To WSO analysts, what's your take on this:
The Shocking Truth About Wall Street Stock Recommendation*
by John Reeves, and Ilan Moscovitz
Excerpt from the article:
Analysts are not that into you
Any time you want to really understand the financial industry, it's helpful to first look at what people are actually paid to do.
The survey found that "accurate earnings forecasts and profitable stock recommendations have relatively little direct impact on their compensation." Instead, industry knowledge and connections are what count.
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*Full article can be read at The Motley Fool:
http://www.fool.com/investing/general/2013/06/03/the-shocking-truth-abo…
That is both correct and irrelevant. Noone on the buy side takes sell side research seriously.
http://www.wallstreetoasis.com/forums/here-is-how-equity-research-works
thanks man, this is something I am curious because I don't know much regarding the practical way of how IB or big institutional investors work. with the flow of information, the variety of sources and the conflicts of interests involved with the originators sometimes you don't know which one is relevant and which is not.
so, when the stock price targets or earnings estimates are posted and made available to investors do they come from buy side or sell side analysts? it might be irrelevant for a person that is inside the business in a sense that he knows what's going on behind the curtains, what about the individual investor or other small boutique firms who lack the connections of the big fish how does it affect them? for example, should the analysts' estimates posted in yahoo be taken as unbiased?
The individual investor probably isnt paying tens of thousands of dollars per year for access to er departments. And individual investors shouldnt be picking stocks in the first place. They should buy etf's/indexed securities.
Sell side research is not useless however it has no real use either. While its not as bad as it was in the 90s sell side research still caters to the ibd team in order to get business.
I see, so buy side are the dudes that needs attention, thanks guys. it make sense about the individual investor what about the small boutiques which data do they refer to or they do their own estimates for each and every stock? are there any cases when buy side analysis can be considered biased?
Small shops are pretty much anything under a billion or so. Most get millions in management fees. Super small ones, 25 million or so, they are started by guys who were previously analysts at bigger places. They tend to specialize and can do their own analysis and know a specific sector or two.
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