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

---

Quit and Retire Three Years Earlier!

For most people, there is a direct correlation between how... Read More

Retirement or Financial Freedom?

In the past most people never retired. They died. The... Read More

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

I love to collect quotes as they concisely promote a... Read More

Short Selling for Investors

Shorts. Let's see. If there are shorts there must be... Read More

The Real Cost of a Bad Habit

What is the value of a good habit? Think of... Read More

CYA

You all know what CYA stands for. Of course, Cover... Read More

Emotions: A Traders Worst Enemy; Get Rid of Fear and Greed - Youll be Glad You Did

You hear it over and over and over in books,... Read More

Everybody Wants to Know How to Invest

Those unfamiliar with the process of making and managing investments... Read More

Advice for International Investors on How to Safeguard Their Profits

What are the risks?Today, investors are increasingly turning to global... Read More

Buying a Home - Your BIGGEST Investment

This column has often focused on intangible investments like stocks... Read More

Is Starting A Business For Me? What To Consider Before Starting A Business

Do you have the right temperament?Starting a small business is... Read More

Beta Factors: How They Can Be Used In The Current Situation

Ever since the turn of the century, world stock markets... Read More

Options Education : Opinion versus Fact!

The most basic aspect of trading is learning to differentiate... Read More

Almost Anyone Can Open A Roth IRA!

The Roth is kind of weird until you get used... Read More

Creating Wealth by Gearing Up

Gearing is where you borrow money to invest. As already... Read More

Building The Foundation For Wealth

You wouldn't build your home on anything less than a... Read More

The Switzerland of Asia Shines

In many respects, Singapore is the Switzerland of Asia.Begun in... Read More

Success Trading: Yet More Basic Terminology for New Traders

In this day and age of online brokers for virtually... Read More

Penny Stock Investing

The Nature of Penny StocksFor anyone new to investing in... Read More

How To Create Wealth In The Stock Market

First and foremost, an opportunistic strategy for creating wealth in... Read More

Annuity Help

Many people today are looking for annuity help. The biggest... Read More

Chinas Inscrutable Currency Strategy

Purpose: Expose Opportunities for Smart InvestorsThe move by China's central... Read More

The Differences Betweeen the Wealthy and Everyone Else

I recently received an e-mail from a young lady who... Read More

Stock Market Retirement Investment Plan

For a successful retirement investment plan to work in the... Read More

The Convertible Craze Brightens The Future Of Equities

Convertibles are stealing the show with their safe investment image... Read More

Investing Pointers for Neophyte Investors

If you know next to nothing, how do you go... Read More

Investing Psychology Today Requires All Traders to Awaken Their Speculator Minds

Stock trading strategies are as rampant today, as they were... Read More

The Economys Greatest Depression Downturn Ever Is Now Just A Few Years Away

What really controls the economy? Forget interest rates, forget deficits,... Read More

It?s Never too Early to Start Investing!

Remember the old saying, "never too late to start"? Well,... Read More

Retirement Is A Scary Proposition If Youre Without A Plan, And Running Out Of Time

Of the 75 million baby boomers nearing retirement today, many... Read More

Gold and Silver Maple Leafs Get New Packaging

Gold Maple Leafs and Silver Maple Leafs are receiving packaging... Read More

Why You Need To Buy and Sell Gold Coins (Part 3)

Putting Rare Coin Market Cycles to Work for You...Until recently... Read More

Global Markets: A Window on the World Economy

Expectations drive the market. Every stock price is driven by... Read More