Business Ideas

By BRENT KENDALL And JACOB GERSHMAN

WASHINGTON—The U.S. Supreme Court on Monday turned away a constitutional challenge to New York City’s decades-old rent regulations, refusing to take up the case of an Upper West Side landlord and his wife who argued that the government had violated their rights by forcing them to subsidize their tenants.

The high court refused without comment to hear the appeal of James and Jeanne Harmon, the owners of an Upper West Side brownstone. The couple sought to strike down the rules shielding three of their tenants—and about two million other New Yorkers—from market prices.

Lower courts had rejected the plaintiffs’ rent-control challenge. The case gained little attention until the Supreme Court in December requested that New York officials file written responses to the plaintiffs’ high-court appeal. That the court would signal any interest in taking a fresh look at a long-established law surprised legal experts on both sides. But the Harmons ultimately failed to persuade at least four justices to hear the case.

“Rent regulation in New York City has a long history, and the court properly left it to elected state and city officials to decide its future,” said Alan Krams, a senior counsel at the city’s law department.

The Harmons argued that the rent rules amounted to a government seizure of private property without just compensation, violating the Fifth Amendment. One of their longtime tenants, an executive recruiter, pays about $1,000 a month for a one-bedroom unit, while owning a weekend home in the Hamptons. The couple also contended that the long sustained “public emergency” underpinning the rent controls violated due process.

But the Harmons lacked allies in lower courts. “There was no break in the uniform judicial consensus against challenges to rent-control ordinances,” said libertarian legal scholar Richard Epstein, a New York University law professor, who said he was disappointed but not surprised by the court’s decision.

Though the odds were always long, it was a dispiriting day for Mr. Harmon, a former prosecutor who had nearly single-handedly brought the issue to the high court’s attention and re-invigorated a policy debate about the merits of insulating a third of the city’s housing stock from market forces. Mr. Harmon declined to be interviewed Monday, but issued a statement from his family.

“The Harmon family is disappointed in the Supreme Court’s decision,” he said. “We still believe that the Constitution does not allow the government to force us to take strangers into our home at our expense for life. Even our grandchildren have been barred from living with us. That is not our America.”

Assembly Speaker Sheldon Silver, a Manhattan Democrat, called the court’s decision “welcome relief” for tenants. Christine Quinn, the New York City Council Speaker said the high court’s refusal to hear the case was “consistent with longstanding precedent” and allows the city’s rent regulations to “proceed unfettered.”

The city’s rent regulations trace back to the post-World War I era, when a surge of returning troops and a lack of new construction created a housing shortage, prompting Albany to adopt an emergency rent law. The Rent Stabilization Law, the current system, has been on the books since 1969. Every few years, with authorization from Albany, the city has extended the law and re-declared a housing emergency, citing the city’s persistently low vacancy rate. In March, Mayor Michael Bloomberg and city lawmakers renewed the law for another three years.

Write to Brent Kendall at brent.kendall@dowjones.com and Jacob Gershman at jacob.gershman@wsj.com

Printed in The Wall Street Journal, page A17

This methodology for The Wall Street Journal’s annual Best on the Street Analysts Survey was used to identify the top analysts of 2011. FactSet Research Systems Inc. collected the data.

This year’s survey focuses on 44 industries thought to be of particular interest to investors. Within each industry, the survey seeks to identify the top three analysts. The measure used is stock-picking skill.

Every analyst, whether a well-known veteran at a major Wall Street securities firm or an eager unknown from a small regional firm, must meet the same requirements and is subject to the same standards. From the initial planning through each step leading to publication of the survey in May 2012, every effort has been made to ensure objectivity, accuracy and fairness.

Analyst Eligibility

To be eligible, analysts must follow stocks that trade on major exchanges in the U.S., though the analysts may be based in North America, Europe or Asia. Typically, they will have worked for the same firm throughout 2011. But analysts who switched firms during the year can qualify if they meet all of the basic requirements. (For purposes of evaluating the overall performance of the firms at which the analysts worked, the firm at which an analyst worked longest in 2011 will get the credit.)

Analysts can be eligible in as many industries as they meet the coverage requirements for. They generally are required to have covered at least five stocks in any of the survey’s 44 industry groupings to be eligible in that industry.

Typically, an analyst’s coverage within an industry must have included at least five stocks during any three quarters and at least four stocks in the remaining quarter. But in certain industries where analyst coverage was limited, the number of required companies may be lowered so that a reasonable number of analysts can be included.

Analysts must have some sort of buy, hold or sell recommendation on the stock during the calendar quarter. Recommendations are recorded using FactSet’s standardized five-tier rating scale. Recommendations from each firm are translated to the standardized scale according to the firm’s prior agreement with FactSet.

When it comes time to calculate final scores for the Survey, the recommendations are converted into a three-tier scale, a simple buy, hold or sell. All 1′s and 1.5′s are converted equally into the positive category (i.e., buy), 2′s are converted into the neutral category (i.e., hold), and 2.5′s and 3′s convert equally into the negative category (i.e., sell).

Returns for each recommendation change (for example, an initial buy recommendation or a downgrade from buy to hold) are calculated on the pricing date of the analyst’s report. This is usually the 4 p.m. Eastern time closing price the day before the change, except when the analyst’s report specifically mentions an earnings report that day, in which case the calculations began with the close on the day of the change.

Eligible Companies

To be counted in determining analysts’ eligibility and in evaluating their stock-picking performance, a stock must have been traded on the New York Stock Exchange, NYSE Amex or the Nasdaq Stock Market during 2011. In addition, it must have had a market value of at least $100 million at the start of 2011; American depositary receipts and initial public offerings launched at any point during the survey year and meeting these basic requirements are also included.

The 44 industry groups in this year’s survey were derived from the proprietary classification system used by Dow Jones Indexes. Dow Jones Indexes’ proprietary classification system comprises 10 industries, 19 supersectors, 41 sectors and, at the most granular level, 114 subsectors. Dow Jones Indexes calculates and distributes indexes that track each of these groupings.

Dow Jones Indexes licenses these indexes and others globally as the basis of financial products, including exchange-traded funds, futures and options contracts, mutual funds and variable annuities. Major indexes are published daily in The Wall Street Journal’s Money & Investing section and weekly in the Market Week section of Barron’s, and are disseminated via radio and television.

Further information about the proprietary classification system used by Dow Jones Indexes and Dow Jones Indexes can be found online at djindexes.com/dataservices/?go=sectorclassification and djindexes.com.

In some cases, such as the survey’s advertising and publishing category, sectors or subsectors have been combined. In other cases, subsectors may be divided. The semiconductors subsector was subdivided into semiconductors and semiconductor-equipment-manufacturing categories. Survey groups are subject to change if necessary for sufficient analyst coverage.

Performance Measurement

Analysts’ skill in picking stocks was measured using recommendation-performance scores. These scores were calculated on the basis of the estimated total return, including price changes and dividends, of each eligible stock an analyst covered in an industry.

For a stock rated a buy, the return was multiplied by 1; for a stock rated a hold, the return was multiplied by 0.

Analysts also get credit for being right about sell recommendations. For a stock rated a sell, the return was multiplied by minus 1. If a stock fell, the negative total return multiplied by the negative weighting will produce a positive performance score for the analyst; but if the stock rose, the negative weighting will yield a negative score for the analyst. The final performance score also reflects such factors as the number of stocks in an analyst’s “portfolio.”

If two or more analysts have identical scores, ties were broken on the basis of the number of eligible companies each analyst followed.

Data Collection

The recommendations on which the rankings are based typically were collected throughout the year by FactSet Research as part of its business of disseminating and analyzing brokerage-house research. As a result, the information was generally subject to the basic policies to which brokerage firms agree when they submit information to FactSet.

In the case of team coverage, for example, firms were asked to tell FactSet which individual analyst should get the credit.

Additional Information

The calculations for the survey were performed by FactSet Research Systems. Questions about the methodology and rankings should be directed to bestonthestreet_US@factset.com.

By SARAH E. NEEDLEMAN

Sylvester Chisom began paying a consultant last summer to blog on Twitter, post status updates on Facebook and run marketing campaigns on both sites for his auto-detailing business.

He thinks the service, which costs $450 a month, is worth it. “It’s just better having somebody else dedicated to thinking of stuff to put up,” says Mr. Chisom, co-owner of Showroom Shine Express Detailing LLC in St. Louis.

Some small-business owners, overwhelmed by the time commitment required of marketing their products and services via social media, are hiring consultants to lend a hand. But the price of such support can vary widely based on the extent of work involved, and many entrepreneurs with already meager resources for marketing and advertising may need to think carefully before taking on the extra cost.

The start-up 3 Green Angels, for example, charges clients a $400 fee to organize Twitter parties — real-time discussions on specific topics. Everywhere LLC, another specialty firm in Atlanta, charges clients up to $20,000 to arrange three streaming video press conferences led by popular bloggers.

Other agencies simply tack on social-media support as part of a package of advertising and public-relations services. Red Square Agency Inc., in Mobile, Ala., charges clients around $200 an hour, and ThinkInk LLC charges $10,000 to $20,000 a month for the integrated services.

Showroom Shine’s Mr. Chisom says he’s received several inquiries from potential customers who said they learned about his company through a recent promotion on Facebook. Revenue and traffic to his company’s Web site are up slightly from this time last month, he adds.

But Jonathan Zadok, co-owner of the Coffee Groundz LLC in Houston, says he wouldn’t pay another firm to blog on behalf of the four-year-old café.

“The idea with Twitter is that you get close to an immediate response,” he says. With an in-house person handling it, “there’s no middle man that has to go check with the company,” he says.

Mr. Zadok says last fall Coffee Groundz’s general manager, J.R. Cohen, set up profiles for the café on Twitter and Facebook. Customers started tweeting orders and special requests such as booth reservations, and in-store events promoted on the sites drew crowds three times as large as those previously advertised through signs and other traditional means.

Mr. Cohen, 31 years old, says he simultaneously posts blog entries on Twitter, Facebook and his employer’s Web site three times a day, often from his BlackBerry. He receives text-message and email alerts whenever messages are posted to Coffee Groundz’s feed so he can respond, if necessary, in a timely manner.

Mr. Cohen taught himself how to use Twitter and Facebook in about a month despite being someone who’s “not tech savvy at all,” he says. He estimates he devotes no more than 30 minutes a day to managing his employer’s presence on social media. “That’s really all you need,” he says.

Larry Chiagouris, professor of marketing at Lubin School of Business at Pace University, says it makes sense for some companies to pay for help to quickly learn social-media basics. But to use sites like Twitter and Facebook effectively, he says small firms typically need to be in control to show they are legitimate and sincere. “Unless a third party lives with you a long time, they can’t do that very well,” he says.

Some small-business owners say they are paying only for training and will eventually take full responsibility for managing their companies’ day-to-day presence on social media. Still, others say they need continuous support for handling certain tasks and promotions because they lack the necessary manpower and expertise.

Back of the House USA LLC, a St. Petersburg, Fla., provider of back-office support to solo entrepreneurs, falls into the latter category. Founder Erik Vonk says he and the firm’s 12 employees are getting “technical guidance” in using social media from consultants at Everywhere. But he adds that any opinions expressed on the sites “are ours.”

Back of the House has been paying Everywhere a monthly retainer since the spring and expects the social-media training to wrap up late next month. Afterward, Everywhere’s consultants will continue to help the firm take advantage of social media by organizing special promotions, monitoring what’s being said about the company and more.

The service is costing Back of the House between $5,000 and $15,000 a month (Mr. Vonk declined to be more specific).

So far Mr. Vonk says the investment is paying off. “I’m learning enormous amounts about how social media work, where to find the right software, how to search, what lingo to use, etc.,” he says.

Write to Sarah E. Needleman at sarah.needleman@wsj.com

Printed in The Wall Street Journal, page B5