Jun

4

Some observations from the field based on my recent experience:

1) An analyst's ranking has everything to do with seniority and how well he knows a business or company, nothing to do with how well his recommendations have been doing.

2) The story you have to tell is more important than anything else. If you have a great buy without a story, forget about it.

3) Many investors seem to be looking for a 'trigger' or 'catalyst' that will re-value a company.

A quantitative study of stocks with a 'catalyst' or 'trigger' maybe could be done by counting how many times these words appear in analysts' research for a particular stock, to see if these stocks over- or underperformed. Wouldn't be surprised if stocks where investors have high hopes for a trigger (such as new regulation, spin-off or announcement of buyback) will have underperformed. I personally like stocks without any kind of triggers.


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  1. Gary Rogan on June 4, 2008 4:18 pm

    It’s best to ignore any conclusions that the analysts have. Their facts may be useful. This whole idea that if you tell a nice story about a stock or propose a mythical “trigger” that somehow makes the stock more valuable is crazy. Exciting stories are what bubbles are made of.

  2. James Miles on June 17, 2008 3:29 am

    Analyst ranking forms are filled in my junior members of buyside teams. Few things re taken less seriously. I have worked in both buy and sell side institutions, and saw equity salesmen filling in ranking forms for their clients, placing our analyst in third position, and then having the documents biked over for signature. Our Turkish equity analyst received a 2nd place All Asia Technology analyst ranking. As a fund manager, I voted for Citigroup when I meant Credit Suisse because I forgot an analyst I regarded well had changed house. In the UK Extel survey top ranked analysts in major sectors often reveive 20 out of fifty votes cast - equity sales desks speak to hundreds of investors.

    For ranking to make any sense, there should be league tables of how recommendations have performed, and forecast accuracy. Watch them run for the doors….

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