As a follow-up to my previous post, I strongly recommend reading the book "Guerrilla Investing" by Peter Siris. shop.barnesandnoble.com
In his section on analysts, he notes the following:
"Investors should be cautious about buying stocks pushed by analysts who work for the brokerage firms doing the stock's investment banking....Analyst rarely lower their ratings on their investment banking clients, but they often subtly put their opinions in their reports."
"While you should be cautious about buying a stock recommended by the analyst of an investment banker, you should not be cautious in selling a stock if the analyst says something negative about the company."
Was there a warning for VVUS?
In 1996, VVUS raised money via financing with PaineWebber, Invemed, and Genesis Merchant Group.
On July 7, 1998 (VVUS 6 7/8), PaineWebber upgraded VVUS to strong buy from neutral. www3.techstocks.com
On June 3, 1998 (VVUS@ 8 3/4), Genesis downgraded VVUS from long-term buy to hold. edgar.newsalert.com
In retrospect, when a former investment banker downgraded a stock, it was a great indicator that difficult times were ahead.
BigKNY3
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