Analysts should report what companies tell them!
Analysts should report better on what companies tell them. Then, seperately draw their own views and their own conclusions.
The problem often starts with broker analysts. These visit select companies of their chosing, mostly large caps, then too often tell management what they think they can or can"t do. Later, again to often, do not report fairly on what management explained about their business to these analyst, in other words on what these company insiders think they can do. (I am not even talking about broker conflicts of interest here, as this is another potential abusive trap to investors).
Many analysts, here as I supose everywhere, too often think they understand all businesses better and so are in a superior position to give the company free advise, or guide them what they think is possible. They so inject their own opinions in a business they often in fact know little about, because for the most part they have no real life experience in that industry. While there are exceptions to this, most analyst should report more on what companies tell them and not play the experts or the filters. Or worse, selectively report at all what the company stated in the interview.
Look at Ticon as just one example, over a year ago this firm said they would establish a property fund and so book a huge capital gain. Yet most all analysts said "no you can"t do this.."it won"t work", or, simply "we don"t believe it", and fewest if any so advocated a buy on this stock at a price of the time at between 6-8. I here have old broker reports, published at the time, mentioning little to nothing about the new property fund. Now trading as TFUND (10), and as as stated to my members months ago, my clear favorite in the sector.
These select acclaimed "masters of the universe" analysts, often with their CFA’s, just declared "Ticon can"t do this" and so put a hold or sell rating on that stock. Now that its price doubled and that they *did do this*, Ticon is on their buy list. This example is not so untypical as it happens more oftent then we think. After Ticon established their first property fund successfully in May of 2005, some broker reports came out stating they won"t be able to do a second fund, after they first stated they probably can"t do the first. Why can"t analysts just report what listed companies tell them, even if they feel they must state their own view that its risksy.
This sort of regular shortcoming, in addition to the potential conflicts of interest, is precisely the reason why we need professional others whom can freely express their opinions, without some "powers at hand" to dictate otherwise. The question then is, who are these others?
"Others" with no experience, training, or professional background might well do some harm, by being seriously mistaken or flawed about something they understand little about. But in practice few would write a credible viewpoint on a subject they know little about -and if they did, probably would not give their true name (making it suspect from the start). More likely give away the lack of understanding just in the way and form they wrote about it. Nothing let’s "the cat out of the bag" faster then a person writing about something they have no real understanding about. These have no background, no credentials, no track record, and often no real name or address..hence no credibility. Only the most gullable & silly would pay attention.
Are these occasional potential abuses as bad as the analysts whom run around town telling companies what they can or can"t do…or just as bad, not fairly reporting in their company research what was stated by senior management. Or possibly having the research director then just burry the report for other reasons, like an editor could do to a newstory. Are analyst or research directors then editors, or reporters of investment merit?
There are many professionals in business/industry and in the investment business whom have a better understanding of companies then most or all these analysts. They are a quit smart silent group whose insights we should value and treasure -and allow to be expressed. The day these voices are no longer permitted to express their own viewpoints freely, is the day I will walk away from believing stocks are a good overall investment.
Best Regards,
Paul A. Renaud.
