeles, a distinct market niche.

Being a financial analyst has its own pressures and conflicts. Analysts around the country have come under fire for sometimes sugar-coating their reports so as not to lose business for their firms' underwriters and consultants. Chamberlain insists there are no pressures at Jefferies to put a positive spin on the institutions she covers.

"That's a clear violation of SEC rules, and we clearly don't do that kind of thing," she said.

Nonetheless, there are pressures that analysts like Chamberlain must confront every day. In order to do their jobs, they must have access to the chief executives of the companies they follow and CEOs have been known to cut off analysts who write unfavorable reports about their companies.

For Chamberlain, the ability to maintain access is a matter of demeanor. "Ultimately, the bromide answer is, friends come and go, enemies accumulate. You really don't want to build enemies in this business, and you want to maintain access to companies," she said. "It's a very fine line. You want to maintain contact. You want to maintain cordial and civil relationships just to make sure that you have access to the companies to answer your questions."

In fact, Chamberlain is known in the industry as someone who isn't afraid to speak her mind although she does it in a politic way. "If she didn't particularly like a situation, rather than say it in a derogatory way, she'd say it in a funny way," said Jim Reynolds, a Wedbush Morgan Securities senior vice president who hired Chamberlain in 1993. "As an example, some people were suggesting she follow a particular bank in Alaska. But she just pointed out there were more financial assets from Santa Monica to Redondo Beach than in Alaska. Sort of a whimsical thing."

Her sharp sense for choosing good stocks and avoiding the bad ones earned her the vote as favorite analyst among the brokers at Jefferies just two months after she joined the firm last year.

An economist by training, she credits much of her success to her approach of starting with each company's basics and working out from there. "Generally, I think picking companies based on fundamentals has worked out pretty well," she said.

Chamberlain, like many analysts, had a very strong year in 1997 but she's the first to admit that during one of the strongest and longest bull markets in history, it was hard not to pick a lot of winners. Now that the market is on shakier ground and capital is tightening, advising clients has become more challenging. Analysts, she said, will have to take a different approach to stay in favor with investors.

"In this climate, you have to change from looking for companies where the focus is on the upside, to making sure that none of the companies you follow have vulnerabilities to bankruptcy," Chamberlain said. "You need to make clients aware of the financial-services companies that ultimately have access to deposits, vs. the ones that need to go to financial markets. (The latter group) are companies that could potentially have liquidity problems."

One of Chamberlain's less stellar picks was the stock of Imperial Credit Industries, which ran into exactly the kind of liquidity problems she now looks out for. "That was one (case of a stock dropping) that was very specific to liquidity for sub-prime mortgage lenders," she said. "Liquidity for sub-prime mortgage lending went down very, very fast. Typically the situations like that where something happens very, very quickly it's a situation almost like an earthquake."

In these uncertain times, an analyst becomes as much a hand-holder for clients as an advisor, she said.

"You have to be there with the client to talk with them and tell them if the stock is going down because the market's going down and people are exiting the equity market, or is it just going down because of fundamentals," she said.

A native of New York City, Chamberlain at first had thoughts of becoming a pharmacist, but was quickly sidetracked by an economics course she took at the University of Connecticut. She went on to get her Ph.D. in economics at Cornell University.

Real-world experience has taught Chamberlain a lot about what kinds of work do and don't suit her. For example, an early start as an economics professor quickly fizzled for reasons that cut to the heart of her character.

"(When I was at Cornell), I did want to teach," she said. "But after about two years of teaching, I decided I much preferred the discipline of doing research with an end goal of being useful, rather than an end goal of being published."

Chamberlain's career over the last three decades has included several private-sector jobs and two stints with the federal government, one heading up an economics think tank at the Department of Transportation and the other as chief economist of what is now the Office of Thrift Supervision.

On the private-sector side, Chamberlain worked two stints at Glendale Federal Bank, first as an economist and later as head of strategic planning, giving her a strong background into the workings of the savings-and-loan industry.

A portfolio manager at Wells Fargo & Co. who asked to remain anonymous said Chamberlain is known for her analysis of savings and loans, and her views are often considered.

"Before we develop our strategy, we survey the opinions of many people in the industry, and we're interested in what highly regarded people are thinking people like analysts," he said.

As the number of thrift stocks dwindles, Chamberlain acknowledges that she must branch out into other financial-services companies areas she didn't cover in the past. But she insists it's not all that different going from one group to the others.

"It's consolidation, and really consensus is that the number of banks is shrinking, but there are more and more companies that do the same kind of thing," she said. "In the past, you did banks or thrifts or finance companies. Now you can do anything because they do everything."

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