Stock Analysts Tell All! - Total Return - WSJ

So.....who can you trust in this world today?


Earlier this year, accounting professors Laurence Brown of Temple University, Andrew Call of the University of Georgia, Michael Clement of the University of Texas at Austin and Nathan Sharp of Texas A&M University surveyed 365 sell-side analysts and did 18 direct interviews, detailing how analysts do their work and view their roles. They made the results anonymous to ensure confidentiality.
Their study draws some striking conclusions:

• Asked who was their most important group of clients, 81.5% of analysts picked “hedge funds.” Only 13.3% chose “retail brokerage clients.”
• Fewer than a quarter of the analysts said that the “accuracy and timeliness” of their earnings forecasts were very important to their compensation. Only 35% said that the profitability of their stock recommendations was crucial in determining how much they earned. Their “standing in analyst rankings or broker votes,” however – essentially how they score in media surveys, “broker votes” and other annual popularity contests among clients – was very important in shaping compensation for 67% of the analysts.

.... Any investor – especially any individual investor – still clinging to the delusion that Wall Street analysts provide an independent, objective and skeptical perspective on companies needs to read this study.




Stock Analysts Tell All! - Total Return - WSJ