Monday, March 31, 2008

Is Analyst Research useless?

Despite reforms after the 1999 bubble, most Wall Street research analysts are still simply “talking the book” for their firms. The so-called “Chinese Wall” between research and investment in most of the firms is nearly worthless.

Still the community of naïve investors appears to eat up every upgrade and downgrade that rolls off the street. Many of the herd are greatly concerned with the average analyst rating for a stock, not recognizing that these figures have nearly no correlation with stock pricing, or at best are a lagging indicator.

Sophisticated investors totally ignore Wall Street analyst ratings and perform their own research. This serves as their edge on the market. The only factor these investors hunt for are the number of analysts covering a stock, less is better.

The press is finally recognizing that most Wall Street research does not hold water, and the recent bear market has brought forward a slew of articles questioning if analyst ratings have any value whatsoever.

Worthless Wall Street Research