David A. Mallach

“Growing up in that environment, you look at the world and you find commonalities amongst the people you live with — what works, what functions, regardless of where it is. The multi-cultural aspects of moving around, even within the U.S., taught me there is no one way of doing something. You have to look at things from different angles,” says Mallach, who has $350 million in assets under management. “Investing is nothing more than a composite of all kinds of cultures. Everyone is participating in the game, and there are universal rules.”

Mallach, who has spent his entire career with Merrill Lynch, is known for designing two investing strategies, based on exhaustive Merrill research and used worldwide by advisors. The growth strategy focuses upon revisions in earnings estimates made by security analysts. To qualify, a stock has to have had its earnings revised upward twice in six months. To work effectively, 10 or more stocks are recommended in a portfolio

“Instead of the price, I look at what’s causing the price to move. We don’t look at the subjective opinion of analysts but quantitative numbers. When analysts revise forecasts, you can make money. Thousands of advisors have built their career around this,” says Mallach, whose book, Dancing with the Analysts, published in 2002, wraps the growth strategy in a fictional thriller.

“It’s like flying. All the risk in flying is ahead of me. If I’m flying to Atlanta today and you hear me talking to the weather experts, I’m not going to be asking what the weather was like last week in Atlanta. You want to know how the weather pattern is about to change ahead because that’s where the risk is,” adds Mallach, who has two sons who work as advisors for Merrill. “It’s more valuable than historical data.”

A second strategy, focusing on income and growth, invests in the common stock of telephone and electric utility companies that increase their dividends at a rapid rate. Merrill’s research suggests that when utility companies raise their dividends rapidly, a move reflecting management’s optimism regarding future performance, their stock price also tends to rise. Mallach’s new novel, Walking with the Analysts, due out next year, will feature income investing in a plot twist.

With an average account size of $3 million, Mallach’s clients — individuals, institutions and Middle Eastern royalty — span the globe. Twenty-five percent of the assets he manages are tied to clients from the Middle East. Not surprisingly, one of his strategies follows the tenets of the Quran.

His charitable outreach is also global. Last year, he contributed $25,000 to a University of Pennsylvania AIDS/HIV project in Botswana in southern Africa. The funds helped support physicians and medical students there. Six months ago, he purchased a house for the doctors to live in.

Mallach since the late 1970s has awarded a music scholarship to outstanding members of the Troy University band who excel in academics. Mallach graduated from the Alabama university in 1971 with a degree in business administration. He was band captain in 1970.

Going forward, Mallach has no plans except to “have fun” and work with clients who are “exciting” and “challenging.” As always, he is pondering what’s next.

As he puts it, “The world is going to change a lot in the next five years. Pharmaceuticals, technology — some of it’s going to be bad, a lot of it good. Are you investing according to change of the future or are you investing because of what’s already happened in the past? When it comes to money, a lot of people just aren’t flexible enough when it comes to change. You have to be nimble. As times change, as we move forward, the world is going to change exponentially. People need to have some type of method to anticipate change. It’s the future we need to be paying attention to.”