Ok I don't think this was supposed to be funny but when I read it, I had to chuckle for a few minutes to self.
Here is the link to Bespoke's full blog entry on the topic but essentially after Cummins Engine (CMI) dropped from $133 to $111, Citigroup upgraded the stock from sell to hold.
Sounds reasonable right? Stock falls a lot - gets a better valuation - you had a sell rating, you upgrade. Here is the kicker - the Citi analyst has had a SELL on the stock SINCE September 2005.
Stock price in September 2005? $43.74.
So this call would of cost you 202% from the $133 price before Cummins sold off (and it was higher than $133 in the previous week), and even as the stock tipped to mid $110s it would of cost you about 160%.
Oops.
We all make some bad calls from time to time, but the key is to eventually recognize the reality and change course. By eventually I mean within a few months.... not 2+ years. Ouch. Another "value add" analyst - you know the type - those who downgrade after a stock has fallen 40% from a bad earnings report or upgrade a stock up 150% from their sell/hold.
Bespoke shows the graphical story below... as they say, a picture is worth a thousand words
Long Cummins Engine in fund; no personal positions
4 comments:
Interesting! I have learnt the exact same thing many times. I dont really trust these schmucks anymore as I have lost money placing bets on someone else's homework. :). I'd rather repent loosing money on my own judgements.
I agree with your judgement and the post comments.
interestingly on the morning it dropped someone placed a pre-market get-me-the-hell-out now order to sell 5000 shares at $120.00 ($600,000 move). The previous close was $133, so they basically told wall st to open it lower. I think this was a careless & stupid move which defies good judgement & reason unless they had a bigger plan to move the stock lower in order to buy more cheaper.
institutions... can you really trust them?
/end rant
furthermore, cmi split at $140 several few months back, so if the price has doubled again since the split, it should be worth $280 (is that right) so thats 608% the analyst cost you. also analyst consensus have major swings, saw one company (sorry next few numbers arnt exacts) go from 25% rating to 96% rating after the price advanced 10%
It could be the entire chart is split adjusted though - not sure. Essentially analysts have about 90%+ buy ratings over the entire spectrum because essentially their firms want investment banking business in the future so they are "wink wink" guided not too be too harsh in their ratings. Hence it takes a lot to get an outright sell or even hold. This "wall" between investment banking and analysts was supposed to be strengthened after the late 90s when all these analysts were shown to be in bed with companies, and for a few years companies moved away from such a close relationship but now after we "forget" the past and the late 90s become a distant memory, the corporations are now bringing down this wall between the 2 parts of the organization again - in fact I just read an interesting article (did not keep the link, wish I did) about how its starting to revert back to the late 90s. Remember, regulation is bad, companies tell us they will regulate themselves, which they do for a few years until we stop watching them closely than they quietly go back to old ways.
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