Despite the booming U.S. securities markets, most Japanese brokerage firms on Wall Street have posted losses or paltry profits over the past two years. But not Daiwa Securities America Inc., the U.S. arm of one of Japan's big-four brokerages. While the other three have floundered in the U.S. markets, Daiwa earned $70 million for the year ended last March. Its secret weapon: Andy Stone, a 35-year-old trader of mortgage-backed securities hired two years ago to shore up Daiwa's sagging mortgage-backed trading desk.
Stone's record lately has been remarkable. Since April, 1991, sources say he has racked up $250 million in gross profits trading mortgage securities--most of them distressed assets scooped up from the failed savings and loans managed by the Resolution Trust Corp. Last year, for example, Stone swept in on a slew of mobile-home-park mortgages others had shunned as worthless. When he repackaged them and found buyers, other bidders began copying the transaction. Now, Stone is buying nursing-home mortgages and even used-car loans. "We buy the stuff no one else will buy at any price," he says.
Stone takes risks more conservative firms won't allow. A University of Chicago business school graduate, he got his start in 1981 when he went to work for Salomon Brothers Inc. and the legendary Lewis S. Ranieri, who made millions as one of the pioneers of the mortgage-backed securities market. In 1987, Stone left to run his own department at Prudential Securities Inc., before Daiwa lured him away. The Japanese gave him an offer he couldn't refuse: Stone and his staff of 35 professionals take home as much as half of whatever they make for the firm. These days, they're betting that even healthy banks will provide opportunities as they dump commercial real estate mortgages wholesale. The only question is whether Andy Stone can keep picking winners.