- What Is a Wall Street Securities Analyst?
- Wall Street Analysts Are Bad at Stock Picking
- Opinion Rating Systems Are Misleading
- Research Never Contains an Analyst's Complete Viewpoint
- Wall Street Has a Congenitally Favorable Bias
- Downgrades Are Anguishing, Arduous, and Rare
- Most Downgrades Are Late; the Stock Price Has Already Fallen
- Buy and Sell Opinions Are Usually Overstated
- Wall Street Has a Big Company Bias
- Brokerage Emphasis Lists Are Not Credible
- Stock Price Targets Are Specious
- The Street Orientation Is Extremely Short-Term
- Analysts Miss Titanic Secular Shifts
- Street Research Is Unoriginal; Opinions Conform
- Analyst Research Is Valuable for Background Understanding
- A Lone Wolf Analyst with a Unique Opinion Is Enlightening
- The Best Research Is Done by Individuals or Small Teams
- Overconfident Analysts Exhibiting Too Much Flair Are All Show
This chapter is from the book
This chapter is from the book
This chapter is from the book
The Best Research Is Done by Individuals or Small Teams
Individuals and small teams concentrate on a modest range of stocks or a limited sector. They do not attempt to cover the waterfront, but rather do focused research on a select number of companies. Small teams tend to emphasize quality research rather than quantity. The tendency with big research teams is to generate a deep level of detail, extensive earnings models, the nth degree of information, and a plethora of reports. It is overkill. Investors, the sales force, traders, and all the other audiences are unable to absorb this amount of trivia. With big teams analysts get sidetracked, bogged down in all the fine points.
Although senior analysts should be freed up to ponder bigger picture trends, instead they spend most of their time marketing, meeting, and calling on institutional clients. Senior analysts are distracted by all the oversight, review, coordination, and supervision. Junior, inexperienced analysts are conducting the research. Analysis is a mile wide and an inch deep. Small groups or individual analysts avoid these pitfalls and their research is superior.
Analysts might be error prone if they are not concentrating on a narrow industry segment. During my eight-year span at Salomon Brothers in the mid-1980s, I covered the entire computer industry. Instead of specializing, I was attempting too broad a reach. I did not think to specialize in computer services and software until three years after the establishment of a separate category for that sector in the preeminent annual Institutional Investor (II) analyst poll. After I made the shift, I immediately vaulted to a #1 ranking and retained II All-America team status for 19 straight years.