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June 30, 2002

Can Adams, Harkness Ride a Winner? Another bronco buster is mounting that wild horse called tech an

By Peter Chapman

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  • Can Adams, Harkness Ride a Winner? Another bronco buster is mounting that wild horse called tech an

Adams, Harkness & Hill, a Boston boutique that concentrates on emerging growth companies, wants to take over the role recently filled by the Four Horsemen of the brokerage business. The Four Horsemen of emerging growth, Hambrecht & Quist, Alex.Brown & Co., Robertson Stephens and Montgomery Securities - had once dominated the research, underwriting and trading of volatile technology and healthcare companies.

But after selling out to Bank of America, Chase Manhattan, Fleet Bank, and Bankers Trust, respectively, in the late 1990s, they abandoned their focus on the up-and-comers to trade Nasdaq's blue chips.

Today, these firms focus most of their energy on the same large-cap stocks as the Goldmans and the Morgans: Dell Computer, Sun Microsystems, WorldCom, Oracle and the rest.

First Call

Executives at Adams, Harkness say the decks are clear for the brokerage to become the "first call" of institutions looking for fast-growth small- and mid-cap stocks. "There is a void out there created by the changes at the Four Horsemen of emerging growth," said John Tesoro, head of the brokerage's equity department. "Our vision is to be recognized as the firm that filled that void."

Adams, Harkness trades 330 names in just three sectors: technology, healthcare and specialized consumer. All are Nasdaq stocks. Many are illiquid. About 50 are handled by the firm's arbitrage desk. The roster includes 220 covered by the firm's research department. Banking stocks, or those underwritten by Adams, Harkness, account for about 25 percent, say execs.

At the desk sit eight position, 10 sales and one agency trader. Joe Ranieri has run dealing since December. That's when he replaced long-time head Ben Marsh, who is now a sales trader. Running sales trading is Paul Mazzarella, a 19-year veteran with Adams, Harkness. He and Ranieri report to Tesoro.

With volume of about 1.5 billion shares in 2001, Adams, Harkness ranked 35th among Nasdaq market makers, according to Thomson Financial's AutEx/BlockData. Volume was virtually unchanged from 2000, but represents a near tripling from five years earlier.

Those figures are impressive when one considers that all of the stocks the firm trades are low-volume small- and mid-caps. Most firms of its size make their numbers trading high-volume large caps.

Still, Adams, Harkness is not the only independent brokerage touting its expertise in emerging growth. Among the biggest are Thomas Weisel, Robert W. Baird, Gerard Klauer Mattisson, and C.E. Unterberg Towbin.

Tesoro acknowledges success won't come easily. "We're still in the second or third inning," he said.

But, by one measure, Adams, Harkness already stands out. Of its top ten stocks as measured by volume, the brokerage was the ax in half during the first quarter of 2002, according to Nasdaq. Only one other member of its peer group, Thomas Weisel, could boast of such a percentage. The rest dominated no more than three of their top ten names. R.W. Baird was the ax in three names; Gerard Klauer in zero; and Unterberg in one.

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