Do you ever follow City analyst share recommendations?
Discussion
Well they do seem to be listened to.
After all, the expert analysts must be well educated and clever to even get a City job, and will have close connections to what is really going on. They attend meetings with company directors to see the 'sharp end', so should know far more than private investors. Their office buildings look alarmingly plush and expensive.
Do you ever look back to see how accurate their forecasts were, and therefore wonder whether their clients would have prospered (or lost) from the advice?
I never forecast the future in respect of any financial, or economic matters. It all tends to be just too unpredictable, so best to keep quiet.
Quite fun therefore to spot the occasional expert analyst howler, where clients would have lost money, either through buying, or failing to buy.
7th December 2021 - Hargreaves Lansdown gave an opinion on British American Tobacco.
'A valuation of 7.5 times future earnings is significantly below its longer-term average. We suspect the threat of increased regulation and the ever-increasing number of investors seeking ethical investments is behind the valuation fall. They're not trends that are likely to reverse any time soon, and that makes a return to historic valuation levels unlikely['.
Sensible comments, but they couldn't resist putting their 'head above the parapet', with unlikely to reverse any time soon.
Within just 26 trading days, the share price rose 20% !
November 2019 - HSBC gave an opinion on Aston Martin Global Holdings.
HSBC advised investors to buy Aston Martin shares. The firm said, the Bond movie, No Time to Die, should give sales a lift in the key market of China.
Just 12 months later and prior to the pandemic arriving, Aston Martin was in a desperate state. Share price on the floor and more capital needed just to keep going.
Aston Martin had given a clue one week earlier, when it warned that demand for its least pricey model, the Aston Martin Vantage, remains below its original targets.
Perhaps the HSBC analyst did not follow the Pistonheads forum, otherwise he/she would have known that very few of the existing loyal customers of Aston Martin, showed any interest in upgrading to the replacement Vantage model. Prior to that, existing customers had been a significant proportion of the sports car buyers.
A bad loss there for any HSBC clients who acted upon the advice they were given.
Have you seen any howlers, or indeed any advice which turned out to be very wise words ?
Edited by Jon39 on Monday 17th January 18:41
Jon39 said:
Well they do seem to be listened to.
After all, the expert analysts must be well educated and clever to even get a City job, and will have close connections to what is really going on. They attend meetings with company directors to see the 'sharp end', so should know far more than private investors. Their office buildings look alarmingly plush and expensive.
https://ofdollarsanddata.com/medallion-fund/
"What’s even more intriguing about the Medallion Fund’s historic run is that the people who produced it knew next to nothing about business and individual companies. "
That said, the talking heads can sometimes be entertaining.
https://www.youtube.com/watch?v=rOVXh4xM-Ww
You will have good and bad analysts, some last in the industry and make solid calls, others wither away or move onto doing something else. I think it is definitely useful to read the analyst reports if you can get hold of them, but as with most things in life, it really pays to do your own research.
Problem is some of these guys can be quite theoretical and Excel model driven and they might not fully understand or appreciate some of the more obscure risks which could cause a share price to really move up or down.
Some guys are great and make good calls, others are more reactionary to what happens with the stock price and sort of tell you what's happened, once it has happened, which is of limited use.
Some of the best performing funds in the world are quantitative. They don't take meetings, they don't look at P&L or balance sheet numbers, they just look at trading patterns, price and volumes.
Problem is some of these guys can be quite theoretical and Excel model driven and they might not fully understand or appreciate some of the more obscure risks which could cause a share price to really move up or down.
Some guys are great and make good calls, others are more reactionary to what happens with the stock price and sort of tell you what's happened, once it has happened, which is of limited use.
Some of the best performing funds in the world are quantitative. They don't take meetings, they don't look at P&L or balance sheet numbers, they just look at trading patterns, price and volumes.
sideways sid said:
Look at how many buy recommendations there are versus sell recommendations.
Does that tell you anything about the impartiality of the analyst community?
Everything but a buy recommendation really means sell.Does that tell you anything about the impartiality of the analyst community?
I see it rather like no means maybe, maybe means yes, yes means.....
Jon39 said:
Well they do seem to be listened to.
After all, the expert analysts must be well educated and clever to even get a City job, and will have close connections to what is really going on. They attend meetings with company directors to see the 'sharp end', so should know far more than private investors. Their office buildings look alarmingly plush and expensive.
Do you ever look back to see how accurate their forecasts were, and therefore wonder whether their clients would have prospered (or lost) from the advice?
I never forecast the future in respect of any financial, or economic matters. It all tends to be just too unpredictable, so best to keep quiet.
Quite fun therefore to spot the occasional expert analyst howler, where clients would have lost money, either through buying, or failing to buy.
7th December 2021 - Hargreaves Lansdown gave an opinion on British American Tobacco.
'A valuation of 7.5 times future earnings is significantly below its longer-term average. We suspect the threat of increased regulation and the ever-increasing number of investors seeking ethical investments is behind the valuation fall. They're not trends that are likely to reverse any time soon, and that makes a return to historic valuation levels unlikely['.
Sensible comments, but they couldn't resist putting their 'head above the parapet', with unlikely to reverse any time soon.
Within just 26 trading days, the share price rose 20% !
November 2019 - HSBC gave an opinion on Aston Martin Global Holdings.
HSBC advised investors to buy Aston Martin shares. The firm said, the Bond movie, No Time to Die, should give sales a lift in the key market of China.
Just 12 months later and prior to the pandemic arriving, Aston Martin was in a desperate state. Share price on the floor and more capital needed just to keep going.
Aston Martin had given a clue one week earlier, when it warned that demand for its least pricey model, the Aston Martin Vantage, remains below its original targets.
Perhaps the HSBC analyst did not follow the Pistonheads forum, otherwise he/she would have known that very few of the existing loyal customers of Aston Martin, showed any interest in upgrading to the replacement Vantage model. Prior to that, existing customers had been a significant proportion of the sports car buyers.
A bad loss there for any HSBC clients who acted upon the advice they were given.
Have you seen any howlers, or indeed any advice which turned out to be very wise words ?
Edited by Jon39 on Monday 17th January 18:41
The number of genuine equity analysts has been falling for years. In many cases the ones retained are done so just to add value to the core service being sold. Kind of, buy our clearing service and we'll chuck in a supply of bogroll that you can chuck on to your end clients and look like great guys.
At the other end they are just door to door double glazing salesmen in waiting. Just oiks spewing out tripe at boiler rooms seeking to mug off retail punters.
The hard bit is knowing who's who. A bit like walking into a suburban pub. You can spot the obvious perv, the alki and the 'still lives with mother' but the others are harder to read. Most will be normals but you know that in amongst them are the other wronguns.
Are there any basic rules? I think common sense and intelligence plays a role. What's the stock they're pitching and what's the size of the house they're pitching from etc.
Of Goldmans are telling you to buy then the party's over and they're selling out. If the broker is named after a fancy London street then they have pumped the price up and are flogging them important client stock to retail mugs. If it's a brokerage named with a made up word then they've just made up a story structured around buzzwords for search engines. In the middle is the good stuff, written by smart people and factually correct. But their work is irrelevant because the underlying stock is basically going to do whatever it wants regardless of what someone writes out it.
sideways sid said:
Look at how many buy recommendations there are versus sell recommendations.
Does that tell you anything about the impartiality of the analyst community?
'Cos negative research can be detrimental to your job and existing or future client relation! Does that tell you anything about the impartiality of the analyst community?
Going back a few years from my memory bank (spent near 3 decades in the sell side), and I recollect 2 old stories:
1- an analyst issued a negative research note titled "Can't Recommend A Purchase" on the Mirror Group which annoyed a certain Mr Robert Maxwell. He was fired. (see below for the only Internet link I can find on this subject).
https://books.google.co.uk/books?id=R8CqGDfbsqMC&a...
2- Mr Terry Smith was Head of Research in my firm at the time. He didn't write a research piece, but a whole book ("Accounting for Growth") exposing the dodgy accounting methods adopted by certain corporates (including internal clients! ). He was fired.
mike74 said:
Maybe I'm just cynical but I find it hard to believe that any analyst is genuinely impartial with no skin in the game, whether they're offering buy or sell recommendations they're just either ramping or de-ramping for their own or their associates benefit.
On a quality stock they'd have no power. They may be aligned with a house position but may not be. If you're talking about the world of AIM then best to assume all facets are hooky and best left to gamblers. Aston Martin Global Holdings
A 2021 forecast.
Citigroup - Reiterated Rating - Buy - 2,900 pence -
Best of luck with that one mate.
You need to study the Company's 108 years of financial history. All the clues are there.
Mind you, how wonderful for a business to struggle along for a century, without ever making any worthwhile profits.
Is that an all-time business record?
A credit to the passion of so many rescuers, and a delight for so many others.
From the tail end of last year
https://www.thestreet.com/streaming/nflx/netflix-s...
"Of all 31 ratings on NFLX, 24 analysts label the stock a buy, four indicate you should hold, and three recommend selling."
Currently down 41% YTD.
https://www.thestreet.com/streaming/nflx/netflix-s...
"Of all 31 ratings on NFLX, 24 analysts label the stock a buy, four indicate you should hold, and three recommend selling."
Currently down 41% YTD.
Derek Chevalier said:
From the tail end of last year
https://www.thestreet.com/streaming/nflx/netflix-s...
"Of all 31 ratings on NFLX, 24 analysts label the stock a buy, four indicate you should hold, and three recommend selling."
Currently down 41% YTD.
https://www.thestreet.com/streaming/nflx/netflix-s...
"Of all 31 ratings on NFLX, 24 analysts label the stock a buy, four indicate you should hold, and three recommend selling."
Currently down 41% YTD.
You have to laugh, although not those who acted upon the recommendations.
24 buy recommendations, so that might have produced some worthwhile transaction fee income.
You do wonder how these jokers can sleep at night, or even have the gall to accept their salary.
There is a lady in a tent on Blackpool beach. Well not now, she has time off during the winter.
With the help of a glass globe and a hanky, she can achieve more accurate results than many City analysts.
Derek Chevalier said:
From the tail end of last year
https://www.thestreet.com/streaming/nflx/netflix-s...
"Of all 31 ratings on NFLX, 24 analysts label the stock a buy, four indicate you should hold, and three recommend selling."
Currently down 41% YTD.
Even at the level of stock analysts there will be herd mentality showing through.https://www.thestreet.com/streaming/nflx/netflix-s...
"Of all 31 ratings on NFLX, 24 analysts label the stock a buy, four indicate you should hold, and three recommend selling."
Currently down 41% YTD.
I think a lot of stock stuff is self-fulfilling prophecy though.
Chart tea leaf readers, HFTs and algos scraping trend data, social media, etc… the ebb and flow of the sentiment is somewhat baked in through pre-conceptions.
Tye Green said:
if some analyst actually had any useful info regarding a particular stock he'd borrow some money and buy it or short it. can't see any reason he'd spread the news?
ask yourself who is paying the wages of the bloke thats spreading the news.
Analyst: Buys shares of Company Xask yourself who is paying the wages of the bloke thats spreading the news.
Analyst: Company X is a great company, blah blah blah, BUY!
Avid followers: Buy shares -> price goes up
Analyst: Sells shares, makes bank, happy days
Share price tanks when everyone else realises it isn't that great.
Derek Chevalier said:
From the tail end of last year
https://www.thestreet.com/streaming/nflx/netflix-s...
"Of all 31 ratings on NFLX, 24 analysts label the stock a buy, four indicate you should hold, and three recommend selling."
Currently down 41% YTD.
It's that time of year againhttps://www.thestreet.com/streaming/nflx/netflix-s...
"Of all 31 ratings on NFLX, 24 analysts label the stock a buy, four indicate you should hold, and three recommend selling."
Currently down 41% YTD.
Our analysts say:
https://www.hollywoodreporter.com/business/busines...
"Overall, the Cowen expert “slightly reduced our sub forecast,” as a result of which he cut his stock price target by $10 to $590. He kept his rating at “outperform,” though."
"He added: “Our target declines to $640 from $650 driven by lower estimates, largely owing to the removal of Russia from our model.”"
"However, Wells Fargo’s Steven Cahall, who has an “overweight” rating and $600 price target on Netflix,"
The market says:
https://www.reuters.com/technology/netflix-subscri...
"Netflix subscribers fall for first time in a decade, shares plunge 23%"
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