- 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
Buy and Sell Opinions Are Usually Overstated
Analysts cheerlead their Buys and disparage the Sells. The Street tends to overdo its enthusiasm on stocks being fervently recommended, effectively pounding the table to entice investors to amass major positions. This ardor is self-fulfilling. Research analysts are overconfident. The more proficient analysts that are in this endeavor, the higher the stock climbs, and the better our call looks. We promote these favored ideas way out of proportion to the reality. As a result, the stocks can ascend to artificially high, unsustainable levels. The opposite is true for infrequent Sell opinions. We exaggerate the negatives, diss the company at every opportunity, and basically pile on an already troubled, depressed stock. This is to help push the shares lower and make our negative view all the more correct. In both situations, analysts overstate their positions. Stocks swing in both directions far beyond what is warranted, because analysts overstress their stances. Investors should sell when analysts get overly enthusiastic and likewise avoid unloading (maybe even buy) when an analyst has derided a company too long.