US analysts still hate 'sell' ratings

In this corporate earnings environment, there should be ample opportunities for analysts to put "sell" ratings on stocks. Of course, there was the famous call a few days ago when one enterprising securities researcher had the guts to say GM shares would fall to zero. He probably still kept his "buy" rating on the stock.

New evidence has come up that "sell" ratings are scarce as hen's teeth, at least in the US.

Research from Thomson Reuters StarMine shows that 18% of European analysts have "sell" ratings or the equivalent on stocks that they cover. The number in the US is less than 7%. According to the FT, "Equity research departments around the world have become much more bearish since the start of the year, but US analysts remain markedly more bullish on stocks than peers elsewhere."

Relative to economies and corporate earnings in other regions, there is no reason for analysts in the US to be more willing to support the firms that they cover. It does investors a tremendous disservice. And, it makes the analysts look like fools.

There has never been an adequate explanation of why American analysts seem to love the companies that they cover so ardently. Some will say that putting poor ratings on companies takes away access to management. Some probably still think they are helping the investment bankers at their companies by keeping relationships which could lead to business.

Or, perhaps Wall St. researchers don't have guts to have the corporations that they cover give them a hard time.

By all rights, almost every stock in the market should be a "sell." But, in a world full of layoffs, why bite the hand that feeds you?

Top Stocks blogger Douglas A. McIntyre is an editor at 24/7 Wall St.

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Comments

 

Pretty well written. The only fallacy is acrediting these people (he calls them analysts) with any professional capability at all.

Due to obesity, the clothing industry developed "vanity sizes"; so that even on the porky side their customers could continue a delusional existence.

Same thing here, these cowardly idiots opt for delusion rather than harsh reality. Typically this sort of thinking does not have a happy ending.

Miles (Posted 11.18.08 7:44 AM) Report Abuse

to take a line from the That 70's Show -"these dumb ass" analysts were the ones who started a lot of this slide. They are like leminks, one jumps of the cliff the all do.Whats wrong with HOLD, remain calm, and wait till cooler heads prevail.

Yes there was a finincial wave and market correction due to the banks greed in the subpime morgage mess, but these bozzos in stead of selling their clients on the HOLD principal panicked them and told the world the sky was falling and a tidal wave insued - look at Warren Buffet if you want to know how to act in this type of correction. Analysts don't know people; don't know how to sell except by deception and finincial mumbo jumbo.Positive action is needed not selffullfilling negative proficy "see I told you it was going to happen" "and it did " after the fact.

INVESTORS OF THE WORLD UNIT AND GET A REALITY CHECK ON THE MONEY YOUR INVESTING.KNOW THE WHO, WHAT, WHERE, AND WHEN NAD HOW.

AND IF IT SEEMS TO GOOD TO BE TRUE  ????

Paul Hicks (Posted 11.18.08 1:27 PM) Report Abuse

So we are Saturated with cars. Half of them non-domestic. Hey, why don't we charge an import tax like Japan does to the big 3.Anthony Mirhaydura tells you what's wrong with GM so it must be true. That's the problem with this country, would you ever see reporter Sam Smith on Japans top web-site telling you what's wrong with Toyota? Think about it.

above average Joe (Posted 11.18.08 3:02 PM) Report Abuse

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