Have Analysts Gotten Honest?

It caught my attention when I heard an analyst on a popular financial news program tell investors to sell a stock because too many analysts liked the company, citing the fact that there were no sell ratings.

It seemed perfectly logical to me that analysts wouldn't be telling investors to sell 3M (MMM), which has one of the most consistent positive earnings records in the history of the stock markets. But being suspicious of conflicts of interest between brokerage firms and analysts I decided to do a bit of fact checking anyway.

While the stock did not have any sell ratings at the time of writing, there were quite a few hold ratings. Now I feel compelled to diverge here and say that the hold rating seems quite illogical to me. If a stock is good enough to hold it's good enough to buy, and vice versa if you wouldn't want to buy it then you shouldn't want to hold on to it either.

As it turns out, the average analyst rating for 3M was only slightly and insignificantly better than the average for all stocks in the Dow Jones Industrial Average, of which the company is a component.

But what was most interesting about the ratings on Dow components was that, despite numerous and serious legal problems, AIG (AIG) was tied with General Electric (GE) and Du Pont (DD) for the third best rating, only bested by Citigroup (C) and Microsoft (MSFT). AIG was actually more highly recommended by analysts than J.P. Morgan Chase's (JPM) and American Express (AXP).

This didn't do much for my confidence in analyst ratings.

So I dug a little deeper looking at the more statistically significant S&P 500. What I found was that companies in the index with the worst revenue performance did actually carry more sell ratings than companies with the best performance.

At least analysts were using the sell rating, something they seldom did in the past.

There was, however, a significant bias towards the neutral 'Hold' rating for all stocks indicating reluctance on the part of analysts to commit to buy and sell recommendations.

Mark Mahorney is a freelance financial writer for hire.

Mark Mahorney
MarketSpectator.com
BlogginWallStreet.com
MarketBlog.com

---

Profitability And Stock Turn Rate

The inventory of the typical store represents the largest single element of its total assets. The sale of goods from this inventory is the merchant's chief source of operating profit. Thus, the way... Read More

Introduction To FOREX

The Foreign Exchange Market, better known as FOREX, is a worldwide market for buying and selling currencies. It handles a huge volume of transactions 24 hours a day, 5 days a week. Daily... Read More

The Biggest Oil Opportunity in the World ? And How You Can Profit From It

Where is the second biggest deposit of oil reserves in the world?In the oil sands region of Alberta, Canada. Oil sands are a thick, viscid mixture of bitumen, sand, clay, and water. Alberta's... Read More

July 2005: Hurricane Forecasts for Weather Traders

Tropical Storm Arlene formed as a tropical depression on June 8, 2005 near 83 West Longitude and 17 North Latitude. Although Dr. Bill Gray's updated hurricane forecast for 2005 calls for 15 named... Read More

Just what is Arbitrage Investment?

In the simplest of terms, Arbitrage means to exploit price differential.Usually it meant looking at differing sources of an investment, and if there was a price difference between Source A and Source B... Read More

Day Traders and Swing Traders and Options? Maybe!

Typical day traders and swing traders look for stocks with quick, short term movements, and are not in the business of holding positions overnight let alone a week or two. So the use... Read More

Bankers in Denial

Denial is a ubiquitous psychological defense mechanism. It involves the repression of bad news, unpleasant information, and anxiety-inducing experiences. Judging by the German press, the country is in a state of denial regarding... Read More

Discipline in Trading and Investing

The one thing I can think of that most affects both trading and investing has to be self-discipline.Being disciplined is fully 50% of the job of trading or of investing. I don't care... Read More

How to Use Annual Report

There are many steps in calculating the fair value of a company. However, before we even do that, it is imperative to know how a company earns its profit. Does it do that... Read More

How to Calculate the Value of Your U.S. Savings Bonds

If you're like many Americans over the age of 55, you've probably had money taken out of your paychecks for years and years in order to purchase U. S. savings bonds. Those bonds... Read More

Trading For A Living - Part 2

In part 1 of this article I started to look at the financial implications of giving up the day job to instead start trading full time for a living. There are more than... Read More

Rolling your 401k: Contributory IRA vs. Rollover IRA

In an ideal world you would start your working career with a great company in your early 20s, steadily climb the corporate ladder, retire at age 65, and draw a sufficient income from... Read More

Do You Need A Financial Planner?

No matter how much money you make, it pays to keep on top of money coming in and going out. Even if you do a good job of that, there are important times... Read More

How Eating Bitumen Made Me a Better Stock Trader

Stock market trading is a fascinating activity.There are so many layers to it. And so many paths that you can go down.Soon after we first got interested in the stock market I became... Read More

Love The Thrill of Risk? Invest in an Annuity!

With the stock market in steep decline, people are looking for safe places to invest their savings. Many banks and investment companies are pushing annuities. Annuities offer a higher interest rate than CD's,... Read More

Dont Catch a Falling Knife

One of the most common mistakes made by inexperienced investors is trying to "catch a falling knife". This is the phrase used to describe the habit of buying stocks that are in "freefall",... Read More

Wit and Wisdom on Money, Wall Street and Success - Part #1

I love to collect quotes as they concisely promote a philosophy which is readily understandable.In my 25+ years of investing I have collected hundreds of quotes related to Wisdom, Wall Street and Success.... Read More

Time is Money and We Are Running Out of Both!

One of the fundamental principles of finance is the concept that $1 today is more valuable than $1 a year from now.Making adjustments for inflation, the dollar will buy less goods and services... Read More

Exchange Traded Funds

They call 'em ETFs.There are hundreds of them.The mutual funds don't want you to find out about them.Why?Because they beat the socks off mutual funds in so many categories. The expense ratios of... Read More

Choosing A Financial Advisor

With so many financial advisors trying to woo you with their qualifications and experience, how do find one you can trust your finances with? 'Trust' is the keyword here, as you will depend... Read More

How to Choose the Right Share Class

You'll want to opt for the no-load or institutional share class instead. If you're a no-load investor who is determined to buy a fund that's primarily broker-sold, go through a supermarket and opt... Read More

Why Do You Want to Become a Online Trader?

Motivational guru Tony Robbins teaches that the reason for doing something rates much higher than the methods you use to get the job done. In order to make your goal REAL, you need... Read More

Getting Started In Investing

Are you ready to open your pathway to financial independence?Well you should be. The sooner the better. But, how do you get started?There is so much to know about investing and the truth... Read More

Why have Investment Plans for the Stock Market

If you do not have an investment plan in the stock market you are subject to impulses, urges, hunches, premonitions, strong feelings, greed, panic, fear, indecision, and just plain foolishness. In my opinion,... Read More

Delist My Corporation Please

It use to be said that once a company was de-listed from the NASDAQ it was the kiss of death, not so any more. With Sarbanes Oxley and all the insane reporting requirements... Read More

Guru Focused: Robert Olstein?s Short Sells

While it is rather rare that value gurus sell stocks short, Robert Olstein has been selling short in his Financial Alert Fund. The accountant-turned fund manager spots values by looking behind the numbers.... Read More

Critical Investors Business Daily Responsibilities - If not Followed Could Cost You Millions!

When thinking about the investors business daily responsibilities in today’s market environment, the best remedy for this situation is for you to get more involved in your own investing decisions.The problem is that... Read More

Creating a Financial Future - Putting Your Plan Into Action Part 1

This column has previously discussed "picturing the future that we desire", and outlining a plan to achieve it. We mentioned that the plan must include goal-setting, measurement, and implementation. That implementation is this... Read More

Franchise Investing, Franchise Opportunities and Franchising Renewals

Have you considered buying a franchise instead of trying to start a business from scratch. Many franchise agreements are renewed every five or ten years, automatically. If you do not want to renew... Read More