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It seems that in a world where aggregated content is king, earnings estimates are now officially part of the craze. Meet Estimize, a startup that allows anyone to put up their own estimates come earnings season.

Obviously this has been around for awhile in the form of "whisper numbers" the unofficial but widely relied on earnings numbers by which companies are judged. Apple may have a blowout corner but if it doesn't meet the whispers... well.. hope you owned puts. Surprising or otherwise, it seems the crowd over at estimate are pretty good at what they do...

In the first four months of 2012, the site's earnings forecasts for 160 reports were more accurate than those by Wall Street analysts 63 percent of the time. "We are able to put forth the guys who are actually the best analysts," says Drogen, "vs. the guys who are just the loudest or have the biggest names."

Obviously, this probably doesn't come as a surprise considering many of the people who sign up are professional analysts anyways. It does seem to be a continuation of a trend towards democratizing financial research and further minimizing the need to pay for sell side coverage (or at least wholly rely on it). What do you guys think? Could sell side analysts be going by the wayside? Do those of you currently in the industry scoff at the fact that aggregated opinions could possibly beat out all the hard work you put in?
http://www.businessweek.com/articles/2012-04-23/es...

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Comments (7)

  • KingEastwood's picture

    It isnt really surprising they are more accurate, it is simply statistics. The larger the sample size the more likely them mean is closer to the true value. Especially if a firm is only covered by like 2 wall street firms vs. 500 ppl on that site, then the effect is gonna b huge. Question of course is about the quality of each estimate submitted to the site and whether or not they simply took some research reports estimate and added a few cent.

  • In reply to KingEastwood
    Khansian's picture

    KingEastwood:
    It isnt really surprising they are more accurate, it is simply statistics. The larger the sample size the more likely them mean is closer to the true value. Especially if a firm is only covered by like 2 wall street firms vs. 500 ppl on that site, then the effect is gonna b huge. Question of course is about the quality of each estimate submitted to the site and whether or not they simply took some research reports estimate and added a few cent.

    But the sample is not unbiased. The site doesn't randomly call 1,000 people off of a list of phone numbers across the US and ask them for earnings estimates. 500 people self-selected and submitted their estimates. So what is surprising is that a large biased sample was more accurate than a small biased sample, though there is no reason (using simple statistics) it should be.

  • HumPiranha88's picture

    63% is pretty underwhelming and it's such a small sample, but yes, sell side research is going by the way side (at least as a paid service). There's a thread somewhere on here how ER downright plagerize from other banks. Someone still needs to talk to companies but that someone is becoming anyone.

  • In reply to HumPiranha88
    BTbanker's picture

    HumPiranha88:
    63% is pretty underwhelming and it's such a small sample, but yes, sell side research is going by the way side (at least as a paid service). There's a thread somewhere on here how ER downright plagerize from other banks. Someone still needs to talk to companies but that someone is becoming anyone.

    So is this the beginning of the end for ER?
  • In reply to Khansian
    iValueValue's picture

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