March 15 - The Analyst Rating Game
What really burns my beaver these days is when investment houses keep raising ratings and re-iterating positions every other day. The
way Securities and Exchange Commission Chairman Arthur Levitt talks about equities you would think he would do everything in his power to slow the mania, but in actuality he has done little but stamp a daytrading
report and wave his fist in the air at the psychotic equity gamblers, and has yet to even mention some of the free wheeling analyst ratings.
Biotech Genome Therapeutics Corp rose from $2 5/8 to over $75 3/8 in a short period
of time as it road the biotech craze. The stock is still at $32 after losing 20% yesterday. There is nothing wrong with some good old fashioned speculation in a free market but what complicates issues
is when seemingly professional investment houses are allowed to endorse insanity. M.H. Meyerson & Co started GENE off with a "buy" rating on Feb 24 and on March 8 they re-iterated their
position and raised the price target to $85 a share "to reflect strong market demand.". No joke, M.H. felt it neccessary to raise their target because the stock price rose and investors may
continue to crave biotech. There was no discussion about corporate results other than mounting losses and long term dreams. The question is, were is Mr.Levitt when this is happening. Is the man too
busy investigating 1 out of every 100 firms or speaking to the press to figure out the that the real criminals can be seen each morning before the bell rings spouted repetitious and self-serving corporate
ratings. The ratings game has become more about who is the craziest than who is right, and investors, like it or not, have to listen to this noise.
Remember Merrill Lynch last year when they rated
Coke their number 1 stock pick for 2000 based on what the stock has done over the last 5 years. After a hearty chuckle someone spoke out and told Merrill that Coke was a lame duck so they have not
re-iterated their stance (well only once) but no doubt soon will again. Coke is off almost 40% since Merrill found it to be a diamond in the ruff, and a recent report on February 7 from Brown Brothers Harriman
analyst Roy Burry which questioned 2000 earnings for Coke (a useful attribute of analysts is some of the reports) still hasn't swayed Merrill's stance. Isn't amazing how stocks can fall like bricks with no
sell ratings on them? Even the slightly bearish Roy Burry who sees Coke earning $1.38 a share this year didn't have the guts to downgrade Coke past his neutral rating. What good is he if he doesn't listen to his
own data? ($1.60 is high estimate for Coke in 2000)
How about some financial stocks. These five companies (AXP, CMB, COF, KRB, C) on November 11 had 120 major house rankings, they were as follows.
92 Buys - 19 Holds - 3 Sells -- Since November 11 each stock has slid lower and many quite significantly. Only 3 out of 120 analysts is right and we have to listen to most of the other 117
like clockwork re-iterate their stance. There has been zero sell re-iterations. Doesn't this seem a tad strange? In the most obvious case of "who is the craziest" last year, JP
Morgan started C off with a strong buy but only a day after it capped a 20+% rally. The stock is obviously down since then after the new bank bill rally faded. Was JPM's rash choice made to allow some key
top dogs the chance to sell with the injected momentum? Probably. Nice going JPM, its almost time for the re-iteration isn't it?
Solution Why not declare the first day of every month analysts day. Make it the
one day that houses can re-iterate, scream and holler new price targets all the day long... At least this way, inside a world were investors are supposedly becoming more savvy due to easy access to
information, we won't have to listen to the constant squabbles of those who profit from selling information we all knew was coming anyway.
Life Of A Bull Market Analyst: "UPGRADE, UPGRADE, RE-ITERATION,.. STRONGBUY!...what's that?....an earnings warning while I was out at lunch?...DOWNGRADE, DOWNGRADE!.....Hold."
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