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A snapshot of the BoomBustBlog
commentary.
According to this Bloomberg article, the boombustblog.com articles more than tripled
the performance of the best performing Wall Street analyst of the past year,
and soundly out-performed ALL
of the analyst and brokerages house recommendations - most of whom had deeply
negative returns and failed to beat the broad markets. To translate the numbers
from the analyzed banking sector (or any other % of stock price decrease above)
into a short sale result after commissions, multiply by a factor of about -1.9x.
I cover much more than banking stocks, which would have given these results a
much higher risk adjusted return if one were to keep score and run the
calculations, which I am not. Sourced from Bloomberg:
Best
Performances
The analysts who made investors the
most money were Charles
Peabody of New York-based Portales Partners LLC and Richard
Bove of Ladenburg Thalmann & Co. in Miami, Florida, whose ``sell''
ratings on Merrill, Morgan Stanley, Lehman and Goldman Sachs Group Inc.
produced profits of 47 percent and 18 percent, respectively, according to data
compiled by Bloomberg. Citigroup's Colin
Devine made 4.8 percent by rating Ameriprise Financial Inc., the only
brokerage stock he covers, ``sell'' before moving to ``hold'' in July.
``Ten years ago, the expectation was
that analysts would simply avoid the worst excesses,'' Bove said in an
interview. ``The idea was just to beat the benchmark. Today, analysts have got
to make you money in both up and down markets. You don't have any excuse.'' …
… Bove said other analysts may have
made money-losing recommendations because they based their reports on brokerage
earnings rather than examining risk in credit markets.
Losing Influence
Analysts lost influence after 10
securities firms paid $1.4 billion in 2003 to settle allegations that they used
tainted research to promote investment banking clients. Regulation FD, a
Securities and Exchange Commission rule implemented in 2000, prevents companies
from disclosing information to analysts that they don't tell the public. Merrill
ordered its stock advisers this month to boost ``underperform'' ratings to at
least 20 percent of the stocks they follow. Goldman Sachs had ``sells'' on 15
percent of the companies it covered as of April 1. Analyst ``sell''
recommendations across Wall Street are down from 11.1 percent in May 2003,
according to Bloomberg data.
``There's nothing you can glean from
them that's going to make you any money,'' said Jack
Ablin, who oversees $62 billion as chief investment officer at Harris
Private Bank in Chicago. ``Right now `Wall Street' and `unique research' is an
oxymoron. Unless they're able to do some kind of very unique research, I don't
see any of them coming up with an edge.''
Average total returns for investors who
followed the recommendations of analysts for stocks in the AMEX Securities Broker/Dealer
Index, measured from June 3, 2007, through June 3, 2008. Returns factored for
investors who bought on ``buy'' ratings, sold on ``hold'' and sold short on
``sell.'' Zero percent returns reflect analysts rating stocks ``hold'' for the designated
period.
