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

---

Is a SEP Plan Right For Your Business

A SEP is a special type of IRA. Under a... Read More

Options Made Easy and Investor Education - Simple Enough for a 10 yr Old Kid

How many of you out there think that the market... Read More

California Deparment of Corporations and Franchise Opportunities Law

What CA Needs To Do To Address Issues in FranchisingWe... Read More

Stock Market Leaders and Laggards

Leaders are stocks that breakout immediately when the market confirms... Read More

Justify Social Security ... Dont Save for Retirement

It is a common question when investors review their retirement... Read More

Success Trading: More Basic Terminology for New Traders

One important aspect of trading the markets is to understand... Read More

Find a Methodology and Minimize Investment Madness

There are many reasons to be investing these days, and... Read More

Super Rules, OK?

Do you rule your superannuation or does it rule you?It's... Read More

Chinas Great Missed Opportunity

While a U.S. Representative to the Asian Development Bank Executive... Read More

Buying Florida Investment Properties and Where Its Hot

Relaxing in Style: Florida Investment PropertiesIn Florida, relaxing in the... Read More

How to Invest Overseas - Intelligently!

In recent months, many advisors have talked a lot about... Read More

Stock Market Money Management Skills

Let's start by saying: You can't be afraid to take... Read More

What Age Should I Start Saving For Retirement?

Ask this question to 100 people and you will receive... Read More

The Cost of Green Eggs and Ham

Young readers know that March 4th is the birthday of... Read More

IF - The Wonders of Investing

If it seems... Read More

The Arrow-Debreu Contingent Claims Model of Investment

Throughout the discussion of speculation and stability, we emphasized that... Read More

Investing in New Zealand - Learn how to Find Unique Investment Opportunities

Investing in New Zealand might be much easier than investing... Read More

Overbought/Oversold

Has your broker ever told you that a stock is... Read More

Trading Expert Discovers Ways To Beat Stock Market Odds With Money Management

The first point to mastering money management is that you... Read More

Franchise Investing, Franchise Opportunities and Franchising Renewals

Have you considered buying a franchise instead of trying to... 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... Read More

Investing As A Sport?

I said last week that money doesn't generally buy happiness,... Read More

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

This column has previously discussed "picturing the future that we... Read More

Credit Scores = ROI Profits for Real Estate Investors

Strong credit saves real estate investors money on mortgage finance... Read More

Retire Dollar Smart

Jim Miller is a registered investment advisor. This means that... Read More

Day Traders and Swing Traders and Options? Maybe!

Typical day traders and swing traders look for stocks with... Read More

Evaluating A Money Manager

Scams and frauds are designed to take your money through... Read More

Using Divergences to Keep Out of Bad Trades

The American Football season just came to an end with... 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

Planning for Retirement

Almost without exception, people don't start planning for their retirement... Read More

Angel Investors: Who They Are & When Are They Appropriate

Angel investors are individuals who invest in emerging business ventures.... Read More

Selecting Rules for Investing and Trading

There are three important differences between investing and trading. Overlooking... Read More

Finding a Broker

"Hey Joe! I need help finding a broker. I notice... Read More